Everyone has their own way of ‘winding down’ when they get home at the end of a workday. It could be having a drink, cooking, watching television, scrolling through their social media, listening to music or some combination of these. As for me, I enjoy having a cup of coffee from our Nespresso machine and plopping down in ‘my’ chair with a book.
The one I am currently reading is entitled The Sparrow from an author by the name of Maria Doria Russell. The one prior to it was named Engine Summer by John Crowley. The one before Engine Summer was Hampton Sides’ most recent work, The Wide, Wide Sea. I ended April by finishing Andy Weir’s excellent The Hail Mary Project, and I will leave it at that.
If you followed the links to any of those books, you might have surmised I read a fair amount of history and science fiction.
The reason this is important, if you can call it that, is that so much of today’s news feels like science fiction. Either that or some kind of bizarre alt-history.
This past week, our head of information security brought up the subject of quantum computing (QC) during the cybersecurity portion of our Board of Directors meeting. Let’s just say science fiction is no longer fiction. Once this technology becomes mainstream (and this isn’t a question of IF), the changes to how we live our lives and conduct our business will be exponential.
IF you would like to read more about the technology itself, please follow this link to a decent primer from McKinsey:
https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-quantum-computing.
Here is the thing. If you think the current iterations of AI are scary, QC will make them downright nightmarish. In fact, the more you read about it, the easier it is to imagine a dystopian future like The Matrix. Of course, that would assume a limit to human ingenuity and an inexplicable willingness to let the worst-case scenario happen.
However, I think it fair to predict the global economy will likely need a lot more energy than it currently uses. It will also need a lot water with which to cool all of the necessary data centers and processing facilities.
So, more energy? More facilities? More water? Sounds like areas with lots of land, lots of water, lots of electricity and lots of friendly politicians are well-positioned for the economy of the not-so-distant future. Frankly, it sounds like Alabama, if we could learn to get out of our own way.
As for the technology itself, the possibilities are seemingly limitless. If AI is a potential game-changer, then it would seem that the game-changer (QC) to the game-changer (AI) is that much more mind-boggling, which is an apt description.
Consider this. At the time of its invention, the telegraph was mind-boggling. So were the telephone, the record player, the airplane, the radio, the television, the computer and…well, take your pick. Shoot, Pringles and a Coca-Cola would have been pretty neat tricks in the 1700s, let alone a frozen lasagna.
Will this rapid advancement in technology cause economic disruption? To be sure, and it could get pretty ugly for some. For example, why would anyone have to type out 1,200-1,500 word economic newsletters? Let the machines do that. In fact, they already can and do, although I still crank them out periodically the old-fashioned way.
You can call me an old, fuddy-duddy if you would like. Laughingly, my use of the phrase fuddy-duddy actually sort of makes me one, doesn’t it? I mean the kids aren’t really using it these days, are they?
Interestingly, the more that QC and AI alter the economic landscape the more investors will start to focus on things they have largely ignored for years. Boring things like water, electricity and real estate.
To be sure, these things have always been important for economic development. However, they will become even more so moving forward. This will likely mean a reassessment of water use in some localities, and potentially fierce legal battles between governing entities for access to it.
What’s more, we can intuitively expect greater investment in major desalination plants around the world. Currently, these are heavily concentrated in the Middle East, Australia and parts of Africa. It is not inconceivable to imagine them elsewhere, as countries, territories, provinces and states clamor for supply to meet the increased demand in the future.
In fact, it isn’t that much of a stretch to argue water is as much of the technology ‘story’ as anything else. You simply have to have it. It has to be constant and reliable. In order to provide that, as well as ensure enough for all the other many uses we have for H20, well, it has to come from somewhere.
To that end, let’s take a look at a map, shall we? Does the world have enough water? Sure, but not all of it is usable for our needs, is it? So, what can we do about that? Well, we can either start to invest in areas where it is already ample OR we can create our own.
Causing hydrogen and oxygen molecules to conjoin would require a lot of energy, a lot, and would be pretty dangerous to boot. As such, the next best and greatest idea is to take what we have and refine it to our use.
In essence, what I am saying here is the global economy will very likely be in need of an increased amount of usable water in the future to meet the needs of the technology sector. This will likely lead to new technologies and efficiencies in desalination and distribution infrastructure.
Obviously, there could be money to be made here, and we will be on the lookout for opportunities which are both promising and prudent. Trust me, that will be more difficult than it sounds.
That is about it for today. A relatively short missive on science fiction and water. The two don’t always go together, but they likely will, in a big way, in the investing world’s future.
Thank you for your continued support. As always, I hope this newsletter finds you and your family well. May your blessings outweigh your sorrows on this and every day. Also, please be sure to tune into our podcast, Trading Perspectives, which is available on every platform.
John Norris
Chief Economist
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