Grading Ourselves on Ray Dalio’s Principles

Our conference room has a small library. In it are 19 books (so far) that are important to us in some way, be it a gift, a guide, a reminder, or a fundamental truth. We also have a small shoe collection. Anyway, one of those books is Ray Dalio’s Principles. As a way to self reflect, and to encourage you to explore these principles, we thought it would be helpful to grade ourselves on Dalio’s principles using his eight episode mini-series on YouTube.

Grading yourself objectively at anything is difficult, but we gave ourselves at least a passing grade in every category. Loup Ventures has a clear vision and an active culture built on values that we’ve embraced and developed over 10+ years of working together.

That said, we’re in year two of – as we like to say – building our firm for the next 40 years, so we have a lot of work left to do. Dalio’s principles provide a helpful framework against which we can measure our values, strengths, weaknesses, processes, and outcomes. And, as you’ll see, there are principles on which we need to reflect and make changes.

Think for yourself about what is true: C+

Dalio leads with the importance of establishing your own principles based on 1) what you want, 2) what you think is true, and 3) what you should do to achieve #1 in light of #2. At Loup, our compass is set – we know what we want (to be the leading frontier tech investment platform). We’re fairly clear on what we think is true and have shown the courage to act on it. The one issue we’ve had here is that by combining three persistent founders with the reality that this is our first fund, which will lay the groundwork for future funds, we can sometimes be slow to disagree and commit. We sometimes wrestle with decisions for too long by over-thinking and over-worrying instead of moving forward with confidence based on our principles. Recognizing this will allow us to improve over time.

Embrace reality and deal with it: B

“Truth is the essential foundation for producing good outcomes,” explains Dalio. We’ve made a habit of looking to nature as a guide to the fundamental truths of reality. Just recently, we made an investment in the artificial intelligence space based on this very habit. Embracing reality and our mistakes, especially as a team, requires radical honesty, one of our four core values. Moving forward, we can improve at reflecting on our mistakes and the problems we encounter in order to evolve.

Use the five-step process to get what you want out of life: A-

It takes a lot of practice to do it well, but our weekly partners’ meeting gives us the opportunity to engage in Dalio’s five-step process: 1. Know your goals and run after them; 2. Encounter problems that stand in the way of you getting to your goals; 3. Diagnose problems to get at their root causes; 4. Design a plan to eliminate problems; 5. Execute those designs.

We use an operating system for our business that requires a long-term vision, an annual plan, quarterly goals, and weekly to-dos. And during our weekly partners’ meetings, we have the opportunity to identify, discuss, and solve the issues standing in our way.

The abyss: I (incomplete)

In our short history as a firm, we haven’t gone through the abyss, but we have faced failure. Frequently. We’ve failed to secure certain investors and form certain partnerships that we believed, and still believe, will be important to our future. The roller coaster of a startup (and investing in startups) is an insane ride because the risk/reward can feel so extreme. On the upswing, you think you’ll be a billionaire next year and on the downswing, you feel like you’ll be broke tomorrow. At Loup, we embrace learning from our mistakes. As we continue to build, we’ll need to be more systematic about reflecting on our failures. Some of our favorite thinkers across disciplines (investing, philosophy, sports) agree that pain is the best opportunity for growth, and we look forward to it.

Everything is a machine: B-

Dalio argues that everything works in cycles, “Everything is ‘just another one of those.'” The five-step process outlined above allows us to fine tune the Loup machine so that we are better prepared when we encounter a certain challenge again. However, as a startup, it’s incredibly difficult to take off our near-term, fear-based blinders to see our situation as “just another one of those.” According to PitchBook, 2017 saw more than 300 venture capital funds raised. We are, in fact, just another one of those.

We’re students of history – an important input for much of our research – but we need to do a better job reflecting on the patterns of history that affect our business, then implement processes to better anticipate them.

Your two biggest barriers: B+

Dalio argues that your two biggest barriers are 1. your ego, and 2. your blind spot. We’ve been wrong a lot, which has helped us develop and institutionalize humility. As a group, we make it a habit to under promise and over deliver in all we do, lead with bad news, and acknowledge when we’re wrong. We’re building a culture that encourages people to embrace the difficult things, which goes hand in hand with barrier #2, your blind spot. Identifying and encouraging our team’s superpowers is a strength, and we need to be even more aggressive in positioning our team to focus on their strengths and avoid their weaknesses.

Be radically open-minded: A-

“Replace the joy of being proven right with the joy of learning what’s true.” We’ve embraced this principle through a value we call contrarian curiosity. By combining a respect for different opinions with endless curiosity built out of our research roots, we’re comfortable with looking at life through the perspective of others. We’ve set out to build something that each of us could not build on his own, and we’re building a team that further complements us. We will always strive to build a team with diverse perspectives and strengths for as long as Loup Ventures exists, but we’ve experienced the power of, as Dalio describes it, a shared mission with extraordinary people.

Struggle well: B

“Success is not a matter of attaining one’s goals… [the] struggle toward personal evolution with others is the reward.” Disassociating the journey from the results is a difficult thing in such a results-driven business, but results can hide the reward that Dalio talks about: the journey. Our embrace of contrarian thinking lends itself well to enjoying the journey, and we regularly appreciate how lucky we are to be surrounded by great people on a shared mission, struggling together. We’ve even tried to operationalize decision making to remove emotion tied to the expectation of a result, particularly for investment decisions. Dalio’s challenge to struggle and evolve well is a journey that we are collectively honored to be on.

If you haven’t read Dalio’s Principles yet, we highly recommend it. Or at least read through the full list of principles, which he’s outlined here. Hopefully, this exercise has encouraged you to reflect on your own life and your own work through the lens of Dalio’s Principles. Embrace the open-minded struggle!

Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Apple’s Original Content Is Further Along Than You Think

  • Apple has 16 new shows in the works, comparable to Netflix in 2013 (its first year of original programming) when it had released 13 originals.
  • We expect Apple to spend $900M on video content in 2018, growing to $4.2B by 2022.
  • Original video content is defensible and adds to Apple’s Services segment.

We believe Apple’s investment paradigm is shifting, centered around the Services segment. In CY18, Services should account for 14% of revenue, growing to 20% by CY23. Content is an emerging part of the Services pillar, as evidenced by the success of Apple Music, now with over 50M paying subs. Original video content is a new category for Apple and represents optionality to Services revenue growth and is not yet reflected in the value of AAPL shares.

Framing up the opportunity. While off to a disappointing start, (Carpool Karaoke and Planet of the Apps), we believe Apple is making measurable progress in original video content that will begin to contribute to Services growth starting in 2019 or 2020. Content could ultimately account for $10-$15B in annual revenue (Netflix will do $16B  in 2018) and 3-5% of overall Apple revenue.

Key content hires. At the helm of the company’s content efforts are Jamie Erlicht and Zack Van Amburg, who Apple hired away from Sony in 2017. Erlicht and Van Amburg ran Sony’s primetime series division since 2005. They will report directly to Eddie Cue, who runs Apple’s Services business. Apple has also hired an array of industry veterans from a range of backgrounds including streaming platforms like Hulu and Amazon Studios, and mainstay media companies like WGN America and Legendary Entertainment.

Apple’s content pipeline:

  • Amazing Stories – Apple plans to spend ~$5M per episode on a 10 part sci-fi/horror series originally created by Steven Spielberg in 1985. Source
  • Are You Sleeping – A thriller drama series based on true crime novel by Kathleen Barber. Source
  • Central Park – Comedy that tells the story of how a family of caretakers living in Central Park ends up saving the park & the world. Source
  • Dickenson – Documentary about the early life of poet Emily Dickenson starring Hailee Steinfeld. Source
  • Home – Will offer viewers a “never-before-seen look inside the world’s most extraordinary homes” and the minds of the people who created them. Source
  • See – Straight-to-series epic world-building drama set in the future. Source
  • Untitled Damien Chazelle Project – Details of the series’ plot are under wraps. This project will be the first time Chazelle has written and directed every episode of a series. Source
  • Untitled Kristen Wiig Project – Comedy series produced by Reese Witherspoon, inspired by Curtis Sittenfeld’s upcoming short story collection “You Think It, I’ll Say It.” Source 
  • Untitled M. Night Shyamalan Project – Straight-to-series psychological thriller. Source
  • Untitled Morning Show – Morning show drama starring Jennifer Aniston and Reese Witherspoon. Source
  • Untitled Ronald D. Moore Project – Ronald D. Moore, developer of Battlestar Galactica, explores what would have happened if the global space race had never ended. Source
  • Swagger – Profile on the early life and career of NBA star Kevin Durant.  Source
  • Little America – Based on a series of true stories featured in Epic Magazine that paint a portrait of America’s immigrants. Source 
  • Foundation – Based on Isaac Asimov’s iconic science fiction novels published between 1942-1993. Source
  • Shantaram – Drama series based on “Shantaram,” a 2003 novel about a man who escaped an Australian prison only to hide out in the slums of Bombay. Source
  • Little Voices – Tells the story of finding authenticity in the crowded and diverse New York musical landscape. Source

Apple is about 5 years behind. At first glance, it appears Netflix’s lead in original content is insurmountable. Netflix will end 2018 with close to 1,000 original titles and spend an estimated $3.5 billion on new titles this year. Keep in mind that almost half of that content is outside of the U.S. That compares to Apple, which has 2 titles out today and another 16 in the works (to be released in 2019 at the earliest), expecting to spend about $900 million this year. However, history is on Apple’s side, given that just five years ago Netflix had 13 original titles including the debut season of House of Cards. In other words, with the right resources, which Apple has, Apple’s original content titles can ramp from just under two dozen to potentially over one hundred. We note that Apple has stated they are focused on quality vs. quantity.

Apple’s Advantage. It’s an understatement to say that the video streaming landscape is competitive. Apple, once again, is late to the game but has an opportunity to change the game. Specifically, Apple can change the game around content streaming customer acquisition. Just like Netflix, HBO, and Hulu, Apple’s stories and production quality are first class. What separates Apple is the company’s access to 1.3B active devices through which they can subtly encourage adoption. Apple Music’s market share gains over the past two years are a testimony to the power of coupling Services with widely adopted hardware. An unrelated advantage is Apple’s brand, which, at its core, represents quality and attention to detail, and should translate into favorable initial adoption.

Apple Music’s market share gains over the past two years are a testimony to the power of coupling Services with widely adopted hardware.

How will Apple’s video content be distributed? Consuming video on Apple devices is confusing. Between the iTunes Store, Music, TV, Podcasts, Books, and News apps, it is unclear where to discover and consume Apple’s video content. This presents an issue as they attempt to bolster content offerings going forward. While it is unclear how the video streaming service will be branded and delivered, we expect the iTunes Store to fade away, folding its content into the existing Music, TV, Books, and Podcasts apps.

Content is an emerging area of investment. It’s no secret that original content will be an emerging area of investment for Apple in order to boost the increasingly important Services revenue line. The good news is that cord cutting is undeniable and consumers are now paying for multiple monthly streaming services. Multiple streaming services means there will be a handful of content provider winners. We think that over the next 5 years Apple will ramp its original content investment from an estimated $900m this year to an estimated $4.2B in 2022.

UPDATE: On Friday, June 5th, Apple announced a “unique, multi-year partnership” with Oprah Winfrey. She will work with Apple to, “create original programs that embrace her incomparable ability to connect with audiences around the world.” This is a high-profile win for Apple, as Oprah brings with her a global brand and experience across television, print media, film, and more. This marks the 17th project that Apple has in the works.

Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.’

Key Apple Supplier Reiterates Favorable Outlook Ahead of Fall Launch

  • Finisar (FNSR) is Apple’s 3rd largest VCSEL array supplier, accounting for about 5% of iPhone X VCSEL arrays.
  • Tonight the company reported earnings for the Apr-18 quarter.
  • Finisar continues to expect a ramp in VCSEL demand in their Oct-18 quarter, suggesting more iPhone models will incorporate Face ID and 3D sensing for AR.

Finisar is Apple’s 3rd largest VCSEL array supplier, which enables 3D sensing applications such as facial recognition through a flood immolator and dot projector on the front of the iPhone X. While VCSEL revenues were suppressed in the quarter due to seasonality, Management’s commentary remains mostly in-line with the previous quarter, with the company still expecting to see a ramp in demand in the Oct-18 quarter from Apple.

What they said. In line with Management’s expectations, Finisar’s VCSEL revenue (about $5 -7M in the quarter) was down sequentially as a result of seasonality in the quarter. While demand for VCSELs will be flat in the Jul-18 quarter, the company highlighted they continue to anticipate a ramp in the Oct-18 quarter in anticipation of a key customer’s (Apple) new product launches. Finisar also highlighted the new Sherman facility remains on track to go live in Fall 2018. Note this facility is the new 700,000 square foot capacity expansion initiative the company announced shortly before Apple awarded Finisar a $390M contract for future orders.

Read on iPhones. Finisar’s comments are in-line with previous comments, so we are not making any changes to our iPhone estimates. That said, we believe Management’s comments around an Oct-18 quarter ramp suggests this fall the Apple will introduce multiple new iPhones incorporating Face ID 3D sensing technology. In addition, with the Sherman facility going online this fall, we believe demand for VCSELs will accelerate into 2019 as more phones and other products integrate 3D sensing technologies. This, in turn, will be a key adoption driver to augmented reality (AR) applications.

Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

A New Hope: The Nervous System

Brave early adopters are the hallmark of an innovation set to create immense human value. In this story, the innovation is cutting-edge technology for interfacing with the nervous system, and the brave early adopter is Ian Burkhart.

Ian, a young man in his mid-twenties, suffered a C5 spinal cord injury (SCI) during a diving accident in 2010. The result was bilateral paralysis below his elbows. With an admirably positive attitude and a wonderfully helpful community, Ian was able to make modifications to his life and still live with a sense of meaning.

One of the primary factors motivating Ian forward through the years of rehabilitation was the strong hope that, at some point in his lifetime, there would be biomedical advances capable of giving him back use of his hands.

As it happened, such a possibility crossed his path.

Image: https://ianburkhart.com

In 2014, Ian was presented with an incredible but uphill opportunity led by Dr. Chad Bouton of Battelle (he’s now with the Feinstein Institute): a team of researchers was looking for a patient to test out a system for restoring movement to the hands of a paralyzed patient. The catch was that it required brain surgery and extensive training.

There are 5.4 million Americans living with some form of paralysis, and Ian is acutely aware of the challenges they face. But optimism is one of his defining characteristics: given the chance to pioneer a technology that could bring massive human value, he was willing to make a sacrifice. And so, in 2014, Ian risked his life by undergoing electable brain surgery, implanting a manmade electrode array into the left motor cortex of his brain.

Over the four years since the operation, and hundreds of hours of tedious and extremely difficult training, Ian has collaborated closely with a team of researchers to improve the brain-machine interface system. Ian can now use the technology, which acts as a “bypass” to his damaged spinal cord, to play Guitar Hero using his right hand.

Image: PBS

The body has two information pathways, the vascular system and the nervous system. The typical conception of physiological medical care is that treatments should leverage the body’s vascular system, as in the case of pharmaceuticals; Ian’s system, in contrast, is based on the principle that medical care can be given by interacting with the nervous system. The names of the fields that embody this innovative approach are bioelectronic medicine (BEM) and brain-machine interfaces (BMI).

Brain-machine interfaces are technological systems that read from and/or write to the brain. Bioelectronic medicine systems are technological systems that read from or write to the nerves in your body (the peripheral nervous system). Both of these types of neural interfaces can provide therapeutic value through the insight to target medical interventions at the nervous system rather than just the bloodstream.

At Loup Ventures, we invest in domains of frontier technology that offer strong investment opportunities built on delivering unique human value-add. Bioelectronic medicine and brain-machine interfaces check both boxes with bold strokes. We’re here to explain these technologies and why you should care about them.

Starting with a story

Ian Burkhart was originally approved by the FDA to participate in a year-long trial using a Utah Array electrode implanted in his left motor cortex. When fully hooked up in the laboratory, the signals recorded from the Utah Array, a type of intracortical multielectrode array, are decoded by a neural decoding algorithm and used to control 130 surface electrodes wrapped around his right forearm (which he can’t move on his own). When current is run through the surface electrodes, it causes muscles in Ian’s forearm to contract in particular ways, ultimately controlling his hand movement. In other words, the researchers aim to understand what Ian’s neural activity looks like when he’s thinking about moving his hand. With this understanding, they can use his neural activity to decipher when he wants to move his hand. Then, knowing that he wants to move his hand, a computer program controls his muscles via the electrodes so he can actually move his hand. In essence, they skip right over the spinal cord injury responsible for his paralysis.

Image: biomedicalcomputationreview.org

Ian and his team of researchers have been so successful that the FDA has extended the experiment multiple times; he’s now in his fourth year of participation.

Loup Ventures recently had the pleasure to talk with Ian about his experience and his outlook. Here’s some of what we learned (listen to one of our conversations with him on our Neurotech Podcast here):

  • Each day he uses the system, Ian has to retrain the algorithms that decode his neural activity. This is because the specific neural activation representing his thoughts changes frequently due to neural plasticity. When Ian first started with the BMI system, he would leave training sessions mentally exhausted. Over the years, however, it’s become much easier; training isn’t something he has to pay much attention to, now. This has implications for future BEM/BMI technologies: it will be critical to minimize training time and repetition and to make the necessary training as pleasant as possible for the user.
  • Ian has spent time learning about the neural decoding algorithms themselves to the extent that he understands the different parameters the research engineers can tune. Now, when Ian is trying to make the BMI perform as well as it can, he can suggest that the researchers adjust specific parameters. This is similar, in a sense, to adjusting the speed of your mouse cursor on your computer screen. In general, this insight from Ian suggests that BEM/BMI systems ought to be designed like any piece of software, where there’s a symbiosis between the user and the machine. The better the user can intuit how the machine will understand him/herself (and vice versa), the more effective the system will be. Ian is very insistent that in order for mass adoption, the technology must be user-friendly; just because its value proposition (i.e. returned movement) is so large doesn’t mean that normal human-centric design considerations can be thrown out the door.
  • Even though Ian is very excited about the progress he’s making with the research system in a laboratory setting, he can’t take the system out of the lab yet—partly due to regulation and partly due to the unwieldiness of the technology.
  • Even amongst spinal cord injury patients, Ian sees resistance to the adoption of brain-machine interfaces. This paper has great data about which types of interfaces paralysis patients would be comfortable with, given specific types of benefits they can receive. For example, as compared to typing, controlling a cursor, and moving a robotic arm, patients were overwhelmingly most interested in using neural interfaces to control the movement of their own limbs.
  • Ian emphasized to us over and over again that brain-machine interfaces and bioelectronic medicine systems must be designed to provide as much value to the user as possible; this bears repetition since most systems are currently in the hands of research scientists and research engineers, not user experience designers.
  • We’re discussing a technology that plugs directly into a human brain; this conversation would be woefully incomplete without discussing ethics. Ian pushed this point, since he clearly sees the potential for good in neurotechnology, but acknowledges there’s also potential for bad. One example we think is particularly relevant given current conversation about software platforms is user privacy. User privacy takes on a whole new meaning when the data isn’t just behavioral (like clicking on an ad), but neural. Through the talks he’s given and the other SCI patients he’s spoken with, Ian recognizes that there will be big pushback on technologies that interface with the nervous system, and we think the pushback can be healthy if addressed constructively. With current screen-based interfaces, there have clearly been both positives and negatives. In general, as technology becomes more directly able to “extract” information from, and “input” information into us, the privacy and digital wellbeing stakes get higher. Any foray into the therapeutic benefits of BMI/BEM—whether as an interested onlooker, an investor, a researcher, or a company—would be ill-advised without strong considerations for, and safeguards to protect, the ethical implications of the BMI/BEM product.

In general, we take inspiration from Ian’s conviction about the positive value of nervous system-based interventions, and we take direction from his emphasis on the necessity for BMI/BEM engineers to focus on the practical value of their products. In speaking about his work to improve his own system for movement restoration so that other patients can use it, he says, “I see my involvement with the study as a job that I have to succeed in.” He sees no other choice; the upside is just too large to ignore.

The general bioelectronic medicine approach

Now that we’ve discussed bioelectronic medicine and brain-machine interfaces from the perspective of a real user, we’ll describe these related domains and their benefits to conclude this introductory article. Although the fields of bioelectronic medicine and brain-machine interfaces speak to different use-cases (bioelectronic medicine involves the peripheral nervous system and treats or diagnoses disease in the body; brain-machine interfaces involve the central nervous system and address sensory deficits and cognitive/affective disorders), we’re going to discuss both under the header of “bioelectronic medicine” for the sake of brevity and comprehensibility.

At its highest level, bioelectronic medicine simply uses electronics to interface with the body where previously, chemicals/drugs would have been used. There are three basic components to any BEM system: a body, a device (either inside or outside of the human body), and a computer. In plain English, there are two general ways to use a BEM system:

  1. A device is used to record electrical or chemical signals from the body, and a computer interprets those signals in order to understand the state of the body or a specific system within it.
  2. A device is used to stimulate electrical (or other) signals within the body in order to have a desired therapeutic or enhancing outcome, and a computer controls the stimulation.

Some examples of BEM systems include: brain-machine interfaces for restoring movement to paralyzed patients, as in the case of Ian Burkhart; retinal prostheses to return vision to the blind; stimulating the vagus nerve to treat rheumatoid arthritis; and recording electrical signals from the vagus nerve to understand the state of the body’s inflammatory response.

Image: Tracey, 2007

The latter two use-cases exemplify an aspect of bioelectronic medicine that differs from central nervous system-focused brain-machine interfaces: bioelectronic medicine leverages reflexes. In this sense of the word “reflex,” we refer to the idea that the brain both keeps track of and controls organ function using peripheral nerves. This keeping track and controlling is a reflex to preserve homeostasis.

Regulatory and cost advantage

Aside from providing novel treatments and diagnostic opportunities that have yet to be achieved with pharmaceuticals, bioelectronic medicine products offer significant advantages over pharmaceuticals in terms of the FDA regulatory process. All medical devices and drugs are subject to regulation by the FDA. However, it takes between 30–50 months for a medical device (BEM devices classify as medical devices) to get through the FDA, as compared with 144 months for a drug to get through the FDA. A direct correlate of this is that BEM device development is significantly less expensive than pharmaceutical development: BEM devices cost ~$100M for high-risk devices, whereas drug development can require on the order of ~$1B (although the exact cost is uncertain and fluctuates).

Frontiers

There are several frontiers of bioelectronic medicine: technological, scientific, and social/political. Technologically, devices to record and stimulate the nervous system need to be able to record and stimulate at smaller spatial scales and to operate wirelessly (without a wire running from the implanted device, out of the skin, and to a power source). Additionally, neural recordings will be fused with sensors under development that focus on biological signals such as the activity within individual cells. In terms of basic science, researchers need a better understanding and more detailed atlas of the peripheral nervous system and are additionally working to characterize other nervous system reflexes within the body (“reflex” in the sense we described above). Finally, on the social/political front: although public forum discussion of BEM and BMIs is rather small right now, it’s likely that conversation picks up over the next ~5 years as ambitious interface companies like Neuralink, Kernel, and Paradromics hopefully bring progress to bear; almost certainly, the public conversation will focus on privacy and ethics.

Market size: understanding the prospects

To understand the massive market for therapeutic devices that interface with the nervous system, we’ll list six example opportunities and their respective market sizes:

  • Spinal Cord Injury – 280,000 patients in the US as of 2016, with a $2.3B global market as of 2017.
  • Alzheimer’s Disease – 5.7M patients in the US, with a $1.7B market in North America as of 2017.
  • Amyotrophic Lateral Sclerosis – 30K patients in the US, $16M market in the US as of 2018.
  • Stroke – 795,000 strokes per year in the US (144,000 deaths per year caused by strokes); $6.5B market in the US as of 2016.
  • Rheumatoid Arthritis – 1.5M patients in the US; $11.5B market in the US as of 2016.
  • Mental Health/Substance Abuse – 43.8M adults in the US experience mental illness annually; based on data through 2013, the US mental health and substance abuse services industry was expected to produce $53.2B in revenues in 2017.

Expanding beyond these specific use-cases, any new class of treatment and diagnostic methodology like bioelectronic medicine is likely to have effects that trickle down and impact a large portion of the $3.3 trillion dollar US healthcare industry.

In Conclusion

In this piece, we’ve introduced the concept of bioelectronic medicine and brain-machine interfaces: providing therapeutic value to patients by interfacing with their nervous system instead of their bloodstream. We see huge opportunity in this space, driven by novel interfaces to the nervous system and new disease treatment paradigms. As we saw with Ian Burkhart, bioelectronic medicine and brain-machine interfaces are domains with enormous value to add, but whose development will be intricate and require careful ethical considerations. Stay tuned as we dive in-depth to understand the science, technology, and business of bioelectronic medicine.

Special thanks to Ian Burkhart for sharing with us his story and insights. Through the Ian Burkhart Foundation, he works to improve the lives of individuals with spinal cord injuries.

Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Tesla Reorg: Aligning Profit and Vision

  • Today, Tesla gave details on its previously announced company reorganization. The 9% workforce cut was more than the 5% reduction we were expecting.
  • We believe this reorg brings Tesla a measurable step closer to long-term sustainability.
  • Reading between the lines, there is now a higher probability that they will be profitable in the Sep-18 quarter.
  • We remain positive on the Tesla story given our belief that Model 3 will scale, and the company will achieve its mission of accelerating the world’s transition to sustainable energy.

Source: (Screenshot) Bloomberg

Critical production metric likely unchanged. Elon Musk addressed the elephant in the room in his letter to employees, clarifying that the cuts will not impact Model 3 production. This, of course, is the most important near-term metric to the story, even more so than cash.

Framing up the cost savings. Tesla currently employs about 37,000 people, which will be reduced to about 33,500. For starters, we expect a one-time charge of $130-$150M split between cash and stock, detailed on the Jun-18 earnings call. More importantly, the quarterly op-ex savings going forward should be about $80M ($320M annually). This is estimated using a $100,000 average salary and a 6-quarter average tenure. In the context of the company’s high cash burn rate, $80M  per quarter may not sound like enough to have an impact, but as the next several months may decide the fate of the company, every dollar counts.

The Road to Profitability. Tesla previously said that they will be GAAP profitable in the second half of this year. Conventional wisdom suggests we should discount any of Musk’s predictions on timing, but given the magnitude of the reorg, it’s clear he is serious about reaching profitability. The Street is generally looking for GAAP profitability in early 2019. In rare form, Musk directly aligns the company’s mission with its ability to make money, saying, “we will never achieve [our] mission unless we eventually demonstrate that we can be sustainably profitable. That is a valid and fair criticism of Tesla’s history to date.” We believe this reorg will bring Tesla one step closer to profitability – and to achieving their mission.

Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make. 

Posted in Tesla  •