Latest news with #Schumpeterian
Forbes
5 days ago
- Business
- Forbes
Silicon Valley Is Nearing A Breaking Point
American comedian Gallagher (born Leo Gallagher Jr) moving fast and breaking things at the Rosemont ... More Horizon, Rosemont, Illinois, July 10, 1981. (Photo by) The current mood in Silicon Valley seems to be dominated by this sentiment, originally popularized by Facebook. And for many leaders in the tech center of the universe, Silicon Valley, it has spread beyond just information technology innovation and into a sense of how to reinvent all walks of life, all industries, and even politics. For many of the giants in today's tech and innovation sector, technology is by itself the solution to everything. It is Schumpeterian thinking dialed up to eleven. It is quasi-religious, in that there is a sense that a great technology flood will wash over the economy and society and wash clean the ills, leaving behind efficient, reinvented new industries, regulations (if even needed at all) and personal behavior. Some of this is a byproduct of ideology and an independent streak – an understandable frustration that today's systems are antiquated and in many cases broken, giving the idea of starting from scratch a romantic appeal. These are brilliant people who think big and so aren't tethered to old 'this is how it's done because this is how it's always been done' thinking. Some of this is a byproduct of naivety and not ideology – I once sat in a meeting while a very successful individual from Silicon Valley lamented how hard it was to change Sacramento… and concluded that his next step was therefore to go fix Washington, DC. Because of course changing Washington DC would be easier than changing a state government. Sure. This combination of ideology and naivety has recently impacted how some of the most powerful in Silicon Valley view the climate change challenge, among other 'non-tech' issues. For some of these titans, there is a sense that the people most in need of innovative solutions around issues like climate have rejected them personally, so the heck with those issues, no need to care about all that fluffery anymore. For others, there is a sense that what is needed isn't to try to improve the current infrastructure over time, but simply to effectively start over. For example: Working with today's utilities on energy efficiency is a waste of time, go invent commercially-viable fusion-based nuclear power and the rest (ie, who will finance those plants, who will build those plants, who will maintain those plants, who will distribute the power from those plants) will simply sort itself out. These sentiments may seem in opposition to each other, but in reality they are simply two sides of the same techno-superiority coin. So, moving fast and breaking things (either ignoring petty issues like a rapidly degrading global climate or undermined political-economic foundations, or assuming they'll be addressed by unnamed others because, you know, 'Innovation') is pretty much how many of the leaders in Silicon Valley are setting their agendas these days. But here's the thing – they would never think to do this with data center construction. Nor with IT networks or microchips or any of the other hardware and infrastructure that they know they fully depend upon for their own innovations to work. These giants of the tech industry know full well that they can't 'move fast and break things' when it comes to building out and maintaining the infrastructure that is core to their own operations. They employ huge teams of project developers who are tasked with definitely not being sloppy and letting things break. They pay for the careful maintenance of decades-old communications infrastructure. Unlike fuzzy concepts like climate change and politics, these are very concrete systems that must be built the right way, not just assumed to be built by someone else unnamed, and (of course!) incorporating a lot of 'old tech' alongside innovations rather than replacing it. This infrastructure is very real to these tech leaders, and thus given the respect and investment it deserves. As a rapidly degrading global climate and increasingly undermined political-economic foundations come to the fore, they will also start to become very real to these same leaders. Natural disasters are already affecting the tech sector's customers, workforces, and infrastructure. Political-economic uncertainty will begin impacting revenues and costs (see Exhibit A: Tariff uncertainty, and Exhibit B: Unforecasted and significant costs recently incurred by various universities, law firms and media companies – will the tech industry be next?). As these risks start to directly impact the day to day business of these tech leaders, they will no longer be able to consider them some distant concepts to be treated academically. They will have to invest into clean energy, climate adaptation and resiliency, clean water, and stable politics. Or their companies, industries and personal wealth will suddenly start to directly suffer the consequences. The good news is that Silicon Valley has a long and proven history of building great infrastructure. When push comes to shove, 'move fast and break things' quickly gets put aside in favor of professional, thorough, critical infrastructure investments. All that needs to happen is for their definition of 'critical infrastructure' to be broadened to include the planet they live on and the social and economic foundations that they depend upon. Silicon Valley may soon be at this breaking point, if not already there. Not abandoning techno-centric viewpoints and big bold ideas. Just no longer naively leaving these other crucial underpinnings like the environment, the economy and society to someone else to deal with. And when that happens, when the technology Great Flood assumption is abandoned and these brilliant minds are put to work actually pragmatically addressing this 'infrastructure' broadly defined… we will see an amazing resurgence of actual investments and scalable solutions for these mounting challenges. The innovative power of Silicon Valley is one of the most powerful forces humanity has ever built, and harnessed correctly accomplishes amazing things. Just as when a fever breaks, when Silicon Valley finally reaches this breaking point it will be a very good thing.
Sydney Morning Herald
04-07-2025
- Business
- Sydney Morning Herald
Trump's big, beautiful mistake will have China licking its lips
China is betting that you cannot halt a technological steamroller or force the world to act against its own economic self-interest. Electro-tech will win in the end because it is massively more efficient. Critics of clean energy love to hurl the laws of thermodynamics at their foes, but they commit two intellectual crimes themselves: they skip over the detail that two-thirds of fossil energy is in aggregate lost to the skies in heat, while roughly 90 per cent of electric energy is used for its final function. They hide behind the fallacy of primary energy demand. How many times have you heard that 80 per cent of our energy still comes from fossils, as if that tells you anything? But when you replace a dinosaur light bulb with an LED bulb you slash energy use by 80 per cent at a stroke. When you switch from a home gas boiler to an electric heat pump powered off the British grid on an average energy mix, you also cut it by about 80 per cent. Bingo. As expected, Trump's omnibus bill guts the Inflation Reduction Act, Joe Biden's Rooseveltian bid to throw the US back into the global race for electro-tech supremacy before the window closes altogether. But it goes further. Loading It actively handicaps those new technologies that fall foul of MAGA ideology. It is not a return to the free market. It rigs the market to defend the legacy status quo, though geothermal is spared, and so is nuclear fusion. 'America's strength has always been that it lets old industries die, but now it is now blocking the Schumpeterian process of creative destruction,' said Ember's Kingsmill Bond. Market commentary has honed in on the US' spiralling debt-to-GDP ratio and the dangers of a compound interest trap, as indeed it should. The omnibus bill – a 'disgusting abomination', says Musk – sets the US on a path of fiscal deficits of 6 per cent to 7 per cent of GDP as far as the eye can see. The US Treasury relies on foreign funds to soak up this debt, and they know that Trump will force the Federal Reserve to slash rates and hold down bond yields by fiat, debasing the coinage in the manner of Henry VIII after he had exhausted his plunder from the monasteries. But there is another question for markets. It will become clearer over the next five years that 'going electric' outcompetes fossils on pure price in most activities. At what point do global investors conclude that the US is making a fatal and irreversible error? When will they judge that it no longer deserves an equity premium, and deserves a discount instead? That fundamental re-rating may not be far off. The bill eliminates tax credits for wind and solar but creates a new tax credit for coal. The federal coal royalty rate is slashed. Fees for wind and solar projects on federal land rise fivefold. The $US7500 subsidy for electric vehicles is axed. Electric vehicles (EVs) will pay a $US250 annual road charge, double what petrol cars pay through fuel tax. Old Auto will get an effective $US2000 subsidy by making car loans tax-deductible. Few EVs qualify because they fall foul of Trump's war on Chinese clean-tech components. The US Post Office has been ordered to sell its EV fleet. You get the drift. The whole thrust of the policy is vindictive. Another generation of US car buyers will be locked into old technology. By the time that is cleared, EVs will have leapt further ahead and Chinese companies like BYD will own the planet. You can take the view that there should be no subsidies, but the problem with this piety is that China already manufactures 80 per cent of the world's solar panels, 75 per cent of its batteries and 70 per cent of its EVs. The US needs turbo-charged incentives to have any hope of catching up. Wind and solar added over 90 per cent of all new power in the US over the last two years. Further projects are the only possible way to meet rising electricity demand for data centres between now and 2030, since there is a five-year supply chain blockage for new gas turbines. Every other option takes too long. Energy Innovation estimates that Trump's bill will deprive America of 340 gigawatts of power over the next decade and push up wholesale electricity prices by 74 per cent. Data centres will not be built because there won't be enough power. You could hardly find a better way to sabotage the country's AI ambitions. The United States has just dropped a big, beautiful, bunker-busting bomb on its own economy. It fritters away America's advantage in industrial costs just as China reaps a mirror-image gain from installing that much new wind and solar every year, at costs that take your breath away. BNEF says the cost of Chinese solar modules fell below 10 cents per watt last year. That is tantamount to free power. The combined 24/7 cost of solar and batteries is already the cheapest form of power for the large majority of mankind in low latitudes. Four-fifths of those people live in countries that are net importers of fossil fuels. These nations have no interest in perpetuating a dependency on oil and gas that drains their balance of payments year-in, year-out. It would be insane for them to invest in new infrastructure that locks them into this wealth loss for the next 40 years, or even to think of buying Trump's LNG at an exorbitant Asian spot price of $US11 per MMBtu. Loading They will buy Chinese solar panels, and then Chinese cars. They will go full electric. The energy trillions of the future will either go to China or those countries that carefully nurture their electrification industries. The United States has just dropped a big, beautiful, bunker-busting bomb on its own economy.
The Age
04-07-2025
- Business
- The Age
Trump's big, beautiful mistake will have China licking its lips
China is betting that you cannot halt a technological steamroller or force the world to act against its own economic self-interest. Electro-tech will win in the end because it is massively more efficient. Critics of clean energy love to hurl the laws of thermodynamics at their foes, but they commit two intellectual crimes themselves: they skip over the detail that two-thirds of fossil energy is in aggregate lost to the skies in heat, while roughly 90 per cent of electric energy is used for its final function. They hide behind the fallacy of primary energy demand. How many times have you heard that 80 per cent of our energy still comes from fossils, as if that tells you anything? But when you replace a dinosaur light bulb with an LED bulb you slash energy use by 80 per cent at a stroke. When you switch from a home gas boiler to an electric heat pump powered off the British grid on an average energy mix, you also cut it by about 80 per cent. Bingo. As expected, Trump's omnibus bill guts the Inflation Reduction Act, Joe Biden's Rooseveltian bid to throw the US back into the global race for electro-tech supremacy before the window closes altogether. But it goes further. Loading It actively handicaps those new technologies that fall foul of MAGA ideology. It is not a return to the free market. It rigs the market to defend the legacy status quo, though geothermal is spared, and so is nuclear fusion. 'America's strength has always been that it lets old industries die, but now it is now blocking the Schumpeterian process of creative destruction,' said Ember's Kingsmill Bond. Market commentary has honed in on the US' spiralling debt-to-GDP ratio and the dangers of a compound interest trap, as indeed it should. The omnibus bill – a 'disgusting abomination', says Musk – sets the US on a path of fiscal deficits of 6 per cent to 7 per cent of GDP as far as the eye can see. The US Treasury relies on foreign funds to soak up this debt, and they know that Trump will force the Federal Reserve to slash rates and hold down bond yields by fiat, debasing the coinage in the manner of Henry VIII after he had exhausted his plunder from the monasteries. But there is another question for markets. It will become clearer over the next five years that 'going electric' outcompetes fossils on pure price in most activities. At what point do global investors conclude that the US is making a fatal and irreversible error? When will they judge that it no longer deserves an equity premium, and deserves a discount instead? That fundamental re-rating may not be far off. The bill eliminates tax credits for wind and solar but creates a new tax credit for coal. The federal coal royalty rate is slashed. Fees for wind and solar projects on federal land rise fivefold. The $US7500 subsidy for electric vehicles is axed. Electric vehicles (EVs) will pay a $US250 annual road charge, double what petrol cars pay through fuel tax. Old Auto will get an effective $US2000 subsidy by making car loans tax-deductible. Few EVs qualify because they fall foul of Trump's war on Chinese clean-tech components. The US Post Office has been ordered to sell its EV fleet. You get the drift. The whole thrust of the policy is vindictive. Another generation of US car buyers will be locked into old technology. By the time that is cleared, EVs will have leapt further ahead and Chinese companies like BYD will own the planet. You can take the view that there should be no subsidies, but the problem with this piety is that China already manufactures 80 per cent of the world's solar panels, 75 per cent of its batteries and 70 per cent of its EVs. The US needs turbo-charged incentives to have any hope of catching up. Wind and solar added over 90 per cent of all new power in the US over the last two years. Further projects are the only possible way to meet rising electricity demand for data centres between now and 2030, since there is a five-year supply chain blockage for new gas turbines. Every other option takes too long. Energy Innovation estimates that Trump's bill will deprive America of 340 gigawatts of power over the next decade and push up wholesale electricity prices by 74 per cent. Data centres will not be built because there won't be enough power. You could hardly find a better way to sabotage the country's AI ambitions. The United States has just dropped a big, beautiful, bunker-busting bomb on its own economy. It fritters away America's advantage in industrial costs just as China reaps a mirror-image gain from installing that much new wind and solar every year, at costs that take your breath away. BNEF says the cost of Chinese solar modules fell below 10 cents per watt last year. That is tantamount to free power. The combined 24/7 cost of solar and batteries is already the cheapest form of power for the large majority of mankind in low latitudes. Four-fifths of those people live in countries that are net importers of fossil fuels. These nations have no interest in perpetuating a dependency on oil and gas that drains their balance of payments year-in, year-out. It would be insane for them to invest in new infrastructure that locks them into this wealth loss for the next 40 years, or even to think of buying Trump's LNG at an exorbitant Asian spot price of $US11 per MMBtu. Loading They will buy Chinese solar panels, and then Chinese cars. They will go full electric. The energy trillions of the future will either go to China or those countries that carefully nurture their electrification industries. The United States has just dropped a big, beautiful, bunker-busting bomb on its own economy.
