On brain-computer interfaces, early education research, tech IPOs and startups, and understanding China

Interesting Links: August 30, 2020

1. Elon Musk presented on Neuralink (Youtube), with the mission to “solve important brain and spine problems with a seamlessly implanted device”. Here, I suffer from the opposite of the Gell-Mann Amnesia effect. I have no idea whether this has potential to be ridiculously revolutionary or another Elizabeth Holmes.

   For example, check out comments by Nandor Ludvig here on TechCrunch also noted here on Hacker News. This neuroscientist in the field is highly skeptical, to put it mildly. I am very interested in seeing how this field develops, and perhaps learning about it more in the future. For the moment, I’m just a clueless spectator.

2. Interesting discussion on the Heckman curve. The Heckman curve, named after one of the most influential economists in the world and the 2000 Nobel prize winner, says that the rate of economic return is highest for investments in early childhood learning and declines substantially as children grow older. The link to Andrew Gelman’s blog above has a prototypical graph of this Heckman curve.

   The authors discussed in the blog post, David Rea and Tony Burton, found no evidence for this central finding embedded in the Heckman curve. In response, supposedly Heckman stated that “the Heckman curve does not describe how the return on investment of human capital interventions differs by age. It is instead a theoretical proposition or thought experiment about an optimal portfolio of best-practice investments in human capital.” This is quite an emphatic admission given how the Heckman curve is typically stated and discussed in policy circles.

3. It is IPO season. Here I’ll just highlight three of the recent S-1 filings: Corsair, Unity, and Asana. Other IPO filings included Palantir, Sumo Logic, and Snowflake.

   i. Corsair and the PC gaming industry

   The global gaming PC and streaming gear markets totaled approximately $36 billion in 2019, with an estimated 524 million PC gamers and an estimated 729 million console gamers.

   Corsair’s market share in the U.S. is around 18.3% in the global periperhals market and around 42% in the gaminc PC components market. Similarly, its market share is 18% in gaming computer cases, 53% in cooling solutions, 42% in power supplies, and 54% in high-performance memory. Those are staggering numbers.

   While Corsair’s revenues were over $1 billion in 2019 and are well on track to easily exceed that in 2020, around 40% of their net revenue is generated from sales of DRAM modules. And around 30-32% comes from other gaming components while around 27% comes from the gamer peripherals segment. Their profit margins are also lowest for the memory modules segment (around 22%, compare to 27% for other gaming components and 33% for gamer peripherals).

   ii. Unity and the gaming development industry

   On a global basis, in 2019 about 53% of the top 1,000 mobiles games and over 50% of such mobile, PC and console games combined were made with Unity. 93 of the top 100 game development studios (by global revenue) were Unity customers.

   Net revenue of over $540 million in 2019 and seemingly on track for around $700 million in 2020. Understandably, their R&D costs are considerably higher than, say, Corsair discussed above. Unity’s R&D spend was over $250 million in 2019. And again understandably, their Cost of Goods Sold is similarly much smaller than say Corsair’s above.

   iii. Asana and the world of productivity software

   It’s quite something that such a company is even considering IPOing. 2019 revenues of around $142 million, with $106 million spent on sales and marketing and $90 million spent on R&D. That leads to a massive net operating loss. But apparently the market for “collaborative applications and project and portfolio management” is around $23 billion in 2020. I do wonder what all exactly counts under this classification - Microsoft Office?

   I do like that the risk factors now have to prominanently include such things: “We rely on third parties maintaining open marketplaces to distribute our mobile application. If such third parties interfere with the distribution of our platform, our business would be adversely affected.”

   It is interesting that 41% of their revenue is generated from customers outside the U.S.

4. Y Combinator’s Demo Day for the summer 2020 batch was this week. Here are the companies who presented on Day 1 and on Day 2. Very little inspiring stuff, to be honest, but some interesting concepts introduced were:

   Hotplate helps unemployed chefs cook food at home, sell it, and deliver it. In principle, this could be an interesting idea in a place like India where women (or primarily women) sell home cooked food (snacks, pickles, etc.) on Whatsapp groups.

   Bikayi is trying to be a Shopify type place for India, but it appears to be a very new, incomplete app, without even a privacy policy on its front page.

   Orange Health helps individual doctors/clinics in India set up online services and billing. While Farmako Healthcare is an Indian electronic health records company.

   StartPlaying.Games is a marketplace for hiring hosts for social tabletop games like Dungeon & Dragons. According to TechCrunch, they are seeing a GMV of over $10k per month.

5. Good dialog between two China watchers Tanner Greer and Jordan Schneider.

   They talk about how in his speeches, Xi Jinping regularly identifies three forces of history: i) the ocean of globalization, ii) multi-polarization, which makes the world less western and America-focused, iii) peace, that those who try to use military force to impose their will will find it backfire on them.

   “The invasion of Taiwan would be the largest military amphibious invasion in human history. [China] wouldn’t be able to hide it. We’d know weeks beforehand, months perhaps and technology favors the defender.”

   On his blog, Tanner Greer has a great Chinese history reading list.

6. Ben Thompson at Stratechery continues reporting on the Apple app store news. As he notes, “I believe that Apple’s current approach to the App Store is bad for developers, bad for innovation, and ultimately bad for Apple.”