5 stories that caught my eye and what I took from them
Not The End Of The World – Hannah Ritchie
Opinion | Cows Are Just an Environmental Disaster - The New York Times (nytimes.com)
An optimistic take on our ability to solve climate change without sacrificing living standards.
Hannah Ritchie from Our World in Data provides a high-level view, akin to Hans Rosling's approach in his TED talks (re-watch!), focusing on the big picture through data.
A few bits that caught my eye (or pricked my ear).
Our carbon footprint is smaller than our grandparents’. The average person’s carbon footprint in the UK has halved from 11 tonnes of CO2 per year to just 5.
Global warming projections have improved from 4-5 degrees to 2.5-3 degrees. Not good enough, but progress.
There are many examples of improving climate outcomes alongside rising living standards. E.g. we have more cars, but less air pollution than in the 70s.
We have enough minerals to decarbonise. There is almost no mineral where total amount is a constraint. And reserves are increasing while material efficiency is improving over time.
Once we have decarbonised, material demands will drop as renewable resources like solar panels and batteries can be and will be recycled.
Our material requirement will decline once we have decarbonised. Fossil fuels are burnt and gone. The materials in solar panels or batteries can and will be recycled.
If you were to put solar panels on all the land that is currently used in the US to plant biofuels, you could power the US three times over.
Big picture: food transition is more important than energy transition.
50% of ice-free land is used for agriculture. 75% of that is grazing land.
25-33% of global greenhouse gas emissions come from food systems. Livestock alone is 14-18% of those emissions.
Food transition is more challenging socially than energy transition
Yet, food transition is technologically so much more simple than energy transition.
A global shift to plant-based diets could reduce land used for agriculture by 75%
Bottom line: Decarbonisation investment themes are dominated by energy transition. Food transition should be part of the theme.
Ozempic is coming for the alcohol and tobacco industries next – Quartz
- Ozempic, weight loss drugs threaten alcohol and tobacco industries (qz.com)
- The list of use cases for GLP-1 weight loss drugs has been steadily growing. See last week’s note.
- But from a macro perspective the real game changer would be if they also acted as anti-craving drugs. Then it’s not just food manufacturer’s and fast food restaurants that feel the impact. What about gambling, alcohol, coffee, cigarettes, etc.? How would that translate to healthcare costs and inflation?
- A Morgan Stanley survey of 300 GLP-1 users revealed changes in their consumption habits:
- Cigarette smoking decreased from 40% of users to 24% after starting GLP-1 treatment.
- E-cigarette use dropped from 30% of users to 16%.
- 56-62% of alcohol users reported reduced consumption, with 14-18% cutting their alcohol consumption entirely.
- This was not a clinical trial, so we need to be careful not to take the results as evidence. Clinical trials are underway, so we will know more soon.
- Bottom line: More superpowers for obesity drugs = greater macro impact
Global military spending surges amid war, rising tensions and insecurity – SIPRI
- Global military spending surges amid war, rising tensions and insecurity | SIPRI
- Swedish think tank SIPRI tracks global military spending and have updated their database with 2023 spending.
- Moving into a multipolar world has been a slow-moving theme for several years. It’s easy to get caught up with the persistent urgency of the day-to-day news flow around the latest crisis, so data like this is a good reminder of the bigger picture.
- Military spending is accelerating: the 6.8% increase in 2023 was the steepest year-on-year rise since 2009.
- It’s not just because of Ukraine and Gaza. Military expenditure went up in all regions.
- Raises the question: Does higher military spending deter future conflicts or make them more likely? I suspect the latter, but would love to see some data on this.
- At the company level a lot of this has been priced. Shares of Rheinmetall doubled after the invasion of Ukraine and have doubled again over the past year.
- I remember pitching a Long Defence investment theme for a multipolar world back in 2017, but it was deemed too uncomfortable for PMs to be questioned about it by investors. That push-back would likely not be an issue anymore today, but that’s why it is also much more priced.
- Bottom line: The rise in military spending is consistent with a multipolar world.
Batteries & Secure Energy Transition – IEA
- Batteries and Secure Energy Transitions (windows.net)
- Battery storage is one of the key components of Decarbonisation and their roll-out continues to grow exponentially.
- The latest IEA report cited battery storage in the power sector was the fastest growing energy technology in 2023.
- Deployment more than doubled year-on-year, from what is no longer an insignificant base.
- To achieve COP28 targets, battery storage deployment needs to continue growing at 25% per year through 2030. More to go, but 2023’s doubling was a great start.
- Even the IEA expects battery costs to fall another 40% by 203, and the IEA have repeatedly underestimated the cost declines in the past. At historic average cost declines, prices would fall faster, making deployment targets easier to achieve.
- Related milestone: battery storage was the biggest source of electricity supply during the evening peak period in California’s grid last week
- On a personal level, I have only good things to say about the first year of having a Tesla Powerwall installed alongside my solar panels.
- Bottom line: Decarbonisation continues apace in battery storage
Algorithmic Progress In Language Models – Ho et al
- 2403.05812 (arxiv.org)
- Though it’s early days in AI as a technology, equity markets attempt to price the future, so the AI investment theme already reflects part of the AI future. With elevated prices com elevated expectations and for the AI theme that means we need to see continued progress in the algorithms.
- To understand whether AI progress is accelerating or slowing down, we need to know the base line. What’s the Moore’s Law of LLMs? And are we still on the same path?
- This paper finds that the compute required to reach a set performance threshold has halved approximately every 8-9 months since 2012. That’s a lot faster than Moore’s Law!
- Let’s see how GPT-5 measures up when it is released. Prediction markets still have a 75% chance of its release this year.
- Bottom line: AI progress has been faster than Moore’s law. For the AI investment theme to keep running future LLMs need to stay (at least) on that curve.
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