This morning, I was welcomed with a banner ad on The Wall Street Journal. Chinese tech giant Huawei sponsored it:
As a reminder, Huawei is now one of the largest and most impressive technology companies in the world. It makes information technology (IT) equipment that competes with Cisco’s. Its wireless technology equipment competes with Nokia and Ericsson. It even has mobile phones that compete with Samsung and Apple.
But Huawei has also been complicit in aiding the Chinese government’s campaign to monitor foreign network traffic. And the Central Intelligence Agency determined that Huawei has been funded by the People’s Liberation Army, China’s National Security Commission, and the Chinese state intelligence network.
That’s why the Trump administration recently banned Huawei from doing business with U.S. government agencies.
Obviously, Huawei wants to reverse this ban. But I find its approach to swaying U.S. policy makers perplexing…
First of all, it states a “fact” about something that hasn’t happened yet. It’s something to come in the future. More specifically, Huawei says that the U.S. GDP will drop significantly if it doesn’t purchase Huawei products. In my book, that’s a prediction based on a lot of assumptions.
It also won’t make the current U.S. administration very happy. After all, Huawei’s go-to market strategy has been to undercut its competition on pricing. And consider this: Back in 2004, it was determined that Huawei stole Cisco’s source code for its routing technology line for line.
The Neutral Expert’s Final Source Code Report, dated June 15, 2004, determined explicitly that “the exactness of the comments and spacing not only indicate that Huawei has access to the Cisco code but that the Cisco code was electronically copied and inserted into [Huawei’s]” products.
It couldn’t get clearer than that. It’s easy to sell products cheap when you don’t have to spend much money on research and development, and software is by far the most difficult and expensive product to produce. Huawei’s routers were what kickstarted the company and enabled it to grow so rapidly.
These uncomfortable details are the actual facts. And this did result in lost U.S. GDP… from the billions of dollars of lost revenue to Cisco, Juniper Networks, and a long list of other U.S.-based IT companies.
That is why I find this latest public relations stunt an odd one… Why stir the kettle when tensions are already so high?
The ongoing trade negotiations are important to keep an eye on for technology investors like us. I’ll keep following the story.
But for now, let’s turn to our insights.
The robot that will save us from strokes…
Researchers at MIT have developed a small thread-like robot designed to combat strokes and aneurysms.
It’s like a thin snake that scientists can steer using a magnet. This allows it to navigate the arteries of a human brain. The plan is to use this robot to eliminate blockages and blood clots in the brain…
This is big news. Stroke is the number five cause of death in the United States. And it’s one of the leading causes of disability. But if we can respond within the first 90 minutes, survival rates improve drastically. And if we can get rid of blood clots, brain damage can be avoided.
That’s where this robot comes in. It’s our first responder for brain injuries.
This is truly a bleeding-edge development. This robotic technology will allow surgeons to noninvasively care for a stroke victim simply by using a high-tech magnet as a steering device.
Tesla is launching its own auto insurance…
Tesla just introduced Tesla Insurance. That’s right… Tesla is also getting into the auto insurance business.
I can hear the critics already. They will say Musk is starting another venture to mask what they see as shortcomings in Tesla’s car manufacturing business.
But I see this as a brilliant move. Here’s why…
Insurance is the one of the oldest and most profitable businesses on the planet. And Tesla will offer rates that are 20-30% lower than what drivers can get anywhere else. Plus, its coverage will be competitive with normal insurance companies. Terms will be similar.
How can Tesla guarantee lower rates?
Every Tesla car is a connected vehicle. Tesla has all the driving data on each car. That means Tesla can quickly and easily assess how good of a driver any Tesla owner is. That allows Tesla to price insurance rates based on quality of driving. Better drivers get better rates. Common sense, right?
No other car insurance company is doing this to the extent Tesla can. And that’s because no other car insurance company has this much data on drivers. So legacy companies aren’t able to price their insurance based on risk. Instead, they offer standardized packages. Good drivers pay the same rates as bad drivers.
This is a remarkable competitive advantage for Tesla.
What’s more, Tesla’s insurance underwriting is automated. It uses AI to comb through the data it already has. That cuts underwriting costs tremendously. I expect that this reduces underwriting costs by at least 90%.
So this is a great move for Tesla. Its insurance business will be extremely profitable. And consumers benefit also. Good drivers will finally get the lower insurance rates they deserve.
China’s state-backed cryptocurrency is coming…
News has leaked that China wants to push out its state-backed digital currency much sooner than we thought. According to anonymous sources, it may happen as early as November.
This is the digital currency that will be issued through China’s central bank, the People’s Bank of China (PBOC). It will function like a cryptocurrency. But unlike a cryptocurrency, it won’t be decentralized. Quite the opposite, in fact… It will be controlled by the Chinese government.
Clearly, China is racing to get its own digital currency out before Facebook’s Libra, which we have covered in these pages. The goal is to establish dominance in this space within the country.
What’s interesting is that the PBOC is giving its first round of digital currency to tech giants Alibaba and Tencent, as well as five banking organizations. These entities will distribute the digital currency to the population through the normal course of business.
Obviously, the banks make sense as a distribution channel. And if we look at the reach of the two Chinese tech giants, we can see why they were chosen also.
Alibaba has 674 million active users. And Tencent has over 400 million active users. That means roughly 75% of China’s population is interacting with these two companies regularly. That makes them well-positioned to get China’s digital currency circulating in the economy.
To me, this is a sign of things to come. Most countries are going to issue their own digital currency, phasing out paper currency in the process.
And that’s because governments will be able to see, and tax, every single transaction using a digital currency. Even those taking place outside of the country’s borders. It’s a central planner’s dream…
Editor, The Bleeding Edge