SITALWeek #354
Welcome to Stuff I Thought About Last Week, a personal collection of topics on tech, innovation, science, the digital economic transition, the finance industry, and whatever else made me think last week.
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In today’s post: from humanoids to mining, robotics is steadily rolling into the mainstream as developed countries see structural declines in new labor-force participation levels; those same-labor force issues are structurally deflationary and only just beginning; a look at the detailed images coming back from the new Webb telescope; power shortages and the risk of further supply chain snarls and perhaps data center regulation; evidence is building that deglobalization, much like its predecessor globalization, will be paradoxically deflationary; and, much more below...
Stuff about Innovation and Technology
EVE on Duty
Last week, I wrote about some of the complications involved in our co-evolution with an increasingly complex and expanding set of digital tools, robots, and software. Earlier this year, ADT Commercial ordered 140 EVE humanoid robots from Norway’s Halodi to perform basic security checks, patrolling buildings to ensure that doors are locked, lights are off, and no unauthorized personnel are present. If EVE detects anomalies, centrally located humans can use VR goggles to assess the situation. As the EE Journal also reports, EVE works in retail to keep tabs on stock and relocate misplaced items to their proper shelves. In hospitals, EVE can deliver meals and check on patients.
Automated Mining
The WSJ recently wrote about the rising use of automation in mining. The new tools help keep mines running, but also put mining operations in competition with other industries for highly skilled workers and AI experts. A modern new mine ramping in Australia has a control center with 70 people overseeing 600 workers and an array of automated equipment: “At Rio Tinto’s Gudai-Darri mine, nearly two dozen driverless trucks haul iron ore on preplanned courses, tracked by autonomous water carts that are used to control dust. Robots are used to transfer samples in the site’s laboratory, while ore departs the mine on a driverless train for export to customers in Asia.” The Journal also reports that rail companies in North America are keen to look at the Rio Tinto autonomous trains (a topic I also wrote about in last week’s note linked above). Whether it’s EVE or automated mining, there is clearly a slow revolution happening in robots increasingly working alongside humans. And, those humans are increasingly not entering the workforce (see below).
Miscellaneous Stuff
JWST’s Jaw-Dropping Imagery
I eagerly awaited the arrival of the first images from the new James Webb Space Telescope last week. The telescope allows us to see further back in time than ever before with even greater detail. The images JWST gathers come from light and radiation that shone as far back as ~600M years after the big bang – taking ~13B years to reach the lens – and it far outshines its Hubble predecessor. An image that covers an area of space equivalent to a grain of sand held at arm’s length is filled with galaxy upon galaxy upon galaxy. The Webb also takes advantage of gravitational lensing, whereby light that’s bent by heavy objects can enhance faint signals and enable the search for exoplanets. (Gravitational lensing was also used to prove Einstein’s theory of general relativity!). While the images are awe inspiring, the technological accomplishments of the mission are nearly as fascinating (I covered the cool tech in the million-mile-away scope here). What you might have missed in the general social media and press coverage of the first set of images is the level of detail afforded by the massive optics of the Webb. You can open up and zoom in on the big files on Nasa’s website. My favorite, naturally, is the deep field with gravitational lensing magnifying distant galaxies behind a 4.6B year old cluster of galaxies. The full resolution PNG image file of the new deep field can be viewed here. Seeing alll those galaxies as you zoom in is a breathtaking way to place ourselves in the universe, as we are able to witness it, from our little pale blue dot.
Quantum Computing, Reviewed
The amount of time the average person should spend analyzing quantum computing is near zero given that the field is largely speculative and is a lifetime away from potential payoff (quantum communication and quantum battery storage, in contrast, have more near-term potential). That said, I found this article in IEEE to be a nice background piece on the field, prior problems, and current approaches to scalability and error correction.
Stuff about Geopolitics, Economics, and the Finance Industry
Feeling the Burn
With potential energy shortages due to the war in Ukraine and extreme heat/weather patterns, we may increasingly find ourselves in situations where we need to limit power consumption, e.g., residential rationing and curtailing of non-essential industrial manufacturing. As a center for manufacturing, Germany in particular may feel a pinch. Toyota said last week that it was limiting production in Texas due to chip shortages and power availability. Of course, even if there isn’t a power crunch, prices may be unfeasible. Will an energy shortage have regulatory consequences in the data center? Can we continue to crunch out funny images on Dall-E, run massive machine learning models to sell higher priced ads, and mine Bitcoin? Total data center power consumption is typically a low single digit percent of energy use, but AI's energy intensity is growing while some countries are subsidizing the costs. Will a curtailment in industrial production, an inability to heat our houses, or a future glut of funny dog pictures finally catalyze a real effort to overhaul our sources, storage, and distribution of energy? Or, are the resources needed to accelerate the transition out of reach?
Demographics Are Economic Destiny
This video does an excellent job explaining the connection between labor-force growth, GDP growth, and inflation. I often come across the seemingly false claim that an aging population is inflationary. In fact, it’s the opposite, as consumption peaks during child-raising years and then tails off from retirement onward. There are inflationary pressures from an aging population’s increased healthcare needs (and aging in place puts pressure on home prices), but, overall, a lack of young adults entering the workforce (as we now have in the US) is ultimately deflationary. Further, rising debt and a shrinking tax-payer base tamp down economic growth. This scenario, of course, started playing out in Japan in the 1990s, Europe around 2010, China around 2015, and now the US is approaching a similar situation, hastened by the recent decline in immigration. As I’ve argued before, developed countries should do everything they can to entice working-age immigrants if they view economic growth as important (which they should!). Further, EVE (see above) and similar robots don’t have children, buy cars, go on vacations, or pay taxes. The long-term deflationary pressures are stacking up. In a world of low or no growth, opportunity is created by the companies providing more value for less and driving growth through productivity.
Reshoring Rising
This FT op-ed addressing the changing nature of global trade contains several useful charts. Notably, they illustrate the peak of trade occurring over fifteen years ago (something I’ve covered before) as well as the decline in China’s wage competitiveness, which began leveling off around ten years ago. I believe fears that deglobalization will be inflationary have little merit based on the seemingly incidental impact of years of ebbing international trade (although, it’s admittedly hard to parse causation from correlation given everything happening, especially with aging populations and technological progress). The inflationary impact could certainly change if there is a significant uptick in reshoring, but I suspect there is a natural cadence to just how fast supply chains can move capacity and repopulate their labor force. If it took half a century to globalize, it will probably take that long to reverse. A breakthrough in general-purpose humanoid robotics like EVE or other automation technology could accelerate reshoring, but such technological leveraging would provide compensatory deflation. The WSJ reports on a perfume company with annual sales of ~$1B that has rapidly shifted capacity back to the US and is now sourcing 70% of inputs from US suppliers. It would take a significant further reduction in Chinese costs to shift back overseas. Meanwhile, Bloomberg reports a rapid acceleration in reshoring and nearshoring of manufacturing, 10x above pre-pandemic levels. The construction of new manufacturing in the US is up 116% y/y (note: expensive new chip fabs in Arizona may be a big factor in that number). The CEO of GE Appliances (owned by Chinese parent Haier) began reshoring to the US in 2008 and sees it as the way to go for producing large items with higher quality for less cost. Generator maker Generac has shifted from China and now sources more than half of their supply from the US and Mexico. I’ve theorized that, after decades of shifting overseas, deglobalization is a challenge given the lack of labor and infrastructure – not to mention the lost know-how – but there is clear evidence building that, at least in some cases, reshoring is economically and logistically feasible, in part thanks to technology. As I’ve said before, remaining largely a global trade society is far better for peacekeeping and progress, so finding an equilibrium between domestic and international trade/manufacturing would be ideal for ongoing prosperity.
✌️-Brad
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