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.

How did U.S. 'energy dominance' turn into rising domestic natural gas prices?

The noticeable upward tilt in graphs of the U.S. natural gas price since April 2024 is likely a hint of things to come for U.S. consumers of energy. That's because record amounts of U.S. natural gas are now being sent abroad in the form of liquefied natural gas (LNG). And much more export capacity is planned. The U.S. Energy Information Administration forecasts that U.S. LNG export capacity will double by 2029. That's all gas that cannot be delivered to American users.

I have written about these trends (see here, here, here and here) and predicted they would mean considerably higher heating and electricity costs for Americans and much higher costs for American-based chemical manufacturers; for industries that rely on natural gas for process heat in the manufacture of steel and other metals, concrete, and glass; and for farmers who use natural gas to dry crops.

There's been a lot of talk about U.S. "energy dominance" by which the current administration means policies that maximize production, maximize exports, and yet somehow "reduce energy costs" at the same time. It's the "reduce energy costs" part that is now running into trouble.

'Newspeak' comes to the Energy Department

In George Orwell's novel, 1984, a totalitarian regime now rules the homeland and operates by three slogans: 1) War is peace, 2) freedom is slavery and 3) ignorance is strength. In 1984 the term "Newspeak" refers to what is essentially a mandatory style guide for using the English language under that regime by substituting Newspeak formulations for common words and phrases so as to make public discourse conform to the ruling party's orthodoxy. (For a list Newspeak words and phrases, check here.)

Not surprisingly, failure to conform to this style in written and oral communications is considered a crime. In fact, to think thoughts contrary to those expressed in Newspeak terms is considered a "thoughtcrime" because it implies one's personal values are not in harmony with official party dogma. Even having a facial expression that appears to imply disagreement with that dogma is a "facecrime."

Every modern regime tries to regulate the language used by its citizens (or subjects, as the case may be). As I have written previously, "If you want to corrupt a people, corrupt the language." So, it's not particularly surprising that the U.S. Department of Energy (DOE), now controlled by an oil industry insider, has put out its own Newspeak-like manual in the form of an email to department employees which is focused on subtracting words and phrases according to Politico. In the email the DOE is doing to the vocabulary of its personnel what the Trump administration is doing to the government, namely, cutting it.

Taking a break - no post this week

I am taking a break this week and plan to post again on Sunday, October 19.

AI vs humans: The 'singularity' keeps getting postponed

Sam Altman is the CEO of the most visible artificial intelligence (AI) organization on the planet, OpenAI, the purveyors of the popular ChatGPT AI interface. His job is to keep the investment dollars flowing into OpenAI, tens of billions of them. So, it's pretty important for Altman to keep investors interested and to promise them breakthroughs...and also, apparently, to reschedule those breakthroughs when they don't occur.

Now, something that most people don't understand about OpenAI is that despite being recently valued at $500 billion, OpenAI loses money, reportedly $5 billion last year on sales of $3.7 billion. Back in 2023 Altman was telling the public that OpenAI had achieved artificial general intelligence (AGI). For those who don't know, AGI means intelligence capable of learning and executing all the tasks that humans can do. No one appears to know how exactly to measure whether a machine can do the totality of things a human can do, but it sounds very cool to talk about it. And, it's the kind of talk that keeps investors excited. The implication, of course, is that the investor class won't have to put up with pesky employees much longer for most jobs.

The moment when this happens, when machines become smarter than humans and start running everything for us —as if they don't already—is sometimes called the singularity, usually with a capital "S." Now, singularity has a specific meaning in physics. In this context it refers to a nonreligious, tech version of the rapture in which technological advancement becomes very rapid as machines take over and iterate on technical innovation. We know what happens to people in the religious version of the rapture—some ascend to heaven and others are left behind. But we aren't exactly sure what is to become of humans after the so-called singularity version of the rapture since supposedly there won't be much work to do. AI will be doing it.

Fracking wastewater now endangers both drinking water and the wells that regurgitate the wastewater

There's an old saying that I won't spell out completely, but which most readers will certainly have heard at least once in their lives, to wit: "Don't sh-- where you eat." It is an all-purpose warning about not pursuing incompatible activities in the same place, particularly activities that produce either physical waste or emotional complications.

In this case the waste part is wastewater emitted by oil wells drilled into shale deposits which must undergo extensive hydraulic fracturing (often called fracking) before the oil can be freed. What most people do not know is that for every barrel of shale oil extracted, three to five barrels of water laden with fracking chemicals and salt, toxic minerals and radioactivity (from the deep rock) also comes up, most of it water originally injected under high pressure to fracture the shale and release the oil.

Some 9 millions barrels a days of shale oil is currently produced in the United States each day, according to the U.S. Energy Information Administration. That means between 27 and 45 million barrels of fracking wastewater is produced EACH DAY; in gallons that's between 1.1 and 1.9 billion gallons. And, of course, multiply by 365 and you'll get yearly totals. That's a lot of wastewater and it has to go somewhere and that somewhere is starting to pollute underground water supplies and surface soil and water, and to interfere with oil production itself.

Can authoritarians solve our environmental problems?

If you are deeply concerned about our environmental future, if you believe climate change is an existential issue, if you think toxics in soil, water and air are a major contributor to disease and to rapid fertility decline in humans and perhaps other animals, if you believe that the catastrophic decline of insect populations is something more than a convenient development for outdoor living but rather a sign of biodiversity collapse, if you wonder how increasingly over-exploited natural resources including water, soil, fossil fuels and metals can keep up with growing populations and growing demand, if you are worried about some or all of these things, then you may have been wondering in the last couple of decades whether democratic governments will actually do anything significant to reverse the negative trends in these areas.

The answer so far is not much. Perhaps you have asked yourself if the public and corporations need to be forced to do the right things when it comes to addressing our existential environmental threats. Well, democracies can force them with laws; but so far the laws and their enforcement in most countries do not appear to be anywhere near enough to change the crisis trajectory all of human civilization is now on.

That may be part of why more countries are turning to authoritarian leaders. There are, of course, many other reasons: fear of immigrants, fear of crime, poor response to natural disasters, anger over stagnant or falling living standards, and cultural conflict over the role of women and minorities in society to name a few. But when you look at this list you can see that it can be linked in most cases with proliferating climate change effects (such droughts that lead to migration), rising prices due to over-exploitation of resource supplies including energy (which can lead to falling living standards and crime), and cultural retrenchment which occurs in times of societal stress (in this case, the reassertion of male dominance and dominance for racial majorities that feel they are losing out to racial minorities).

The myth of managing the biosphere

A recent piece in New Scientist has reminded me that it is a myth that humans, if they are wise and clever enough, can learn to "manage" the biosphere.

The piece is about the unfortunate trade-off between pollution reduction and global warming. It has been known for some time that successful efforts to reduce air pollution have resulted in fewer particles in the atmosphere, particles that reflect sunlight back into space. This reduction has actually accelerated global warming even as it has improved air quality and reduced illness and death.

The warning in the New Scientist piece comes from imagining a scenario in which world governments somehow agree on global action to curb warming climate by "spraying reflective particles into the stratosphere that dim the sun. The strategy works: temperatures at ground level stabilise, and life goes on as normal despite escalating carbon dioxide concentrations in the atmosphere."

Wars and rumors of wars: America, Europe, Russia and China

We have the ancient Roman writer Vegetius to thank for the phrase: "If you want peace, prepare for war." The phrase itself was adapted from one found in Vegetius' book on Roman military strategy, De Re Militari (circa 450 AD), the only complete work on the topic to survive to the modern era. The phrase translated literally reads, "Therefore let him who desires peace prepare for war."

Whether that is good advice seems less relevant than whether those who prepare for war actually desire peace. I am thinking of something Madeleine Albright, secretary of state under President Bill Clinton, said to Colin Powell, the then chairman of the Joint Chiefs of Staff, to wit: "What's the point of having this superb military that you're always talking about if we can't use it?"

Which brings us to today: a world decidedly more under the sway of Albright than Vegetius, a world in which everyone seems to be preparing for war, but with little intention of preserving the peace.