April 2010 Archives

The Economist Ideas Economy: Human Potential

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I've just signed on to The Economist's next event in the Ideas Economy series, "Human Potential".  15-16 September, 2010 in NYC.  See you there.

A Few Notes on China

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  • China Daily recently carried an Op--Ed asserting that "Giant leap" in education spurs nasty slump in academics.  (Oddly, the piece appears to be badged as an article, but the URL suggests it is an opinion piece.)  The piece asserts that "According to the education bureau, the number of university applicants in Beijing this year has decreased by 20%, and Shanghai has failed to meet its recruitment demand for three consecutive years."  Those are numbers I will have to dig into.  Another story from China Daily reports that, due to reduced enrollments and accumulated debt, "Universities face bankruptcy".
  • Slashdot has a brief blurb on how "China's Research Ambitions Hurt By Faked Results".  For those who haven't been following this story, while China has been climbing the world rankings of published scientific papers, so has the number of fraudulent papers.  I have to wonder what the real numbers are, though.  The Slashdot story links to a specific example of 70 crystal structures shown last year to be completely fabricated, but other accounts are mostly "just so" stories.
  • China's economic growth jumped to 11.9% in the first quarter of 2010.  The NYT also reports that Beijing raised fuel prices to help keep inflation in check.  Exports rose 46% in March, year on year, while imports rose 45%.
  • According to the NYT, China's Premier Wen Jiabao recently said that "China would pour money into strategic industries, boosting research and development and infrastructure spending to "capture the economic, scientific and technological high ground." Among the areas he singled out were biomedicine, energy conservation, information technology and high-end manufacturing."
  • Earlier this year, for the first time, Chinese oil imports from Saudi Arabia surpassed US imports.  As a result, China ran a trade deficit in March for the first time in years, and is buying up oil production in Canada.  Re-reporting a story from the China Securities Journal, China Daily asserts the sudden drop in the trade deficit is "a result of China's strive for a trade balance by taking measures to encourage imports and stabilize exports".
  • Here is the full text of China's recently published "Report on the Implementation of the 2009 Plan for National Economic and Social Development and on the 2010 Draft Plan for National Economic and Social Development" (via Xinhua).
  • Xinhua asserts that "China's trade surplus with US misread".  Among other revelations, it is apparently all our fault for refusing to export high tech items to China.
  • China has been blocking release of monetary data to the IMF since 2007, which makes it hard for the international organization to make any judgements about currency manipulation: "China allowed the release of its reports until the monetary fund's executive board decided in June 2007 that reports should pay more attention to currency policies. China has quietly blocked release of reports on its policies ever since, without providing its specific reasons to the I.M.F.

    A person who has seen copies of the most recent report last summer said that the monetary fund staff concluded the renminbi was "substantially undervalued."

    The monetary fund regards a currency as substantially undervalued if it is more than 20 percent below its fair market value
    ."
  • Genetically Modified rice has been given a safety certificate by the Chinese Ministry of Agriculture, but the strain has to clear further hurdles before hitting the shelves.  Here are some interesting numbers: "China now yields around 500 million tons of grain annually. With the population expected to increase to 1.6 billion by 2020, 630 million tons of grain will be needed, experts said."  Wow -- that's a 25% increase in 10 years.
  • China has announced "A big plan to wipe out overcapacity".  According to China Daily, "The China Banking Regulatory Commission, China's watchdog on banks, has asked banks to retain strict controls on loans to industries with high energy consumption, high emissions or overcapacity. For instance, no loans are now allowed for any new projects in six industries with overcapacity and ship making unless these projects have approval from the National Development and Reform Commission, China's top economic planner. The six industries are steel and iron, cement, glass sheet, chemical processing of coal, polysilicon and wind power equipment."  Hmmm...the government of a centrally-planned economy proclaiming a drive for efficiency.  Best of luck with that.

DIYBio and Making at the BBC

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This morning's biosecurity update from the Partnership for Global Security carried a mess of links I hadn't seen, including a story at the BBC entitled "Tech Know: Life hacking with 3D printing and DIY DNA kits".  The embedded video has an interesting clip on a printed stainless steel Mobius strip with freely moving rings that can run around the perimeter -- interlinked complex shapes.  Neat.  (Not a new thing in plastics, but I hadn't seen it in metal before.)

Cambridge's James Brown gets the honor of introducing the Beeb's audience to synthetic biology, biobricks, and engineering methods for biological systems.  The 3D-printed DremelFuge gets a photo and a significant mention.  I explicitly pointed to this sort of application of 3D printing in my book, though it is happening even faster than I had imagined.  Shapeways is now printing all sorts of interesting materials, though the resolution of most 3D printers and processes still doesn't make them useful for the sorts of objects I want to print.  That said, there is clear improvement over time.

It will be interesting to see how long it takes before you can print mixed media functional objects, say something like a zero-dead volume, positive displacement membrane pump.  Or better yet an entire pump block.  (Which is usually milled from a piece of stainless steel -- see where this is going?)  That gets you the most annoying bit of kit needed for a DNA synthesizer.  At which point you can forget any regulations limiting access to DNA of any sequence. 

China Buys More of Canada

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China Daily is reporting that Sinopec is buying ConocoPhillips' stake in Syncrude for $4.65 billion.  This on top of purchases last year by Sinopec of a piece of Total's oil sands project, and by PetroChina of the Athabasca Oil Sands Corp.

This is interesting in light of last month's Chinese trade deficit of ~$7.2 billion (Xinhua), attributed to the cost of commodity imports (including oil).  A report late last month put Chinese petroleum use growth at about 5% for the next five years.  More deficits to come, perhaps.

Life Technologies Buys GeneART

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Life Technologies today bought 58% of synthetic DNA provider GeneART, with a public tender planned for shares outstanding (Yahoo Finance, GeneART Press Release).  Previously, before changing its name, Invitrogen entered into a strategic agreement to buy the exclusive worldwide rights to distribute Blue Heron Biotechnologies gene synthesis services.

What should we make of this?

First, Life is led by Gregory Lucier, who used to be way high up at GE and is a former protege of Jack Welch.  In my observation, and in my experience, Life is trying to the be the GE of biology.  What does that mean?  GE is obviously a conglomerate, and it operates not so much as a maker and seller of things but as a finance operation that seeks growth through return on capital.  As such, GE buys other companies aggressively -- this is, vastly oversimplified, the Jack Welch strategy.  Life is operating the same way.  The company is aggressively acquiring biotech companies of all sizes. The web was full of rumors earlier in 2010 that GE, seeing something it liked and a familiar strategy, was trying to buy Life Tech.  Who knows -- that may be real and may still happen.  It would be another interesting indication of a certain kind of maturity in the market for biological technologies.

Second, Life obviously sells lots of cloning reagents -- a market that is threatened by synthesis -- so the move could be somewhat defensive in nature.  Life is getting reputation, market share, and expertise in an area that they do not yet dominate.

Third, while GeneART is big, they are a European shop paying German wages to a bunch of people running around with plates and pipetters.  GeneART gets some cash and a big marketing arm, and Life gets ... hummm ... an operation that may have difficulty competing with Chinese labor (Genescript) and automation (Blue Heron).  Presumably, Life looked at the balance sheet and the marketing forecasts and decided the deal makes sense.  But it might be a complex calculation involving not just return on capital, but also access to IP, expertise, and factors that nobody outside Life can do more than guess at, like balancing sales of cloning reagents against sales of synthetic genes.

Now, what might be the implications for the synthetic biology community?  Probably not much.  Prices for synthetic DNA continue to fall.  The $.39 per base price established last autumn as a "special" is now, no surprise, the industry standard.  We will probably see additional consolidation and shifting around as margins get squeezed.  The industry is expecting prices to be at $.05 to $.15 per base within 5 years.  Though even within the same conversation you might hear $.10-$.25 per base, thereby managing consumer expectations, which makes me wonder if people are starting to quail a bit at the exponential and its implications for their business.  You will still have the option to pay more for rush jobs or for genes that are tricky to synthesize.

As I have observed previously (most recently in Nature Biotechnology, here), the maximum profit margin on synthetic genes is evaporating exponentially.  That is not hyperbole, but rather a quantitative observation based on market prices over more than ten years; it is data.  That said, even as prices fall it will still be possible for some companies to increase their revenues as competitors leave the market or go out of business.  But I would be surprised if the market dynamics that enabled Intel to exploit Moore's Law for many decades reemerged in synthetic genes.  Intel knew it could ship exponentially more transistors every quarter -- which meant it could rapidly grow even in the face of falling prices -- but I do not have any evidence that the total market for synthetic genes is expanding much faster than the price is falling.  Conversations with industry executives lead me to believe the total dollar value in the market is continuing to rise, if somewhat slowly.  The rate of increase is hard to pin down, however, given the hiccup that was 2009.  This year's volume and revenues should be bigger, but it isn't clear that one should attribute this to more than the broader economic recovery.

All in all, this seems like business as usual for an industry that is experiencing a rapid transition to commodity status while simultaneously suffering from globalization and lowered barriers to entry.  It probably isn't so different in overall impact from the demise of Codon Devices.  This is just another step towards maturity in an area that will have much more impact on our lives in the future than it has thus far.
I recently had cause to re-read the National Strategy for Countering Biological Threats (Full PDF), released last fall by the National Security Council and signed by the President.  I think there is a lot to like, and it demonstrates a welcome change in the mindset I encounter in Washington DC.

When the document came out, there was just a little bit of coverage in the press.  Notably, Wired's Threat Level, which usually does a commendable job on security issues, gave the document a haphazard swipe, asserting that "Obama's Biodefense Strategy is a Lot Like Bush's".  As described in that post, various commentators were unhappy with the language that Under Secretary of State Ellen Tauscher used when announcing the Strategy at a BWC meeting in Geneva.  According to Threat Level, "Sources tell this reporter that the National Security Council had some Bush administration holdovers in charge of editing the National Strategy and preparing Ms. Tauscher's script, and these individuals basically bulldozed the final draft through Defense and State officials with very little interagency input and with a very short suspense."  Threat Level also asserts that "Most are disappointed in the language, which doesn't appear to be significantly different than the previous administration."  It is unclear who "Most" are.

In contrast to all of this, in my view the Strategy is a clear departure from the muddled thinking that dominated earlier discussions.  By muddled, I mean security discussions and policy that, paraphrasing just a little, went like this: "Biology Bad!  Hacking Bad!  Must Contain!" 

The new National Strategy document, however takes a very different line.  Sources tell this reporter, if you will, that the document resulted from a careful review that involved multiple agencies, over many months, with an aim to develop the future biosecurity strategy of the United States in a realistic context of rapidly spreading infectious diseases and international technological proliferation driven by economic and technical needs.  To wit, here are the first two paragraphs from the first page (emphasis added, of course):

We are experiencing an unparalleled period of advancement and innovation in the life sciences globally that continues to transform our way of life. Whether augmenting our ability to provide health care and protect the environment, or expanding our capacity for energy and agricultural production towards global sustainability, continued research and development in the life sciences is essential to a brighter future for all people.

The beneficial nature of life science research is reflected in the widespread manner in which it occurs. From cutting-edge academic institutes, to industrial research centers,
to private laboratories in baseĀ­ments and garages, progress is increasingly driven by innovation and open access to the insights and materials needed to advance individual initiatives.
Recall that this document carries the signature of the President of the United States.  I'll pause to let that sink in for a moment.

And now to drive home the point: the new Strategy for Countering Biological Threats explicitly points to garage biotech innovation and open access as crucial components of our physical and economic security.  I will note that this is a definite change in perspective, and one that has not fully permeated all levels of the Federal bureaucracy and contractor-aucracy.  Recently, during a conversation about locked doors, buddy systems, security cameras, and armed guards, I found myself reminding a room full of biosecurity professionals of the phrase emphasized above.  I also found myself reminding them -- with sincere apologies to all who might take offense -- that not all the brains, not all the money, and not all the ideas in the United States are found within Beltway.  Fortunately, the assembled great minds took this as intended and some laughter ensued, because they realized this was the point of including garage labs in the National Strategy, even if not everyone is comfortable with it.  And there are definitely very influential people who are not comfortable with it.  But, hey, the President signed it (forgive me, did I mention that part already?), so everyone is on board, right?

Anyway, I think the new National Strategy is a big step forward in that it also acknowledges that improving public health infrastructure and countering infectious diseases are explicitly part of countering artificial threats.  Additionally, the Strategy is clear on the need to establish networks that both promulgate behavioral norms and that help disseminate information.  And the new document clearly recognizes that these are international challenges (p.3):

Our Strategy is targeted to reduce biological threats by: (1) improving global access to the life sciences to combat infectious disease regardless of its cause; (2) establishing and reinforcing norms against the misuse of the life sciences; and (3) instituting a suite of coordinated activities that collectively will help influence, identify, inhibit, and/or interdict those who seek to misuse the life sciences.

...This Strategy reflects the fact that the challenges presented by biological threats cannot be addressed by the Federal Government alone, and that planning and participation must include the full range of domestic and international partners.
Norms, open biology, better technology, better public health infrastructure, and better intelligence: all are themes I have been pushing for a decade now.  So, 'nuff said on those points, I suppose.

Implementation is, of course, another matter entirely.  The Strategy leaves much up to federal, state, and local agencies, not all of whom have the funding, expertise, or inclination to follow along.  I don't have much to say about that part of the Strategy, for now.  But I am definitely not disappointed with the rest of it.  It is, you might say, the least bad thing I have read out of DC in a long time.

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