Even for those of us that are quite technically minded, we spend precious little time thinking about the cables that carry our signals and do all the important work we need them to do on a daily basis. A great deal of theory and engineering goes into making things like telephone lines and HDMI cables work, but we mostly just plug them in and get on with whatever we’re doing.
If this is your experience, you might find the Hackaday Europe talk from [Michael Wiebusch] to be particularly interesting. He dives into transmission line theory from an accessible standpoint, explaining how two disparate signals can go in opposite directions on the very same wire. Then he demonstrates the theory by building a cable modem… well, sort of!
Signal
Michael begins his talk by discussing the Telegrapher’s Equation, but only as a fakeout. Given the limited time on offer, he decided a quicker, easier explanation of the physics involved would be more appropriate. Key to this was explaining the difference between cables and transmission lines. To create a true transmission line, by his definition, he explains that there is a necessity to have two conductors that are relatively close together. Such a transmission line is effectively a distributed network of inductances and capacitances all the way down, though often we talk about “lossless” transmission lines for modelling purposes. He also covers the point of coaxial cables, wherein one conductor is wrapped around another to shield a signal from external noise, and to prevent signal from leaking out.
Transmission lines allow signals to pass in opposing directions, much like ripples on a pond will pass through each other, retaining their form. Credit: talk slides
There are several basic facts to remember about transmission lines. They are fundamentally just channels down which EM signals can travel. It’s also good to remember that they delay signals. To a human, the signal may appear to travel instantaneously, but it does take time. This also has other impacts; for example, coax cables are filled with plastic, a material in which the speed of light is roughly 66% of the speed of light in a vacuum.
This slows the rate at which the field of an EM signal can travel to this fundamental limit. [Michael] also notes that transmission lines, as a wave medium, essentially allow waves travelling in different directions to pass each other, much like ripples spreading on the surface of a pond. This is why it’s possible to have bidirectional communication on a single transmission line. It’s also important to terminate a transmission line properly, such that the wave you’re transmitting down it ends where you want it to—at the receiver. Fail to terminate your transmission line, and you’ll have that wave bouncing back and forth which is undesirable for clear transmission.
The coupler allows sending and receiving signals via a single transmission line. Credit: talk slides
[Michael] demonstrates basic transmission line theory by building a sort of cable modem out of an Arduino and some supporting hardware. He notes it’s not really a modem—there is no modulation or demodulation going on. Instead, he’s simply squirting TTL signals into either end of a cable and receiving them on the other end. The “black box” that couples the signals into and out of the transmission line is a simple directional coupler. Built out of resistors and an op-amp, it allows sending a signal down a transmission line, as well as receiving a signal coming the other way. The design works all the way down to DC logic level signals, which let [Michael] use it to send TTL signals up and down 50-ohm and 75-ohm coaxial cables. He notes this has very obvious practical applications where it’s desirable to reduce cable counts when sending signals in multiple directions, relating this directly to his professional work on science experiments.
If you’ve ever wanted to get two devices talking over a single cable in a relatively easy fashion, then [Michael’s] talk may be valuable to you. At the very least, it’s a great way to learn some of the basics of transmission lines and better understand what’s going on when you shoot a signal down a random bit of wire. It’s all good stuff.
Every piece of information has a half-life. By the time it reaches you, the edge it once carried has usually decayed past usable.
This is not a complaint about being late. It is a description of how information moves through markets. The same headline that feels urgent at 9:00 was already known at 8:45, traded at 8:30, and structurally positioned for at some point earlier in the week. The version you receive is the final, most-public iteration of a story that has been circulating, in different forms, through different participants, for a long time.
The trader who acts on widely-known information is not acting on information. They are acting on a residue of it.
The Layers Information Passes Through
Markets are not flat. Information does not arrive simultaneously to all participants. It moves through layers, and at each layer, the pricing power of that information decays.
At the earliest layer, there is the source. A protocol team aware of a vulnerability. A market maker watching unusual order flow on a counterparty’s books. A custody desk seeing redemptions from a fund. These participants are not predicting anything. They are observing the raw inputs that will, eventually, become a story for everyone else.
The next layer is the close network. People one or two relationships away from the source. They do not have the same certainty, but they have enough conviction to act. Their positioning starts shifting the price in small, often unattributable ways.
After that come professional traders who read the order book carefully. They cannot see the source, but they can see the footprints. Unusual buys at calm hours. Aggressive bids on low liquidity. A widening spread that does not match the surface narrative. These traders act on inference, not knowledge.
Then come analysts, who construct theories from price action and on-chain data. Then retail-focused newsletters, which repackage those theories. Then social media, which amplifies the conclusion without the reasoning. Then mainstream coverage, which announces it as news.
By the time the story is news, the price has moved through every prior layer of positioning. The information has been priced six times before it reaches the seventh layer.
Why the Late Layer Is the Loudest
There is a paradox in how information feels. The earliest layers operate quietly. A few orders. A few conversations. No headlines. The latest layers operate loudly. Trending posts. Push notifications. Television segments.
The volume of attention is inversely correlated with the freshness of the information. By the time something is loud, it is also stale.
This creates a structural illusion. Loudness feels like signal. The trader watching social media sees activity, conversation, urgency, and reads it as evidence that something is happening. Something is happening, but it is the discussion of an event, not the event itself. The event already occurred when the first layer began positioning.
The decay is not always visible in the chart, but it is usually visible in price before the headline. The market does not wait for confirmation. It responds to the early layers, drifts during the middle layers, and often reverses by the time the last layer arrives. This is the entire structure behind why markets move before news. The price is not predicting. It is reflecting positioning that the public layer has not yet seen.
What Decayed Alpha Looks Like
When a trader acts on information that has already passed through most of the layers, they are not buying edge. They are buying the appearance of edge. The signal is real. The reasoning is sound. But the position has already been taken by others, and those others now need someone to sell to.
The late entrant is the exit liquidity for the early layer.
This dynamic is most visible during news-driven moves. A protocol announces a partnership. Price spikes on the headline. The trader who entered on the headline often watches price fade for the rest of the session. The move that looked like the beginning was actually the end. The earlier participants who positioned during the rumor phase used the headline-driven enthusiasm to distribute.
Nothing about this is conspiratorial. It is the natural consequence of how information propagates. If you can see the headline, the headline has already been processed by the market.
The Internal Dynamics of Each Layer
It would be wrong to suggest each layer is a homogeneous group acting in coordination. They are not. Within each layer, participants disagree about magnitude, timing, and interpretation. Some early actors take small positions. Some take large. Some hedge. Some scale.
But what is consistent across layers is the type of information available. The early layers have access to raw inputs. The middle layers have access to inferred patterns. The late layers have access to confirmed narratives. Each type of information is less actionable than the one before it, because the price has already absorbed the earlier interpretations.
By the time the narrative is confirmed, the actionable phase is over. What remains is positioning around the resolution, not around the discovery.
The Trap of Feeling Informed
The most expensive feeling in markets is the feeling of being informed.
A trader reads three articles, watches two interviews, and follows a thread that summarizes a complex situation. They feel they understand. They feel prepared. They take a position based on what they now know.
The problem is that the act of being able to read those three articles means the information is already public. The thread exists because someone wrote it, which means someone else read it first, which means the conclusion the trader is now reaching was reached by others days or weeks earlier.
Feeling informed is a sign that the information has fully decayed. The market did not wait for the trader to read the thread. It moved during the period when only the source knew. By the time the trader arrives at a confident interpretation, the price reflects a different stage of the cycle, often the stage where early positioning is being unwound.
A good study in this is the exploit was expected — a clean example of how informed participants act on information before the public layer ever sees it, and how the headline arrives at the moment the early layer is exiting.
Why Decay Cannot Be Outrun
A common response to this problem is to try to move faster. Refresh feeds more frequently. Subscribe to more sources. Watch more screens. The reasoning is that if late information is decayed, then earlier information must be better, and the way to access earlier information is to consume more of it.
This logic fails because the constraint is not consumption speed. It is layer position. A trader on social media can refresh every second and still be in the seventh layer. The earlier layers are not faster versions of the same channel. They are different channels entirely.
The professional desk does not learn about the order flow from Twitter. They see the order flow directly. The custody team does not learn about redemptions from a newsletter. They process the redemptions. No amount of faster consumption moves a participant from a downstream layer to an upstream one.
Speed within a layer is not the same as access to a higher layer.
What Remains When Information Decays
If information decays past usable by the time most traders see it, what is actually tradable? The honest answer is: structure, behavior, and price itself.
Structure does not decay. The architecture of how markets move, how liquidity gathers and disperses, how participants behave at certain types of levels, remains valid across cycles. It is not faster information. It is a different kind of information entirely.
Behavior does not decay either. The way crowds react to losses, to rallies, to news cycles, is consistent over time. A trader who studies behavior is not racing against the information layer. They are operating on a different axis.
Price itself is the most honest layer. Price reflects all the positioning that has already happened, including from the earliest layers. A trader who reads price carefully is not trying to predict what comes next. They are trying to see what has already been decided.
These are slower, less exciting forms of analysis. They do not produce the urgency that headline trading produces. But they do not depend on being early to information, because they do not depend on information in the conventional sense.
The Discipline of Knowing You Are Late
Most traders are in the late layer most of the time. This is not a personal failure. It is a structural fact of how information distributes.
The useful response is not to pretend otherwise. It is to assume lateness as the default, and to design behavior around it. If you are late, the headline is not a buy signal. It is, more often, a sign that the move you are reading about is in its distribution phase. The trader who acts on the headline is providing liquidity to the participants who acted weeks earlier.
This does not mean acting on news is always wrong. It means acting on news as if it were fresh information is always wrong. The information is not fresh. The price has already absorbed it through six earlier layers.
The trader who understands this stops chasing the feeling of being informed. They stop refreshing feeds for an edge that the feed cannot provide. They start watching structure, behavior, and price, because these are the few layers that do not decay between the source and the screen.
The half-life of information is short. The half-life of structure is long. Most traders spend their effort optimizing for the wrong one.
Every day I track one thing: where market structure and crowd sentiment disagree — and which one leads. Today’s read:
Xbox CEO Asha Sharma laid out a wide-ranging plan to overhaul Microsoft’s gaming division Monday, calling it the most significant restructuring in Xbox history and disclosing that the business has been losing 64 cents on every dollar invested in its game studios.
As detailed in a memo to employees, the changes include roughly 3,200 job cuts through the fiscal year — about 20% of the Xbox workforce — the spinoff of four game studios, a new COO, and a plan to flatten management from as many as 14 layers to no more than five.
“We will return to growth in 2027,” Sharma wrote. “History is full of companies that mistake longevity for inevitability. We will not be one of them.”
Sharma, a startup veteran and former Microsoft AI leader, was named Xbox CEO in February.
“I know this is painful,” she wrote. “These changes will directly affect people who have poured their creativity into building XBOX. Many joined us through acquisitions, while others were recruited here, or sought us out because they loved this industry and loved XBOX. Today’s decisions do not reflect their talent or dedication.”
But she also reiterated what she said in a memo last month: Xbox’s business is not healthy, operating at margins 3-10x lower than industry peers after years of heavy spending that failed to produce the expected growth.
About 1,600 of the Xbox job cuts take effect Monday as part of a broader round of 4,800 layoffs across Microsoft. The remaining Xbox reductions will come in the months ahead. Sharma acknowledged that a year-long restructuring “creates additional challenges” but said “it is not possible to make all the necessary changes in a single day.”
Sharma said the cuts reach across Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios, though no publicly announced games are being cancelled.
Several game studios will be spun out as standalone ventures, removing the costs from Microsoft’s books while giving the studios a chance to survive on their own.
Compulsion Games (South of Midnight) and Double Fine Productions (Psychonauts) will return to their management teams as independent studios, keeping their intellectual property and current projects.
Ninja Theory (Hellblade) and Undead Labs (State of Decay) will shift to new owners with funding to complete their current games.
In France, Arkane (Dishonored, Deathloop) is beginning a legally required consultation with its employee works council to determine its future.
Sharma will also take on direct oversight of game studios Mojang (Minecraft) and King (Candy Crush), Xbox’s two largest studios by monthly active players.
In addition, she is establishing a new chief operating officer role with end-to-end financial responsibility across content, hardware, platform, and services. Helen Chiang, a nearly two-decade Xbox veteran who led Mojang and the Minecraft franchise, has been promoted to the role. Dave McCarthy, a 17-year Xbox veteran who helped build the platform, is retiring.
Across the division, Sharma wrote in the memo, Xbox will cut vendor spending by 50% and reduce management layers from as many as 14 to no more than five.
The overhaul follows a 25-year period in which Microsoft largely subsidized Xbox as a strategic bet on the living room. Microsoft CEO Satya Nadella has said that era is over, noting that YouTube creators make more money from Xbox games than Microsoft does.
Xbox at a gamescom briefing in 2014. Microsoft is pressing its games division to turn a profit. (Microsoft Photo)
In 2007, Microsoft’s Xbox 360 consoles started dying — overheating until three lights on the front blinked red, a defect gamers came to call the “red ring of death.” Microsoft’s response was to extend the warranty on every machine and take a charge of more than $1 billion to fix the problem, making it one of the costliest product failures in the company’s history.
Microsoft could afford it financially, but the bigger factor was strategy. Xbox was a bet on the living room, and for a company minting money on Windows and Office at the time, losing a billion or so was a justifiable cost of staying in the game.
Nearly two decades later, that patience has run out.
“Going forward, this cannot continue,” the new Xbox CEO Asha Sharma wrote in a memo to employees last month, offering a blunt assessment of a business that has spent more than $20 billion over five years, only to see its core revenue fall by nearly half a billion dollars, running at a thin 3% profit margin, by Microsoft’s own internal measures.
With thousands of layoffs expected to be announced across Microsoft as soon as next week, the Xbox division is likely to be among the hardest hit.
The cuts reach across the company — including sales and consulting — part of a restructuring that has become routine around the close of Microsoft’s fiscal year. But for Xbox, they’re an early step in a broader effort to reset the business, rein in costs, and position the division for healthier profits.
Microsoft CEO Satya Nadella has been blunt about it: the company has spent years subsidizing Xbox rather than profiting from it, and that era is over. The videos and livestreams of people playing Xbox games that fill YouTube generate more money than Microsoft makes from the games themselves, he noted in an appearance on the Hard Fork podcast.
“No one can accuse Microsoft of not having invested for the last 25 years,” Nadella said. “And now we have to turn this into a sustainable business.”
Long-term strategic bet
Turning it around means breaking a pattern that runs through Xbox’s history.
Xbox launched in 2001 and lost money for most of its first decade. Microsoft absorbed the losses and stayed in — going up against Sony’s PlayStation and Nintendo — because it saw a strategic prize in owning a piece of the living room, and later mobile. Online gaming also gave the company early experience running services at scale, which fed its cloud ambitions.
Over time, the goal shifted from selling hardware to selling subscriptions.
Xbox Live, launched in 2002, turned online play into recurring revenue. Game Pass, which arrived in 2017, let players pay a monthly fee — the top tier is about $23 — for a library of games, including Microsoft’s own new releases the day they come out. The idea was to get people paying for Xbox everywhere: consoles, PCs, phones and the cloud.
And when growth stalled, Microsoft doubled down. It paid $7.5 billion in 2021 for Bethesda, the studio behind Fallout and The Elder Scrolls, then $69 billion in 2023 for Activision Blizzard (whose games include Call of Duty, World of Warcraft, Diablo and the mobile hit Candy Crush) the largest acquisition in Microsoft’s history.
A series of economic headwinds
In recent years, almost everything about the economics of gaming has turned against Xbox at the same time.
Hardware loses money, and AI is making it worse. Microsoft sells consoles at or below cost, banking on games and subscriptions to make up the difference. But AI data centers are consuming so much memory and storage that chip prices have spiked. That has forced Microsoft to raise Xbox console prices, most recently a $100-to-$150 hike this summer that it blamed directly on component costs.
Xbox lost the console war. By most estimates, Sony’s PlayStation 5 has outsold the Xbox Series X and S more than two to one. A smaller base means fewer game sales and subscriptions to offset the upfront hardware losses. That has left Xbox a distant second for the entire generation.
Revenue is shrinking. Even setting aside the games it gained from Activision, Xbox’s annual revenue has fallen nearly $500 million over five years — while the money going into the business keeps climbing. It has been investing more to earn less.
Microsoft’s most recent quarterly filing shows gaming revenue of $16.8 billion for the nine months through March, down about $1.1 billion, or 6%, from a year earlier.
Game Pass cuts into sales. Handing subscribers a new game the day it launches undercuts the roughly $70 they would have paid to buy it. The service delivers steady subscription income, but thinner economics on the games themselves.
Activision didn’t fix the margins. Even with one of gaming’s most profitable businesses folded in, Xbox earns only about 3 cents of profit on every dollar — well under the 17 to 22 cents typical in the industry. If the biggest acquisition in company history can’t move the margin, little will.
Every spare billion is flowing to AI. Microsoft is pouring more than $100 billion a year into the data centers and chips behind its AI push, trying to capitalize on the boom. Against a risk and payoff that big, a gaming business that barely breaks even feels like yesterday’s strategic bet.
What’s next for Xbox
The cuts have already started. In recent weeks, Microsoft has signaled plans to close or sell some studios, including Ninja Theory, maker of the acclaimed “Hellblade” series.
Shedding staff, studios and marketing will lift Xbox’s profit margins in the near term. What it won’t do is fix the underlying problem: a business can trim its way to a better number only so much before it has to generate more revenue.
Sharma’s plan, so far, is to concentrate on Xbox’s biggest franchises, funding blockbusters like Halo and Fallout while pulling back elsewhere. It’s leaning on Game Pass and releasing most of its games on PCs and rival consoles from Sony and Nintendo, reaching players well beyond Xbox’s shrinking base, even as it holds back a few new exclusives like Gears of War to give owners a reason to stay.
Microsoft is also rethinking the console itself. In her memo, Sharma described a “hardware component crisis” that has left the company unable to make as many consoles as players want, and called for “a new business model and partnerships” for its hardware.
How far the reset ultimately goes is an open question. The Informationreported that Microsoft has weighed making Xbox a standalone subsidiary, a joint venture, or a spin-off, though nothing is imminent.
Microsoft’s response to the Xbox 360 “red ring of death,” July 6, 2007. (Seattle Post-Intelligencer / NewsBank)
Whatever happens next, it’s clear that times have changed. In 2007, as the red ring of death crisis emerged, Peter Moore, who ran the Xbox business at the time, and his boss Robbie Bach went to then-CEO Steve Ballmer to ask for the money to repair and replace the failing consoles.
Told it was $1.15 billion, Ballmer said, simply: “Do it.”
Moore credits that decision with saving Xbox. There would have been no Xbox One, he said, without Ballmer’s willingness to spend more than a billion dollars to protect the brand.
Nearly two decades later, Microsoft is done writing that kind of check.
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