Taking a break - no post this week

I am taking a break this week and plan to post again on Sunday, November 30.

Tehran contemplates "evacuation" as many cities across the globe face water dilemmas

I've put the word "evacuation" in the title of this piece in quotes because it's not clear where Tehran's 9.8 million people or some significant number of them would evacuate to as water supplies run dangerously low. Iranian President Massoud Pezeshkian has been criticized for saying out loud how bad the situation is: "If it does not rain in Tehran by December, we should ration water; if it still does not rain, we must empty Tehran."

Doubtless Iranian water authorities will force severe restrictions on Tehran's residents if the rains—which have been 82 percent below the long term averages for the past year—do not come. And there is almost certainly room to conserve. But the relentless heat (and thus increased evaporation from reservoirs) and lack of rain are not something that can be put down to water system mismanagement unless (as you should) you count not understanding and reacting to climate change as a failure of management.

Back in 2018 Cape Town, South Africa was facing a severe water shortage for lack of rain during which the city began making announcements of a specific date which it called "Zero Day" when water would have to be shut off to most of the city. Dramatic conservation which drove water consumption down 30 percent and the return of seasonal rains saved the city (for now).

Washington denials and AI bailouts

There's an old adage in Washington: Don't believe anything until it is officially denied. Now that the Trump administration's so-called artificial intelligence (AI) czar David Sacks has gone on record stating that "[t]here will be no federal bailout for AI," we can begin speculating about what form that bailout might take.

It turns out that the chief financial officer of AI behemoth OpenAI has already put forth an idea regarding the form of such a bailout. Sarah Friar told The Wall Street Journal in a recorded interview that the industry would need federal guarantees in order to make the necessary investments to ensure American leadership in AI development and deployment. Friar later "clarified" her comments in a LinkedIn post after the pushback from Sacks saying that she had "muddied" her point by using the word "backstop" and that she really meant that AI leadership will require "government playing their part." That sounds like the government should still do more or less what she said in the The Wall Street Journal interview.

Now maybe you are wondering why the hottest industry on the planet that is flush with hundreds of billions of dollars from investors needs a federal bailout. It's revealing that AI expert and commentator Gary Marcus predicted 10 months ago that the AI industry would go seeking a government bailout to make up for overspending, bad business decisions and huge future commitments that the industry is unlikely to be able to meet. For example, in a recent podcast hosted by an outside investor in OpenAI, the company's CEO, Sam Altman, got tetchy when asked how a company with only $13 billion in annual revenues that is running losses will somehow fulfill $1.4 trillion in spending commitments over the next few years. Altman did NOT actually answer the question.

U.S.-China trade dispute resolution leaves China with huge leverage over global electronics industry

Back in 2019 the United States had a dust-up with China regarding trade and tariffs and as part of its response China threatened to reduce export of rare earth elements (REEs) essential for many civilian and military electronics.  The Chinese then as now held a dominant position in the mining and processing of these metals. China did not carry through on its threat and by early 2020 both nations signed an agreement that deescalated the trade war.

Fast forward to today and we have China and the United States deescalating a trade dispute far broader in its scope with both sides reducing tariffs and China agreeing to drop its restrictions on exporting REEs to the United States. But none of this alters China's stranglehold on REEs production and mining. And China's return to exporting these strategic metals means its dominant position in that market gives it continuing power over key electronic industries worldwide that are dependent on Chinese supplies. China currently controls 69 percent of the REEs mine production and almost 90 percent of the processing of these elements.

To guard against ongoing dependence on Chinese supplies, the Trump administration has provided capital for a facility that will produce high-strength magnets made from REEs for delivery to the U.S. military by becoming part owner of the only operating REEs mine in the United States. The U.S. Department of Defense (DOD) will guarantee prices that are almost twice the current world price for such magnets for 10 years. This move was followed by a DOD award to U.S. company developing facilities to increase production of scandium, niobium, and titanium, the first of which is an REE. Investors believe there are more investments to come in other companies by the U.S. government.