Thematic Megatrends Are Exponential, Not Linear

On January 13, 2023, Jeremy Schwartz, Global CIO of WisdomTree, and I had the opportunity to speak with Haim Israel, head of the global thematic research team at Bank of America.

Haim is a captivating speaker on a key topic dominating the markets: the outlook for growth stocks and thematic investing. We review the highlights of the discussion below.

Artificial Intelligence Was Discussed in the 1940s and 1950s

Haim believes artificial intelligence will ultimately profoundly impact the global economy, but it is obviously still early in this cycle. The cost of accessing computing power, memory capacity and data transfer speeds have all gotten large enough to give us step changes in capability. It’s not an accident that ChatGPT came out in 2022, as opposed to 2010 or 2015.

Haim told us that the world is making 2.5 quintillion—and a quintillion is a million trillion—bytes of data per day. This figure is on a path of doubling every two years…and it’s still accelerating.

However, the concept of artificial intelligence, viewed through a different lens, has been long-established. Alan Turing posed the question “Can machines think?” in a paper published in 1950¹, and others proposed research explorations in a similiar effort at Dartmouth in 1955². It’s important for us to realize that increases in capability have been compounding, year over year, for decades at this point.

The iPhone has only been with us since 2007.³ If you go back 20 years, which means 2003, surfing the internet was not something most people were doing every single day, and I personally know the idea of being in college at that time was exciting partly because of the internet speed on campus.

So, in 2003, are you able to logically predict the emergence of ChatGPT in 20 years? The reality then was worrying about the cost of sending a text message on many cell phone plans and the fact that it was hard to imagine dictation software that didn’t trip over correctly transcribing human speech.

Quantum—Humility Tells Us We Don’t Yet Know the Exact “When” or “What”

Today, quantum computing is mostly an interesting concept. The major public cloud infrastructure providers have their own versions of allowing users to experiment with access. It is not yet the case that users NEED quantum computing for everyday business purposes, but Haim could not be more excited about the topic.

While it was the subject of some debate, Google indicated that a machine, in 200 seconds, performed the same number of calculations that IBM’s most powerful supercomputer could perform in 10,000 years.⁴ This extra computing power will have large implications across sectors. 

Megatrends Do Not Exist in a Vacuum

Haim emphasized the feedback loop on how megatrends magnify each other in certain cases. Quantum computing could be a force multiplier in that certain types of computation are very difficult to do at the proper scale and speed to lead to productive outcomes. If we could run the required calculations to manage the plasma in a nuclear fusion reactor on a quantum system, this might help with further progress on this very important energy initiative. If we could simulate the molecular interactions of potential new drug therapies on a quantum system, maybe this could help speed up the finding of new medicinal molecules.

The Inflation Reduction Act Gives Us a Road Map for Future Geopolitics

We also discussed the current geopolitical backdrop within the context of the Inflation Reduction Act. In Haim’s view, this act is really a signal of the world’s push toward independence and deglobalization. This is a big piece of the U.S. strategy, in his view, even if we tend to hear things like “climate change mitigation” and “going carbon neutral.” These are positive things, but they aren’t necessarily the core of the matter.

One way to look at the progress on this relates to the existing “battery value chain.” The current approach has the world mining a lot of the raw materials in South America, processing them in China and then some of the final assembly happening in other places, like the U.S. If someone is buying an electric vehicle in the U.S., it’s possible that the materials in the battery have already traveled 50,000 miles before the actual car is driven one mile. The world is seeking to transition away from this model.

It was interesting to hear Haim’s take on many energy sources of the future, whether nuclear, wind, solar or hydrogen, and even his take on “peak oil.”

Listen to the Full Discussion Below:

Those investors interested in megatrend investing should listen to this episode, available on all the major podcast platforms.

¹ Source: A.M. Turing, “Computing Machinery and Intelligence,” MIND: A Quarterly Review of Psychology and Philosophy, October 1950.
² Source: J. McCarthy et al., “A Proposal for the Dartmouth Summer Research Project on Artificial Intelligence,” 8/31/1955.
³ Source: Steve Jobs first presented the iPhone on January 9, 2007. https://singjupost.com/steve-jobs-iphone-2007-presentation-full-transcript/
⁴ Source: Elizabeth Gibney, “Google Publishes Landmark Quantum Supremacy Claim,” Nature, 10/24/19.