Category: What I’m Reading

  • Not your grandma’s geothermal energy

    The pursuit of carbon-free energy has largely leaned on intermittent sources of energy — like wind and solar; and sources that require a great deal of initial investment — like hydroelectric (which requires elevated bodies of water and dams) and nuclear (which require you to set up a reactor).

    The theoretical beauty of geothermal power is that, if you dig deep enough, virtually everywhere on planet earth is hot enough to melt rock (thanks to the nuclear reactions that heat up the inside of the earth). But, until recently, geothermal has been limited to regions of Earth where well-formed geologic formations can deliver predictable steam without excessive engineering.

    But, ironically, it is the fracking boom, which has helped the oil & gas industries get access to new sources of carbon-producing energy, which may help us tap geothermal power in more places. As fracking and oil & gas exploration has led to a revolution in our ability to precisely drill deep underground and push & pull fluids, it also presents the ability for us to tap more geothermal power than ever before. This has led to the rise of enhanced geothermal, the process by which we inject water deep underground to heat, and leverage the steam produced to generate electricity. Studies suggest the resource is particularly rich and accessible in the Southwest of the United States (see map below) and could be an extra tool in our portfolio to green energy consumption.

    (Source: Figure 5 from NREL study on enhanced geothermal from Jan 2023)

    While there is a great deal of uncertainty around how much this will cost and just what it will take (not to mention the seismic risks that have plagued some fracking efforts), the hunger for more data center capacity and the desire to power this with clean electricity has helped startups like Fervo Energy and Sage Geosystems fund projects to explore.

    On 17 October, Fervo Energy, a start-up based in Houston, Texas, got a major boost as the US government gave the green light to the expansion of a geothermal plant Fervo is building in Beaver County, Utah. The project could eventually generate as much as 2,000 megawatts — a capacity comparable with that of two large nuclear reactors. Although getting to that point could take a while, the plant already has 400 MW of capacity in the pipeline, and will be ready to provide around-the-clock power to Google’s energy-hungry data centres, and other customers, by 2028. In August, another start-up, Sage Geosystems, announced a partnership with Facebook’s parent company Meta to deliver up to 150 MW of geothermal power to Meta’s data centres by 2027.

    Geothermal power is vying to be a major player in the world’s clean-energy future
    David Castelvecchi | Nature News

  • Who needs humans? Lab of AIs designs valid COVID-binding proteins

    A recent preprint from Stanford has demonstrated something remarkable: AI agents working together as a team solving a complex scientific challenge.

    While much of the AI discourse focuses on how individual large language models (LLMs) compare to humans, much of human work today is a team effort, and the right question is less “can this LLM do better than a single human on a task” and more “what is the best team-up of AI and human to achieve a goal?” What is fascinating about this paper is that it looks at it from the perspective of “what can a team of AI agents achieve?”

    The researchers tackled an ambitious goal: designing improved COVID-binding proteins for potential diagnostic or therapeutic use. Rather than relying on a single AI model to handle everything, the researchers tasked an AI “Principal Investigator” with assembling a virtual research team of AI agents! After some internal deliberation, the AI Principal Investigator selected an AI immunologist, an AI machine learning specialist, and an AI computational biologist. The researchers made sure to add an additional role, one of a “scientific critic” to help ground and challenge the virtual lab team’s thinking.

    The team composition and phases of work planned and carried out by the AI principal investigator
    (Source: Figure 2 from Swanson et al.)

    What makes this approach fascinating is how it mirrors high functioning human organizational structures. The AI team conducted meetings with defined agendas and speaking orders, with a “devil’s advocate” to ensure the ideas were grounded and rigorous.

    Example of a virtual lab meeting between the AI agents; note the roles of the Principal Investigator (to set agenda) and Scientific Critic (to challenge the team to ground their work)
    (Source: Figure 6 from Swanson et al.)

    One tactic that the researchers said helped with boosting creativity that is harder to replicate with humans is running parallel discussions, whereby the AI agents had the same conversation over and over again. In these discussions, the human researchers set the “temperature” of the LLM higher (inviting more variation in output). The AI principal investigator then took the output of all of these conversations and synthesized them into a final answer (this time with the LLM temperature set lower, to reduce the variability and “imaginativeness” of the answer).

    The use of parallel meetings to get “creativity” and a diverse set of options
    (Source: Supplemental Figure 1 from Swanson et al.)

    The results? The AI team successfully designed nanobodies (small antibody-like proteins — this was a choice the team made to pursue nanobodies over more traditional antibodies) that showed improved binding to recent SARS-CoV-2 variants compared to existing versions. While humans provided some guidance, particularly around defining coding tasks, the AI agents handled the bulk of the scientific discussion and iteration.

    Experimental validation of some of the designed nanobodies; the relevant comparison is the filled in circles vs the open circles. The higher ELISA assay intensity for the filled in circles shows that the designed nanbodies bind better than their un-mutated original counterparts
    (Source: Figure 5C from Swanson et al.)

    This work hints at a future where AI teams become powerful tools for human researchers and organizations. Instead of asking “Will AI replace humans?”, we should be asking “How can humans best orchestrate teams of specialized AI agents to solve complex problems?”

    The implications extend far beyond scientific research. As businesses grapple with implementing AI, this study suggests that success might lie not in deploying a single, all-powerful AI system, but in thoughtfully combining specialized AI agents with human oversight. It’s a reminder that in both human and artificial intelligence, teamwork often trumps individual brilliance.

    I personally am also interested in how different team compositions and working practices might lead to better or worse outcomes — for both AI teams and human teams. Should we have one scientific critic, or should their be specialist critics for each task? How important was the speaking order? What if the group came up with their own agendas? What if there were two principal investigators with different strengths?

    The next frontier in AI might not be building bigger models, but building better teams.

    The Virtual Lab: AI Agents Design New SARS-CoV-2 Nanobodies with Experimental Validation
    Kyle Swanson et al. | bioRxiv PrePrint

  • A Digital Twin of the Whole World in the Cloud

    As a kid, I remember playing Microsoft Flight Simulator 5.0 — while I can’t say I really understood all the nuances of the several hundred page manual (which explained how ailerons and rudders and elevators worked), I remember being blown away with the idea that I could fly anywhere on the planet and see something reasonably representative there.

    Flash forward a few decades and Microsoft Flight Simulator 2024 can safely be said to be one of the most detailed “digital twins” of the whole planet ever built. In addition to detailed photographic mapping of many locations (I would imagine a combination of aerial surveillance and satellite imagery) and an accurate real world inventory of every helipad (including offshore oil rigs!) and glider airport, they also simulate flocks of animals, plane wear and tear, how snow vs mud vs grass behave when you land on it, wake turbulence, and more! And, just as impressive, it’s being streamed from the cloud to your PC/console when you play!

    Who said the metaverse is dead?

    People are dressed in clothes and styles matching their countries of origin. They speak in the language of their home countries. Flying from the US to Finland on a commercial plane? Walk through the cabin: you’ll hear both English and Finnish being spoken by the passengers.

    Neumann, who has a supervising producer credit on 2013’s Zoo Tycoon and a degree in biology, has a soft-spot for animals and wants to make sure they’re also being more realistically simulated in MSFS 2024. “I really didn’t like the implementation of the animal flights in 2020,” he admitted. “It really bothered me, it was like, ‘Hey, find the elephants!’ and there’s a stick in the UI and there’s three sad-looking elephants.

    “There’s an open source database that has all wild species, extinct and living, and it has distribution maps with density over time,” Neumann continued. Asobo is drawing from that database to make sure animals are exactly where they’re supposed to be, and that they have the correct population densities. In different locations throughout the year, “you will find different stuff, but also they’re migrating,” so where you spot a herd of wildebeests or caribou one day might not be the same place you find them the next.

    Microsoft Flight Simulator 2024: The First Preview
    Seth G. Macy | IGN

  • Making a Movie to Make Better Video Encoding

    Until I read this Verge article, I had assumed that video codecs were a boring affair. In my mind, every few years, the industry would get together and come up with a new standard that promised better compression and better quality for the prevailing formats and screen types and, after some patent licensing back and forth, the industry would standardize around yet another MPEG standard that everyone uses. Rinse and repeat.

    The article was an eye-opening look at how video streamers like Netflix are pushing the envelope on using video codecs. Since one of a video streamer’s core costs is the cost of video bandwidth, it would make sense that they would embrace new compression approaches (like different kinds of compression for different content, etc.) to reduce those costs. As Netflix embraces more live streaming content, it seems they’ll need to create new methods to accommodate.

    But what jumped out to me the most was that, in order to better test and develop the next generation of codec, they produced a real 12 minute noir film called Meridian (you can access it on Netflix, below is someone who uploaded it to YouTube) which presents scenes that have historically been more difficult to encode with conventional video codecs (extreme lights and shadows, cigar smoke and water, rapidly changing light balance, etc).

    Absolutely wild.

    While contributing to the development of new video codecs, Aaron and her team stumbled across another pitfall: video engineers across the industry have been relying on a relatively small corpus of freely available video clips to train and test their codecs and algorithms, and most of those clips didn’t look at all like your typical Netflix show. “The content that they were using that was open was not really tailored to the type of content we were streaming,” recalled Aaron. “So, we created content specifically for testing in the industry.”

    In 2016, Netflix released a 12-minute 4K HDR short film called Meridian that was supposed to remedy this. Meridian looks like a film noir crime story, complete with shots in a dusty office with a fan in the background, a cloudy beach scene with glistening water, and a dark dream sequence that’s full of contrasts. Each of these shots has been crafted for video encoding challenges, and the entire film has been released under a Creative Commons license. The film has since been used by the Fraunhofer Institute and others to evaluate codecs, and its release has been hailed by the Creative Commons foundation as a prime example of “a spirit of cooperation that creates better technical standards.”

    Inside Netflix’s Bet on Advanced Video Encoding
    Janko Roettgers | The Verge

  • Games versus Points

    The Dartmouth College Class of 2024, for their graduation, got a very special commencement address from tennis legend Roger Federer.

    There is a wealth of good advice in it, but the most interesting point that jumped out to me is that while Federer won a whopping 80% of the matches he played in his career, he only won 54% of the points. It underscores the importance of letting go of small failures (“When you lose every second point, on average, you learn not to dwell on every shot”) but also of keeping your eye on the right metric (games, not points).

    In tennis, perfection is impossible… In the 1,526 singles matches I played in my career, I won almost 80% of those matches… Now, I have a question for all of you… what percentage of the POINTS do you think I won in those matches?

    Only 54%.

    In other words, even top-ranked tennis players win barely more than half of the points they play.

    2024 Commencement Address by Roger Federer

  • Biopharma scrambling to handle Biosecure Act

    Strong regional industrial ecosystems like Silicon Valley (tech), Boston (life science), and Taiwan (semiconductors) are fascinating. Their creation is rare and requires local talent, easy access to supply chains and distribution, academic & government support, business success, and a good amount of luck.

    But, once set in place, they can be remarkably difficult to unseat. Take the semiconductor industry as an example. It’s geopolitical importance has directed billions of dollars towards re-creating a domestic US industry. But, it faces an uphill climb. After all, it’s not only a question of recreating the semiconductor manufacturing factories that have gone overseas, but also:

    • the advanced and low-cost packaging technologies and vendors that are largely based in Asia
    • the engineering and technician talent that is no longer really in the US
    • the ecosystem of contractors and service firms that know exactly how to maintain the facilities and equipment
    • the supply chain for advanced chemicals and specialized parts that make the process technology work
    • the board manufacturers and ODMs/EMSs who do much of the actual work post-chip production that are also concentrated in Asia

    A similar thing has happened in the life sciences CDMO (contract development and manufacturing organization) space. In much the same way that Western companies largely outsourced semiconductor manufacturing to Asia, Western biopharma companies outsourced much of their core drug R&D and manufacturing to Chinese companies like WuXi AppTec and WuXi Biologics. This has resulted in a concentration of talent and an ecosystem of talent and suppliers there that would be difficult to supplant.

    Enter the BIOSECURE Act, a bill being discussed in the House with a strong possibility of becoming a law. It prohibits the US government from working with companies that obtain technology from Chinese biotechnology companies of concern (including WuXi AppTec and WuXi Biologics, among others). This is causing the biopharma industry significant anxiety as they are forced to find (and potentially fund) an alternative CDMO ecosystem that currently does not exist at the level of scale and quality as it does with WuXi.

    According to [Harvey Berger, CEO of Kojin Therapeutics], China’s CDMO industry has evolved to a point that no other country comes close to. “Tens of thousands of people work in the CDMO industry in China, which is more than the rest of the world combined,” he says.

    Meanwhile, Sound’s Kil says he has worked with five CDMOs over the past 15 years and is sure he wouldn’t return to three of them. The two that he finds acceptable are WuXi and a European firm.

    “When we asked the European CDMO about their capacity to make commercial-stage quantities, they told us they would have to outsource it to India,” Kil says. WuXi, on the other hand, is able to deliver large quantities very quickly. “It would be terrible for anyone to restrict our ability to work with WuXi AppTec.”

    A hand giving pills to another hand with a backdrop of the US and China flags.

    Industry braces for Biosecure Act impact
    Aayushi Pratap | C&EN

  • Freedom and Prosperity Under Xi Jinping

    Fascinating chart from Bloomberg showing level of economic freedom and prosperity under different Chinese rulers and how Xi Jinping is the first Chinese Communist Party ruler in history to have presided over sharp declines in both freedom and prosperity.

    Given China’s rising influence in economic and geopolitical affairs, how it’s leaders (and in particular, Xi) and it’s people react to this will have significant impacts on the world

    ‘Are You Better Off?’ Asking Reagan’s Question in Xi’s China
    Rebecca Choong Wilkins and Tom Orlik | Bloomberg

  • How the Jones Act makes energy more expensive and less green

    The Merchant Marine Act of 1920 (aka “The Jones Act”) is a law which requires ships operating between US ports to be owned by, made in, and crewed by US citizens.

    While many “Made in the USA” laws are on the books and attract the anger of economists and policy wonks, the Jones Act is particularly egregious as the costs and effects are so large. The Jones Act costs states like Hawaii and Alaska and territories like Puerto Rico dramatically as they rely so much on ships for basic commerce that it was actually cheaper for Hawaii and New England to import oil from other countries (like Hawaii did from Russia until the Ukraine war) than it was to have oil shipped from the Gulf of Mexico (where American oil is abundant).

    In the case of offshore wind, the Jones Act has pushed those companies willing to experiment with the promising technology, to ship the required parts and equipment from overseas because there are no Jones Act-compliant ships capable of moving the massive equipment that is involved.

    This piece from Canary Media captures some of the dynamics and the “launch” of the still-in-construction $625 million Jones Act-compliant ship the Charybdis Dominion Energy will use to support its offshore wind facility.

    To satisfy that mandate, Dominion commissioned the first-ever Jones Act–compliant vessel for offshore wind installation, which hit the water in Brownsville, Texas, last week. The hull welding on the 472-foot vessel is complete, as are its four enormous legs, which will hoist it out of the water during turbine installation. This $625 million leviathan, named Charybdis after the fearsome sea-monster foe of Odysseus, still needs some finishing touches before it sets sail to Virginia, which is expected to happen later this year. 

    Charybdis’ completion will be a win for what’s left of the American shipbuilding industry. The Jones Act, after all, was intended to bolster American shipbuilders and merchant seamen in the isolationist spell following World War I. But a century later, it creates a series of confounding and counterintuitive challenges for America’s energy industry, which frequently redound poorly for most Americans. 

    …

    Elsewhere in the energy industry, the expense and difficulty associated with finding scarce Jones Act–compliant ships push certain American communities to rely more on foreign energy suppliers. Up until 2022, Hawaii turned to Russia for one-third of the oil that powered its cars and power plants. The Jones Act made it too hard or costly to import abundant American oil to the U.S. state, leaving Hawaii scrambling for other sources when Russia invaded Ukraine. 

    Over in New England, constraints on fossil-gas pipelines sometimes force the region to import gas via LNG terminals. The U.S. has plenty of fossil gas to tap in the Gulf of Mexico, but a lack of U.S. ships pushes Massachusetts and its neighbors to buy gas from other countries instead. 

    US offshore wind needs American-made ships. The first is nearly ready
    Julian Spector | Canary Media

  • Why Intel has to make its foundry business work

    Historically, Intel has (1) designed and (2) manufactured its chips that it sells (primarily into computer and server systems). It prided itself on having the most advanced (1) designs and (2) manufacturing technology, keeping both close to its chest.

    In the late 90s/00s, semiconductor companies increasingly embraced the “fabless model”, whereby they would only do the (1) design while outsourcing the manufacturing to foundries like TSMC. This made it much easier and less expensive to build up a burgeoning chip business and is the secret to the success of semiconductor giants like NVIDIA and Qualcomm.

    Companies like Intel scoffed at this, arguing that the combination of (1) design and (2) manufacturing gave their products an advantage, one that they used to achieve a dominant position in the computing chip segment. And, it’s an argument which underpins why they have never made a significant effort in becoming a contract manufacturer — after all, if part of your technological magic is the (2) manufacturing, why give it to anyone else?

    The success of TSMC has brought a lot of questions about Intel’s advantage in manufacturing and, given recent announcements by Intel and the US’s CHIPS Act, a renewed focus on actually becoming a contract manufacturer to the world’s leading chip designers.

    While much of the attention has been paid to the manufacturing prowess rivalry and the geopolitical reasons behind this, I think the real reason Intel has to make the foundry business work is simple: their biggest customers are all becoming chip designers.

    While a lot of laptops and desktops and servers are still sold in the traditional fashion, the reality is more and more of the server market is being dominated by a handful of hyperscale data center operators like Amazon, Google, Meta/Facebook, and Microsoft, companies that have historically been able to obtain the best prices from Intel because of their volume. But, in recent years, in the chase for better and better performance and cost and power consumption, they have begun designing their own chips adapted to their own systems (as this latest Google announcement for Google’s own ARM-based server chips shows).

    Are these chips as good as Intel’s across every dimension? Almost certainly not. It’s hard to overtake a company like Intel’s decades of design prowess and market insight. But, they don’t have to be. They only have to be better at the specific use case Google / Microsoft / Amazon / etc need it to be for.

    And, in that regard, that leaves Intel with really only one option: it has to make the foundry business work, or it risks losing not just the revenue from (1) designing a data center chip, but from the (2) manufacturing as well.

    Axion processors combine Google’s silicon expertise with Arm’s highest performing CPU cores to deliver instances with up to 30% better performance than the fastest general-purpose Arm-based instances available in the cloud today, up to 50% better performance and up to 60% better energy-efficiency than comparable current-generation x86-based instances1. That’s why we’ve already started deploying Google services like BigTable, Spanner, BigQuery, Blobstore, Pub/Sub, Google Earth Engine, and the YouTube Ads platform on current generation Arm-based servers and plan to deploy and scale these services and more on Axion soon.

    Introducing Google Axion Processors, our new Arm-based CPUs
    Amin Vahdat | Google Blog

  • Starlink in the wrong hands

    On one level, this shouldn’t be a surprise. Globally always available satellite constellation = everyone and anyone will try to access this. This was, like many technologies, always going to have positive impacts — i.e. people accessing the internet where they otherwise couldn’t due to lack of telecommunications infrastructure or repression — and negative — i.e. terrorists and criminal groups evading communications blackouts.

    The question is whether or not SpaceX had the foresight to realize this was a likely outcome and to institute security processes and checks to reduce the likelihood of the negative.

    That remains to be seen…

    In Yemen, which is in the throes of a decade-long civil war, a government official conceded that Starlink is in widespread use. Many people are prepared to defy competing warring factions, including Houthi rebels, to secure terminals for business and personal communications, and evade the slow, often censored internet service that’s currently available.

    Or take Sudan, where a year-long civil war has led to accusations of genocide, crimes against humanity and millions of people fleeing their homes. With the regular internet down for months, soldiers of the paramilitary Rapid Support Forces are among those using the system for their logistics, according to Western diplomats.

    Elon Musk’s Starlink Terminals Are Falling Into the Wrong Hands
    Bruce Einhorn, Loni Prinsloo, Marissa Newman, Simon Marks | Bloomberg

  • Why don’t we (still) have rapid viral diagnostics?

    One of the most disappointing outcomes in the US from the COVID pandemic was the rise of the antivaxxer / public health skeptic and the dramatic politicization of public health measures.

    But, not everything disappointing has stemmed from that. Our lack of cheap rapid tests for diseases like Flu and RSV is a sad reminder of our regulatory system failing to learn from the COVID crisis of the value of cheap, rapid in-home testing or adopting to the new reality that many Americans now know how to do such testing.

    Dr. Michael Mina, the chief science officer for the at-home testing company eMed, said the FDA tends to have strict requirements for over-the-counter tests. The agency often asks manufacturers to conduct studies that demonstrate that people can administer at-home tests properly — a process that may cost millions of dollars and delay the test’s authorization by months or years, Mina said.

    “It’s taken a very long time in the past to get new self-tests authorized, like HIV tests or even pregnancy tests,” he said. “They’ve taken years and years and years and years. We have a pretty conservative regulatory approach.”

    Rapid tests for Covid, RSV and the flu are available in Europe. Why not in the U.S.?
    Aria Bendix | NBC News

  • Huggingface: security vulnerability?

    Anyone who’s done any AI work is familiar with Huggingface. They are a repository of trained AI models and maintainer of AI libraries and services that have helped push forward AI research. It is now considered standard practice for research teams with something to boast to publish their models to Huggingface for all to embrace. This culture of open sharing has helped the field make its impressive strides in recent years and helped make Huggingface a “center” in that community.

    However, this ease of use and availability of almost every publicly accessible model under the sun comes with a price. Because many AI models require additional assets as well as the execution of code to properly initialize, Huggingface’s own tooling could become a vulnerability. Aware of this, Huggingface has instituted their own security scanning procedures on models they host.

    But security researchers at JFrog have found that even with such measures, have identified a number of models that exploit gaps in Huggingface’s scanning which allow for remote code execution. One example model they identified baked into a Pytorch model a “phone home” functionality which would initiate a secure connection between the server running the AI model and another (potentially malicious) computer (seemingly based in Korea).

    The JFrog researchers were also able to demonstrate that they could upload models which would allow them to execute other arbitrary Python code which would not be flagged by Huggingface’s security scans.

    While I think it’s a long way from suggesting that Huggingface is some kind of security cesspool, the research reminds us that so long as a connected system is both popular and versatile, there will always be the chance for security risk, and it’s important to keep that in mind.

    As with other open-source repositories, we’ve been regularly monitoring and scanning AI models uploaded by users, and have discovered a model whose loading leads to code execution, after loading a pickle file. The model’s payload grants the attacker a shell on the compromised machine, enabling them to gain full control over victims’ machines through what is commonly referred to as a “backdoor”. This silent infiltration could potentially grant access to critical internal systems and pave the way for large-scale data breaches or even corporate espionage, impacting not just individual users but potentially entire organizations across the globe, all while leaving victims utterly unaware of their compromised state. 

    Data Scientists Targeted by Malicious Hugging Face ML Models with Silent Backdoor
    David Cohen | JFrog blog

  • Nope, the Dunning-Kruger Effect is just bad statistics

    The Dunning-Kruger effect encapsulates something many of us feel familiar with: that the least intelligent oftentimes assume they know more than they actually do. Wrap that sentiment in an academic paper written by two professors at an Ivy League institution and throw in some charts and statistics and you’ve got a easily citable piece of trivia to make yourself feel smarter than the person who you just caught commenting on something they know nothing about.

    Well, according to this fascinating blog post (HT: Eric), we have it all wrong. The way that Dunning-Kruger constructed their statistical test was designed to always construct a positive relationship between skill and perceived ability.

    The whole thing is worth a read, but they showed that using completely randomly generated numbers (where there is no relationship between perceived ability and skill), you will always find a relationship between the “skill gap” (perceived ability – skill) and skill, or to put it more plainly,

    (y-x) \sim x

    With y being perceived ability and x being actual measured ability.

    What you should be looking for is a relationship between perceived ability and measured ability (or directly between y and x) and when you do this with data, you find that the evidence for such a claim generally isn’t there!

    In other words:

    The Dunning-Kruger effect also emerges from data in which it shouldn’t. For instance, if you carefully craft random data so that it does not contain a Dunning-Kruger effect, you will still find the effect. The reason turns out to be embarrassingly simple: the Dunning-Kruger effect has nothing to do with human psychology. It is a statistical artifact — a stunning example of autocorrelation.

    The Dunning-Kruger Effect is Autocorrelation
    Blair Fix | Economics from the Top Down

  • Cat Bond Fortunes

    Until recently, I only knew of the existence of cat(astrophe) bonds — financial instruments used to raise money for insurance against catastrophic events where investors profit when no disaster happens.

    I had no idea, until reading this Bloomberg article about the success of Fermat Capital Management, how large the space had gotten ($45 billion!!) or how it was one of the most profitable hedge fund strategies of 2023!

    This is becoming an increasingly important intersection between climate change and finance as insurance companies and property owners struggle with the rising risk of rising damage from extreme climate events. Given how young much of the science of evaluating these types of risks is, it’s no surprise that quantitative minds and modelers are able to profit here.

    The entire piece reminded me of Richard Zeckhauser’s famous 2006 article Investing in the Unknown and Unknowable which covers how massive investment returns can be realized by tackling problems that seem too difficult for other investors to understand.

    Investing in cat bonds was the most profitable hedge fund strategy of 2023. Fermat delivered a 20% return, beating the average 8% achieved by hedge funds as a whole. While other cat bond funds did well too, Fermat’s $10 billion portfolio — capturing a quarter of the market — made it by far the most prolific investor to take advantage of a bumper year.

    Cat bonds investors are gambling on nature. If a disaster they’ve bet on occurs, their money is used to settle insurance claims. If it doesn’t, they get handsome returns. For decades, the instruments were a last resort reserved for super-rare events, such as a cataclysmic storm on the scale of Hurricane Katrina. But multibillion-dollar calamities have become alarmingly frequent on a warmer planet.

    “The insurance market is on edge,” says Seo. “It’s freaked out about risk and wants as little as possible.”

    How a Physics Whiz Made a Fortune Betting on Nature’s Catastrophes
    Gautam Naik | Bloomberg

  • Shein and Temu now drive global cargo

    Maybe you have shopped on Shein or Temu. Maybe you only know someone (younger?) who has. Maybe you only know Temu because of their repeat Superbowl ads.

    But these Chinese eCommerce companies are now the main driver behind air and ship cargo rates with Temu and Shein combined accounting for 9,000 tons per day of shipments!

    This is scale.

    Shein and Temu together send almost 600,000 packages to the United States every day, according to a June 2023 report by the U.S. Congress – is boosting air-freight costs from Asian hubs like Guangzhou and Hong Kong, making off-peak seasons almost disappear and causing capacity shortages, the sources said.

    “The biggest trend impacting air freight right now is not the Red Sea, it’s Chinese e-commerce companies like Shein or Temu,” said Basile Ricard, director of Greater China operations at freight forwarder Bollore Logistics

    Rise of fast-fashion Shein, Temu roils global air cargo industry
    Arriana McLymore, Casey Hall, and Lisa Barrington | Reuters

  • Geothermal data centers

    The data centers that power AI and cloud services are limited by 3 things:

    • the server hardware (oftentimes limited by access to advanced semiconductors)
    • available space (their footprint is massive which makes it hard to put them close to where people live)
    • availability of cheap & reliable (and, generally, clean) power

    If you, as a data center operator, can tap a new source of cheap & reliable power, you will go very far as you alleviate one of the main constraints on the ability to add to your footprint.

    It’s no small wonder, then, that Google is willing to explore partnerships with next-gen geothermal startups like Fervo in a meaningful long-term fashion.

    But Google is hoping the road to commercialization for next-generation geothermal will mimic the early days of the tech industry’s solar procurement efforts, Maud Texier, global director of clean energy and decarbonization development, told Latitude Media.

    “While there are some important differences between solar and geothermal technologies, we would like to see geothermal power follow a similar trajectory as solar has over the last few decades in terms of rapid cost declines and performance improvements,” Texier said.

    A geothermal plant

    Google: Geothermal could follow ‘similar trajectory’ to solar
    Maeve Allsup | Latitude Media

  • Dexcom non-prescription glucose monitor approved

    Cheap and accurate continuous glucose monitoring is a bit of a holy grail for consumer metabolic health as it allows people to understand how their diet and exercise impact their blood sugar levels, which can vary from person to person.

    It’s also a holy grail for diabetes care as making sure blood sugar levels are neither too high nor too low is critical for health (too low and you can pass out or risk seizure or coma; too high and you risk diabetic neuropathy, kidney disease, and cardiovascular problems). For Type I diabetics and severe Type II diabetics, it’s also vital for dosing insulin.

    Because insulin dosing needs to be done just right, I was always under the impression that one of two things would happen along the way to producing a cheap continuous glucose monitor, either:

    1. The FDA would be hesitant to approve a device that wasn’t highly accurate to avoid the risk of a consumer using the reading to mis-dose insulin OR
    2. The device makers (like Dexcom) would be hesitant to create an accurate enough glucose monitor that it might cannibalize their highly profitable prescription glucose monitoring business

    As a result, I was pleasantly surprised that Dexcom’s over-the-counter Stelo continuous glucose monitor was approved by the FDA. It remains to be seen what the price will be and what level of information the Stelo will share with the customer, but I view this as a positive development and (at least for now) tip my hat to both the FDA and Dexcom here.

    (Thanks to Erin Brodwin from Axios for sharing the news on X)

    Dexcom shared Stelo’s name, and that the device had been submitted to the FDA for review in February. The sensor will be worn on the upper arm and lasts for up to 15 days before it needs to be replaced, according Dexcom.

    Jake Leach, chief operating officer at Dexcom, told CNBC in February that Stelo will have a unique platform and branding. The platform will be tailored to the needs of these Type 2 patients, he said, which means it will not include many of the alerts and notifications meant for diabetes patients at risk of experiencing more serious emergencies.

    “It’s designed to be a simpler experience,” Leach said in an interview. “There’s a lot of people who could benefit.”

    Dexcom’s first-ever over-the-counter glucose monitor patch gets FDA clearance
    Ashley Capoot | CNBC

  • “Corporate” Design

    Read an introspective piece by famed ex-Frog Design leader Robert Fabricant about the state of the design industry and the unease that he says many of his peers are feeling. While I disagree with some of the concerns he lays out around AI / diversity being the drivers of this unease, he makes a strong case for how this is a natural pendulum swing after years of seeing “Chief Design Officers” and design innovation groups added to many corporate giants.

    I’ve had the privilege of working with very strong designers. This has helped me appreciate the value of design thinking as something that goes far beyond “making things pretty” and believe, wholeheartedly, that it’s something that should be more broadly adopted.

    At the same time, it’s also not a surprise to me that during a time of layoffs and cost cutting, a design function which has become a little “spoiled” in the past years and of which calculating financial returns is experiencing some painful transition especially for creative-minded designers who struggle with that ROI evolution.

    If Phase 1 was getting companies to recognize that design thinking is needed, Phase 2 will be the space learning how to measure, communicate, and optimize what the value of a team of seasoned designers brings to the bottom line.

    In recent years, there has also been a shift in the very nature of design leadership inside companies. Where the early corporate pioneers were in “building mode” to establish and integrate design capabilities, these functions are now focused on optimization. That is where the professionals at IBM and Accenture/Song come in, with creativity giving way to utilization as the primary metric of success, particularly in an economic downturn. 

    Magowan of Design Leaders is hearing this sentiment from his clients on the hiring side. “Companies are still adjusting,” he says. “Trying to understand how to embed design properly and not make the mistakes they made by hiring folks into design leadership roles who were not equipped.”

    This transition is not well-suited to most creative leaders, even proven ones like Powell. “Scaling takes attention,” he says. “But once you get there, then you need to keep turning the dial so that this [design] machine runs more and more efficiently. For me that is where it got to be not as fun.” Perhaps 2024, then, is the right moment for the big handoff to the folks at McKinsey Design to lead the charge armed with their corporate reports and CDO roundtables on business value and design effectiveness?

    The big design freak-out: A generation of design leaders grapple with their future
    Robert Fabricant | Fast Company

  • Costco Love

    Nice piece in the Economist about how Costco’s model of operational simplicity leads to a unique position in modern retail: beloved by customers, investors, AND workers:

    • sell fewer things ➡️
    • get better prices from suppliers & less inventory needed ➡️
    • lower costs for customers ➡️
    • more customers & more willing to pay recurring membership fee ➡️
    • strong, recurring profits ➡️
    • ability to pay well and promote from within 📈💪🏻

    Customers are not the only fans of Costco, as the outpouring of affection from Wall Street analysts after Mr Galanti announced his retirement on February 6th made clear. The firm’s share price is 430 times what it was when he took the job nearly four decades ago, compared with 25 times for the s&p 500 index of large companies. It has continued to outperform the market in recent years.

    Why Costco is so loved
    The Economist

  • How packaging tech is changing how we build & design chips

    Once upon a time, the hottest thing in chip design was “system-on-a-chip” (SOC). The idea is that you’d get the best cost and performance out of a chip by combining more parts into one piece of silicon. This would result in smaller area (less silicon = less cost) and faster performance (closer parts = faster communication) and resulted in more and more chips integrating more and more things.

    While the laws of physics haven’t reversed any of the above, the cost of designing chips that integrate more and more components has gone up sharply. Worse, different types of parts (like on-chip memory and physical/analog componentry) don’t scale down as well as pure logic transistors, making it very difficult to design chips that combine all these pieces.

    The rise of new types of packaging technologies, like Intel’s Foveros, Intel’s EMIB, TSMC’s InFO, new ways of separating power delivery from data delivery (backside power delivery), and more, has also made it so that you can more tightly integrate different pieces of silicon and improve their performance and size/cost.

    The result is now that many of the most advanced silicon today is built as packages of chiplets rather than as massive SOC projects: a change that has happened over a fairly short period of time.

    This interview with IMEC (a semiconductor industry research center)’s head of logic technologies breaks this out…

    What we’re doing in CMOS 2.0 is pushing that idea further, with much finer-grained disintegration of functions and stacking of many more dies. A first sign of CMOS 2.0 is the imminent arrival of backside-power-delivery networks. On chips today, all interconnects—both those carrying data and those delivering power—are on the front side of the silicon [above the transistors]. Those two types of interconnect have different functions and different requirements, but they have had to exist in a compromise until now. Backside power moves the power-delivery interconnects to beneath the silicon, essentially turning the die into an active transistor layer which is sandwiched between two interconnect stacks, each stack having a different functionality.

    What is CMOS 2.0?
    Samuel K. Moore | IEEE Spectrum