I try my best to avoid writing headlines that ask questions. Depending on the subject, the interrogative subject line suggests the article’s author doesn’t know the answer.
Take, for instance, the provocative essay in the “Sunday Review” section of The New York Times yesterday that queried, “When Will the Tech Bubble Burst?” The author, Ruchir Sharma, chief global strategist at Morgan Stanley Investment Management, certainly doesn’t seem to know the answer to his own question. (He or his editors might also have pointed out an extremely similar, if more concise, piece that appeared a few days earlier in The Economist called, simply, “Tech stocks have regained their dotcom-era highs.”) “We can never know when the end will come,” Sharma writes, before offering the existence of three factors he hints might already be present: imminent regulation of big tech companies, imminent tightening of monetary policy by central banks, and imminent earnings disappointments.
Rather than making a call myself, I’ll offer three observations for you to chew on to start your week.
* Identifying a bubble is easier than forecasting when it will pop. I saw the signs as long ago as 2014, in an anecdotal piece I wrote about the soon-to-be-public Arista Networks. At $12.4-billion in market value, Arista’s share are about triple their worth in their IPO.
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* History is helpful, but the details are important. Morgan Stanley’s Sharma notes the outsized importance of companies like Facebook, Amazon, Netflix, Google, Alibaba and Tencent. He also reflects on how the “dot-com era saw the rise of big companies that were building the nuts and bolts of the Internet—including Dell, Microsoft, Cisco and Intel—and of startups that promised to tap its revolutionary potential.” A problem: Each of these companies pre-dated the dot-com era. Microsoft quite nearly missed it. Companies that can transcend an era tend never to be overpriced.
* These aren’t one-size-fits-all bubbles. Apple, for instance, has been underpriced by traditional metrics for years. Amazon has been consistently overpriced. Both appear to be built to last—and for vastly different reasons.
***
Many thanks to Aaron as well as Andrew Nusca and Verne Kopytoff for ably keeping my seat warm last week.
| Adam Lashinsky | |
| @adamlashinsky | |
| adam_lashinsky@fortune.com |
NEWSWORTHY
Sexism in tech. A Google engineer circulated a 10-page anti-diversity essay, arguing that women were less fit for engineering jobs than men. Many Google employees expressed outrage, and brand new vice president of diversity, integrity, and governance Danielle Brown quickly issued a denunciation. Fortune's Ellen McGirt said the essay was a reminder of why "there are fewer women (or people of color) in tech because they know how awful it can be to work there."
Backdoors. The U.S. Army will stop using drones made by Chinese manufacturer DJI Technology because of "cyber vulnerabilities" in the products. An Aug 2. memo doesn't detail what those vulnerabilities might be, but refers to classified reports in May from the Army Research Lab and the Navy.
Dueling narratives. Marcus Hutchins, the hacker arrested last week for his alleged participation in writing a malware program called Kronos, has admitted his authorship, according to prosecutors. But lawyers for Hutchins, who is known for having helped stop the spread of the WannaCry cyber-attack, say the researcher denies involvement. "He's pled not guilty," defense lawyer Adrian Lobo said. "He is standing by that and he fights the charges."
Unconnected. The next version of Apple's smartwatch will likely be a lot less dependent on the iPhone. The third generation will contain an Intel modem chip allowing it to connect directly to cellular networks, Bloomberg reported on Friday. U.S. and European carriers are negotiating with Apple to carry the device. Meanwhile, rumors surfaced of a copper-colored new iPhone. Count me intrigued.
Too connected. Disney is being sued in a proposed class action lawsuit for allegedly violating the Children’s Online Privacy Protection Act by collecting personal data about children who use its smartphone apps, The Wrap reported. Disney failed to get parents' consent before collecting data from kids under age 13, as required by the law, the lawsuit claims. The suit is "based on a fundamental misunderstanding of COPPA principles," Disney said.
Road tripping. Tesla fans in Italy set a new electric driving record on Friday, driving a Tesla Model S 100D over 1,000 kilometers for the first time–well 1,078 km or 670 miles in total, to be precise. Elon Musk celebrated the achievement on Twitter: "Officially verified as the first production electric car to exceed 1000km on a single charge! Congratulations Tesla Owners Italia!!"
FOOD FOR THOUGHT
Having a computer generate random numbers is no easy task, as some casinos are finding out the hard way. A Russian math whiz cracked the code of some of the "pseudorandom number generators" used in slot machines all over the world, Brendan Koerner reports for Wired.
By monitoring machines with cracked random number generators, agents knew just when to give the slots a spin, generating winnings of $250,000 or more a week. The practice is against the law in the United States, but the math whiz, who is identified only as Alex, tells Koerner that he's not hacking the machines:
My agents are just gamers, like the rest of them. Only they are capable of making better predictions in their betting. Yes, that capability is gained through my technology, it’s true. But why should it be against the law? On the basic level, it's like using a calculator for counting faster and more accurately, rather than relying on one’s natural capacity.
IN CASE YOU MISSED IT
Lady Gaga Partners With Verizon for Ticket Giveaway by Aaron Pressman
Tesla Hopes to Raise $1.5 Billion to Ramp Up Model 3 Production by David Meyer
Bitcoin Rockets Past $3,000 to a New Record High by David Z. Morris
Amazon Alexa Just Made It Even Easier to Find the Right Music on Echo by John Patrick Pullen
Exclusive: Apple Is Now Working With This Key Google-Backed App Technology by Barb Darrow
How Huawei May Have Finally Cracked the U.S. Phone Market by Aaron Pressman
We Interviewed the Guy Making Replicas of Mark Zuckerberg’s Favorite T-Shirt by Lavinia Liang
BEFORE YOU GO
Where the Wild Things Are was probably my first favorite book. The brilliant author, Maurice Sendak, died five years ago, but a new book is on the way after a fully-completed unpublished manuscript was discovered among his files recently. Expect Presto and Zesto in Limboland in the fall of 2018.
