TDS 15 - Waymo, Afghanistan, Oil, and a wandering cow

So the two-letters-in-a-week thing didn’t work out, huh. Anyway, no more promises will be made about how many I’m gonna write and when - you’ll get a newsletter as soon as I’m done writing one, and hopefully it’ll be one every week. Also, work from home isn’t as fun as it is made out to be, although I do like waking up at 9 every day.

Waymo announced its first external investment round! They raised $2.25b from several funds, including the usual suspects - Mubadala, a16z, Silver Lake, to name a few. Honestly, I think (and this is just me) that self-driving cars are over-hyped. When I say over-hyped, I mean that there is still a lot of work to be done before we can get to cars that can really drive by themselves. Sure, you have cars in the market right now that can do party tricks like park themselves, steer for a bit, change lanes, bring themselves to you from the garage, and brake according to the car in front and all that, but that’s very different from a car driving itself!

See, there are two kinds of situations in the world - complex situations, and complicated ones. Complicated situations refer to those where there are just a lot of steps, to be done in a particular order, with the result being a predictable one. Complex situations refer to those that require you to carefully interact with several moving parts, each that can self-mutate (sort of), and so the end-result of your interaction might not necessarily be predictable. While just getting a piece of software to do a car party trick is a complicated endeavour, it can be done. Just feed in the different steps, and build a set of safeguards/rules the computer has to follow. But to get it to drive the way a human would, is a complex one. And we really don’t have technology advanced enough to handle the sort of complexity that comes with driving on the roads yet.

Anyway, why did Waymo do an external investment round? It’s not like its parent company, Alphabet, doesn’t have cash - they declared $117bn in cash reserves in August 2019. One reason must have been to give its employees an idea of how much their stock options are worth - this investment values Waymo at around US$30bn. It is one thing for you to have stock options that are worth $x$ dollars because the company that gave them to you says so, but it’s another to see that they’re worth that many dollars when someone else pays for them.

Another could be that they’ve gained some confidence in their technology, and are now looking for more partners to work with. One of the investors in this round is Magna International, a leading contract manufacturer of cars. Currently, Magna manufactures the BMW 5 series, the Jaguar I-PACE, the Jaguar E-PACE, and the Mercedes-Benz G Class. So where earlier Waymo’s plan was to convert a car into a self-driving one by adding an aftermarket kit, it might now be considering giving Magna a contract to just mass-produce and install those kits in cars.

And lastly, they may have raised this money to signal a shift - Sundar Pichai isn’t willing to fund Larry and Sergey’s pet projects by himself for long. Sooner rather than later, these projects will have to go out into the world, and stand up on their own two feet. So there’s that.

The US and the Taliban reached an agreement in Doha, clearing the way for withdrawing American troops from Afghanistan. The Taliban, by the way, is not the Afghan government. Let me be absolutely clear here - the US has secured an agreement with a terrorist organisation to withdraw from a country where the organisation operates, and the government of that country is not a party to this deal. Oh also, the Taliban and the Afghan government continue to fight, and large parts of the country are actually under control of the Taliban. Here’s a handy map to explain who controls what there.

You know where this is headed. A schedule has been drawn up for American withdrawal, contingent on some terms and conditions that must be met by the Taliban. In the event that the Taliban does not abide by their part, the United States can void the agreement, and the war will continue. Going by the mood of the American leadership, though, the withdrawal should happen soon (unless there’s a change of leadership), even though the Americans have very specific intelligence telling them that the Taliban has no intention to abide by the terms of the treaty.

What is Afghanistan, really? It is a land ‘that produced little but men and stones’, as one of its former rulers once said. It’s got some natural resources, yes, some poppy, but not much else. It has always been a battleground for big countries, however. The British and Russians began fighting over it in the 19th century, and continued till the first quarter of the 20th, then the Russians waded in, followed by the Americans.

This deal brings to a close the United States’ longest war ever, which has been running from 2001, so around 20 years now. There are kids in the US who’ve enlisted in the US military, having never known a time when the US was not at war. This also strikes off another one of Trump’s campaign promises - he’d said that he was going to pull the US out of Afghanistan if he got elected. Say what you want about the man, but I really like how he methodically ticks off one campaign promise after another. Few have the gifts that he does, I guess. This is where the facts end.

Now, let’s go in for some conjecture. What’s going to happen in Afghanistan, post the American withdrawal? Let’s see. The Taliban will continue fighting the Afghan government. They will send “negotiators”, who will negotiate with the Afghan government for about a year or two, all expenses paid for by the UN/USA. Once the last American soldier leaves, they (the Taliban) shall slowly and steadily take over the country - they’ll overrun Helmand, Kandahar, Herat, and finally Kabul. Once ensconced in power, they’ll bring back sharia law and draconian restrictions on civil liberties. Then, they’ll provide harbour to some terrorist group, which will become too big for its boots, and upset a big power (USA or Russia), or a rising power (China or India). How they’ll do that, I don’t know. Anyway, angered, the country that got messed with will move men and materiel into Afghanistan, and be held there for the longest time, fighting a war that can’t really be won. And this entire wretched cycle shall repeat again. As an Indian, I hope that India isn’t the one that gets pulled into this - it’s just not worth it.

In the past couple of weeks, oil prices fell off a cliff, into the ocean, sank to the ocean floor, and then dug a hole for themselves there.

Till around 2013, oil prices were in the US$100+ region. Soon after, a shale oil boom began - several shale oil sites in the US came online, spitting out millions of barrels of oil. The excess supply from them brought oil prices down a bit. In response, Saudi Arabia raised supply on its side, hoping to send oil prices low enough to make operations uneconomical for the American firms. There was another reason to increase Saudi supply - if prices stayed low for a while, life could become very difficult for the Iranian government, which is one of Saudi Arabia’s many arch-enemies.

The gamble didn’t work as far as America was concerned. You see, the Americans don’t mess around when it comes to business; they’d made sure that their costs were low enough to allow them to withstand low oil prices for a while. Another country suffered, though - Russia. At that time, Russia’s budget balanced if oil was sold at around the $110/barrel mark. Which meant that anything less, and the country was screwed. Around the same time, Russia invaded Crimea, and the US responded with sanctions, crippling the Russian economy. This had the unintended effect of letting Putin know just where Russia was vulnerable, so being the smart guy he is, he spent the next 5 years tightening things, getting ready for when such a concatenation of circumstances hit him again. Today, Russia’s budget balances if oil is around $40/barrel.

Fast forward to 2020. A couple of weeks ago, in the OPEC-plus meeting, no agreement could be reached on output cuts. As a result, Russia and Saudi Arabia began a price war in oil (petrolheads rejoice!). Russia had had enough of listening to the OPEC and cutting output, only to have American shale producers step into the void and increase their own market share. Putin looks prepared for the war - he’s built up reserves of around US$600b, that should last him for a while. Both Saudi and Russia are pumping oil, and neither looks ready to blink. Who’s gonna blink? It’s anyone’s guess.

In these dark times, when - the markets are in turmoil (the VIX went all the way up to 85 last week, for god’s sake), the coronavirus is at large, Ethiopia is dealing with locusts, and 16,000 people in Madagascar have been displaced by floods, good news is scarce. So when I do come across something nice, I make sure I share it with y’all.

Today’s good news is that a cow has managed to successfully evade Florida police for over 2 months. The police is after it because the cow seems to like hanging out near the highway, posing a danger to all motorists that use it. But you gotta hand it to the cow - it takes special skills to evade a police department for as long as it has. The way I see it, this cow is the only good thing going on in the world right now.

The police of Pembroke Pines Police, Florida posted a notice on their Facebook page, describing the cow as follows -

Female cow, brown with a white head. Faster than it looks; talented fence jumper, enjoys pools. Frequents the area near Sheridan Street & I-75.

So there. Keep going, dear cow. I hope you’re successful in evading the cops for a long time.

Stay safe, people.