Our brave new world, according to Davos
Read this exclusive extract from our Economic Intelligence newsletter and sign up at the bottom of the article to get it every Tuesday
Data technology is accelerating from a polka to a lightning-fast tarantella. Algorithms will start to “help” and then displace doctors over the next decade because they are statistically better at diagnosis. Nurses will last longer, indispensable for care and the human touch. This will slash health care costs.
Routine journalism will be usurped by ChatGPT and its ilk, the talk of the WEF 2023 in Davos. It can already write passable news articles at a fraction of a reporter’s salary. Before long, it will compete with commentators, and I will retire to our goat farm in France. (Chèvres Poitevines, if you were wondering).
Whether they realise it yet or not, TV news anchors are replaceable too. I learned that it is already possible to create what looks like human beings talking on screen. By 2025 you will not be able to tell whether these invented personalities are fakes or the real thing.
Artificial intelligence (AI) is taking over our lives even faster than I realised. Breakthroughs have happened over the last five years that are suddenly unleashing volcanic social change.
“We have the emergence of a completely new set of technology, which I think is going to be revolutionary. AI is just at the beginning of the S-curve,” said Microsoft’s Satya Nadella.
“The internet maybe took 30 years to spread around the world, maybe the cloud and mobile took 15 years, and now I think we're talking months,” he said.
He predicts that the latest tech will be a powerful “deflationary force”. If you think that the internet, the cloud, and digital commerce, were behind the great disinflation from 1990 to 2020, be prepared for the next tidal wave.
The nature of Davos is that you are pulled out of your mental silo. You sit next to people at dinners who operate at the frontier, know their stuff, and leave you ashamed of your own ignorance. As a child of the mid-20th century, this happened to me a lot last week.
I learned that the data world changed in 2017 when a team from Google presented a paper called Attention is All you Need at the Conference on Neural Information Processing Systems, cited 63,000 times since then. It is the foundation of GPT-3 (Generative Pre-trained Transformer 3), a language processing technology.
Out of this was born Open AI’s chatGTP, closely linked to Microsoft, and Google’s coming LaMDA alternative. Will these displace the Google search engine with a tailored package that answers your questions? This is where the battle will be fought, or so Davosians tell me.
At a breakfast with Intel’s Pat Gelsinger, I learned that the first AI semiconductor chip was created 35 years ago. It was unusable. “What happened? Nothing happened,” he said.
Thirty years later, generative AI has suddenly allowed tech companies to harness the colossal force of this technology. “Algorithms and data allow us to write software in the cloud in minutes,” he said.
“Our devices can hear everything, see everything, and sense everything. Soon my glasses will be telling my hearing aid who you are. Our weaknesses will be turned into strengths,” he said.
Needless to say, this can be used by the totalitarians against us. “I think, ‘Wow, We can do that?’ And then I think, ‘Oh god, they can do that,” said FBI Director Christopher Wray.
Mr Wray said China’s drive for global dominance of AI is “built on top of massive troves of intellectual property and sensitive data that they’ve stolen over the years”, and that is not subject to democratic constraints.
“That’s something we’re deeply concerned about, and I think everyone here should be deeply concerned about,” he said in Davos.
Technology billionaire Thomas Siebel, now pioneering artificial intelligence at C3.ai, told a tech panel that elastic cloud computing is allowing us to do extraordinary things, with dystopian consequences if we are not careful.
“The largest commercial application will be precision medicine. We have the capability today to aggregate the genome sequences and medical care records of the population into a unified image – haematology, radiology, pharmacology, health history, the works,” he said.
“Much of the population will be wearing – or have embedded – devices that report on pulse, blood chemistry, gut chemistry, or brain waves. It is within our grasp today. We can predict with very high levels of precision who is going to be diagnosed with what disease. We will know who is going to die from a terminal illness in the next three years,” he said.
“This is huge. We’ll deliver lower cost, more efficacious health care, into a healthier community. What could possibly go wrong?”
“Let’s think about this: whether we have a single-care provider (NHS), or a quasi free market system like in the US, if you don’t think they’re going to use these data to ration health care, get over it, because they are. They will in the UK, they will in China, and they will in the US,” he said.
On the global economy, I learned that the Davos fraternity overwhelmingly believes in a soft-landing and a painless immaculate disinflation. “The complacency this year is stunning,” said Harvard professor Ken Rogoff, an expert on debt cycles and a former US chess grandmaster, accustomed to looking more that one move ahead.
The optimism has not reached the surreal levels of January 2008, which must go down in history as the acme of financial self-delusion, but it is strangely blind to obvious dangers.
There is always a narrative that you can latch on to. At this WEF it was the return of China. Vice-premier Liu He, economic plenipotentiary of the Communist Party, came to reassure the business elites that the neo-Maoist purge is finally over and wolf warrior diplomacy is giving way to diplomatic detente.
“We must let the market play the fundamental role in the allocation of resources. Some people say China will go for the planned economy. That’s by no means possible,” he said.
“All-round opening-up is the basis of state policy. China’s national reality dictates that opening up to the world is a must. We must open up wider and make it work better,” he said.
It was a serenade. There was not a single word of criticism of the West, or the US.
While one can take a hard-bitten view of this charm offensive, China’s dash for growth after a three-year drought is real. This will lift many global boats. The Chinese have accumulated $2 trillion of excess savings under the Great Lockdown and want to travel. Brace for an extra million barrels a day of Chinese jet fuel demand in a tight world oil market.
The question is whether an increasingly “Japanised” China is still capable of roaring growth, and whether this is enough to offset the monetary squeeze and fiscal austerity in the West.
The major central banks are carrying out the most aggressive interest rate rises in living memory, as well as switching from bond purchases (QE) to bond sales (QT). They are navigating uncharted waters, increasing the cost of money and reducing the quantity of money at the same time.
This is colliding with near record debt ratios left from the pandemic. The effects of such tightening feed through with a long lag. We have not felt the full sting.
Almost nobody pays attention to the money supply any longer. This is remarkable given that the money aggregates gave a clear forewarning of last year’s surge in OECD inflation. Those few investors who did pay attention dodged the “60/40 massacre” of 2022, the worst combined equity and bond crash in 150 years.
Groupthink is now ignoring the equally clear forewarning of a disinflationary crunch. You would not have known in Davos that the real money aggregates are contracting with varying degrees of intensity in the US, the UK, and the eurozone. The Davosians are betting that the central banks will get the calibration right and step back with perfect timing.
Hhmm. The European Central Bank’s Christine Lagarde was there breathing fire. “Inflation is way too high,” she said, rebuking futures markets for not pricing in enough overkill.
Former US Treasury Secretary Larry Summers repeated his calls for a scorched-earth monetary policy. “The greatest tragedy would be if central banks were to lurch away prematurely and we were to have to fight this battle twice,” he said.
If there were voices at the WEF making the counter-case that central banks have already done enough tightening, and that they ought to stop immediately before inflicting grave damage, I did not hear them.
Perhaps they are right. But one thing I have learned from going to Davos for almost two decades, is to mistrust snapshot consensus.
No comments:
Post a Comment