Surely, You’re Joking

September 2024 Client Letter

I became more familiar with physicist Richard Feynman after my dad wrote about him in the July 2003 issue of Richard C. Young’s Intelligence Report. My dad’s interest in Chaos Theory led him to James Gleick’s national bestseller, Genius, a book about the life and science of Feynman. Genius provides a comprehensive look into the renowned physicist’s career, including his work on the Manhattan Project at Los Alamos, where he was one of the youngest group leaders. It also covers his significant contributions to quantum electrodynamics, the field of physics that describes how light and matter interact, which eventually led to his Nobel Prize in physics in 1965. Additionally, the book details his appointment to the Rogers Commission to investigate the Space Shuttle Challenger disaster in 1986. Feynman’s famous demonstration of the O-ring’s susceptibility to cold temperatures became a defining moment in the investigation.

I’ve had Genius and Surely You’re Joking, Mr. Feynman! on my office bookshelf for years but had not paid them much attention until more recently. As quantum computing has become a hot topic over the last few years, I found myself reintroduced to Feynman. In doing research on IBM, I learned of Feynman’s groundbreaking talk at the 1981 IBM-sponsored conference on the physics of computation, held at MIT. In this talk, Feynman proposed the idea of quantum computers, arguing that classical computers are inefficient for simulating quantum mechanical systems because they operate under classical physics principles. These principles do not adequately capture quantum phenomena such as superposition and entanglement.

Full disclosure: I had no idea what superposition and entanglement were, but if Richard Feynman feels they are important that’s all I need to know. For help understanding the topic I watched a Ted Talk video called “Quantum Computers Aren’t What You Think—They’re Cooler,” by Hartmut Neven. Hartmut Neven is a prominent scientist known for his work in quantum computing, computer vision, robotics, and computational neuroscience. He is currently the vice president of engineering at Google, where he leads the Quantum Artificial Intelligence Lab that he founded in 2012.

Neven presents that superposition allows quantum bits (qubits) to exist in multiple states simultaneously, rather than strictly as 0 or 1 like classical bits. This means a quantum computer can process a vast number of possibilities at once. Quantum entanglement further enhances this capability by linking qubits in such a way that the state of one qubit can depend on the state of another, no matter the distance between them.

As an example, imagine you have a large file cabinet with many drawers and you need to find a specific document. With a traditional computer, you’d have to open each drawer one by one, potentially checking every drawer to find the document. This process is time-consuming. Now consider using an algorithm with a quantum computer. Instead of checking each drawer individually, the quantum computer uses superposition to open and check multiple drawers simultaneously. This means it can explore many possibilities at once. Additionally, quantum entanglement allows the drawers to be interconnected in such a way that the state of one drawer can influence the state of another.

In essence, the quantum computer transforms the tedious task of sequentially searching through each drawer into a much quicker process by leveraging the unique properties of quantum mechanics. This makes quantum computers incredibly powerful for search tasks in large datasets.

The implications of quantum computing are profound, particularly in how it could reshape our workforce and redefine productivity. As quantum capabilities accelerate, the potential to achieve more with less becomes a reality. Tasks that once required extensive resources and manpower can now be executed much more efficiently. This transformation will not only optimize operations but could also create new opportunities across industry sectors, driving growth and innovation at an unprecedented pace.

In The Quant Space: Amazon, Google, and Microsoft

A significant number of companies across various sectors are actively working on quantum computing, each contributing to different aspects of the technology. These companies range from the smaller, lesser-known companies including IonQ Inc., Rigetti Computing Inc., and D-Wave Quantum Inc. to the larger more established companies such as Google, Microsoft, and Amazon.

Google is a leading company in the field of quantum computing, with several notable achievements and ongoing initiatives. Google’s Quantum AI division is focused on advancing quantum computing by building quantum processors and developing new quantum algorithms. In 2019, Google announced a major milestone with its 54-qubit quantum processor named Sycamore. They claimed to have achieved “quantum supremacy,” after Sycamore successfully performed a specific calculation faster than the most powerful classical supercomputers at the time. This event marked a significant moment in quantum computing history. Google claimed that Sycamore completed this task in approximately 200 seconds (a little over three minutes). They estimated the most powerful classical supercomputer at the time, called Summit, might take around 47 years to achieve the same result. Today, Google collaborates with universities, research institutions, and other technology companies to further quantum research. Their partnerships often focus on developing quantum algorithms that could have practical applications in fields like chemistry, material science, and machine learning.

Microsoft is deeply invested in quantum computing, focusing on creating a comprehensive quantum ecosystem that spans hardware, software, and cloud-based solutions. Azure Quantum is Microsoft’s cloud-based quantum computing platform. It offers access to a range of quantum hardware from different providers, as well as quantum simulators, all through the Azure cloud. Developers and researchers can use Azure Quantum to run quantum algorithms, test them on real quantum processors, and simulate them on classical hardware. Unlike many other companies working with quantum computing, Microsoft is focused on developing topological qubits. These qubits are expected to be more stable and less prone to errors than other types of qubits. While still in the research phase, Microsoft believes that topological qubits could be key to building scalable and reliable quantum computers. Microsoft’s approach to quantum computing is unique due to its focus on topological qubits and its comprehensive integration of quantum computing with its existing cloud services. This strategy aims to make quantum computing accessible and practical for a wide range of applications, from scientific research to commercial use.

Amazon also has a significant presence in the quantum computing space, primarily through its cloud platform, Amazon Web Services (AWS). Amazon Braket is the central hub for Amazon’s quantum computing efforts. It’s a fully managed service allowing researchers, scientists, and developers to explore and build quantum computing applications. Amazon is also investing in quantum networking and quantum communications. This involves research into the development of quantum networks that could securely transmit quantum information over long distances, potentially leading to new forms of secure communication systems. Amazon’s vision for quantum computing involves not just providing access to quantum hardware but also integrating quantum computing into the broader cloud ecosystem, making it easier for businesses and researchers to harness the power of quantum computing for practical applications. Through Amazon Braket and their various research initiatives, Amazon is potentially positioning itself as a key player in the quantum computing space, focusing on making quantum technology accessible and useful for a wide range of industries.

Living on the Edge

While quantum computing is still in its early stages, edge computing has been around for decades.

Edge computing is a technological approach bringing data-processing closer to the location where the data is generated, rather than sending it to a centralized cloud or data center. In traditional cloud computing, data from devices or sensors is sent to a central server, often located far away, where it is processed and then sent back. In contrast, edge computing processes data locally, either on the device itself or on a nearby server, which is often referred to as “the edge.”

The “edge” refers to the geographic location where data is collected, such as factories, vehicles, or smart devices. By processing data closer to its source, edge computing reduces the time it takes for the data to be analyzed and acted upon, improving the performance and speed of applications and devices that rely on real-time data.

The Edge, AI, and Toothpaste

Colgate-Palmolive is a company familiar to many. The maker of toothpaste, soap, and Speedstick was founded in New York City in 1806 under the name William Colgate & Company. Colgate stock is often popular in dividend-oriented portfolios in part because of its 61 total years of dividend growth. While the company may be perceived as stodgy, Colgate-Palmolive has been integrating edge computing and AI to enhance manufacturing efficiency across its 49 plants.

By leveraging sensors, robotics, and digital tools, Colgate-Palmolive has significantly improved quality control and operational efficiency. These technologies ensure that products like toothpaste tubes are properly aligned, sealed, and printed and that the packaging matches the product. Additionally, analytical testing for Hill’s pet food uses robotics to ensure the food meets the desired formulation.

The implementation of edge computing and AI has led to increased efficiency by streamlining manufacturing processes. Automation and AI allow for faster and more accurate quality-checks, reducing downtime and increasing production speed. Continuous monitoring and real-time data analysis help maintain high product-quality standards, minimizing defects and ensuring consistency across all products.

With less reliance on manual checks, the likelihood of human error is significantly reduced. Employees can focus more on overseeing operations rather than performing repetitive tasks. This shift not only enhances productivity but also allows for better utilization of human resources.

The technology also allows Colgate-Palmolive the adaptability to quickly respond to changes in consumer demand and market conditions. This flexibility is crucial for maintaining a competitive edge in the fast-paced consumer goods industry. By improving efficiency and quality control, Colgate-Palmolive can produce more products in less time, effectively meeting consumer demands.

Monster Returns

It might surprise some to learn that Monster Beverage is one of the best-performing S&P 500 stocks over the last three decades. Since its August 1995 IPO, Monster has generated a total return of 164,539%. I do not own the stock and have not purchased it for clients either. Also, I have never consumed an energy drink, so this stock has truly been under the radar for me. But do you know whose radar it has not been under? Coca-Cola’s. In 2015, Monster struck a deal with Coca-Cola in which Coca-Cola took a 16.7% ownership stake in Monster in return for Coca-Cola becoming Monster’s primary global distributor.

Coke’s $1-Billion Partnership

Coke, which has paid a dividend for 61 consecutive years, has also made a deal with Microsoft. For $1.1 billion, Coke entered a significant five-year strategic partnership to leverage Microsoft’s cloud computing and artificial intelligence services. This collaboration aims to accelerate Coca-Cola’s digital transformation by integrating advanced technologies across its operations, enhancing efficiency, and fostering innovation.

The partnership will see Coca-Cola utilizing Microsoft’s Azure, Dynamics 365, and Microsoft 365 platforms to replace its fragmented systems with a unified, scalable system. Azure, Microsoft’s cloud computing service, will be the backbone of this transformation, providing robust infrastructure and AI capabilities. One of the standout technologies being adopted is the Azure OpenAI Service, which Coca-Cola has already been using to innovate in areas such as marketing, manufacturing, and supply chain management. This service allows Coca-Cola to harness generative AI to create new marketing strategies, optimize production processes, and streamline supply chain operations.

Additionally, Coca-Cola will explore the use of Copilot for Microsoft 365, a generative AI-powered digital assistant designed to improve workplace productivity. This tool will aim to help employees by automating routine tasks, providing real-time insights, and facilitating better decision-making. The integration of Microsoft Teams and Power Platform will further enhance collaboration and data analysis capabilities, enabling Coca-Cola’s workforce to operate more efficiently and effectively.

Coke hopes to reap many benefits from the Microsoft partnership. By migrating all its applications to Microsoft Azure, Coca-Cola ensures a more reliable and secure IT infrastructure, which is crucial for maintaining business continuity and protecting sensitive data. The use of AI-driven insights from Dynamics 365 will provide Coca-Cola with a comprehensive view of its operations, allowing for more informed decision-making and proactive management of business processes. This approach to data management and analysis should enable Coca-Cola to identify trends, predict outcomes, and respond swiftly to market changes.

Have a good month. As always, please call us at (800) 843-7273 if your financial situation has changed or if you have questions about your investment portfolio.

Warm regards,

 

 

 

Matthew A. Young
President and Chief Executive Officer

Fraud and Theft
For security, stop picking up the phone. | TechCrunch

TechCrunch recently produced a good review on the growing risks of phone-based scams, particularly those enhanced by voice AI tools that can clone voices, leading to potential fraud. In one instance, a Ferrari executive nearly fell victim to a scam where an imposter, using a voice clone of Ferrari’s CEO, attempted to commit fraud. The executive, suspicious, asked a personal question only the real CEO would know, causing the imposter to hang up.

Phone scams have existed for decades, but technology has made them more sophisticated. AI-generated “deepfake” voices and spoofed phone numbers now make it easier for scammers to impersonate people, evoking emotional responses by pretending to be a familiar figure, often in distress. Scammers rely on tactics that create urgency and pressure, making their targets act hastily without verifying information.

Common scams include phone calls from fake authorities, like the police or federal agents, demanding payment to resolve fictitious legal issues. Others involve impostors of healthcare providers making fraudulent claims regarding bills. Scammers impersonating banks, workplaces, or tech companies may also call, asking for, under false pretenses, sensitive information like security codes or passwords.

To combat these scams, avoid phone conversations with unknown callers or let such calls go to voicemail. When in doubt, verify the caller’s identity. For example, if someone claims to be from a bank, hang up and call the official number on the bank’s website or card. Similarly, if a company asks for sensitive information, don’t rely on Google search results for contact numbers; scammers can manipulate search engines to display fake support lines.

Health and Wellness

“By 2027, approximately 50% of all knee procedures will be robotic, up from 11% in 2019,” says Dr. Douglas Unis, a board-certified attending orthopedic surgeon for the Mount Sinai Health System and chief of quality improvement for Mount Sinai West. Building upon an interest in robotics that began at Case Western Reserve University School of Medicine, Unis founded Monogram Orthopedics with the goal of using robotics, 3D printing, and artificial intelligence to enable safer, more efficient, longer-lasting joint replacements. Mount Sinai supports Monogram through its BioDesign incubator program.

Travel

Global 2023 cruise passenger volumes reached 31.7 million in 2023, surpassing pre-pandemic 2019 figures by 7%, according to data released by industry body CLIA. In its 2024 State of the Cruise Industry report, the association found the U.S. was the largest source market in 2023, with 18.1 million passengers, followed by Europe with 8.2 million. The top reasons given by customers as to why they like to cruise were 1) the ability to visit multiple destinations and 2) value for money. Global cruise capacity is forecast to grow by at least 10% in the next four years, from 677,000 berths in 2024 to 745,000 in 2028, as at least 56 more ships are scheduled to come online, costing $38 billion.