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In this episode of Global Infusions, Tom and Tom explore the impact of water, from geology and the environment to politics and business. They discuss disappearing lakes, leaking pipes, and why bottled water costs more than petrol, while discovering a surprising similarity between cotton and sheep. Finally, they look at an AI for smells, analyse the cost of the energy crisis, listen to a black hole, and lament the obstacles to love in the metaverse.

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TR –  Hello, I’m Tom Record and I’m here with Tom Morris. Welcome to Global Infusions, an investment podcast from the Liontrust Global Fundamental team that takes a long term view of today's stories.


Last episode we chatted about sport and how the money flows in this emotive area. This episode we’re chatting about water… the stuff that makes up the majority of your body and has defined countries, politics and conflict. If your taste buds are tickled or you have any questions for our next episode, please do send them in via your client contact or through the contact us link on the Liontrust website.


So sit back, grab a cup of tea and remember that when we talk about individual companies we are not making a recommendation to buy or sell shares and that some of these companies may not be held across Liontrust’s global fund range.


TR – so Tom, where shall we go first? Country borders, droughts, floods, mining? Your choice…

TM – Well let’s start 135,000 years ago. Scientists think that a series of megadroughts drove early humans to migrate out of Africa and into the middle East.

TR – Indeed, to Mesopotamia, which is Greek for between two rivers.

TM – I didn’t know that! I’ll file it away for future use. But the point is the availability of water has pushed humanity to move and adapt over the course of many thousands of years.

TR – OK, but I want to go back a little further. Have you come across the Zanclean Megaflood?

TM - Honestly, nothing beyond a vague recollection that it might have something to do with the Mediterranean?

TR – yes – this was a giant flood 5 and a bit million years ago that tore through the straits of Gibraltar and refilled the Med with water levels rising up to 10m a day. There was a giant 1.5km tall waterfall near Sicily that poured over the Malta escarpment.

TM – hold on I’m trying to visualise this, but I’m struggling a bit – the Mediterranean was cut off from the Atlantic as the strait of Gibraltar closed, it dried up, and then the strait reopens and it gets suddenly reconnected again?

TR – yes, and water rushed in, filling the Western Mediterranean basin first, and then cascading into the Eastern basin. It carved a huge canyon that can still be seen today.  Immense.

TM – Amazing.

TR - So, let’s get back to how people are impacted by water.  Obviously there are often borders defined by seas or rivers, and in Europe the river Danube perhaps illustrates that best, passing through four different capital cities. Tom can you name them?

TM – Oh well this is an absolute quiz classic question, so thankfully I actually do know the answer: Vienna, Bratislava, Budapest and Belgrade.

TR – Awesome.  Good skills. But it’s not just rivers that get entangled with politics – huge bodies of water can too, like the Aral Sea.

TM – I’ve not heard of that.

TR – Well at one stage it was the fourth largest lake in the world with a surface of 68,000 square km.

TM – That’s huge, about the same size as Ireland

TR – but since then it’s shrunk by more than 90% - after the USSR started diverting water for irrigation in the 1960s.

TM – Ah, I think I’ve seen pictures of stranded, rusting boats in the middle of nowhere, is that it?

TR – yes, those boat skeletons make amazing photos that remind us of a major ecological disaster…

TM – And it’s a pattern we can sadly see happening again and again around the world. The Great Salt Lake in Utah is shrinking as the snow melt that historically replenished it is diverted for human use. The lake has already shrunk by two-thirds since the 1980s, and there’s a risk that it dries up completely.

TR – And dry lakes can cause big air pollution problems, as the lake bed turns to dust and gets blown up into the atmosphere.

TM – That’s right, and it’s a particular problem for the Great Salt Lake because the lake bed contains high levels of arsenic, and it sits right next to Salt Lake City, with over a million residents.

TR – Nasty.

TM – Yep, and even before that happens, the shrinking volume of the lake means the salt concentration keeps rising. If it reaches 17% salt, which it is forecast to do over the next couple of years, it will become inhospitable for algae, which are at the bottom of most food chains in the lake. So there’s a risk of ecological collapse.

TR – So what can be done about it?

TM – Well the only thing they can do is use less water, and there have been some efforts to stop issuing permits for new water intensive businesses like data centres

TR – Ah yes it’s amazing how much water data centres use for cooling. There’s been some discussion in the UK recently about it – I think Thames Water was trying to find ways of saving water after the drought over the summer. They said that one proposed data centre in Slough had asked for  permission to use 25 litres a second, which is about 790m litres a year, the same as around 5000 four-person households.

TM – Amazing. Since you’ve brought up the UK, it makes sense for us to quickly mention the sorry state of water infrastructure in this country.

TR – Some of the stats are shocking, and the sewage discharges into the sea this year have been horrible, and even caused a diplomatic spat with France.

TM – So Thames Water reckon that they supply 2.6 billion litres of water a day into their network, but 24% of that is lost to leaks before it reaches customers.

TR – So over 600m litres a day lost to leaks, just in the South East of England?

TM – Yep. And they have the audacity to put hosepipe bans in place – the one positive I can see is that the regulator is at last forcing them to invest more to sort themselves out, with the private owners forgoing dividends for the last few years.

TR – Well that is something at least, but it’s a classic example of where the consumer can see the cost but the product (and the leaks) are hidden underground. Now might be a good time to move on to the cost of bottled water, which is quite an amazing illustration of human irrationality.

TM – Ah yes, we’ve got to talk about bottled water.

TR – So a 500ml bottle of still water in Pret a Manger is £1.95. That means the price for a litre is £3.90. Now, even with the UK’s famously high fuel taxes, the price of a litre of unleaded petrol is currently about £1.66, so less than half the price.

TM – And if we just look at the crude oil price, the difference is even bigger. Oil currently trades at about $90 or about £79/barrel. There are 159 litres in a standard oil barrel, so that gives a price per litre of about 50p.

TR – So bottled water is massively, massively more expensive than oil. And just think for a moment about the difference in technological difficulty between the production of those two liquids. Oil has to be searched for and found, with potential reservoirs studied for years, then drilled and developed, often beneath kms of water and rock, requiring the absolute cutting edge of human engineering. It then has to be refined and shipped around the world, potentially for thousands of miles.

TM – And mineral water basically just bubbles up to the surface naturally all over the place.

TR – And tap water can be consumed essentially for free – Thames Water charges 0.15p/litre to metred customers.

TM – So it comes down to branding and convenience.

TR – Exactly – people are amazingly willing to pay several pounds for something that they can get for free at home, to save them the hassle of carrying it around with them, and to give them the chance to display a brand they like, from Aqua Panna to Dasani.

TM – And it’s worth noting that Dasani is literally just filtered tap water.

TR – Ha! Yes indeed. And on that note, it’s nice to see more and more places offering free filtered water taps, from train stations to cafes.

TM – Agreed. So we should also talk a bit about water use in food I think.

TR – Absolutely.

TM – So it’s pretty common knowledge now that beef is extremely water intensive – the Guardian reckons that 1kg of beef requires about 15,000 litres of water to produce, about 98% of which is used to grow the crops that the cow eats.

TR – that’s a pretty shocking stat.

TM - It is, but what is talked about less often is the context. A household of four in the UK uses about 160,000 litres a year, so 1kg of beef is equivalent to almost 10% of that.

TR – So when we talk about the water use of a family as just being the amount the comes out of their taps at home, we’re kidding ourselves really.

TM – Yes – food is an absolutely enormous part of our consumption, it’s just harder to see.

TR – Lamb and pork are also have a lot of embedded water – at over 10k and 5k litres per kg respectively, and of course dairy does too, as a consequence of the cows.

TM – So vegetables are obviously the least impactful – a kilo of potatoes only takes about 290 litres of water to produce. Chicken is the lowest impact meat I could find, but it’s still at about 4000 litres/kg.

TR – And of course the materials in clothing embed quite a lot of water too. Cotton for instance requires about 10,000 litres of water per kg – it’s as bad as sheep.

TM – Jeans have a lot to answer for – we haven’t even got time to discuss the energy and chemicals used in the dying and artificial weathering processes.

 TR – That’s for another episode. So Tom, let’s get back into politics – the other day I was reading a paper about the importance of water in shaping Imperial China.

TM – Ok, so this is going back a long time… over the last 2,000 years?

TR – exactly, and the peculiarities of China’s geography and particularly her waterways meant that any group that aspired to unify China had to carry out large scale water management activities through a centralized state to stop floods and to maintain navigable rivers.

TM – So water has historically pushed China to become an integrated political entity for thousands of years and I suppose, it has therefore had huge influence on culture and creating a collective psyche.

TR – And there are challenges when rivers span multiple countries.  Staying with China and South East Asia, the major rivers such as the Mekong have been a cause for concern in recent years.

TM – China has been building dams on the Mekong, and has changed its flow in countries further downstream that rely on the river as an integral part of their economies and people’s livelihoods.

TR – Yes, in 2018 the Mekong’s water level fell to its lowest level in 100 years and that was during Monsoon.  China has built a degree of leverage over its downstream neighbours like Laos, Thailand, Myanmar, Cambodia and Vietnam.

TM – There is a UN convention on watercourses from 1997, but it doesn’t seem to have much in the way of teeth.

TR – Yes another one that we could have included in our episode on bad rules.

TM – Before we finish on water, I just want to mention the floods in Pakistan, which have been pretty extreme.

TR – Yes it looks like about a third of the country has been affected, and Pakistan is not a small place.

TM – It’s terrible, and has almost certainly been made worse by climate change

TR – Another example of a poorer country bearing the worst of the consequences, while emitting very little CO2.

TM – Yes, personally I think it shows why richer countries really ought to be sending more money to poorer ones to help them adapt to more extreme weather, and move away from things like coal power generation.

TR – Agreed.

So let’s move on to the news – Tom what do you have for us this episode?

TM – Well the first thing that caught my eye this month was Stable Diffusion, another image generation AI similar to Dall-E, that we’ve spoken about on the podcast before, but with the big difference that it’s open source.

TR – Ah I see. I must say that it was a lot of fun playing around with cue words for Dall-E after we got accepted onto the early user program.

TM – Yes, it was really impressive, and also hilarious. My favorite was the image it generated when we asked for a painting of a hedge fund manager making a splash in the style of David Hockney.

TR – Yes – they were great.  So Tom, sorry, you were saying about Stable Diffusion.

TM – Yes, So while most of these headline grabbing AIs are locked down by their creators, Stable Diffusion is available for anybody to play with, even for commercial use. You can host it in the cloud, run it on your computer at home, or even start making programs that sit on top of it.

TR – Yes I saw that someone has already made a plugin for photoshop, allowing people to generate AI art with a few clicks when they’re working on a project.

TM – One of the initial killer use cases has to be a plugin for Microsoft Office to give a modern alternative to clipart.

TR – It feels like a really exciting time for image AI – we’re seeing remarkable innovations almost every month.

TM – We’re certainly all going to have to become a lot more sceptical about supposed ‘photographic evidence’.

TR – Indeed. So the first thing from me today is also an AI – and a paper from Google about AI Smell!

TM – Smell?

TR – Yes – Google has developed an AI that can fairly accurately predict how things will smell, based on their molecular structure – something that was previously extremely difficult.

TM – Fascinating.

TR – It works by creating an odor map that places different smells in different areas. It looks really cool and the idea was based on a colour map showing saturation and hue.

TM – And then they used this map to train the AI and see if it can predict smells?

TR – exactly… and it was really good at prediction.

TM – OK, so it sounds like a fun bit of science, but did they come up with any useful applications?

TR – well the example that gripped me is that they have been searching for new molecules that repel mosquitos more effectively than DEET and are more stable and cheap to produce.

TM – A really important cause – hopefully they can make some progress.  So the next thing from me today is on energy.

TR – A huge issue at the moment.

TM – Indeed. So there have been headlines across Europe recently as national governments announced packages of support for consumers and businesses to help them deal with exceptionally high energy prices caused by the war in Ukraine.

TR – This is from Russia restricting natural gas flows into Europe.

TM – Yes, which has pushed both gas and electricity prices to levels many times higher than previous records.

TR – And I think the electricity situation has been made even worse by outages in many of France’s nuclear power stations, as corroded pipes are replaced.

TM – Yes that has not come at a good time, but at least it’s being dealt with safely. So what I really wanted to highlight is the scale of these support programmes. The UK package announced by our new PM Liz Truss is estimated to cost about £150bn.

TR – which I think is about 7% or so of GDP.

TM – yes exactly, but that doesn’t tell the whole story really. I mean when it’s presented as 7% of GDP, it doesn’t sound that bad – 7 isn’t a big number, and most people probably just think ‘fair enough’ and move on to the next story. But 7% of GDP, £150bn, is an absolutely enormous number. It’s the same as the budget for the entire NHS in 2019.

TR – Wow.

TM – It’s way more than we spend on education and defence combined, which would be about £110bn.

TR – Now that is starting to sound like a lot.

TM – it’s the same as all the money that is raised from capital gains taxes, council taxes, fuel duty, tobacco and alcohol duty and business rates, combined, which were about £152bn last year.

TR – Ok ok I get it.

TM – Ha! Good. I also had a look at how much renewable generation capacity could be added in the UK if we’d planned ahead and spent that £150bn on wind turbines instead. Based on the cost of the Dogger Bank offshore wind farm, which is £9bn for 3.6GW of capacity, I reckon £150bn would pay for about 60GW of wind turbines.

TR – Remind me what UK electricity demand is?

TM – About 30GW on average.

TR – oh.

TM – yes. And I know the wind doesn’t always blow etc etc – so I looked at existing wind capacity, which is about 25GW, and compared that to average wind energy production over the last year, which was just under 7GW, so about 30% or so of the nameplate capacity. And on that basis an extra 60GW of capacity could be expected to add about 18GW of power on average, which would make a huge difference.

TR – Agreed. Right, so the second thing I wanted to highlight this episode is a really interesting post from NASA.

TM – Oh yes? It seems like we’ve seen a lot of amazing stuff from them since the launch of the James Webb telescope.

TR – We have, but this isn’t an image. It’s a sound.

TM – I thought space was silent?

TR – The vacuum of space is, but a galaxy cluster has enough gas that sound waves can propagate through it for extremely long distances.

TM – OK that makes sense – so what have they found?

TR – NASA has found that pressure waves created by the black hole at the centre of Perseus galaxy cluster are causing ripples in that cluster’s hot gas that can be interpreted as a note. The ripples were picked up by NASA’s Chandra X-ray observatory, but there is a problem.

TM – And what’s that?

TR – The note is about 57 octaves below middle C, so far too deep for human ears to perceive.

TM – So ridiculously deep.

TR – Yes, and so NASA have scaled the sound up into the range of our hearing, and put it on Youtube – and so you can hear the sounds of a kind of creepy cosmic whale song.

TM – That is cool. It’s a shame Douglas Adams isn’t around to interpret it for us!

TM – So the final thing from me this month is a bit of a follow up on last episode’s discussion on sport. Serena Williams retired from competitive tennis in September after winning 23 singles grand slams, the most of any human in the open era. I thought it might be interesting to have a quick look at the career earnings of one of the greatest sportspeople of all time.

TR – Absolutely – let’s start with prize money.

TM – So Serena tops the all-time WTA career prize money ranking by quite some distance, with about $95m, more than double the haul from the #2, her sister Venus Williams.

TR – That’s quite a family record!

TM – Ha! I thought the same thing. So as we discussed last week, there are no wages in tennis, so it’s notable that the rest of Serena’s earnings, about $350m according to Sportico, came from endorsements. She’s also had some success in venture capital investment, which is becoming a bigger area of interest for celebrities, as we discussed back in our episode about fame.

TR – Very good, so the last thing from me this episode is a story about a Japanese man who married a virtual character.

TM – Oh yes I remember reading about this a few years ago – he’d taken his fanhood to the next level by holding a marriage ceremony with a virtual singer.

TR – Yes she was called Hatsune Miku, and the man, Akihiko Kondo, married a hologram of her displayed inside a gadget called a Gatebox, which is basically a glass tube about the size of a coffee machine that allowed him to interact with her.

TM – I think I saw a youtube video demoing the Gatebox – it’s quite a cool holographic display that makes it look like you have a tiny cartoon character in a glass bottle, like tinkerbell in Peter Pan. And there is some basic AI that allows for rudimentary conversations, reminders and other features similar to voice assistants like Alexa and Siri.

TR – Exactly – but the problem is that the makers of the Gatebox are discontinuing the service, so that Kondo will no longer be able to interact with his virtual wife.

TM – That’s actually quite sad.

TR – Yes and it shows that while virtual characters may not die, because they were never alive, they can still become obsolete, or get hacked, or just break – which really isn’t that different to getting ill or dying.

TM – Yes that’s a good point – just being virtual doesn’t suddenly tidy up all the messy bits of real life.

TR – Thank you for listening to Global infusions - a podcast that believes that the best discussions are had over tea and cake. We hope you've enjoyed your cuppa and our thoughts on water. Please do subscribe through Apple or Spotify and with that we wish you goodbye!

TM – Goodbye!

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