7 stories I read this week and what I took from them.
Nature Has Value. Could We Literally Invest in It? – The New York Times
- Nature Has Value. Could We Literally Invest in It? - The New York Times (nytimes.com)
- Assumption: for natural resources to be valued and preserved within a capitalist framework, they need to be quantifiable in economic terms, they need a price.
- For some natural assets this is easy. Forests have become a mainstream asset, but much of the value derives from the ability to turn trees into wood. That gives it a cash flow, a yield. But not ever asset has a yield, e.g. gold or bitcoin.
- Beyond direct financial returns, forests provide critical 'ecosystem services' like carbon sequestration, soil stabilization during heavy rains, and ground shading during hot summers, contributing indirectly to economic value.
- This brings us to 'Natural Asset Companies' (NACs), a concept aimed at encapsulating the comprehensive value of natural assets. These companies offer potential cash flow and extend their value proposition to include ecosystem services, acting as a store of value, and offering future resource access options, all while being an uncorrelated asset class.
- NACs had a setback when lobbying pressure ‘from right-wing groups and Republican politicians and even some conservationists’ led to the SEC proposal being withdrawn in January.
- Bottom line: Exploring innovative financial structures like NACs is crucial. The objections to NACs haven't questioned their potential effectiveness or environmental benefit, which underscores the importance of continuing to experiment in this space.
It's time for the White House to put up or shut up – Nate Silver
- It's time for the White House to put up or shut up (natesilver.net)
- A quantitative look at Biden’s declining odds of winning the election.
- If Biden’s age is the main problem (an improving economy and Trump’s trials have not helped Biden) then it’s a problem that is difficult to fix.
- Silver’s suggestion: sink or swim, do four lengthy sitdown interviews with “non-friendly” sources. This could change the narrative or be the catalyst for a leadership change.
- Otherwise, Biden is now a below-replacement-level candidate.
- Biden can still win, of course. Polarisation all but ensures a close election regardless of the candidates. And voters could look at the race differently when they have more time to focus on it. Essentially, Democrats could win despite Biden.
- Bottom line: Fascinating politics, but limited market impact. From a market perspective Biden=status quo and Trump=tax cut hopes vs trade war risks
New GOP-passed maps that weaken gerrymandering become law in Wisconsin – The Washington Post
- New GOP-passed maps that weaken gerrymandering become law in Wisconsin - The Washington Post
- Some hopeful news from US politics for a change.
- Gerrymandering, the practice of drawing electoral district boundaries to favour one party, decreases election competitiveness, exacerbates political polarization, undermines public confidence in democracy, and skews policy outcomes in favour of partisan interests. So, all round pretty bad.
- Wisconsin has signed into law new maps that redraw voting lines and undo a decade of gerrymandering that favoured Republicans.
- A new liberal majority on the Wisconsin Supreme Court required the change, but in the end both Democrats and Republicans agreed on the new maps.
- Bottom line: Just one state and just for the state legislature, but let’s take the W.
Culture and Wealth Creation: Evidence from World Stock Markets – Eun et al
- delivery.php (ssrn.com)
- As an equity strategist I am always interested in what drives equity markets. So, this research paper caught my eye, arguing that national culture can be a meaningful driver of stock market wealth creation.
- The research applies a recognized framework that examines cultural dimensions such as power distance, individualism, masculinity, uncertainty avoidance, long-term orientation, and indulgence.
- It reveals that countries with a strong individualistic streak tend to generate more stock market wealth, whereas those scoring high in ‘masculinity’ and ‘uncertainty avoidance’ see less wealth creation.
- This feels intuitively right, yet the robustness of these findings, even when adjusting for various other factors, is particularly striking.
- Some good news for those arguing that ESG is financially material: ‘A masculine culture is less innovative, has a lower institutional quality, and poorer education for its overall and female population, which are detrimental to stock market wealth creation.’
- Bottom line: Perhaps country allocation is worth another look, having fallen out of favour. The effects are longer-term in nature, but it suggests that there is some value to qualitative long-term views on a country’s culture moving decisively in global rankings.
The Effect of Robot Assistance on Skills – Sungwoo Cho
- ChoJMP_RobotAssistance.pdf - Google Drive
- A paper about robots and baseball…what’s not to like?
- It dives into this big question: Robots and AI give us superpowers, but at what cost to our own skills? They found the perfect way to test this with robot umpires in baseball.
- The findings reveal that umpires, particularly the less experienced ones, improved their accuracy in calling balls and strikes with robot assistance, a phenomenon observed across various fields.
- But once they took the robot assistance away, umpires were suddenly worse than before they used it. Even a year later, they hadn't recovered all of their skill.
- This wasn't simply a matter of being out of practice, as their skills remained intact after the break due to COVID-19.
- So, it makes you wonder: do we end up sacrificing some skills by leaning on robots and AI? What skills suffer the most, the technical ones or the creative ones? And is this really any different from what's happened with past technologies?
- Bottom line: Let’s hope the power never goes out.
Google pauses Gemini’s ability to generate AI images of people after diversity errors – The Verge
- Google pauses Gemini’s ability to generate AI images of people after diversity errors - The Verge
- Like many new AI model releases, users have found a few issues with Gemini’s image generation.
- It turns out that it’s difficult for an AI to be culturally sensitive and historically accurate at the same time.
- You can wrap this story up in culture wars, but it really just highlights a well-known problem with AI. If your training data is the internet it will take on the biases of the internet, and one of these biases is the underrepresentation of minorities.
- It’s a good thing that Google is trying to address this issue. So it is a calibration problem, not a woke problem.
- Bottom line: It has been an exciting ride in AI, but it’s still early days.
Intuitive Machines lands on moon in nail-biting descent of private Odysseus lander – Space.com
Intuitive Machines lands on moon with private Odysseus lander, 1st for US since 1972 | Space
If, like me, you enjoyed watching the ‘For All Mankind’ TV series (highly recommended), then the pickup in activity on the moon and today’s landing of Odysseus has been very exciting.
NASA Administrator Bill Nelson described it as a ‘giant leap forward’, but it’s only one of the first chapters in a bigger story.
The plan is to establish a long-term, sustainable human presence on and around the moon by the end of the 2020s — and to use the knowledge gained in doing so to help get astronauts to Mars by the late 2030s or early 2040s. I can’t wait.
Bottom line: The first chapter of an exciting story