Tomorrow's Energy
The James Watt solution to the AI Revolution
We owe everything to James Watt.
The way I see it, he freed us from service to feudal lords. He set the stage for British world dominance. He singlehandedly gave us the ability to capture and control our planet’s resources. And we’re stingy with respect for this titan. We give him a trivial nod when we buy a “500-Watt” stereo receiver or change a “100-Watt” lightbulb. It’s shameful.
Watt arguably caused the Industrial Revolution. An economic turning point so important, Britannica capitalizes the phrase. It’s a proper noun. A named event of historical significance like, Great Depression, or World War.
The Revolution Watt kicked off altered the course of humanity.
“...the process of change from an agrarian and handicraft economy to one dominated by industry and machine manufacturing.”
Britannica
We’re on the cusp of a similar change today. Our descendants might see a quote one day about the AI Revolution, which is certainly set for proper noun status.
And instead of machine manufacturing being the leap forward, as it was back then, it’s machine learning the James Watt of today makes possible.
The trusted reference book goes on…
“…technological changes included…the use of new basic materials, chiefly iron and steel, new energy sources including fuels and motive power such as coal and the steam engine…”
Try to imagine life before the mid-18th century. It wasn’t pretty.
For starters, life expectancy in the most civilized parts of the world was ~30 years. If you survived birth, oddsmakers gave you another decade or so. People had kids like puppy litters hoping one or two would survive long enough to in turn reproduce.
Fumbling through life with candles and sticks, success was serving a lord who didn’t drink too much and send you off to die fighting for some unknown cause. Becoming a man of the cloth was the most viable option for those clearheaded enough to see the perils of late adolescence.
The commoners stood little chance of autonomy. Nobody asked kids what they wanted to be when they grew up. The answer was, “to stay alive.”
Then comes Watt. And what he did seems so simple now. He merely saw something powerful, and made it better…4-times better.
The James Watt Effect
Around 1712 a man called Newcomen built a crude steam engine. He wasn’t the first person with the idea, but he was the first to practically use it.
Newcomen used steam power to install a mine pump. Water seeps out of cracks deep underground in mines. I’ve seen it myself on more mine tours that I’d like to remember. Left alone, the water slowly fills the mine like a subterranean swimming pool.
Newcomen’s steam-powered pump kept the mine free of water, meaning workers operated at greater depths. It was a step forward, but not a big one.
50-years later, James Watt tinkers with Newcomen’s steam pump. He focuses on the condensing unit, which at the time is part of the machine guts. He tries separating it into two pieces. The engine, and the pump, as separate parts, connected, but working freely.
This critical change boosted the machine’s power by 4-times while reducing the coal it burned by ~75%. Watt did not invent the steam engine; he merely shrunk it. He made Newcomen’s engine better…a lot better.
Quickly, the steam engine changed the course of history. The British harnessed its power, and used it to conquer the world. Recall its ascent to hegemonic empire in the late 18th century…after Watt’s tweak.
The Spanish dominated the earth before with more crude means, and the Portuguese before that by boat. While the reasons for British ascension are numerous, and dynamic, there’s an undeniable fact that they came together by harnessing a new power technology. James Watt, a Scottish tinker, made it possible.
As the world rushed to understand and use the first-generation steam engine, the British raced ahead with quadruple the power. They didn’t waste the advantage, using it to quickly incircle the globe.
A New Race for World Dominance
We’re a long way from the steam engine today. But the stakes for world domination are the same…or greater.
The first country to solve the AI power supply problem will rule the second half of this century.
To understand this issue, you need to see past our current use of of AI.
ChatGPT answers questions, writes you a draft breakup email, or middle school book report at a C- level. It does this in mere seconds. While that’s fun, we’ll soon interact with AI in a way that’s so human we won’t know the difference.
And while chip technology gets the headlines, the real governor holding back the AI race is access to power… insane amounts of it.
The computing power needed to answer one ChatGPT question is as much as 10-times what’s needed to run a search query on Google.
You might already be using AI, and not know it.
Founder Level subscriber Morgan S. relayed a shocking conversation he had with a cyborg last week. It was so real he not only signed a 12-month lease with her, he also wanted to hire her. If you’re new, TTL’s “Founder Level” is a proper noun…we capitalize it.
Morgan needs a temporary apartment beginning in January. He called around to check prices and availability. Erica at The Alcove was most helpful. He called back three times, then set up a tour. She remembered details from previous calls, and answered his questions.
When he showed up to the tour, Erica wasn’t there. The braindead staff at the complex told him, “Yeah, that’s an AI service.”
Until that moment he thought generative AI was a fun chat interface… now he knows it’s much more.
Mimics Human Life
We only see the outer layer of what’s ahead.
In August 2017, I went to Alesund, Norway. It’s in the middle of nowhere, way up the Atlantic Highway, near the iconic fjords often pictured in print advertisements.
Almost no one visits Alesund. They go to Oslo, and Bergen, and figure the rest of the 1,570-mile-long coast is more than they can handle. And they’re right.
I had a specific reason for visiting the area. In fact, I drove more than three hours east from Alesund into the rural Norwegian heartland looking for a very specific place.
It all started when watching a movie the year prior called Ex Machina. It’s the story of an employee at a technology firm who wins an internal contest. The prize is a VIP trip, the final leg by helicopter, to hang out with the company’s CEO at his architecturally stunning home, in a remote and scenic location.
Mind blown by the pomp surrounding the situation, it takes the lucky employee several days to realize the CEO has a major problem. His gorgeous and helpful assistant Ava is a humanoid with super-computing capacity. She’s powered by AI, and 10 years ago this seemed futuristic.
I loved the movie, but for reasons unrelated to its technological prescience. For me it was the architecture. The stunning home of the CEO set me on a quest to find where they filmed this movie. And when I did, I booked a trip to see it for myself.
The hotel was amazing. Architectural bungalows with floor-to-ceiling glass line the creek like futuristic treehouses. Every night the hotel encourages its maximum 20-guests to dine together in a coursed-out meal. It was a memorable experience.
We had exotic local foods like whale carpaccio. Yes, raw whale meat. Castrated ox from the valley, and the first acorn squash of the season. All of this in the middle of nowhere… and with no sign of Ava.
The hotel had poorly functioning Wi-Fi and the most exotic piece of technology was a battery-powered lawnmower that inched across its giant driveway entrance every morning.
At the time, the idea a humanoid would interact with us seemed too sci-fi to take seriously. At best, we conceived of car-assembling robots with arms bearing no human resemblance.
And that’s all about to change. The cyborg from Ex Machina is here….and she needs a lot of power.
There Will Only Be One Winner
Cyborgs don’t take days off, don’t sleep, and don’t have incentive to break the law. But their programmers do.
It’s a matter of time before one nation emerges as the dominant force in the AI era. Right now, we seem to be running full speed, neck and neck.
And while we need fast chips, we can’t run them without power…insane and constantly increasing amounts of it.
Western technology companies realize the scale of the problem. It’s why Amazon (AMZN) and other household firms rushed to move facilities close to old soon-to-be decommissioned nuclear reactors. But that won’t solve the problem. And the regulators know it.
AMZN had the right idea. Position data centers near these aging behemoths. But it’s the old way. It won’t splice yesterday and tomorrow.
This is a new Cold War, a modern arms race where the weapon is power.
That photo of Xi and Biden shaking hands works for now. They won’t let Erica the apartment leasing cyborg or any other robot decide which parts of the world turn into molten rock.
But any truce is only as strong as the ability to back it up.
The Future Power Plant
The U.S. has around ~100 large-scale reactors still operating. The number hasn’t increased since the 1990s. And it won’t.
People bullish on uranium stocks sometimes get this wrong. The talk about the Chinese building X-number of reactors. Same with Middle Eastern countries. While those are facts, the future looks different.
Those countries often still need a modern grid. Huge swaths need connection to reliable power. But that has nothing to do with AI. And it’s something the U.S. did last century.
In order to power our leap ahead we’ll use a new source. Tech billionaires Gates, Bezos, Altman, and a list of others you haven’t heard of have well-funded startups racing to figure this out. There are two listed companies in the race. We’ll buy both today.
Two New Stocks
I have a theory about how this plays out. It looks like this.
James Watt tweaked the steam engine to make it more powerful, smaller, and more efficient. We’ll do something similar to win the AI Arms Race currently underway.
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