2023 Predictions

After several requests to follow up on last year’s predictions and now, as is tradition, it is time for some predictions for 2023.

Before that, I would like to share some thoughts and observations about 2022.

I personally think my hit rate was pretty solid with a few misses but go check last years post for yourself here: https://www.linkedin.com/pulse/my-2022-predictions-thomas-petersen/?trackingId=WynF3WxM7%2B6FFWayxRN3qg%3D%3D

It is almost hard to believe, but 2022 was yet another year in the name of unpredictability and where “the new normal” played out like a slow-motion game of “strip poker”. The stripping of the legitimacy of Western systems unfortunately continues relentlessly, deck of cards at a time.

Firstly, it became obvious that Europe have been living in delusion for the past 25 years. They did this by believing that they were making their energy consumption more green and more secure.

Instead, they found out that in their eagerness to push wind and sun as a base load energy source, and by banning the extraction of, for example, shale gas, they had given Putin a hand that he was able to exploit to the fullest.

However — if you think that it is the war in Ukraine that is to blame for the explosion in energy and food prices, you are mistaken. Putin’s invasion of Ukraine was clearly the catalyst. But it revealed a much larger underlying strategic mistake in Europe’s energy policy and investments. Unfortunately, EU politicians do not seem to have realized this yet, but they will over the next year or so, when they are forced to deliver a host of bad news for their votes.

Secondly, it seems that not only in Europe, but also in the US in general, we have lost sight of the principles, values, and landmarks that are responsible for bringing us as far as we have come.

The West has historically been about the right to free exchange. Whether we talk goods, opinions, property, or services; The most important thing was that citizens made the decisions for themselves, their closest and their immediate surroundings.

This freedom resulted in some fantastic innovations and progress, but it also had negative externalities. Mostly this vulnerability was considered a fair price to pay for the freedom that we enjoyed.

In recent years, however, it has become more and more apparent that this balance has been lost. The state has increasingly become the one who decides what we can and cannot do and what we can and cannot say. Social media and the entire stack of services underneath (cloud, payment etc) are increasingly cow-towing to the will of the politicians and their own personal biases.

Politicians are happily lining up to “do something” and so over time we have developed a society that is extremely risk averse, paralyzed and in many ways unable to make strategic decisions. Decisions that may seem horrible in the short term, but in the long term are preferable because they create anti-fragile societies through better error correction.

Today no one is allowed to suffer — the old, the young, the children, the animals, the middle class, the upper class, the poor, the families, the public employees, the private employees, the students, the companies, nature, women, the men, society — everything and everyone is a target group, politicians can appeal to for sympathy and votes.

The West has developed into what can best be described as a kind of “woke” capitalism. A capitalist system where the individual is unimportant and its only function is to enter into one or the other oppressed intersectional group identity so that they can be used politically.

Science and politics are presented as if they were one and the same thing. As if all policy is driven by the same objective criteria as the 2nd law of thermodynamics. We saw this especially during covid, where “trust the science” was used as a trope for any political decision.

We see it in the climate debate, where actual political decisions are presented as if they come directly from CERN’s particle accelerator.

We see it when discussing poverty, capitalism, the conditions of children, the conditions of the elderly. Reports that are often politically commissioned or based on an activist agendas are presented as if they are objective descriptions of reality.

The demand for progress is increasing, most often from politicians but also society as whole. At the same time, there has never been so much regulation, it has never been so difficult to get approvals to build larger facilities, it has never been so expensive and time-consuming to develop new medicine, to get approval for new drilling, new mining or pipelines.

Conventional agriculture, which is completely fundamental to a well-functioning modern society, is considered to be almost environmentally harmful and many Western countries would prefer to shut it down. If someone or something can be negatively affected, there is a politician ready, like an “ambulance chaser” to represent their grievances.

The marketplace of ideas we normally use to sort the good from the bad has become a battlefield where obliterating the opponent is the primary goal regardless of the validity of their viewpoints.

Everything that can be politicized will be politicized. Politics is eating the world and that — to put it nicely — cannot continue if the West wants to be the civilizational beacon it has been in many areas.

One solution of course is physical confrontation which ultimately determines who has the best argument. We have seen this throughout history in the form of civil wars and ethnic conflicts. Not sure that’s desirable.

Another solution could be that we all come to our senses and re-establish faith in the Western project through a political overhaul to instill faith in the political system. However, the probability of this is very small as the problems we are trying to solve are a product of the very system we are trying to clean up (Gall’s Law)

The 3rd option, and probably the most likely, is that a solution arises that makes the current system redundant. Something people want to adopt rather than being coerced to do and something that isn’t on collision course with reality. But that’s for another essay.

Speaking of being in collision course with reality. 2022 was also the year when blockchain, web3 and crypto had to bend the knee and realize that not all that glitters is gold.

Not only did the industry lose steam as the FED started to raise interest rates, it took a few serious hits due to various scandals. The biggest of them all was FTX’s collapse and Sam Bankman Frieds’s upcoming trial where he faces many years in prison for defrauding users for $10 billion.

As most people know, I am a big proponent of Blockchain. I am such a big advocate that I invested time and money into building one and is saddened to see the many collapses we see.

Part of the collapse is because of what many critics have rightly pointed out as pure speculation. But another and bigger problem has been that there was so much money available in the last few years that there was no need to build anything of utility.

All you really had to do was to create the illusion that value was created and so most people who got involved in web3 and crypto did so based on the dream of “asset appreciation” rather than “utility usage”.

In other words, most people involved in crypto and web3 did so as investors, not as users. This is obviously unsustainable and the market corrected accordingly.

This is not the same as saying that everything is bad. DAOs are becoming normalized to organize online communities, NFTs have started to inject themselves into all sorts of industries; from flights and concert tickets to memberships, to accessories and games.

Especially in countries and regions with unstable political governance, crypto actually works extremely well and helps people with remittances and as a store of value. But the most speculative areas, no matter how look at it have imploded and that’s only good.

In the exact opposite direction, the end of 2022 offered some extremely revolutionary and encouraging progress.

One happened in the world of physics and more specifically with regards to fusion energy. The American National Ignition Facility (NIF) achieved] “ignition”. That is to say, they have succeeded in starting the same process that “ignited” our own sun and trillions of other stars.

It is nothing less than revolutionary and many of us hope to experience fusion in our lifetime. It’s important to note that fusion is not just another way of powering your lightbulbs. It is a completely new kind of energy that is not only as clean as energy can be but make things possible that were not possible otherwise.

One is that with fusion we will be able to create space rockets that can achieve 10% of the speed of light, the second is that because fusion is de facto a sun under our control and we will thereby in principle be able to use it to create materials. Gold, silver and all sorts of other elements. There is still a long way to go for any of that, but it truly goes to the support of the idea that there is no shortage of resources, only of the knowledge required to create them.

The other truly ground-breaking sensation is in the world of technology, specifically AI. AI as an industri have been under way for 70 years and went through a number of “AI winters”, but in 2022 something happened that no one imagined would happen, AI became public property.

From being something primarily technologists and academics were interested in, to suddenly becoming something everyone could use, AI tools like Stable Diffusion and ChatGPT soon found itself in the center of the AI revolution. A large part of the credit for that can be attributed to Stability AI who decided to open source their AI models so that everyone could continue to work with them. It created an explosion of new applications and models and new features. Incredible to see what open source can do when normal people are given the freedom to use their own creativity.

It’s hard to describe how monumental this is without sounding like a naive techno-utopian, but we’re talking about something that will affect virtually every industry in some very fundamental ways. In the next 12 months, the difference won’t be terribly noticeable, but over the next 5 years, many industries will look very different some will be gone.

The AI we are talking about today is not just rule-based but can also learn and be semi-creative. That is, it can get ideas within the intersection of ideas humans have already explored. We are talking marketing, code, quizzes, name ideas, business ideas, essays, job postings, jokes, songs and I could go on. If it is something with data in/out, then it is potentially going to be eaten by the new AI models.

Where the zeros were “What is your Cloud strategy?”, the 10s; “What is your Big Data strategy?”, 2017–2022; “What is your Blockchain strategy?”, the question for every company in 2023 and beyond is, “ What is your AI strategy?”.

If you haven’t messed with AI, make that your New Year’s resolution.

With all that said, we’ve come to what it’s all about; predictions for 2023 and as always, none of this is investment advice. Do your own research.

First, the macro economic and political:

• The Ukraine war will either end with Russia withdrawing and gaining a few territories or a coup.
• The US and China will step up the military presence around Taiwan.
• China’s covid situation is getting completely out of control. If it doesn’t mutate into something dangerous, it will disappear as quickly as it spread.
• AI will become one of the most politicized areas. The discussion will be about bias, copyright, AGI and creativity.
• There are voices in AI skepticism, so politicians will try to legislate in the area, especially the EU.
• San Francisco will continue to do away with its dysfunctional progressive legislation.
• The European countries will burn more fossil fuels than in 2022.
• Coal will be the “best performing commodity” (Denmark alone 7 doubled imports of coal in 2022).
• Investments in the green transition will be sharply reduced and several completely shelved.
• The housing market will crash (Already down 10% in the US in 2022).
• Credit card and loan debt will hit an all-time high.
• Savings will hit the lowest point in recent times.
• Energy will become more expensive, which means everything else will become more expensive.
• Most schools will ban AI, some of the more rational ones will implement it into their teaching.
• India will continue to develop economically, socially, technologically and become a power player on an equal footing with China and the USA.
• Most countries will see zero to minus growth (i.e. recession)
• Nuclear power is becoming more popular than ever.
• Many people’s pension savings will be greatly reduced.

And now for the technological/startups related:

• Venture capital investments in AI-related software are breaking records because investors have total FOMO.
• We will see a bloodbath of companies going bankrupt or being bought as talent acquisitions.
• “What is our AI strategy?” replaces “What is our Big Data Strategy?” as the most important question a company can ask itself.
• Google, one of the biggest investors in AI models and chips, will be one of the companies that will be forced to publish how they intend to use AI while not killing their existing business.
• The number of new search engines based on AI will explode.
• The number of “AI optimized” products will explode.
• By far the AI companies will fail as early as 2023.
• GPT-4 will either be multimodal or have more direct access to the Internet.
• NFT’s will continue their popularity in many areas that have not used them before.
• Crypto will finally get clear regulatory rules in the US.
• We will see some pretty big advances in bio-technology due to Crisper. Especially cancer research.
• Sam Bankman Fried from FTX will either get life in prison or go completely free.
• Twitter survives despite cutting 70% of the company by asking: “Who is exceptional and who is indispensable?”.
• Blockchain and AI will be the new power couple. They need each other. One provides utility, the other identity.
• Many other companies will do what Musk has done and cut their staff.
• More crashes in the Crypto world.
• Mastodon who?
• Mr. Beast becomes new Twitter CEO.

With this I would like to wish everyone a good 2022 and hope to see many of you around where I come.