I signed off last week with the rather gnomic declaration that Facebook isn’t about social networks…
Alphabet isn’t about search.
Amazon isn’t about e-commerce.
I could have added that Apple isn’t about iPhones…
Or Microsoft isn’t about Windows.
The tech titans are fast evolving into new species… AI platforms that cut through the morass of passwords, touch screens and keyboards to deliver services tuned to your voice, tastes, even your moods.
This goes way beyond Facebook, WhatsApp, Netflix, Windows, Android, iOS… and it is vitally important for investors and businesses to understand.
How Well do You Know Your Robot PA?
Last week we looked at Amazon’s dip into the future via Echo/Alexa, to get a sense of what’s coming at us over the horizon, much of which will involve us running our lives by talking to highly intelligent, to all intents and purposes omniscient personal assistants based on the Cloud.
With exponential advances in machine learning, these assistants will have an almost telepathic understanding of our needs and wants and how to help us satisfy them.
Far fetched? Yes, but it’s on the way…
It’s interesting that Mark Zuckerberg’s New Year resolution is to write code for his own robot PA — a sign that we will play an active part in coaching our new assistants.
What’s also needed, says Andy Rubin, celebrated creator of Android, is an OS fit for an emerging world of 30 billion sense-aware ‘things’ connected to each other, adapting to the needs of 3 billion people with smartphones, ‘smart’ household hubs, and increasingly ‘smart’ wearables including smart earpieces, jewellery, and VR/AR headsets and lenses.
Big Data is Dumb Without Algorithms
As Peter Sondergaard, head of Gartner’s global research, said at last October’s ITxpo, the future of business is being defined ”by interconnections, relationships and algorithms… and algorithms are where the real value lies… algorithms define action… without algorithms, Big Data is dumb.”
By 2020, he says, smart agents such as Alexa, Google Now, Siri and Cortana will facilitate 40% of our interactions with technology.
He alluded to the fact that algorithms now spawn algorithms, like robots building robots, and this enables systems to learn and improve themselves without human intervention.
A few months later, we watched AlphaGo’s machine learning algorithm beat the world Go champion 4-1, having taught itself the game and honed its strategic and tactical skills by playing millions of games against itself and online opponents.
A stunning achievement and one that many thought was 10 years away.
Facebook’s Next Move…
With its huge active user base and decline in the use of its social networking app notwithstanding, Facebook is investing heavily in AI in the form of a high-octane team under neural networking superstar Yann LeCun.
LeCun was cheesed off when AlphaGo trumped Facebook’s software in the race to beat human Go players. Facebook had announced at the beginning of the year that it was ready to start playing humans.
Facebook have three particularly interesting projects…
AI that mimics the brain: The interesting thing here is that LeCun, as much a hardware pioneer as software maven is driving to integrate a truly fit for purpose chip architecture with software that simulates how neurons talk to each other. Facebook is starting to design its own chips — bad news for the semiconductor industry.
A social network of bots: Facebook is morphing Messenger M into a single app of apps to run our lives on a mobile. The project is an attempt to emulate Tencent’s WeChat/Weixin hugely successful mobile app of apps in China.
Facebook has introduced bots to M that you can engage in simple conversations — offering you weather, news and traffic updates — but the goal, as you communicate more and more, is natural conversation.
The idea is that you chat instead of click. This will allow Facebook to handle a whole economy of simple tasks that humans used to provide, though people’s first instinct after the launch this week was to make the bots look foolish.
Virtual Reality: Facebook will also attempt to pull us into virtual environments with its Oculus VR technology. This week Zuckerberg unveiled Surround 360, a 360-degree camera that stitches together images from 17 shutters to capture a complete environment, similar to the design that Google used to render Google Street View.
The Surround 360 is open source. Facebook are making it available to developers for free in the hope that they will render videos of interesting environments that we will later access through the Oculus VR headset, providing a new means of advertising to a captive audience.
Watch Apple TV
Apple’s approach has always been to wait for others to create a market and then come in late to devour the profits with superior design, tightly integrated hardware and software, better, more intuitive product, unbeatable marketing, and world beating manufacturing lines.
For example, the Walkman opened up the market for the iPod, and scores of mobile phone companies led by Nokia presaged the iconic iPhone.
Apple has created and maintained customers on a scale and with a ‘stickiness’ like no other company in history.
Apple customers form a vast global cult, most of whom are so enthused with Apple products and what they say about them that they will buy almost anything Apple makes.
This binds them to the Apple ‘ecosystem’ of apps and services.
Facebook, Amazon, Google, Microsoft — none comes close to Apple’s premium brand or degree and scale of customer loyalty.
That’s why Apple TV is so fascinating.
This platform will go head-to-head with Amazon’s Echo/Alexa when the market matures.
The 4th generation Apple TV remote will not only turn the household TV into a giant iPhone, it will turn Apple into the largest cable company in the world, with Netflix and others becoming apps on Apple’s platform rather than destinations in themselves.
Eventually like Echo/Alexa, it will manage the household’s smart devices and the whole system, like Echo/Alexa will be driven by voice — Siri.
Siri has not delivered the seamless interface many had hoped for, which calls into question the quality and scope of Apple’s in-house AI and machine learning capabilities.
Last autumn Apple put it about that it was looking for over 80 AI software engineers for its Cupertino HQ, but the pool is pretty well scooped by it competitors and start-ups focused on brain-science based AI.
So Apple is reverting to aqui-hire — talent and IP via corporate acquisition.
Last year it acquired start-up Emollient, a pioneer in reading people’s emotions by analysing facial expressions. Doctors are already using this technology to determine the extent of patient pain, and retailers use it to track how shoppers react to products in stores.
And this year, Apple acquired Cambridge UK-based Vocal IQ, which has developed the world’s first self-learning dialogue API — bang on relevant to enhancing Siri.
Apple is also active in the rich hunting ground of Israeli’s tech startup community, as have Facebook and Alphabet. I’ll keep you up to date with the most promising AI startups over the next few months.
Who Will Dominate?
The internet giants cited above are all within the top 10 most valuable companies in the world by market capitalisation — led by Apple, Google and Microsoft as the top three — and are all highly owned ‘hedge fund hotel’ stocks.
They illustrate the extent to which the 40 million strong global ‘nerd nation’ is the world economy’s next great power. The geeks discovered business — starting with Gates and running from Jobs, Bezos, Page and Brin to Zuckerberg. And these companies are probably among the few who are entirely out of range of a grievous bear market.
The methods that the tech titans are using — data analytics, algorithms, AI — will be emulated by every other industry, assuming the tech titans haven’t already assumed control of that industry first. This is an across-the-board modernisation effort.
One does wonder in the cases of Amazon and Facebook how they would fare in the absence of their Napoleonic, micromanaging, visionary founders whose creatures they are just as Apple was Jobs’s — the latter a suitable case for separate treatment.
For now, welcome to the age of AI-powered platforms and be wary of any portfolio holdings that lack the tech cultures and capabilities to adapt. Bear in mind that even a former tech icon like HP can flounder.
I’ll take a detailed look at Apple through the lens of recent patents and the shift to a subscription based services company in a week or two.
Next week though, I’ll look at the Chinese BATs – Baidu, Tencent and Alibaba.