Dear Reader,
As we begin the slide into the holiday season, it’s hard for me to not be thinking about supply chain problems.
I know that’s a bit odd. After all, thoughts of a big turkey, cranberries, wine, garland, gingerbread, Christmas trees, presents, and some much-deserved respite are far more enjoyable.
But as an analyst and a parent trying to figure out what presents can arrive before Christmas, it’s kind of hard not to think about supply chains. We already had a look in The Bleeding Edge about the problems at major U.S. ports.
With dock workers not returning to work, the labor shortage has caused an epic bottleneck for getting products onshore and into normal distribution channels. But the more I dug into this incredible situation, the more I realized that our problems are even worse.
The issue is that 82% of port truck drivers – those who pick up containers at ports and deliver them to warehouses or distribution facilities – are independent drivers. That might not sound like a problem at all… And if the ports were functioning normally, it wouldn’t be a problem.
But now, it is a disaster, and it’s not the fault of the port truck drivers.
The problem is that it can take hours – sometimes an entire day – to enter a port, pick up a container, and get out of the port. Now, if you’re paid by the hour, that might not be a problem.
But 82% of port truck drivers are independent. They get paid by the load. And because of that, they can’t afford to sit around all day to pick up a single container.
Most independent contractors have financed their rigs, which means they have a large operating expense. So if they aren’t moving cargo, they aren’t getting paid. And if they aren’t getting paid, then they can’t afford their payments for the trucks.
This has resulted in both the retirement of many truck drivers, as well as a shift of independent drivers away from the ports. They’ll prioritize long haul or regional freight where their time is used efficiently and not wasted. That’s smart – if they are paid by the load, they need to make that decision to support their business and their families.
So until the port situation is cleaned up, this problem is going to persist. In fact, it is going to get much worse than it is today. Not only is the scale of the problem so large, but the incentives are also the opposite of what we might think.
The reality is that the shipping companies and the ports are making money hand over fist. They have more business than they can shake a stick at right now. The longer containers are stored at the ports, the more the port can charge for storage fees.
The longer this situation persists, the larger the fortune for the port operators.
Incredible. Contrary to what the government wants us to believe, the factories are not closed due to COVID. The factories around the world are humming.
The labor shortages are a direct result of failed pandemic policies that we now know did absolutely nothing to stop, or even slow, the spread of the virus.
Put simply, it could have all been avoided.
I, for one, am not going to lower my expectations for the holidays. I’m going to have a great time with family and friends, and I hope you all do as well.
This port-related supply chain problem is endemic to the U.S. Other ports around the world are doing just fine.
We need to hold those that got us into this mess accountable and make sure that destructive policies are not allowed to persist, and hopefully not allowed to be implemented again.
Hopefully, we’ve learned a lesson through all of this.
And it’s worth mentioning that this supply chain issue in the U.S. is quite separate from the semiconductor shortages that are impacting some areas of the electronics industry. Those issues are not COVID-related but driven by strong economic demand for the latest generation of consumer electronics and electric vehicles.
That’s a good problem to have… And it’s especially good for companies that manufacture semiconductors, or supply semiconductor manufacturers, with goods and services.
While this “tech shock” will persist next year, and in some cases into 2023, new manufacturing capacity is being brought online every month. By the way, if you haven’t already, click here to learn about my latest research and investment ideas on exactly this.
New semiconductor manufacturing plants are being built in the U.S. in order to have more secure production. We’re at the beginning of what I think of as an “American manufacturing renaissance,” which is part of a much larger, global trend towards decentralizing manufacturing and bringing production back onshore.
Not only does it create jobs, result in a more secure supply chain, and dramatically reduce logistics costs… but it’s also better for the environment. It reduces carbon emissions, as the world isn’t unnecessarily shipping materials halfway around the globe only to turn around and ship a finished product back again.
We have an exciting few years ahead of us as this shift takes place. It will be a massive build-out of next-generation factories that maximize the use of automation, robotics, and machine learning.
It’s an industrial revolution, and we’ll be here each step of the way.
For those based in the U.S., I hope you have a wonderful holiday weekend. I have a special issue of The Bleeding Edge for you tomorrow about a favorite topic of mine. And we’ll have our normal mailbag on Friday.
A decentralized autonomous organization (DAO) called Friends With Benefits (FWB) just raised $10 million in a venture capital (VC) round led by Andreessen Horowitz. This is the same VC firm that raised the largest crypto fund in history at $2.2 billion.
Let’s put the name of the DAO aside for now, and just explore what it is and how it’s going to work. That’s the interesting part. FWB is taking an online community and bringing it to life in an innovative way. To me, this is a lens on the future.
As a reminder, DAOs are entities with no executives, no headquarters, or management teams at all. They are leaderless, and the consensus is formed by votes using tokens that are recorded on a blockchain. That’s why I have referred to DAOs as a no-CEO structure.
In the case of FWB, people who want to join the DAO must buy 75 FWB tokens and submit an application. That’s an admission price of a little over $10,000 at today’s prices. From there, the FWB community reviews the application and votes on if the new person should be accepted into the DAO.
Once accepted, members gain access to a private chat room on the popular chat app Discord. Members also get access to exclusive online events, non-fungible token (NFT) digital art galleries, and even investment opportunities.
And here’s where it gets really interesting – FWB’s goal is to also host in-person meetups and parties around the world. Only members will know about these events.
This is very reminiscent of the “phyle” concept that Neal Stephenson presented in his science fiction book Diamond Age. This is a topic I talked with Doug Casey about on a panel at the Legacy Investment Summit in Carlsbad, CA, two years ago.
(If you’re interested in attending the upcoming Legacy conference in 2022, go right here for more details.)
Phyles are groups of people with common interests who band together to form a decentralized network. Members engage and contribute to projects and causes that are of interest to them.
If we look around our society today, it is clear that America is more divided than it’s been in recent history. And many individuals identify more with an online community than they might with their neighbors.
For this reason, I think DAOs like FWB represent the rise of phyles in the modern age. And what’s really exciting is how crypto-economics creates a virtuous circle of sorts.
Here’s what I mean…
The more people who want to join the FWB DAO, the more demand there will be for FWB tokens. That pushes the token price higher, which makes the membership fee more expensive.
That, in turn, makes the DAO more exclusive. And at the same time, it gives the DAO more money to fund its activities because of the token’s price rise. This is because every DAO that issues its own currency maintains a reserve for itself.
This gives the DAO the capital it needs to host in-person events. It also empowers the organization to transact with things that are of interest to the DAO community.
In this case, the FWB DAO has the ability to curate, create, and even buy NFTs for its art galleries for members to view. And, of course, there’s a chance those NFTs could appreciate in value as well, making the DAO even more valuable.
So I think FWB is on to something here. And I expect we will see more and more of these phyle-like DAOs popping up quickly next year. This will be a major trend this decade.
This is one more example of the tokenization trend we’ve been covering here in The Bleeding Edge. It’s clear we’re going to see more and more utility from cryptocurrencies and their associated projects… and I, for one, can’t wait to see what comes next.
Of course, this means there are also growing opportunities to profit from these developments, and I want to help my readers stay at the forefront of this trend. If you haven’t already, simply go right here to see some of my latest research.
Autonomous delivery vehicle company Nuro just raised another $600 million in its Series D venture capital round. The company is now worth $8.6 billion. That’s nearly decacorn status. And the companies investing in this recent round really caught my eye…
We have talked about Nuro several times before in The Bleeding Edge. For the sake of newer readers, Nuro developed a small self-driving vehicle for delivering packages and groceries. It’s called the R2.
Here it is:
Nuro’s Autonomous Delivery Vehicle
Source: Nuro
As we can see, the R2 was designed specifically for groceries and smaller packages. Nuro is focusing on fast-moving consumer goods… the kinds of things that we tend to buy weekly.
So I wasn’t surprised to see supermarket chain Kroger among the companies that invested in Nuro’s Series D round.
Kroger is already running pilot programs to test Nuro for grocery delivery in a few markets. And now it is financially incentivized to stick with Nuro. That’s a great commitment to have.
Toyota was the second big company that invested in Nuro’s Series D. I imagine Toyota would love to manufacture the R2 for Nuro at mass scale. That’s something Nuro likely wouldn’t do on its own. So Toyota’s investment makes perfect sense.
But then we get to Google. The tech giant was the other big name investing in Nuro’s Series D. Why?
On the surface, we could say that Google’s autonomous driving division Waymo might be interested in Nuro. And maybe that’s true. It’s also true that Nuro will need cloud computing resources as it scales commercially. Maybe Google wants the cloud business. But I’m not so sure…
Nuro is a small company. Any cloud computing contract with Nuro would be tiny relative to Google’s overall business. So that got me thinking… it must be about the data. If we think about it, Nuro will generate a ton of data that are tied to individual consumers.
It starts with the products each customer orders. Nuro will know their preferences and buying patterns. That data would be valuable to Google.
As companies like Apple implement their new privacy policies around data collection through software applications, the need to collect consumer data from other sources is quickly becoming a serious issue.
What’s more, Nuro is going to generate a wealth of data as the R2 navigates the streets to make its deliveries. It will see what kind of neighborhoods each customer inhabits, what activities often take place in each area, and what types of homes or apartments its customers live in.
Nuro is like having real-time, daily video surveillance of the neighborhoods that it operates in. There are all sorts of information that could be derived from this data. And once consumers get used to the convenience and contact-free nature of receiving their daily goods via Nuro, there’s no turning back.
I’m just speculating here, but I would bet that Google struck an agreement with Nuro as part of its investment to have access to Nuro’s data. That’s the most logical reason why the tech giant would be investing in this tiny grocery delivery company.
it’s a pretty safe bet to always be wary of Google’s real intentions.
We’ll wrap up today with an incredible development from NVIDIA (NVDA). This is a company that Near Future Report subscribers know well. We are sitting on gains of over 800% on NVDA as I write.
And NVIDIA just released new research around StyleGAN3. This refers to a form of artificial intelligence (AI) called a generative adversarial network (GAN). And the “3” signifies that this is the third generation of AI.
I’ll explain with a little background. It starts with the predecessor technology, StyleGAN2…
StyleGAN2 is an AI that can create tremendously realistic portraits of people from nothing. Here’s an example:
StyleGAN2 Portrait
Source: thispersondoesnotexist.com
Here we can see what looks to be the picture of a real woman. Except it’s not. This image was generated from scratch by the StyleGAN2 AI.
We may ask – what’s the point of this? What are the applications? Well, having a still picture like this really isn’t that useful.
However, if we can animate these images and turn them into characters, then there are all kinds of applications in the entertainment industry. It’s easy to envision movies, television shows, and games being created using these images.
Yet StyleGAN2 produced images that were hard to animate. For example, look at the video below:
StyleGAN2 Vs. StyleGAN3
Source: NVIDIA
Notice how the beard of the man on the left doesn’t look natural as the image moves. There’s a weird distortion happening. It’s almost like the beard is fixed in place compared to the moving face.
Now, look at the image on the right. The beard looks perfect even as the face moves. That’s the result of NVIDIA’s work on StyleGAN3. It’s an optimized image that can now be animated.
So we may see some remarkable developments around computer animation thanks to NVIDIA’s work here. That will be an interesting story to track. Imagine having completely lifelike actors and actresses that have been created by an AI.
I can even envision some becoming stars in their own right, much in the same way that computer animation has created incredible franchises along the lines of Disney and Pixar.
Only now, with technology like StyleGAN3, people won’t know if the actors are real or generated by an AI.
Of course, these images could also be used to create deepfake videos. As we have discussed before, deepfakes are altered media content. They are fake videos or audio where AI is used to mimic a real person’s voice and/or image. Naturally, deepfakes can be used for all kinds of nefarious purposes.
I think we’re going to need an AI that can detect another AI…
Regards,
Jeff Brown
Editor, The Bleeding Edge
Like what you’re reading? Send your thoughts to feedback@brownstoneresearch.com.
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.
