The Shift Toward Residency Concert Tours

The economist For The Intelligence F from the Economist, I'm Jason Palmer Today on the show, America's capricious grip on frontier AI models and the changing business of concert tours irst st up. The world's largest energy firms, collectively known as the Majors. They've done really well with this oil shock. and one reason is that they've drilled oil and they've refined it And they're soldly at a higher price, which is not surprising to most people But another reason is far less known, which is that they've done a lot of trading T Favas is our commodities editor And the Iran war has really shown the extent to which this activity trading has become central to these businesses Let's start with what you mean when you say trading So trading can be defined in opposition to marketing. So marketing is selling what you produce distributing it into the Grouble market. Trading is buying someone else's produce and selling it to whoever wants it most the highest price possible at a profit And whereas when you sell your own products, what matters is the level of the price at which you sell When you trade, what matters is the spread. It's a difference between the price at which you buy and the difference in price at which you sell And the spread is typically higher when the market is quite chaotic. So if there is a war somewhere There's a supply shock then in certain places there will be shortages, there will be also a rush for getting the product now instead of later. And so you have all these differences in price that traders can seek to benefit from And so over time The majors have learned to do that really well, especially the Europeans. So which companies are we talking about then omanies like BP and Shell, which are mostly British. tootal energy, also known as tootu, which is French otal L to tell And they trade by estimate forty to fifty million dollars per day of oil and gas. relative to It's five to ten times more than what they produce. So it's huge. It just shows how central trading is to these businesses at this moment or in general. In general. Yeah, in general. And probably during this very volatile pay there's been more because they've shifted mobiles. It's a very very lucrative activity. The majors don't publish data for their trading desks on profitability or anything else really. It's very secretive. But the estimates we've got from a number of sources suggest that these trio, BP Shell and Total This year could earn in between fifteen to twenty billion dollars in profit, which might be one fifth of the profits. up to a third of their return on capital. so something that shareholders will like a lot Trading profits alone explain why the Europeans have outperformed the American wages so far this year since the crisis in particular since February. Why should that be? Why aren't the American majors just as good at this secretive game It's largely a product of history and geology. So the American majors, they've always have access to vast resources in the ground. They have a lot of oil and gas They also have a vast domestic market that they can sell to So they can take advantage of both. The Europeans they don't have that. neither of the things So what they've had to do pretty much since the formation is to go abroad and produce the barars there and then distribute it to the global market. Which worked fine until the nineteen seventies when there was a wave of nationalizations in the Gulf in the Middle East and they lost access to this soil so they had to go A broaden and buyabs from somewhere else. So BP did it first. essentially discovered that it could buy the blls you didn't need and resell them at a profit in the nineteen eighties. And then in the nineteen nineties, Chal and Totel did it then because oil prices were pretty low They needed to boost their returns and they thought that was a way maybe to diversify So that's a lot of the history of this trading arm for the Maatriress, but you say that they're really good at it. What does that look like? How do they do it well The secret source of these trading operations is the intelligence, the information they can harness from the vast operations of the mothership. So the majors are huge companies They've got lots and lots of oil and gas fields, refineries, terminals storage facilities, tanker fleets all around the world. as the mages operate this big global network There's a lot of information that surfaces about the amount of supply, the amount of demand there is in the world and therefore the direction of prices. And so U that intelligence, They can harness volatility. So that's how they do it. And that's the reason why when I speak to sources, they say these operations, they basically never lose money They make bad bets sometimes, but on an annual basis, they find ways to correct that. And so in worst years, they just make a bit less. In good years they make a lot of money This being a good year? It's been a pretty good year, I think for them. Yeah, I think so. Yeahah, really, really good. But it's got to require quite a few people to be chasing all of that information and compiling it into a bet That's what's really interesting because these teams they are at the same time large and pretty lean. so each trading desk for each product that they trade. So it would be like crude oil or it would be what we call light ends, which are petrol and jetu LNG liqueified natural gas For each of these products you maybe have like sixty to seventy traders. So if you add all the desks together For the whole trading operation, it's maybe like a few hundreds And then you add shipping, financing, risk management, All the sort of support functions Th he would be one or two thousand, which seems quite a lot, but at the same time these companies they have like one hundred thousand, maybe people. So it's a really small percentage So if you take the profit that they make And you divide by the number of people that they employ, it's a really high profit per head, you know In the good year may be like ten million dollars So there's a lot of incentive then for companies that are not the majors, the European majors and even the American ones to get in on the game if you say it is so lucrative Absolutely, O is it something that just only works at scale in this way? It only works at scale. so the Americans have tried before, the American majes And it didn't work because they did it halfheartedly. they didn't give enough money basically to their traders So that limited the scale of the bets. And also they did not give them enough independence. They were forced to sell the bartls of the company basically. But they're much more serious about it now, they're much more determined to do it. and so you're starting to see that in The way you speak about it and also the national oil companies which are the big stay onone producers which are in the big oil producing countries. So in the Gulf, for example, Saudi Aramo or Adenk, which is the Abu Dhabi National oil compompany They also want to do it. So I spoke to one recruiter for this piece. and he said that the Americans and the national oil companies, Exon in particular and Anock are among the biggest recruiters at the moment of traders worldwide. So they really Wh can to do it? to do it properly this time with the right number of people, the right number of dollars to spend. That's right. But even if they do that to your first point Closing the gap may still take quite a few years because it it really is quite a A finely tuned machine, a well oiled you race carar that you need to together to make it work. You you You prepare the car, you do a race doing a crisis, you look at the dayat time when it comes back. You you make a few tweaks and then you do another race, but this could take many, many cycles before. get very good at it That is to say that the European majors will stay on top for some time yet I would say the European majors still have a few years of really lucrative Trading, the Glden Goose is still there. But competition is coming. So in a few years time maybe profits will Trick and the engineers But the deal makers will be on the Asendant once again. Maybe they'll take back the building I to than Thankk you very much for your time. My pleasure, Jason The AI future is not going to be won by hand wrringing about safety. It will be won by building Again and again, America's vice President, JD. Vance and other Trump administration officials laid out the same ethos about AI Tape, get government out of the way, let America win And I'm going to go see President Xi in two weeks. I look forward to that, but I'll say I'm leading. And then what might reasonably be called hand wringing about safety Anthropic pulled access to its newly released AI models, Met thoseose five, and fable five after the US government restricted who could actually use them The administration now wants the makers of the most powerful AI models to seek government review before new launches In an executive order that sounds more suggestion than law The government here is asking those companies to give over those models for review for safety reasons, it says Putting that into practice has been Let's call it uneven And the effects are likely to get in the way of that whole letting America win idea The Trump administration assumed office Railing against the regulation of AI Chhan Josei is our incoming Washington bureaotief What's happened in the last couple of months a dramatic reversal, a stance in which leading AI models are now under de facto, in some cases pretty draconian regulation and What's behind that turnaround, that complete about face Well fundamentally, Jason, its that the models have got very good. You recall the release of Mythos, the model byanthropic, that turned out to have extremely good cyber capabilities, including being able to find and exploit vulnerabilities in software, some of which had been undiscovered for years and years. And so the administration was pretty worried about this. I think any government would have been and said, hang on a minute can't release this freely. We're going to release this on a very careful basis There was a public version of the model called Fable five that was then put out. It was pretty carefully restricted, but there was an alleged way to get around some of its safeguards And that prompted in a kind of panic, the administration to say, you have to now shut down everything. We've also seen in recent weeks, open AI, which makes the Chat GPT series of models release another model called GPT five point six or SOL, a particularly capable variant of that. And they have not been allowed to freely release it. Basically, the government has given them permission to give it to a relatively modest number of trusted partners So what's your view on this reversal? There are clear motivations behind it, a matter of safety, national security, and so on, but there are these questions around innovation and what have you Well, there was an executive order on june second, and it was a way of trying to impose some sense of governance of AI. And it said, look, we should have a framework in which private companies can voluntarily share their most advanced models with the government and discuss the risks That was kind of happening anyway, right? We know that openpAI was doing that, we know that Anthropic was doing it. But the interesting thing about that order is that it explicitly says nothing should be a formal licensing regime. This is not a compulsory or mandatory system for companies to follow because there are a lot of people in the Trump administration who basically think this should be unshackled to maximize innovation at a time when investment in AI infrastructure like data centers is really holding up some parts of the American economy. effectively, we have a de facto licensing regime in place that is described as voluntary, but to me, it looks about as voluntary as, you know, paying your taxes. You can choose not to do it, but there are going to be some consequences if you don't But what about the model that they're pointing at here? Trusted partners figure out what harms are possible, and then one presumes a wider release. There is a certain sense to it There is a certain sense to it. you want to exploit this window of superiority in particular ways without giving access to the model to every potential bad actor who would use it for nasty things. The problem is though, It's been such an opaque process. It hasn't been clear what the rules are and it hasn't been clear who gets special access So for example, if you look at GPT five point six SoOl, the open AI model on june twenty sixth, that was opened up to trusted partners and the same day America's government eased some of the export controls on Mythos five, which was the anthropic model that as I said earlier, had been completely effectively shut down. So the models are now accessible again to some degree, but it's taken a while to get there and nobody really understands the exact criteria by which these things are being held back, restricted, opened up again. And that makes life very, very difficult for the companies in understanding how their models are going to be out there in the world in the future So the principle is sound, but the pace of change is such that the implementation is just really messy Imlementation is really messy. There's not that much in house expertise on cutting edge AI inside the American government at all The Commerce Department has been leading the implementation of policy, but I don't think it has very many AI experts. And there are AI experts in something called the Center for AI Standards in Innovation, or Kasey That body is a standards body. It's not a regulation body. That executive order I mentioned that is supposed to create process to judge which models need to be controlled and how they should be controlled. And that should happen before August, but really it isn't clear to me how that's going. and a lot of people I speak to say that it's really a complete mess at this point. and a mass that seems to stand in stark contrast to what's going on in China where the other best models are Chinese AI labs are really storming ahead. Those models are six to ten months behind their American equivalents, so that they're not up there with you know Mythos or with five point six Sl They are getting increasingly good They offer increasingly advanced capabilities. And here's the important bit, they do that at pretty competitive prices. And so there is this concern among many in America that if the administration holds back the American labs from releasing their models compomanies including American companies might look to using Chinese open weight models. And so we've seen Microsoft, for example, consider should they use Dep sea for their co pilot, which is their own AI tool. And I think that sense that this could give an opening to the Chinese partarticularly when this administration has allowed the sale off some pretty advanced chips to China that then can be used to train the next generation of Chinese models. I think there's a lot of concern about that, including in the Trump administration So essentially America is at grave risk of ceding its lead in this just because it's bound up in regulatory hell I think there's a question of its lead, particularly in adoption. But I think it's not just about the competition versus China. There are huge economic stakes here. Almost eight hundred billion dollars is going to be spent on AI capital expenditure this year. and most of that's on data centers in America. That will grow to one point six trillion doars annually by twenty thirty one The American economy is really, really reliant on this technology and its promise And if you look at what happened to the ban on Mythos, It reduced Anthropics's expected IPO value by about ten percent. So you can kind of see this economic knock on effect. If there is uncertainty around whether these companies will really be able to release their next models or will have to wait for weeks to do so eating into that window in which they can basically sell access to models defray the enormous cost of developing this technology. And so the economic stakes here, Jason, are also absolutely enormous Com, Thankks as for joining Thanks so much, Jason When Harry Sttyles sang his lyrics on One Directions's hit Midnight Memmories, he was already very well accustomed to the glamour and grind of a global concert tour Vicki Jessp writes about culture for the agonist. This is a man who has been in one direction and now is striving out on a very successful solo tour Across his boyband and solo career, Harry has performed more than six hundred gigs on six continents. His previous tour vited in seventy nine cities. This is a man who is used to being on the move. But to paraphrase Parry himself Pall is not as it was The sixty eight concerts on his new tour together will be hosted in just seven cities, which include several quasi residencies, including File of Nights in London, Kenton Ubstdam, where he kick things off, and Cty in New York City He is currently in a five night run at Wembley Stadiion in London which ends on divid the source And this string of performances at Weembley, which take place across June and July means that hell actually overtake Coldplaying Taylor Swist as the artist with the most performances at the venue in a single year And that's before August, where he goes to Madison Square Gardens to play on whopping thirty concerts But it's not only Harry Styles who's tralling Lasbury's work. manyany of the biggest pop acts have started to expect their fans to come to them Take Gyonce The star spent half her cowboy cart tour in just three venues, including London's Tottenham popper stadium C play, played extensively in certain cities, Oasis Breez through Wembbley not once but twice Olivia Rodrigo would do the same when she had that on the road in September, and Arianne Grande is only appearing in three countries on her tour, the US, Canada and the UK There are a couple of reasons that musicians are actually tralling less. First of all, Tory is grulid These tours hit multiple cities sometimes night after night. If you stay in fewer places for a longer period of time, that' less exhausting to the artist there's more lucricative. Toring is more expensive than it's ever been. And fans expect elaborate sets these days trans transansforting them across the world is not cheap, so staying in one place for longer is a good way of keeping outlays down and Potics upub in addition to making it easier for artists to secure good support packs For the chosen cities who get lucky, often London, often New York, or Los Angeles, this need huge windfalls So Sttyles' fans are expected to spend one billion pounds on tickets, accommodation and other expenses in London alone, according to Barcleavys Similarly to Taylor Swift, who's multiight residency in Wembley, injected a predicted one billion pound to the UK economy There are usases in this too For the smaller regional cities bump from the schedule, such as Manchester and Pventry, it means losing access to megastars and fans spending power as well as similar artists The way we gig is changing. Instead of dropping fifty Qid on a Wednesday night gig, concerts have become modern Super Bowl style events. peopleople spush out and they are willing to spend the money, but they demand stactical in return Still, despite the expense, and don't seem to mind going on the road themselves Around twenty five percent of the fans watching Mr. Sars at Wembley are traveling from outside London. and twenty eight percent are turning the occasion into a mini break Last year, a survey of three thousand UK adults showed that more than a third said they booked overnight accommodation to attend the gig One person who was at Harry Ston's opening night at Weembley travelled one thousand five hundred miles from Central Romania, whilst another travelled three thousand nine hundred miles from Indiana in the USA to be one of the first in line when the doors opened These days, concert goers are cultural tourists as well as gig gooers In an age where music is cheap and increasingly easy to access, Live shows have acquired a new social value There's scarity value there of course, because gigs sell out very quickly But these diges also offer the chance to connect with other songs as well as the actual artist In that sense, concerts have become a kind of modern pilgrimage journeyys made out of devotion to an idol. One things for certain When it comes to live music, the future of Ty involves a lot less of it than the name might suggest That's all for this episode of the Intelligence. We'll see you back here tomorrow