Everybody, Peter Zion here coming to you from Pine Creek, which is one of the access points to the collegiate wilderness and some of the Colorado where I’m going to be going for a few days Anywho. Today, I wanted to talk about a question a lot of people ask, and that is on innovation. I am not exactly known as the sunshine and chocolate unicorns guy. So is there any way that we can innovate our way out of some of these problems? And the answer is, of course there is. But
you should kind of rein in your expectations, because we’ve been living in a period of extreme technological advancement for the last 30 years, for a couple of reasons, primarily demographic. First of all, if you want to do tech at scale, you need a huge number of people in their 20s in their 30s, to do the work, to imagine the future, to develop the technologies to prototype them to bring them to operationalization only then can the inter mass manufacturing, then you also need a huge amount of really cheap capital. Because none of the stuff that the 20 and 30 Somethings we’re doing is free, it all has to be paid for. And there’s no income until you’re on the back side of things. We’ve been in that environment since roughly 1990 9095. We are anymore. The baby boomers are retiring, they’re taking their money with them. And the oldest Millennials turn 44 This year, the number that we will have that are in their 20s and their 30s is gonna be shrinking every year for the next 15 And the next generation Zoomers may be the most educated generation we’ve ever had. But it’s also the smallest generation we’ve ever had. So the kind of the undergirding societal issues that have allowed the American tech boom to exist, they’re gone.
Which means any technologies that are not at least to the point of operationalization, probably aren’t going to make the cut. Now, that doesn’t mean there’s not gonna be anything just means that you have to narrow your expectations to a much shorter list. So let’s go through six that I’ve identified first.
And we’re doing these in order from least likely to most likely, least likely Small Modular nuclear reactors, there are a number of reasons to respect nuclear power to be part of our future. Unfortunately, none of them had to do with politics. It’s gotten a bad rap, the Russians have really pulled out all the stops to make it look bad with their propaganda efforts. And a lot of the modern Green Movement was founded, at least at least one leg in the Russian propaganda world, the Russian, excuse me, the German Green Party is a good example of that. It’s an institution that was basically indirectly founded by the KGB during the Cold War. Anyway, Small Modular nuclear reactors, from a technological point of view would solve a lot of problems. The idea is that they’re portable, and you can just put them into city whenever you need an incremental increase in supply. And best yet, it dovetails with a lot of green goals, because you could plug it into a pre existing coal plant that you’re decommissioning because all the transformers are there, all of the electrical connections to the grid are there already. And in that sort of environment, it’s very, very easy, just kind of plug and play. The downside is that this hasn’t been operationalized. Yet. The prototype is being built by a corporate alliance that involves a company called Nucor, and
excuse me, and a B, National Lab system. And we should know in a year or two, whether or not the prototype works, if the prototype works, then they have to operationalize it, and then they can bring it into mass manufacturing. But you shouldn’t expect to see appreciable numbers of these things out there in the best case scenario before 2030 2035. So it is a very promising technology. But to be perfectly blunt, it doesn’t exist yet. All right, second, artificial intelligence. This is one of those things, it’s right on the cusp. So we’ve all heard of chat GPT. And we’ve all probably played with it on our phones and our computers at a really has come a long way in a very short period of time. And Chet GPT driven or AI driven programs are now available for purchase in a large number of industries. And they’re having a very sizeable impact. The problem here is going to be hardware. Not every chip is capable of doing the kind of processing that is required for AI. It’s really only the best chips that are available. And those are the ones that are like four nanometers and smaller. Now, all of these chips, almost all of them are manufactured in Taiwan. And if you put the security issue of the China Taiwan issue to the side for a moment, which is relevant. The real problem is the ecosystem that supports that manufacturing. To put in military terms, I want to simply the point of the spear, everything that’s behind that thrust requires globalization. You’ve got several 1000 companies, it’s about 9000 now that are involved in building the stuff that allows us to build those chips, and half of those steps are only done by one company in one country.
With a single staff, who has no global competition, and who has only one customer, it’s globalization in its perfect form. And it’s taken us 60 years to get here. So if you break down globalization really anywhere of significance, you’re going to lose the ability to make those chips and mass now we can rebuild that ecosystem. But that’s a decade process in an environment where we don’t have a lot of capital. Okay, so that’s number two. What’s number three? Number three is space. One of the many, many things that Elon Musk has done in his illustrious career, he’s created something called SpaceX, which has dropped the cost of launching things into orbit by about 90%.
You know, it’s not really a crazy idea that you should reuse your rockets, right? Anyway, by dropping those costs, we have been able to open up the frontier of satellites, to pretty much any industry who’s interested, a lot of this is now going into r&d, which is giving us a less expensive way to do tech development, which was overall great. But mostly, I think it’s going to be those industries that are dependent upon transfer of information. It was one thing when the US military had a monopoly, sorry, uphill, when the US military had an monopoly on global communications, we’re not in that world anymore. And now private companies can have constellations of satellites that allow for instantaneous transmission of information, and increasingly so at scale. So satellite communications at scale, at a corporate level, maybe even down to the personal level, where any company that midsize or better, can have their own secure satellite network, that is going to generate a lot more connectivity than we’ve been used to seeing even with the web. And it’s gonna allow people to compartmentalize it, and keep it secure, which will, at least in part, overcome some of those restrictions on technological development. So expect to see a lot more in this space. And who knows, space tourism might turn out to be really interesting, although I’m not holding my breath. Getting a person into space requires a habitat. And until we have that habitat, I wouldn’t really count on it really going anywhere too extreme. Okay, what’s next number for biologic drugs. One of the many outcomes of cracking and mapping the human genome is we now are able to tailor medications on a person by person basis. And as computing power has gotten better and better and better, were able to do so with a reasonable speed at it’s still an exorbitant cost. But to be perfectly blunt, the sort of people who will pay $40,000 to live in an extra couple of years, they’ve got the money. So this is one of those things that has become an exception from the capital shortage rule. Because the people who are most interested in preceded Ford, for personal reasons, are absolutely willing to put their own personal money into it. I’m not going to say anything gaudy. Like this is the end of cancer. But if cancer is going to end, this is probably how it’s going to happen. A drugs that are tailored to a specific situation and a specific person over a specific timeframe of high cost, yes. But every time it’s done, a cost is going to come down. And if you fast forward this 10 years, you’re looking at the number of treatments for everything from psoriasis, to cancer, to heart disease, to leukemia,
that may not be able to be cured in the traditional sense, but can be managed kind of like HIV is today. All right, next is shale. Now the shale revolution has gone through a number of iterations, all of which have driven down the cost of producing.
At first, we were only after the natural gas because it was all we could figure out how to get out and we choose the technologies were able to go after oil, then we were able to do longer laterals make each individual well more productive than we put in data analytics. And we were able to custom frack each stage of each well. It’s gotten better and better and better. It’s probably about 16 100% better than it was when it started back in 2004. This curve might not be continuing at the same speed that it has been, but it hasn’t leveled out at all. The next couple of phases in the shale revolution are twofold. Number one, we’re seeing the second phase, where we moved into natural gas processing to make chemicals going now into medium manufacturing, and all of those and products for plastics and metals and coatings and such where the United States was already the world leader. We’re really becoming a dominant power in that space.
Second, on the production side itself, the shale revolution used to be the province of the mom and pop companies because they would try every trick they could come up with
In order to increase output, they weren’t very efficient about it, either in terms of time or capital. But it meant that we had hundreds of companies across the United States as oilpatch. Try new things every day. And eventually, they found out some things that worked. Well, all of that has since been combined into a package of best practices. And now the super majors are getting involved. And that means you’ve got companies like Exxon, and especially Chevron, who are buying up large chunks of acreage, not just in producing basins like the Permian. But in kind of older basins like the Barnett, where that technologies kind of passed by, that was where the shale revolution began, that’s not insignificant. But the Permian is just so much more productive, that everybody kind of moved there. Well, now, you can take these technologies, apply them with the power of a super major and bring them back to some of the original fields. And this doesn’t require a huge amount of technological breakthrough. And even if it did, it still be okay, because it’s the super majors that are doing this, and they’re able to raise their own capital. And so when you see capital costs going up on a global basis, it doesn’t affect them nearly as much as you might think, that suggests that the United States is facing a third shale revolution
where our production capacity will totally outstrip our needs. And then the question is geopolitically what does the US do with all of that? That’s a political question. That’s a security question, that is a question for another time. And then finally, the sixth one, the one that I think that is most likely to have a transformative impact is in agriculture. Kind of how data processing has remade what is possible with say, satellite communications, and AI and shale, it’s done the same thing in agriculture. We now have new cultivars out there that really focus a plant on producing its fruit as opposed to its stock. So if you were to go into iOS 15 years ago, all of the hybrids that were out there, by the time you got to the end of July, and early August, you’re talking about plants that are 1213 feet tall, and you have just laden with corn. Well, now, they’re probably half that height. But the amount of corn they’re producing is twice as much. This sort of gene editing slash GMO, and from my point of view, these are the same technologies, I realize that a lot of people try to differentiate those. But whatever, there are massively increasing yields if you have access to the scientific supply chain that is necessary to produce the seed.
In addition, a I married to agriculture raises the possibility of individual care for each individual plant. And once you remove broadcasting, and put that in the cost of inputs to the system for pesticide, the fertilizer, and the rest, go down dramatically, even as the yield per plant goes up. So in the United States by 2032, I have no doubt that agricultural output for all of the row crops is going to be roughly doubled, maybe even more. And the best part of this is it’s not dependent on everything else. Like let’s say we lose the capacity to make AI chips at scale. Well, the AI chips that you’re going to need in agricultural equipment, are not going to be much more than you would need for a normal car.
And each farmer only needs one of each thing. Not like you have to do a mass fleet here in order to apply these things. But anyway, those are the six in order of improvement that I think have the best chance of actually changing some of the things of the world. Now, you’ll notice, a lot of these disproportionately benefit. first world countries, you have to have a lot of row crop to get to benefit from the Ag situation, you’ve got to have a legal structure to benefit from the shale situation. You’ve got to have a lot of disposable income at the top in order to benefit from the biologic drugs situation.
Every technological change throughout history
has always benefited some regions of some countries, some people more than others. That’s not going to change at all. And since the United States is the country that has the most 20 and 30 somethings that are skilled, and the most capital, even in this new era, you should expect these changes to have an impact here, first and foremost. And what happens after that? Well, then we get into politics and security. All right. That’s it. I’ll catch you guys later. Bye.