🔮 Exponential asymmetry in war; AI & complexity; Chinese Fordism; origami, Nvidia & Ozempic ++ #477

Hi, I’m Azeem Azhar. In this week’s edition, we explore how the increasing affordability of electric vehicles for Chinese workers might further stimulate China’s already advanced cost advantage in the global market.

And in the rest of today’s issue: 

1. Need to know: Yikes…
   Traditional military defences are finding it difficult to protect the supply chain.

2. Today in data: Meeting climate goals
   Global energy investment is expected to exceed $3 trillion in 2024, which we at Exponential View believe is almost enough to meet the 2030 climate goals.

3. Opinion
   What to expect when you’re expecting GPT-5.

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Sunday chart: Chinese Fordism

One chart to end your week

The time it would take for an average Chinese factory worker to afford a basic plug-in EV has dropped from around nine years to less than one year since 2008. As investor and startup founder Glenn Luk points out, China is having a Fordist moment.

China has reduced vehicle costs through economies of scale in manufacturing, allowing prices as low as $10,000 per vehicle. In addition, wages are likely to have increased fivefold since 2008¹. These factors have made vehicles more affordable for China’s middle class. Last year, China registered 8.1 million new EVs. With 120 million factory workers, unlocking domestic demand will create a virtuous cycle of learning and growth for manufacturers.

Chinese cost leadership in EVs is already challenging US and German companies. The Tesla Model 2, cancelled in April, was going to cost $25,000 and the cheapest Volkswagen EV is €36,900 – both well above BYD’s $10,000 Seagull. Tariffs of 100% in the US and potentially of at least 50% in the EU are designed to buy time for incumbent carmakers, but the pressure is on to compete. These companies bear some responsibility for their situation, having defended ICE vehicles rather than embracing the exponential trajectory of battery pricing and EV demand.

The tariffs won’t mean much to China – there are plenty of markets for their cheap vehicles, Brazil, Asia, Africa (and Ethiopia, of course). Even in the UK, I just saw my first BYD in a local neighbourhood in London last week.

The lesson is a cautionary tale of hubris, for Western car makers who doubted the exponential trend sweeping electric vehicles and stepped in too timidly and, possibly, too late.

See also:

• Remember the slowdown in US EV sales that everyone was worried about? That was a blip, as we expected.

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Spotlight 

Ideas we’re paying attention to this week

Exponential asymmetry. Since the late 1970s, the US Navy has sent the pride of its arsenal, carrier battle groups, to protect the Persian Gulf and the Arabian Sea. These carrier battle groups often comprise up to a dozen surface and submarine ships, a carrier air wing that rivals the air forces of all but a dozen nations, and thousands of crew members. They projected American power into the Gulf and saw action in the first and second wars against Iraq. It was one such carrier battle group that was immortalised in Top Gun. For several months, the giant CVN 69 USS Dwight D Eisenhower, escorted by a cruiser and two destroyers, has been in the neighbourhood. Now they have met their match. Not from a superpower but from an organised group of rebels using cheap drones and crude rockets. Data from the IMF shows that shippers are avoiding areas protected by Western navies because those fleets can’t cope with the drone threat. Some of the drones used by the Houthis may cost as little as $1000 (although others may run to ten or even a hundred times that). A typical Standard anti-air missile used to shoot one down costs $2 million, and an American destroyer carries no more than a few dozen.

Call it exponential asymmetry. The language of the battlefield has evolved. As I mentioned in my book, the use of drones in the 2018 Armenia-Azerbaijan conflict marked a turning point. It sparked the realisation that “the traditional man and material approach of the twentieth century is vulnerable to low-cost, exponential technologies”. Simulations show that a fleet of 100 Shahed drones can penetrate a Navy ship’s current defences and they cost only $375,000 each. The price of drones will come down as they use more consumer technology and are built in larger numbers. A fleet of 100 Shaheds would only cost $37.5 million – a good ROI for attacking a $10 billion supercarrier. But why stop at 100? As prices decrease, fleets of 1,000 or 10,000 drones could be feasible. The West needs to catch up… rapidly! 

Future you. Have you ever felt anxious about something and then wondered why you were worried in the first place? It’s a common occurrence, with 60% of adults in the UK reporting that anxiety has interfered with their daily life in the previous two weeks. But what if you could talk to your future self? This is what the Future You system promises, using AI to create a virtual version of you that you can chat to. Users reported feeling less anxious and more connected to their future selves. While the above study was conducted on adults, its potential may be best realised with teenagers. Author Jonathan Haidt argues that teenage phone use has created the “anxious generation”. There may be a solution in fighting fire with fire: effectively offering access to instant therapeutic sessions on the very device that is causing the trouble.

Understanding complexity. Computing and neural networks are helping us analyse and interpret complex patterns in data. Microsoft’s new AI, Aurora, is the first AI to predict global air pollution. Meanwhile, in materials science, scientists used a neural network simulation to discover that it can nucleate and grow salt crystals, accurately predicting an emergent phenomenon outside its training dataset². These breakthroughs highlight how neural networks can reveal and predict complex phenomena in diverse fields, with the potential to solve real-world problems. It’s a two-sided coin, for sure. While there are clear benefits, Harvard professors Barath Raghavan and Bruce Schneier argue that our attempt to turn everything into data structures reduces the complexity of reality to abstract terms that inadequately capture the nuances of human experience and society.

• See also: An excellent analysis of how multimodal foundation models have led to a leap forward in robotics, grounding them more in the real world.

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Data

The number of superyachts in the world has tripled since the millennium.

Super-commutes, journeys over 75 miles, have increased by a third since before the pandemic. Remote working is the driver.

A Harvard study found that AI maintained 64-68% accuracy for the rarest diseases, while humans were closer to chance (50-55%).

Nvidia stock is up +22,080% over the past 10 years, the biggest gain among mega-cap tech companies – Microsoft’s best was +13,300%, Apple’s +9,650% and Amazon’s +4,730%³.

Global energy investment is expected to exceed $3 trillion by 2024. As we reported in EV473: “Estimates of the annual investment required by 2030 range from $4 trillion (IEA) to $9 trillion (Climate Policy Institute), but we think the actual figure could be lower due to rapidly falling prices and learning rates. We are likely to be close to what we need.”

A subsidiary of Saudi Aramco has made a $400m investment in Zhipu AI, a Chinese generative AI startup, in the first major foreign investment in China's genAI sector.

On average, labour productivity in China increases by 0.018% for every 1% increase in the density of industrial robot use. This productivity gain diminishes in already capital-intensive industries. 

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Short morsels to appear smart at dinner parties

🔥 What role has technology played in the rightward shift and splintering of conservatism in the West? Superb essay by Edmund Fawcett.

💨 Nearly 100% of content from internet portals and private websites from the first decade of China’s internet has now been obliterated.

🥴 Counterfeit Ozempic is flooding the pharmaceutical underground.

🧞‍♂️ Ikea is hiring staff for its virtual Roblox store.

😮 Scientists discover that a predatory single-cell organism uses an origami-like structure to enable rapid shape changes, such as extending its feeding apparatus up to 1.2mm in under 30 seconds.

🤳🏽 What happens when Starlink enters one of most isolated indigenous communities in the Amazon.  

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End note

Many subscribers have told us they would like more multimedia content as part of our analysis and insight. Let us never disappoint you.

If you are still pondering the threat cheap drones pose to the US Navy, we have just the thing for you! A few weeks ago, I put together House Still in the Danger Zone, a 90-minute music set on just the question.

Enjoy!

A

P.S. If you enjoyed this week’s newsletter — and particularly if you are a long term subscriber — hit the heart on this email or forward it to a friend.

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What you’re up to – community updates

• Reid Hoffman argues that American business should not empower a criminal. 

• Andrew Ng and collaborators have released a new climate emulator to explore the use of Stratospheric Aerosol Injection (SAI) to mitigate global warming.

• Evgeny Shadchnev published a new book, a guide to leadership transitions for founders.

Share your updates with EV readers by telling us what you’re up to here.

1. This is based on the labour manufacturing costs increasing five fold since 2008.

2. Note, it is still a preprint.

3. % gain is obviously at the whim of market conditions.