Trading in World's Commodities

This book gives a good insight into how commodity traders and companies work behind the scenes and supply raw materials, essential to modern life - like energy, metals and food. Often they work around any sanctions and make things happen carving out their cut amidst all that.

In the past, this group has intervened in Iraq by supplying Saddam to sell oil, helped Cuba with a sugar-for-oil scheme and supplied U.S wheat to Russia. They have also advanced big loans to cash-strapped countries in exchange for guarantees for future supplies of natural resources there (Kurds, Congo).

In the complicated financial world, they are now so intertwined that retirement funds of teachers in U.S states of South Carolina and Pennsylvania ended up in the Middle-East before. LINK

The big ABCD firms in agricultural commodity trading are Archer Daniels Midland, Bunge, Cargil and Louis Dreyfus.

The business model is very simple: 

• Buy natural resources in one place and time, and sell them at another making a profit.

• Possible because supply and demand aren’t in sync.

• Natural resources (mines, farms, oilfields) are far away from the places they are needed.

• Not every producer can afford to build a network to sell their produce.

In the past commodity traders were so successful because -

• There was less access to information. (If the coffee crop suffered in Brazil that info flowed very slowly and to limited places. Not anymore).

• Size and scale of the bets.

• Their investments in networks of pipelines, ports, tankers, farms and mines. (If the oil pipeline which they owned had a snag, they would be the first to know and anticipate price movements and bet accordingly).

• Finance the producers.

Although now most of these advantages have vanished in the 21st century.

The book also contains an explanation of how the U.S dollar is being weaponized via sanctions.

Also, in the book learned bunch of new terms related to shipping/logistics -

TOLLING
Supply raw product and take as payment the finished product. Self-explanatory.

Demurrage
Containers that are left at the port or rail yard longer than their allotted free time.
Hire a Very Large Crude Carrier (VLCC) with crude oil in it but do not deliver it and wait by the port side until oil prices jump.

Commodity SuperCycle

There’s a correlation between a country’s wealth and its consumption of natural resources. As the country’s per capita income passes $4000 people start spending money on things other than essentials (food, shelter, medicine). 

China crossed this threshold around 2001 thus requiring more raw materials than before and more than what it produced domestically. This sparked a commodity supercycle - an extended period where the price of raw materials is well above its long run trend lasting for decades. Towards the end of 2000s, other BRICS countries joined this phenomenon.

However, the authors take a nuanced view when it comes to the question whether commodity traders are responsible for spikes in commodity prices. They say NO. In their view, commodity traders are buyers and sellers of last resort. Even though it is always tempting to blame them for food crises.

Duty - A Memoir Worth Reading

I hesitantly picked up this book (published 2014) looking at the number of pages (~640) and wasn’t sure if it had any good insights in it. But I pushed through it and by the time I was a few chapters in - I was enjoying the memoir actually and finished it in a week. It had some few good aha moments and some reconfirmations of what I thought happened.

By the end of the book the author who served as Secretary of Defense aka Defense Minister under POTUS 43 (last 2 years) and POTUS 44 (first two years) - acknowledges and underlines few things about War in general -

• There is always this assumption in the beginning that the war would be short. And it never is. 
• Once the first round of shots/bombs are fired - war is unpredictable and it takes its own course.

No country is fully prepared for the next war. I liked Donald Rumsfield quote -

You go to war with the army you have, not with what you wish you had.

Another thing which I thought was a big deal for someone of the author’s stature to mention was that in the intervention in Libya (2011) - out of 28 NATO allies, only half provided some contribution and only half of them sent in their aircrafts. And the U.S had to step in to provide not only recon capabilities but also midair refueling of those planes. After only 3 months, the U.S had to replenish NATO’s dwindling ammo as they started to run out of them.

It is remarkable in my view, because as per NATO’s charter every country has to spend ~2% of its GDP on defense but very few do for various reasons. This was called out by POTUS 45 but the message was lost due to other ongoing things. Adjacent to this was what he writes about Russia - those views are no longer acceptable today.

I have always wondered why the U.S defense budget is so huge and always keeps increasing. And reading the former Secretary of Defense’s autobiography gave me enough understanding for that. 

• First factor is Inflation. The budget obviously will keep going up at least at the same rate as inflation. And Military salaries need to go up accordingly.
  
  
• Fuel. This is such an overlooked factor. Lot of transport vehicles - trucks, tanks, planes, helicopters - all require fuel (diesel) and that cost keeps going up.
  
  
• The Military Industrial Complex is real!
  Lot of projects of manufacturing ammo, weapons are spread across the country providing a lot of jobs and driving local and regional economies. Even if the President and Secretary of Defense want to shut down some programs which aren’t needed - as per the author, often the Service chiefs would go to Congress and lobby for them.
  
  Similarly, in a rare case where neither the civilian government nor the Service chiefs want some program/weapons shelved as its outdated or less value add - the Congress would still allocate budget for it overriding them both. Congresspersons are scared and clueless how to replace those factories and jobs. As mentioned so many times in the book - parochial interests drive the budget mostly and not national security vision.

Reading the book the delicate Middle East situation became clearer.

How the U.S has been successfully managing the volatile region and trying to hold back Israel (mostly) is admirable and praiseworthy. However, understanding all the aspects makes it feel like it is a matter of When not If, when it all erupts.

There is also some good wisdom on revolutions. They always start with hope and idealism, but mostly end with bloodshed and authoritarianism. Because often the more organized and extremist groups capitalize on it and take power. We have seen it happen in Iran (1979), Cuba and even in Egypt (Arab revolution 2008).

Overall, this book gives a very good overview on how the U.S government functions.

• One would think meetings would be a problem only in the corporate world but no it was amusing to see that even at such a top level there are so many meetings all day and so much context switching.
  
  
• Transfer of power requires lots of work from a dedicated team. Since it is humans we are talking about here - you can expect all kinds of attitude you can think of from an outgoing team to incoming team regardless of political affiliations. 
  
  
• It is remarkable how the Secretary described his experience interacting with Congresspersons.
  In the privacy of a room devoid of cameras they can be intelligent, thoughtful and insightful in discussions but once the little red light went on the top of a camera, it has the full effect of a full moon on a werewolf. No wonder public hearings are all about hot-takes!
  
  
• In Iraq and Afghanistan there was often a lot of frustration at the slow progress in the newly formed governments of those countries. Ironically, the U.S Congress can be equally frustrating at arriving at consensus on big ticket items.
  
  
• Finally, in big positions in government you make decisions with either too little time or too much ambiguous info. That’s par for the course.
  
  
  

Overall, for the above reasons it's a good read. 
⭐⭐⭐⭐

Unwinding Globalization

The book's central theme is perfectly captured in the subtitle - Mapping the Collapse of Globalization. The author lays out in great detail how Jan 2020 was the peak of globalization, and the onset of the Covid pandemic marked the start of the demise of this global order. Post World-War II the world was together in a way in which security was no longer a concern but keeping costs low was. This was solely possible due to the U.S guaranteeing security under its alliance in exchange for opening its market to other countries who joined. Trade was the norm of the day with capital flowing freely to investment opportunities aided at times by the credit cycle.

But with the U.S retreating from the current position - global trade will have a serious dip, globalization will collapse and the era of abundance will be over. Trade will not be as seamless and smooth as before due to a bunch of security concerns and inward looking perspectives. 

Various other factors will also hasten the demise of globalization - 

Demographics

The author places a lot of importance on Demography which I felt odd at first but as I read along I understood better its significance. The key thing with demographics is that you cannot change it/reverse it/innovate around it even with infinite amounts of money. If there are less children today it guarantees that there will be a small labor force 25 years from now. Also, keep in mind that the most of the spending a person does occurs between the age of 15-45. Thus a lopsided demographic may not help.

The replacement rate is 2.1 and a lot of countries in Europe are past the point of no return. Some Asian countries like Japan (oldest society in the world) and China (fastest aging society) are also on that path. 

Demographics are visibly shifting as baby boomers (born in 1940-60s) retire rapidly in 2020 and 2030s. And they will no longer have any new income to invest in fact they will also change the profile of their investments - from risk taking to risk averse. Combined with rising interest rates this change in investing choices of the richest generation will dry up capital for many industries.

Another impact would be on tax revenues. Gone are the days of 2000-10s of a tax-heavy, mature worker heavy demographic and with the days of 2020-30s of tax poor and retiree heavy demographics. 

Thus, if the consumption economy starts to sputter thus will the related export/manufacturing led economies like China which thrive on supplying and meeting the endless demand for products.

Region	TFR (2015-2020)
Africa	4.4
Oceania	2.4
Asia	2.2
Latin America and Caribbean	2.0
North America	1.8
Europe	1.6

Capital

The era of easy free money is over. Poor capital allocation decisions and an easy money credit cycle has propped up a lot of industries (and has led to many innovations) - in place of profitability. Conditions of the last 13-14 years aren’t coming back. Fiscally prudent economies will survive and there are not many in that category. 

• Countries have grown credit at a rapid pace and Monetary expansion is Inflationary.
• Coupled with falling consumption habits of an aging population is Deflationary by nature.
• Building a new supply chain, a new plant not dependent on globalization is Inflationary.

Thus, a dizzying number of factors will pull the economic stability in all different directions.

Renewables

I liked the nuanced take of the author on renewables. He says that he’s a believer in green tech when it's matched to correct geography.
The example given is of Austin v/s Denver. Even though TX is hot, sunny -  Denver which is the sunniest metro area and at a high altitude there is no humidity and no air to block sunlight is more effective for solar. Also, most parts of the world are neither very windy nor very sunny. 

On-demand electricity is a very important concept that currently can’t be fulfilled by renewables as of today.

Also, the hastened rush to phase out oil & gas can cause a lot of problems. Worth remembering, oil is also the base material for the building world's petrochemical needs. Modern petrochemicals are like food packaging, medical equipment, footwear, tires, diapers. 

Greentech requires much more Copper, Chromium and Lithium. And the supply chain of these rare metals are much more complex than oil & gas (OPEC). Also, worth mentioning that mining these rare metals is not an environmentally friendly process.

However, amidst all this per the author the US will continue to have enough supply of these materials as it will retain access to the Western Hemisphere and Australia and also a powerful military to go out there and get what it needs. 

Agriculture

This was very interesting as it's not exactly obvious at first how globalization and agriculture are linked. But it made sense. Fertilizers - nitrogen, phosphate and potassium are chemicals but none as important as potassium fertilizers. It comes from a mineral potash which is found mainly only in 6 countries. With the collapse of globalization, the supply chain for global fertilizers will also collapse, forcing some to substitute it with organic foods or manure. 

Here the author provided an interesting outline of organic  - they aren't environmentally friendly as they consume a lot of water, require chemical free fertilizers & herbicides which are expensive and have a low yield/acre requiring more acreage. 

Also meat supply chains will suffer too. Due to globalization caloric intakes have increased and there are a bunch of sources now. But that may be going away. 

My take 

The author is unbelievably bearish on China - he thinks not only that country will implode due to severe disruption in supply chains, but also be affected by slowing consumption rates in the West due to an aging population and finally its own demographics will vanish it's labor force and eat it's cheap manufacturing advantage.

At the same time the author is very bullish on the United States. Even though a retreat from the world stage wouldn't hamper it's prospects as per him. He gives three reasons - strategic geographical advantage, very strong military and a global reserve currency (dollar). Now I'll take it with a grain of salt considering many financial institutions and even the U.S military are clients of the author's geopolitical strategist firm.

Good book overall. Got to learn about quite a few trends and some not-so-obvious changes which are lurking around the corner.

P.S -

Although at few places it feels like the author is B.S. He says "... for manufacturing machinery Germans are so good at it due to their penchant of being so precise. Americans are not at the same level but not too far behind as 2nd." Really? No other country can manufacture machinery?

Ethics of Gene Editing

After the 2020 Nobel Prize in Chemistry was awarded to Dr. Jennifer Doudna and Emmanuelle Charpentier for “ the development of a method for genome editing”, I spent 2021 reading, learning and being amazed by the potential this technology had. Along the way I also found that there are possible ethics questions that may arise with this technology’s growing maturity.

On searching I found this book which apparently talked in detail about the ethical questions.  The book did not disappoint. It does a great job in explaining the ethical quandary surrounding CRISPR and its applications. 

To set the baseline while CRISPR may appear to work at first - it may take years even decades to learn about any possible side-effects. Since it requires gene editing (modifying a gene) theoretically there’s a possibility of any conflicts with gene expression or any unwanted, unpredictable off-target effects. And it is possible that these issues will be caught after a few years even though after the treatment the person may look fine, healed and healthy. 

Somatic = Non-reproductive i/e non-heritable

Germline = Heritable

Normally, any research to be successful has to yield a treatment that is both SAFE and EFFECTIVE at the same time.

	SAFE	UNSAFE
EFFECTIVE	✔	X
NOT-EFFECTIVE	X	X

Currently, there are many trials/researches being run by universities and pharma companies. However, as the author rightly points out that even though somatic cell human genome editing is funded by the public, the irony is that the costs of any such therapy may be outside the reach of an average person. That in itself is the first major ethical question - affordability. Haves v/s Have-nots.

People with rare diseases are often a small segment and thus the research on their diseases and cures is often less prioritized. Pharma companies usually fund projects based on the market size and even when they come out with a treatment the prices can be exorbitantly high. 

For example - in 2015 a drug named Glybera went on market with a price for one million US dollars for a one-time dose. The drug was a failure due to limited demand and high price. Similarly, for a rare eye inheritable disease affecting one-two thousand people in U.S states a gene therapy was launched by Luxturna in 2018 with a price tag of $850,000 ($425,000 per eye). 

These examples as the author highlighted indicates that any treatments arising from the research will remain out of reach of most people. Even though the technology may mature and become widely available, it probably won’t be accessible to people in countries where the per capita income is much lower than in the U.S.

Another ethical question is choosing between Somatic v/s Germline editing.
Somatic treatments cure a disease in a person but won’t stop it from being transmitted to the off-spring thus requiring the same treatment cycle to be repeated again. 

However, with germline editing a disease will cure the disease and also ensure that it is no longer passed down to the future generations. The proponents of germline editing advocate it because it would be futile for the treatment to be repeated again on the offspring and there might be less costs if the treatment doesn’t require it to be repeated.  

Ethics of Genome Editing

The debate around ethics of genome editing rests on the distinction between treatment and enhancement. For example - if peak athletic performance is a result of complex environmental and genetic factors, then why not improve on both fronts? Athletic performance has been linked to the MSTN gene. 

On the other hand, if genome editing is used to provide people who are already at the tall end of the spectrum or are just average, a few more inches to outperform on the basketball court - that would be an ethically questionable form of enhancement.

It basically boils down to the distinction between ethically questionable and ethically unacceptable. All treatments are enhancements but all enhancements are NOT treatments.

Also, genes do NOT single-handedly decide a trait. Trait is a result of genetics and a complex web of environmental and genetic causes and influences that include everything that happens since conception. 

Genetic enhancements could greatly increase the gap between haves and have-nots in the world. It would introduce a genetic divide that mirrors the current unjust economic and social divide between rich and poor individuals and nations on top of the natural lottery.

Also, use of genetic modifications will endanger the small, reduced population with imperfections. With fewer children born with so-called undesirable genes/traits - life will become harder for children who actually have them and their families. In addition to discrimination, stigmatization and marginalization - it'd mean less opportunities for people to come together to advocate and demands for resources. The author gave the example of deaf community.

There’s very vigorous debate and interesting arguments around having gene editing for kids/babies. Author reminds us that we live in a competitive world. Parents try to provide their children with almost anything to aid their development. And with any consumer goods - some people are able to afford it OR some parents have to go under debt to get it done OR some are simply not able to afford it. Same is bound to happen with germline editing or even somatic editing. 

I liked and seem to agree with the author’s prediction that there will be “a cycle of initial condemnation, followed by ambivalence, questioning and limited use, followed in turn by change in public perceptions, advocacy and finally widespread acceptance.”

Non-health related heritable genome editing would follow the same pattern : 

Initial condemnation -> ambivalence/questioning/limited use -> Change in public perceptions/Advocacy -> Widespread acceptance.

However, there is no denying that there is real danger that this technology turns into a modern eugenic project sold in a new private form of “democratic consumer culture”. Eventually, prejudices of people will come to the surface in use of this technology as they will decide what genetic changes in their offspring. Social norms & prejudices that classify those traits as desirable or undesirable. 

Unequal access to this technology will seriously challenge the idea that "We All Are Created Equal".

It was interesting that the author referenced A Brave New World where Huxley led us to believe that when it came to our genes/reproductive futures - our worst nightmare was a government involved in procreative activity and a society that devalued individual decision making.  

Insurance

Can/will persons with enriched genomes willingly disclose this info to insurance companies in exchange for lower insurance premiums?

Research, Progress in Science and Ethics

The author in my view rightly critiqued the current model where scientific research in healthcare - results of studies are taken over by commercial interests to be repackaged and resold to the public for profits.This almost ensures that the taxpayers who funded the research never benefited from it.

There is also the matter of it taking a long time to have a drug approved in the U.S which incentives pharma companies to guard any outputs from their research even though it was fully/partially funded by tax dollars. 

It takes 12 years for a drug to be approved. And 7 years for a medical device to be approved.

The author points out that the common refrain that Ethics hasn’t kept pace with Science is that it reinforces the notion that ethics is burdensome.

Also, there was a mildly interesting section about should scientists just research and work to contribute to the fountain of knowledge OR should they wade into policy debates and take positions?

My View

My view on genome editing is that it is definitely going to pick up speed and become widespread in the coming decade. There are already many clinical trials underway on how changing/editing a single gene can reverse/treat widespread diseases like Cholesterol and so on. The risks of editing or silencing a gene may not surface until many years in a person. However, this technology is here to stay as companies try to convince the FDA for approval. Eventually, some drug will be approved and the low simmer debate around ethics will suddenly be the main spotlight. That’s where this book is such an interesting read. Lots of nuance and great arguments from a bioethicist point of view.

Rare Metals Crunch

There is an ongoing movement to phase out the fossil fuel industry and replace it with everything electric. This book talks about some of the key things needed to make that happen but are overlooked - and that is the rare earth metals. These metals go in the power-train of an electric car, or to manufacture power magnets which go in electric vehicles. 

As one can imagine - these materials will need to be mined from the Earth. They are spread across the globe across different countries from Angola, DRC in Africa to Kazakhstan in Central Asia to the biggest producer of them all - China. Access to these materials is a must to have the electric movement succeed. And there are many different caveats around this! The author does a decent job of explaining them.

Is Mining Rare Metals Environment Friendly?

Currently, cities in East China/Mongolia (Bataou, Dahlia) are the poster-childs of how “clean energy” is not clean. These cities sit on top of reserves of rare metals but the cities are full of the toxic sludge containing Hydro-sulfuric acid used to wash and clean the deposits to extract the minerals via the process. BBC even did a report on this in 2005.

Worth remembering - after extraction there is an elaborate process to extract the metal which consumes thousands of gallons of water. This is where the concept of EROI (Energy Return on Investment) comes in. EROI is the ratio that measures the amount of usable energy delivered from an energy source versus the amount of energy used to get that energy resource.

Can recycling of Rare Metals compensate for mining?

The answer is NO as of today based on the technology available. Even Apple - the company with abundant capital and resources is only able to manufacture products only with 20% of recycled materials. Rest of the materials like Tungsten etc - it sources from suppliers around the world. Apple's Environmental Progress Report 2021

Role of China

If for Oil - OPEC produces 41% of it, then for rare metals China today produces 95% of them - such is its vast influence on it. 

The Western Hemisphere has only two mines left- one in Australia (Lynas) and another one in California (Mountain Pass). Rest of the mines in Europe had to shut down as China dumped the market with so much supply that mining became a highly unprofitable endeavor.

Also, China has instituted export controls (export duty) on rare metals to thwart foreign companies relative to its domestic companies. Due to these export duties, input costs of foreign companies increase as China is the only major supplier today. Other countries in the Southern hemisphere like Indonesia have also followed suit by limiting exports of raw materials as they too try to climb up the value chain.

Another factor has been the vociferous movement against mining in the Western world which has resulted in a sharp drop in public approval for the mining industry resulting in shut-down of mines all across Europe and the U.S.

Criticism

However, the biggest question mark/criticism of the book is that the EPA website classifies some of the claims made in the book as myths. Let's analyze them -

One is that EVs are not bad for the environment even though the electricity generated to charge them may exacerbate carbon emissions. Power plants rely on fuels like coal/nat.gas/nuclear-power/solar etc to generate electricity. It's easy to guess which fuels are most in vogue as of today. The EPA's claim - may create carbon emission feels like a cop-out. And no mention of how much electricity demand a household with two EVs will generate (answer is - charging two EVs will double a house's electricity consumption). Overall, I'm not convinced by the first claim on EPA website that it won't result in more carbon emissions.

Same goes for the claim on battery manufacturing. Materials used for battery manufacturing have to be mined which is not an environmental friendly process. And the argument Recycling EV batteries can reduce the emissions associated with making an EV by reducing the need for new materials 
- doesn't make sense as explained further above.

Final thoughts - 

At this moment in time I agree with the author’s assessment that the public doesn’t realize that trading oil fields for rare metals deposits means more mining of rare metals deposits and mining isn’t an environmentally friendly process either. And we haven’t discussed at all about how the vast demands of electricity would be met when every vehicle would be electric. Western development model seems to be mired in some contradictions. Dreams of a green and more technologically advanced world doesn’t seem to be that clean.