Depreciation

Source

More than three years ago, based on Paul Butler's The problem with bitcoin miners, I wrote Generally Accepted Accounting Principles. The TL;DR was that the economic life of Bitcoin mining rigs was estimated at 16 months, as Moore's law in a competitive ASIC market rapidly generated more power-efficient rigs. But the Bitcoin miners' accounts were using 5-year straight-line depreciation for their rigs, which was significantly increasing their nominal profits.

Below the fold I look at the same problem unfolding in the heart of the AI bubble.

Cherry-picking

Source

Via Barry Ritholtz we find this infographic entitled Top Performing S&P 500 Stocks showing the best total return over the past 5, 10, 15 and 20 years. Ritholtz sourced it from Ranked: The Top Performing S&P 500 Stocks in the Last Two Decades By Marcus Lu with graphic design by Miranda Smith.

In each case, Nvidia is the best performing stock, and it is the only stock to appear in all four periods. Sounds great, doesn't it? Why wouldn't you just hold NVDA all the time and be guaranteed to beat the market?

But follow me below the fold for more detail from someone who has been long NVDA for more than three decades..

Accelerated Computing

Source

One big problem of the economies of the US and the UK is the cult of the CEO, and the resulting flood of CEO hagiographies that appear after a surge in their company's stock price. These aren't harmless fluff pieces, they contribute to a CEO mindset that is profoundly destructive — see Elon Musk for one example. Will Hutton writes:

But decades of being congratulated and indulged for the relentless pursuit of their own self-interest has turned the heads of too many of our successful rich. They really believe that they are different: that they owe little to the society from which they have sprung and in which they trade, that taxes are for little people. We are lucky to have them, and, if anything, owe them a favour.

Below the fold I continue the "Old man yells at cloud" theme of recent posts by trying to clarify an aspect of the current Jensen Huang hagiography.

Engineering For The Long Term

Content Warning: this post contains blatant self-promotion.

Contributions to engineering fields can only reasonably be assessed in hindsight, by looking at how they survived exposure to the real world over the long term. Four of my contributions to various systems have stood the test of time. Below the fold, I blow my own horn four times.

The 50th Asilomar Microcomputer Workshop

Source

Last week I attended the 50^th Asilomar Microcomputer Workshop. For a crew of volunteers to keep a small, invitation-only, off-the-record workshop going for half a century is an amazing achievement. A lot of the credit goes to the late John H. Wharton, who chaired it from 1985 to 2017 with one missing year. He was responsible for the current format, and the eclecticism of the program's topics.

Brian Berg has written a short history of the workshop for the IEEE entitled The Asilomar Microcomputer Workshop: Its Origin Story, and Beyond. It was started by "Three Freds and a Ted" and one of the Freds, Fred Coury has also written about it in here.Six years ago David Laws wrote The Asilomar Microcomputer Workshop and the Billion Dollar Toilet Seat for the Computer History Museum.

I have attended almost all of them since 1987. I have been part of the volunteer crew for many, including this one, and have served on the board of the 501C3 behind the workshop for some years.

This year's program featured a keynote from Yale Patt, and a session from four of his ex-students, Michael Shebanow, Wen-mei Hwu, Onur Mutlu and Wen-Ti Liu. Other talks came from Alvy Ray Smith based on his book A Biography of the Pixel, Mary Lou Jepsen on OpenWater, her attempt to cost-reduce diagnosis and treatment, and Brandon Holland and Jaden Cohen, two high-school students on applying AI to the Prisoner's Dilemma. I interviewed Chris Malachowsky about the history of NVIDIA. And, as always, the RATS (Rich Asilomar Tradition Session) in which almost everyone gives a 10-minute talk lasted past midnight.

The workshop is strictly off-the-record unless the speaker publishes it elsewhere, so I can't discuss the content of the talks.

Competition-proofing

Source

Apart from getting started in the midst of one of Silicon Valley's regular downturns, another great thing about the beginnings of Nvidia was that instead of insisting on the "minimum viable product" our VCs, Sutter Hill and Sequoia, gave us the time to develop a real architecture for a family of chips. It enabled us to get an amazing amount of functionality into a half-micron gate array; I/O virtualization, a DMA engine, a graphics processor that rendered curved surfaces directly, not by approximating them with triangles, a sound engine and support for game controllers. As I write, after a three decade-long history of bringing innovations to the market, Nvidia is America's third most valuable company.

I've written several times about how in pursuit of a quicker buck, VCs have largely discarded the slow process of building an IPO-ready company like Nvidia in favor of building one that will be acquired by one of the dominant monopolists. These VCs don't support innovation. Even if their acquisition-bound companies do innovate in their short lives, their innovations are rarely tested in the market after the acuisition.

Below the fold I discuss a new paper that presents a highly detailed look at the mechanisms the dominant companies use to neutralize the threats startups could pose to their dominance.

Autonomous Vehicles: Trough of Disillusionment

Jeremykemp CC BY-SA 3.0, Link

This is the famous Gartner hype cycle and it certianly appears that autonomous vehicles are currently in the Trough of Disillusionment. Whether they will eventually soar up to the Plateau of Productivity is unknown, but for now it is clear even to practitioners that the hype bubble they have been riding for years has burst.

Below the fold I try to catch up with the flood of reporting on the autonomous vehicle winter triggered by the bursting of the bubble.

Why Worry About Resources?

The attitude of the crypto-bros and tech more generally is that they are going to make so much money that paying for whatever resource they need to make it will be a drop in the ocean. Amd that externalities such as carbom emissions are someone else's problem.

I discussed Proof-of-Work's scandalous waste of energy in my EE380 talk, Can We Mitigate Cryptocurrencies' Externalities? and elsewhere, since 2017 often citing the work of Alex de Vries. Two years ago de Vries and Christian Stoll's Bitcoin's growing e-waste problem pointed out that in addition to mining rig's direct waste of power, their short economic life drove a massive e-waste problem, adding the embedded energy of the hardware to the problem.

de Vries Fig. 1

Now, de Vries' Bitcoin’s growing water footprint reveals that supporting gambling, money laundering and crime causes yet another massive waste of resources.

But that's not all. de Vries has joined a growing chorus of researchers showing that the VC's pivot to AI wastes similar massive amounts of power. Can analysis of AI's e-waste and water consumption be far behind?

Below the fold I discuss papers by de Vries and others on this issue.

Prof. Hilary Allen On Venture Capital

After writing Predatory Pricing, via David Gerard, I found Prof. Hilary Allen's Interest Rates, Venture Capital, and Financial Stability. In the abstract she writes:

This Article illuminates one path through which the prolonged period of low interest rates from 2009-2021 has impacted financial stability: it traces how yield-seeking behavior in the wake of the Global Financial Crisis and Covid pandemic led to a bubble in the venture capital industry, which in turn spawned a crypto bubble as well as a run on the VC-favored Silicon Valley Bank.
...
It argues for increased monitoring of the venture capital industry by financial stability regulators, given that venture capital is well-positioned to generate asset bubbles now and in the future. More specifically, it argues for more aggressive enforcement of the securities laws to tamp down on the present crypto bubble, as well as for structural separation between crypto and the traditional financial system.

Prof. Allen describes yet another of the many ways the current venture capital industry is malfunctioning, and calls for increased oversight of these risks to financial stability. Below the fold I discuss this and one of the papers it cites.

Two Great Reads

This post is to flag two great posts by authors always worth reading, both related to the sad state of the venture capital industry upon which I have pontificated several times:

• Molly White's The venture capitalist's dilemma.
• Fais Khan's Zero Knowledge Influencer: Are ZKPs Worth the Hype?.

Each will reward your time. Below the fold I comment on both of them.

It Was 40 Years Ago Today

Sun Microsystems was founded 24^th February 1982, and died 27^th January 2010. I spent 1982 on sabbatical in Amsterdam waiting for the Sun/1 we had ordered to show up. IIRC I visited their initial offices on Walsh Ave. in Santa Clara in early 1983, and joined the company in September 1985. I owe Sun, and the people who worked there, a debt of gratitude I could never repay.

In those early days Sun was an extraordinarily interesting company to work for, and throughout its 28-year history it spawned an incredible number of other startups. One of them was Nvidia, which is currently the 8^th most valuable company in the world, but there are far too many others to list.

In It Isn't About The Technology I wrote:

In the late 80s I foresaw a bleak future for Sun Microsystems. Its profits were based on two key pieces of intellectual property, the SPARC architecture and the Solaris operating system. In each case they had a competitor (Intel and Microsoft) whose strategy was to make owning that kind of IP too expensive for Sun to compete. I came up with a strategy for Sun to undergo a radical transformation into something analogous to a combination of Canonical and an App Store. I spent years promoting and prototyping this idea within Sun.

One of the reasons I have great respect for Scott McNealy is that he gave me, an engineer talking about business, a very fair hearing before rejecting the idea, saying "Its too risky to do with a Fortune 100 company". Another way of saying this is "too big to pivot to a new, more “sustainable” business model".

In the terms that Wall St. imposes on public companies, Scott was right and I was wrong. In the 8 years or so from my talk to the dot-com crash SUNW made the stockholders an incredible amount of money. But then the money stopped, in some ways for the reasons I had spotted. Being right too soon is as bad as being wrong.