By Garvin Jabusch.
“Modern civilization writes checks only continual technological development can cash.”Mustafa Suleyman, The Coming Wave: Technology, Power, and the Twenty-first Century’s Greatest Dilemma
Reading Mustafa Suleyman’s recently published book The Coming Wave: Technology, Power, and the Twenty-first Century’s Greatest Dilemma, one is struck by multiple observations. First, just to get the fawning out of the way, Suleyman is as lucid a thinker as you would expect from a founder of DeepMind (now Google DeepMind), and his book is required reading for anyone aspiring to get their head around the structure of the economy in the present moment, much less hoping to anticipate some of its emerging contours. Second, and right off the bat in the first chapter, I appreciated that Suleyman identifies biotech as the other fundamentally transformative set of general-purpose technologies that will be shaping the world from today on, writing, “It’s no exaggeration to say the entirety of the human world depends on either living systems or our intelligence. And yet both are now in an unprecedented moment of exponential innovation and upheaval, an unparalleled augmentation that will leave little unchanged.” Although predominantly concerned with AI, the book’s continual layering in of parallels and confluences with biotech, and the amazing opportunities and challenges presented by both, is one aspect that makes Suleyman’s book stand out from the large crowd of continually minted AI literature. In fact, the entire fifth chapter is devoted to life, biology, and biotech. Key insight: DNA is data: “Artificial intelligence and synthetic biology are almost interchangeable.” Which is important because “information is a core property of the universe. It can be encoded in a binary format and is, in the form of DNA, at the core of how life operates. Strings of ones and zer0s, or the base pairs of DNA—these are not just mathematical curiosities. They are foundational and powerful.” So too the effect on economies and markets.
By ‘foundational and powerful’ Suleyman means these techs have the power to redirect civilization and even the biosphere. Suleyman describes AI and biotech as general or multi-purpose technologies; and “by “general-purpose technologies,” I mean those that enable seismic advances in what human beings can do.” Which in turn means how we fundamentally define the economy and how that economy functions are now undergoing a process of rapid evolution. One might say we’re entering the Next Economy.TM
Within a book full of exceptional observations, the quote I used to open this review stands out to me as an answer to a question we sometimes get here at Green Alpha Investments, namely, ‘why do your portfolios have a significant amount of weight on technology and innovation; what’s sustainable about that?’
Good question. Reading Suleyman’s comments about the current wave of innovation sheds a lot of light on why Green Alpha’s holdings are what they are: “While AI and synthetic biology are the coming wave’s central general-purpose technologies, a bundle of technologies with unusually powerful ramifications surrounds them, encompassing quantum computing, robotics, nanotechnology, and the potential for abundant energy, among others.” And in the next paragraph, Suleyman illuminates why we or anyone might have conviction in the growth characteristics of this portfolio positioning: “The coming wave will be more difficult to contain than any in history, more fundamental, more far-reaching. Understanding the wave and its contours is critical to assessing what awaits us in the twenty-first century.” For me, this framing also demonstrates why the primary skill required by portfolio managers today is adaptability in the face of rapid change.
Consider transportation, one of Suleyman’s many examples, “Today some 2 billion combustion engines are in everything from lawnmowers to container ships. Around 1.4 billion of them are in cars. They have grown steadily more accessible, efficient, powerful, and adaptable…Now, thanks to hydrogen and electric motors, the reign of the combustion engine is in its twilight. But the era of mass mobility it unleashed is not.” Here, he demonstrates that economic growth from now on can come from new approaches to fulfilling an economic necessity. “Transportation” no longer has to mean “polluting,” and in fact the newer, cleaner alternatives can be as or more economically compelling than the older technology. Thus, sustainability and Next Economics are not about containing or shrinking growth, they are about continual improvement: “As long as a technology is useful, desirable, affordable, accessible, and unsurpassed, it survives and spreads and those features compound.” Intentionally or not, with this sentence Suleyman provides a concise masterclass on where to look for investment opportunities.
Internal combustion giving way to electrified transport though is a tiny snapshot of the accelerating flywheel of innovation; “The more tools you have, the more you can do and the more you can imagine new tools and processes beyond them.” Where does it end? There’s “No obvious upper limit on what’s possible.”
His review of the energy landscape is also insightful, with observations such as:
“Endless growth in energy consumption was neither possible nor desirable in the era of fossil fuels, and yet while the boom lasted, the development of almost everything we take for granted—from cheap food to effortless transport—rested on it. Now, a huge boost of cheap, clean power has implications for everything from transport to buildings, not to mention the colossal power needed to run the data centers and robotics that will be at the heart of the coming decades. Energy—expensive and dirty as it often is—is at present a limiter on technology’s rate of progress. Not for too much longer.”
Statements like ‘data centers are terrible for the environment because they use so much energy’ will at some point be moot. Within this paradigm change, the world will need a framing reset: it’s not the use case for energy that determines whether there is a problem, it is the source of energy. As economy-wide structural change advances, using a lot of power to accelerate innovation won’t cause harm, and a regenerative economy can begin to take hold.
This observation represents the lynchpin of everything the world will need if the goal is an indefinitely enduring and just economy. The first pillar of Next EconomicsTM maintains that economic productivity must be many, many multiples of what it is today if the eight billion and counting humans presently alive are to maintain (or first realize) a reasonable standard of living, without simultaneously overtopping the planetary boundaries. This is not an impossible dream. As Suleyman reports, over the last 200 years, economic output is up over 300 times. The innovations occurring today, along with the acceleration with which new ones are emerging, make it entirely plausible that the next 300x improvement in economic productivity will happen in decades as opposed to centuries. Meaning we may soon be getting a whole lot more out of a whole lot less. If you take nothing else from this book, you can hold that in mind as a reassuring thought.
Suleyman also (unknowingly) addresses the fourth pillar of Next Economics, namely that all these fantastic means of production will need to be more equitably owned than is generally the case today, if we are to avoid the risks of war and collapse that commonly emerge from inequality. Here, he suggests society gets busy experimenting, writing, “a fixed portion of company value, for example, paid as a public dividend would keep value transferring back to the population in an age of extreme concentration.” Good idea, and not too dissimilar from Chris Hughes’, (one of the co-founders of Facebook) proposal that social media companies should share part of their revenue from selling user data with the users themselves.
Suleyman argues that we need unprecedentedly powerful new tools to achieve sustainability because without them, there has never been a civilization that was able to last (average length is around 400 years): “It’s not just that civilizations don’t last, it’s that unsustainability appears baked in.” But now, “Returns on intelligence will compound exponentially,” ushering in a new world, for better or worse.
It’s the “worse” that he’s worried about, and so Suleyman spends a meaningful portion of the book addressing the possibility of containing AI to manage its risks. Ultimately, he doesn’t believe that AI can or will be contained, although he confesses that he wishes it could be, at least to the extent that it might be able to grow and proliferate in productive, responsible ways. Ever pragmatic though, Suleyman concludes that in a technological arms race, the good guys will have no choice but to invest more, work harder, and innovate faster than the bad guys, to give us our best shot at avoiding the worst outcomes from AI/biotech.
His reasons for doubting humanity’s ability to contain our powerful new tech are grounded in legacy:
Technology has a clear, inevitable trajectory: mass diffusion in great roiling waves. This is true from the earliest flint and bone tools to the latest AI models. As science produces new discoveries, people apply these insights to make cheaper food, better goods, and more efficient transport. Over time demand for the best new products and services grows, driving competition to produce cheaper versions bursting with yet more features. This in turn drives yet more demand for the technologies that create them, and they also become easier and cheaper to use. Costs continue to fall. Capabilities rise. Experiment, repeat, use. Grow, improve, adapt. This is the inescapable evolutionary nature of technology.
This seems plain enough, and in fact is as clear a discussion as I’ve seen supporting (again, unknowingly) why we at Green Alpha emphasize exposure to IP and moat-protected innovation in our portfolios. It’s where the growth is and always has been.
Within the containment discussion, Suleyman recounts his early attempts to raise concerns about the dangers of AI being dismissed and scorned by his professional community, in an effect he calls “anti-pessimism bias.” This concept resonated with me, as I have seen anti-pessimism bias more than once in my own career. On one occasion, years ago, I was invited to what was then called the SRI in the Rockies conference to give a presentation on a stock that I thought deserves to be sentenced to “ESG jail,” or in other words not eligible for investment by ESG funds and portfolios. As a climate-first portfolio manager, I selected a company that I believe has no place in a climate-oriented stock portfolio, Toyota. This was to some extent a deliberately provocative choice, as I knew Toyota was a darling of the ESG crowd, but I thought the facts were unassailable, and if I presented them rationally, at least some of the crowd would understand or even agree with my position. I pointed out that Toyota had yet to make or even publicly contemplate an EV*, that the 10 million cars they then sold annually had an average fleet wide MPG of 25, and that therefore the company is one of the main demand drivers for fossil fuels in the world, and a major, direct cause of the climate crisis, to say nothing of Toyota’s share of responsibility for the untold morbidity and mortality caused by global tailpipe emissions. I made the analogy that for a fossil-free, climate-oriented fund to hold Toyota was akin to an alcohol-free fund (something the audience would have been familiar with) disdaining owning distillers and brewers, but simultaneously purchasing every alcohol distributor and bar they could get their hands on. When I concluded my case, you could have heard a pin drop in the hall. Then, after a minute, cat calls and boos, and even one shout of “liar!” How dare I criticize the company that popularized the Prius hybrid? My co-panelist, a CEO of an ESG firm, took the opportunity to jump up and explain that internal combustion is an excellent technology, and that in his opinion, “Ford is the most innovative company in the world.” So yes, anti-pessimism bias, and its sister status quo bias, are as real as they are problematic.
So, okay, Suleyman, lesson learned. But so how do we lead people to consider managing risks they don’t like to face? He first urges people to get out of their comfort zone: “Guarding against failure means understanding and ultimately confronting what can go wrong. We need to follow the chain of reasoning to its logical end point, without fear of where that might lead, and, as we get there, do something about it.” Well and good, but Suleyman knows that merely telling people to let go their biases and behave like rational empiricists isn’t going to work.
Resistance to confronting risks is risky:
“The pessimism-averse complacency greeting the prospect of disaster is itself a recipe for disaster. It feels plausible, rational in its own terms, “smart” to dismiss warnings as the overblown chatter of a few weirdos, but this attitude prepares the way for its own failure…There will be no single, magic fix from a roomful of smart people in a bunker somewhere. Quite the opposite. Current elites are so invested in their pessimism aversion that they are afraid to be honest about the dangers we face.”
Truer words have rarely been written and could apply just as easily to the asset management industry as to AI. So the pessimism-aversion problem for now could be intractable. Suleyman writes, in the end, what his book provides are “hints at how pessimism avoidance may be overcome.”
But what are these hints? I can’t be sure what he means exactly, but he does leans into his credibility as an expert, noting that as an insider his view matters: “Credible critics must be practitioners.” Elsewhere he asserts that “Pessimism aversion is much harder when the effects are so nakedly quantifiable.” These feel like strained arguments to me in a world where objectivity scarcely seems to matter, and as scholar David R. Samson puts it, “people choose tribe over facts.”
And Suleyman knows the odds may not be in our favor, and his pessimism sometimes shows: “Spend time in tech or policy circles, and it quickly becomes obvious that head-in-the-sand is the default ideology.” He knows we’re walking on a knife’s edge between an unimaginably better future and an unimaginable worse one. Our best shot, it seems, may lie in the wisest possible use of our phenomenal new tools.
“Technology is central to how the future will unfold—that’s undoubtedly true—but technology is not the point of the future, or what’s really at stake. We are.”
*Recently, under new CEO Koji Sato, Toyota has, according to Bloomberg, “detailed plans to commercialize solid-state batteries, roll out 10 new electric models and sell 1.5 million battery-electric vehicles annually by 2026.” This is unquestionably a big improvement over the intransigent ICE maker of years ago when I gave my talk about Toyota as a climate-crisis-culpable agent. Still, if they meet this goal, greater than 85% of Toyota’s sales will remain from ICE vehicles in 2026 (Toyota sold around 10.48 million vehicles globally in 2022). In my opinion, therefore, the company still has no place in a fossil-free or decarbonization-themed stock portfolio. Toyota has likely produced at least several hundred million internal combustion engines in total when considering its high annual production volumes sustained over many decades, and they have no plans to stop now, even as the begin adding EVs.
Green Alpha is a registered trademark of Green Alpha Advisors, LLC. Green Alpha Investments is a registered trade name of Green Alpha Advisors, LLC. Green Alpha also owns the trademarks to “Next Economy,” “Investing in the Next Economy,” “Investing for the Next Economy,” “Next Economy Portfolio Theory,” and “Next Economics.” Green Alpha Advisors, LLC is an investment advisor registered with the U.S. SEC Registration as an investment advisor does not imply any certain level of skill or training. Nothing in this post should be construed to be individual investment, tax, or other personalized financial advice. Please see additional important disclosures here: https://greenalphaadvisors.com/about-us/legal-disclaimers/