AI’s Global Economic Boost. The Return of Civil Servants? The Surprising Fact Behind Global Population Shrinkage. Plus More! #212

Grüezi!?I’m Adrian Monck – welcome!

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1???The REAL Macroeconomic Impact of #AI

That boost to the global economy? Hmm...

MIT’s Daron Acemoglu has a new paper out that crunches the numbers on future economic gains from Artificial Intelligence (AI) over the next ten years.

Using Hulten’s theorem he finds that Total Factor Productivity (TFP) gains from AI could max out at 0.7% over the next decade.

It’s hardly a growth game-changer.

Worse, early productivity gains come from easy-to-learn tasks, whilst future gains will come from hard-to-learn tasks with lower productivity gains. Accounting for this, Acemoglu predicts just 0.5% TFP gains over 10 years.

The social consequences? Even if AI boosts the productivity of low-skill workers in some tasks, it will likely widen the gap between capital and labour income.

Plus some new AI-enabled tasks may be harmful, like online manipulation algorithms. Factoring this in, GDP gains could be outweighed by welfare losses.

Meanwhile Eric Schmidt has been sharing thoughts on where governments need to invest to educate the #AI experts of the future:

• “If you were a research physicist 50 years ago, you had to move to where the cyclotrons [particle accelerators] were because they were really hard to build and expensive — and they still are.
• “We never had that in software, our stuff was capital-cheap, not capital-intensive. The arrival of heavy-duty training of AI models, which requires ever more complex and sophisticated hardware, is a huge economic change.”

??Some Pharma companies are still betting big on AI productivity gains.

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2?? The Return of the Civil Service?

Consultants may be compromising themselves from government.

The most interesting government work used to be done by civil servants – think Sir Humphrey from classic Brit-com Yes Minister – unimaginative bureaucrats with elite educations.

Increasingly –?around the world –?that work is done by unimaginative consultants with elite educations.

Rising geopolitical tensions mean the freewheeling days of this intellectual condottiere are coming to an end.

Economic data and information now seem more like potential security threats than fuel for globalised innovation and improvement.

Restrictions are coming fast on the exchange of strategic information, particularly in areas like semiconductors, cloud computing, and AI.

Where once consultancies could easily work with clients in different countries without much controversy now they’re being portrayed as economic ‘fifth columnists.’

The data revolution has made nearly every major business an information broker, putting them at risk of being targeted or conscripted as unwilling combatants in the geopolitical competition between the US and China.

What can businesses do?

• Map exposure, get to grips with their data practices, and reform the way they’re structured to minimise the risk of becoming political ‘targets.’
• Some may want to reconsider their involvement in information gathering and brokering altogether...

The globalised capitalism model, which information brokers and consultancies like McKinsey helped nurture, is in trouble as information becomes increasingly seen as a source of geopolitical risk rather than just an economic input.

??McKinsey’s China collaboration was once a sign of a globalising world.

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3?? The Baby Bust –?Solving Teenage Pregnancy

The good news? We did it. The bad news? We did it.

The Economist has a great take-out on the population baby-bust. Including this factlet:

“Women aged 30 and above are having more children. It is only younger women who are having fewer...”

Why? Look no further than America’s drop in teen pregnancies:

More than half the drop in America’s total fertility rate is explained by women under the age of 19 now having next to no children.

Governments seeking to boost their populations have tried everything from paternity leave to improved child care but ... little seems to permanently move the needle.

??The Guardian profiles a comically terrible “Pro-Natalist” family.

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4?? Tortilla Ex-Tort-ion

How the Mexican mafia took over the national staple.

Glasgow gangsters fought over ice cream. In Mexico the WaPo reports on how cartels have infiltrated the tortilla business.

But what’s the strategy?

1. Stable Revenue Stream: The average Mexican eats 75 kgs of tortillas annually, and pays cash. There’s a tortilla shop in virtually every Mexican neighbourhood.
2. Diversification: As drug prices have dropped, gangs have looked for new businesses. Tortillas are part of a broader move into sectors like agriculture, fuel, and retail.
3. Political clout: Controlling neighbourhood businesses helps gangs infiltrate and influence local governments and protect their interests.
4. Supply chain integration: Gangs control everything from farming and irrigation to transportation and retail. This ensures they can squeeze everyone from the farmers growing the corn to the shops selling the tortillas.

If only gangs had consultants working for them, this could be a powerpoint presentation.

??It isn’t just tortillas – the Mexican mob has moved on avocados too.

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5?? Life On Planet Oven

India just broke it’s own heat records.

India has never been hotter. Its cities have more concrete, and less shade and tree cover making them heat islands:

Concrete absorbs heat during the day but cannot emit infrared heat, causing the heat to be trapped. In rural areas, where relatively more green cover is present, the process of transpiration – absorption of water by plants and evaporation through leaves and stems, allows water to be released into the atmosphere.

??India’s heat may be crushing its election turnout.

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6?? Cooling Another Of The World’s Hottest Cities.

Riyadh wants to be a little more chilled.

??The plan to turn down the temperature in desert cities.

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7?? How Will Boomers “Hand On The Reins”?

Andrew Rousso has a brilliant take on generational succession.

???You can follow Andrew Rousso here.

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Best,

Adrian