Author Archives: theusernamewhichismine

The stock market doesn’t care about your cost basis

When someone is down 50% or more in a stock, they’ll often take to social media to complain and casually ask “what should I do next”? No one wants to sell for a loss, people almost act like it’s admitting failure. And people’s perceptions are often colored by the price at which they bought the stock. “Oh I bought 10 shares at 100$ and now they’re each worth 50$, when can I expect to break even again?” I can’t predict the market but I can say one thing: the price you paid for the stock DOES NOT MATTER. It doesn’t matter if you’re up or down, you should look at any stock you own and as yourself “do I think this stock will perform as well or better than the market in the near future?” A lot of people get stuck in a mental narrative, they start to think trends will either continue indefinitely or definitely reverse soon, depending on what would make them feel better. But a stock that is way down could still be overvalued just like a stock that is way up. A few months ago Carvana ($CVNA) stock was down 50% year to date. What did it do after that? It dropped another 50%, and another 50% from there, and just for good measure another 50% from there. Dropping 50% 4 times in a row meant it had lost about 94% of its starting value from January 1st. And Carvana still had a ways to go as it’s currently down 98%. If you had bought $CVNA on January 1st, then by April 1st you would have seen it lose 50% of it’s value. Your friend may have been tempted to think “it can’t go much lower, can it?” and bought the dip while you held your shares. You would then see your shares go on to lose 98% of their value while your friend’s shares lost 97% of their value. Your friend lost relatively less than you did, but still lost nearly everything.

Your cost basis on a stock is only relevant for tax purposes, it should have no bearing on your investment decisions. The only thing you should care about is the current price and the expected future price.

My internet sucks today

As with many people, I travel during Christmas to see my family. I’m currently staying at a family member’s house, typing out a blog post because I still want to write every day. They’re working on decorating and I don’t want to disturb them, but I don’t know the password to their wifi. I’m having to make do by using my phone as a personal hotspot, but the bandwidth is terrible and it takes like 20 seconds to load any webpage. This had made me think of a question: what technology would I miss the most if I lost it? Agriculture might be pretty high up there, but the internet would definitely take top spot. I could probably do without a car or climate controlled rooms for longer than I could do without the internet, it’s just made my life so much easier and more fun. I like to blog, I like to game online, but more deeply I like to keep in touch with all my friends who live far away and work with my collaborators who live in other countries. I like that when I travel I can easily book hotels and find restaurants all before I arrive in a city, and that when I’m home I can find which hotspots are too crowded to go to without wasting my time to first go to them. Even reading has gotten more fun with the internet, Agatha Christie had a habit of dropping random bits of French into her books just because, and if I read those books without the internet I’d have no way of knowing what a character had said, and wondering to myself if it had been an important clue. Now I can just type it into google translate and know “ah, that character was just mocking another one’s accent, cute.” Not to mention that I can start a book on a kindle, lose that kindle, and continue right where I left off on a second kindle. And also not to mention that my local library has an email digest of new books that are often very interesting, and which I’d have never known about if it weren’t so easy for them to tell me about them through email.

Yeah the internet is pretty great, I should ask for the wifi password.

Why do people still use Twitter?

This is a short thought today, since it’s mostly jumping off my last post about Twitter. But with Twitter again in the news since their CEO is addicted to limelight, I figured I’d pontificate about why I think Twitter worked and may continue to work as a prestigious social media site despite proclamations of doom coming from every angle.

Note that I did say prestigious social media company. Some may turn up their noses, but Twitter was and still is the social network of choice for many companies to broadcast their content globally. Most companies wouldn’t be caught dead on Reddit, and Facebook doesn’t really enter into the social fabric as it once did, but the things that happen and are posted about on Twitter continue to drive endless news cycles, even when it’s not about Elon Musk, and companies want to take part in that conversation to direct it for their own ends. Companies and fame addicted continue to broadcast themselves on the Twitter, even as some of them start contemplating an escape route, but I don’t think one will be easy to find because nothing really replicates what Twitter is. Not Mastadon, not Post, not Substack, there is not a single social media site that is just “Twitter without Elon Musk.”

Twitter allows users to broadcast their message in ways that no other social media site does. While other sites do let you spread your message through posts and links, Twitter lets any and every user view your content if you attach yourself to multiple avenues of “trending topics” either with a hashtag, a phrase, or just putting yourself in the middle of a thread that’s trending. If you want people to see you, just look at the sidebar for what’s tending and try to put that somewhere in your tweet, the algorithms will find you and anyone searching the trending topics will see your tweet. If enough of them see and like your tweet, your tweet itself may trend and be made visible at the bottom of entirely unrelated tweets. Compare that to any other social media, the easiest example is Reddit which is a walled garden at the best of times: if you want people to see you there is no way at all to broadcast yourself to the entire Reddit community. At best you can join a highly popular subreddit and try to post in the highly upvoted threads, but even then you’re only speaking to a specific community in a specific thread. People in the r/cutekittens community will never ever see your epic takedown of Ron Desantis if you posted it in r/politics, and people in r/politics will never see your favorite fuzzball because you posted it in r/cutekittens. The moderators of the subreddits ensure that their communities stay “on topic” and thus separated from each other by a wall that can’t be breached. By contrast someone scrolling through @cutekittenpics will always see the trending topics on their sidebar, and your epic takedown of Ron Desantis may be trending there, putting the cat-scroller just a click away from seeing you.

Back to the moderators, Twitter is much more of a free-for-all than other social media. Of course there are rules and moderators will ban you if you break them, but the Twitter moderators are for lack of a better word more “professional” than most social media mods not least because Twitter mods are paid. By in large Twitter’s broad guidelines are but lightly enforced (especially now that Twitter is understaffed). Compare that to a subreddit where a volunteer moderators will ban you for no better reason than they’re on a power trip, or Mastodon where high-school level drama can get you banned from communities for being part of the wrong clique. Very little gets you banned from Twitter for any length of time. Just because you acted like a dumbass, or held extremist opinions, or just outright hate authority, you will still likely be able to tweet into the void for as long as you want so long as you don’t repeatedly violate their very very low standards of conduct. You can be infamous on Twitter but it’s very hard to be silenced, even before Elon Musk took over some of worst lightning rods in popular discourse kept their names alive on Twitter long after a Mastodon or Reddit admin would have banned them.

It’s not well appreciated, but these two factors; light touch moderation and ability to broadcast, go hand in hand as part of Twitter’s MO. Because no one is able to control the discourse the way a moderator would, companies and individuals feel free to set up shop and broadcast their message since they can’t be silenced by a cranky or drama-prone mod. And because every type of competing message is being broadcast at all times, Twitter becomes window into the “now” of society, a look at all those things being talked about right now but which may or may not still be important in a week. This window into the “now” draws in journalists, activists, and others who feed on discourse. The producers of discourse (companies, politicians, socialites) get attention, which they think will help them with whatever their goal is. The consumers of discourse (journalists, activists, socialites) get a window into the “now” which they think will help them with whatever their goal is. Note that many Twitter users are both producers and consumers of discourse, and I use the word “socialites” to demarcate anyone and everyone who enjoys or spends their time talking about society and humans in general (that includes most of us!).

This kind of firehose of social discourse, where everyone’s messages are constantly competing for views and clicks, is not replicated on any other social media that I know of. Some social media is heavily moderated, where the moderator gets to decide the narrow alley of what discourse is allowed (politics vs cute kittens) or of which views are allowed (right, left, center, etc). Other social media is heavily siloed, so even unmoderated discourse can’t spill out into each user’s individual walled garden. There really is nothing quite like Twitter at this point in time, and to me that explains why the vast majority of its users are sticking with the platform even while many of them dunk on the current owner and bemoan the downfall of their favorite timesink. I wonder what historians will write about all this in a hundred years’ time?

You can get addicted to warm temperatures

I’ve lived in the same house for many years and I’ve almost always slept with the heating off at night. The winters around here aren’t brutal, but their cold enough to chill you to the bone without plenty of blankets. Recently the heating unit in the front of the house failed, and while it’s being fixed I’ve been using a space heater to stay comfortable. I told myself I’d only use it a little, but after having it on blast just a few feet away from me while I stay awake reading, it’s very hard not to leave it on to keep me warm while I go to sleep. Heck it’s very hard not to keep it on at all times day and night, with it blasting warm air I feel like a ball of warmth in the middle of a snowstorm. Psychologically, just knowing that right now with the push of a button I could be warm instead of cold makes it hard for me not to push the button and warm myself up. I hope the heating gets fixed soon or I could become addicted to this.

Synthetic biology: why it still might be a miracle industry

I’ve spent most of the last 2 weeks ragging on a few of the hottest SynBio startups. I’ve pointed out that these synbio startups have a very difficult path to profitability, and some might not even have a working business model. But from the scientific side, there’s still a revolution out there for synthetic biology, and I want to explain it.

To start with, the insulin and drug products revolution is a definite win for synthetic biology. The ability to take any gene, clone it into a bacteria or yeast cell, and then express it and collect the product is what has made many drugs so much cheaper than they were decades ago when we had to extract the drugs from animal carcasses or massive amounts of plant matter. It has also allowed revolutions in the types of drugs we can study and offer to patients, just about any protein you can think of could be turned into a drug that is usable for patients. Antibodies are a special type of protein which can also be produced through synthetic biology, and many antibody products have hit the drug market to treat all kinds of diseases. Aducanumab is one such antibody, a much hyped drug for treating (or rather slowing the progress of) Alzheimer’s disease. Quick note: you can tell if a drug contains an antibody by it’s name: aducanumab’s name ends in “mab” which stands for “monoclonal antibody.” Gemtuzumab (AML drug), Tezepelumab (severe asthma), pretty much any drug who’s name ends in “mab” is an antibody drug, and almost always they are produced through synthetic biology.

Biology can also catalyze certain reactions that chemistry can’t easily do. The classic example of this is creating molecules with specific stereochemistry. This will be a bit technical, but consider your left and right hand: they both have 4 fingers and a thumb but they are mirror images of each other, you can’t put your left hand in a right-handed glove and vice versa. In chemistry we would call left and right hands “stereoisomers” of each other, and just as with hands and gloves you can’t put left-handed molecules into places that require right-handed molecules. But chemically stereoisomers are identical, they have almost the exact same chemical properties and so a reaction which produces one stereoisomer will usually produce all possible stereoisomers in equal amounts. Image you wanted to produce only right hands, your starting material is the assembled 4-finger-plus-palm, now you just have to add the thumb in the correct place. Ignoring that the 4 fingers are of unequal length, if you put the thumb on one side of the fingers you get a right hand, while if you put the thumb on the other side of the fingers you get a left hand. A chemical reaction will make an equal number of right hands and left hands because it will add the thumb randomly to both sides. A reaction catalyzed by an enzyme however will only put the thumb on one side, the side you picked, and thus using an enzyme you can ensure you only make right hands and not left hands. This is another place where synthetic biology can be critical, there are many stereoisomers where one isomer is a useful drug and the other isomer may be a harmful chemical, we need to have some process to create only one of them and for that engineering enzymes with synthetic biology can yield good results.

Finally biology can greatly catalyze reactions in a way that greatly reduces the amount of energy we have to put into the system. Make no mistake, catalysis doesn’t yield free energy, but it does lower the energy barrier for a reaction. To turn carbon dioxide into some non-harmful form of carbon, we would chemically have to pump in a lot of energy to break the carbon-oxygen bonds which hold it together. That energy would require a high temperature and high pressure, which would then require containment, meaning scrubbing carbon from the atmosphere chemically is a very difficult process. However plants remove carbon dioxide every day, and do so at the modest temperatures and pressure that we find anywhere on Earth. They can do this because they use enzymes to catalyze the reaction, which lowers to energy barrier for the reaction to proceed forward. IF carbon capture technology ever becomes economically viable, mark my words it will have to be done using enzymes.

So synthetic biology allows us to tap into biological processes to perform jobs that are difficult to do chemically. The tools we have to do so, the genetic code of living organisms, also provide us with a vast array of starting tools to choose from to make things easier since we aren’t starting from scratch. And finally the fact that living organisms will grow and develop from things as simple as sugar instead of requiring oil or rare earth metals means that synthetic biology can be done just about anywhere and isn’t as limited by commodity costs like most other industries. In short, I DO believe synthetic biology may be the future, but I’m just not sure the current crop of biotech upstarts have what it takes

Amyris: might they be profitable?

Amyris ($AMRS) is another small-cap biotech that alongside Ginkgo ($DNA) and Twist ($TWST) has lost over 50% of its value year-to-date. With a stock price of ~2$ and a market cap of less than a billion, I think they technically qualify as a “penny stock” so all the usual caveats about volatility and such apply here. With that said, Amyris might be the better positioned company out of the 3. While Ginkgo wants to be the Apple App Store and take a cut out of everyone else’s money, Amyris is content to make money themselves by making and selling biosynthetic products. In the first 3 quarters of 2022, they made 194 million dollars a year in revenue, and spent 610 million dollars (GAAP) in order to do so. They had 483 million dollars of cash in December of 2021, but only 18 million in cash was left at the end of 2022 Q3. It all seems rather unsustainable and what’s worst is that only 81 million dollars of their expenses come from R&D ie most of the expenses are just running the business. Cost of products was 170 million, Sales+Admin was 358 million, and revenue remember was 194 million.. But if you fired all the salesmen, administrators, and R&D people they might theoretically be making a profit, whereas Ginkgo expects to make a profit from licenses that may never materialize and Twist is being accused of selling products for less than their cost.

That does not mean Amyris is a good investment, even in this theoretical world where they made 26 million dollars in earnings they would have a P/E north of 200, and not even Amazon trades that highly these days. Still revenue has been growing close to 100% year on year, and there is perhaps a profitable company somewhere inside Amyris that could be worth your money.

Amyris is interesting to me because they appear to be the most “pure play” of the synthetic biology micro-caps that I see talked about. Ginkgo and Twist both operate on the “shovel salesman” business model, the old chestnut that in a gold rush you’d rather be a shovel salesman than a miner. Ginkgo wants to license the GMOs that would produce synthetic biology products, Twist wants to sell the DNA that goes into those GMOs, but Amyris is actually doing the work of making biosynthetic products and selling them on. And what are they producing? Well beauty products, mostly.

Most of Amyris’ products are a good window into the synthetic biology world. There was some chemical discovered ages ago that was useful to humans, but it only came from a rare plant or animal, so we humans would harvest these plants and animals by the billions to extract the chemical and put it in whatever product we needed. Then synthetic biology comes along and finds a way to produce the chemical in a microorganism instead. The benefits in cost for this should be massive, but they don’t seem to be showing up in Amyris’ balance sheet. Instead the biggest benefits appear to be in Amyris’ branding and product ethics. There’s been a years long push to make products be “less cruel” depending on one’s definition. For some consumers this means products should not be made using animals, for others they should not be extracted from conflict zones, still others demand the products be made with only unionized or at least well-paid labor. Everyone has their own definition of ethical consumption, and their own boundaries that they will not cross. Importantly our boundaries usually depend on how necessary we find that product for our daily lives, some folks will only drink Fair Trade coffee but some will take any cup of joe served by an underpaid Starbucks employee because they need their caffeine and need it now. Beauty products sit right at the top of Mazlow’s hierarchy of needs and so the consumers of these products can demand as much ethics as they want because the consumer doesn’t really “need’ them and the producer knows it. There’s also the fact that beauty products are already sold to us as an avenue of self-expression, and for some folks moral/ethical self-expression is the most important type of all. To this end, beauty products have recently tried to show themselves as world leaders in ethical consumption, advertising that they have no animal cruelty, don’t contain products from combat zones, aren’t produced by underpaid laborers, and all sorts of ethical guarantees. This is a place where Amyris and other synthetic biology companies should have the greatest benefit because there are very few ethical concerns to making a product in a Silicon Valley lab using micro-organisms. To that end, it’s not surprising to me that beauty products are so far Amyris’ strong suit.

But beauty isn’t the end all be all, there are stories floating around on social media that Amyris only pivoted to beauty in a desperate attempt to get cashflow and save the company. It still might not work because they’re burning cash and have little of it left on hand. But if it works, the higher ups (it is claimed) still want to make all the other synthetic biology products you can think of, plastic substitutes, green hydrogen, novel drugs those kinds of things. It’s a lofty goal and if Amyris can do it and make a profit then I’d invest. But right now they’re still burning cash and their fate is likely tied to how far and fast the Fed tightens the money supply. Only time will tell.

Twist Bioscience, do they have it?

When reading up on Ginkgo Bioscience ($DNA), another biotech mini-cap was brought to my attention. Twist Bioscience ($TWST) claims to be another company of the future, disrupting the DNA industry by being able to synthesize massive amounts of DNA on a large scale for low cost. Synthesis of DNA is the first step in creating GMOs to produce biosynthetic products, as I described when talking about Ginkgo Bioscience. Because GMOs are supposed to fuel the incoming biotech revolution, the company that gets to synthesize the DNA going into those GMOs should make a lot of money, and sure enough Ginkgo and Twist recently partnered so Twist could sell Ginkgo DNA.

Browsing the price options, Twist does seem to offer DNA for a bit cheaper than it’s nearest competitor, GeneScript. These modest savings are supposedly thanks to Twist’s silicon-based DNA synthesis platform, a technology that is namedropped in every Twist press release but which I am unsure of it’s full scope nor how much it’s used in their actual manufacturing. The technology appears to be old-fashioned DNA synthesis coupled to a microarray that allows the process to be controlled by a computer. I’m sure name-dropping silicon is supposed to make people think of Silicon Valley, semiconductors, and the computer/tech revolution, but the novelty seems surprisingly modest and I’m not sold on how it is supposed to lead to the huge magnitude of savings claimed by Twist. Because while their prices are a bit cheaper than their competitors, it is worrying that Twist has been accused of selling their products below cost which is not a sustainable way to run a business. Twist’s publicly available earnings reports do show that they’re spending 2$ for every 1$ they make in revenue, so the shorts may be right on this one. Burning investors’ money to gain market share may work when interest rates are low and money is cheap, but in the currently constricted environment it doesn’t seem sustainable which is probably why Twist’s stock is down 70% year to date.

Twist has also tried to generate hype by claiming that DNA is the next information-storage medium, and that they have the patents to make this happen. I honestly think this sounds a lot like Elon Musk’s claims that Tesla will produce Robotaxis or build a robot, it’s hype for hype’s sake with no path to a profitable product. DNA does store information, but information is only as good as our ability to write and retrieve it. Silicon is a great store of information because photons can be used to change the electron states of the atoms and thus to read and write information at the speed of light. On the other hand DNA does not easily read/write. Writing information to DNA means changing a DNA base, which is a very difficult process requiring very precise biochemistry (like CRISPR or other enzymes), and it fails as often as it success. Reading DNA information means extracting it into some usable form, and while photons from silicon are easily converted into electric impulses which can drive some process (the movement of a robot arm or the display of a pixel on a screen), DNA codes for RNA which codes for proteins and none of those are easily converted into an electric impulse or anything else that could drive a process. At best, you could do some kind of X-ray crystallography and hit the DNA with photons to read out its sequence, but doing so damages the DNA to the point that you’re better off just using silicon, and you still haven’t solved the problem of writing new information to the DNA.

So does Twist have it? They are currently selling DNA for cheaper than anyone else I could find, but they’re also burning investors’ money to do so meaning I’d rather be a customer than a shareholder. They had a net loss of 218.9 million dollars and 505 million dollars in cash, so they can keep this up for at least 2 years without taking loans or selling more stock. In that time, it’s possible that they could gain market share and economies of scale to the point that they become profitable, but I kind of doubt their silicon-based hype will be the key driver of of those profits. I also am highly skeptical of their DNA-as-information-storage hype, and don’t think it will contribute much more than Elon Musk’s robotaxis. If they can profitably sell DNA for less than their competitors they’ll be a buy, but until I see evidence of it I won’t touch their stock myself.

Algorithms usually give you what you ask for

One complaint I’ve seen a lot of recently is that technology algorithms are bad for us and are dividing our society. The Twitter “Trending” tab is blamed for all manner of political polarization, Tiktok is said to specifically show us inflammatory videos, and YouTube was long bemoaned as a haven for unhinged videos that could send people down a rabbit hole of radicalization if they clicked the wrong thing. All this is supposedly because there is an evil algorithm controlling them and making them show us these evil things, but is the algorithm evil or are viewers just addicted to evil content? That’s not a blithe or pithy statement, what you have to understand is that 99.9% of the time the algorithm is giving you engaging content. When you first start out on Twitter or YouTube, the algorithm doesn’t know anything about you or your account, so it starts by giving you content that has been highly engaging to other users. Eventually you start clicking around on the content, engaging with some of it and ignoring others, and the algorithm tracks your clicks to learn what you specifically will engage with. So when you find the algorithm is handing you solely inflammatory political videos, it’s very likely because you and others have spent a lot of time and clicks watching those. Remember to that hate watching is still watching so if you watched a bunch of far-right or far-left content for the sole purpose of being angry and commenting on them, the algorithm knows that this is the best way to farm your clicks and your time and so will keep giving you those.

That’s not to say that the algorithms are perfectly impartial by any means, there is always some amount of “secret sauce” in each of them that is controlled by the company. The simplest and most obvious version of this is that content from advertisers obviously get shown to you no matter what you click, and it’s likely that most of these sites also use a version of payola to allow certain content to pay for getting highly promoted by the algorithm. But at the end of the day the algorithm is a click farmer, and if people didn’t click on what it provided them, then the company that made it (Google, Meta, whoever) would quickly find themselves with less engaged users, less ad revenue, and in need of a new algorithm. So in conclusion, the algorithm itself isn’t evil, people are addicted to evil content.

Why do college graduation robes look so goofy?

A lot of us have graduated college. For the graduation ceremony we probably purchased from our school a a cardboard square with some fabric over it plus a threadbare black sheet with a hole in the middle. This traditional cap and gown is goofy enough, but have you ever seen what the professors wear during these ceremonies? When I went to see a friend’s commencement I thought the professors had all graduated from clown college. They were introduced at the start of the ceremony and came out in an array of blistering colors and poofy hats, none of which matched or fit together in any way. I’m sure there’s some thousand year old tradition as to why these clothes look the way they do, but do the traditions really matter at this point? Personally I’d be a lot happier to wear my normal clothes, maybe a formal jacket and shirt, but never something as awful as that. When I’m a faculty member presiding over graduations, you can be sure I’ll tell the provost what I feel about the gowns.