American executives are betting that the president is good for business. Not in the long run
MOST American elites believe that the Trump presidency is hurting their country. Foreign-policy mandarins are terrified that security alliances are being wrecked. Fiscal experts warn that borrowing is spiralling out of control. Scientists deplore the rejection of climate change. And some legal experts warn of a looming constitutional crisis.
.. Bosses reckon that the value of tax cuts, deregulation and potential trade concessions from China outweighs the hazy costs of weaker institutions and trade wars.
.. the investment surge is unlike any before—it is skewed towards tech giants, not firms with factories. When it comes to gauging the full costs of Mr Trump, America Inc is being short-sighted and sloppy.
.. The benefits for business of Mr Trump are clear, then: less tax and red tape, potential trade gains and a 6-8% uplift in earnings.
.. During the Obama years corporate America was convinced it was under siege when in fact, judged by the numbers, it was in a golden era, with average profits 31% above long-term levels.
Now bosses think they have entered a nirvana, when the reality is that the country’s system of commerce is lurching away from rules, openness and multilateral treaties towards arbitrariness, insularity and transient deals.
.. so far this month 200-odd listed American firms have discussed the financial impact of tariffs on their calls with investors. Over time, a mesh of distortions will build up.
.. American firms have $8trn of capital sunk abroad; foreign firms have $7trn in America; and there have been 15,000 inbound deals since 2008. The cost involved in monitoring all this activity could ultimately be vast. As America eschews global co-operation, its firms will also face more duplicative regulation abroad. Europe has already introduced new regimes this year for financial instruments and data.
.. The expense of re-regulating trade could even exceed the benefits of deregulation at home. That might be tolerable, were it not for the other big cost of the Trump era: unpredictability. At home the corporate-tax cuts will partly expire after 2022.
.. Bosses hope that the belligerence on trade is a ploy borrowed from “The Apprentice”, and that stable agreements will emerge. But imagine that America stitches up a deal with China and the bilateral trade deficit then fails to shrink, or Chinese firms cease buying American high-tech components as they become self-sufficient
.. Another reason for the growing unpredictability is Mr Trump’s urge to show off his power with acts of pure political discretion.
- He has just asked the postal service to raise delivery prices for Amazon, his bête noire and the world’s second-most valuable listed firm.
- He could easily strike out in anger at other Silicon Valley firms—after all, they increasingly control the flow of political information.
- He wants the fate of ZTE, a Chinese telecoms firm banned in America for sanctions violations, to turn on his personal whim.
.. When policy becomes a rolling negotiation, lobbying explodes. The less predictable business environment that results will raise the cost of capital.
.. Mr Trump expects wages to rise, but 85% of firms in the S&P 500 are forecast to expand margins by 2019
.. Either shareholders, or workers and Mr Trump, are going to be disappointed.
.. In a downturn, American business may find that its fabled flexibility has been compromised because the politics of firing workers and slashing costs has become toxic.
.. American business may one day conclude that this was the moment when it booked all the benefits of the Trump era, while failing to account properly for the costs.
Tech Luminary Peter Thiel Parts Ways With Silicon Valley
Billionaire investor frustrated with what he sees as intolerance of conservatism in tech industry; has discussed resigning from Facebook board
Billionaire investor Peter Thiel is relocating his home and personal investment firms to Los Angeles from San Francisco and scaling back his involvement in the tech industry, people familiar with his thinking said, marking a rupture between Silicon Valley and its most prominent conservative.
.. Thiel has grown more disaffected by what he sees as the intolerant, left-leaning politics of the San Francisco Bay Area, and increasingly pessimistic about the prospects for tech businesses amid greater risk of regulation
.. Mr. Thiel has long stood out in Silicon Valley for his vocal libertarianism, but he drew heavy criticism from many tech-industry peers—including fellow Facebook board member Reed Hastings, CEO of Netflix Inc.—when he backed Mr. Trump’s presidential campaign and later served as an adviser on his White House transition team.
Mr. Thiel has recently said tech culture has become increasingly intolerant of conservative political views since Mr. Trump’s election, an attitude he has said is intellectually and politically fraught.
“Silicon Valley is a one-party state,” Mr. Thiel said last month at a debate about tech and politics at Stanford University. “That’s when you get in trouble politically in our society, when you’re all in one side.”
.. Mr. Thiel has bucked Silicon Valley conventions since his days as a Stanford University student in the 1980s, when he helped start a student newspaper to promote conservative views.
.. He also has backed more unusual initiatives such as an institute that advocates creating ocean-based cities outside the reach of governments.
.. Mr. Thiel also has been an emissary for Facebook to its large population of right-leaning users. In May 2016, after media reports that curators of Facebook’s “trending topics” feature suppressed news about conservative events and from conservative sources, he helped Facebook convene a closed-door meeting to smooth things over with a group of prominent conservatives.
.. Mr. Zuckerberg publicly deflected the criticism of Mr. Thiel, saying in March 2017 that demands for his removal were “crazy” and that “ideological diversity” had become a necessary component of diversity in the workplace and boardroom.
.. Mr. Thiel sees an opportunity to build a right-leaning media outlet to foster discussion and community around conservative topics, the person said.
Canadian Tech Sector Thrives, but Struggles to Keep Its Talent
Government seek to attract investment from big foreign players while stopping the brain drain
Mr. Trudeau has lamented a “brain drain” of Canada’s best tech minds, saying at a recent Google event in Toronto, “Quite frankly, we’re tired of Google poaching our best graduates from the University of Waterloo and sucking them down to California.”
.. Trudeau wrote to Mr. Bezos, asking him to consider Canada because of its inclusiveness, single-payer health-care system, and an immigration system designed to attract high-skilled talent.
.. Canada is widely considered to be at the nucleus of some world-leading research in areas such as machine learning and artificial intelligence.
.. Seminal work published by University of Toronto’s Geoffrey Hinton, University of Montreal’s Yoshua Bengio and others has spawned advancements in voice recognition and automated driving. Mr. Hinton published breakthrough research on “deep learning” in 2007 and 2012 that ushered in a new wave of AI and the potential it could have for smartphones, self-driving cars and other devices.
.. Canada’s AI talent pool is also the third biggest in the world behind the U.S. and the U.K., with about 1,100 researchers in the country
.. An Amazon move to Toronto might also end up being a “Trojan horse” that would draw Canadian workers to the company’s Seattle base rather than improve Canada’s economy
.. “The best and brightest Canadian engineers or marketers that operate under Amazon Canada will see their career path head down to Seattle, not in Canada,”
.. He says companies like Facebook have different needs than startups, noting that staff at Facebook’s AI lab in Montreal are focused on more advanced research.
.. Cole Clifford, a 23-year-old machine-learning engineer at Toronto-based startup DeepLearni.ng , said he received about 50 recruiter emails in his LinkedIn account last month, most of them from Silicon Valley firms
.. the Canadian government spent C$125 million last March to set up new AI “superclusters” in Toronto
.. The goal is to keep researchers in Canada and create 1,000 AI graduates in the next five years
.. “We aren’t realizing that the intellectual property developed by these individuals and all of those economic benefits are rarely in Canada and not taxed in Canada,” Mr. Ruffalo said. “That’s the problem.”
.. One potential avenue for keeping foreign companies in check is for Canada to withhold R&D tax incentives
.. Another option is to create a government-backed sovereign patent fund, similar to what South Korea, Japan and France have launched in recent years, which would protect smaller startups from patent claims by foreign companies
Google’s true origin partly lies in CIA and NSA research grants for mass surveillance
Two decades ago, the US intelligence community worked closely with Silicon Valley in an effort to track citizens in cyberspace. And Google is at the heart of that origin story. Some of the research that led to Google’s ambitious creation was funded and coordinated by a research group established by the intelligence community to find ways to track individuals and groups online.
The intelligence community hoped that the nation’s leading computer scientists could take non-classified information and user data, combine it with what would become known as the internet, and begin to create for-profit, commercial enterprises to suit the needs of both the intelligence community and the public. They hoped to direct the supercomputing revolution from the start in order to make sense of what millions of human beings did inside this digital information network. That collaboration has made a comprehensive public-private mass surveillance state possible today.
.. It is a somewhat different creation story than the one the public has heard, and explains what Google cofounders Sergey Brin and Larry Page set out to build, and why.
.. The intelligence community wanted to shape Silicon Valley’s supercomputing efforts at their inception so they would be useful for both military and homeland security purposes. Could this supercomputing network, which would become capable of storing terabytes of information, make intelligent sense of the digital trail that human beings leave behind?
.. the Central Intelligence Agency (CIA) and the National Security Agency (NSA) had come to realize that their future was likely to be profoundly shaped outside the government. It was at a time when military and intelligence budgets within the Clinton administration were in jeopardy, and the private sector had vast resources at their disposal. If the intelligence community wanted to conduct mass surveillance for national security purposes, it would require cooperation between the government and the emerging supercomputing companies.
.. To do this, they began reaching out to the scientists at American universities
.. There was already a long history of collaboration between America’s best scientists and the intelligence community, from the creation of the atomic bomb and satellite technology to efforts to put a man on the moon.
.. Silicon Valley was no different. By the mid 1990s, the intelligence community was seeding funding to the most promising supercomputing efforts across academia, guiding the creation of efforts to make massive amounts of information useful for both the private sector as well as the intelligence community.
They funded these computer scientists through an unclassified, highly compartmentalized program that was managed for the CIA and the NSA by large military and intelligence contractors. It was called the Massive Digital Data Systems (MDDS) project... MDDS was introduced to several dozen leading computer scientists at Stanford, CalTech, MIT, Carnegie Mellon, Harvard, and others in a white paper that described what the CIA, NSA, DARPA, and other agencies hoped to achieve.
.. the program’s stated aim was to provide more than a dozen grants of several million dollars each to advance this research concept. The grants were to be directed largely through the NSF so that the most promising, successful efforts could be captured as intellectual property and form the basis of companies attracting investments from Silicon Valley.
.. Today, the NSF provides nearly 90% of all federal funding for university-based computer-science research.
.. The research arms of the CIA and NSA hoped that the best computer-science minds in academia could identify what they called “birds of a feather:” Just as geese fly together in large V shapes, or flocks of sparrows make sudden movements together in harmony, they predicted that like-minded groups of humans would move together online.
.. Their research aim was to track digital fingerprints inside the rapidly expanding global information network, which was then known as the World Wide Web. Could an entire world of digital information be organized so that the requests humans made inside such a network be tracked and sorted? Could their queries be linked and ranked in order of importance? Could “birds of a feather” be identified inside this sea of information so that communities and groups could be tracked in an organized way?
.. The primary objective of this grant was “query optimization of very complex queries that are described using the ‘query flocks’ approach.” A second grant—the DARPA-NSF grant most closely associated with Google’s origin—was part of a coordinated effort to build a massive digital library using the internet as its backbone.
.. Human beings and like-minded groups who might pose a threat to national security can be uniquely identified online before they do harm. This explains why the intelligence community found Brin’s and Page’s research efforts so appealing
.. The two intelligence-community managers charged with leading the program met regularly with Brin as his research progressed, and he was an author on several other research papers that resulted from this MDDS grant before he and Page left to form Google.
The grants allowed Brin and Page to do their work and contributed to their breakthroughs in web-page ranking and tracking user queries. Brin didn’t work for the intelligence community—or for anyone else. Google had not yet been incorporated. He was just a Stanford researcher taking advantage of the grant provided by the NSA and CIA through the unclassified MDDS program.
.. The MDDS research effort has never been part of Google’s origin story, even though the principal investigator for the MDDS grant specifically named Google as directly resulting from their research: “Its core technology, which allows it to find pages far more accurately than other search engines, was partially supported by this grant,” he wrote. In a published research paper that includes some of Brin’s pivotal work, the authors also reference the NSF grant that was created by the MDDS program.
NSF likewise only references the digital libraries grant, not the MDDS grant as well, in its own history of Google’s origin.
.. But the grant from the intelligence community’s MDDS program—specifically designed for the breakthrough that Google was built upon—has faded into obscurity.
Google has said in the past that it was not funded or created by the CIA. For instance, when stories circulated in 2006 that Google had received funding from the intelligence community for years to assist in counter-terrorism efforts, the company told Wired magazine founder John Battelle, “The statements related to Google are completely untrue.”
Did the CIA directly fund the work of Brin and Page, and therefore create Google? No. But were Brin and Page researching precisely what the NSA, the CIA, and the intelligence community hoped for, assisted by their grants? Absolutely.
.. Brin’s breakthrough research on page ranking by tracking user queries and linking them to the many searches conducted—essentially identifying “birds of a feather”—was largely the aim of the intelligence community’s MDDS program. And Google succeeded beyond their wildest dreams.
.. most people still don’t understand the degree to which the intelligence community relies on the world’s biggest science and tech companies for its counter-terrorism and national-security work.
.. in the most recent reporting period between 2016 and 2017, local, state and federal government authorities seeking information related to national security, counter-terrorism or criminal concerns issued more than 260,000 subpoenas, court orders, warrants, and other legal requests to Verizon, more than 250,000 such requests to AT&T, and nearly 24,000 subpoenas, search warrants, or court orders to Google.
.. the Patriot Act legal process has now become so routinized that the companies each have a group of employees who simply take care of the stream of requests.
.. In this way, the collaboration between the intelligence community and big, commercial science and tech companies has been wildly successful. When national security agencies need to identify and track people and groups, they know where to turn – and do so frequently. That was the goal in the beginning. It has succeeded perhaps more than anyone could have imagined at the time.