• Is there really “clean and free” energy?
  • Offering voice synthesis at scale
  • Determining an appropriate buy-up-to price…

Dear Reader,

Welcome to our weekly mailbag edition of The Bleeding Edge. All week, you submitted your questions about the biggest trends in technology.

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.

As yet another sign that things are snapping quickly back to normal, Salesforce announced that it will be holding its annual Dreamforce conference in person this September. That’s right. It won’t just be over a Zoom call – it will be in real life (IRL).

Dreamforce has been one of the largest tech events every year. In 2019, there were 171,000 registered attendees for the event, which is always held in San Francisco.

That’s an unbelievable number for a single company’s annual conference.

While it is still too early to say how many will attend this year, it will certainly be a fraction of the size given the many travel restrictions and varying levels of vaccination around the world. In 2019, attendees came from more than 120 countries.

What is surprising, however, is that it is happening at all. San Francisco has been one of the most dysfunctional and panic-driven cities in the country, with extreme measures and restrictions put in place at the expense of incredible economic damage.

I’ve heard through my own network that so many of those restrictions are still in place and the city has yet to come back to life.

This is a stark contrast to New York City where I stayed the last couple of days. It almost feels like it’s gone back to normal. It’s encouraging to see.

Salesforce will require that all attendees be vaccinated. It’s not clear if they will require proof or not. But it is still a bold move for a massive San Francisco-based tech company to step up and be the first to say, “It’s on!”

Well done, Salesforce! It is great to see the company providing some industry leadership by moving forward with the event. Others will follow.

And most of us are craving to get back to in-person events and have more productive and meaningful interactions.

The timing is fantastic for Salesforce as well. Days ago it released its first fiscal quarter earnings results. It was the best first quarter in the company’s history. The company raised its revenue and operating margin guidance for the year. And its business looks stronger than ever.

Salesforce is on track to generate an incredible $50 billion in revenue in its fiscal year 2026.

The pandemic was fantastic for Salesforce’s business. Companies around the world were forced to accelerate their adoption of digital technology and cloud-based business process software in order to function in a remote work environment. It was a necessity to keep things moving in an unexpected work environment.

And there is no turning back after adoption.

Now let’s turn to our questions…

The hunt for the best clean energy…

Let’s begin with a question on the trade-offs of clean energy:

Dear Jeff: In your latest “mailbag” edition, you write: “Purchasing an EV when we can fuel it with electricity produced by the Sun is clean.” But don’t solar panels contain heavy metals that leech off into the environment via rain?

My understanding is that if you put up a solar panel within or bordering an “organic” garden or field, you’ll jeopardize your organic certification because of the leeching cadmium, etc. It’s also my understanding that solar panels have a limited lifespan, after which they have to be landfilled because, at least with existing technology, they can’t be recycled. Same with windmill blades, which also kill untold numbers of birds and bats every year.

Also, to refer to hydropower as “clean” strikes me as somewhat misleading. In order to produce it, running water must be impounded. The environmental impacts of such impoundments (on fish and other species, not to mention other natural processes) are real, although we may conclude that producing hydropower is still preferable to burning fossil fuels to produce electricity.

Still, there’s no completely “clean and free” source of power, is there? I hope you’ll comment on these issues in The Bleeding Edge, which I read every day.

Best regards,

– Jeff D.

Hi there, Jeff, and thanks for being such a regular reader. I’m glad you’re enjoying The Bleeding Edge.

As for your question in response to our recent mailbag, you’re absolutely correct. It is great that you are thinking that way as well.

Very few people consider the entire picture when talking about clean energy.

I can’t tell you how many blank stares I have received when I ask those who think that they are contributing to a clean environment by driving an EV, “Where does your electricity come from, and from what fuel source was it produced?”

As you noted, solar panels are made with toxic chemicals. And the manufacturing process, while less polluting than fossil fuels, can also create greenhouse gases such as nitrogen trifluoride and sulfur hexafluoride.

Solar panels are also difficult to recycle after they have passed their useful life. After about 15 years, the efficiency of solar panels drops significantly, and they have to be replaced. We’re facing a massive issue with how to safely dispose of and/or hopefully recycle these panels so that we aren’t just dumping most of them into a landfill.

Solar power also often requires large areas of land, which can disrupt habitats. The exciting Gemini Solar Project, for example, will cover 7,000 acres of federal land in the Nevada desert.

But the Gemini site overlaps with the habitats of endangered or threatened species like the desert tortoise, kit fox, and burrowing owl.

Hydroelectric power also has drawbacks. It damages our natural waterways, especially freshwater ecosystems.

And wind farms negatively impact migratory patterns of wildlife – birds, in particular. Wind turbine blades are also a real problem. They can’t be recycled or repurposed and are now being dumped into landfills.

Sadly, it’s rare to see journalists, or even environmentalists, present a complete picture of these sources of clean energy. We need to understand all second-order environmental impacts.

And, of course, there are other challenges. With many forms of renewable energy, we also must deal with factors like how to store the energy efficiently – even when the Sun isn’t shining or the wind isn’t blowing.

Most of today’s solar panels only convert 15–18% of the Sun’s energy that hits the panel. And that’s on a sunny day.

So to your point, if we are to be objective, rational, and smart about energy production when planning for the future, we must look at the whole picture – how energy is manufactured, the dangers or complexities involved in its use, the negative environmental impacts, and how and if materials can be recycled when they have reached the end of their useful life.

And these are some of the reasons I speak so highly of nuclear fusion. I truly believe it’s the future of clean energy production.

Nuclear fusion (not fission) will generate truly clean energy without many of the drawbacks I listed above. Unlike nuclear fission, fusion can create energy without radioactive waste. And the fusion reactors will actually have small footprints. They just won’t take up that much space.

And the good news is that we’re getting close to making it a reality.

As I wrote at the start of this year, we’ve seen more and more breakthroughs in creating and maintaining these reactions… And companies like Commonwealth Fusion Systems and TAE Technologies are hard at work making this a viable source of baseload energy.

That’s why, within just a few years, I expect we’ll start seeing nuclear fusion becoming one of the hottest topics in the world of technology.

And I’ll be sure to keep all readers current on the latest details here in The Bleeding Edge.

Will voices just be a novelty?

Next, a reader comments on our coverage of Facebook’s recent patent:

Hello, Jeff, and everyone at Brownstone. I really enjoy the Brownstone Unlimited service. Keep up the great work.

Regarding Facebook’s recent patent to read messages in the voices of its users, there’s not much new about it. John Legend’s voice is already available with Google Assistant  – that happened two months ago. Google has been working on voice synthesis for a long time.

However, Facebook’s patent is interesting because it indicates that the company is considering offering voice synthesis at scale to its users. That is something Google has not demonstrated yet. Also, we can already listen to voice messages (and record them) with almost any messaging app. Given that processing power, memory, and bandwidth are continually increasing, there are few technical limitations to voice messaging – voice transcription and synthesis are not needed.

Then why is Facebook interested in this capability? I think it will be a novelty to keep users engaged and show them advertisements. Imagine users’ delight when they can click on their feed and listen to Facebook’s goofy simulations of their friends’ voices. Many users will want to record their own voices too because of FOMO [fear of missing out].

And like you said, this feature could be appreciated by anyone who has lost a family member. I have a few friends who saved voice messages from a loved one because they were not ready to let go. Some people may find comfort in listening to a deceased relative’s old posts, and Facebook will show them advertisements for counselors and emotional support groups.

By the way, if you liked Black Mirror, you should watch Upload on Amazon Video. The future of the memorial AI industry is central to its story.

Best Regards,

 – Joseph B.

Hi, Joseph. Thanks for being a lifetime member and for sending in your thoughts on our discussion of Facebook’s latest patent.

I think you’ve brought up an interesting point with the novelty aspect of using this kind of voice technology. The “fun” element of being able to use different people’s voices would definitely appeal to some users and help drive adoption.

We can think of it in a similar way like emojis or the simplicity in using GIFs on social media. The rate of adoption for these simple and silly annotations has just been extraordinary.

I believe voice features will experience a similar adoption curve. And I can certainly see Facebook using its voice synthesis to push advertisements like you suggested.

The primary difference between the John Legend cameo on Google Assistant and Facebook’s patent is that Facebook will likely do more than just have a celebrity record a limited set of phrases.

While the John Legend cameo could only respond to certain prompts, such as sharing the weather or singing Happy Birthday, Facebook’s patent would potentially enable the synthesized voice to say anything.

Once it has captured a voice, it wouldn’t be restricted to limited dialogue options.

We’re going to see some interesting developments over the next few years, especially with other voice synthesizing technology like the Marvel.ai platform I wrote about recently.

And I expect we’ll see some interesting uses of this technology as it hits the mainstream.

Thanks for the recommendation on Upload. Work keeps me pretty busy, and I don’t have much time for TV these days. But I just had a quick look and it looks really interesting.

The formula for good buy prices…

Let’s conclude with a question about how our buy-up-to prices are determined:

Dear Jeff, I am a Brownstone Unlimited member. Could you please explain how you determine the “buy-up-to” price? Is the formula the same for all securities? If not, what determines the differences?


 – Bill P.

Hi, Bill – thanks for being a lifetime subscriber and sending in your question.

While there isn’t a simple math formula I use, the key factor I consider for every recommendation is valuation, as opposed to the dollar price of shares. There are a couple of reasons for this.

To start with, the stock price is influenced by the number of shares outstanding. For example, two companies may each be trading at $25 per share, but that doesn’t mean they are worth the same thing.

If one of those companies has far more shares outstanding, it would be worth far less than the other company – even though the stock price happens to be the same.

So the share price really doesn’t give us much information. Enterprise value, on the other hand, tells us the comprehensive value of a company. This allows for apples-to-apples comparisons.

And I often use the enterprise value-to-sales (EV/sales) ratio as a measurement of how “expensive” a stock is. It puts a company’s value in the terms of its sales. In other words, how many years of revenue (not profits) a company’s valuation is equivalent to.

This can often give us a picture of the growth prospects and potential return for a company… or how likely it is to plummet soon.

For example, listen to the former CEO of Sun Microsystems, Scott McNealy, reflecting on his company’s overly high valuations before its stock fell 96%:

We were selling at 10 times revenues… At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees.

That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?

Sun Microsystems’ stock didn’t fall because it had bad technology. In fact, we still use its Java programming language today. It fell because the valuation was way too high at that time, in that market, to support its future growth expectations.

But while McNealy said an enterprise value (EV) to sales of 10 was ridiculous, we have to put these valuations in context. Back then, in those market conditions and with Sun’s growth profile, it was.

But today, some companies can justify an EV/sales ratio of 10 or more as long as they have the gross margins and growth rate to support it.

And there are examples that make Sun’s valuation back then look ridiculously cheap.

When cloud-computing software company Snowflake (SNOW) went public last year, for example, it was valued at an astronomical EV/sales ratio of 177. That valuation said the company’s worth was equivalent to 177 years of revenue.

That’s simply nonsensical. Investing at a valuation that high is a near guarantee that we will lose money.

On the flip side, when I see a company that is undervalued – especially compared to its peers – then that can be a sign we’re in for huge profits.

As one example, in an Exponential Tech Investor issue at the beginning of this year, I noted that my semiconductor recommendation was trading at an EV/sales of about 9.

Its close competitors, however, were sitting at 18.6 and 15.3. [Paid-up subscribers can catch up here. And if any readers would like to learn how to join us, go right here for the details.]

Given the expected growth of the semiconductor space and the potential market for this recommendation, these competitors served as a baseline for what we could reasonably expect in the future.

And using those metrics, I calculated a reasonable growth target for our semiconductor company, which I then used to determine our recommended buy price. I also take into consideration the liquidity in any given recommendation.

Buy-up-to prices are determined differently for smaller companies with less float as compared to large-cap companies with large amounts of liquidity.

Making logical assessments of value and growth like this is a big part of how we beat the markets and hedge funds so consistently in my services.

When we can find a company that other investors are overlooking, we know we have an opportunity sitting in front of us.

That’s all we have time for this week. If you have a question for a future mailbag, you can send it to me right here.

Have a good weekend.


Jeff Brown
Editor, The Bleeding Edge

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