This guest column is written by recurring “Securities” guest star Michael Magnani. Michael is a Political Risk Researcher based in NYC and graduated from NYU’s Center for Global Affairs with a concentration in Transnational Security. His past columns were Principal Problems, Loose BRICS and Powerful Productivity.
In 1611, English explorer Henry Hudson became the first European to cast his eyes upon the massive bay that now bears his name. He was searching for a Northwest Passage to Asia, a search that failed after he was set adrift by his mutinous crew and lost at sea. Even if he had continued his voyage though, he would have realized the passage was frozen over. There would be no shortcut between Europe and Asia through North America.
That is, until now. Due to climate change, the Northwest Passage has melted into a reality, opening up a critical shipping lane that has become a critical strategic crossroads for the Global North. Canada, whose Arctic coastline is second only to Russia’s in length, has become a linchpin in the region through organizations such as the Arctic Council.
Or at least it should be.
Canada’s position in the Arctic, much like its geopolitical position in the rest of the world, is unnecessarily diminished and subsidiary to that of the United States. A recent piece for The Financial Times lays it out in bare terms:
Jonathan Berkshire Miller, an Indo-Pacific expert at the Macdonald-Laurier Institute think-tank in Ottawa, says that successive governments have tended to treat foreign policy as a “luxury item” and have left it to the Americans to “step up to the plate”, or the Japanese and Australians in the Indo-Pacific. “We’ve had this complacency on foreign security issues for several years,” says Berkshire Miller.
For years, Canada reasonably considered itself geographically impenetrable, surrounded by three oceans (one frozen) while its closest ally — the United States — guarded the south. A ‘fireproof house’ was how politician Raoul Dandurand described Canada’s fortunate locale a century ago (an historical irony given this past summer’s record-breaking wildfires that scorched 18.4 million hectares).
Canada’s insulation allowed it to focus on economic growth over the global defense environment, eventually becoming the ninth largest economy in the world. A highly globalized and developed economy, Canadian industries such as energy and mining are world-leading, and Canada is richly abundant in oil, comprising the world’s fourth-largest proven reserves according to the U.S. Energy Information Agency. The country is also a global leader in education, healthcare and quality of life.
When it did engage with international security, diplomacy from afar has been Canada’s main commitment, with the country a member of tangibly important international organizations such as the G7 and NATO, alongside large, regional trade pacts such as the USMCA and the CPTTP. The country is also a key member of the world’s largest intelligence group, the Five Eyes. For this ‘fireproof house,’ the fires were always far away.
Even when they weren't though, America’s defense assets would pick up the slack. In February, an American F-22 shot down an object thought to be a Chinese spy balloon (it turned out it wasn’t) over the Yukon in the Canadian Arctic at the behest of Prime Minister Justin Trudeau. Technically, that’s how NORAD, the joint operational command for North America staffed by both Americans and Canadians, is designed to be used. America’s president and Canada’s prime minister can order and utilize military assets from either nation. But in reality, does that really diminish the headline of ‘American Jet Defends Canadian Airspace?’
Those sovereignty slights have weakened Canada’s presumed invulnerability, but the melting of the Arctic’s ice cap has dissolved it entirely. Canada is now nestled next to a revisionist Russia, which is bulking up its presence in the Arctic by reopening previously shuttered Soviet bases while also modernizing its navy and undertaking military drills in the region. Eight of Russia’s eleven submarines carrying long-range nuclear weapons are thought to be based in the Arctic.
On top of this, China’s interest in the Arctic has grown considerably as economic and geopolitical advantages grow out of the melting of the ice cap. They now consider themselves a ‘near-Arctic state’ and are attempting to stake their own claim in the region.
NATO, in turn, is severely lagging behind these two in its investment in the Arctic. This is largely the fault of the NATO member who has the largest coastline in the region: Canada. Instead of proactively investing in its security as the Arctic melted, Canada’s defense spending as a percentage of GDP has largely stagnated since the first reopening of a Soviet-era base in the Arctic in 2005.
Following Russia’s invasion of Ukraine in early 2022, Trudeau announced that Canada would boost defense spending toward that magical benchmark of 2% of GDP. So far, there’s been no plan of action on how the country will change its fiscal calculus, when it might do so, or even to what areas these phantom funds would be allocated to. As a matter of fact, Trudeau told NATO officials that Canada will never meet the 2% target, according to The Discord Leaks earlier this year. That isn’t surprising since it is in line with successive governments from both of the main political parties who have avoided upping defense while Canadians worry about the affordability of housing and the quality of healthcare.
Recent Canadian dealmaking, such as the purchase of F-35s to replace its aging CF-18 fleet, are a welcome surprise after years of debate. But it shouldn’t stop there. A country surrounded by three oceans that seeks to be a key player in each should also invest in vessels that enhance its blue-water capabilities, such as submarines.
Canada can no longer sit back and hope geopolitics pass it by. A major player on the global stage both diplomatically and economically, it must become one militarily. Countries such as Russia, China and India have recently run amok over Canada’s sovereignty, largely because they rightly calculated Canada wouldn’t do much beyond a verbal condemnation.
Canada should be able to deploy assets to numerous theaters, chief among them the ever-expanding Arctic region, in support of its own and global defense and security goals. In “Loose BRICS,” I highlighted the seriousness of NATO’s collective defense by noting how Canada led the deployment of a forward operating presence in Latvia since 2014, alongside NATO’s Eastern Front. This was a good start, but where from there?
After all, Canada is a country that has a rich history of being a major player in global security. The history of both World Wars is not complete without mentioning the heroics of Canadian soldiers at Vimy Ridge in 1917 or the landings at Juno Beach in 1944, and more recent deployments to Afghanistan show Canada still stands to play a critical role in global security. It’s time for this ‘fireproof house’ to buy the extinguishers it needs to protect itself.
Podcast: The Consciousness Winter with Erik Hoel
Podcast artwork design by Chris Gates using DALL-E.
What is consciousness? It’s a debate that has been at the center of philosophical arguments for millennia, touching on the meaning of existence, sensing, perception, mind versus matter, and so many more fundamental topics. All of that work has crescendoed in importance over the past few years as artificial intelligence has reached ever more sophisticated levels. Where does AI cross over from intelligent to conscious? And does that even matter?
Just as we need more theories of consciousness though, we are suddenly stumbling upon a “consciousness winter”, or so explains our special guest today Erik Hoel, the writer of the excellent newsletter The Intrinsic Perspective. Erik argues that scientists need to develop a grand theory around consciousness, but have been relegated to mundane questions in the subsystems of our brains instead. Unsurprisingly, we have had little to no progress on a theory of consciousness.
Erik and I, along with Lux’s managing partner Josh Wolfe and scientist-in-residence Sam Arbesman, talk about the consciousness winter, the divide between intelligence and consciousness, free will versus destiny, and finally, integrated information theory, and its place as a stepping stone to a deeper theory of the brain. This is part one of a two-part interview, so let’s get started.
Sam recommends Jaime Green’s piece in The Atlantic on “An Existential Problem in the Search for Alien Life.” “The search for extraterrestrial life is not the kind that is likely to yield an aha moment—not in the sense that, with the tools currently available, scientists are going to look at data brought in from the cosmos and instantly declare, “Yes, this is life.” There are too many technical hurdles, too many variables that will need time to be sorted out. And even accounting for those issues, another obstacle exists—an enduring puzzle that tests the limits of science. The fact is, we still don’t know what life is.”
I’ve been enjoying Jake Berman’s new book, The Lost Subways of North America, a retrospective on the extensive subway and train systems in cities as far flung as Los Angeles, Cincinnati, Vancouver and Rochester. It reminds me of exhibitions like SPUR’s Unbuilt SF, which show alternative visions of cities that either came and left, or were never built in the first place.
Sam recommends a new working paper on Arxiv on using AI to simulate how countries fall into world wars. “These findings highlight the deterministic nature of conflict within a given set of circumstances, yet also point to the potential of strategic modifications in national policies or relations as a means to alter these seemingly predestined outcomes.”
I enjoyed Ben Lerner’s new memoir essay in Harper’s on the meaning of memory and narrative when critical sources like Wikipedia can be rewritten and become self-referential. “I added Teddy Roosevelt to the list of bocce enthusiasts on the ‘bocce’ main page. Soon this fact appeared on the home page of the United States Bocce Federation. Then I could use that home page as the source for the claim on Wikipedia. Such edits were somewhere between childish pranks and tiny terrorist attacks on the historical record. All of these examples are fake, but can stand for the ones I made, the bedbugs I released into the linguistic furniture. It was my first attempt at writing fiction.”
Finally, Apple TV+ is presenting Come From Away, a Broadway musical about the small town on Newfoundland, Canada that hosted dozens of flights and their thousands of passengers during the 9/11 terrorist attacks when America shut down its airspace. It’s an earnest performance on the spontaneous humanity and connections that appear when far-flung people come together in times of danger.
That’s it, folks. Have questions, comments, or ideas? This newsletter is sent from my email, so you can just click reply.
Forcing China’s AI researchers to strive for chip efficiency will ultimately shave America’s lead
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Right now, pathbreaking AI foundation models follow an inverse Moore’s law (sometimes quipped “Eroom’s Law”). Each new generation is becoming more and more expensive to train as researchers exponentially increase the number of parameters used and overall model complexity. Sam Altman of OpenAI said that the cost of training GPT-4 was over $100 million, and some AI computational specialists believe that the first $1 billion model is currently or will shortly be developed.
As semiconductor chips rise in complexity, costs come down because transistors are packed more densely on silicon, cutting the cost per transistor during fabrication as well as lowering operational costs for energy and heat dissipation. That miracle of performance is the inverse with AI today. To increase the complexity (and therefore hopefully quality) of an AI model, researchers have attempted to pack in more and more parameters, each one of which demands more computation both for training and for usage. A 1 million parameter model can be trained for a few bucks and run on a $15 Raspberry Pi Zero 2 W, but Google’s PaLM with 540 billion parameters requires full-scale data centers to operate and is estimated to have cost millions of dollars to train.
Admittedly, simply having more parameters isn’t a magic recipe for better AI end performance. One recalls Steve Jobs’s marketing of the so-called “Megahertz Myth” to attempt to persuade the public that headline megahertz numbers weren't the right way to judge the performance of a personal computer. Performance in most fields is a complicated problem to judge, and just adding more inputs doesn't necessarily translate into a better output.
And indeed, there is an efficiency curve underway in AI outside of the leading-edge foundation models from OpenAI and Google. Researchers over the past two years have discovered better training techniques (as well as recipes to bundle these techniques together), developed best practices for spending on reinforcement learning from human feedback (RLHF), and curated better training data to improve model quality even while shaving parameter counts. Far from surpassing $1 billion, training new models that are equally performant might well cost only tens or hundreds of thousands of dollars.
This AI performance envelope between dollars invested and quality of model trained is a huge area of debate for the trajectory of the field (and was the most important theme to emanate from our AI Summit). And it’s absolutely vital to understand, since where the efficiency story ends up will determine the sustained market structure of the AI industry.
If foundation models cost billions of dollars to train, all the value and leverage of AI will accrue and centralize to the big tech companies like Microsoft (through OpenAI), Google and others who have the means and teams to lavish. But if the performance envelope reaches a significantly better dollar-to-quality ratio in the future, that means the whole field opens up to startups and novel experiments, while the leverage of the big tech companies would be much reduced.
The U.S. right now is parallelizing both approaches toward AI. Big tech is hurling billions of dollars on the field, while startups are exploring and developing more efficient models given their relatively meagre resources and limited access to Nvidia’s flagship chip, the H100. Talent — on balance — is heading as it typically does to big tech. Why work on efficiency when a big tech behemoth has money to burn on theoretical ideas emanating from university AI labs?
Without access to the highest-performance chips, China is limited in the work it can do on the cutting-edge frontiers of AI development. Without more chips (and in the future, the next generations of GPUs), it won’t have the competitive compute power to push the AI field to its limits like American companies. That leaves China with the only other path available, which is to follow the parallel course for improving AI through efficiency.
For those looking to prevent the decline of American economic power, this is an alarming development. Model efficiency is what will ultimately allow foundation models to be preloaded onto our devices and open up the consumer market to cheap and rapid AI interactions. Whoever builds an advantage in model efficiency will open up a range of applications that remain impractical or too expensive for the most complex AI models.
Given U.S. export controls, China is now (by assumption, and yes, it’s a big assumption) putting its entire weight behind building the AI models it can, which are focused on efficiency. Which means that its resources are arrayed for building the platforms to capture end-user applications — the exact opposite goal of American policymakers. It’s a classic result: restricting access to technology forces engineers to be more creative in building their products, the exact intensified creativity that typically leads to the next great startup or scientific breakthrough.
If America was serious about slowing the growth of China’s still-nascent semiconductor market, it really should have taken a page from the Chinese industrial policy handbook and just dumped chips on the market, just as China has done for years from solar panel manufacturing to electronics. Cheaper chips, faster chips, chips so competitive that no domestic manufacturer — even under Beijing direction — could have effectively competed. Instead we are attempting to decouple from the second largest chips market in the world, turning a competitive field where America is the clear leader into a bountiful green field of opportunity for domestic national champions to usurp market share and profits.
There were of course other goals outside of economic growth for restricting China’s access to chips. America is deeply concerned about the country’s AI integration into its military, and it wants to slow the evolution of its autonomous weaponry and intelligence gathering. Export controls do that, but they are likely to come at an extremely exorbitant long-term cost: the loss of leadership in the most important technological development so far this decade. It’s not a trade off I would have built trade policy on.
The life and death of air conditioning
Photo by Ashkan Forouzani on Unsplash
Across six years of working at TechCrunch, no article triggered an avalanche of readership or inbox vitriol quite like Air conditioning is one of the greatest inventions of the 20th Century. It’s also killing the 21st. It was an interview with Eric Dean Wilson, the author of After Cooling, about the complex feedback loops between global climate disruption and the increasing need for air conditioning to sustain life on Earth. The article was read by millions and millions of people, and hundreds of people wrote in with hot air about the importance of their cold air.
Demand for air conditioners is surging in markets where both incomes and temperatures are rising, populous places like India, China, Indonesia and the Philippines. By one estimate, the world will add 1 billion ACs before the end of the decade. The market is projected to before 2040. That’s good for measures of public health and economic productivity; it’s unquestionably bad for the climate, and a global agreement to phase out the most harmful coolants could keep the appliances out of reach of many of the people who need them most.
This is a classic feedback loop, where the increasing temperatures of the planet, particularly in South Asia, lead to increased demand for climate resilience tools like air conditioning and climate-adapted housing, leading to further climate change ad infinitum.
Josh Wolfe speaking at Nvidia Auditorium at Stanford. Photo by Chris Gates.
Josh Wolfe gave a talk at Stanford this week as part of the school’s long-running Entrepreneurial Thought Leaders series, talking all things Lux, defense tech and scientific innovation. The .
Lux Recommends
As Henry Kissinger turns 100, Grace Isford recommends “Henry Kissinger explains how to avoid world war three.” “In his view, the fate of humanity depends on whether America and China can get along. He believes the rapid progress of AI, in particular, leaves them only five-to-ten years to find a way.”
Our scientist-in-residence Sam Arbesman recommends Blindsight by Peter Watts, a first contact, hard science fiction novel that made quite a splash when it was published back in 2006.
Mohammed bin Rashid Al Maktoum, and just how far he has been willing to go to keep his daughter tranquilized and imprisoned. “When the yacht was located, off the Goa coast, Sheikh Mohammed spoke with the Indian Prime Minister, Narendra Modi, and agreed to extradite a Dubai-based arms dealer in exchange for his daughter’s capture. The Indian government deployed boats, helicopters, and a team of armed commandos to storm Nostromo and carry Latifa away.”
Sam recommends Ada Palmer’s article for Microsoft’s AI Anthology, “We are an information revolution species.” “If we pour a precious new elixir into a leaky cup and it leaks, we need to fix the cup, not fear the elixir.”
I love complex international security stories, and few areas are as complex or wild as the international trade in exotic animals. Tad Friend, who generally covers Silicon Valley for The New Yorker, has a great story about an NGO focused on infiltrating and exposing the networks that allow the trade to continue in “Earth League International Hunts the Hunters.” "At times, rhino horn has been worth more than gold—so South African rhinos are often killed with Czech-made rifles sold by Portuguese arms dealers to poachers from Mozambique, who send the horns by courier to Qatar or Vietnam, or have them bundled with elephant ivory in Maputo or Mombasa or Lagos or Luanda and delivered to China via Malaysia or Hong Kong.”
