world update
28th February 2018 - World Update
According to Bloomberg, the world’s most innovative countries are South Korea, Sweden, Singapore, Germany, Switzerland, Japan and Finland. This bland statement raised a number of questions for me. Are these countries at the top of the list because their political leaders are scientists and engineers rather than lawyers and realtors? Or is it because their education systems foster innovation? Is the reason we never hear about the innovations taking place in these countries that, apart from Singapore, they are not English speaking? Maybe it’s simply because American innovators are so much better at blowing their own trumpets even though they don’t feature in the top ten? I’ll leave you to mull on this further.
Turning to demographics, in 2016 Japan’s population shrank by more than 300,000 as the birth rate declined further. Demographers predict Japan’s population could drop by as much as a third by 2060. According to a report from the National Center for Health Statistics, life expectancy for the U.S. population in 2015 was 78.8 years, a decrease of 0.1 year from 2014 and the first drop in life expectancy in twenty two years.
Drug overdoses could be one reason for the decline. America’s Council of Economic Advisers reported that more than 64,000 Americans died from drug overdoses in 2016, most involving a prescription painkiller or an illicit opioid. They estimated that in 2015, when 33,000 Americans died from drug overdoses, the economic cost of the opioid crisis was US$ 504.0 billion, 2.8% of GDP. On a more positive medical note, in November 2017, the FDA approved a pill containing a sensor that can digitally track if patients have ingested their medication; no doubt more data for Big Brother to monitor!
If you lived in Europe right now, you would find it hard to believe that temperatures in the Arctic are some 35 degrees above normal February temperature. Back in December the National Oceanic and Atmospheric Administration (NOAA) warned that the Arctic is warming at twice the speed of the rest of the globe leading to melting of sea ice and permafrost at an increasing pace. Down south this is reflected in studies by New Zealand’s National Institute of Water and Atmospheric Research which show that winters there are a month shorter than a century ago.
Looking at some of the economic consequences of climate change, the NOAA calculated that the cost of the damage caused in the USA in 2017 by three strong hurricanes, wildfires, hail, flooding, tornadoes and drought was US$ 306 billion, far exceeding the previous record of US$ 215 billion in 2005. It would seem homeowners are starting to take heed. There are already stories of flood and heat victims starting to abandon Texas, Louisiana, New Mexico and Florida for the milder North West. Meanwhile Australian research by Bernstein, Gustafson & Lewis concluded that homes likely to be exposed to sea level rise in the medium to long term already sell at a 7% discount relative to observable equivalent unexposed properties equidistant from the beach. Worse still for us wine lovers, in 2017 world wine production dropped 8.2% because of climate change with Italy, France and Spain particularly affected. I had better stock up before prices rise any further.
Moving on to energy, researchers from the National Renewable Energy Laboratory predict that changes in wind power technology could cut the cost of wind power, already down 65% since 2009, by a further 50% making wind competitive with natural gas almost everywhere in America, without subsidies. Lazard Levelized Cost of Energy Analysis calculated that in much of North America “the full-lifecycle costs of building and operating renewables-based projects have dropped below the operating costs alone of conventional generation technologies such as coal or nuclear.”
In an interview at Davos, IMF CEO Christine Lagarde warned that Bitcoin mining could end up using more electricity in 2018 than is consumed in Argentina. The introduction of electric vehicles is also going to place a major load on the networks with one analyst calculating that the amount of electricity to charge just one of the recently announced Tesla trucks would be the equivalent of the electricity used by 3,200 British households in one hour. DHL has placed an order to 150 of these trucks and Pepsi for 100; just charging these two fleets would take the electricity of 750,000 households.
Autonation CEO Mike Jackson expects electric vehicles could account for 15 to 20% percent of new vehicle sales in the United States by 2025. In 2015 more data were generated every day than existed in total by the end of 2003; according to Climate Home News, billions of internet-connected devices could use 20% of electricity by 2025 and produce 3.5% of global emissions within ten years and 14% by 2040. Clearly we need to spend more time looking intelligently at future electricity demand. On a more positive Tesla note, in South Australia the company has commissioned the world’s largest battery which covers an area more than the size of two football pitches and is already having an impact on grid stability and costs.
Big Brother continues to watch us ever more closely, and not just when we are dosing ourselves. Private US company Planet now has 190 satellites orbiting the earth, taking a combined 1.3 million photographs of earth a day which can be integrated with other data to form a massive geo-database. Over in Hangzhou, China, Alibaba Cloud is employing artificial intelligence to monitor cameras and other devices in order to smooth the flow of traffic through the crowded streets. The result is that average traffic speed has increased and violations were reported with 92% accuracy. Now the same City Brain system is to be deployed in Kuala Lumpur, Malaysia, where it will be linked to 500 video cameras and 300 traffic lights. Imagine all those fines for traffic violations and not a traffic cop in sight!
As you can see, I continue to be fascinated by new artificial intelligence developments. Blue River Technologies has developed AI based equipment that can identify individual plants in a field and be used for automatically thinning seedlings or applying herbicides, fertiliser and water directly onto the appropriate individual plants through microjets. Facebook has developed an application to recognize which camera was used to take photographs based on the scratches and dust on the lens which show up in the images. Google is using deep learning to predict a person’s blood pressure, age and smoking status by analysing a photograph of their retina. Baidu added an AI-powered image search to its mobile app, allowing a user to snap a photo of a piece of merchandise for the search engine to identify, and then look up price and store information in a flash. Amazing!
Earlier I mentioned the world’s most innovative countries. Well, the International Federation of Robotics lists the countries with the most robots per 10,000 workers at the end of 2017 as South Korea (631), Singapore (488), Germany (309), Japan (303) and Sweden (223). China’s Foxconn is reported to have replaced 60,000 jobs with robots and is planning to replace all the workers in its liquid crystal display-making section by robots by the end of 2018. The number of robots employed by Amazon increased from 45,000 to 120,000 during 2017.
It’s not just AI and robots that are displacing workers. A survey of financial companies by Opimas concluded that 90,000 jobs in asset management, including fund managers, analysts and back-office staff, out of 300,000 worldwide will disappear by 2025 because of AI. In November 2017 the National Bank of Australia retrenched 6,000 staff, 20% of the total workforce, all made redundant by computer technology, while at the same time announcing an annual profit of A$ 5.3 billion. In December, RBS announced the closure of a further 259 branches in the United Kingdom while last month Wells Fargo Bank announced plans to close 900 branches across the USA.
Transport is another sector where job losses are forecast. Recently Embark automated a truck which drove from California to Florida without human intervention. Bob Lutz, the former vice chairman of GM, predicts that within twenty years all vehicles will be self driving modules with the vast majority owned by companies with large fleets that are rented out by the ride. While individuals might balk at the thought of replacing their car with a self driving one, it’s the fleets that are going to dictate the speed of transition as they compete to be the ride provider of choice. KPMG projects that sales of personally-owned sedans in the U.S. will drop from 5.4 million units sold today to just 2.1 million units by 2030 as automated cars are provided by ride sharing companies. That would render car dealers obsolete; U.S. dealerships employed 1.3 million people in 2016, according to the National Automobile Dealers Association.
All these job losses don’t seem to show up in official employment statistics. In November, for instance, US unemployment remained at 4.1%, the lowest figure since 2000. Economists expect unemployment to drop below 4% during 2018. Underemployment dropped from 9.3% to 8% over the previous year. However, Erik Hurst of the Chicago Booth Business School estimates that 18% of American men between 21 and 30 years of age who did not have college degree did not work in 2017.
The bottom line in all these reports of automation driven unemployment is that the wealthy shareholders are going to get richer and the retrenched workers much poorer. In January, Oxfam issued a report showing that the richest 42 people on the planet own as much wealth as the 3.7 billion poorest people. By comparison their 2009 report showed 380 people and their 2017 61 people together owned this proportion of wealth. Some 82% of wealth created in 2017 went to the richest 1%. On average a new billionaire is minted every two days. According to Bloomberg, the world’s richest 500 people increased their combined wealth by 25% in 2017, largely as a result of rising stock market prices. The US stock market has tripled in value since 2008.
Meanwhile a study by the Institute of Fiscal Studies shows that as the British minimum wage rises, so those newly entitled to the minimum wage are much more likely to be in jobs that can be automated and that will be automated as the minimum wage level continues to increase. We tend to think of the British as well-off but according to a report prepared for the United Kingdom’s House of Lords, 32% of the country’s workers have less than £500 in savings and 41% have less than £1,000. Almost 30% are concerned about their level of debt while 43% of workers do not have anyone in their household they could depend on to support them financially in the event of hardship. Watch for the government making things even tighter by increasing taxes and reducing health and welfare benefits.
Finally, here’s a couple of less serious items. At the recent Consumer Electronic Show – now also known as the Chinese Electronic Show because of the number of exhibitors from that country - in Las Vegas one entertainment joint provided a robot stripper who could also pole dance; fascinating but hardly evocative – unless you were a robot looking on perhaps.
In a second hand book shop recently I bought a 1990 era compendium of obituaries. Included was one for a curious amateur weather forecaster named Arthur Mackins. One of the techniques he used was to examine spider webs; long strands warned of dry days ahead, short ones of rain. I wish I was that smart at forecasting!
As always I look forward to your comments and promise that my newsletters will be more regular from now on!
According to Bloomberg, the world’s most innovative countries are South Korea, Sweden, Singapore, Germany, Switzerland, Japan and Finland. This bland statement raised a number of questions for me. Are these countries at the top of the list because their political leaders are scientists and engineers rather than lawyers and realtors? Or is it because their education systems foster innovation? Is the reason we never hear about the innovations taking place in these countries that, apart from Singapore, they are not English speaking? Maybe it’s simply because American innovators are so much better at blowing their own trumpets even though they don’t feature in the top ten? I’ll leave you to mull on this further.
Turning to demographics, in 2016 Japan’s population shrank by more than 300,000 as the birth rate declined further. Demographers predict Japan’s population could drop by as much as a third by 2060. According to a report from the National Center for Health Statistics, life expectancy for the U.S. population in 2015 was 78.8 years, a decrease of 0.1 year from 2014 and the first drop in life expectancy in twenty two years.
Drug overdoses could be one reason for the decline. America’s Council of Economic Advisers reported that more than 64,000 Americans died from drug overdoses in 2016, most involving a prescription painkiller or an illicit opioid. They estimated that in 2015, when 33,000 Americans died from drug overdoses, the economic cost of the opioid crisis was US$ 504.0 billion, 2.8% of GDP. On a more positive medical note, in November 2017, the FDA approved a pill containing a sensor that can digitally track if patients have ingested their medication; no doubt more data for Big Brother to monitor!
If you lived in Europe right now, you would find it hard to believe that temperatures in the Arctic are some 35 degrees above normal February temperature. Back in December the National Oceanic and Atmospheric Administration (NOAA) warned that the Arctic is warming at twice the speed of the rest of the globe leading to melting of sea ice and permafrost at an increasing pace. Down south this is reflected in studies by New Zealand’s National Institute of Water and Atmospheric Research which show that winters there are a month shorter than a century ago.
Looking at some of the economic consequences of climate change, the NOAA calculated that the cost of the damage caused in the USA in 2017 by three strong hurricanes, wildfires, hail, flooding, tornadoes and drought was US$ 306 billion, far exceeding the previous record of US$ 215 billion in 2005. It would seem homeowners are starting to take heed. There are already stories of flood and heat victims starting to abandon Texas, Louisiana, New Mexico and Florida for the milder North West. Meanwhile Australian research by Bernstein, Gustafson & Lewis concluded that homes likely to be exposed to sea level rise in the medium to long term already sell at a 7% discount relative to observable equivalent unexposed properties equidistant from the beach. Worse still for us wine lovers, in 2017 world wine production dropped 8.2% because of climate change with Italy, France and Spain particularly affected. I had better stock up before prices rise any further.
Moving on to energy, researchers from the National Renewable Energy Laboratory predict that changes in wind power technology could cut the cost of wind power, already down 65% since 2009, by a further 50% making wind competitive with natural gas almost everywhere in America, without subsidies. Lazard Levelized Cost of Energy Analysis calculated that in much of North America “the full-lifecycle costs of building and operating renewables-based projects have dropped below the operating costs alone of conventional generation technologies such as coal or nuclear.”
In an interview at Davos, IMF CEO Christine Lagarde warned that Bitcoin mining could end up using more electricity in 2018 than is consumed in Argentina. The introduction of electric vehicles is also going to place a major load on the networks with one analyst calculating that the amount of electricity to charge just one of the recently announced Tesla trucks would be the equivalent of the electricity used by 3,200 British households in one hour. DHL has placed an order to 150 of these trucks and Pepsi for 100; just charging these two fleets would take the electricity of 750,000 households.
Autonation CEO Mike Jackson expects electric vehicles could account for 15 to 20% percent of new vehicle sales in the United States by 2025. In 2015 more data were generated every day than existed in total by the end of 2003; according to Climate Home News, billions of internet-connected devices could use 20% of electricity by 2025 and produce 3.5% of global emissions within ten years and 14% by 2040. Clearly we need to spend more time looking intelligently at future electricity demand. On a more positive Tesla note, in South Australia the company has commissioned the world’s largest battery which covers an area more than the size of two football pitches and is already having an impact on grid stability and costs.
Big Brother continues to watch us ever more closely, and not just when we are dosing ourselves. Private US company Planet now has 190 satellites orbiting the earth, taking a combined 1.3 million photographs of earth a day which can be integrated with other data to form a massive geo-database. Over in Hangzhou, China, Alibaba Cloud is employing artificial intelligence to monitor cameras and other devices in order to smooth the flow of traffic through the crowded streets. The result is that average traffic speed has increased and violations were reported with 92% accuracy. Now the same City Brain system is to be deployed in Kuala Lumpur, Malaysia, where it will be linked to 500 video cameras and 300 traffic lights. Imagine all those fines for traffic violations and not a traffic cop in sight!
As you can see, I continue to be fascinated by new artificial intelligence developments. Blue River Technologies has developed AI based equipment that can identify individual plants in a field and be used for automatically thinning seedlings or applying herbicides, fertiliser and water directly onto the appropriate individual plants through microjets. Facebook has developed an application to recognize which camera was used to take photographs based on the scratches and dust on the lens which show up in the images. Google is using deep learning to predict a person’s blood pressure, age and smoking status by analysing a photograph of their retina. Baidu added an AI-powered image search to its mobile app, allowing a user to snap a photo of a piece of merchandise for the search engine to identify, and then look up price and store information in a flash. Amazing!
Earlier I mentioned the world’s most innovative countries. Well, the International Federation of Robotics lists the countries with the most robots per 10,000 workers at the end of 2017 as South Korea (631), Singapore (488), Germany (309), Japan (303) and Sweden (223). China’s Foxconn is reported to have replaced 60,000 jobs with robots and is planning to replace all the workers in its liquid crystal display-making section by robots by the end of 2018. The number of robots employed by Amazon increased from 45,000 to 120,000 during 2017.
It’s not just AI and robots that are displacing workers. A survey of financial companies by Opimas concluded that 90,000 jobs in asset management, including fund managers, analysts and back-office staff, out of 300,000 worldwide will disappear by 2025 because of AI. In November 2017 the National Bank of Australia retrenched 6,000 staff, 20% of the total workforce, all made redundant by computer technology, while at the same time announcing an annual profit of A$ 5.3 billion. In December, RBS announced the closure of a further 259 branches in the United Kingdom while last month Wells Fargo Bank announced plans to close 900 branches across the USA.
Transport is another sector where job losses are forecast. Recently Embark automated a truck which drove from California to Florida without human intervention. Bob Lutz, the former vice chairman of GM, predicts that within twenty years all vehicles will be self driving modules with the vast majority owned by companies with large fleets that are rented out by the ride. While individuals might balk at the thought of replacing their car with a self driving one, it’s the fleets that are going to dictate the speed of transition as they compete to be the ride provider of choice. KPMG projects that sales of personally-owned sedans in the U.S. will drop from 5.4 million units sold today to just 2.1 million units by 2030 as automated cars are provided by ride sharing companies. That would render car dealers obsolete; U.S. dealerships employed 1.3 million people in 2016, according to the National Automobile Dealers Association.
All these job losses don’t seem to show up in official employment statistics. In November, for instance, US unemployment remained at 4.1%, the lowest figure since 2000. Economists expect unemployment to drop below 4% during 2018. Underemployment dropped from 9.3% to 8% over the previous year. However, Erik Hurst of the Chicago Booth Business School estimates that 18% of American men between 21 and 30 years of age who did not have college degree did not work in 2017.
The bottom line in all these reports of automation driven unemployment is that the wealthy shareholders are going to get richer and the retrenched workers much poorer. In January, Oxfam issued a report showing that the richest 42 people on the planet own as much wealth as the 3.7 billion poorest people. By comparison their 2009 report showed 380 people and their 2017 61 people together owned this proportion of wealth. Some 82% of wealth created in 2017 went to the richest 1%. On average a new billionaire is minted every two days. According to Bloomberg, the world’s richest 500 people increased their combined wealth by 25% in 2017, largely as a result of rising stock market prices. The US stock market has tripled in value since 2008.
Meanwhile a study by the Institute of Fiscal Studies shows that as the British minimum wage rises, so those newly entitled to the minimum wage are much more likely to be in jobs that can be automated and that will be automated as the minimum wage level continues to increase. We tend to think of the British as well-off but according to a report prepared for the United Kingdom’s House of Lords, 32% of the country’s workers have less than £500 in savings and 41% have less than £1,000. Almost 30% are concerned about their level of debt while 43% of workers do not have anyone in their household they could depend on to support them financially in the event of hardship. Watch for the government making things even tighter by increasing taxes and reducing health and welfare benefits.
Finally, here’s a couple of less serious items. At the recent Consumer Electronic Show – now also known as the Chinese Electronic Show because of the number of exhibitors from that country - in Las Vegas one entertainment joint provided a robot stripper who could also pole dance; fascinating but hardly evocative – unless you were a robot looking on perhaps.
In a second hand book shop recently I bought a 1990 era compendium of obituaries. Included was one for a curious amateur weather forecaster named Arthur Mackins. One of the techniques he used was to examine spider webs; long strands warned of dry days ahead, short ones of rain. I wish I was that smart at forecasting!
As always I look forward to your comments and promise that my newsletters will be more regular from now on!
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