In his role as CEO of OpenAI, Sam Altman spends a great deal of time thinking about the coming robot revolution. In this excellent piece, Altman explores the exponential nature of technological innovation, and how automation can be harnessed to create a more wealthy—and equitable—society. “This revolution will generate enough wealth for everyone to have what they need,” Altman writes, “if we as a society manage it responsibly.”
“In the next five years, computer programs that can think will read legal documents and give medical advice. In the next decade, they will do assembly-line work and maybe even become companions. And in the decades after that, they will do almost everything, including making new scientific discoveries that will expand our concept of “everything.” This technological revolution is unstoppable. And a recursive loop of innovation, as these smart machines themselves help us make smarter machines, will accelerate the revolution’s pace.”
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Meet the godfather of AI—an upright Brit named Geoff Hinton
In the link above, Sam Altman sets the scene of the coming AI boom; in the piece below, Cade Metz, a longtime technology reporter, tells the story of one of its main characters, Geoff Hinton. Hinton is well-known in Silicon Valley for his pioneering work on neural nets, machine learning and artificial intelligence. It is not an exaggeration to say that his work has helped push further progress in fields as diverse as genomic sequencing to self-driving vehicles. In this story excerpted from his new book on AI — “Genius Makers” — Metz recounts an exhilarating bidding war between the world’s largest tech giants for access to Hinton’s algorithms.
“…Hinton and his students had changed the way machines saw the world. They built what was called a neural network, a mathematical system modeled on the web of neurons in the brain, and it could identify common objects—like flowers, dogs, and cars—with an accuracy that had previously seemed impossible. As Hinton and his students showed, a neural network could learn this very human skill by analyzing vast amounts of data. He called this “deep learning,” and its potential was enormous. It promised to transform not just computer vision but everything from talking digital assistants to driverless cars to drug discovery.”
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There is a trillion-dollar bubble brewing in conventional energy assets
Tony Seba and Adam Dorr of RethinkX, an independent think tank that analyzes and forecasts the speed and scale of technology-driven disruption, explore how most Wall Street analysis on the energy sector is getting the renewable energy disruption wrong. In short, Seba and Dorr see a bubble forming because most analysis assumes conventional/legacy power plants will be able to generate consistent cash flows for the next 20 years—a logic that Seba and Dorr believe is deeply flawed. “Just as the credit rating agencies ignored actual market data in the buildup to the subprime mortgage crisis,” they write, “mainstream energy analysts have ignored market data in the valuation of new conventional power plants.”
“A large and rapidly-expanding global financial bubble now exists around conventional coal, gas, nuclear, and hydro power energy assets. This bubble has in part been created by mainstream energy analyses that have, for the last decade, significantly underestimated the levelized cost of electricity (LCOE) from conventional power plants because they assume these plants will be able to successfully sell the same quantity of electricity each year from now through 2040 and beyond. This assumption has been false for at least ten years. The rates at which conventional power plants are utilized will continue to decrease as competitive pressure from near-zero marginal cost solar photovoltaic and onshore wind power, and battery energy storage continue to grow exponentially worldwide.”
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Germany is electrifying
More than a decade ago, in March 2010, VW claimed it would be all-in on electric by 2018. “The goal is to become the market leader in E-mobility by the year 2018,” then-CEO Martin Winterkorn said. Fair to say it’s been a slow start. However, under new leadership, VW is now ramping up its EV efforts. This week I watched their “Power Day” in which the company unveiled some high-level thoughts on how they’re approaching the transformation of their business model, from the types of battery chemistries they’re experimenting to bi-directional charging capabilities. I’ll be heading to a VW event to test-drive the new electric ID.4 and speak with VW reps in early April—should be an interesting ride.
“The race for huge improvements in battery technology is one of the most expensive and hotly contested on the planet right now. Practically every automaker is betting that electric vehicles will be the future, with some of the largest countries (and largest auto markets) in the world moving to phase out gas-powered cars and trucks. To ensure that shift, batteries need to be more powerful, last longer, and be cheaper to make in order to entice enough customers to make the switch from gas to electric.”
“This is why I believe great investing is an art form. Those I’ve found to be most successful, view their portfolios as an extension of themselves and their innate personalities / curiosities. You can’t run a global portfolio if you aren’t passionate about learning how countries & societies develop, nor can you run a concentrated portfolio if you get unnerved easily by volatility. There are many artistic styles – but each style is unique to only that particular artist (and those why try to copy it, without possessing that special cocktail of traits, will never be as good as the pioneer).”
“The biggest risk of all is the possibility of rising interest rates. Rates have declined quite steadily for the last 40 years. This has been a huge tailwind for investors, since a declining-rate environment lowers the demanded returns on assets, making for higher asset prices. The linkage between falling interest rates and rising asset valuations is a good part of the reason why p/e ratios on stocks are above average and bond yields are the lowest we’ve ever seen (which is the same as saying bond prices are the highest). But the downtrend in rates is over (if we can believe the Fed’s assurance that it won’t take nominal rates into negative territory). Thus, while interest rates can rise from here – implying higher demanded returns on everything and thus lower asset prices – they can’t decline. This creates a negatively asymmetrical proposition.”
“In a sense, Modern Monetary Theory has won. This is not because policy measures are necessarily in line with what MMT adherents would prescribe. Rather, the debate over economic policy, in particular fiscal policy, is happening on MMT terms. MMTers argue that the constraint on government spending is inflation and real resources — not credit risk — and that’s exactly how even the critics of the stimulus bill have attacked it, that it will be inflationary. So how has the debate around fiscal policy changed so much over the last several years? Much of the credit goes to Stephanie Kelton, the MMT economist and author of the best-selling book The Deficit Myth.”
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Welcome to The Nightcrawler, a weekly collection of thought-provoking articles and analysis on technology, innovation, and long-term investing. The Nightcrawler is published every Friday evening by Eric Markowitz, Nightview Capital’s Director of Research. Subscribe below. In this evening’s email… Quote of the week: “Doubt is not a pleasant condition, but certainty is absurd.” Voltaire Embracing uncertainty as a competitive edge In …
