Dear Reader,
Welcome to our weekly mailbag edition of The Bleeding Edge. All week, you submitted your questions about the biggest trends in tech and biotech. 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. I always enjoy hearing from you.
There is a lot of hysteria going on about the feds taking control of your money, privacy etc. I have a different take.
I think it would be great that everyone knows that their income tax can be audited completely and accurately by a computer at lightning speed. We could drastically cut the people working at IRS audit and move them to collections.
I bet we could cut our tax bills by 20% or more by getting rid of cheats.
Bring on digital currency, quantum computing, less government bloat and less cheating. I have nothing to hide and thus no fear of a digital dollar. Do you have an opinion on this?
– Brian C.
Hi, Brian. I’d be happy to share my thoughts on the point you raise.
And I’m glad that you wrote in with this perspective because there is definitely the potential for major benefits through the employment of this kind of technology.
For the sake of readers, a central bank digital currency (CBDC) is a digital version of a national currency. A CBDC would be under the control of a country’s central bank and the federal government.
And as Brian mentioned, every transaction with a CBDC could easily be tracked and taxed. And if we extend the employment of a CBDC, combined with the removal of all bills and coins from the system, it all but guarantees all transactions will be made using the CBDC system (with the exception of barter transactions).
That would theoretically increase tax revenue and cut down on tax cheats. That alone is a major incentive for any government to roll out a CBDC.
Transactions would be as simple as using our phones. We’d simply hover the phone over a point-of-sale reader. I’m sure many of us transact with our phones already. Using a CBDC will be that simple.
And having a central bank backed digital wallet also makes it easy to distribute stimulus or benefits to a population.
Certain kinds of stimulus can even be earmarked for certain kinds of transactions. For example, stimulus meant for mortgage support could only be spent on mortgage payments. Stimulus meant to offset the increased price in electricity could only be applied to an electricity bill.
Recent history shows us how this technology could have been incredibly useful.
The Paycheck Protection Program (PPP) turned out to be a money grab. Billions of taxpayer dollars were incorrectly funneled or distributed in the United States. The latest estimates I saw were that 15% of the funds could have been distributed fraudulently.
It was so horrendously managed. It’s such a mess that it’s hard to unwind just how much waste and corruption was involved in the stimulus programs. This sloppy work came at huge expense to hard working, tax paying Americans.
These kinds of issues exist in just about every country, and they could benefit from a well-designed CBDC system.
So, yes. There are absolutely benefits to a CBDC.
And maybe just a few years ago, I probably would have been more optimistic about the employment of this technology. But something has changed in recent years.
For instance, early last year, Canadians were peacefully protesting for something that should have been commonsense: An end to “mandates” and “lockdowns.”
And what did the Canadian government do? They “de-banked” their own citizens.
Chrystia Freeland, Canada’s Finance Minister, said it herself:
The names of both individuals and entities as well as crypto wallets have been shared by the [Royal Canadian Mounted Police] with financial institutions. And accounts have been frozen. And more accounts will be frozen.
Here we had a supposedly democratic country seizing their citizens bank accounts for simply protesting.
And in the U.S.?
A sitting president was effectively banned from the internet…Scientists were “deplatformed” for sharing independent research.
For almost two years we were kept in our homes and told if we were allowed to go to work…allowed to see our family… allowed to send our children to school. With a CBDC, the government could decide if we’re allowed to spend our own money.
That’s my concern.
A CBDC would centralize control of a nation’s money. It would give an enormous amount of power to governments that have shown a willingness to punish their own citizens for having “unacceptable” views. That’s why the inevitable roll out of a CBDC concerns me.
And Brian, I completely share your view on the need for less government bloat. Imagine if we just had a flat 20% consumption tax. Food and medicine would be exempt. The more an individual consumes, the more tax they pay. We could dramatically reduce the size of the IRS. Or maybe we could eliminate it all together.
But that kind of solution has never been adopted. In fact, right now, the current administration is trying to hire 80,000 more IRS agents at a multi-billion-dollar expense. That’s not the answer.
I share your belief that new technologies can simplify and automate government processes and reduce the size of the government at large.
But the reality is that even when governments adopt new technologies, they tend not to reduce the size of government. Quite the opposite. Governments tend to look for other areas to expand their reach.
I wish I could trust that government will get smaller, but objectively I doubt that will happen. And with all that said, I think you’ll agree that we should still try…
Hi Jeff,
I know you cannot and do not offer investment advice. but I would like to know as it applies to CRISPR technology, which company in your estimation is a better stock to accumulate in an investor’s portfolio and why?
The choices are CRISPR Therapeutics, Editas Medicine, Beam Therapeutics, or Aera Therapeutics?
Thank you very much for providing timely and insightful information on cutting-edge technology topics and companies.
– Arcelio J.
Hi, Arcelio. You’re right that I can’t offer personalized advice. But I’m happy to share my thoughts on the various CRISPR companies in public markets.
For the benefit of readers, CRISPR is a genetic editing technology that can edit our genetic code as if it were software. The technology has the potential to end all disease of genetic origin. I believe it will ultimately be remembered as the most consequential medical breakthrough since the discovery of antibiotics.
We’ve been following the developments in CRISPR for almost ten years. That was long before it was covered by the mainstream press and before the technology won a Nobel Prize. It’s not an exaggeration to say that my readers were some of the first retail investors to gain exposure to this technology when I recommended companies back in 2015.
The important thing for us to know is that this isn’t a zero-sum game. Just because one company succeeds does not mean other CRISPR companies will lose. The reality is that this is a greenfield opportunity. There is plenty of room for all these companies to thrive and succeed in the years ahead.
But, if investors were looking for what is effectively a “picks and shovels” company to gain exposure to CRISPR technology, I would name Editas Medicine (EDIT).
One really important development last year was the resolution of a long-running, and pretty ugly, patent dispute between the Broad Institute of MIT and Harvard, and U.C. Berkeley.
In essence, the dispute was over who had patent priority for the foundational technology of CRISPR.
Berkeley knew that there were potentially billions of dollars of patent royalty at stake. The patent case had been going on for years. I remember first covering it all the way back in 2016.
There were three appeals levied from the Berkeley team. And the Broad Institute won all three in a row. So, now, the patent priority has been won definitively.
This was a great development. The legal battle was always a distraction. And now that Broad has clearly won, it means that Editas— which has the exclusive license to those patents—is in a primary position to license patents to other industry players.
What I predict will happen this year is that all the industry players will come together and form what’s called a “patent pool.” They’ll collectively group their intellectual property together.
From there, the pool will collect all the royalties from any licensing agreements, and it will be paid out proportionally. So, Editas would almost certainly have the largest proportional share. Editas can, and will, license its patents directly to industry players.
That’s why I refer to it as a “picks and shovels” play on CRISPR technology. And in time, I predict Editas will be acquired for its intellectual property.
And you’ve named several other great CRISPR related companies. Intellia Therapeutics is another one, and Prime Medicine is also an exciting new entrant into the space led by one of the pioneers in genetic editing.
Generally speaking, for investors that are interested in this space, a smart approach is to build a basket of the best companies working on CRISPR genetic editing technology.
Like I said, it is basically a greenfield opportunity. That means that there is more than enough business for a large number of companies to become multi-billion-dollar successes. And each company will develop at a different pace depending on how successful their therapeutic programs become.
For more engaged subscribers, I recommend doing research on each individual company and looking for those that have near-term catalysts in their therapeutic pipelines – for example, a near term data readout from a clinical trial that looks promising.
The biotech industry was punished during the pandemic due to the pandemic policies that negatively impacted the entire industry’s ability to conduct clinical trials.
And because the NIH was heavily skewed towards giving out grants to anything COVID related, it stunted growth in other areas. It was devastating to see the impact caused by such irrational and ineffective policies.
But the silver lining is that we are seeing once in a lifetime “cheap” prices of bleeding edge biotech companies. We are on the cusp of the next great biotech bull market.
We have a lot to look forward to.
Given your comments about AI and its affect on gaming products, can you give us your thoughts on what affect AI will have on companies like Unity?
– Roger S.
Hi, Roger. Thanks for your question.
Last week we discussed how the video game company Roblox is integrating generative AI into their metaverse. Here’s a look at their generative AI in action:
Generative AI Applied to the Roblox Metaverse
Source: Roblox
Notice the captions in the top corners in this video. Those are the text prompts that tell the AI exactly what to do within the game.
And as we can see, these prompts enable users to change colors and patterns for objects in the game on the fly. And they even enable some powerful graphics, such as turning the car’s lights on upon command.
This is going to be a massive application for gaming, especially in these kinds of metaverses that empower players/users to create in these online worlds.
But to your question, could this have implications for companies like Unity (U)?
First, it’s probably important for us to make the distinction between what Unity does and what a company like Roblox does.
Roblox is basically an online, virtual world within which players can create and build. In this case, Roblox is employing AI to help creators become even more productive in building within Roblox. This makes Roblox an even more exciting and thriving virtual world.
Unity is a software company that makes a gaming engine. Gaming software companies build their games using Unity’s software. That’s an important distinction.
You may be surprised to know that Unity is already using a form of AI called machine learning in its software suite. It allows game makers to create “intelligent” agents/players inside of the games that they are developing.
Unity’s software also provides deep learning tools to help train these agents in their gameplay. These kinds of technologies are available to any game company that is building games using Unity’s software.
Game developers are also using their own AI to accelerate and improve their own game development. Tasks that have been historically a manual, time consuming process like creating computer graphics are able to be automated now using artificial intelligence.
We’re really just at the beginning.
I can envision in a few years’ time that there will be real-time games that will be “managed” by an artificial intelligence and in a constant state of transformation and evolution. That will make them very immersive and addictive, and capable of adapting to each individual player.
Regards,
Jeff Brown
Editor, The Bleeding Edge
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.
