🔮 Can the West wean off from China?; European startups; AI war rooms; fragile societies ++ #472
Hi, I’m Azeem Azhar. In this week’s edition, we explore China’s dominance of the battery supply chain.
And in the rest of today’s issue:
Need to know: GenAI as a GPT
Is generative AI a general-purpose technology? We’ve long believed it to be one, and mounting evidence over the past year contributes to this position.Today in data: A disconnect
80% of Americans believe that their elected officials don’t care what people like them think.
Opinion: What is Tesla?
Tesla faces an identity crisis, its grand vision clashing with its roots as an electric vehicle manufacturer. We look at the company between two worlds.
🚀 Thanks to our sponsor: Sana, your new AI assistant for work.
Sunday chart: A critical chokepoint
China dominates the global energy transition supply chain. In the battery sector, the country displays a robust presence in mining and an almost monopolistic grip on processing and manufacturing — a supremacy echoed in the solar industry.
This poses a tricky problem for Western nations. The urgent need to meet energy transition deadlines while simultaneously diversifying supply chains to safeguard both security and the equitable spread of economic and geopolitical clout.
It is a tightrope. As noted in EV#469, Biden’s treasury vizier Janet Yellen “has vowed to protect the US from Chinese clean-energy ‘overproduction’, a mercantilist approach at odds with David Ricardo’s long-held theory of comparative advantage”. In our opinion, this stance is misguided.
However, taking a hands-off, laissez-faire approach is also a wrong move. Leaving China with control over the material inputs of the energy transition provides the country with a power that could come back to bite the US. China’s current position results from long-running industrial policy and government direction of the economy, not free-market forces. The US has countered with the Inflation Reduction Act (you can see our overview of it here). These include sourcing rules for critical minerals in electric cars. Vehicles with components with any critical minerals produced in China will be ineligible for a $7,500 tax break in 2025. Similarly, EVs with Chinese-made battery components will not qualify for the clean vehicle tax credit starting this year.
This will likely further increase the cost of battery manufacturing in the US due to China’s dominance of mineral processing. Lithium-ion battery prices are already 10-20% higher in the US than in China.
The geopolitical quagmire will put some headwinds on falling prices but the power of learning rates will continue to see exponential declines in prices.
See also:
For Europe to effectively curb the influx of low-cost Chinese EVs, it would need to impose a 50% tariff. And Ford EV sales in April are up 129% year on year.
New German data suggests that EVs break down almost 50% less than ICE vehicles.
The rapid adoption of rooftop solar power and battery storage in South Africa, with capacity growing at a monthly compound rate of 4.6%-5%, has significantly reduced reliance on Eskom, eliminating load shedding since March.
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Key reads
Fit for purpose. Andrew McAfee joins us in the line of thinking we’ve been arguing for over a year — that genAI is a general-purpose technology. And now there is increasing evidence that genAI meets the three key criteria of rapid improvement, pervasiveness and complementary innovation. Benchmark advancements have accelerated, context windows have lengthened and usage has become cheaper. Already, 28% of people have experimented with genAI at work. EV member Paul Daugherty, Accenture’s chief technology and innovation officer, reports unprecedented enterprise uptake. His firm is running over 1,000 enterprise pilots, many moving to scale deployment. Although complementary innovation might feel less obvious at first, it is certainly evident in biology. GenAI-designed programmable gene editors have enabled the first successful precision editing of the human genome (EV#471) and experiments are creating multiscale foundation models across all levels of biological data (see Owkin chief R&D officer Jean-Philippe Vert’s slideshow for details). As I mentioned in my commentary last week, even if the technology stagnates, ample room for innovation remains.
Old world, new tricks? New data suggests that Europe’s startup environment might be healthier than expected, with 1,000 more startups created than in the US in the first three quarters of last year. Nevertheless, structural frictions make it harder for startups to thrive in the EU. As entrepreneur and angel investor Andreas Klinger highlights, the lack of a standardised legal entity structure across the EU hinders growth. And there are other issues. For one, smaller exits mean that team option pools need to be bigger or salaries higher compared to US ones. In practice, both are higher in the US. To maximise your chances of getting rich, you need to go to the US. Yet as some Europeans would quip — what’s the point of money if you don’t have the time?
See also, the number of companies listed on the London Stock Exchange has nearly halved since 2008.
Gigawatt gambit. Microsoft has earmarked a record-breaking $10 billion deal to develop 10.5 gigawatts of renewable electricity projects. This deal’s generation capacity is around eight times larger than the previous renewable electricity purchase agreement record. The move aims to address concerns about the surge in data centre energy demand, which is forecast to triple by 2030 due to AI. Cloud providers face the challenge of building data centres in harmony with net-zero goals. Data centre developers in North Virginia are requesting power equivalent to several nuclear reactors. Meeting this demand with renewables alone may be tricky until long-duration energy storage (LDES) batteries become further commercialised. In the interim, natural gas will likely be needed to run data centres at night. However, these companies could play the role of a crucial demand driver for developing the LDES sector, accelerating the industry’s learning rates. While a short-term crunch may be unavoidable, the long-run adaptation of the industry may emerge stronger as a result.
See also, Microsoft announced it was investing $1.7 billion in new cloud and AI infrastructure in Indonesia. And, in a 2019 email, Microsoft’s CTO expressed concern that Google was far ahead in AI development, prompting Microsoft to invest billions in OpenAI in an effort to catch up.
Newsreel
Eight major US newspapers have brought a suit against Microsoft and OpenAI for copyright infringement. Meanwhile, the FT has signed a content partnership with OpenAI. In the EU, OpenAI is being brought to court by Noyb — European Center for Digital Rights for GDPR violations.
Tesla is laying off everyone working on superchargers and new vehicles teams. See our commentary on Tesla’s identity crisis.
Under a new law, the US is banning Russian uranium imports.
A mysterious model called “gpt-2 chatbot” that’s appeared on an LLM benchmarking site is reportedly performing at a GPT-4 level. Also, Meta has released a paper outlining a new approach — multi-token prediction — which it claims leads to increased performance on various benchmarks, and allows for up to three times faster inference.
Apple is adding AI to Safari and is in talks with OpenAI for iOS 18 integration. Amazon has launched a genAI-powered assistant for businesses and developers called Amazon Q, while Anthropic is launching a Claude 3 iOS app.
Data
Virtual power plants are 40-60% of the cost of gas or utility-scale battery plants.
80% of Americans believe that elected officials don’t care what people like them think.
Space insurers paid out a record $995 million in claims during 2023.
After the introduction of GDPR, companies in the EU reduced their data storage by 26% and data processing by 15%, compared to similar companies in the US.
The number of BBC World Service journalists working in exile has almost doubled since 2020, reaching 310.
AI-related corporate spending grew by 293% in 2023 according to Ramp data.
95% of the key minerals in EV batteries can be recycled.
An AI alert of a patient’s electrocardiogram led to a 17% reduction in all-cause mortality.
Short morsels to appear smart at dinner parties
👀 Ukraine is using an AI-generated spokeswoman to make messages on behalf of its foreign ministry. Also read this superb analysis of how fake news against Olena Zelenska’s fomented.
🇮🇳 Indian political parties are estimated to spend over $50 million on AI-generated content.
💨 Scientists studying pre-modern societies find that states age — and eventually collapse.
⚡️ Many firsts this week: A Seattle-based startup established a Bluetooth connection with a satellite. Researchers have sent data 4.5 million times faster than average broadband. Physicists have found a long sought-after thorium transition, making it possible to combine classical quantum physics and nuclear physics for the first time. And the first autonomous car race “Dallara Super Formula” took place this week.
🧐 A new meta-analysis confirms positive links between cognitive diversity and team performance but shows that context and type of diversity matter when it comes to impact on outcomes.
🤝 Levels of cultural individualism account for around a third of variation in remote work rates across countries.
End note
We’re moving towards a more fragmented, more uncertain, more conflictual world. Satya Nadella issues a new command to Microsofties: “If you’re faced with the trade-off between security and another priority, your answer is clear: Do security.” Microsoft’s greater-than-state role as a global provider of digital infrastructure is being brought to the fore. Whatever motivation (the profit one) is driving a focus on integrity in the face of nation-state attacks.
And read this alongside Emmanuel Macron’s dire warning of Europe’s triple existential risk: Europe can die. Europe’s vulnerabilities are not merely about defence and grey war, of course, they stretch to its lack of technological and economic leadership. But Macron’s underlying point is of a rougher, tougher, higher-stakes world.
Strong defences are expensive. So too is perpetual peace. But such realism need not result in hot conflict, except with the most unhinged actors on the world stage. Rather, a more robust and secure architecture across traditional domains and new ones (cyber, information, etc) can create incentives for bad actors to play better.
Cheers,
Azeem
P.S. I will be speaking at the ITU’s AI for Good Global Summit on May 30, sharing how I envision AI impacting the world by 2030. You can join me virtually, register here.
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