The Weekly Distillation No.72
Neal Stephenson; Extending Life; AI; Leadership; Culture; Markets; Inflation
People once said…………
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.” ― Charles Dickens, A Tale of Two Cities
“The real problem of humanity is the following: we have Paleolithic emotions, medieval institutions, and god-like technology.” - Edward O. Wilson, Sociobiologist in a debate at Harvard University in 2009
Skim it in a minute
Thoughtfulness and Technology
I picked up a Neal Stephenson novel to read recently, my first. He is the science fiction / speculative fiction writer who first coined the use of the word ‘metaverse’. I am reading “Fall or, Dodge in Hell” and it is a fascinating read. It delves into fake news, alternative internet, mass surveillance, divided societies - and also cryogenics. It dives into the question of what parts of the body you’d want to retain if you hoped to later resurrect/unfreeze the person - and one company argues that you are only what’s in your brain and therefore capturing the bits through ion-beam scanning (which destroys the body by cremating it cell by cell) is sufficient. You become uploaded to the cloud (ha) and brought back to life once the technology has advanced sufficiently to do it.
I was struck by the great role that technology ethics plays. Is this even a good thing? What would happen to the world if 1 billion people unfreeze at the same point in the future and are added back into society? What parts of you need to be saved to be still human? Is the energy use justified? What does it say of a society that won’t accept the reality of death? Why do we think all technological progress is positive?
It’s perhaps not such a crazy concept though. There continues to be a lot of people focusing on how to extend life or defeat mortality. Recently scientists announced they would cryogenically freeze animals who are on the road to extinction so that they could later be brought back to life. Injecting younger blood into mice is proving to rejuvenate cells and combat ageing.
AI offers the potential to assess immense amounts of data in very short timespans and draw conclusions from it that can then be turned into actions. But AI is known to demonstrate bias currently and also now people now find fake faces more trustworthy than real ones (hmm, can’t see where that might cause us a problem). Scientists in the US ran an experiment on an AI program that was usually used for drug discovery. They wanted to find out what would happen if the platform fell into ‘evil’ hands. They made one change - setting the desired toxicity to 1 rather than 0 and then setting a threshold for the level of toxicity desired. They went home, leaving it to run. In the morning, the platform had come up with 40,000 different molecules as lethal as VX, one of the most deadly compounds in the world.
We are unlocking and unleashing technologies that are multiples of what we have ever had. This can lead to great advances in society. But doing this without measured debate, or considering how mankind might shoot itself in the foot as we have done with every previous technology in one way or another, seems highly dangerous. We need great ethicists, knowledgeable politicians, and lawyers with great integrity. Most of all we need technologists and leaders of technology companies to see the dangers as well as the upsides and to create accordingly. The long-held mantra of ‘we just create the tools and it’s not our fault how they get used is not appropriate for the new era.
The need for good leadership
Talking of technology companies, Coinbase, the crypto exchange, is starting to offer staff a way to rate their colleagues in meetings. I imagine a techy thinking how good instantaneous and continuous feedback would be, and quantifying it might add a better layer of clarity. But what about the worker whose parent just died and isn’t on form in the meeting. Would a low score be good for them at that moment? What about the self-interest of employees that might lead them to mark their colleagues down unfairly, for their own advantage? Where are the empathy and the thoughtfulness? We need leaders who can think before acting.
We remain in a highly tight job market. I read somewhere (I don’t have the source anymore) that the unemployment rate for programmers is 0.1% in the US, with a normal expected rate of 2% being considered to be full employment. How long this lasts is another conversation. Creating a workplace culture that workers value is now not just a nice-to-have but a critical part of staff retention. Remote working is a key aspect of that, with 86% of millennials desiring this as part of their working pattern and over 70% of Gen X. Gen Z and Boomers are less keen but still over 60% in both cases. Recently a key leader in a major technology firm left his role because his bosses were forcing him into coming back to the office three days a week. Remote work isn’t all straightforward though - the ability of workers to keep working when they are sick has increased and so sick days may be a thing of the past. I have a friend who is a mental health professional and argues we should have regular duvet days to look after our emotional wellbeing also.
Less toxic cultures, fewer dictators, and more helping teams face uncertainty, burnout, and perfectionism. Here are 35 questions managers should ask themselves regularly.
Market meltdown
The brutality towards ‘risk-on’ assets in the financial markets continues. This is being seen across all asset classes apart from physical assets yet. In US tech venture capital, term sheets are being pulled at a rapid rate, valuations are down 60-80% and VCs are jumping over themselves to offer advice on how to manage the cash burn and to hunker down until the storm passes.
The reasons for the crash are obvious - we have built a financial system based on printing money, reducing interest rates (as a function of inflation falling from globalisation and technology), and propping the system up whenever it wobbles (1998, 2001, 2006, etc). Post pandemic, the re-stocking and re-energising of the world at a rapid pace has meant supply chain chaos, shortages everywhere, and a mass ordering of almost everything. Less stock available = higher prices to get it now. When the oil price increases to reflect the reluctance of OPEC to turn on the taps plus Russia and Iran as oil-producing nations not being flavour of the month in the West, then we get mass inflation. Central banks have no choice under their independent mandates but to jack up interest rates.
Higher interest rates for cash means that nearer term cashflows become more useful than far-out cashflows (there is a time value of money again) and any long-duration stock (pick any tech stock) that is built on future hope is suddenly worth a lot less.
So how do we get out of this? The view of markets seems to be that that only happens when inflation gets to a point where the central banks (mostly the Fed) stop raising rates. To get inflation to calm down you have to either create massive capacity (increasing supply), which takes years/decades and requires mass investment which is in short supply, or you reduce demand which takes the steam out of the system. The Central Banks are pursuing the latter, hence why many commentators are predicting we will enter recession next year. In the US, consumer confidence (with consumer spending being the majority of the economy) is highly correlated with the performance of the stock market. So it’s arguable that the Fed now wants the stock market to fall as it is the quickest way of reducing demand and thus inflation. The news that really spooked the market was when Walmart admitted it was struggling with inflation - so the fears go to high inflation, rising interest rates, low growth, and rising unemployment.
What about other assets? NFTs, where volume is dropping rapidly. Crypto, where Bitcoin is down over 55%. And housing?
If the global economy slows rapidly, we will see rate rises taper off, inflation collapse, and investment is constrained. How much demand needs to fall to get supply and demand back in balance is the great unknown. Food, energy, logistics, refined products, labour - there are extensive shortages everywhere that are not easily fixed.
Building a great company in these times is often easier because the focus becomes product/service over marketing. People refine down to the core customer value proposition and superfluous nonsense gets culled. Investors will still invest, good companies will get funding and markets will recover - but it’s going to be a choppy year.
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