Meta Status

AI economy history internet technology

What does Meta do? It turns people into money. Those that are on the Internet, that is—not in a Soylent Green kind of way.

At least, that was the mantra up until 2018. Then Cambridge Analytica broke. And the Q2 2018 earnings gave an inkling of the possibility that not a fixed—and also rather large—ratio of people entering the Internet would become, just like magic, Facebook users.

Later, people seemed to forget about the fact that they get algorithmically nudged in Zuck’s wonderland every step of the way. Wall Street itself realized that revenues at 1 Hacker Way actually kept on rising—until they jumped in 2021. COVID, remember?

The Metaverse, however, wasn’t really that great of a hit, and after the virus bonus revenue fell back in line the following year, FB lost a staggering two-thirds of its value. A trillion-dollar meme stock.

An attribute that it then turned into current heights via hitching itself to the AI bandwagon.

Releasing the LLaMA weights is undoubtedly a commendable move. It sounds utterly impressive when you can claim, “While we’re working on today’s products and models, we’re also working on the research we need to advance for LLaMA 5, 6, and 7 in the coming years and beyond to develop full general intelligence,” in an earnings call. Pretty much like that strange man proclaimed five years ago: “I want 5G, and even 6G, technology in the United States as soon as possible.” Numbers: They go up, up, and up.

Hype aside, I am not really aware of any practical applications for LLaMA 3. Zuck bought lots of GPUs. Both Jensen and I are happy about that. Maybe they thought they had all this data that people have entered in their apps. Maybe they could train a LLM on it. With GPT-3, there was this notion that the size of the training corpus was all that mattered. After all, OpenAI’s chatbot was such a wonder, and it jumped into existence just via the increase of its training data. I speculate that a trillion training tokens derived from FB discussions yield surprisingly little meaningful reasoning power. Especially compared to actual content like, for instance, Wikipedia.

The pressure to come up with something must have weighed heavily on 1 Hacker Way. As those two transformer-based applications (LLMs and Image Diffusers) broke into public view and kicked the world into a frenzy that seemingly became the new normal, Meta itself had just spent around $50 billion on developing, well, the Metaverse. Which received rather little positive reaction, to put it mildly.

The total and utter failure of Zuck’s idea to come up with a whole new thing left Meta with no choice but to jump on the AI hype PR scheme. And up to this day, it has worked rather well. While revenue is ticking along as expected, the stock is kissing new heights. For now.

So, what’s next?
Nobody knows.

What will happen is that Internet population growth will end. There are simply no more people left that could join. Pretty much everybody who could go online already has done so. While 25% of the world’s population are younger than 15, many of them live in underdeveloped parts of Africa. Furthermore, young people hardly flock eagerly into the Meta family of products once they get their first Internet device.

Meta’s revenue growth would therefore stall together with the plateau in its user count. While they continue to make a lot of money, a PE ratio of currently around 30 is expecting something else: More money. You need to grow profits to justify such a valuation.
A quick way to bump revenues would be to reduce costs. Twitter is still up and running, despite Mr. Musk letting go of most of its workforce. A tempting move that could save the numbers for a quarter or two at Menlo Park as well. The problem is that this approach works only briefly: Costs go down to zero. But not more.

Which means that Meta needs to increase revenues while user numbers can no longer grow.

Can Zuck’s companies accomplish that? They might, but it would not be pretty: Billions of people have delegated a great part of their social existence into the “Meta Family of Products”. (What’s in a name?) A sticky situation in itself. Add to that the addictive aspects that rival nicotine, and you realize that half the planet as a user base won’t go anywhere fast.

Wealth as well as the inflexibility to change app use or social topology both tend to grow with increasing age. Meta owns people’s time and attention in staggering amounts.

Here comes the part that isn’t pretty: it is rather easy to manipulate people online. Tech is able to do it. And will increasingly be. There is a threshold after which you no longer realize that you got nudged.

When the magician manages to direct your attention successfully, all sorts of things are possible. With a serious difference: Magic lives from the effect, that the outcome shows you, that you must have missed something. You are supposed to notice that it is impossible what just happened.

Manipulation to gain, aka advertisement, has a different aim: You should be made to act in certain ways, all the while thinking that you want to do that.

The total spending of Meta family users is responsible for a mind-boggling share of GDP. And, as discussed, most of the users will not go anywhere. If Meta does not f*ck up royally, pretty much half of the global adults will continue to point their noses, eyes, minds, and wallets its way.

Turning on the manipulation engine will not be one deliberate conscious act or one magnificent large piece of software. Lots of little changes will yield lots of little benefits. With billions of people, you can do a whole lot of A/B testing. Nobody will notice. Everybody’s feed is different and the fact that you see wording that is ever so slightly different will not trigger any of the societal mechanisms that will raise a reaction.

Jacob Riis used flash photography at the end of the 19th century to show the world how poor people lived in NYC, and he changed the world for the better. I cannot imagine how we can illuminate the modern plight of getting nudged into an ultimately unhappy existence that looms on the horizon.

Power Shower

daily life economy marketing

Orwellian, isn’t that what you call it?

What happened? Some bean counters at Best Western figured out how much money gets spent on heating water for the guest showers. Probably a fair bit, since BW Hotels operates 320,000 rooms globally.

So let’s put in those water-saving devices.

Yes, actually taking a shower is pretty much impossible now. Your body still gets wet. Somewhat, in some places. But forget about mundane actions like washing the soap away from the skin. That measly drip coming out of the device will not do that. Water is an essential feature of taking a shower.

BW Hotels think that this is not a given.

The amazing thing is, that somebody thought to put up a sign reading:

Dear Guest,
Please be
advised that
this shower is
with a gentle,
style head.
It is not a
“Power” shower

Now we know. It is not a bug, it is a feature. Bugs are unintentional. This one very much is intentional. And it sucks. Really badly.

So, if I have the choice to stay in a Best Western or in any other establishment I know what to do.

Trying to reframe what is normal into something special, that got replaced by something special, is evil. Intentional, and I will not support it.

The TV in the room was from 2011. A lot has happened in TV tech since then.

Off course SLV was a pump and dump

economy media
Silver was already a thing before.

But it never was propagated via WSB. Instead the WSJ and NYtimes put that shit right on their front pages. For days.

Now that the SEC is looking into it they quickly would very much to forget that they were much involved in the SLV pump and dump scheme:

writes the WSJ on February 12th

Just to be clear: That Silver talk was on the pages of the newspapers, but not on reddit. Nowhere to be seen.

I forgot who said that malice should be ruled out as long as stupidity and ineptness can be used as a reasonable explanation. Which is, I am afraid to say, the case with both the NY Times and WSJ. They are well written. But so much of what they write is nonsense. Amazing that people still fall for it. And buy silver. Following the detour laid out by the papers for them …

Bald wieder auf dem Lidl und Aldi Parkplatz: Der Fendt 724 Vario

deutschland economy politics

10% mehr Traktoren wurden 2020 verkauft. In Deutschland allein mehr als 1000 von Fendt’s 724 Model. Des PS stärksten der beliebten 700 Reihe. Mit um die 200,000 Euro sind die zwar nicht ganz billig. aber so ist das eben. Und völlig ohne Scham werden sie dann auch zum nächsten Bauernprotest gefahren.

Der arme Bauer kriegt vom Kapitalisten Discounter kein Geld für seine Milch. Gefördert wird er zwar. Von vorne bis hinten. Aber es reicht eben noch nich: Fendt ist ja bei weitem NICHT die billigste Traktoren Marke.

Wenn Harzer mit neuen Mercedes und BMW Mittelklasse Modellen vor den Kuhställen unserer Agrarschaffenden auftauchen würden um billigere Milch einzufordern wäre das nicht auch komisch?

So sieht er natürlich aus. Das Bild oben ist ja nur ein Favorit 12S. Letztes Jahrhundert. Wie man sich einen Traktor vorstellte. Als sie auch noch auf die Strasse passten.

will it end in tears as expected?

economy internet technology

There are layers to what happens now with stocks and stories around it. I think it will end in tears. Trading options on the phone is a reality. And weird. Other, by now established, retail traders like TD or Schwab have you go through some lengthy process before you can dabble in options. It feels like Robinhood let you do it without much fuzz. Fun game. As long as it lasts. RH is said to have $20B AUM. Almost as big as Citadel with its $35B AUM. Citadel is also a “Market Maker”. An entity that connects buyers and sellers of stocks. Something Bernie Madoff did before he went off the deep end. Bernie also invented “Payment for oder flow“. A scheme were the market maker pays for a third party to bring clients in. Robinhood makes most of its money from these kind of deals. It routes many of the trades that its 12 million customers make via Citadel. Bernie is busy right now, he can not do it, even if it he wanted to.

The plot thickens when we look at Citadell backing Melvin with $2.75B earlier this week. Melvin had shorted, among other actors, ailing games retailer chain GME. A short is a promise to provide a given stock at a given date for a given price. A great contract if you can get the stock cheaper than that. A really shitty contract if you can not. While the money you can make is limited by the price will be. The money you can loose has no such limit. If I would have shorted Tesla when I though their pricing was just outrageous, I would have lost 4 dollars for each dollar that I would have made that bet (short trade) with. I did not. Melvin did short GME though. And the price for GMA has gone up. Like allot.

What happened next? Robinhood, that company that makes most of its money with Citadel, stopped allowing people to buy GME stock on their platform. Basically manipulating the market. Preventing that the people that congregate on CondeNasts reddit in the WallStreetBets section from keeping the price up, or raising it even further.

It is pretty naive that people raise their pitch forks when in fact they only hold life sized paper cut outs of said farming devices in their angrily shaking fists. They seem to ignore the fact, that it is the people on the other side of the moat that gave them to them as a trade for the real thing and some confetti animation.

So, yes, it will end in tears. The wsb / GME story. As well as Robinhood, as well as the concept that all that money from your bail out check and that you saved by not going to Bali and that you put ‘into the market’ will get you instant riches.

In the end of every bubble the audience needs to get broadened. One needs more people to join the party. To keep the thing going for just one more round. In that it is not unlike the phase of a loosing war: All sorts of people get recruited to ‘turn things around’. The DJIA touched 31K. Where do you think would it go from here? The concept of asset price inflation can only carry you so far.

But I have been betting on a falling market since it was overpriced at 11,500. The first time. More than 20 years ago.

money – digital

economy politics technology

China is testing a digital currency. In the US credit cards are big. They let you pay without physical money and they give people a line of credit. Charging them 15% interest rates. Yes, this is an actual business model. The other form a revenue is a 3% cut the card company gets from the transaction. There is a convoluted network of institutions involved in a credit card purchase. Enter ‘credit card payment flow diagram’ in image search and you will see. It is not that complicated. But it is also not that easy that you just use ‘visa’ or ‘master card’. Tandem Computers ran for a long time these transactions. So payments are being processed by computers. But they behave as if you still use Knuckle buster to initiate a paper trail.

The system kinda works. It is inherently unsafe and slow. Lots of people are involved. Their jobs are of the kind of a switch board operator in the early days of the telephone: A tech system that requires glue by people since it has not full matured. Those are always horrible jobs. Just ask an assembly line worker.

Since everybody carries a connected computer around you can replace physical money with digital one. You “just” need a system to do so securely and reliable. Technically entirely possible. And China is heading that way.

I bought a geiger counter board the other day. Arrived in less than a week in Europe. It was packaged really well. Documentation? A WeChat QR code. So I might as well get an account with them.

Alipay – not digital money but a replacement for credit cards – gets accepted in more and more places outside of China.

Much like we have Paypal accounts and credit cards we will have Digital Renminbi accounts. First to just get better service, a better price on a little trinket. But since it will work and will be easier than other things we will use it more and more. Out of the sudden the world will use 3 currencies, not 2. Right now people use their local currency, and they use US dollars. If they know or not. The US dollar is being used to buy lots of stuff. Like Oil etc. It is the currency that steps in when local currencies have flaws. Digital Renminbi will be a 3rd currency. Driven by ease of use and Security. Many people don’t like the dominance of Amazon. But they end up using them anyway since the experience is just better than those with other services. Same with Google. People don’t like China and how it ignores our beloved Democracy. But when you need a geiger counter board you get it from China. A working digital currency can be so much cheaper than other means of transactions. I pay 3% for credit cards and 1.3% for international wires. I’d rather keep that money. I would gladly use Chinese Money if my loss would be 0.5%. Technically charges as low as 0.01% are possible. The amount of data you need to transfer is really really tiny. Think oil tankers full of condensed water mist. One of these drops that are so so small that they can float is your transaction. The oil tanker is the Internet pipelines that people have to watch 4K TV. The software you only need to create once. Cost is in the backbone systems. Here we think water mist drops and Water bottles. A little bit of work, but not much.

Other countries will not be able to get a digital currency going. Facebook tried with Libra, and failed.

This might happen by 2030.

Lawyer Art

art economy

Christopher Schulz makes Sharks. Chrome Sharks. Sometimes he adjuncts the animals alongside weapons parts.

It is nice to look at. Art for men. Older men. Or other men that engage in inner monologues about their fading vigor.

Good for the market is that some of these men have money. And offices where they can place these objects. They do not know that with the purchase of a piece like this they communicate their insecurities. All they see the novelty of the combination of Chrome and Shark. That must be Art. Art they can understand. So it is good. And then it is expensive. They can afford it. And they have taste. Are modern. Their Grandma would not like it. She would see a shark in chrome. They like that about the work. She likes dolphins in porcelain more than sharks in chrome. Actually they are the same.

Nice to look at. Kitsch.

urban devastation week

economy politics technology

Two events obliterated urban landscapes around the globe this week. Ammonium nitrate not stored properly will become a bomb. It happened many times before. 75 years ago a single bomb devastated a Japanese town.

Not violent, and so far unnoticed by press and pundits is another change: Trump directing his “lets break things to get reactions” spiel on WeChat. (And tiktok). Outside of China WeChat is not widely understood. I have never seen or used it. Neither have I handled Fertilizer components or enriched uranium. WeChat is how people do everything in China. Banning WeChat for a Chinese person is like banning the Internet for you. Why would that change the urban landscape? Much of the building boom in DTLA is fueled by Chinese investments. Chinese money erected lots of glas towers, hoping to sell at least parts of them to Chinese citizens. An A380 can get you from the Middle Kingdom to Hollywood in great comfort and less than a day. Sunshine, stars, America. That is was something to go for. But without WeChat it suddenly is no longer interesting: What good is it, if you see Jonny Depp driving by (you never do, but it sells real estate) and you can not send your friends pictures. What good is it, if the sun is always shining, but non of your family members can reach you.

For reasons that don’t matter, I care for a specific building in Downtown LA. So I check occasionally how many listings there are in Zillow:

  • May 15 – 11 listings
  • May 29 – 14 listings
  • Jun 12 – 14 listings
  • July 11 – 20 listings
  • Aug 8 – 24 listings 

This doubling in inventory has nothing to do with the impact of 45 attempting to mess with Chinese online entities. It would take months to show up in these numbers.

Prices didn’t change much. They seem to slowly decline. But no real big changes. Yet. Since money and its value is questionable right now and going forward they might never really go down. I think that – depending on what individual situations will be going forward – there will be spikes and good deals to be had. There is certainly pressure building from the circumstances.

Banning an App seems like nothing, but it is something. People exist through their screens. It is reality for them. That is stupid. But something being stupid never has stopped people from following it, as long as it tickles enough of their fancies they will continue to go where it feels good …

“beyond payments”

economy technology

is Wirecards motto. Those jokers ran a company, and a scheme where they pretended that billions of Euros would be generated by some daughter company in Dubai. That money then was supposedly in the Philippines. Funny that that that division in the middle east was the only part of Wirecard that made all that money. And it was growing. So the Wirecard stock price when up and up. The FT had some articles about stuff being sketchy. I think, no interest to peek behind their paywall. They seem to play the role of Harry Markopolos in this re enactment of the Madoff story: A crisis puts pressure on a Ponzi Scheme until it collapses. Crazy that it is only always one of these that gets exposed.

Not so great is the role of EY KPMG PWC and and Deloitte. Wirecard was running this scheme since 2015. And only in 2020 did KPMG notice. Beyond Responsibility would be a better subtitle for this.

Principles by Ray Dalio


I am usually suspect of people like Ray Dalio. Not because he is very rich. But he seems to have the material that cult leaders are made from. If you look for somebody to follow then he could be a candidate. I still enjoyed “Principles: Life and Work”. It is long, and the later part is more a manual for people working for him than a book for public. But he builds a mostly coherent case for a specific view on humans and – which is not that common – derives from his insights clear guidelines on how to structure interactions. The book is interesting in this respect. I don’t agree on all points, others are really valuable. I am already sad that I forgot so many of them. I am not aspiring to make as much money as he did. But I imagine that if I would have remembered one or another of his Principles and put them to work I might end up this decade being richer than I would have otherwise.

It is a wonderful gesture that Mr Dalio takes the time to write all this down. He does not have to. He does not have to do anything. That he put all the work in to document his process is really amazing.

I would recommend giving what he has to say some attention.