• “Like a pony chasing a racehorse”
  • Starlink’s true value…
  • Finding opportunities in international markets

Dear Reader,

Welcome to our weekly mailbag edition of The Bleeding Edge. All week, you submitted your questions about the biggest trends in tech and biotech. Today, I’ll do my best to answer them.

If you have a question you’d like answered next week, be sure you submit it right here. I always enjoy hearing from you.

Is technology moving too fast?

Jeff,

I’m in my late 60’s and have been somewhat able to keep up with technology, kinda/sorta.

I feel lately unless I read or research something every day I’m falling way behind, but thanks to your newsletter I don’t feel like I’m on a pony chasing a racehorse, kudos.

I’m concerned that so much technology so fast is going to leave people way behind the curve. My question is that, if people don’t understand it, can’t readily use it or worse, don’t know about it, how will adoption take place, and doesn’t no adoption equal bad investment?

– Roger T.

Hi, Roger. Thanks for being a reader and for your feedback. Producing just one edition of The Bleeding Edge is an hours-long process every day. And in order to find the real insights, I obviously can’t rely on the high-level “fluff” we see from most mainstream technology journalists.

So, that means listening to conference calls, reviewing new patent submissions, reading through academic research, and even speaking to my contacts in industry to get the real “scoop.” It’s a lot of work, but I’m happy to hear you find value in it.

First off, you’re definitely not alone. 

I typically spend at least 12 hours a day, sometimes as much as 18, doing my very best to stay on top of all of the major developments. Even with the additional support from my great team, I too sometimes feel like I’m having a hard time keeping up. But it definitely keeps things exciting and interesting.

One of the things that I do try to do is write about these incredible topics in ways that are accessible to all readers. After all, if I were to use a bunch of lingo and no one understood me, that wouldn’t be very useful at all. I enjoy taking complex subjects and making them easy to understand. 

One of the things that I’ve found over my 30-plus-year career in high tech has been that the rate of technological advancement has never slowed down. That’s another way of saying that the rate of change will continue to accelerate. 

And for many, that will feel very uncomfortable. The application of these technological advancements will have a direct impact on all of our lives. It will be mostly good, but I’m certain that we’ll have those things that “were just fine the way that they were.”

Something else interesting is happening with technology. It’s actually getting a lot easier to use. 

We might remember the old days when we tried to connect our desktop computer to a printer. It often required a lot of fiddling, downloading drivers, trial, and error, etc. It was a very manual and time-consuming task.

Largely, those days are over. 

Working with new consumer technology has become dramatically easier. And the employment of artificial intelligence in the form of a chatbot that can perform tasks for us will be as easy to use as simply speaking. My point is that we won’t have to deeply understand it in order to use it.

And because of that, adoption will happen at even faster rates than ever. The reality is that the easier technology is to use, and the more value that an individual technology provides, the faster the rate of adoption.

And one final point… 

As an analyst and investor, I’d like to point out one critical thing to be aware of – our own bias when evaluating whether or not something will be adopted.

It’s human nature for us to think that “well, that’s not so useful to me, so I doubt it will be successful.” That’s an easy and very natural trap for us to fall into.

When I’m looking for great investment opportunities, I always remind myself that it doesn’t matter whether or not I would use their product or service. What matters is whether a large number of consumers, businesses, or government agencies will find it useful. 

Purely from an investment standpoint, that’s the right lens to look through.

I’ll be doing my best to make sure that we’re riding on the thoroughbred racehorse in the Bleeding Edge so that we can all keep up.

The real value of Starlink…

Dear Jeff,

As you’ve written extensively on Elon Musk’s Space X and Starlink, I want to get your take on this critique I just read:

Starlink, one of SpaceX’s business lines, is a collection of satellites that promises to offer Internet from space for millions of paid subscribers.

Unfortunately, it’s not a network of satellites. Despite SpaceX launching thousands of them into space, each satellite acts alone. It echoes your data straight back down to the internet near you.

Because these satellites don’t work together, Starlink has no “network effect” – a success that builds on itself as more users join. Instead, when many new users connect to a Starlink satellite, it gets overwhelmed.

Just as important, small satellites close to Earth are short-lived assets. They run out of fuel, fall, and burn up…

So SpaceX is the massive proliferation of an idea that works in testing but can’t work on a larger scale.

This is Starlink’s fatal flaw… And SpaceX does not want investors to understand this before its IPO.

– Gary S.

Hi, Gary. I’m happy to tackle this one. And I can tell right off that the author of the critique fundamentally doesn’t understand how the Starlink constellation works.

To catch readers up, Starlink is a business unit of SpaceX. The company launches and maintains a “mega constellation” of low-Earth-orbit satellites that provide internet connectivity to users, targeted specifically in areas where broadband is not available. It is already the largest satellite constellation in history.

As of late 2022, Starlink had just over 3,200 satellites in orbit. And Starlink plans to eventually have as many as 42,000 satellites in their constellation. But even with just 3,200 satellites, it’s a truly amazing feat. The graphic below gives us some idea.

Visualizing Starlink’s “Mega Constellation”

Source: satellitemap.space

Each white dot represents just one satellite. And as we can see, they are blanketing the entire planet. Amazing.

But as for the critiques…

The idea that these satellites aren’t a network is not true. By any definition, these satellites—which coordinate and communicate with each other—are absolutely a network. It is kind of like a mesh network that encompasses our planet.

The skeptic points out that each satellite “works alone” to provide connectivity. Again, that’s not true. The way it works is that these satellites are in constant orbit around the globe.

A Starlink user may be connected to one satellite at any given time. But as that satellite moves out of position, the next one in the constellation moves into position and picks up the connection seamlessly. A Starlink users will interact with dozens of different satellites as they circle the globe, assuming that they are using the internet over an extended period.

The way the system work is that a Starlink user sends a request up to the Starlink satellite above them. That satellite then communicates directly with a ground station that connects with the internet (assuming one is in range), then it sends the information back up to the satellite and down to the user. 

But when the Starlink satellite is out of range of a ground station, it connects to another Starlink satellite that can communicate with a ground station.

Many of the Starlink satellites also have the ability to enable what I think of as backhaul data transport. Data can be sent through space from one Starlink satellite to another using laser technology.

Your skeptic also says these satellites will “run out of fuel.” I guess this person didn’t bother to confirm that the satellites are solar powered. Solar power is very efficient from space as there is no atmospheric interference.

It’s true that Starlink satellites do have to reposition themselves in orbit over time. Each satellite has small nozzles for thrust to do just that; but eventually they’ll run out and be decommissioned.

Because of this, each satellite has a lifespan of about five years. After that, the satellites need to be brought back to earth and new ones will take its place. But the idea that a Starlink satellite is going to run out of fuel unexpectedly like a car on the side of the road isn’t the case.

And believe it or not, there are a few companies that are basically building rocket fuel stations in space. They can service existing satellites. In time, this will be a big business. It may or may not make sense for Starlink to refuel in this manner, but it may also be the case that it is cheaper to just launch new satellites that have upgraded capacity.

The other comment is about there being no “network effect.” That doesn’t make much sense either.

It’s true that Starlink isn’t like a social media network, or a blockchain network, but neither or wireless network operators, cable TV operators, or other telecommunications providers.

These kinds of businesses are some of the most successful and valuable businesses. And their key is scale. There are large upfront capital expenditures, but once their networks are up and running, each additional user on the network improves the overall financial metrics of the business.

As the network scales and eventually reaches free cash flow, it can invest further in the network making it even more valuable and continuing to grow its subscriber base. 

Starlink is now expanding to providing its satellite based broadband internet services to planes, boats, buses, RVs, and pretty much anything that moves and would benefit from an internet connection. 

And it has completely enabled a world of opportunities for people who need to stay connected, but want to live remotely, so remote that there is no broadband communication. That’s awesome.

And finally, your skeptic says Starlink “promises” to offer internet connectivity to millions of subscribers. Again, I guess they didn’t bother to check that Starlink already is providing connectivity for more than one million users. 

Gary, I’m glad you’re engaged and following the topics we cover in The Bleeding Edge. But whoever provided the critique clearly doesn’t understand some of the most fundamental points of the underlying technology.

Speaking to international readers…

Hi Jeff,

As a few years or so as member of Brownstone research I have the following questions.

Almost 80 if not 90% of your editorial content and reports are editorially US biased. Whilst I anticipate the majority of your members are US based, you have a proportion (unclear how many), but certainly thousands of non-US members that live outside USA and are not American citizens.

I am sure you are aware that there are many excellent opportunities, developments and investment opportunities In Europe, Asia, and other parts of the world.
However, the absolute bias most of the time is USA, USA!

– Richard P.

Hi, Richard. Thanks for being a reader. And you’re right, most of our subscribers are based in north America. But not all of them…

Having lived and worked for the majority of my adult life overseas, I’m actually very aware of and in tune with the international markets and love the fact that I have so many non-US based subscribers.

I’ve had the great pleasure of meeting many of my international subscribers. I’ve spoken to them. I know they come from all walks of life and from all corners of the globe. And I try to produce research that will speak to any investor, regardless of their country of origin.

Most subscribers know that I spent almost my entire career living and working overseas in Asia. I also lived in London when I was earning my M.S. at the London Business School. I consider Japan just as much a “home” as I would The United States.

And my experience in international markets gave me a unique perspective on the high-tech industry. And I believe that comes through in my research.

For instance, some of my favorite companies that I’ve profiled and recommended are domiciled outside the United States:

  • Nokia, a Swedish company

  • ASML, based out of the Netherlands

  • TSMC, a Taiwanese semiconductor foundry

  • Infineon, a German automotive semiconductor company

  • MercadoLibre, the “Amazon of Central and South America”

The list goes on…

It’s true that the majority of the companies I cover are US-based. And there is a reason for that. 

The U.S. financial markets are the most liquid in the world for equities. The U.S. is where the largest amount of capital in the world comes to invest in tech and biotech. 

And great companies receive the largest valuations when they are trading on U.S. markets because of that. It is also relatively easy for my international subscribers to have brokerage accounts that allow them to trade U.S. equities.

Whether it is a public or private investment opportunity, I really try to make sure that the opportunity is accessible to a large number of my subscribers. 

I’m always interested in great opportunities with international companies, as long as they are trading on U.S. markets that have the broadest accessibility.

Another interesting point is that the U.S. is home to the most vibrant venture capital and private equity markets. Because of that, there is more investment in early stage tech and biotech companies in the U.S. compared to anywhere else in the world. 

Naturally, that leads to breakthroughs that are worth having a look at and eventually investing in.

Any perceived bias isn’t because I have any blinders on to international opportunities. It’s just that my editorial naturally focuses on the capital markets and opportunities that serve my broad subscriber base. 

The U.S. has the largest economy in the world. And U.S. policy (good or bad – mostly bad right now), clearly has an impact on the rest of the world. 

So, it’s critical that my editorial and research has a heavier weight towards what’s happening in the U.S.

I appreciate the feedback. 

Nothing would make me happier than to have Brownstone Research teams in Europe and Asia expanding our reach and capabilities even further. 

I’ve thought about that a lot. Perhaps one day we’ll get there…

Regards,

Jeff Brown
Editor, The Bleeding Edge