Tesla: The Improvisation Debt

Tesla: The Improvisation Debt
By Jean-Louis Gassée
Aug 29 2016
<https://mondaynote.com/tesla-the-improvisation-debt-b6358721a52a>

No one would have given Elon Musk the money to start a “normal” car company. And yet, Musk went ahead, improvised, vaulted over one obstacle after another and created an iconic electric car company. In doing so, Musk incurred a deeply rooted Improvisation Debt, one he must now pay back in order to free himself from his heroic low-volume car-making past and become a truly industrial, million cars a year enterprise.

Critics love to point to Tesla’s misses. They’re right, Elon Musk’s company has a history of missed deadlines, quarterly deliveries below plan, higher than planned cash consumption and other sins, all summarized in an August 15th WSJ article:

“In the past five years, though, Tesla has fallen short of more than 20 projections made by Mr. Musk, ranging from car-production output to financial targets, according to an analysis by The Wall Street Journal. The company missed 10 of his stated goals by an average of nearly a year.”

Undoubtedly accurate but missing a larger point: In spite of its minuscule size (50K cars in 2015, perhaps 80K this year, vs 62M cars sold worldwide) and its many stumbles, Tesla has achieved a unique status, one for which the oft-abused iconicadjective is fully justified.

What Elon Musk has accomplished with Tesla goes beyond good and bad company numbers. Electric cars used to be associated with moderation bordering on self-denial. With the Model S, Musk has given us an electric car that looks like the luxury car that it is… and is a blast to drive (I know, my spouse lets me drive hers). As an impolitic Valley wag once said: Before Tesla, e-cars were for vegetarians; Musk made an electrifying chariot for carnivores.

I have no data on eating habits in my Palo Alto neighborhood, but this small university town has become Tesla City. No block without a Tesla in a driveway, sometimes two. Ten Teslas or more in the garage at work (plus one or two BMW i3s, and the odd Chevy Volt, Nissan Leaf or electric Kia). Granted, Palo Alto holds money and green politics in unusually high concentrations, but it wasn’t that long ago that it was Prius City, an early adopter of what became the successful hybrid genre.

Looking at Tesla’s trajectory, I’m reminded of the original 1984 128K Mac. It was a tour-de-force, complete with a LaserWriter driver and an AppleTalk networking stack, but its improvised software foundation lacked a fully functional OS. The Mac languished and almost died until Steve Jobs’ return for Apple 2.0, with a full team of computer scientists who finished the job. They made good on the Improvisation Debt by sliding a Unix foundation under the edifice and gave use the modern Mac.

Is this what we see, today, with Tesla?

Elon Musk didn’t start Tesla. Martin Eberhard and Mark Tarpenning did, in 2003. But it’s Musk who swooped in, changed management, and saved the company by investing $70M of his own money and leading rounds of financing. By January 2009, Tesla had narrowly avoided bankruptcy, raised $187M, and delivered a grand total of…147 cars.

A few months later, Tesla announced the Model S and took the company public, raising $226M in its IPO. Of course, the Model S was late, by a lot: First deliveries didn’t start until June 2013. Another model, the X, a quasi-SUV derivative of the S was announced in February 2012 and delivered more than three years later, in September 2015. Plagued by bugs, mostly because of it unusual “falcon doors”, the Mode X led Musk to confess his hubris — in those very words — an honest admission well received by his many fans.

And the Tesla fans spoke loudly, putting down 375K pre-orders for the upcoming Model 3, a $35K (or a little more) sedan with a 200 mile range, to be delivered “mid to late” 2017 (or a little later).

With this in mind, we can now turn to skeptics who doubt Elon Musk’s ability to join the league of “real” automakers, to fulfill the 375K Model 3 pre-orders, to make 1M or more cars per year in the 2018–2019 time frame. With Musk’s preternatural skill to overcome mistakes, delays, and cash incineration, is there any doubt that Tesla will find the resources, people, time, and money required for Tesla 2.0?

The answer can be found in two places.

[snip]

Re: Don’t buy anything Apple-related right now (everything is changing)

[Note:  This comment comes from friend Chuck Jackson.  DLH]

From: Charles Jackson <clj@jacksons.net>
Subject: Re: [Dewayne-Net] Don’t buy anything Apple-related right now (everything is changing)
Date: August 29, 2016 at 10:06:33 AM EDT
To: dewayne@warpspeed.com


This one’s different, trust us. Our new event for New York is focused on quality, not quantity.

 

 

Why? USB-C.

 


A reasonable article.  But, it fails to mention that the USB-C connectors and cables also work with Thunderbolt 3 ports.  

See https://thunderbolttechnology.net/blog/thunderbolt-3-usb-c-does-it-all.  The claim is for 40 Gbps.  Starlink sells a 40 Gbps cable—0.5 meters long.  Their 1.0 meter long cable delivers “only” 20 Gbps!

I think the bottom line of the article is correct.  Apple’s move to USB-C will speed the switch to USB-C ports and cables.

Chuck 

Don’t buy anything Apple-related right now (everything is changing)

 

By NATE SWANNER

 

Aug 28 2016

 

<

http://thenextweb.com/insider/2016/08/28/apple-usb-c-lightning-change/

>

 

The Anthropocene epoch: scientists declare dawn of human-influenced age

The Anthropocene epoch: scientists declare dawn of human-influenced age
Experts say human impact on Earth so profound that Holocene must give way to epoch defined by nuclear tests, plastic pollution and domesticated chicken
By Damian Carrington
Aug 29 2016
<https://www.theguardian.com/environment/2016/aug/29/declare-anthropocene-epoch-experts-urge-geological-congress-human-impact-earth>

Humanity’s impact on the Earth is now so profound that a new geological epoch – the Anthropocene – needs to be declared, according to an official expert group who presented the recommendation to the International Geological Congress in Cape Town on Monday.

The new epoch should begin about 1950, the experts said, and was likely to be defined by the radioactive elements dispersed across the planet by nuclear bomb tests, although an array of other signals, including plastic pollution, soot from power stations, concrete, and even the bones left by the global proliferation of the domestic chicken were now under consideration.

The current epoch, the Holocene, is the 12,000 years of stable climate since the last ice age during which all human civilisation developed. But the striking acceleration since the mid-20th century of carbon dioxide emissions and sea level rise, the global mass extinction of species, and the transformation of land by deforestation and development mark the end of that slice of geological time, the experts argue. The Earth is so profoundly changed that the Holocene must give way to the Anthropocene.

“The significance of the Anthropocene is that it sets a different trajectory for the Earth system, of which we of course are part,” said Prof Jan Zalasiewicz, a geologist at the University of Leicester and chair of the Working Group on the Anthropocene(WGA), which started work in 2009.

“If our recommendation is accepted, the Anthropocene will have started just a little before I was born,” he said. “We have lived most of our lives in something called the Anthropocene and are just realising the scale and permanence of the change.”

Prof Colin Waters, principal geologist at the British Geological Survey and WGA secretary, said: “Being able to pinpoint an interval of time is saying something about how we have had an incredible impact on the environment of our planet. The concept of the Anthropocene manages to pull all these ideas of environmental change together.”

Prof Chris Rapley, a climate scientist at University College London and former director of the Science Museum in London said: “The Anthropocene marks a new period in which our collective activities dominate the planetary machinery. 

“Since the planet is our life support system – we are essentially the crew of a largish spaceship – interference with its functioning at this level and on this scale is highly significant. If you or I were crew on a smaller spacecraft, it would be unthinkable to interfere with the systems that provide us with air, water, fodder and climate control. But the shift into the Anthropocene tells us that we are playing with fire, a potentially reckless mode of behaviour which we are likely to come to regret unless we get a grip on the situation.” Rapley is not part of the WGA.

[snip]

FBI says foreign hackers penetrated state election systems

FBI says foreign hackers penetrated state election systems
By Michael Isikoff, Chief Investigative Correspondent
Aug 29 2016
<https://www.yahoo.com/news/fbi-says-foreign-hackers-penetrated-000000175.html>

The FBI has uncovered evidence that foreign hackers penetrated two state election databases in recent weeks, prompting the bureau to warn election officials across the country to take new steps to enhance the security of their computer systems, according to federal and state law enforcement officials.

The FBI warning, contained in a “flash” alert from the FBI’s Cyber Division, a copy of which was obtained by Yahoo News, comes amid heightened concerns among U.S. intelligence officials about the possibility of cyberintrusions, potentially by Russian state-sponsored hackers, aimed at disrupting the November elections.

Those concerns prompted Homeland Security Secretary Jeh Johnson to convene a conference call with state election officials on Aug. 15, in which he offered his department’s help to make state voting systems more secure, including providing federal cyber security experts to scan for vulnerabilities, according to a “readout” of the call released by the department.

Johnson emphasized in the call that Homeland Security was not aware of “specific or credible cybersecurity threats” to the election, officials said. But three days after that call, the FBI Cyber Division issued a potentially more disturbing warning, entitled “Targeting Activity Against State Board of Election Systems.” The alert, labeled as restricted for “NEED TO KNOW recipients,” disclosed that the bureau was investigating cyberintrusions against two state election websites this summer, including one that resulted in the “exfiltration,” or theft, of voter registration data. “It was an eye opener,” one senior law enforcement official said of the bureau’s discovery of the intrusions. “We believe it’s kind of serious, and we’re investigating.”

The bulletin does not identify the states in question, but sources familiar with the document say it refers to the targeting by suspected foreign hackers of voter registration databases in Arizona and Illinois. In the Illinois case, officials were forced to shut down the state’s voter registration system for ten days in late July, after the hackers managed to download personal data on up to 200,000 state voters, Ken Menzel, the general counsel of the Illinois Board of Elections, said in an interview. The Arizona attack was more limited, involving malicious software that was introduced into its voter registration system but no successful exfiltration of data, a state official said.

The FBI bulletin listed eight separate IP addresses that were the sources of the two attacks and suggested that the attacks may have been linked, noting that one of the IP addresses was used in both intrusions. The bulletin implied that the bureau was looking for any signs that the attacks may have been attempting to target even more than the two states. “The FBI is requesting that states contact their Board of Elections and determine if any similar activity to their logs, both inbound and outbound, has been detected,” the alert reads. “Attempts should not be made to touch or ping the IP addresses directly.”

“This is a big deal,” said Rich Barger, chief intelligence officer for ThreatConnect, a cybersecurity firm, who reviewed the FBI alert at the request of Yahoo News. “Two state election boards have been popped, and data has been taken. This certainly should be concerning to the common American voter.”

Barger noted that that one of the IP addresses listed in the FBI alert has surfaced before in Russian criminal underground hacker forums. He also said the method of attack on one of the state election systems — including the types of tools used by the hackers to scan for vulnerabilities and exploit them — appear to resemble methods used in other suspected Russian state-sponsored cyberattacks, including one just this month on the World Anti-Doping Agency.

[snip]

FCC Loses It’s Muni Broadband Test Case. What Comes Next?

FCC Loses It’s Muni Broadband Test Case. What Comes Next?
By Harold Feld
Aug 16 2016
<http://www.wetmachine.com/tales-of-the-sausage-factory/fcc-loses-its-muni-broadband-test-case-what-comes-next/>

Sometimes the law is clear. Sometimes it isn’t.

While that seems obvious, we often miss it in policy debates. But it is rather important to keep in mind when reading Tennessee v. FCC. In a case released August 10, the Sixth Circuit reversed the Federal Communications Commission (FCC) 2015 Order preempting restrictions the state of Tennessee and the state of North Carolina imposed on their municipalities with regard to providing broadband service. While Commissioners Pai and O’Reilly are certainly entitled to their victory laps, it is equally important to applaud Chairman Wheeler and Commissioners Rosenworcel and Clyburn for doing what they believed was both the right policy and the right call under the law. The petitions from the City of Wilson, NC and from the Electric Power Board of Chattanooga, TN raised novel questions of law. The FCC’s Order was a test case. On a very narrow and murky legal question, the FCC majority bet wrong — at least according to the 6th Circuit.

For myself, not surprisingly, I thought the FCC majority had the better argument. But I can’t say the Sixth Circuit was utterly wrong in holding the contrary. The limits of the Tenth Amendment and preemption power are generally unclear. The interpretation of Section 706 (47 U.S.C. 1302) as providing authority to the FCC remains relatively undefined. Based on the language in the dissent in Verizon v. FCC, which inspired munibroadband proponents to bring the petition and support the case, it looked like a good shot. Similarly, the facts of the case — already existing munibroadband providers, clear demand for them to expand their services, a willingness to expand service but for the relevant state laws restricting service — made this a favorable fact pattern.

Unfortunately, sometimes the best bet in the world doesn’t pay off. But that is why people bring test cases — to try to resolve questions in the law that move policy in the direction those bringing the case favor. It is neither an overreach nor illegal for Petitioners to bring test cases, to have an agency resolve them, and for the agency and those who brought the petition to the agency to defend them in court. To the contrary, this is how the rule of law works under the principles of the common law.

I stress this point because whether you bring conservative test cases to challenge laws and test limits or progressive cases to challenge laws and test limits — or cases that don’t easily fit in the conservative/progressive paradigm — we want agencies to actually address these cases in a timely fashion. As I remarked many years ago, when the FCC’s efforts to encourage competition in the 700 MHz auction resulted in a mixed result, we need  agencies to be willing to actually address novel circumstances and try new things because otherwise the law will ossify and we lose one of the most important elements of administrative law, the ability of an agency to respond to changing circumstances and provide a suitable record for Congressional action where necessary.

Bellow, I give a brief recap of the case and a forecast on what comes next for the muni broadband movement . . .

I’ve been talking about the fight between muni broadband and incumbent providers for over a decade now. The idea of municipal broadband is a fairly straightforward one. A local government, for whatever reason, decides to build a broadband network or contribute assets to it or enter into a contract with a non-incumbent provider either because the locality doesn’t have a local provider or because they don’t like the local service or to attract business or whatever. A lot of people like this idea for various reasons (I recommend reading Susan Crawford and Chris Mitchell on the subject if you want to know more). I personally believe that every locality ought to have the right to do what it pleases in building out local infrastructure, but that any locality needs to weigh such an investment with care, and determine whether it makes sense or what flavor of public broadband makes sense for that localities specific purposes (compare, for example, the full soup-to-nuts residential triple play ISP of Lafayette, LA, with NYC contract with LinkNYC for local hotspots to get a sense of the potential variety of “muni broadband” systems).

Needless to say, incumbent providers don’t like competition at all, let alone competition provided by local government. Incumbents have therefore pushed laws at the state level barring localities from providing commercial broadband service, or putting in lots of barriers making it really difficult for localities to provide service. At this point, about 20 states have some kind of restriction on the books.

[snip]

The Fundamental Reason Buffett Beats the Market

[Note:  This item comes from friend David Rosenthal.  DLH]

The Fundamental Reason Buffett Beats the Market
By Noah Smith
Aug 24 2016
<https://www.bloomberg.com/view/articles/2016-08-24/the-fundamental-reason-buffett-beats-the-market>

Eugene Fama and Richard Thaler, two legendary finance professors at the University of Chicago, recently had a debate about whether markets are efficient. Fama was generally perceived to have gotten the better of the exchange, and I tend to agree with him — the efficient markets hypothesis isn’t strictly true, but it’s a great baselinefor thinking about markets.

But Thaler was probably being too nice in the debate. There are a number of holes in the EMH that go beyond the problems that the two brought up. One of these is the persistent success of investors who rely on fundamental analysis — the technique of making bets about companies’ true value by looking at their financial statements.

The so-called semi-strong form of the EMH says that market prices already reflect all publicly available information. In other words, making a profit just by looking at a company’s income statement and balance sheet should be impossible, unless the market is somehow dysfunctional.

That semi-strong thesis contradicts some of the most classic investing advice. Benjamin Graham and David Dodd’s book “Security Analysis” has been the bible of stock-pickers for almost a century. Titans of investing such as Warren Buffett have very explicitly made their fortunes using techniques based on its principles. As Buffett explained back in 1984, an efficient market wouldn’t have allowed this kind of success:

Buffett…presents nine different funds that have beaten the market averages over long periods, all sharing only two qualities: a value strategy and a personal connection to Buffett. He emphasizes that they weren’t cherry-picked with the benefit of hindsight. In closing, he boldly predicts “those who read their Graham and Dodd will continue to prosper.”

Buffett, who said this in a debate about the efficient market hypothesis, wasn’t being as gentle as Thaler.

Fundamental analysis succeeds if two things are true. First, the market has to have overlooked important things about a company’s value — things that can be observed by carefully scrutinizing publicly available information. Second, the market has to eventually realize the company’s true value. This second step is important because if the market never catches on, you would have to hold the stock for a very long time in order to make a profit from dividends and share buybacks. If the market catches on, maybe even slowly, you can cash out and get your profits in a year or two — very important if you’re managing a fund and need to show annual gains.

Now, there’s no reason that fundamental analysis should be restricted to the value investing techniques outlined in Graham and Dodd. In principle, any technique that consistently extracts valuable but unrecognized information from balance sheets, income statements and the like counts as a big violation of the efficient markets principle. And a couple of financial economists have a new paper showing that a very simple, general fundamental analysis technique — perhaps even more universal than Graham and Dodd’s — consistently predicts the way that a stock’s price will change during the next two years. If this result holds up, it’s a big blow to Eugene Fama’s side of the debate.

[snip]

Hidden assets, hidden costs

[Note:  This item comes from friend David Rosenthal.  DLH]

“Globalization’s advocates – and they are very many, including all the varied categories of worthies on both sides of the Atlantic and beyond who preside over almost all respectable academic institutions and elite gatherings – habitually celebrate its transfer of income from higher-income to lower-income countries while disregarding the overwhelming evidence that much of that consists of the transfer of income from lower-income people in higher-income countries to higher-income people in lower-income countries. “

Hidden assets, hidden costs
By EDWARD N. LUTTWAK
Aug 16 2016
<http://www.the-tls.co.uk/articles/public/hidden-costs/>

The Panama Papers opens with an engaging first-person account by Bastian Obermayer, a well-known investigative journalist for the Süddeutsche Zeitung, of how the whole story started: an unsolicited email from a John Doe offering “data”. As soon as Obermayer accepted the twin conditions of total anonymity and encrypted communications, he received “a big bunch of documents”.

These mostly concerned the alleged smuggling of $65 million out of Argentina on behalf of its President, Cristina Fernández de Kirchner – hardly startling news if true, given the country and the person but the documents also included what really mattered: full corporate information on the 123 name-plate-only (“shell”) companies that were used to zig-zag the money surreptitiously around the world, all of them formed by a Panamanian law firm called Mossack Fonseca.

If anyone tried to work back from company number 123 to the original money-sending company by way of the 122 companies in between, a lifetime of investigations might not do it, especially because those 122 companies could be registered anywhere in the world, not restricted to the places where Mossack Fonseca had and still have offices, to wit: Anguilla, the Bahamas, Belize, the British Virgin Islands, Costa Rica, Cyprus, Hong Kong, Malta, the Netherlands, Panama, Samoa, the Seychelles, the United Kingdom and two US states: Nevada and Wyoming. Those companies, moreover, could be legally incorporated yet have no identifiable owners at all, because their equity might all be vested in nameless “bearer” shares. Not even the ultra-formidable billionaire Paul Singer, who had bought up heavily discounted Argentine debt, had refused “haircut” payouts and was employing lawyers and investigators everywhere to track down anything of value that he could impound (he did succeed with an Argentine naval vessel), could do anything about the $65 million sitting tantalizingly close to him in Nevada – but now all the data was revealed (too late for Singer because Argentina’s new President, Mauricio Macri, also a Mossack Fonseca client as it happens, had already decided to settle and pay him off, along with all the other hold-out claimants).

At this point Obermayer asked “John Doe” if his data was all about Argentina. That elicited more documents, related to a Russian and a German, the former being the extraordinary figure of Sergei Roldugin, a distinguished cellist with no history of business activity whatsoever, who unaccountably supposedly owns companies that transact sums of up to $850 million at a time (and yes, he happens to be Vladimir Putin’s intimate friend and the godfather of one of the Russian President’s daughters), and the latter being Hans-Joachim K. [sic], a Siemens manager who is recorded as receiving almost $500 million in gold at the Société Générale bank in the Bahamas in the autumn of 2013, which is passing strange because Siemens supposedly confessed to, and expunged, its mega-bribery and mega-slush fund sins five years before that.

This was the beginning of a flood of 11.5 million documents containing the records of the formation and transactions of 214,000 nameplate companies, including full documentation of their initiators (passport data page scans, etc), all of whom are, or are serving, tax avoiders – in ways legal, but unethical and duplicitous for politicians, prelates and professedly responsible “stake-holder” entre­preneurs and business executives – or else fraudulent tax-evaders and/or thieving rulers. Faced with this immensity of revelations, Obermayer right away enlisted his colleague Obermaier (there are office jokes) and the Süddeutsche Zeitung as a whole enlisted the insufficiently celebrated International Consortium of Investigative Journalists, whose members belong to some 100 media organizations around the world, mostly newspapers. The printed press may be dying but if so the Panama Papers revelations are a magnificent swansong.

At just about this point (we are still in the Prologue), readers will have realized that this is an extremely important book – this decade’s most important rather than this year’s – and not because it uncovers the thoroughly unethical behaviour of politicians in countries as varied as Iceland (the Prime Minister of which briefly resigned – though he will be contesting the next election – and was only one of several ministers and ex-ministers there who had availed themselves of the services of Mossack Fonseca) and Malta, with plenty of the more predictable places in between, and nor even because it uncovers the exact machinery of corporate and personal tax avoidance and tax evasion, but rather because it offers an entirely new perspective on the greatest question of the age: why has income distribution in the more developed economies become increasingly unequal pari passu with the advance of globalization?

[snip]