Startups – Lynne's Take on Tech

AI Trends for 2024: What’s Old is New Again

There’s a lot of shock and awe in the AI space these days. And lots of money on the table. But through the sturm und drang, some trends are emerging. To level-set, I went back and reread our last published article together, Moving Forward in 2020: Technology Investment in ML, AI, and Big Data (William F Jolitz & Lynne G Jolitz, Cutter Business Journal, 7 April 2020).

Four years ago, AI was at a crossroads. When we looked a traditional value propositions in technology, where one went from a specific technology to a target customer in a high value sector to a broadened sector and use, AI was doing miserably. 70% of companies said their AI projects provided little to no benefit to their company. Only 40% of companies said they had made a significant investment in AI. The frustration lay with “products sold with ill-defined benefits” which led to “unsustainable revenue that plummets when customers become disillusioned from a tactical lack of sales focus”. We stated the key problem was “the startup’s sales focus no longer aligns with the customer’s strategic focus”. In tech speak, they couldn’t figure out what to do with it and got disappointed.

We suggested what we called an “axiomatic” approach: “Instead of moving from technology to key customers with an abstracted TAM (Total Available Market), we must instead quantify AI and ML benefits where they specifically fit within business strategies across segment industries”. We then highlighted three areas to watch: surveillance, entertainment, and whitespace, while also discussing the issues with ad hoc architectures which potentially disrupt the cloud services costs and security. In terms of architectures, there is now more focus on data ownership and control, as well as reducing costs in the cloud. But it’s still very much the same as four years ago for most customers.

But the key prediction where we were literally “on the money” was our analysis of chaotic disruption of the market forwarded and funded by “super angels”. This was how companies like OpenAI spawned and spurred tremendous disruption in a very short timeframe:

“Venture capital (VC) investments in ML/AI fixate on a startup’s ability to obtain go-to-market sales by disintermediating other vendors and to lock-up highly profitable (yet elusive) opportunities. The VC’s intent is startup validation and gauging threats to other vendors’ uncompetitive businesses that will drive the startup’s ability to gain partnerships and revenue shares. However, sometimes, the result is not what VCs would wholly desire but rather more like paralysis with no clear “win” — because the startup only partially engages the customers and does not succeed in displacing other vendors. To force the win, tactical deconstructing/reconstructing of AI/ML solutions around existing layers of edge and cloud platforms as an investment category is akin to desperately reshuffling poker chips on the poker table. This is best avoided. Industry disruption is inherently unstable. Like an ouroboros, it can abruptly turn from obvious low-hanging fruit targets to feeding off earlier successful targets undergoing a state of change.
The potential for radically greater opportunities is more interesting than patiently maintaining course or re-navigating the rough waters to see existing ventures through to a reasonable conclusion. This potential is the realm of super angels, self-funders, and leading edge “winners.” These individuals and groups see no disadvantage to riding a chaotic wave because they’ve gotten accustomed to being so out in front of theirthe self-competition within their newly chosen, ever-shifting “whitespace path.”
However, the traditional VC process is disadvantaged by these groups because venture capitalists’ gut instincts based on the feel of the deal get whipsawed by the loss of bragging rights to ROI, limiting them from getting too far out beyond their headlights. Thus, chaotic disruption is a no-go zone for most. For those who decide to enter these perilous waters, the tendency to share risk across many partners leads to a kind of groupthink at odds with the fast moves and flexibility required of the super angels.

As open source investments demonstrated, it’s a risky business consuming your own potential customers. In the AI chaotic disruption, all potential customers are considered targets: media, artists, writers, businesses.

In consuming the “long tail” of literature, art, whitepapers, business databases, and personal information and opinion on the Internet and then regurgitating it as facsimiles stripped of authorship and authority, companies like OpenAI and Google whipsawed established players. As we have seen, the rush of businesses and consumers to magnify this effect was phenomenal — and dangerous.

The intent was to rapidly drive paniced companies to sign exclusive agreements and become the dominant company in AI for the next half century. If it sound unbelievable, note we now have only a few companies which dominate search, content, and connection due to brand recognition and addictive use. It takes a lot of money to maintain an addition, or establish a new one.

As the investment space is still suppressed due to poor conditions despite all the dry powder, there are a few bright spots. Battery investments continue to spark interest. Climate change companies surge and storm. Crypto was actually legalized by the SEC, because you can’t play with GameStop forever — so it’s time to jump into the big scams, kids. Space investments are, well, vast. AI plays a role in all of these.

But because of the chaotic disruption strategy that our billionaires strategized in Silicon Valley, AI now has the attention of everyone, from governments and military and NGOs to plain ordinary users. It doesn’t matter if AI is “lazy”. Even the IMF is jumping in.

Will AI benefit humanity? That’s out of my paygrade. William and I saw it had unique potential in many areas in 2020. That’s still true in 2024. I hope the chaotic disruption doesn’t prevent us from seeing some real benefits for the better.

Sedate Sunday: Startups in the Age of Climate Change

As we sit by and watch the ever-increasing impact of climate change on our world, it stands to reason that startups must also be seeing an increase in interest, investment, and technology innovation to fight this. Yes, this would be reasonable.

The startup scene is never reasonable.

It’s not the 1980’s, kids. We don’t invest in technology or startups with the public good in mind anymore. Big global investments are entirely focused on making money fast — preferably by stealing it from you and me in fees and in turn selling our personal information to others who also want a piece of you and me. It’s rather disgusting, actually.

Want to change this? It’s pretty easy. 1) Require opt-in on personal information. 2) Disallow monopolies to bundle / require opt-in as a requirement for using their software. 3) Eliminate Section 230. Oh, and we might actually eliminate the tax carry loophole used by venture, forcing them to actually do some work.

None of these suggestions are going to happen, folks.

We all are watching what happened in Maui. Fire swept by 60mph winds consumed the entire town of Lahaina in a few hours, taking many in the town completely unaware. Cell service and power were down — obviously, there was inadequate or non-existent backup capability, and old-styles poles were knocked over like dominos — rendering notification impossible. No one thought to use the sirens. The counting of the dead has just begun, and already it has surpassed the death toll from the 2018 Camp Fire in California.

I suppose everyone is now asking “Why didn’t we see this coming?” Well, actually we did and we do. We just can’t get anyone to put money into startups to deal with this threat.

The 2020 CZU Lightning Complex Fires started with a hot wind and dry lightning. I know. I felt the pressure change and awoke. I walked to the screen door and almost fell over from the sudden blast of hot wind from a direction of the mountain wind shadow. William was by my side as we stepped out on our covered porch. William cautioned me to not step beyond the shelter of the porch. We watched the dry lightning start to hit different locations of the surrounding mountains as the wind gusted. And the fires began.

Unlike Maui, CalFire has much more extensive resources for fighting fires. Yet many communities burned to the ground. CalFire was hampered by the rills and gullies inaccessible to conventional firefighting equipment throughout the Santa Cruz mountains. Like Maui, we have been in the midst of long-term drought, so dead fuel was ubiquitous. The winds were strong, but not as strong as Maui.

While power was immediately knocked out for many locations (PG&E also relies on old-fashioned power poles in many mountainous regions), cellular and microwave links were maintained due to adequate battery backup. However, many locations in the mountains are “dead zones” with respect to cellular linkage. For those folks, they relied on house-to-house contact by local authorities and neighbors. Unlike the poor people of Lahaina, the mountain people had more time and more resources to get out, so loss of life was minimized. Loss of property, however, was considerable.

Also unlike the Maui fires, the strikes resulted in fires under the canopies of trees, so air flights dropping retardant and water from the local reservoirs failed to reach the actual fire points. This meant, simply, that small fires could not be staunched before they became big fires. This was a significant opportunity loss.

William and I were among the thousands under mandatory evacuation in the days after the lightning strikes. As we sat in a hotel near Stanford Hospital (William had cancer surgery scheduled that week), William looked up at me and said “You know, I’m tired of this. We could use existing technology to locate the fires. We could use drones to get under the canopy. We can carry retardant to drop on small fires before they become big fires.” And then, he began to put together a business plan to do exactly that.

It wasn’t easy for a man with terminal cancer to begin this process. But William and I were struck by the complete indifference by Silicon Valley companies and venture to the reality of climate change. Oh sure, they put money into charities to help folks after-the-fact. But that’s too-little, too late.

William is a legend in Silicon Valley. He’s the Father of Open Source Berkeley Unix. His work and its progeny are the engines of commerce. Yet he could not get sufficient interest beyond some meetings and happy talk. Apparently, wealthy folks can just relocate to safer locales. It is not a burning concern to these folks.

But with global climate change, is anywhere really safer?

There is actually some movement now on his vision to make a safer world 1-1/2 years after his death. So in this, I am hopeful.

To assist in spotting small fires before they become big fires, UC San Diego is working with CalFire to develop AI mechanisms to essentially sort through various feeds looking for anomalies that may indicate a fire starting.

This is the first item William outlined 3-1/2 years ago as we sat in our hotel room waiting out the fires.

As to drone development, at the time William was putting together his funding proposal and doing the research, drones were predominantly consumer-oriented, with the capability of handling a camera. They were user-operated over short distance. And they were completely unusable for carrying heavy loads like fire retardant.

But war is often the engine of change. And the war in Ukraine launched by Russia has resulted in a literal blitzkrieg of drone innovation and reduced cost of payload. This price to payload ratio is the key to affordable drone fire-fighting capability. After all, a cheap $2,000US drone targeting a small under-canopy fire is now much more cost-effective than a helicopter dropping fluids from above which may or may not work. As stated in the article, “A drone gives a lot of bang for the buck, as utterly new weapons often do.”

NATO has also announced a new $1B fund for defense and security startups. Expect to see startups focused on cyber-security, drone technology, and non-interceptible command and control hardware and software to take the lead here.

Translating weapons of war to consumer products is often challenging. However, drones have gone from consumer toys to weapons of war capable of carrying heavy payloads. So it is much more feasible to move them back to peaceful purposes like fire fighting.

It is as important to keep the peace as it is to make war. And climate change is not simply a war we can win or lose and walk away. We can only adapt. Or die.

Fun Friday: I Welcome our AI Overlords, Don’t You?

As the layoffs of the old continue here in Silicon Valley, the investment community and Big Tech ™ rush headlong into the wonderful world of AI. Every company and every startup now sees that brass ring ready to anoint the Overlords of AI ™ (pending I assume).

Elon Musk, annoyed with his not-good-enough OpenAI involvement, is simultaneously railing against the perils of AI and announcing a new AI company called xAI — which will apparently tell us how the real world works with an exploration of “the true nature of the universe”. Heh.

I guess the Earth and the Solar System aren’t enough anymore. Nor is the Milky way galaxy with everything within the Perseus and Scutum-Centaurus arms. Nope, now we’ve got to include the Hubble picture of all galaxies to get the maximum pitch potential. I guess the TAM is huge enough for even the most greedy investor. I think…

Meanwhile, ChatGPT application growth has finally started to slow down, as people rush to the new Threads app launched as a competitor to Twitter. Yes, folks, the dumbest site in all the Milky Way has been duped by Meta (the Facebook fellows) as an add-on to their Instagram app.

It is a truth universally acknowledged that a site in need of boosting must be in want of a cloned competitor. In other words, the quickest path to development is usually to rip and piggyback open source code onto something else and cross your fingers as you go live. It may not be ready, but it will be running, kinda.

Meanwhile, OpenAI is being investigated by the FTC for its propensity to unleash “hallucinating” AIs on the world, leading to rampant lies and misleading statements. They’re also annoyed that the AIs were trained on copyrighted works, but honestly I think that’s an afterthought as no one cared when source code attribution was deleted and content aggregators like Google News allowed one to find the article that didn’t require payment before. Why now? Maybe it just makes the filing more “human”.

The term hallucinating is a fascinating one for a piece of software, n’est-ce pas? It allows the company to elide responsibility for their software producing rotten results by implying the software is just some kind of person with a disability who should be treated with kindness and not legal threats. It also distances the company from this AI “person”, as person’s are only responsible for themselves and no one else.

This is, in sum, a very weird attempt to extend the ragged edges of Section 230 of the communications act to AIs where the AI software developer has no influence nor liability for what the AI actually says.

If you recall, the act states that “no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”

The legal shield was passed to allow individuals to comment and post items on websites like Facebook and Twitter — and even blogs like mine if I so desire — with no liability to the provider of the service for the words said. People say dumb things, goes the thought, so why punish the website operator? This little sentence made the Internet providers rich beyond the dreams of avarice.

By acting like the AI itself is just providing information, and the developers and propagators of the information are just providers of an interactive computer service, they distance themselves from the liability of these acts.

So of course, everyone in Silicon Valley and beyond wants to extend it to AIs. Investors. Big Tech. Even Elon Musk.

That’s where the money is.

Sedate Sunday: Silicon Valley and Post-Cold War Innovation

I came across this essay on Silicon Valley’s ascendency. It’s a bit wordy in some places and only abstractly relates to Silicon Valley. But who can resist an article that merges IPR, Gramsci, Silicon Valley investment, and Bretton-Woods.

I was amused, no matter how romantized some of the the assumptions. Come on, we all know that communism was really just another form of kleptocracy in disguise, just like Prosperity Gospel, unbridled capitalism, and all the other scams. It’s the human condition writ large.

Scams work by promising people things they don’t merit nor deserve in return for becoming their trolls, fan-boys, minions, and various minor demons. At least Maxwell’s demons did some undeniably important work, but most of these lesser types from the Stygian Depths reject pile don’t want to work (hence the “merit” stuff I menioned), nor are they part of the in-group (hence the “deserve” part). They’re also non-too-bright as a rule. But they are useful in aiding the ascent to substantial power and wealth, primarily by flooding the airwaves and empty streets with bellowing monsters, which in turn is covered by a lazy press corp as a meaningful “event” which should be taken seriously by “those in charge”.

Technology has certainly brought down the costs of this well-established mechanism. You don’t have to print pamphlets to get attention. You can even more cheaply motivate the mob using facebook ads targeted to any feeble-minded demographic, or pull off in-your-face twitter placement with a word from the Big Twit himself.

Honestly, it makes me long for the good old days of board room shenagins when William and I pitched hard tech companies. And yes, they were just as misogynistic, narrow-minded, and assholish then as now. That hasn’t changed.

It’s just back then there were still rivals, rules, and relationships to manage in the SV investment side. So William and I had a fighting chance. And fight we did. Sometimes…sometimes we made a success — before anyone caught on. Those were amazing times.

Now writers view startups as some kind of historical media retcon — a rather odd combination of Highlander, Fawlty Towers, and The Big Bang Theory (no women allowed, folks, unlike real life). William, who handled acquisitions for Tandem at one point, also had a fondness for Barbarians at the Gate, but that’s East Coast, not West Coast. And despite what folks will tell you, all those hagiographic movies about SV are so ridiculous and boring I just don’t bother.

But historical fiction about SV will continue to be popular, especially with a polisci or econ twist. So go ahead, and imbibe this one, especially the amusing views of open source development and startups:

“Within even the very early culture of Silicon Valley, a distinctive tension could be discerned between the “hacker ethic”—with its commitment to entirely free and open information, born as it was in a university laboratory—and the entrepreneurial drive to protect intellectual property. This was not a superficial short-term contradiction, but a defining productive tension that continues to animate the entire domain of networked and computer-driven social and economic relationships.”
Gilbert and Williams, How Silicon Valley Conquered the Post-Cold War Consensus

On to one of my personal pet peeves — there was no hacker ethic as described by the authors back when we were putting together various technologies for the Internet and Berkeley Unix prior to the early 2000s. The very concept of a hacker having any ethics is so laughable I wonder that any reputable journalist can type the words without gagging. We were in it for the fun, the money, and kicking over apple carts. Anything else someone tells you is a sales pitch.

Not to say there weren’t hackers back then. Of course there were. John Draper, aka Captain Crunch, was one such example. Back in the 1970s and 1980s, one could still get access to all the telecommunications and tech docs in public libraries and, with a bit of cleverness and elbow grease, hack pay phone, computers, and all sorts of primitive networks. Security was an afterthought in those days. Security is still an afterthought now. However, it wasn’t all fun and games. John was always followed around by men in suits and shiny black shoes at conferences, William noted.

Even 386BSD, which through Dr. Dobbs Journal articles and releases birthed the open source operating system (even Linux used the article’s 386 source code supplied with every issue), was based on a very different viewpoint from the present-day common viewpoint of everything “free”. Berkeley Unix had been licensed for over a decade, yet the vast majority of works which encompassed it were not proprietary. It was inevitable that eventually those code remnants would be removed and replaced.

Yes, the copyleft and RMS were talked about a lot back then with the long-awaited HERD OS expected to roll over everything in the universe and then Marxism would prevail! Gosh, I can barely type that while laughing. And yes, they really did believe they were some kind of Second Coming of the Open Source Proletariat before Bernie Sanders came along and stole their thunder.

This invested belief in the copyleft actually allowed Berkeley and us to work quietly. Frankly, no one expected Berkeley to finally get around to removing most of the old version 6 Unix detritus.

Even William’s and my prior company, Symmetric Computer Systems, contributed code on disk drive management. And William and I contributed the source code for the 386 port, making Berkeley Unix actually usable.

During this time, I really enjoyed writing the Source Code Secrets: Virtual Memory book with William, based on the virtual memory system from CMU. The CMU Mach project provided the key in a new approach to a virtual memory system, permitting the jettisoning of the old industrious evaluation virtual memory system of a decade prior. It’s a nice piece of work that is much underappreciated.

And of course, when the unencumbered incomplete release was made public, we got creative and wrote entirely new modules to fill in the missing pieces for the releases.

But working on open source and working on proprietary intellectual property is not antagonistic as the author would state. One of my proudest moments was getting my patents granted for InterProphet’s low-latency protocol processing mechanism and term memory.

The key is understanding what you owe to others and what you owe to yourself.

Berkeley Unix was a long-term project that collected the works of many people. Berkeley handled the release mechanics and integration. Sometimes they did new work, but not always. It was research, mostly paid for by the government. And that means you and me.

William and I did the port to the 386, contributed code, wrote published articles, and devised new work as a research project. While we received no funding from Berkeley, we did have a lot of fun.

InterProphet, in contrast, was a 1997 startup focused on improvements in latency in networking using a dataflow architecture. Our innovations were funded, we had employees and an office, and we built the prototype and production boards. We developed the drivers and support software. We paid for really expensive proprietary chip design tools.

And we filed patents and held trade secrets. Intellectual property protection was a given in this work. (A bit of advice here: If your engineers decide to deal with bugs in their software by sending source code to the vendor, put a stop to it immediately. It causes no end of problems later.)

We had an obligation to the investors at InterProphet. And we kept our deals with that company. Just as William and I did with Symmetric Computer Systems back in the 1980s. Technology innovation was valued — at least enough so we could get another startup off the ground. It required due diligence and careful maintenance.

The mistake in many “historical” analysis of Silicon Valley innovation lies in conflating the technology innovation of the pre-2000 era with the non-innovative “free stuff” of the post-2000 period. Investment strategies were completely different. Business structures were different. Even financial structures pre and post IPO changed markedly. They’re not comparable.

There is nothing “free” in using FaceBook, or Twitter, or Google News, or Apple Maps, or a plethora of other websites. And that is by design.

These websites and applications are intended to go “viral”. They must lure in an unsophisticated customer and make the site “sticky” so they can be tracked. Gosh darn, that’s all it was and is about. No innovation required. In fact, invention and innovation were derided. As John Doerr noted back then, it was “renovation, not innovation” that was king.

And as the author notes, anything related to manufacturing was sent off to China. No more chip investments. No more hardware investments. No more of that “risky” tech innovation. It had all been done.

I don’t usually call out specific VCs from that time, but John Doerr and Kleiner deserve it for singlehandedly killing an entire generation of technology with a cynical investment strategy. Special mention goes to Google, Apple, and Intel for corralling open source operating system innovation to maintain their profits.

So John and KPCB, and the tech monopolies as runner-ups — I salute you.

People went hunting for content to populate those websites. Youtube for example grabbed the few popular short videos circulating on the web and put them on the site just to appear like it was being used — until it was used through relentless press.

Customer acquisition dollars were high. A flip was six months.

Content was available in many ways. As the printed press conglomerates strove to grab eyeballs, they inadvertently gave their content away while cratering their traditional print advertising dollars. Aggregators glommed onto that content, manipulating the views towards paid ads and “curated” experiences. Video and music content was pirated as well, but entertainment media executives had been down this road many times before, and hit hard with copyright lawsuits.

Databases of many kinds were publicly available as well, from geolocal map data to astronomy datasets. With that richness of information, the sky was the limit for people putting a front-end on the information. And so it is today.

I remember when Amazon was first funded as a bookstore. I bought a book — a Harry Harrison Stainless Steel Rat book I recall. One of the VCs back then gave me the dark side sell at an investment event: It was all about knowing what you look at, what you want, what you need. And putting that in front of you so you buy it. And Amazon takes a cut all the way to the bank. Privacy? Who cares.

It took Amazon six years to a quarterly profit.

Think about that. Six years losing money. When a VC starts demanding quarterly profits, dig up Amazon’s pro formas.

Fun Friday: Back to the Old New Tech Lifestyle

As I sit in William’s and my office in Los Gatos, I’m struck with how empty everything feels. The aux offices nearby are now empty as the call of the wild beckons folks back to the non-performing real estate that leaves many CEOs fuming. People who once revelled in the glories of a non-commute day now struggle to drive the crowded freeways and fight to park near the lobby entrance, grab a quick drab coffee from the machine, and stagger to a shared table “desk”. Just like in the Before Time.

As I always told the kids, “Traffic is the most important thing is Siicon Valley”.

Does this upset me? Not really. I no longer have to hear the bellowing of the sales guy wafting through the walls. Nobody builds offices to be sound-proof. My relaxing music sounds so much nicer when I don’t have to crank it up to compensate, or put on noise-cancelling headphones.

But for those who worked at home, the demands of working in an office must be quite a struggle. Startup types do their “zero to one” juggling pitch act in any place that will suffice, whether it is a coffee shop, a conference room, a beach, or even, dare I say it, at home. Obtaining an office to work is actually a milestone funding achievement – not a given.

Hence, I am at our office today, surrounded by memorabilia, computer and software and writings, seeking inspiration!

Well, perhaps inspiration should step aside for the moment. Let’s take a bit to check the weak pulse of venture and startups.

As we move out of the “spend money for anything online” phase of a cloistered culture in the grips of the pandemic, major companies responded by 1) laying off all of their excess employees hired to keep other major companies from hiring those same people they just laid off and 2) forcing everyone back to the office to listen to the CEO tell them how useless they were when they were stuck at home working.

In like kind, investment in the wacko side dropped like an anvil. Crypto currency was shown to be a fraud (is anyone shocked?). Blockchain is too narrow for application. Gaming is hit and miss, usually miss. The gig economy is a bust. And whatever happened to Meta?

So now venture is hyping AI. Again. Yes. Again.

In lockstep, startups are all adding their AI gambits to their existing offerings to look mod and rock their asses. Sigh. It’s a living.

So where do we stand. Easy. We have 1) M&A in the doldrums, 2) down rounds and the potential for clawbacks, and 3) VCs on the defensive. Let’s take these one at a time.

M&A:

As VCs closed their wallets, they hoped that continued hype would propel their less favored dead dogs into the eager arms of corporate strategy guys. (Note — William actually handled strategy and new ventures for Tandem in the old days, so I heard about this a lot, every day). Well, these guys aren’t quite as stupid as they thought. A bunch of desperate sounding VCs selling a high discount startup (hey, it’s 50% cheaper than last time!) wasn’t enough to move the acquisition forward. Frankly, these deals take time and are usually lined up well before one needs funding as their “Plan B”.

At the same time, while venture was eager to deal, corporations looked at their bottom line and didn’t like what they saw. Stock prices are depressed, or at the very least not increasing dramatically. Integrating new companies into the fold is a costly investment in people and technology. And last and not least, the random pivots by VCs from one unicorn technology to a completely different unicorn technology has heads spinning and disrupt the acquisition process.

In an effort to preserve the appearance of astronomically priced unicorn startups, venture has grasped the tail of the AI GoogleBull while Microsoft NoPilot yaws and ChatGTFO hallucinates. It is a strange summer, even for Silicon Valley.

Already the tech journo crowd is side-eying all this sturm und drang. They’re starting to whisper that all this stuff is passe. After all, when you start to have ignorant Texas Aggie profs flunking students because he heard about AI taking over writing essays, you know the jig is up.

Down Rounds, Discounts and Clawbacks:

Let’s face it, startup valuations have always been, shall we say, invented? Created? Innovated? OK, yes we look at the upside potential. That’s because in zero-to-one that’s all you have — Potential. And potential can mean nothing — or it can mean everything.

But we also had to demonstrate a product, market, path to profitability, and an exit strategy.

Guess what? This is where the tech innovators and the con-men (like poor little rich boy Sammy Bankrupt-Fried) and con-women (Orange is the New Black Liz Holmes) separate, if not actively scuttle away.

Building a prototype and product is hard. Convincing customers to pay for it is extra hard. Making enough money to actually not need investment is super hard. And finding a means to transition beyond the startup mode, whether through acquisition, IPO or just plain good sales is excrutiatingly hard. So it’s no surprise that most unicorns skipped all that other stuff and got lots of money when money was basically free.

Now that things are hard, VCs are looking at all those other pesky hard things. And most startups funded in different conditions can’t step up and evolve. The end result is a lot of startups will not get further funding. They just aren’t worth it, valuation-wise.

While some of the fatter venture unicorns are pitched as promising M&A opportunities (see above), many others will shrivel and starve. The ones that pivot to some kind of revenue and profitability with real customers may survive, while those that restructure to some kind of “NewCo Tech Opp” (cough, AI, cough) may squeak by with fresh funding.

As venture partners and their Limiteds get increasingly disappointed in their portfolios, anticipate clawback. It’s never pretty, but it will happen.

VCs on the Defensive:

It’s only common sense that as returns nosedived, folks would start looking for someone to blame. And VCs are in the thick of it.

This lovely little article from Crunchbase is an excellent example of forensic analysis of successful investments. On this Fun Friday, I leave you with these thoughts from that article:

“What’s concerning with our sample of the largest IPOs of the past 10 years, however, is the absence of any real star performers among the big names. None are even above their first-day prices, let alone returning a multiple to their IPO investors.

It’s even more worrisome when one looks at how much capital has been going into startup investment. Over the past 10 years, investors have plowed more than $1.4 trillion (!) into seed through late-stage and pre-IPO financings.

At the peak, in 2021, a whopping $329.5 billion went into North American startup investments across all stages, per Crunchbase data. That — to put it in context — is more than the total recent valuation of all 20 of the biggest IPOs in our sample set.

To make good on that level of investment, startup backers will need not just hits but grand slams. Their recent batting averages indicate that’s unlikely to happen.“

Sedate Sunday: NIF Fusion Breakthrough, UC Strike Settled, Nuclear Investments Thrive

As a sum up to an eventful week, LLNL’s National Ignition Facility (NIF) announced that they had achieved fusion ignition. “LLNL’s experiment surpassed the fusion threshold by delivering 2.05 megajoules (MJ) of energy to the target, resulting in 3.15 MJ of fusion energy output, demonstrating for the first time a most fundamental science basis for inertial fusion energy (IFE).” The facility is impressive, using 192 lasers coordinated to burst on a tiny deuterium-tritium capsule.

The media was less impressed: “We are still a very long way from having nuclear fusion power the electric grid, experts caution. The US project, while groundbreaking, only produced enough energy to boil about 2.5 gallons of water, Tony Roulstone, a fusion expert from the engineering department at the University of Cambridge, told CNN.”

Given all the years and planning and building and incredible cost, the NIF wasn’t just a cool way to try to bootstrap fusion ignition as a clean energy source. As physicist Bob Rosner, University of Chicago and former director of the Argonne National Laboratory, stated in an interview with John Mecklin at the Bulletin of the the Atomic Scientists, “The folks who succeeded so splendidly in attaining ignition and self-sustained fusion on December 5 were not part of DoE’s fusion energy program (which sits in the DoE Office of Science Office of Fusion Energy Sciences); they’re working instead for the National Nuclear Security Administration (NNSA), which manages our nation’s nuclear weapons stockpile.”

What’s all this got to do with nuclear weapons? Well, in the late 1980s there was a lot of pressure to ban underground nuclear testing, and it succeeded. So now, how do you certify that your nuke work as advertised? “NNSA decided to build new experimental facilities (one of which was the National Ignition Facility), efforts were made to construct new simulation codes to help certify the weapons, and investments were made in new generations of advanced computers that these codes required and could run on. And NIF was meant to, in part, validate the design code approaches used for the weapons. Before NIF was even completed, they chose a target experiment that—in combination with simulation codes advances—could demonstrate that we knew what we were doing.”

When William and I ran Symmetric Computer Systems in the 1980s, we sold Symmetric 375 computers to LLNL precisely for this reason. As William had a unique security clearance due to his earlier work at NASA, he was asked to examine the simulations and correct any issues with the Fortran compiler supplied with the computers – which was done. Later, when they switched to Sun Microsystem computers, they continued to call us about “Fortran compiler issues” in our systems which didn’t exist. When we told them we found no errors, they admitted it wasn’t our 375 computers that were the problem. Instead, they tried to get us to fix Sun’s Fortran compiler because the Sun people “wouldn’t return our calls”. We told them, nicely, to either buy more 375 computers or take a flying leap. They chose the leap. I suspect the compiler errors delayed their simulation work for about 5 years. Such is the cost of cheapness.

In other news, the long strike of UC workers is over. Graduate students, postdocs and academic researchers are the backbone of the university, but as the cost of living has skyrocketed, pay has stagnated. I’m pleased to see UC is finally dealing with this issue fairly.

Given the NIF breakthrough, perhaps it’s only fair to review the $3.4B in nuclear investments this year. According to Crunchbase, one major player, Bill-Gates backed TerraPower, raised $750M in it’s most recent round. TerraPower uses molten salt reactor technology. Dr. Shu, Professor Emeritus at Berkeley, did a talk back in 2016 at Microsoft on his patented two-fluid molten salt breeder reactor (2F-MSBR) using thorium which I found quite interesting (yes, William and I were there). Dr. Shu felt that this was the only way to combat climate change and save the planet in his lifetime.

As to fusion, even though the NIF has had billions of investment over decades and has only now achieved scientific energy breakeven, there is still a lot of money involved in seeing it through: “The biggest single fusion investment came in December, when Cambridge, Massachusetts-based Commonwealth Fusion Systems raised a huge round of more than $1.8 billion led by Tiger Global and also included investments from Bill Gates, Marc Benioff’s Time Ventures and about two dozen others. Just before that, in early November, Everett, Washington-based Helion Energy closed a $500 million Series E led by Sam Altman—with an opportunity for an additional $1.7 billion tied to reaching performance milestones.”

Expect even more money thrown into conventional and fusion energy investments after NIF’s announcement.

Fun Friday: Telescopes and Memories

I’ve been planning to write something for a while, but frankly, there hasn’t been anything really fun to write about.

Everyone is complaining about gas prices and inflation. Global trade is still bottlenecked and tangled in knots. There’s still a pandemic, folks, although you wouldn’t know it from the way people are dancing like it’s the last night before the End of the World.

On the business front, venture is busily grabbing any money they can to hoard while telling their portfolio companies to “tighten the belt”, mainly around the necks of their employees. Companies are eagerly complying by rescinding job offers and instituting layoffs. Folks are nervous as they crowd airports, hoping their flight isn’t one of the hundreds cancelled that day due to lack of flight staff. And the war in Ukraine waged by Russia in a fit of insanity continues to kill innocents and destabilize the entire EU.

Speaking of dead innocents, the US Supreme Court, destined to go down in history as depraved pandering sacks of shit, decided that guns everywhere makes for a stronger America. Their overturning of Roe v Wade, expected after the leaked draft admiring the people who burned innocent people as witches crawled out of the sewers, has been released and to no one’s surprise reduced women to that of beasts. Yes, it is not a Fun Friday for many people. Maybe it’s a Gun Friday. I’m sorry.

Roe v Wade was decided in 1973. I was twelve. It impacted my life and health for the better. Today it is officially overturned in a ruthless precedent-be-damned legal coup. I am sixty, past childbearing age. It cannot impact me directly. Yet I have daughters and young people I care about. I don’t want to see them hurt. Their happiness and livelihood and health matters to me. They should have the same rights to choice and freedom that I had. They may not know how much it matters yet. But they will. I am sure of that.

I spent the morning cleaning one of William’s prototype telescope designs for display in the office. It’s an unusually compact and minimalist design. As I cleaned the mirror and cover plate, I found a cricket living in the focuser. I watched it hop off the picnic table and out of sight, grabbed the telescope, and took it to the office.

It now sits amongst the many creative works William and I did together. Our reliquary. 375 computers. InterProphet low-latency networking boards. 386BSD articles and books and CDROM. An unpopulated six layer 375 motherboard.

In other parts of the office, an EtherSAN prototype unit box, a 386BSD CDROM with the heftiest liner notes ever made, 386 computers of various vintages used for 386BSD, and bins 386BSD and 375 disk drives, boards, and cables. Some complete and some mid-project, designs waiting for a hand to finish the work.

It is a reminder that things are never finished — they are only left in a state of usability for a time. Once that time passes, one either has to toss it away or begin again. I choose both. To toss some things away and to begin again on other things.

Young people also have a choice. They can fight for their freedoms — and they can toss them away. I hope they choose wisely.

Fun Friday: Funding in Transition and Mammalian Distributed Memory Storage

As inflation continues to take its toll on everyone’s investments as well as steak dinner (psst – get the rotisserie chicken at Costco instead), Silicon Valley is clearly in a state of transition. Startups have been told to tighten their belts financially. Layoffs in big tech companies have begun. “Growth” ventures are failing to get follow-on funding, primarily in the consumer space and media (in Substack’s case, they’re also proving the old adage that no one pays attention to writers).

But for every easy money gambit that’s falling out of the sky, there is hope for the dreamer and rogue. Venture firms are still collecting money hand-over-fist from desperate Limiteds eager to get some return with the stock market slowing. Folks with money want to make more money. There are lots of them.

Of course, this doesn’t directly help the small entrepreneur. Big Venture (TM) doesn’t fund the small fry inventing neat technologies anymore — they have too many Series D unicorn mouths to feed. Big tech companies are no longer a safe bet — they may fire you and escort you unceremoniously out the door without any warning. In hard times, loyalty is not its own reward.

But there are a lot of individual investors out there who can drop $1M on a neat tech idea. All the startups William and I founded started with a dream, some code, and a handshake during lousy economic times. They were funded precisely because making easy money on scams and gambits have evaporated.

So if you’ve got a good hard tech project, now may be the best time to go for it. The cash is still plentiful. Just play it cool. It worked for us. It can work for you.

Researchers tracked neural activity across a whole mouse brain to determine what areas were involved in storing a specific memory. Many brain regions found likely to be involved in encoding a memory (top) were also found to be involved in recall upon reactivation (bottom).
Credits: Image courtesy of the Tonegawa Lab/Picower Institute. — Neural activity across a whole mouse brain to determine what areas were involved in storing a specific memory. Many brain regions found likely to be involved in encoding a memory (top) were also found to be involved in recall upon reactivation (bottom).
Credits:Image courtesy of the Tonegawa Lab/Picower Institute. Read the article!

And speaking of distributed memory, a new study from MIT describes the mammalian brain as storing memory, not densely in a few regions, but instead loosely across many regions of the brain. This makes sense in a way. It’s a lot easier to completely lose a memory if it’s in one or a few locations than spread throughout the brain. Also, storing memories in larger “chunks” would result in a lot of wasted storage space since a memory is of varying size. Indirect references to each memory element, even if a few are lost, are more efficient than directly physically mapping a memory.

It does explain the dreamlike aspect of memories, doesn’t it? And also perhaps memories which are completely wrong but feel entirely real and true. Likely we lose a lot of these references that fill in some of the blanks over time. Associated elements, like smell, can track back along a pathway to a memory to give the gist of it, but it may be only a shadow of what was actually recorded.

But is the brain’s memory sparsely allocated as well? It may well be given this highly distributed storage across many parts of the brain. Sparse allocation is common in operating systems because it is usually faster and overall more efficient. But it can use more total memory than that of a densely allocated memory mechanism if most of the elements contain non-repeatable data. Are most of our memories just collages of a few meaningful pieces and a lot of filler? Perhaps dreams look odd precisely because they are just stray strands of sparse referents to redundant memories garbage collected by the brain and reallocated for use.

To dream. Perchance to sleep. Now that is the question.

Fun Friday: AI Technology Investments, Failed Startups, 386BSD and the Open Source Lifestyle and Other Oddities of 2020

First, William Jolitz and I did a comprehensive article entitled Moving Forward in 2020: Technology Investment in ML, AI, and Big Data for Cutter Business Journal (April 2020 – paid subscription). Given the pandemic and upheaval in global economies, this advice is even more pertinent today.

Instead of moving from technology to key customers with an abstracted total addressable market (TAM), we must instead quantify artificial intelligence (AI) and machine learning (ML) benefits where they specifically fit within business strategies across segment industries. By using axiomatic impacts, the fuzziness of how to incorporate AI, ML, and big data into an industry can be used as a check on traditional investment assumptions.

For additional information on this article, please see AI, ML, and Big Data: Functional Groups That Catch the Investor’s Eye (6 May 2020, Cutter Business Technology Advisor).

Techcrunch presented their loser brigade list of 2020 failed startups in December of 2020 – although a few more might have missed the list by days. Some of these investments were victims of “the right startup in the wrong time”. Others were “the wrong startup in the right time”. And some startups were just plain “the wrong startup – period”.

We mourn the $2.45 billion dollars which vanished into the eager pockets of dreamers and fools (we’re looking at you, Quibi – the pig that swallowed $1.75B of investment and couldn’t get any customers) and feel deeply for the Limiteds who lost money in one of the biggest uptick years in the stock market.

Thirty years have passed since we launched open source operating systems with 386BSD. Open source as a concept has been around for over 40 years, as demonstrated by the amazing GNU GCC compiler done by RMS. But until the mid-1990’s, most software was still held under proprietary license – especially the operating system itself. The release of 386BSD spurred the creation of other progeny open source OS systems and a plethora of open source tools, applications and languages that are standard today. However, the “business” of open source is still much misunderstood, as Wired notes in “The Few, the Tired, the Open Source Coders”. Some of the more precious gems excerpted:

But open source success, Thornton quickly found, has a dark side. He felt inundated. Countless people wrote him and Otto every week with bug reports, demands for new features, questions, praise. Thornton would finish his day job and then spend four or five hours every night frantically working on Bootstrap—managing queries, writing new code. “I couldn’t grab dinner with someone after work,” he says, because he felt like he’d be letting users down: I shouldn’t be out enjoying myself. I should be working on Bootstrap!

“The feeling that I had was guilt,” he says. He kept at it, and nine years later he and Otto are still heading up Bootstrap, along with a small group of core contributors. But the stress has been bad enough that he often thought of bailing.”…

…Why didn’t the barn-raising model pan out? As Eghbal notes, it’s partly that the random folks who pitch in make only very small contributions, like fixing a bug. Making and remaking code requires a lot of high-level synthesis—which, as it turns out, is hard to break into little pieces. It lives best in the heads of a small number of people.

Yet those poor top-level coders still need to respond to the smaller contributions (to say nothing of requests for help or reams of abuse). Their burdens, Eghbal realized, felt like those of YouTubers or Instagram influencers who feel overwhelmed by their ardent fan bases—but without the huge, ad-based remuneration.

Been there. Done that.

Not many Linux-come-latelies know this, but Linux was actually the second open-source Unix-based operating system for personal computers to be distributed over the Internet. The first was 386BSD, which was put together by an extraordinary couple named Bill and Lynne Jolitz. In a 1993 interview with Meta magazine, Linus Torvalds himself name-checked their O.S. “If 386BSD had been available when I started on Linux,” he said, “Linux would probably never have happened.”

Linus was able to benefit from our two year article series in Dr. Dobbs Journal (the premiere coding magazine of the day, now defunct in an age of github), which along with the how-to details of “Porting Unix to the 386” we also included source code in each article. That, coupled with Lions Commentary on Unix (NB – the old encumbered Edition 6 version, and not Berkeley Unix) allowed Linus to cudgel together Linux. We had no such issues, as we had access to both Berkeley Unix and a source code license from AT&T for our prior company, Symmetric Computer Systems, and hence knew what was encumbered and what was not (Lions was entirely proprietary). Putting together an OS is a group effort to the max. Making an open source OS requires fortitude and knowledge above and beyond that.

Jalopnik, one of my favorite sites, found the ultimate absurd Figure 1 patents with this little gem of an article: Toyota’s Robocars Will Wash Themselves Because We Can’t Be Trusted. Wow, they really knocked themselves out doing their Figure 1, didn’t they? Womp Womp.

And finally, for a serious and detailed discussion of how the pandemic impacted the medical diagnostic side, I recommend this from UCSF: We Thought it was just a Respiratory Virus. We were Wrong (Summer 2020). Looking back, it was just the beginning of wisdom.

Stay safe, everyone!

Intel Ouroboros: Pat Gelsinger Returns to Build the Future

Pat Gelsinger is a technologist’ technologist. He worked on the X386 and X486 processors. We referenced the book he and Crawford wrote Programming the 80386 for our “Porting Unix to the 386” series in Dr. Dobbs Journal in the early 1990’s and the development of 386BSD. It was a seminal processor and work that helped launched the open source operating system movement.

Yet Pat didn’t stay to retire with laurels at Intel. After many years battling for Intel’s future, he left to head EMC and, later, VMWare. Now he’s been brought back to Intel as CEO effective 15 February 2021. Why?

In a nutshell, while Gelsinger was off dabbling in storage technologies and cloud services, Intel was burning through every single technology advantage people like Gelsinger had built. Now, Intel is facing a reckoning, and needs to build a future again.

And that future depends on people with technical and domain skill, like Pat Gelsinger.

This was a bitter pill for Intel’s Board of Directors and executive team to swallow. But, as Baron Mordo said, “The bill comes due”.

The roots of this squandering of the future was based not in technology, but in contempt of technologists. Risk-takers in both strategic and startup investment in the 1990’s and 2000’s saw the proliferation of new approaches as “chaotic”.

I sat in an office of a top tier VC firm on Sand Hill Road in the late 1990’s and listened to the “smart money” partner complain about how their investments in ATM were being disrupted by InterProphet’s SiliconTCP low latency chip — as if I owned the burgeoning TCP/IP technology and was personally damaging their investments with a few prototype boards, a handful of working FPGAs and some Verilog.

TCP/IP was present in the mid-1980’s in Berkeley Unix, and used in datacenters throughout academia and government. As Vint Cerf himself noted, it was a good enough solution to get packets from one point to another.

TCP/IP as an “ad hoc” technology was good enough to take out OSI, ISDN and ATM. I thought it was wiser to surf the tsunami instead of railing against it. That just bred resentment.

I sat in corporate offices in the 1990’s and 2000’s and heard complaints about how open source was overtaking proprietary software stacks, and it was ruining their projections and their business.

Berkeley Unix was a feeder of innovation from the early 1980’s. True, it was not a viable competitor to proprietary OS stacks until we launched 386BSD in the early to mid-1990s. From that open source stack, backed by Dr. Dobbs Journal, sprang a whole host of proprietary software industry competitors, including Linux.

Open source kernels like 386BSD and its many progeny would not have made inroads if there had not been a wealth of innovation already present to mine out by these groups — innovation that was neglected, minimized or attacked by established proprietary players.

But up to the point we released 386BSD publicly, everyone underestimated us. It couldn’t be done. It wouldn’t be done. But it was done. I knew it could be done.

I sat in a room in the early 2000’s as a VP at Microsoft complained about how open source was a threat and how, looking right at me, they had gathered information on everyone involved and their families. As if developing the open source OS created some kind of ominous fifth column of open source software subverting their eternal rights to OS glory. It was…unpleasant. It was also incredibly horribly damaging personally.

I listened in the mid-2000’s as a VC “sympathetically” told us that we’d never get funding again after InterProphet. Not because we’d done anything wrong. We met our commitments. We built things. But because they didn’t want innovation and the risks that came with it. And their way to kill the message was to kill the messenger.

“The bill comes due”.

The resentment in the 1990s and 2000s towards new ideas and the creation of new products was intense. All they could see was damage to their five year technology plans and prior investments. The idea of hedging your bets was anathema, because that implied they couldn’t control the industry.

And mind you, it was about control. Control of technology. Control of innovation. Control of monetization. Control of creativity. Control of thought.

So here we are, in 2021. Intel squandered their future, slicing and dicing their monetization game. Intel’s “safe and sane” business relationship with Apple is now in pieces. In 2018 Apple maneuvered Intel into taking out Qualcomm as a competitor. In 2019 Apple acquired Intel’s smartphone modem tech and developed their own. In 2020 Apple introduced the M1 as a competitor to the high end X86 line. And that’s just one customer. The vultures are circling. Intel lost control.

Now Pat Gelsinger has agreed to come back. How will he pick up the pieces of a damaged company? I assume he’d only return if he had broad latitude in restructuring, hiring and firing. He’ll investigate interesting acquisition targets that offer a path forward for Intel. And he’ll look closely at how rivals like AMD under Dr. Lisa Su have done so well while Intel foundered.

Intel ouroboros. Pat is back at the beginning. It remains to be seen how he creates a future for Intel once again.