378 (17 July 2019)

Welcome!  The articles below caught my attention this week.  What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  Article titles preceded by [SR] require a subscription.

(9 July 2019):How the Department of Defense Bankrolled Silicon ValleyThe New York Times

——–[A review of The Code: Silicon Valley and the Remaking of America, by Margaret O’Mara.]  “How an otherwise unexceptional swath of suburbia came to rule the world is the central question animating ‘The Code,’ Margaret O’Mara’s accessible yet sophisticated chronicle of Silicon Valley. An academic historian blessed with a journalist’s prose, O’Mara focuses less on the actual technology than on the people and policies that ensured its success.”  In doing so, she has much to say about the roles of the Defense Department, Stanford University, and “California’s longstanding prohibition on noncompete clauses” that helped unleash creativity and left other would-be Silicon Valleys behind.

********The book appears to provide a good illustration of the invisible forces in action.  I first learned of The Code from the review [SR]How Green Was the ValleyThe Wall Street Journal.  While lifting up many of the same points as the review in the Times, it notes that The Code tells “the Valley’s story with a skeptical eye, capturing is unlikely blossoming without being caught up in its self-serving myths, including the idea that it embodies pure meritocracy.  With individual profiles that provide glimpses into the experiences of underrepresented groups, Ms. O’Mara illustrates how the Valley’s networks were insular and self-perpetuating, to the exclusion of women, African-Americans and Latinos.”

(10 July 2019):Road-Tripping With The Amazon NomadsThe Verge

——–An Amazon nomad is “part of a small group of merchants who travel the backroads of America searching clearance aisles and dying  chains for goods to sell on Amazon.  Some live out of RVs and vans, moving from town to town, only stopping long enough to pick the stores clean and ship their wares to Amazon’s fulfillment centers.”  As such, they are part of “more than 2 million merchants who use the company’s platform as their storefront and infrastructure.  Some of these sellers make their own products, while other practice arbitrage, buying and reselling wares from other retailers.  Amazon has made this easy too, first by launching Fulfillment by Amazon, which allows sellers to send their goods to company warehouses and have Amazon handle storage and delivery, and then with an app that lets seller scan goods to instantly check whether they’d be profitable to sell on the site.”  As one nomad comments, “It’s almost like I’m the front end of the business and Amazon is just an extension of my arm . . . I find the products, and then they mail them to people.”

********This article says a lot about our consumption-driven lives.  Interestingly, the Amazon nomads are often offended, almost nauseated, by the surfeit of goods that fill their waking hours.  The author of the article provides a glimpse of some to the things you will find within: “When you spend weeks on end traveling the strip malls and big-box stores of America, you start to appreciate small differences in what can seem like archipelagos of sameness: the way the Targets get cleaner as you approach corporate headquarters in Minneapolis; the novelty of an unusually small Walmart in Indiana; the McDonald’s in Pomeroy, Ohio, that served pizza, the remainder of an abandoned experiment in the ‘80s.”

(11 July 2019):As Fresh Water Grows Scarcer, It Could Become a Good InvestmentThe New York Times

——–“Water is easy to take for granted.  It falls from the sky, and, thought it’s vital, we sometimes treat it as if it’s worthless.  How often have you seen sprinklers running in the rain?  Yet the prospect of shortages in the years ahead could make water a precious commodity.  That represents an opportunity for investors.  A small group of traditional mutual funds and exchange-traded funds already invest in it, mainly in companies that contribute to the delivery, testing and cleaning of potable water.  Those companies stand to grow as governments around the globe strive to stem the expected water shortfalls.”

********The article reports on recent rates of return on water funds—quite good—and various ways of constructing such funds.  It is noteworthy that “One way water investments differ from those in some other sectors is their greater exposure to regulatory and political risk.  In the developed world, water supplies are often closely regulated, and in the United States, governments are both big customers and potential competitors.”  Among other things, the article  raises ethical issues around profiting from a commodity that is essential for human life.  The article concludes with a statement of the “diamond-water paradox” developed by Adam Smith in The Wealth of Nations.

********A nice companion article is [SR]Neighbors Face Off Over Texas’ Other Lucrative Resource: WaterThe Wall Street Journal.  The case discussed examines the desire of the Williams family of the Fort Stockton, Texas, area, “to pipe as much as 25 million gallons a day away from its property at the edge of the Chihuahuan Desert and sell it to oil companies, cities and anyone else with deep pockets and an unquenchable thirst.  The plan is pitting neighbor against neighbor and rekindling a debate over who should control fresh water in aa bone-dry region.”  In the process of developing argument, the presumably old saw “whiskey is for drinking, water is for fighting” is related.  An important factor in legal wrangling around water is that “Texas follows the rule of capture, a common law tenet dating to Henry IV that holds anything below a property belongs to its owner.”

********The Wikipedia entry for “Rule of capture”  is clear and stunning.  “The general rule is that the first person to ‘capture’ . . . a resource” like groundwater, oil, gas, and game animals owns that resource, so “landowners who extract or ‘capture’ groundwater, oil, or gas from a well that bottoms within the subsurface of their land acquire absolute ownership of the substance, even if it is drained from the subsurface of another’s land.  The landowner that captures the substance owes no duty of care to other landowners.”

(12 July 2019):Why Carmakers Want You to Stop Buying Cars, SomedayBloomberg Businessweek

********This is a Bloomberg QuickTake.  The short answer to the question seems to be, it will be more profitable for them.  What leads to that conclusion, though, is the growth of Mobility as a Service (MAAS).  This involves “a network of coordinated forms of transportation that each handle the parts of a journey in the cheapest and most convenient way.”  Eventually, “Car payments and parking fees will be replaced by buying transportation by the mile on a subscription service similar to Netflix.”  It is estimated that “mobility services could grow to a $10 trillion business, with profit margins double the 10% that automakers clear in their best years in their traditional business.”  Presumably this is why companies like Lyft and Uber, though consistent money losers, have significant market value.

May you have a good week!

Bruce 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s