Dear Reader,
Welcome to our weekly mailbag edition of The Bleeding Edge. All week, you submitted your questions about the biggest trends in technology. Today, I’ll do my best to answer them.
If you have a question you’d like answered next week, be sure you submit it right here.
Let’s begin with a question on Twitter…
Hi Jeff, Given today’s comments about Twitter in The Bleeding Edge, what are your thoughts about its future? Do you remain bullish on this stock? If shares are diluted, don’t we all lose?
Also, you were bullish long before Musk entered the picture, and after knowing about its censorship. Perhaps you could explain your reasoning in more detail? Thank you as always,
– Gordon E.
Hi, Gordon, and thank you for writing in.
This has been such a fascinating story to follow…
We’re seeing the confluence of many things here: A hostile takeover, an undervalued company that is one of the most important social media platforms in the world, the beginning of a transition to Web 3.0 and digital assets, the possibility of open-sourcing of a platform, the acknowledgment of Twitter’s open and active efforts to censor and ban information to influence how we think, and nothing less than the defense of freedom of speech itself.
What an incredible battle.
For readers who missed it, Elon Musk recently became the single largest shareholder of social media giant Twitter, with a 9.2% stake.
Shortly thereafter, Musk declined a position on Twitter’s board… and instead offered to buy the company outright for $43 billion.
This caught the board off-guard, but it quickly retaliated by adopting a “poison pill.” This means if any individual or entity acquires 15% or more of Twitter’s stock without board approval, all other shareholders will be permitted to buy additional shares of stock at much lower prices.
If shareholders buy additional stock at much lower prices, it will result in a large material loss for the party attempting to take control.
Ultimately, these tactics are an attempt to prevent Musk from ever gaining control of Twitter. Yet the board’s pill would also punish existing shareholders – this in itself is a failure of Twitter’s board of directors’ fiduciary responsibility.
Put another way, the board is not only failing to do its job, but also refusing to do its job.
Clearly, Musk is not going to get the support of the board. The board is refusing to act in the best interest of the shareholders, so there is no way the board will approve an acquisition offer from Musk.
Yes, if the poison pill was enacted, it would result in the dilution of existing shareholders.
But rather than focusing on the board, Musk will just make what’s called a tender offer for all of the shares of Twitter. Just within the last 24 hours, Musk announced that he lined up $46.5 billion in financing for the acquisition.
It was incredible to me that some in the media questioned whether or not he would be able to get the cash in hand to do that… Ridiculous.
Musk has some levers to pull right now. He knows how undervalued Twitter is, and he can easily raise additional capital if necessary to affect a successful tender offer.
There is always going to be a price that the large institutional investors will agree to sell at. By making a tender offer, Musk is forcing the decision, as well as accelerating price discovery.
The other interesting dynamic here is that Twitter is now “in play.” Private equity firms and other institutional capital now know that a sale is likely, so I wouldn’t be surprised at all to see another group come in with a counteroffer that is materially higher than Musk’s first salvo.
This could result in a bidding war, which would be exciting. And it would result in a much higher share price. After all, Musk wants Twitter.
And it also accelerates the time that it will take to achieve his goal… But it is radically preferable to building a new platform from scratch which would take so much longer.
Twitter is an incredible platform. Its value simply needs to be unleashed, which can be accomplished with a few relatively easy changes to its business.
Musk clearly understands this, and even if he spends $60 or $70 billion to make the acquisition happen, he knows that he’ll at least double his money over the course of the next couple of years.
Next, a reader wants to know more about our increasingly busy airspace…
Jeff, I continue to enjoy your work every day. As a licensed private pilot myself, I’m familiar with the different classes of airspace. I love the eVTOLs, such as Joby. Cool stuff. Nimble, fast, good range.
I’m beginning to wonder, however, with all the drone deliveries and other small craft flying a few hundred feet off the ground, how is all that airspace going to be controlled? It’s going to be an exciting time, but I have to wonder if the Federal Aviation Administration (FAA) can keep up. I’d love to hear your thoughts on this.
– Ken H.
Hi, Ken, and thank you for writing in. It’s always a pleasure to hear from a fellow pilot.
I used to fly Cessna 172s when I was getting my private pilot’s license. That was back when I was earning my degree in aeronautical and astronautical engineering at Purdue University.
It’s been a long time since I’ve flown my own plane, yet I’d love to start up again if I can ever find the time. My subscribers keep me pretty busy…
And you’re right. Our airspace is certainly getting busier as well.
To your point, there are drones, electric vertical takeoff and landing (eVTOL) craft planned as air taxis, “flying cars” (literally – although I don’t think they’ll be successful, eVTOLs are the way), and other innovative aircraft under development.
We’ve been analyzing these developments for some time now. They fall under a broad category that I like to think of as The Future of Transportation.
Last year, we wrote about Volocopter, an air taxi startup that announced its plans to go public.
Volocopter Aircraft
Source: Volocopter
And Volocopter is in good company. As you mentioned, Joby Aviation is working on another aircraft intended for the air taxi space.
Earlier this year, the company partnered with All Nippon Airways (ANA), the largest airline in Japan, to launch its ride-hailing service by 2025.
Joby Aviation Aircraft
Source: Joby Aviation
And Google’s drone delivery division, Wing, is now the latest company to start making deliveries in the U.S.
Wing’s Drone
Source: Wing
All these examples are merely the tip of the iceberg… Ultimately, the future of transportation will be one of the biggest stories of this decade. We’re going to see an explosion of products and services coming out.
Yet one of the biggest challenges we’ll face with this increase in air traffic will be regulatory. We’re going to have to figure out how to manage traffic in a world where air taxis and other flying vehicles are everywhere.
And we’ve seen some progress.
At the start of 2020, the FAA began requiring all airplanes and helicopters to broadcast their positions using Automatic Dependent Surveillance-Broadcast (ADS-B) equipment. We can think of it as a beacon that projects the aircraft’s location. Ken, I’m sure you’re familiar with this as a pilot.
The FAA said it anticipated this change would enable aircraft to fly more direct routes, saving time and fuel. And controllers would be able to reduce the minimum separation distance between aircraft, increasing capacity in the nation’s airways.
This change also makes it easier for a drone operator to steer clear of any nearby aircraft. We’ll need to install these ADS-B receivers onto drones so they can autonomously identify nearby aircraft.
Enabling automatic detection is what I like to think of as building the infrastructure. Artificial intelligence (AI) for autonomous flight will enable these new aircraft to fly safely from point to point without incident.
And there are good signs of progress on the regulatory front:
The FAA has already been supportive of enabling autonomous drone deliveries. It will likely also accommodate regulations that will enable autonomous air taxis.
While early flights are already beginning, it will still be a few years before we see well-established air taxi networks with high volumes of passengers. In other words, there is time.
All of the companies are working through the process, using the existing system for now, and planning for the future of air travel.
Once the general framework is in place from the FAA for use of airspace, autonomous flying technology – coupled with autonomous detection technology – will ensure safe flights and avoid crashes even with busy skies.
And this will be accomplished without being a burden on existing air traffic control (ATC). Naturally, drone delivery routes won’t be permitted to fly through any airport or landing zones for things like eVTOLs.
This is a huge undertaking, building the future of transportation. While there is a tremendous amount of work being done, this particular theme will be exciting over the next couple of years, and it’s one that I’ll be following closely.
And when possible, I’ll look to experience it for myself. Bleeding Edge readers will be the first to know when I do.
Let’s conclude with a question about quantum computing…
Jeff, you write about quantum computing. Please address a recent MIT article about quantum computing not being able to actually be used to solve everyday problems.
– Frederick L.
Hi, Frederick, and thanks for writing in. Quantum computing is one of our favorite topics here, so I’m happy to address this.
The article you referred to is “Quantum computing has a hype problem” on the MIT Technology Review website. A physicist, Sankar Das Sarma, alleges that much of the talk around quantum computing technology right now is overhyped.
Yet his main argument isn’t so much an issue with quantum technology itself as it is the early commercialization of it.
He points out that we are still in the process of developing quantum computers and refining our techniques for achieving error/noise-free results. This is undoubtedly true.
We’ve talked in these pages about different approaches to quantum computing that we’re currently testing. For example, there are trapped-ion and atom-based approaches… or more recently, superconducting quantum computers are showing incredible progress.
Each of these “types” of quantum computing has different strengths and weaknesses, which is why we haven’t settled on one clear winner yet… But we’re making headway.
Returning to the question at hand, the author of the MIT article primarily criticizes the companies that are claiming that they will use quantum computing in the near future to make millions in profits. He says those kinds of claims are premature.
And he is very naïve to do so.
After all, there are a couple of pure quantum computing companies that are publicly traded today, and both companies have commercially available products in use. They are a work in progress, but they are generating revenue already.
Rigetti Computing, one of my favorites, will generate about $21 million in sales this year. IonQ, another interesting company in the quantum computing space, will generate about $11 million in sales this year. Not so “premature” after all…
And there are private companies that have been generating revenue from quantum computing for years, like D-Wave Systems. D-Wave will likely go public in the near future as well.
Further, Google generates revenue from its quantum computing systems by leasing the computing in the cloud.
The other critical thing for us to understand is that quantum computers will be used to solve certain kinds of high complex multi-variable problems that are not well suited for a classical computing architecture.
Quantum computers won’t be used for everything… And there is no need to use them for problems or tasks that are well suited for today’s cloud-based computing systems.
I have to say, in the last two or three years, I have become hugely disappointed with the MIT Technology Review. The editorial and writing have become quite negative at times, and the publication has become very political.
It has entirely lost its objectivity. It used to be such a great source for information about technological advances and staying on the bleeding edge, but now I find myself rarely reading any of it. It tends to be so heavily biased – and at times manipulative.
There are so many incredibly positive things happening in the world of technology and biotechnology right now. That’s where we like to spend our time.
Think about how far we’ve come since 2019, when Google first demonstrated a 53-qubit quantum computer that could surpass the best classical supercomputer of the time.
And I’ve already made a prediction for this calendar year that we’ll see a 256-qubit quantum computer. While the raw number of qubits isn’t necessarily the most important factor, it is an indication of the sheer computing potential of quantum systems.
The industry is intensely focused on improving the noisiness of quantum computing systems so that they can take on even more complex tasks. These issues will be resolved far faster than the author implies.
This truly is one of the biggest breakthroughs of our lifetimes.
That’s all we have time for this week. If you have a question for a future mailbag, you can send it to me right here.
Have a good weekend.
Regards,
Jeff Brown
Editor, The Bleeding Edge
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The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
