⛵ Cream Skimming

Good Morning, Early Adopters!

Cream skimming is no longer just a market behavior—it’s becoming an architectural choice.

INSURANCE

FSD Insurance Starts Cream Skimming

👀 What’s happening: Lemonade has rolled out an auto policy that cuts premiums roughly in half when Tesla Full Self Driving is active. Pricing is calculated per mile using real time telemetry, separating human driven miles from software driven miles in a way legacy insurers cannot replicate.

🌍 How this hits reality: This is cream skimming at machine speed. The lowest risk drivers get siphoned into FSD priced pools, while traditional insurers are left with slower reaction times and higher loss ratios. Capital efficiency breaks fast when risk is no longer averaged annually but streamed continuously through APIs.

⛵ Key takeaway: Insurance shifts from actuarial guesswork to sensor driven physics. Float based empires like Berkshire Hathaway weaken as Warren Buffett exits. Actuaries at the top of Wall Street face replacement by engineers who price risk in real time.

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NEW TECH

Optical Computing Threatens the Energy Logic of Modern AI

👀 What’s happening: Neurophos, backed by Bill Gates, is developing an optical processing unit that performs matrix multiplication with light instead of electrons. Using micron-scale optical transistors compatible with standard CMOS, it builds a single massive photonic tensor core running at 56GHz. The goal is extreme FP4 compute density without the usual power explosion.

🌍 How this hits reality: Today’s AI costs scale with electricity. GPUs burn power because billions of transistors switch constantly during dense math. Optical computation changes that equation. The math happens passively as light moves through materials. Power is mostly spent converting signals, not calculating. If real, this breaks the assumption that more tokens always mean higher energy bills.

⛵ Key takeaway: If commercialized, this decouples model scale from power consumption. Large models stop being constrained by grid limits and cooling budgets. Compute economics shift from electricity scarcity to architectural placement, forcing players like Nvidia to coexist with a new class of non-digital accelerators.

HR TECH

Federal Probe Turns HR Tech Rivalry Into Criminal Risk

👀 What’s happening: The Department of Justice opened a criminal probe into Deel after allegations it hired a corporate spy to infiltrate Rippling escalated, per The Wall Street Journal. What began as a civil lawsuit now involves federal prosecutors, bank records, confessed informants, and surveillance claims. Both startups deny wrongdoing while preparing for parallel criminal and civil fights.

🌍 How this hits reality: HR software runs on trust, data access, and compliance across hundreds of countries. If espionage crossed into criminal conduct, customer data, product roadmaps, and hiring pipelines become legal liabilities. With valuations near $17B each and billions processed monthly, procurement reviews, audits, and enterprise renewals will slow.

⛵ Key takeaway: Once federal prosecutors engage, outcomes stop being negotiated quietly. Expect stricter diligence across HR tech, slower deal cycles, and clearer red lines on competitive intelligence. If charges land, the sector absorbs reputational damage.

BAY AREA MEMOS

• Tesla scrapped Autopilot and folded highway assist into FSD subscriptions to boost software revenue under regulatory pressure.
• Databricks raised $1.8 billion in debt financing to strengthen its balance sheet, fund acquisitions, support AI-related costs, and prepare for a potential IPO.
• Apple is reportedly considering Intel’s 14A process for some iPhone chips starting around 2028 to diversify its supply chain.
• The SEC dropped its lawsuit against Gemini after investors were fully repaid through a prior settlement, amid a broader easing of U.S. crypto enforcement.
• References to “immigration status” in TikTok’s U.S. privacy policy sparked concern, but the wording reflects state privacy law disclosure requirements.

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