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TiB 135: AI in 2020; why the world gets weirder and weirder; Big Tech and the stock market; and more...

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This week: A look at the State of AI in 2020; why the stock market is less disconnected from the econ
 
October 6 · Issue #135 · View online
Matt's Thoughts In Between
This week: A look at the State of AI in 2020; why the stock market is less disconnected from the economy than it looks; how social media has created competing realities; and more…

Welcome new readers! It’s great to have so many new subscribers this week via Dense Discovery - welcome! Forwarded this email? Subscribe here. Enjoy this email? Forward it to a friend.
All the AI news fit to print
Ian Hogarth and Nathan Benaich published their annual State of AI report. It’s a real tour de force - in my view, the best overview of what matters and what’s changing in the world of artificial intelligence. Lots of themes will be familiar to Thoughts in Between readers, including GPT-3 and language models, Clearview and regulation of facial recognition, the battle for AI talent, the geopolitics of semiconductors, and more (It’s also nice to see so many Entrepreneur First companies featured, including Tractable, CloudNC, PolyAI and Papers with Code)
Ian and Nathan note a growing tension between academia and industry over talent. Big Tech AI labs have poached dozens of professors from leading universities: “no AI professor left in 2004, whereas 41 left in 2018 alone”. Given the extraordinary remuneration available to machine learning PhDs in the private sector (see e.g. TiB 11 and TiB 71) this is perhaps inevitable, but is also a long term risk for the sector. And, as the report notes, it affects entrepreneurship too: this paper suggests that when professors leave academia, fewer of their students start startups.
One thing I love about this report is the willingness to make public predictions. Their 2020 predictions were pretty good - 4.5 out of 6 - so it’s worth a look at those for 2021 on slide 172. Two touch on the theme of technological sovereignty, which we discussed last week in TiB 134. First, they think NVIDIA’s proposed acquisition of Arm will be blocked. Second, they predict a surge of Chinese and European investment into homegrown AI defence startups, given the US’s plays in the space. I’m more confident on the second than the first, but both are important spaces to watch. 
Why the stock market booms as the world burns
Back in TiB 110 in April at the height of the crisis, we discussed the apparent disconnect between the historically disastrous economic numbers and the robust performance of the stock market - and looked at the role of central bank intervention in propping up prices. But Nathan Tankus has an excellent new post (with great charts) that argues that there is no disconnect: you can explain the market’s movement’s based on fundamentals, without reference to the Fed’s magic money tree.
Tankus’s argument rests on two core facts. First, companies that have seen the strongest sales growth in the crisis have seen the biggest increase in market cap (see this chart), as you’d expect if prices are driven by fundamentals. Second, and crucially, on average it’s bigger companies that have seen faster growth during the pandemic (see this chart). By definition, what happens to the most valuable companies has the biggest impact on stock market indices, so overall the markets are up.
The most valuable companies have something in common: they’re tech companies (see this chart). I see three important points here. First, as Tankus notes, the market can be fundamentals-driven and still do a bad job of showing how most firms, never mind most people, are doing. Second, Big Tech dominance is only going to become more politically salient. Third, if growth is going to remain concentrated in a handful of tech giants, non-US pension schemes are going to have to shed their home market bias - or ecosystems outside Silicon Valley will need some giants of their own. 
Why does the world feel like it's getting weirder?
The US election continues to turn up ever more extraordinary plot twists - so much so that Twitter jokes about “the writers” are endemic (e.g. here, here and here). But what if this is more than an amusing metaphor? Is there a more fundamental way to explain what Venkatesh Rao calls “the Great Weirding” - the observation that the world’s narrative arc seems to have become a lot stranger since around 2016?
Julian Lehr recently posted an excellent essay on the topic. The core thesis is that social media has broken down information monopolies and so has provided means, motive and opportunity to craft immersive alternative narratives that become real to their participants. You can think of this as Martin Gurri’s thesis on The Revolt of the Public applied to our understanding of reality itself. In Julian’s words, “social media is essentially the democratisation of virtual world building”. The QAnon conspiracy, discussed in TiB 131, is one example, but there are many.
Some argue this is a good thing. Bruno Macaes, whose work is by turns brilliant and infuriating, makes the case in his new book (or see this interview with him) that a post-truth world liberates individuals from the tyranny of facts. This is a mistake. It’s dangerous to confuse an insightful description with normative force. Truth, if nothing else, is a useful Schelling point. And reality, as Trump is discovering, has a way of catching up with you.  
Quick links
  1. What’s up with rich people in Yemen? Fascinating chart of test scores vs income in countries around the world.
  2. Start at the very beginning. Interesting study that suggests that most of the best ideas come in the first minute(!) when brainstorming
  3. Staying power. Of the 85 institutions in the Western world that have survived over 500 years, 70 are universities.
  4. Excel, secret ruler of the world. The UK missed 16,000 coronavirus cases because they were stored in Excel and exceeded the maximum column(!) width
  5. The question is, which is to be master? The fascinating partisan split on what “socialist” means (This explains an awful lot about US political discourse)
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Until next week,
Matt Clifford
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