🔮 Big Tech & the metaverse; chips & future compute; Fortnite, genes & pointillism ++ #356

Hi, I’m Azeem Azhar. I convene Exponential View to help us understand how our societies and political economy will change under the force of rapidly accelerating technologies.


Today’s edition has been supported by our knowledge partner, McKinsey & Company.

How to deal with price increases in this inflationary market. Is your organization up to the challenge of determining which short-term price increases are fair, and prepared to deal with the long-term consequences of inflationary markets? It’s no easy feat, but that’s not to say it’s impossible, so long as you approach the issues strategically. See how in this new article.

This week on the podcast


On this week’s podcast, I spoke to Michelle You, co-founder and CEO of Supercritical, a London-based startup that helps tech companies plan their path to net-zero emissions. She and I discussed how emerging technologies will help make carbon removal part of the climate fight, and the importance of fixing carbon markets.

🎧 You can listen to our conversation here or 📄 read a full transcript.

The near future


🕹️ Bids on the future
Microsoft’s intention to acquire the gaming giant Activision Blizzard is a serious move to stake out its place in the expanded future of the Internet, a.k.a. the metaverse. For a staggering $69 billion – a sum larger than four of Microsoft’s largest acquisitions together to date – Microsoft is sure to position itself as one of the largest gaming companies in the world (the global gaming market is projected to be worth $365 billion by 2025). Beyond the obvious, though, the company is positioning itself to be at the centre of creating digital (micro-)economies for the metaverse. Games have a long history of pioneering digital economies that scale; the latest experiments in merging games, finance and blockchain under the monicker GameFi could help suss out business models and incentive structures that will transpire into other virtual experiences of the metaverse. See also, Senate Judiciary Committee places its own bids on the future as the antitrust bill advances.

🧫 Petri dish for innovation
Researchers spend 10 to 40% of their time putting together complex grant proposals rather than doing science. A cadre of Silicon Valley missionaries among whom are founders, investors, billionaires, and celebrities are rethinking scientific funding. They are tackling what might be the problem of sclerotic progress or bloat in scientific research. In cancer research, for example, research productivity has declined over decades (see the full paper here which outlines this issue in other sectors and in research as a whole. Or for a similar angle from Patrick Collison and Michael Nielsen, read “Science is getting less bang for its buck.”)

Purple line: years of life saved per 100 publications; green: years of life saved per clinical trial. Source: Bloom, et al American Economic Review 2020

(See also, Web3 is opening new avenues for decentralised science (🔒).)

🧭 Collective resilience
The Royal Society, the UK’s foremost scientific academy, recommended that social media sites should not ban misleading or false content on the basis that such an approach would do little to mitigate its harmful effects. Instead, it argued the need to build ”widespread collective resilience” so people can detect and respond to harmful information. This echoes the recommendations I made in my book - an investment in a set of strategies that make citizens more resilient to bad information (pages 211-212). See also: Areeq Chowdhury has a short set of tweets summarising the report.

Sunday commentary: Chipping away


TThe chips are down. A chip of the old block. Chips with that. The clichés about the semiconductor industry are flowing fast. And for good reason.

This industry has been through some epic shifts. The OG, Intel, missed the mobile market, creating an opening for Qualcomm and ARM. The shift towards contract manufacturing allowed TSMC to emerge, and emerge it did. But since 2010, there has been a confluence of shifts that are radically changing this industry.

Deep learning requires massive amounts of computing: initially provided by NVidia and its GPUs. Cryptocurrencies, too, require a fair ton of compute: the bitcoin network is the most powerful computing fabric in the world (three years ago it was about a million times more powerful than the most powerful supercomputer). The metaverse will also gorge on processing power.

The growth in our demand for computation will likely exceed historical growth rates.

It isn’t just volume of compute, it is also the typology of processing that will change. The uses to which we put this compute to are different: running large-scale virtual worlds places different demands to operating a machine vision system in a factory production line with a strict electrical power budget. Those, in turn, drive other requirements for chips, from power consumption, form factor, throughput, and the like. X86 doesn’t fit all.

So chips, perhaps we can call it advanced computing, and chuck in quantum too, are hot again.

Juche-in-time
Semiconductors are now a “critical sector”. They have extreme geopolitical significance. And a new Great Game is on.

The US, EU, China, and others want to mitigate their massive dependency on Taiwan and build a bit of self-reliance.

Ursula von der Leyen, the president of the European Commission, forecasts that European demand for chips will double in the next decade – and her ambition is for Europe to make 20-30% of its own chips. (As I’ve written many times before, China has similar plans for self-sufficiency.) The European Union is proposing new legislation to support the local industry, including softening state aid rules (and the level playing field that has underpinned globalization thus far. A short write-up of von der Leyen’s comments is here.)

All of this has put the semiconductor market on a roll. Across its main segments, sales of semiconductors globally were $586 billion in 2021, according to Gartner, a rise of 25% on 2020. More than a trillion widgets were shipped last year (which means, on average, a chip costs about 50 cents). Tounderstand how vibrant the sector is, look at SOXX, an ETF that tracks major semiconductor firms. After years of lagging the Nasdaq, it’s sprinted ahead.

And as we pointed out back in COTW#55, the profitability of the semiconductor industry has transformed, from a mediocre mid-performer to a sector with amongst the highest long-term potential for economic profit.

And, of course, semiconductors are not just about chips for computing. The semiconductor industry will benefit from the growth in demand for memory chips, sensors, power chips.

To scale massive capacity
The scales we are contending with are remarkable. Two nanometres on one end, and multi-billion dollar behemoth fabs on the other.

TSMC, the manufacturer for the chip makers, the eminence grise, the puppeteer of the silicon industry, is just astonishing. In 2021, they outlined a 3-year capex of $100bn. They upped their capex forecast to as much as $44bn for this year. TSMC will spend twice as much on equipment as ExxonMobil. Black gold, shmack gold.

TSMC is also at the heart of Intel’s own reinvention. As analyst Ben Thompson points out, Intel may have realised that, essentially, it can no longer compete with TSMC on manufacturing:

it seems increasingly clear that the goal is to de-integrate Intel: Intel the design company is basically going fabless, giving its business to the best foundry in the world, whether or not that foundry is Intel.

Of course, given the strategic importance of chips (listen to Von Der Leyen’s ambition above), no country can afford to rely exclusively on TSMC’s fabs. Yes, fabs are so expensive and hard to build. In the US, a patchwork of regulations may just make it too costly to build fabs compared to other markets. This rather excellent blog post explains what could be done.

Interesting times
It is such a tremendous and exciting time in this field of advanced computing. Midweek I talked to an investor about one of my portfolio companies in the chip space. I found myself tripping over my excitement around the opportunities in this area. I’ve been tracking advanced computing startups for several years, analogue computing, ASICs, low-power devices, deep learning chips, optical computing, quantum and more. The Exponential Age is going to call on so much compute, for so many different uses, one size won’t fit all.

It won’t all be up and to the right. Semiconductor demand has been prone to booms-and-busts, after the dot-com bubble and in 2009, notably. Because fabs take such a long time to build and demand can be volatile, oversupply is a real risk. The whole business is like the MIT Beer Game.

Complicated by the fact that the industry’s customers range from Apple (which has good supply chain discipline) to car manufacturers who historically didn’t hold enough inventories to accommodate demand or supply shocks. Given the rush to build capacity, technology for the latest architectures and sizes and in new geographies, it might not be a surprise to see some over-eager investment in semiconductor manufacturing capacity over the next couple of years. The rush to meet demands for more inventory levels within customers could easily, therefore, be met by a subsequent slump in demand and the woes of excess capacity. It won’t be the first time.

It will be a wild ride. We’re going to need some new chip clichés.

Dept of our climate future


Since 2015, I’ve tracked the challenge of climate change and our actions to decarbonise our economies. In May 2019, I introduced a regular component in the Sunday newsletter, which reminded us of one important indicator, the concentration of carbon dioxide in the atmosphere. Things have changed since, and we decided to update how we track our fight against climate change. This is the first time we’re debuting a new dashboard to track the challenges and progress.

I’ve asked EV member (and entrepreneur and former journalist) Marshall Kirkpatrick to help on the section regularly by curating relevant stories, which you can read below. Thanks, Marshall!

I explain the rationale behind the change here.

🌬️ Wind power: Scotland awarded offshore wind energy leases this week that will double that nation’s wind-power capacity; a total of 17 offshore wind projects in Scottish waters that will combine to deliver 25GW of new capacity. That’s estimated to represent about half of the UK’s capacity for energy consumption. It’s nearly half of the wind capacity of Germany, Europe’s leader. Several global oil companies will now spend more money on wind than they do on oil drilling in the North Sea. EV explored some concern about the resilience of Northern Europe’s wind power in the face of climate change in October. The Scottish leasing agency has also said it’s preparing for another round of auctions later this year.

🔌 Hydrogen generators: US auto manufacturer General Motors has announced that it will port its hydrogen fuel cell technology beyond its electric vehicles to create a mobile power generator that it says produces 70% more power than diesel generators, and will be used to provide fast-charge capability for EVs without installing permanent charge points. Strategic financial backing for the initiative came from, among other partners, the US Army. The US Army is reportedly one of the world’s biggest emitters in terms of scope 1 and 2 emissions and undoubtedly a leader in scope 3 emissions, if petro-empire is understood to be one of its products.

📍 Carbon capture: Researchers at Australia’s RMIT University say they’ve developed a super-efficient new way of capturing carbon dioxide and converting it to solid carbon, using liquid metals, to help advance the decarbonisation of heavy industries. The team’s research has been discussed hopefully around the world for several years but this week it was published in the prestigious Royal Society of Chemistry’s journal Energy & Environmental Science.

Short morsels to appear smart while Big Tech gets bigger


👐 Meta AI developed Data2vec, a neural network algorithm that can multitask.

🧮 More venture capital may not always be better.

🚧 Barriers to doing deep tech corporate investing right, and how to overcome them.

👾 New York artist Kaws has created the first-ever Fortnite exhibition. It’s taking place both online and in real-life London, with a touch of VR.

🚡 Pointillism is inspiring a significant advance in 3D printing of large objects (planes and cars).

😋 GHRd3 is a gene variant tied to growth that may have helped Homo sapiens survive starvation – we still carry it.

End note


I hope you like the new climate tracker. Open for practical implementations on how to improve it. I noticed that we’ve stuck the date in the American format, which is neither logical nor widely used globally. Not quite sure how that happened. We’ll fix it.

Have a great week!

Cheers,
Azeem

P.S. If you like EV, please forward this to a few friends and ask them to sign up!


What you’re up to – notes from EV readers

Congrats to Lucy Hooberman whose been appointed to the ACMWebSciConf programme committee!

Michael Luciani has launched a rolling fund to invest in frontier tech addressing climate change. (EV is proud to have followed Michael’s journey and to have inspired the name :))

Shane Fagan has published a new report which highlights the first-mover advantage in the net-zero transition.

Louis Rosenberg wrote a piece for TechCrunch about the dangers of AI in the metaverse.

David Gallagher has launched a new communications consultancy, DG Advisory.

To share your projects and updates, fill out your details here. Because of space constraints, we prioritise updates from paying members and startups I have invested in. (You can become the former by subscribing, if you have not already, and the latter by getting an intro to me via a trusted contact.)


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