Switching to a monthly frequency of this newsletter over the summer in anticipation of a newsless summer did not prove to be the smartest decision, so in last month's avalanche of tech news, I try to make sense of the two most important developments. First, the massive energy consumption of AI forcing Microsoft and Google to rethink their climate goals. And fears of recession seem to be ushering in a "Great Rotation" in stock markets, with investors fleeing tech funds into more conservative stocks.
Greenpeace and Amnesty against Microsoft?
It seemed like agreed-upon work: on July 2, as many as eighty nonprofit organizations including Greenpeace and Amnesty International declared that the use of carbon offsets (carbon credits) by companies, actually undermines rather than supports climate goals. The objection is that companies are buying virtually worthless carbon credits and not reducing their emissions.
Companies in sectors ranging from technology to mining, on the other hand, argue that carbon offsets are actually crucial to reducing corporate emissions and moving toward net zero emissions. How can the parties be so opposed when they claim to be pursuing the same goal?
Need for high-quality and reliable carbon removal assets
At its core, this is a confusion of concepts. Opposition to useless carbon credits, issued for, say, forest areas that are never threatened, is justified. But companies such as Microsoft, on the contrary, are voluntarily focusing, without legal requirements, on carbon credits based on actual removal of carbon from the atmosphere. And that removal is crucial: annual global greenhouse gas emissions are about 50 gigatons, but as much as 2,200 gigatons must be removed to stay below one and a half degrees of warming. Simply turning off the tap will not have sufficient effect.
"It's about creating a market for high-quality, reliable and sustainable carbon removal assets," Melanie Nakagawa, chief sustainability officer at Microsoft, said in a recent interview. "Think about sequestering carbon in the soil through accelerated weathering of rocks or stones that absorb carbon and are turned into concrete. Or Mombak, a large forestry project in Brazil." Another example of carbon sequestration is 280 Earth, nota bene once spawned by Google.
AI threatens climate goals, but there is hope
On July 3, the day after the 80 organizations shared their objection to bad carbon credits, the very club magazine of business, the Wall Street Journal, reported that Google's total emissions had increased 13.5% from 2022 to 2023.
In fact, since 2019, emissions have increased by nearly half, Google reported deep on page 31 of its sustainability report. Competitor Microsoft's total emissions increased 29% between 2020 and 2023.
source: Bloomberg
Google had just promised to reduce emissions by 50% from 2019 levels, and Microsoft has been saying for years that it will be carbon-negative by 2030.
To cost-effectively combat climate change, it is crucial to find the most cost-effective methods to reduce greenhouse gases (GHG). A fascinating study published in Nature estimates the cost per ton of CO2 for two reforestation methods: natural regeneration and plantations. By creating new maps of costs and carbon storage, it shows that natural regeneration and plantations are cheapest in about half of the suitable areas for reforestation.
Together, at less than $50 per ton of CO2, these methods can reduce 44% more emissions than natural regeneration or plantations alone. This is far more effective than previous estimates by UN research organization IPCC showed. In short: there is hope for effective, affordable carbon removal.
OpenAI loses $5 billion a year
The AI craze is largely responsible for the increasing energy consumption and associated emissions of tech giants. Large language models (LLMs) such as ChatGPT are powered by energy-intensive data centers.
Training, maintaining and using LLMs consumes processor power and thus energy. It therefore came as no surprise that OpenAI is on track to lose $5 billion a year. The question of how all the investments in AI will ever be recouped is becoming more pressing. The gap between investment and market value is now $600 billion.
The quality of LLMs is also being questioned in increasingly wider circles, raising the question of whether other forms of AI do not offer better solutions. Professor Deepak Pathak thinks that not understanding physical environments structurally limits the quality of LLMs.
An LLM can read thousands of reports on gravity without understanding what happens when you drop a ball from your hand. That's why Pathak is trying to develop AI with "sensory common sense.
Spotlight 9: carnage in the stock market
Last Friday, August 2, the stock market experienced its worst day since 2022. This after, to say the least, a turbulent month in the stock market for the technology sector. Initially stock prices were still rising on expectations of a Federal Reserve rate cut in September, but weak economic data, including a drop in manufacturing activity and rising unemployment, caused a stock market sell-off.
Chip stocks were hit particularly hard, market leaders such as Nvidia and AMD fell sharply but the once proud Intel was hit the hardest: falling sales led to mass layoffs and a 32% drop in Intel shares!
The sell-off was not limited to U.S. markets, as investors worldwide were gripped by fears of a global recession. In recent years, larger exchange traded funds such as Apple, Microsoft and Amazon, have far outperformed smaller ones. Still, reports of a "Great Rotation" of large tech funds into lower-market and undervalued "value stocks" seem as exaggerated as the conspiracy theory of a Great Replacement.
Link Tips
Elon Musk gives update on second human with Neuralink implant
Politically, Musk has been on the lookout for what is beyond the far right for a while, but as soon as he talks about technological advances, he remains fascinating. By the way, Musk himself always appears to play podcasts at twice the normal speed. Nicest quote from his latest appearance on Lex Fridman's podcast: "If your vocabulary is larger, your effective bitrate is higher."
PayPal mafia's love for Donald Trump explained
Another interesting podcast, More or Less by the couples Morin and Lessin, tried to explain why people like Elon Musk, Peter Thiel and David Sacks are such ardent Trump supporters. A disconnect between intelligence and empathy can be observed.
How crypto affects U.S. presidential election
Investors Marc Andreessen and Ben Horowitz are donating to Trump, to the annoyance of The Verge, but LinkedIn founder Reid Hoffman and other top investors are rallying behind Kamala Harris. Crypto regulations are proving to be a divisive issue. I expect Harris to propose a different crypto policy before the election than President Biden implemented with the SEC during his presidency.
How do you hire a CEO?
Top investor Vinod Khosla, who was at odds with Elon Musk just a few weeks ago over his support for Donald Trump, explains how to hire a CEO. Khosla is certainly no supporter of Trump and shared in his familiar clear terms what to look for when choosing a CEO. What's nice is that the way he shares it differs on Medium and on X.
The HoverAir X1 drone is the first interesting drone not made by DJI in years. Small problem is that the drone will land on its own, including over water. I'm sure there will be a solution to that soon.
Apple Vision Pro on sale in Europe and Asia
Totally overlooked by the media and by consumers: the Apple Vision Pro is now on sale in most countries but no one cares. Too bad the beautiful device is alarmingly expensive and too little good content remains available for it. When will Apple dare to lower its margin and create a market by, for example, offering substantial discounts on the Vision Pro, say to buyers of a Mac or an iPhone?
Five, no yet six, tips for successful Web3 projects
Dr. Nisheta Sachdev and Gert-Jan Lasterie discussed the success and failure factors when introducing new projects in the Web3 world. Together with the webinar participants, I asked the questions. It is especially interesting to see which tactics for quickly building a real community are also applicable to other products and services.
Even one glass of alcohol a day can lead to serious consequences for your health. But there is also good news: "It is healthier to be social without the need for alcohol, but the benefits of spending time with others are still likely to outweigh the risk of consuming one to two units of alcohol." In other words: raise a glass together, otherwise don't.
Cheers, and see you next month!