- (1:00) - A Brief History of Tribal Behavior
- (11:15) - China's Empire Goals: Winner Take All?
- (24:05) - The Final Frontier: Space or AI?
- (30:00) - Inevitable Expeditions: AI Before Mars
- (38:30) - Episode Roundup: Podcast@Zacks.com
Welcome back to Mind Over Money. I'm Kevin Cook, your field guide and story teller for the fascinating arena of behavioral economics.
This is going to be one of my favorite types of episodes where I take 4 important books and connect their big ideas into one bigger conceptual web for you. This is an idea that can give you better perspective on the world, its origins, problems and opportunities, and your ideal role in the grand scheme.
I'll even have some investment ideas to make you money off of ways that other people are playing the game.
Today's 4 books were all published in the last 5 years. I hope to inspire you to pick up at least one of them. And the last one is brand new from late 2019.
In our last episode titled Nationalism vs. Globalism: Technology Overrules Politics, I invited economist John Blank on the show to talk about the rising populist movements, the trade war, and how while our smartphones might be giving us plenty of new problems with addiction and distraction, they symbolize the forces of innovation which could actually overcome our tribalism.
What I mean is what I always say: Technology changes everything but human nature. So while we know that smartphones and social media encourage some tribalism, they can also be tools of information and knowledge sharing that can overcome it.
A Brief History of Human Myths and Mobs
One aspect of the conversation we didn't have time for was the deep historical perspective about our tribal tendencies. And for that view, my favorite book is Sapiens by Yuval Noah Harari.
Sapiensis one of my top 3 recommendations for non-scientists to learn about evolution, along with Stephen Jay Gould's Wonderful Life: The Burgess Shale and the Nature of History and Jared Diamond's Guns, Germs, and Steel. I call these books "deep history."
I'm currently reading Sapiens for the 3rd time, in addition to listening to the Audible version narrated by the excellent Derek Perkins. From the book description...
100,000 years ago, at least six human species inhabited the earth. Today there is only one. Us. Homo Sapiens. How did our species succeed in the battle for dominance? Why did our foraging ancestors come together to create cities and kingdoms? How did we come to believe in gods, nations and human rights; to trust money, books and laws; and to be enslaved by bureaucracy, timetables, consumerism and the pursuit of happiness?
What I love about Harari's presentation is first he nails you with the fact that you are lucky to be here because it wasn't guaranteed that your species was going to win. What made the difference was "The Cognitive Revolution" (Part One of the book) where scruffy little homo sapiens (Latin for "wise man") learned crucial survival skills in the midst of their social interactions: cooperation, vocal language, and empathy.
While those skills enabled such tasks as group hunting and defense, the slow cultural evolution of beliefs, superstitions, rituals and myths became a fabric for ever larger groups to thrive and promote tool-making, advanced technology -- like clothing, fire, weapons, art -- and, of course, population growth.
In Part Two, "The Agricultural Revolution," Harari tells the story of civilization in ways you may not have thought about. For one, he calls the domestication of grains and animals "History’s Biggest Fraud" because most humans in large settlements or cities ended up becoming slaves to the crops and the beasts, as well as to the wealthy and powerful upper-class that these voracious energy consumers (wheat and livestock) fed and enriched.
In Part Three, "The Unification of Humankind," Harari describes the three most important "systems of mutual trust": money, empires, and religion. Indeed, these early experiments with trade, law, and shared myths gave us the ability and social glue to invent ideas like corporations and nation-states.
Finally, in Part Four, "The Scientific Revolution," Harari's historical canvas explodes with color -- and darkness as well as light -- when he explores "The Marriage of Science and Empire" that saw sea-faring expeditions as both conduit and catalyst for the advance of knowledge and technological innovation.
That's our first book today. Remember both the "empire" and "explorer" themes as we'll come back to them in the other 3 books. In the history of colonial imperialism, science and technology often advance at the expense of conquered peoples -- and the winners take all the spoils.
The China Challenge
On January 9, I listened to NPR's Fresh Air where host Terry Gross interviewed Evan Osnos about his new article The Future of America’s Contest with China. Osnos, a staff writer at The New Yorker, a fellow at The Brookings Institution, and a long-time student of China, wrote this piece on US-China relations with good perspective on the voices which might exacerbate conflict (Newt Gingrich, Peter Navarro, and Mike Pompeo) and ways we might coexist as global competitors.
Osnos inspired me to hunt my small local library in Wisconsin and the only good book I found on the shelves was the best one I could have possibly found in any library. Michael Pillsbury published The Hundred-Year Marathon: China's Secret Strategy to Replace America as the Global Superpower in 2015 and has been studying China, and interacting with its top officials, for over 5 decades. He is by far the preeminent US authority on China and could run circles around all other experts.
These new perspectives from Osnos and Pillsbury inspired me to review my stances on China both politically and technologically.
As an investor in Chinese tech companies like Alibaba and Baidu, two giants that roughly mirrored the business models of Amazon and Google, I had written and podcasted several times in the past few years on the tech wars with China.
Is the 4th Industrial Revolution an "Arms Race?"
In August of 2018, I wrote a special report for Zacks Confidential (ZC) titled "Artificial Intelligence: Investing in Life 3.0" in which I reviewed the economic case for investing in AI-focused companies.
In the big build-out arenas -- data centers and smart cities technology -- revenues could exceed $300 billion in 2022 and capital investment could exceed $1 trillion by 2025, according to data from Statista.
I recommended 5 AI-focused companies in that report: NVIDIA (NVDA - Free Report) , Apple, Mellanox, Micron (MU - Free Report) , and Celgene. All weathered the market storms since then and turned out to be solid investments -- especially if you added during the Q4 2018 meltdown. In fact, Mellanox and Celgene were both since acquired by NVIDIA and Bristol-Myers, respectively.
Here's what I wrote then...
For all the industries I mentioned earlier -- manufacturing, energy, automotive, finance, retail, and medicine -- besides new processes and other innovations, companies will be just way more efficient with AI.
That is, once they buy the new platforms and systems that will get them there. And provided they don't have their lunch eaten by Amazon first.
But the race is really just beginning. And that means the next few years will look like an "arms race" as tech giants scramble to out-do each other to those hills of gold.
In a recent KeyBanc research report, the analysts highlight exactly such an "AI Arms Race" as beginning between "the 7 largest Cloud Titans (Amazon, Alphabet, Microsoft, Facebook, Apple, Alibaba, Salesforce)."
(end of Aug 2018 ZC excerpt)
Data: The New Oil for an AI Arms Race
It’s not surprising that those “7 Cloud Titans” are competing heavily in big-data playing fields. (I would round this list out to 10 Titans by adding Baidu, NVIDIA and IBM.) And they are teaching and compelling enterprises from all other sectors how to better compete.
But a bigger battle is going on behind the scenes with the help of those same engineers of the future. And that arena is more consequential and more concerning because it involves the agendas, doctrines and spending budgets of the biggest enterprises: national governments.
A few days following that report, I made a video and article titled AI Arms Race with China: Deep Learning and Investing. I had just listened to a presentation by Kai-Fu Lee about his new book AI Superpowers: China, Silicon Valley, and the New World Order. Lee, a Taiwanese-born American AI pioneer, China expert and venture capitalist worked at Apple, Microsoft, and Google before creating his own company, Sinovation Ventures.
In the book Lee describes how China is rapidly moving forward to become the global leader in AI, and may well surpass the United States, because of China's demographics and its amassing of huge data sets.
He sums up his view in this quote: "If data is the new oil, then China is the new Saudi Arabia." And the book highlights the opportunities and lack of ethical constraints that Chinese leadership faces in data protection and IP regulations.
Does China Believe in Winner-Takes-All?
I saw some pushback in the past year about the "arms race" metaphor. Justin Sherman writing for DefenseOne.com in March 2019 wrote a piece titled "Don’t Call It an ‘Arms Race’: US-China AI Competition Is Not Winner-Takes-All."
But three experts on geopolitics and technology beg to differ on this point.
On Monday this week (January 13), I wrote another special report for Zacks Confidential, our weekly newsletter on investing trends and opportunities.
Its title is “AI Arms Race: Get Smart or Get Disrupted.” In it, I share "5 False Assumptions" about China's goals and strategies from Pillsbury's The Hundred-Year Marathon.
I also highlight 7 "Clues to Chinese Strategic Thinking on Artificial Intelligence and National Security" by Gregory C. Allen, analyst at the Center for a New American Security (CNAS).
My third expert is Lt. Gen. Jack Shanahan, director of the DOD's Joint Artificial Intelligence Center (JAIC). On December 13, Jeanette Steele writing for the U.S. Naval War College (NWC), penned a brief piece titled "JAIC Director Tells Naval War College Audience to ‘Dive In’ on AI."
Speaking to U.S. Naval War College (NWC) students and faculty on Dec 12, the Air Force general and 1996 NWC graduate explained the challenges and opportunities of fielding artificial intelligence technology in the U.S. military. General Shanahan gave a surprising rationale for pursuing AI in the military, which I discuss in the podcast.
If you want to get a copy of my latest AI report with Pillsbury’s “5 False Assumptions” and Allen’s 7 “Clues to Chinese Strategic Thinking,” just email Ultimate@Zacks.com and tell 'em Cooker sent you.
Italso has my top 4 AI stock picks, including NVDA, CrowdStrike (CRWD - Free Report) and Alteryx (AYX - Free Report) . The report details why these 3 non-defense names are among my top picks to capitalize on our AI frontier.
The AI Frontier: An Inevitable Tool for Good or Bad
In the podcast attached to this article, I talk about a few more books you should know of including the new one I'm most excited about, Beyond The Known: How Exploration Created the Modern World and Will Take Us to the Stars by Andrew Rader, a mission manager at SpaceX.
The book is a wonderful tour of history's explorers from ancient mariners to modern astronauts. It's no wonder since Rader is both a historian and an MIT aerospace engineer specializing in long-duration spaceflight.
He also shares some AI insights from his boss Elon Musk, who actually founded SpaceX in 2002 before becoming an early VC investor in Tesla (TSLA - Free Report) in 2003. Musk is famously known for acknowledging the immense potential power of AI as well as warning about its inherent dangers. Rader writes...
"We could be on the brink of ending disease, hunger, and poverty -- but the stakes are high. Even if AI bears no explicit malice towards us, the unforeseen consequences could be disastrous. As suggested by Elon Musk, an AI that controls a hedge fund might maximize profits by shorting consumer stocks, buying defense stocks, and starting a war."
As we learned in Max Tegmark's Life 3.0, a run-away super AI could indeed wreak havoc or take control. And those possibilities are getting closer because the advance of AI is unstoppable and it will inevitably be part of our space exploration technologies.
At least space pioneers like Musk, whose SpaceX was the first private company to successfully launch, orbit, and recover a spacecraft (Dragon 2010), have a huge vested interest in making sure AI is developed and harnessed responsibly, on Earth roads and on the highway to Mars.
Kevin Cook is a Senior Stock Strategist for Zacks Investment Research where he runs the TAZR Trader and Healthcare Innovators portfolios.