Monday, May 21, 2018

"Meet the Quantum Blockchain that Works like a Time Machine"

From TechCrunch:
A new — and theoretical — system for blockchain-based data storage could ensure that hackers will not be able to crack cryptocurrencies once the quantum era starts. The idea, proposed by researchers at the Victoria University of Wellington in New Zealand, would secure cryptocurrency futures for decades using a blockchain technology that is like a time machine.
You can check out their findings here.

To understand what’s going on here we have to define some terms. A blockchain stores every transaction in a system on what amounts to an immutable record of events. The work necessary for maintaining and confirming this immutable record is what is commonly known as mining. But this technology — which the paper’s co-author Del Rajan claims will make up “10 percent of global GDP… by 2027” — will become insecure in an era of quantum computers.

Therefore the solution to store a blockchain in a quantum era requires a quantum blockchain using a series of entangled photons. Further, Spectrum writes: “Essentially, current records in a quantum blockchain are not merely linked to a record of the past, but rather a record in the past, one that does not exist anymore.”
Yeah, it’s weird.

From the paper intro:
Our method involves encoding the blockchain into a temporal GHZ (Greenberger–Horne–Zeilinger) state of photons that do not simultaneously coexist. It is shown that the entanglement in time, as opposed to an entanglement in space, provides the crucial quantum advantage. All the subcomponents of this system have already been shown to be experimentally realized. Perhaps more shockingly, our encoding procedure can be interpreted as non-classically influencing the past; hence this decentralized quantum blockchain can be viewed as a quantum networked time machine.
In short, the quantum blockchain is immutable because the photons that it contains do not exist at the current time but are still extant and readable. This means the entire blockchain is visible but cannot be “touched” and the only entry you would be able to try to tamper with is the most recent one. In fact, the researchers write, “In this spatial entanglement case, if an attacker tries to tamper with any photon, the full blockchain would be invalidated immediately.”...MORE

"The backlash that never happened: New data shows people actually increased their Facebook usage after the Cambridge Analytica scandal" (FB)

Here's the BI piece I was going for when the post immediately below popped up.

From Business Insider:
  • Facebook weathered the worst of the Cambridge Analytica data storm and actually increased usage, according to figures cited by Goldman Sachs.
  • Deutsche Bank also found that Facebook's purge of 583 million fake accounts had "little to no impact on audience reach."
  • It seems the #deleteFacebook backlash never really arrived.
  • The data will give CEO Mark Zuckerberg confidence as he prepares for a crunch week, in which he will be grilled by top EU lawmakers.
The Cambridge Analytica data debacle was billed as Facebook's biggest crisis, but it looks like it didn't even leave a scratch on the company.

Facebook weathered the worst of the storm and usage actually increased, according to a client note from Goldman Sachs, citing ComScore figures. In other words, the #deleteFacebook backlash never really arrived.

Goldman Sachs said Facebook's US unique users on mobile rose 7% year-on-year to 188.6 million in April, when the scandal was biting hard. Time spent on Facebook also went up. The graph below says it all. 
https://amp.businessinsider.com/images/5afecf831ae66219008b475a-960-663.png 
And there's more good news for Facebook. Deutsche Bank said its advertising system checks had shown that the purge of 583 million fake accounts following Russian interference in the US election has had "little to no impact on audience reach." It produced a graph revealing that ad targeting across all demos has actually grown....MORE

"Journalists drink too much, are bad at managing emotions, and operate at a lower level than average, according to a new study"

The "new study" is dated May 2017.

From Business Insider, May 19:
Journalists' brains show a lower-than-average level of executive functioning, according to a new study, which means they have a below-average ability to regulate their emotions, suppress biases, solve complex problems, switch between tasks, and show creative and flexible thinking.

The study, led by Tara Swart, a neuroscientist and leadership coach, analysed 40 journalists from newspapers, magazines, broadcast, and online platforms over seven months. The participants took part in tests related to their lifestyle, health, and behaviour.

It was launched in association with the London Press Club, and the objective was to determine how journalists can thrive under stress. It is not yet peer reviewed, and the sample size is small, so the results should not be taken necessarily as fact.

Each subject completed a blood test, wore a heart-rate monitor for three days, kept a food and drink diary for a week, and completed a brain profile questionnaire.

The results showed that journalists' brains were operating at a lower level than the average population, particularly because of dehydration and the tendency of journalists to self-medicate with alcohol, caffeine, and high-sugar foods.

Forty-one percent of the subjects said they drank 18 or more units of alcohol a week, which is four units above the recommended weekly allowance. Less than 5% drank the recommended amount of water.

However, in interviews conducted in conjunction with the brain profile results, the participants indicated they felt their jobs had a lot of meaning and purpose, and they showed high mental resilience. Swart suggested this gave them an advantage over people in other professions in dealing with the work pressure of tight deadlines.

Journalists scored pretty high on:...MORE
Here's "STUDY INTO THE MENTAL RESILIENCE OF JOURNALISTS" (12 page PDF)

I asked the Google Box if  'Study into...' was a usage I should adopt and StackExchange returned:
",,,.the verb study casts its field or topic as a direct object—we studied the effect of X on aquatic birds. When transitive verbs are nominalized, their direct objects are most often cast as preposition phrases headed by of:"...

... Often the nominal derivative will license the same prepositions as its mother verb. But this doesn't usually run backwards, from the noun to the verb....
So there you go, don't use "Study Into" and watch out for the self-medicating if you've chosen the Journo lifestyle.

"Beauty Contests and The Term Structure"

And since we're on about bonds.*
From VoxEU, May 10:
The bond premium puzzle arises because the excess yield that investors require to hold a long-term bond is too small in quantitative macroeconomic models. Drawing on the beauty contest literature, this column argues that realistic term premia can be generated by differentiating between private and public information and by introducing strategic complementarities in the formation of expectations. It shows that a significant proportion of US term premia is driven by a beauty contest in forecasting, which rewards investors for being accurate andclose to the average forecast of others.
The famous Keynesian beauty contest literature emphasises the strategic complementarity in forecasting the forecasts of others. Keynes (1936) suggested that such a mechanism could be at work in stock markets, with share prices determined not just by fundamentals but also according to how investors think that other investors value particular shares. We believe that a beauty contest mechanism may operate in bond markets too, in which case the term structure of interest rates depends not only on the compensation an investor demands for holding bonds of different maturities, but also on what compensation the investor thinks that other investors will demand for holding the bonds.
The six winners in the beauty contest of the Sunday Times. The Washington Times, 5 May 1907. 
National Digital Newspaper Program, Library of Congress.
We are far from the first to write about the drivers of term structure. A search for journal articles with the phrase “term structure of interest rates” in the title gives 879 hits in EconLit and 186 hits in JSTOR. Despite this voluminous literature, quantitative macroeconomic models of the type developed by Christiano et al. (2005) and Smets and Wouters (2003, 2007) still struggle to generate risk premia anything like those seen in financial markets. For example, Rudebusch and Swanson (2012) find an average term premium of about one basis point on nominal 10-year bonds in a medium-scale dynamic stochastic general equilibrium (DSGE) model with nominal rigidities and a reasonable coefficient of relative risk aversion. Estimates from Adrian et al. (2013) suggest that the term premium on 10-year US Treasuries between 1999 and 2017 was two orders of magnitude higher at over 100 basis points.

Rudebusch and Swanson (2008) refer to the disconnect between financial market data and models of the term structure as the bond premium puzzle, to mirror the well-known equity premium puzzleof Mehra and Prescott (1985). Mechanisms proposed to explain the latter include recursive preferences (Epstein and Zin 1989), long-run risk (Bansal and Yaron 2004), rare disasters (Barro 2006) and habit formation (Abel 1999). However, models which include one or more of the above mechanisms typically explain data on risk premia only at the expense of implausibility remaining at some other margin. This continues to be the case when these mechanisms are used to explain the bond premium puzzle. Rudebusch and Swanson (2012) ask whether a medium-scale DSGE model with recursive preferences and a plausible degree of long-term risk can match the term premium on a nominal 10-year bond. The answer is yes, but only in a specification where the coefficient of relative risk aversion is 110....MUCH MORE
*Yesterday's Follow-up: "US companies begin to reduce bond holdings after tax overhaul"

Cooley Law: "Venture Financing Report – Q1 2018 – Valuations Continue to Rise in the New Year "

Our Cooley boilerplate:
Cooley is one of the big dogs of the VC legal eagle biz. Something like a third of the unicorns on the WSJ's Billion Dollar Startup Club list have used Cooley for one purpose or another.
Additionally, 20 or 21 of the companies on the "Technology Review's 50 Smartest Companies 2017" list have been represented or counseled by the firm. As I said, one of the biggies.
From Cooley, May 9, 2018:
In the first quarter of 2018, both deal volumes and aggregate dollars raised remained robust, though slowing from the torrid final quarters of 2017. In Q1 2018, Cooley handled 205 disclosable deals representing more than $4.9 billion of invested capital.

During Q1, median pre-money valuations continued to rise to record levels. We witnessed an increase in median pre-money valuations across all deal stages, with the exception of Series C transactions. Valuations for Series A deals hit levels not seen in 14 years of reporting. Up rounds remained at high levels, as 83% of transactions were up rounds during the quarter. We also saw a decrease in transactions structured in tranches across all industries.
Download the full PDF.

And from CooleyGO:
In conjunction with our Q1 Venture Financing Report, I sat down with Matthew Howard from Norwest Venture Partners to get his take on the state of venture capital investing.

A few highlights from Matthew Howard
 
On his market outlook: Overall, I am extremely bullish as technology continues to be a major contributor to the US economy, and I do think disruptive technology and business models will continue to change many aspects of healthcare, consumer and enterprise opportunities.

On valuations: With so much capital deployed over the past several years, valuations seem to have cooled for some companies needing more time to get aligned with the “rule of 40” metrics.

On sector trends: There continues to be a demand for breakout enterprise security opportunities, multitenant cloud-based applications, artificial intelligence augmentation and robotics. We also see a huge white space in solving real-world consumer problems like urban mobility, living spaces and the future of work. We’re also tracking innovative technologies that will make healthcare more personalized, efficient and cost effective.

On exit routes: I expect, based on 2016 and 2017 data, that more often than not, companies will go the M&A route.

On M&A: Q1 2018 saw a huge increase in the tech M&A market from non-tech buyers. Transactions led by non-tech buyers nearly tripled from Q4 2017.

As far as VC deal terms, is the pendulum favoring companies or investors?
It really depends on the company. At Norwest, we like to take a long-term view and relatively patient approach. Regarding Q1, we are not seeing any material trend changes from Q4 2017 to Q1 2018.

Will this continue through 2018?At this moment, we expect mid- to late-stage venture investing to track the macro US economy as we gauge how the Federal Reserve manages interest rates.

Are there noticeable trends that differ for early stage deals compared to later?In general, we continue to see very straightforward and “clean” terms for seed to classic Series A investing. From time to time, we do see structured deal terms in pre-IPO rounds. As mentioned, we have not noticed any material changes quarter over quarter.

Any current trends standing out to you in Q1 that are changes from 2017?
Yes, we’re starting to see IPOs pick up steam after a slow 2016/2017, and M&A activity is continuing to grow. M&A deal volume was strong in Q1 2018, but average deal values remain flat. Interesting to note is that Q1 2018 saw a huge increase in the tech M&A market from non-tech buyers. Transactions led by non-tech buyers nearly tripled from Q4 2017.

Deal pace is trending upwards in Q1 2018, but average deal size remained relatively flat. Q1 2018 showed increases in both deal pace and size on a quarter-over-quarter basis, but only because Q4 2017 was a very quiet quarter.

The software sector will continue to lead the way with regards to both deal volume and size. The most notable software transaction of Q1 2018, and the largest, would be Salesforce’s $6.5 billion acquisition of Mulesoft.

Additionally, there are always situations where there are material, unrealistic valuation expectations among investors and entrepreneurs. However, there continues to be massive demand for high-quality opportunities that drive up valuations in an accelerated manner. It’s important to be judicious about the valuations while keeping a close eye on public market expectations and comparables....MUCH MORE

"60 Minutes reports on the power of Google" (GOOG)

From CBS News, May 20:
This past week the Federal Trade Commission was asked to investigate the data collected by Google on its Android operating system, which powers most of the world's smartphones. It was a tiny blip in the news cycle but another sign of Washington's and Europe's growing concerns about the enormous, largely unchecked power accumulated by tech giants like Facebook, Amazon and Google over the last two decades. Of the three, Google, which is part of a holding company called Alphabet is the most powerful, intriguing, and omnipresent in our lives. This is how it came to be.

Most people love Google. It's changed our world, insinuated itself in our lives, made itself indispensable. You probably don't even have to type Google.com into your computer, it's often the default setting, a competitive advantage Google paid billions of dollars for. No worry. Google is worth more than three-quarters of a trillion dollars right now and you don't get that big by accident.

Since going public in 2004, Google has acquired more than 200 companies, expanding its reach across the internet. It bought YouTube, the biggest video platform. It bought Android, the operating system that runs 80% of the world's smartphones and it bought DoubleClick, which distributes much of the world's digital advertising, all of this barely raising an eyebrow with regulators in Washington.

Steve Kroft: Were any of those acquisitions questioned by the antitrust division of the Justice Department?
Gary Reback: Some were investigated, but only superficially, the government just really isn't enforcing our antitrust laws. And that's what's happened. None of these acquisitions have been challenged.
Gary Reback is one of the most prominent antitrust lawyers in the country widely credited with persuading the Justice Department to sue Microsoft back in the 90s, the last major antitrust case against big tech. Now he is battling Google.

Steve Kroft: You think Google's a monopoly? 
Gary Reback: Oh, yes, of course Google's a monopoly. In fact they're a monopoly in several markets. They're a monopoly in search. They're a monopoly in search advertising.
Those technologies are less than 25 years old, and may seem small compared to the industrial monopolies like railroads and standard oil a century ago but Reback says there's nothing small about Google.

"People tell their search engine things they wouldn't even tell their wives... And that gives the company that controls it a mind-boggling degree of control over our entire society."

Gary Reback: Google makes the internet work. The internet would not be accessible to us without a search engine

Steve Kroft: And they control it.
Gary Reback: They control access to it. That's the important part. Google is the gatekeeper for-- for the World Wide Web, for the internet as we know it. It is every bit as important today as petroleum was when John D. Rockefeller was monopolizing that.

Last year, Google conducted 90% of the world's internet searches. When billions of people asked trillions of questions it was Google that provided the answers using computer algorithms known only to Google.

Jonathan Taplin: They have this phrase they use, "competition is just a click away." They have no competition. Bing, their competition, has 2% of the market. They have 90%.

Jonathan Taplin is a digital media expert and director emeritus of the Annenberg Innovation Lab at the University of Southern California.  He says Google's expertise may be technology, but its business is advertising. And its most valuable commodity is highly specialized information about us. It's helped Google control roughly 60% of worldwide advertising revenue on the internet. Taplin says traditional companies can't compete because they don't have the data.

Jonathan Taplin: They know who you are, where you are, what you just bought, what you might wanna buy. And so if I'm an advertiser and I say, "I want 24-year-old women in Nashville, Tennessee who drive trucks and drink bourbon," I can do that on Google....MUCH MORE, including video

"Buffett & Munger discuss reinsurance challenges Berkshire Hathaway faces"

BRK's annual meeting was held May 5, video below if interested.
From Artemis, May 9:
This weekend saw the quarterly results and annual shareholders meeting of Berkshire Hathaway and one of the most interesting exchanges during the question & answer session was Warren Buffett and Charlie Munger discussing over just how tough reinsurance can be these days.

Berkshire Hathaway experienced positive underwriting and investment results across its insurance and reinsurance business in Q1 2018, as reported by our sister site Reinsurance News.
But with market conditions in reinsurance remaining challenging, the analysts lined up to quiz Buffett and his deputy Munger were keen to explore just how tough Berkshire Hathaway is finding the state of business these days.

The responses highlight the close relationship developed over almost six decades of friendship that the pair enjoy, having originally met over dinner back in 1959.

Responding to an analyst question about the state of the market and the challenges Berkshire Hathaway faces, Buffett implied that while there are challenges, he expects to continue to achieve growth no matter how difficult the market gets.

“The reinsurance business, I don’t think I’d say that it’s tougher than it was ten years ago,” Buffett explained. “But if you go back to forty or fifty years ago, it was not brutally competitive.”
Discussing reinsurance subsidiary Gen Re, Buffett hailed the work Ajit Jain has done since taking responsibility for the firm, saying it has, “changed somewhat and it probably is more growth oriented than it was before.”

However he insisted that growth is not at any cost, saying that anything Jain has a hand in the development of has underwriting discipline attached.

But he noted that the portfolio at Gen Re has been growing, like so many other major reinsurers, explaining that, “There has been some pick-up and I think you actually will see the property casualty reinsurance business grow a fair amount.”
This despite the much discussed challenges faced by reinsurers.

On the life reinsurance side Gen Re has been growing steadily since Berkshire Hathaway took it over and Buffett noted that overall, “I think we’ll have a somewhat larger operation at Gen Re.”
On the appetite of Berkshire Hathaway to remain in the reinsurance business, despite the challenges faced, Buffett said, “We will be in the reinsurance business five years from now, ten years from now and fifty years from now, and we will have some unusual advantages that stem both from our capital position, our attitude towards the business and the talent that we have.”

Clearly Berkshire Hathaway benefits from efficiencies of scale across the conglomerate, as well as its active investment or total-return type model, which perhaps explains why the company can continue to expand into a still-challenging reinsurance environment....MORE 
2018 Berkshire Hathaway Annual Shareholders Meeting
Yahoo Finance Video (7:29:36)

"China’s Claim to the Spratly Islands is Just a Mistake"

So you see, Chairman Xi, it's just a misunderstanding.
 
From the Center for International Maritime Security:

This article is an adaptation of an academic publication by Bill Hayton published in ‘Modern China’ as ‘The Modern Origins of China’s South China Sea Claims: Maps, Misunderstandings, and the Maritime Geobody.’ A version of this article was published in Vietnamese by BBC and may be read here.
By Bill Hayton
The South China Sea is a dangerous place because of the layering of several different struggles on top of one another. There are struggles over the future of the world order, struggles between regional powers, and struggles over maritime resources. But underlying them all is a knot of territorial disputes over a few hundred tiny rocks and reefs. Given how much attention the disputes currently attract, it is surprising how little attention has been paid to their origins. A few flawed accounts were written several decades ago but more evidence has come to light since then and it is time to revise the conventional wisdom. Governments like to pretend that their claims to the hundreds of rocks and reefs in the sea are historical and logical. However, after several years of studying them, it is clear that this is far from true.

The focus of most of the current trouble in the South China Sea is the Spratly Islands and a few underwater features that are closer to the coasts of Vietnam and Borneo. These are a very long way from the Chinese mainland and China has never made clear the precise origins of its claim to them. My own research – just published in the academic journal ‘Modern China’ – leads me to conclude that the Chinese claim only emerged because of some poor translation and bad map-making during the 1930s. My conclusion is that China’s claim to the Spratly Islands is actually a mistake.

The First Claim
The story of China’s claims in the South China Sea began in 1907 with the discovery of a Japanese merchant digging up petrified bird droppings on the island of Pratas (between Hong Kong and Taiwan). Nishizawa Yoshiji was one of many Japanese entrepreneurs mining guano for fertilizer all over the Pacific. However, there were rumors that Japan was also planning to build a naval base on Pratas and that concerned the United States and its newly-acquired colony in the Philippines. The American government informed officials in Beijing in late 1907 but it took well over a year before a Chinese ship was sent to investigate. In March 1909, Chinese officials confirmed Nishizawa’s presence. That triggered large protests in southern China and a boycott of Japanese products. The Japanese government agreed to negotiations, which eventually led to Japan recognizing Chinese sovereignty over Pratas.

However, at the same time, the southern Chinese authorities learned about the existence of the Paracel Islands, apparently for the first time, and became concerned that Japan might try to annex them. This led to an expedition in May and June 1909 during which China formally claimed sovereignty over the Paracels for the first time. The Chinese ships spent three days among the islands firing cannon and planting flags before returning home. However, it was immediately clear to the expedition leaders that the Paracels were not going to deliver any riches. Newspaper accounts mention a plan to turn them into a penal colony but within weeks the authorities had completely lost interest in the islands. They did not return until the 1920s.

The next major incident in the South China Sea created complete confusion – a muddle that infected the earlier academic accounts of the Chinese claim and still affects historical discussions to this day. In December 1931 France – the colonial power in Indochina – claimed sovereignty over the Paracel Islands and, nine months later, China protested. In July 1933, while the two governments were still arguing over the Paracels, France also announced the annexation of six of the Spratly Islands. This led to great confusion in China. It is clear from official documents and newspapers of the time that the Chinese authorities did not know the difference between the Spratlys and the Paracels. They thought that the islands that France had just annexed were the same that China had claimed in 1909. It took several weeks for the confusion to be cleared up. During the discussions the Chinese Navy even sent a telegram to the Chinese Foreign Ministry asserting that the Spratly Islands did not exist! The situation was only cleared up with the help of maps provided by American officials in Manila. In the end, the Chinese government decided that it could not prove a claim to the Spratlys and so did not protest against France’s actions.
However, this confusion led the Chinese government to instruct its ‘Land and Water Maps Review Committee’ to investigate the situation. Among the committee’s other tasks, it inspected and translated maps to show which islands were the Paracels and which were the Spratlys. It also gave Chinese names to them – but these were simply translations or transliterations. North Danger Reef became Beixian 北險礁 (a translation from English). Spratly Island became Si-ba-la-tuo 斯巴拉脫島 (a transliteration of the name of the English sea captain, Richard Spratly), and Luconia Shoals was transliterated as Lu-kang-ni-a 盧康尼亞滩. My own research suggests that the list of names the committee translated was probably taken from the China Sea Directory, published in 1906 by the United Kingdom Hydrographic Office.

However, in the process, the committee made some mistakes. It seems to have been particularly confused by the English nautical terms “bank” and “shoal.” Both mean an area of shallow sea—the former describes a raised area of seabed, the latter is a nautical expression derived from Old English meaning “shallow.” However, the committee chose to translate both as tan 灘, which has the ambiguous translation of “sandbank,” a feature that might be above or below water.

The committee gave one particular underwater feature, James Shoal, the Chinese name Zengmu tan 曾姆滩, and another, Vanguard Bank, the name Qianwei tan 前衛滩. Zengmu is the transliteration of “James,” Qianwei is a translation of “vanguard,” and tan is the translation of “bank” and “shoal.” This translation choice has had major consequences, as we shall see. Why it decided to make a particular point of selecting these two underwater features for its list is also something of a mystery....
...MUCH MORE

Sunday, May 20, 2018

"Mnuchin: 'We're Putting the Trade War on Hold'"

From Reason's Hit&Run blog, May 20:

Treasury Secretary Steven Mnuchin says Trump administration is withdrawing plan to impose 25 percent tariffs on $150 billion of Chinese imports

The Trump administration's trade war with China is over—or at least it's not starting just yet.
Treasury Secretary Steven Mnuchin, during an appearance on Fox News Sunday, said the administration is withdrawing its plan to impose 25 percent tariffs on more than 1,300 Chinese-made goods valued at more than $150 billion while the United States and China continue trade negotiations.

"We're putting the trade war on hold," Mnuchin said. "Right now, we have agreed to put the tariffs on hold while we try to execute the framework."

There were two major developments this week that may have influenced the administration's shift. First, as Mnuchin suggested, there were two days of intense negotiations between the two countries, which concluded Saturday with the release of a joint statement including several vague promises about China's intention to buy more American products. Second, the Office of the U.S. Trade Representative held three days of hearings on the proposed tariffs, with dozens of American business owners expressing their anger and frustration with the proposal, which they said would do significant damage to the domestic economy.

The Trump administration has already gone ahead with tariffs on steel and aluminum, imposed on supposed national security grounds. The second round of tariffs specifically targeting Chinese goods were to be issued under Section 301 of the Trade Act of 1974, which allows the president to use tariffs as a means of resolving trade disputes or to punish unfair trade practices. The Trump administration has sold the tariffs as a way to close America's trade deficit with China—even though a trade deficit isn't really a problem....MORE

"Can Humans Survive a Faster Future?"

Sure, why not?
Folks might have to give up some political chit-chat but, as the gurus say: "There may not be time for everything but there is time enough for anything". It all depends on where you choose to focus.
From The RAND Corporation, May 1, 2018:
Overview
Life is moving faster and faster. Just about everything—transportation, weapons, the flow of information—is accelerating. How will decisionmakers preserve our personal and national security in the face of hyperspeed?
***
An American consulate is surrounded. At 1:06 p.m. local time, three trucks arrive and a dozen men gripping matte black assault rifles stream out of the vehicles. There might have been an explosion in the compound.

Thousands of miles away, a member of the National Security Council is checking email between meetings. Just ten minutes after the incident, updates and questions start pouring in.
How should the United States respond?

News media has the story. It's trending on Twitter. How should the United States respond?
This kind of pressure-cooker scenario is not uncommon. As the velocity of information—and just about everything else—accelerates, leaders face immense pressure to act or respond quickly. To help them adapt, researchers at the RAND Corporation are studying the phenomenon of speed as part of a special project, known as Security 2040, which looks over the horizon to evaluate future threats.
In his former roles as Deputy Secretary of State and Deputy National Security Adviser, Antony Blinken was one of those leaders responding to speed-driven crises.

"The single biggest change that I experienced in almost 25 years . . . was in the area of speed," said Blinken, a RAND adjunct researcher who shared his expertise on the project. "Nothing had a more profound effect on government and the challenges of government."

Blinken is concerned about things moving faster physically and virtually and the resulting pressure placed on government leaders. "It's going to increase the probability of bad decisions."

With Speed Comes New Threats
Almost every aspect of our lives is accelerating—communication, travel, financial transactions, cultural change, even evolution itself through new gene-editing technologies. These changes have benefits. But in many cases, there is a paradox: With progress, comes risk.

Three-dimensional (3D) printing, for example, could drastically reduce the time needed to deliver lifesaving materials to communities after a disaster. But the same technology could also increase the risk of weapons proliferation.

"With speed, we're anticipating risks that come from tech like 3D printing and virtual threats from cyberattacks." said Seifu Chonde, an associate operations researcher at RAND and one of the lead authors of a new paper, Speed and Security: Promises, Perils, and Paradoxes of Accelerating Everything. "But speed can also lead to new, diverse threats seemingly overnight."

Chonde—along with research partner and RAND associate social scientist Kathryn "Casey" Bouskill—predict that this acceleration will continue into the year 2040 and beyond. It can't be stopped, they say, but we can prepare for the changes it might bring. If governments, private-sector leaders, and the public start talking about speed now, there could be ways to mitigate its negative effects.

Stress Testing Security Norms
When it comes to national security, we feel the effects of speed in many ways. It compresses the time that leaders have to respond to threats. It disrupts traditional, more-predictable patterns of conflict escalation. It enables bad actors to attack democracies in novel ways—such as using bots to spread propaganda quickly. Speed is also transforming the weapons that adversaries will have in their arsenals.

During his time in government, Blinken regularly received notice of urgent security situations. News and updates poured in via email, phone call, and text. Often, as soon as a threat was reported, another one would emerge. Separating fact from fiction proved challenging.

He recalls a handful of violent attacks that were immediately labeled as acts of terrorism but turned out to be something else. In such circumstances, decisive action can be necessary—but pausing before acting is essential to getting the facts straight and understanding the second- and third-order consequences of potential actions.

"There is incredible pressure to be reactive and responsive to information that's coming in at any given moment," he said. "But the biggest risk is that, in your haste to react or to show strength, you get it wrong."

In the past, measured diplomatic discussions helped decisionmakers understand and manage conflict. Now, tweets can fan the flames of conflict in an instant.
Weapons are accelerating, too. Hypersonic missiles and planes move at five times the speed of sound. Other threats, such as cyberweapons, can be deployed with the click of a mouse. Blinken likens these weapons to being "a little bit like Dr. Strangelove on steroids." Even if such an attack is detected, officials have just minutes—or seconds—to respond.

Leaders must prepare for these emerging threats, but speed has already landed a few blows on American democracy. The rapid growth of social media and online news platforms have accelerated the spread of online propaganda and misinformation. That plays a role in what RAND calls "Truth Decay," a phenomenon marked by the diminishing role of facts and analysis in public life.

Adapting to Life in the "Infosphere"...
...MUCH MORE 

Duplex: "Uh, Did Google Fake Its Big A.I. Demo?" (GOOG)

Duplex, same Latin root as duplicity.

From The Hive, May 17:

The tech press has questions, and Google isn’t providing any answers.
Google C.E.O. Sundar Pichai’s demonstration of the company’s new virtual-assistant technology, unveiled at the company’s annual developer conference last week, was more unnerving than Pichai presumably intended it to be. Google Duplex, as the technology is called, represents a major leap forward in Silicon Valley’s efforts to produce robots that sound like people. It can make phone calls to schedule appointments, say, or to reserve a table at a restaurant, using familiar human verbal tics and filler words—“uhm,” “mmhmm,” and “gotcha”—that make it eerily hard to tell that the voice on the other line is an artificial intelligence. To show the tech in action, Pichai played a recording of the Google Assistant device—Google’s answer to Apple’s Siri and Amazon’s Alexa—calling and interacting with someone who was purportedly an employee at a hair salon to make an appointment. “What you’re going to hear is the Google assistant actually calling a real salon to schedule an appointment for you,” Pichai told the audience. “Let’s listen.”

The demo was indeed impressive. It was also pretty unsettling, as many people quickly noted. (“Horrifying,” wrote one critic.) But is it possible that the promise of Google’s advanced artificial-intelligence tech is too good to be true? As Axios noted Thursday morning, there was something a little off in the conversations the A.I. had on the phone with businesses, suggesting that perhaps Google had faked, or at least edited, its demo. Unlike a typical business (Axios called more than two dozen hair salons and restaurants), the employees who answered the phone in Google’s demos don’t identify the name of the business, or themselves. Nor is there any ambient noise in Google’s recordings, as one would expect in a hair salon or a restaurant. At no point in Google’s conversations with the businesses did the employees who answered the phone ask for the phone number or other contact information from the A.I. Further, California is a two-party consent state, meaning that both parties need to consent in order for a phone conversation to be legally recorded. Did Google seek the permission of these businesses before calling them for the purposes of the demo? Was it staged in the simulated manner of reality TV?

Google isn’t saying. When Axios reached out for comment to verify that the businesses existed, and that the calls weren’t set up in advance, a spokesperson declined to provide names of the establishments; when Axios asked if the calls were edited (even just to cut out the name of the business, to avoid unwanted attention), Google also declined to comment. The company did not immediately respond to a series of questions from the Hive....MORE
Previously:
May 11
"Google grapples with `horrifying' reaction to uncanny AI tech" (GOOG)
“In 10 Years, the Surveillance Business Model Will Have Been Made Illegal” (AMZN; FB; GOOG)

"High-Tech Bildungsroman: The Hysterical Optimism of Silicon Valley"

LARB, May 12:
SILICON VALLEY’S CONTEMPORARY CRITICS are being proven right at a speed that seems increasingly breakneck. Measuring the gap between a dark warning and its validation is easy enough: take any high-profile example of technological overreach or data abuse, and peruse Google until you find the individual(s) who identified this danger as latent within the technology itself, if not also within the permissive regulatory regime nominally tasked with preventing such offenses. Once in a while, however, you’ll be reminded of some clarion call you had previously dismissed.

Thus, I recently had occasion to recall a profile of one of Silicon Valley’s most persuasive and rigorous detractors, the Belarusian writer Evgeny Morozov, which appeared in the Columbia Journalism Review in 2014. The profile’s author, Michael Meyer, seemed to imagine a reader sympathetic to Morozov’s critiques of “solutionism” — “the idea,” as Meyer puts it, “that we should recast our problems, from political gridlock to weight loss, as things to be solved primarily through technological efficiency” — and “internet-centrism,” which Morozov defines in his book To Save Everything, Click Here (2013) as “the firm conviction that we are living through unique, revolutionary times, in which the previous truths no longer hold,” but a reader also wary, as I probably was myself at the time, of what Meyer calls Morozov’s “bombast.” Suggesting that Morozov might be overzealous in his readiness to trumpet the sinister possibilities of emergent technologies, Meyer writes:
The most benignly progressive ideas can, in Morozov’s hands, become gloomy and confounding — for instance, he believes that people trying to lose weight with fitness-tracking apps are setting a dangerous precedent that could foster abusive practices by health insurers.
There’s a seductive, if potentially faulty, syllogism in play here, one that I regularly use to calm myself: if a given prediction evokes dystopian science fiction, and if science fiction often projects a hyperbolic future that is, at best (or worst), only partially borne out, then that prediction is therefore unlikely to be accurate.

But to trivialize such concerns as “gloomy and confounding” risks sacrificing a valuable alertness, or so it seems to me now. For it was “abusive practices” along these very lines — underwritten, as it were, by a “benignly progressive idea” — that helped catalyze this year’s inspiring West Virginia teachers’ strike. As one teacher explained to The New York Times:
They implemented Go365, which is an app that I’m supposed to download on my phone, to track my steps, to earn points through this app. If I don’t earn enough points, and if I choose not to use the app, then I’m penalized $500 at the end of the year. People felt that was very invasive, to have to download that app and to be forced into turning over sensitive information.
Considered in context, these remarks provide a misleading index of our society’s collective willingness to fight back against weaponization of the data that we passively engender as we go about our daily lives; needless to say, such large-scale organized resistance in our right-to-work era is not the norm. Furthermore, the incursion upon individual privacy represented by Go365 was not the teachers’ only grievance, or even their principal one: West Virginia’s public school teachers are among the lowest paid in the country. But as separate as the workers’ grievances might seem — with stagnating wages on the one hand, and the unsolicited monitoring of extracurricular activity, which then becomes the basis of a significant penalty, on the other — they are related, and this relation helps tell a story about American precarity writ large, with the state ceding certain vital functions to private corporations whose work is, by and large, poorly understood and minimally overseen.

Corey Pein’s brisk and entertaining new book, Live Work Work Work Die: A Journey into the Savage Heart of Silicon Valley, attempts to tell this story, presenting the linked erosion of the public sector and of organized labor as at once accelerants and symptoms of Silicon Valley’s economic ascendancy. Equal parts memoir, ethnography, reportage, and jeremiad, Live Work Work Work Die starts as an account of Pein’s abortive effort to become a startup entrepreneur, widening into a bleaker, more holistic portrait of Silicon Valley — its history, economics, politics, dominant personalities, and vision for the future. “Silicon Valley,” one of the United States’s best-known metonyms, functionally extends beyond the geographic region itself, into San Francisco, which has in some sense become Silicon Valley’s suburb; local literary eminences Rebecca Solnit and Ellen Ullman have both lamented the city’s new status as a “bedroom community,” an inversion that, as Solnit has observed, harkens back to earlier days when Gold Rush arrivistes flocked to the city in hopes of getting rich nearby.
The opening chapter sees Pein, a seasoned journalist and regular contributor to The Baffler, moving to San Francisco in 2015 with little but a nebulous determination to cash in on the tech boom. What distinguished him from his fellow aspirants, however, was his plan to convert this experience into a book, as well as his fundamentally adversarial stance toward the very boom he hoped would make him rich.
Pein sets up Live Work Work Work Die as a nonfictional bildungsroman, the literary-historical form that, in its focus on one (typically male) individual’s arduous self-actualization, most precisely panders to Silicon Valley’s image of itself. But it soon becomes clear that Pein’s deployment of this form is sarcastic, as when he recounts an early entrepreneurial failure that, because he had so fully imbibed the Valley’s insistence on its own meritocratic ordering, he initially interpreted as a harsh measure of his own worth:
My first startup had failed. Thus I had failed. What other explanation could there be? As everyone knew, the internet was a level playing field, a free and frictionless medium for exchange, where the best ideas would inevitably rise to the top. Such was the foundational rhetoric of the internet, repeated like scripture, questioned only by cranks and cynics.
Pein comes to see the regional doctrine of heroic self-sufficiency and “hysterical optimism” as a “specious ideology.” As this early passage indicates, the book is the story not of one young man achieving success through brute force of will, but of one young man realizing that such success stories — for which there is a sizable market — largely miss the structural point.

But if, as literary scholar Joseph Slaughter argues, the typical bildungsroman narrates one individual’s journey toward becoming someone capable of narrating that very journey (a circular process Slaughter calls “narrative self-sponsorship”), this is one feature of the form Pein’s book adapts earnestly, if problematically. “When I started writing this book,” he writes,
it was provisionally titled “How to Make $30 Billion the Silicon Valley Way.” My idea was to pitch a tech startup and get obscenely rich while writing a book about how to pitch a tech startup and get obscenely rich — the Silicon Valley way!

...MUCH MORE

Follow-up: "US companies begin to reduce bond holdings after tax overhaul"

Sharp-eyed reader will see why we headlined with "Follow-up". More after the jump.
From the Financial Times, May 13:
Allergan and Celgene cut their securities investments as executives prepare to invest

US companies’ pile of bond investments is shrinking as they prepare to radically change the way they spend their excess cash.

The biggest 30 corporate stockpiles of securities shrank 10 per cent, or $61bn, in the first quarter to $524bn, according to an FT analysis of public filings.

At the same time the aggregate growth in companies’ holdings of cash and equivalents rose 17 per cent, or $34bn, to $239bn, as senior executives assess new ways to deploy their capital.

Until this year, US companies faced a 35 per cent corporate tax rate at home, but did not need to pay tax on foreign profits until those earnings were repatriated. That prompted companies such as Microsoft, Apple and Cisco in the past decade to invest hundreds of billions of dollars of spare cash offshore, mainly in bonds and other securities, to earn a return....MORE
The author of the above piece is Alexandra Scaggs, in this case writing for the paper rather than FT Alphaville where she looks at fixed-income and other stuff.
In February 2018 she had a couple posts we linked to that foreshadowed what markets have been seeing:
Feb. 1
Bonds: "Apple, Alphabet and Microsoft... — might consider borrowing some bond-market manoeuvres from the Federal Reserve."
If the companies simply repatriate the dollar amount they will only have to sell enough  assets to pay the tax. If they plan to distribute/invest the cash they will have to sell into already weakening markets.
I haven't seen this point raised anywhere in the media other than...

From FT Alphaville, Feb. 1:

B.R.E.A.M. (Bonds Rule Everything Around Me)
Bigtech and pharma companies — Apple, Alphabet and Microsoft among them — might consider borrowing some bond-market manoeuvres from the Federal Reserve....
That was followed by "US companies might be liquidating their offshore bond hoards" a few weeks later.

Alexandra seems to be one of the few journos bulldogging what for market operators is a pretty important story....
...And from FT Alphaville, Feb. 20:
Something odd has been happening to short-term bank bonds.
So far this month, spreads on banks' two-year bonds have widened by more than 15 basis points, according to Bank of America Merrill Lynch. For all US corporate debt maturing in 1-3 years (which includes bank bonds), spreads have widened 8bps, according to BofAML ICE's index. Spreads on three-year and four-year securities have widened by about 11bps and 12bps, respectively:.....
And the "other stuff"? Well, there was:
A weekend in Texas with ZeroHedge readers, Part 1
And:
Cigarettes are the vice America needs  
And...many, many more.

Come for the convexity, stay for the duration.

Coming in from the Cold: On Spy Fiction

It's all fiction. Spies lie.
It's what they do.

From n+1:
  • John le Carré. A Legacy of Spies. Viking, 2017.
  • David Ignatius. The Quantum Spy. W. W. Norton & Company, 2017.
  • Daniel Silva. House of Spies. Harper, 2017.
Over the past year, it has become impossible to ignore the fact that spy terminology has infiltrated everyday discourse. One does not have to be an intelligence analyst to speak confidentlyor at least with knowing, giddy pseudo-confidenceof cut-outs and assets, dezinformatsiya and kompromat. Politics is less about speeches and party platforms than about declassified files, leaks from grand-jury testimonies, and the “dossier.” Collectively, we long for interrogation rather than debate; we yearn for the proofs that only a clandestine bureaucracy could offer. What did the President know and when did he know it? What was in the contents of that secret meeting? Only the spiessecreted in tapped wires and behind hidden camerasknow the truth. It all has had a childish glee to it, as well as a childish comfort: if the spy world seemed narrower than the one we were used to inhabiting, its confines promised protection and some kind of order, a durable state if not a deep one. So it was that I, assailed and assuaged by agency talk, read spy novels. It was 2017, and I was in need of reassurance. I also needed to know what that reassurance was costing me.

To debrief: there are in the world real spies, in possession of real secrets, hired by real organizations with fantasticif, according to their recipients, forever inadequatebudgets, who may prevent harm but also, very often, perform it. (John le Carré, writing in 1991, on the cold-war intelligence services of the US and the UK: “Both services would have done much less damage to their countries, moral and financial, if they had simply been disbanded.”) But the spy is always also a fiction. It isn’t simply that the spy relies on “covers,” or fictions, for their work. It is that no profession has greater traffic with the business of fiction writing itself. Studies in Intelligence, the in-house and partly classified academic journal of the CIA, reviews spy fiction with a connoisseur’s discernment for shoddy verisimilitude and thematic flimsiness. Put aside the covert funding of postwar writers by CIA fronts like the Congress for Cultural Freedom. Spy novelists themselves are routinely ex-agents or intelligence personnelmost famously John le Carré, a.k.a. David Cornwell; Ian Fleming; and Graham Greenewhile in the US we have the less illustrious examples of ex–CIA officer and Nixonian ratfucker E. Howard Hunt, or blown agent Valerie Plame; and if they are not former agents they are journalists who cover the world of secret intelligence. So tight is the relationship that in burying myself in spy novels I became a cliché of agency life itself, like Robert Redford in Three Days of the Condor, working at the American Literary Historical Society, reading thrillers for plot elements and reporting to his superiors on his discoveries.

Spy novels narrow the world to the dimensions of agencies and their rivals or targets. They are realist in texture, never experimental, resolutely focused. Characters become their functions: agent, handler, mole, director, or operational head. Like Balzac in La Comédie humaine, spy novelists reuse characters: though the plots are byzantine, the people are familiar. The locales are far-flung, but in an enclosed, airless way: casinos, hotels, safe houses, clubs, airports, and passport checkpoints. (The spy blends the solitary tourist’s isolation with the native’s blasé familiarity.) There is, of course, the lingo, which manages to be well-known while parading its exclusivity: walk-ins, babysitters, sleepers; to be burned, rolled up, exfiltrated. Spies in spy novels also read other spy novelsOlen Steinhauer’s Milo Weaver reads le Carré; le Carré’s Jerry Westerby reads Greene and Conrad as Saigon falls. Thus the weariness of the literate, worldly spy: there is nothing new under the sun.

The limits of its thought-world defined, spy fiction comfortably becomes a literature of expertisethe literature, perhaps, of the knowledge worker. Written by former participants and experts, thanks to the conventional alibi that the secrets of their world can only be expressed allegorically or fictionally, the spy novel gives us a world with handles. How-to is as important to the spy novel as it is to Odysseus or Robinson Crusoe, and evoking it is one of the spy novelist’s most fundamental tasks. In David Ignatius’s The Quantum Spy, the novel’s putative villaina mole inside the CIA who passes her Chinese masters scientific information out of the ideological principle that science should not respect bordersis caught, but arranges a plea agreement in which she writes “a manual on tradecraft”: “She wrote it in the form of a novel, which captured what she had come to understand about intelligence. . . . Ford’s book was circulated widely within the intelligence community. It gave Ford what she had sought through her career but had only achieved after she became a foreign spy, which was a reputation as a brilliant and intuitive operations officer.”

Tradecraft: the spy’s professional fetish. The dead drop, the brush pass, the dry clean. Knowing how to evade surveillance, make a convincing legend, encrypt a message. Every action in the spy novel is done badly or well, clumsily or skillfully. The mystique of tradecraft lies somewhere between secrecy and simplicity, the suspicion a reader has that one could, with training, also do these things well. So wrote William Hood, former OSS and CIA officer, who in his 1982 memoir, Mole, asserted: “Tradecraft may seem mysterious to outsiders, but it is little more than a compound of commonsense, experience, and certain almost universally accepted security practices. . . . The fact is that tradecraft is like arithmetic: it has been around for centuries. The basics are easy to learn and good texts can be found in any library.” It is also, in its way, fun; when the American Oulipo member Harry Mathews was mistaken for a CIA agent in the early 1970sas he writes in My Life in CIAhe played along: he invented a false travel agency to act as cover, commissioned maps woven into shawls, and left enigmatic chalk marks on Parisian walls...MORE.

Machine Learning is Stuck In a Rut

From Quanta Magazine May 19:

To Build Truly Intelligent Machines, Teach Them Cause and Effect
Judea Pearl, a pioneering figure in artificial intelligence, argues that AI has been stuck in a decades-long rut. His prescription for progress? Teach machines to understand the question why. 
Judea Pearl helped artificial intelligence gain a strong grasp on probability, but laments that it still can't compute cause and effect.

Artificial intelligence owes a lot of its smarts to Judea Pearl. In the 1980s he led efforts that allowed machines to reason probabilistically. Now he’s one of the field’s sharpest critics. In his latest book, “The Book of Why: The New Science of Cause and Effect,” he argues that artificial intelligence has been handicapped by an incomplete understanding of what intelligence really is.

Three decades ago, a prime challenge in artificial intelligence research was to program machines to associate a potential cause to a set of observable conditions. Pearl figured out how to do that using a scheme called Bayesian networks. Bayesian networks made it practical for machines to say that, given a patient who returned from Africa with a fever and body aches, the most likely explanation was malaria. In 2011 Pearl won the Turing Award, computer science’s highest honor, in large part for this work.

But as Pearl sees it, the field of AI got mired in probabilistic associations. These days, headlines tout the latest breakthroughs in machine learning and neural networks. We read about computers that can master ancient games and drive cars. Pearl is underwhelmed. As he sees it, the state of the art in artificial intelligence today is merely a souped-up version of what machines could already do a generation ago: find hidden regularities in a large set of data. “All the impressive achievements of deep learning amount to just curve fitting,” he said recently.
In his new book, Pearl, now 81, elaborates a vision for how truly intelligent machines would think. The key, he argues, is to replace reasoning by association with causal reasoning. Instead of the mere ability to correlate fever and malaria, machines need the capacity to reason that malaria causes fever. Once this kind of causal framework is in place, it becomes possible for machines to ask counterfactual questions — to inquire how the causal relationships would change given some kind of intervention — which Pearl views as the cornerstone of scientific thought. Pearl also proposes a formal language in which to make this kind of thinking possible — a 21st-century version of the Bayesian framework that allowed machines to think probabilistically.
Pearl expects that causal reasoning could provide machines with human-level intelligence. They’d be able to communicate with humans more effectively and even, he explains, achieve status as moral entities with a capacity for free will — and for evil. Quanta Magazine sat down with Pearl at a recent conference in San Diego and later held a follow-up interview with him by phone. An edited and condensed version of those conversations follows.
 
Why is your new book called “The Book of Why”? It means to be a summary of the work I’ve been doing the past 25 years about cause and effect, what it means in one’s life, its applications, and how we go about coming up with answers to questions that are inherently causal. Oddly, those questions have been abandoned by science. So I’m here to make up for the neglect of science.

That’s a dramatic thing to say, that science has abandoned cause and effect. Isn’t that exactly what all of science is about?
Of course, but you cannot see this noble aspiration in scientific equations. The language of algebra is symmetric: If X tells us about Y, then Y tells us about X. I’m talking about deterministic relationships. There’s no way to write in mathematics a simple fact — for example, that the upcoming storm causes the barometer to go down, and not the other way around.

Mathematics has not developed the asymmetric language required to capture our understanding that if X causes Y that does not mean that Y causes X. It sounds like a terrible thing to say against science, I know. If I were to say it to my mother, she’d slap me.

But science is more forgiving: Seeing that we lack a calculus for asymmetrical relations, science encourages us to create one. And this is where mathematics comes in. It turned out to be a great thrill for me to see that a simple calculus of causation solves problems that the greatest statisticians of our time deemed to be ill-defined or unsolvable. And all this with the ease and fun of finding a proof in high-school geometry.

You made your name in AI a few decades ago by teaching machines how to reason probabilistically. Explain what was going on in AI at the time.
The problems that emerged in the early 1980s were of a predictive or diagnostic nature. A doctor looks at a bunch of symptoms from a patient and wants to come up with the probability that the patient has malaria or some other disease. We wanted automatic systems, expert systems, to be able to replace the professional — whether a doctor, or an explorer for minerals, or some other kind of paid expert. So at that point I came up with the idea of doing it probabilistically.
Unfortunately, standard probability calculations required exponential space and exponential time. I came up with a scheme called Bayesian networks that required polynomial time and was also quite transparent....MUCH MORE

Saturday, May 19, 2018

"The impact of Masayoshi Son’s $100bn tech fund will be profound"

From The Economist, May 10:

It is giving new opportunities to entrepreneurs and forcing Silicon Valley's best to stay relevant
HERMAN NARULA named his company Improbable for a business plan so outlandish and fraught with computing problems that only two outcomes are plausible. As the British entrepreneur tells it, the result will be outright failure or success unmatched. He wants to create virtual worlds as detailed, immersive and persistent as reality, where millions of people can live as their true selves, earn their main income and interact with artificially intelligent robots. If that happens, it will be partly because Mr Narula drew the attention of a similarly improbable, wildly ambitious technology fund. The Vision Fund has put close to $500m into Improbable, which had previously raised only $52m.

An outsize investment in an unconventional business is typical of a fund that itself is both vast and resistant to definition. It is the brainchild of Masayoshi Son, an unusually risk-loving Japanese telecoms and internet entrepreneur. It is too big to be considered a conventional venture-capital firm, which would typically manage much smaller sums. It eschews many of the practices of private-equity funds, such as shaking up management and applying plenty of debt. Yet this impressive-but-puzzling experiment is having an impact on everyone who invests in technology. At a recent gathering of financiers in New York, Bill Gurley of Benchmark, a venture-capital firm that has invested in numerous well-known tech firms, called the Vision Fund “the most powerful investor in our world”.

Even amid the hyperbole and fervour of tech Mr Son stands out. This is partly because of his belief in mind-boggling futuristic scenarios such as the “singularity”, when computer intelligence is meant to overtake the human kind. But it is also because Mr Son’s method is to do things rapidly and on a scale other investors would shy away from. Whether backing founders lavishly, so they can roll out new business models and technology as quickly as possible, or encouraging consolidation among the world’s giant ride-hailing companies, including Uber and Singapore’s Grab, he thinks bigger than most.

Silicon Valley insiders are sceptical, saying that Mr Son is force-feeding young firms with more capital than they deserve or need and that his fund will further inflate a bubble in technology valuations. His investors may well discover how hard it is to earn high returns on huge sums invested in relatively mature firms. But entrepreneurs, some of whom regard Mr Son as superhuman, are delighted. “If he came in and levitated one day I would not be surprised,” says Mike Cagney, co-founder of SoFi, an American financial-technology company in which Mr Son has invested.
Those doubting his grand visions have been proved wrong in the past. In 1981 he founded SoftBank to distribute personal-computer software in Tokyo with two part-time employees. On the first day the diminutive Mr Son stood on two apple cartons and announced to those befuddled workers that in five years the firm would have $75m in sales and be number one. They thought “this guy must be crazy”, Mr Son later told the Harvard Business Review, and quit the same day. But Mr Son’s drive and ambition saw SoftBank eventually distributing 80% of PC software in Japan.

Rising Son
SoftBank subsequently grew into a global conglomerate with stakes in hundreds of web firms, including Yahoo. As tech valuations soared in 2000 Mr Son’s personal wealth even briefly overtook that of Bill Gates. The dotcom crash of 2001 wiped out 99% of SoftBank’s market value. But one investment—$20m sunk into Alibaba—is regarded as one of the best in history. The Chinese internet titan went public in 2014 in the world’s biggest IPO. SoftBank’s 28% stake in the firm is now worth $140bn.

Many old hands of the tech industry snootily dismiss his bets on Yahoo and Alibaba as flukes. Mr Son is bent on proving them wrong. He spent a decade focusing on SoftBank’s Japanese telecoms and internet-infrastructure businesses and on trying to turn around struggling Sprint, an American mobile-phone operator acquired in 2013 (on April 29th Mr Son beat a retreat, agreeing to merge it with T-Mobile to create an enterprise worth $146bn). Now Mr Son has returned to investing. Since reaping the riches of Alibaba’s IPO Mr Son has been using SoftBank’s capital for a series of large tech investments, including $2.5bn in Flipkart, an Indian e-commerce site which on May 9th Mr Son said he was selling to Walmart for $4bn (see article). He has also put money into Grab and SoFi. And in 2016 SoftBank bought Arm Holdings, a British chip firm, for £24.3bn ($31.9bn).

The appetite of Mr Son and his main lieutenant, Rajeev Misra, a well-connected former derivatives trader from Deutsche Bank, was far from sated. But Mr Son’s grand dreams were not matched by the depth of SoftBank’s pockets. Its acquisitions had left the firm weighed down by debt. So the two men beat a path to the Middle East. The timing was handy. Muhammad bin Salman, now Saudi Arabia’s crown prince, was preparing to launch a programme to wean the country off oil and diversify the economy. Mr Son’s sales pitch on how he could use the kingdom’s wealth to grab a stake in future technologies, rather than buying the usual Western trophy assets, saw him leave with a pledge of $45bn.

That vast sum, from Saudi Arabia’s Public Investment Fund, is the biggest chunk of the $100bn that the Vision Fund has now raised. It has also raised $28bn from SoftBank itself, $15bn from Mubadala, Abu Dhabi’s sovereign-wealth fund, $5bn from Apple and other corporate sources, and $7bn from other sources as yet unnamed (see chart 1).

Raising the stakes
Having amassed the wherewithal, Mr Son set about collecting stakes. After a year the Vision Fund boasts a family of 24 companies (see chart 2). SoftBank’s holdings in ride-sharing firms—Uber, Didi, Grab and Ola—will reportedly move into the fund within months. Other stakes are expected to move later, such as those in SoFi and OneWeb. All future investments of $100m or more that Mr Son makes will go into the Vision Fund, which plans to have invested in as many as 100 firms within five years....MUCH MORE

"Tell me why you want to become a trader"

A repost from November 2010.


Unfortunately our hat tip did not link to a specific post:
FT Alphaville has been on a roll today and because of that we broke our "one link per day rule". For this video they get a Tip of the old Chapeau. 
Flashback: CBOT Soybean market pit trading:


And from Crain's Chicago Business:

With many of the futures pits going dark next month, current and former traders talk about their highs and lows 

Luddite Tech Support

Join the cult, get the tote bag free!

From Librarian Shipwreck (Libraries, Archives, Technology, Impending Doom):

Why the Luddites Matter
Colloquialisms have a remarkable way of convincing their users that they have done their homework. All that is needed is a spoonful of vaguely historically adjacent meaning to be stirred in with the waters of repeat usage, and suddenly a speaker feels confident that they understand the capital “t” truth behind a term or idea. After all, the thinking goes, if this usage of this term isn’t historically accurate, then why has this term become used in this way? Why indeed. But if you are going to use a term because of the evocative historic meaning you think is bound up in it, you probably want to make sure that you’re getting your history right.

Which brings us to the Luddites.

It is undeniable that the term Luddite has become fairly common shorthand in much of the English speaking world. As it is commonly deployed in regular discourse the term has come to be an easy descriptor for someone who “hates technology,” someone who is “afraid of technology,” or someone who is simply “bad with technology.” Depending on its specific usage, Luddite is can either be used as an expression of comical self-deprecation, or it is thrown about as an insult. Lurking somewhere in the background of most people’s usage of the term is just enough historical knowledge to get partial credit on a history test: the Luddites were some people long ago in England who smashed some machines. Onto this basic foundation, other things wind up getting thrown in as well: the Luddites hated technology, the Luddites hated progress, if the Luddites won we’d be living in caves, the Luddites were illiterate idiots, and so forth. As the historian E.P. Thompson aptly observed before laying waste to the historical basis of this belief, “Luddism lingers in the popular mind as an uncouth, spontaneous affair of illiterate handworkers, blindly resisting machinery.”[2] For a society awash in smartphones, in love with the Internet, and with its hopes for a better future pinned on Silicon Valley – the Luddites appear as the perfect bogeymen. The specter of the Luddites makes it easy to disparage anyone who dares speak out against anything technological by painting them as fools pining for the past who really just want everyone to go live in caves in the woods.

Of course, much of this popular imaginary of the historic Luddites is dead wrong. When the term Luddite is swung about carelessly it smashes any sense of historical nuance, and supplants contemporary values and ideologies for those actually held by the Luddites. Used as a colloquial epithet, Luddite is a powerful method for cutting off critical thinking....MUCH MORE
Librarian Shipwreck homepage.

"Waymo Filings Give New Details on Its Driverless Taxis"

From IEEE Spectrum, May 14:

California's DMV has also received an application from the startup JingChi to test fully autonomous vehicles
Waymo CEO John Krafcik announced last week that the company would be launching a driverless taxi service in Phoenix later this year. An application Waymo filed with the California Department of Motor Vehicles (DMV) for driverless testing, obtained by IEEE Spectrum using public record laws, reveals more about how that service might work.

Waymo is already operating a fully driverless pilot test in Arizona, where companies do not have to seek permission for self-driving cars, with or without human safety operators, or report on their progress. It’s a different matter in California, where many self-driving companies are based. In April, the state’s DMV started accepting applications for fully driverless testing. So far, the DMV has received two applications—one from Waymo, an Alphabet company, and the other from U.S./China startup JingChi.ai.

Waymo’s application seeks permission for 52 fully driverless vehicles, 27 registered in California and 25 with Arizona plates. All are Chrysler Pacifica hybrid minivans, similar to those currently deployed in Arizona. Waymo intends to test its vehicles in an intensively mapped geofenced area of about 50 square miles near its Mountain View offices. Passengers cannot select a destination outside that area, and Waymo’s software will not create a route that travels outside the geo-zone.

JingChi is being much less ambitious. The startup, which has been embroiled in a trade secret dispute with Baidu, received a DMV permit to test autonomous vehicles with safety drivers only last June. The new application requests permission to test a single driverless 2017 Lincoln MKZ hybrid. In a heavily redacted application, the company told the DMV that it will “initially test the driverless [vehicle] at low speeds in parking lots and on public roads with little traffic and no bystanders,” in a non-residential area near its Sunnyvale headquarters.

Manufacturers also have to inform the DMV of the “operational design domain” for their vehicles. Waymo says its vehicles can handle most roads and parking lots, and speeds of up to 65 miles per hour (mph). They can also cope with fog and light rain, and night-time driving. If Waymo’s minivans encounter heavy rain, snow or ice, flooded roads, or off-road terrain, they will seek a “minimal risk condition” (which usually means stopping in or by the side of the road). Waymo vehicles will also halt operations if they detect a failure, hit something, or sense that their airbags are deploying. JingChi redacted details of its operational design domain, but the company did state that it would be testing day and night.

On top of these precautions, California also requires fully self-driving vehicles to have a remote operator in case the car fails or suffers a collision. JingChi will have a human monitoring the car from its office, able to take remote control if the autonomous system fails, if a passenger requests it, or if someone calls the company to report a problem....MUCH MORE

Data Storage: Say Hello to Google One

From TechCrunch:
Google is revamping its consumer storage plans today by adding a new $2.99/month tier for 200 GB of storage and dropping the price of its 2 TB plan from $19.99/month to $9.99/month (and dropping the $9.99/month 1 TB plan). It’s also rebranding these storage plans (but not Google Drive itself) as “Google One.”

Going forward, you’ll also be able to share your storage quota with up to five family members.
 
That by itself would be interesting, given how easy it is to max out 100 GB with 4K videos and high-res images these days, but there is one other feature here that explains the new brand name: free one-tap access to Google Experts for help with any Google consumer product and service.

That access to live experts — not some barely functional AI chatbot — comes with every Google One plan, including the $1.99/month 100 GB plan. In the U.S., these experts will be available 24/7 over chat, email and phone. In other countries, this lineup of support options may vary, but the company tells me that its objective is “to provide users with great one-tap support and constantly improve it over time.”

Google already offered 24/7 support for paying business users with a G Suite account, but this is the first time it actively offers live support for consumers.

It’s worth stressing that the existing free quota of 15 GB will remain.

In addition to access to experts, the company also promises to provide subscribers with other benefits. Google One’s director Larissa Fontaine told me that those could include discounts on hotels you find in Google Search, preferred rates for other Google services or credits on Google Play. “We hope to build those out over time,” she noted....MUCH MORE

"...On the Theory of Platform Capitalism"

Five books, five reviews, one place.
From the Los Angeles Review of Books, April 24:

Delete Your Account: On the Theory of Platform Capitalism
THE TERM “PLATFORM” is everywhere, but it’s not clear if it’s a metaphor or a thing, a new condition in the digital era or semantic camouflage for the banal evil of capitalism. Platforms are raised areas that facilitate — and leave open — exchange and social activity. As long as software platforms were contained behind personal computer screens and locked into physical infrastructures, the metaphor seemed innocuous. But now meatspace and cyberspace have fused. As a recent how-to for the new business era, Platform Revolution, puts it: “A platform is a business based on enabling value-creating interactions between external producers and consumers,” providing “an open, participative infrastructure for these interactions” and setting “governance conditions for them.” This model of privatized governance is spreading. Production and distribution, services and the social: all have been “disrupted” by the rules of the platform. Tom Goodwin observed in 2015 that “Uber, the world’s largest taxi company, owns no vehicles.” And the same could be said for Facebook (media), Alibaba (retail), and Airbnb (hotels). It’s true that none of these platforms owns the goods their services enable. But this now ubiquitous observation raises more questions than it answers.

Are these platforms skimming rent off capital and labor? Or do they represent a fundamental shift in economics, a new Industrial Revolution? The second view, espoused by the pop-management guru team Erik Brynjolfsson and Andrew McAfee, holds that that “cybernation” will automate mental labor in the same way the factory automated the work of the arm. Of course, the “unburdening” of the arm unleashed the horrors of 19th-century industrial labor, so we have reason in advance to suspect such boosterism. Cognitive capitalism, to use Yann Moulier Boutang’s term, might be less about allowing creativity to organize the economic cycle than about siphoning value from socio-cultural activity as such. Companies such as Alphabet, with a market cap in the neighborhood of three quarters of a trillion dollars, have claimed to be neutral arbiters and spaces of informational exchange. No one really believes that anymore, but we lack language to grasp the way these platforms collapse profit and the social, culture and capital. As the media scholar Tarleton Gillespie has argued, the term “platform” tendentiously fuses several meanings to the benefit of these businesses, combining the software platform with the figurative and political senses of the word associated with freedom. Yet criticizing the propaganda of such usage is a less urgent intellectual task than trying to understand what the platformed world we now inhabit looks like.

As we live more of our lives on platforms such as Facebook, even the line between mind and matter is up for grabs. Think about Elon Musk’s proposal to jack your brain into the social network directly, surpassing the necessity for typing. Mark Zuckerberg is a fan of this proposal, since whatever gets platformed — in this case, your mind — also becomes data owned by the platform-owners. Imagine that your mind’s every motion is given for “research purposes” to a prestigious academic, who passes it on to a big data company owned by a secretive billionaire affiliated with a far-right ideology. That’s not a William Gibson plot, but instead basically what happened in the 2016 US presidential election, when avant-garde (or maybe bullshit) psychometrics was used on tens of millions of users’ data by a shadowy company called Cambridge Analytica. Imagine Steve Bannon — who sat on that company’s board — inspecting what even you don’t know about your own mind. In response to this flap, the call to regulate has gotten louder than ever, even reaching the pages of The Wall Street Journal. But regulation isn’t enough. We need theory.

That doesn’t mean we shouldn’t regulate the big platforms, correct for algorithmic bias, and fight troll-farm manipulation. Scholars such as Safiya Umoja Noble, Frank Pasquale, and Kate Crawford have offered among the most sophisticated and compelling visions of what such regulations would look like. But what if we can’t return Pandora’s Platform to the Amazon warehouse we ordered it from? Coping with platform capitalism — a term coined by German theory blogger Sascha Lobo — means figuring out how we need to change our vocabulary and categories, and how we need to update our critical frameworks, for our new reality.
¤
Franklin Foer’s World Without Mind: The Existential Threat of Big Tech, is not up to the task. Foer’s book is The West Wing of broadsides in the increasingly heated debate about tech, wistfully grafting dead values onto a new reality. It points out, with erudition and whip-smart turns of phrase, just how bad things are. Its title promises a lot more than it gives, since the book focuses heavily on Foer’s sour experience with Facebook co-founder Chris Hughes and the digital takeover of the New Republic, which led to Foer’s eventual unceremonious firing. The broadside is expert. Foer argues that “the ascendant monopolies of today aspire to encompass all of existence,” in an attempt to “overhaul the entire chain of cultural production, so that they can capture greater profit.” These attempts have led to a monopoly situation, but a monopoly over things like our ability to “contemplate.” Jeff Bezos inserts himself as gatekeeper into the journalistic community — most obviously through his purchase of the Washington Post — but disavows the role of gatekeeper itselfhas returned to a central role,, deferring editorial judgments to clicks.

This is certainly a necessary critique, but it’s skewed toward Foer’s experience in publishing, so much so that the model he wishes we could return to is simply the old-world publishing empire associated with what he calls the “Acela corridor elite.” The platform monopolies profess “the values of the sixties” and want to “radically remake the production of culture,” shifting from a “competitive marketplace of ideas” (governed by gatekeepers like Foer himself) toward a “conformism” that threatens to flatten cultural creativity to consensus. These behemoths pay pathetically little in taxes, a wrong that might be righted, he writes hopefully, by “The Big One,” a hack to end all hacks. This hope is hackneyed (sorry). The longer-term solution, he argues, is to embrace paper and long-form reading, to voluntarily adopt non-platformed cultural diets. He calls this the “organic mind,” on analogy to Michael Pollan’s recommendations that we simply eat “real food.” We might remember here, though, that Amazon owns Whole Foods. The voluntarist solution falls flat in the face of the sheer size of the networks in question. Competitors in small retail and small publishing can’t afford to opt out of Amazon. The call for a “Data Protection Authority” (something like the General Data Protection Regulation set to go into effect in the EU in May) comes late in the book and is too vague to be compelling. Foer establishes a kind of fictional space in which the values of yesteryear are the governing rules of critique. As he puts it, he was known at the New Republic as a “nostalgist.” And he is. His nostalgia makes his critique lose its bite, since its categories are already outdated. We might take a more general lesson: calls to regulation based on pre-digital critical frameworks make critique conservative. Lacking the conceptual tools to envision progress, liberals are the conversatives now.

Scott Galloway’s The Four, which compares Apple, Amazon, Facebook, and Google to the horsemen of the apocalypse, provides a great deal more information on how to “break them up.” Let’s be clear: this suggestion to splinter the largest platforms in history comes from a celebrity business professor. In taking over social and historical functions that should be isolated from enterprise, the platforms have immiserated too many, flattened growth, and spread unemployment. If you want to read Galloway, you’ll have to put up with a lot of pop psychology, shading into New Age doctrine. Google appeals to the brain, Apple to the genitals (mostly for men, though), and so on. But it’s pretty much worth it....
...MUCH MORE