Category: Economics of Technology

Google Is Vulnerable to Competition

(p. A1) Google’s once-untouchable online-advertising operation took a body blow, hurt by mounting competition and struggles within its increasingly high-profile YouTube unit.

Google parent Alphabet Inc. in the first quarter posted its slowest revenue growth since 2015. The poor results highlight the risks for one of Silicon Valley’s biggest names in effectively leaning on one massive, if lucrative, business.

For all its myriad arms and efforts to diversify, Google remains essentially an old-fashioned billboard operation with a high-tech gloss—and it now faces more rivals.

. . .

(p. A4) Rivals like Amazon, once content to play in their own corners of the Silicon Valley sandbox, are making big plays at online advertising. In a potentially existential threat to Mountain View, Calif.-based Google, more online shoppers now begin their searches directly on Amazon than on search engines.

For the full story, see:

Rob Copeland. “Google Shows Its First Cracks in Years.” The Wall Street Journal (Tuesday, April 30, 2019): A15.

(Note: ellipsis added.)

(Note: the online version of the story has the date April 29, 2019, and has the title “Google Shows First Cracks in Years.”)

Cheaper to Teach Humans than to Upgrade Robots

(p. A1) SASEBO, Japan—Yoshihisa Ishikawa’s one-night stay at a robot-staffed hotel in western Japan wasn’t relaxing.

He was roused every few hours during the night by the doll-shaped assistant in his room asking: “Sorry, I couldn’t catch that. Could you repeat your request?”

By 6 a.m., he realized the problem: His heavy snoring was triggering the robot.

Turns out, robots aren’t the best at hospitality. After opening in a blaze of publicity in 2015, Japan’s Henn na, or “Strange,” Hotel, recognized by the Guinness Book of World Records as the world’s first robot hotel, is now laying off its low-performing droids.

So far, the hotel has culled over half of its 243 robots, many because they created work rather than reduced it.

. . .

(p. A8) The hotel launched with around 80 robots. The initial positive reaction encouraged it to add many more for guests’ entertainment, such as a team of human and dog robot dancers in the lobby.

That’s when problems started to pile up, said the hotel’s general manager, Takeyoshi Oe.

Toshifumi Nakamura, a former hotel guest, recalled that about half the puppy-size lobby dancers appeared to be broken or in need of charging when he visited in mid-2016. Mr. Oe said the hotel increased overtime for the human staff to cope with the additional workload.

. . .

Mr. Ishikawa, the heavy snorer, said he wasn’t sure how to turn Churi off.

“She got a bad reputation,” said Hideo Sawada, president of the travel company that owns the hotel. Churi was among the robots removed.

. . .

Mr. Oe said the hotel has considered upgrading some robots but has to weigh the potentially high costs of frequent replacements. Churi was in service for four years, plenty of time for the technology to become outdated.

“Many people get a new phone every couple of years, so four years seems really old,” said Mr. Oe.

. . .

Mr. Sawada said he hasn’t given up on the idea of a hotel without human staff, but Strange Hotel has taught him that there are currently many jobs suited only for humans. “When you actually use robots you realize there are places where they aren’t needed—or just annoy people,” he said.

For the full story, see:

Alastair Gale and Takashi Mochizuki. “The World’s First Robot Hotel Is Looking for a Few Good Humans.” The Wall Street Journal (Tuesday, January 15, 2019): A1 & A8.

(Note: ellipses added.)

(Note: the online version of the story has the date Jan. 14, 2019, and has the title “Robot Hotel Loses Love for Robots.”)

China Steals Micron Memory Chip Innovations

(p. A8) A Wall Street Journal study of 10 recent technology-related prosecution cases in Taiwan found that in nine of those, prosecutors allege the technology ended up with or was intended for companies in China.

China’s technology ministry has in public statements said Taiwan and China should cooperate in high-tech sectors including semiconductors. It didn’t reply to requests for comment on the Taiwanese cases.

One case involved a Taiwanese unit of Idaho-based Micron Technology Inc., America’s largest memory-chip manufacturer. On a spring day in 2016, a 41-year-old engineer for the unit opened his company laptop and, according to Taiwanese prosecutors, tapped into Google search: “clear computer use records.”

Wang Yongming found a file-erasing program called CCleaner, which he used to try to delete traces of more than 900 files from his laptop before returning it to his employer, the prosecutors say.

Ten months after Mr. Wang returned the laptop to the company and left for a job with a smaller Taiwanese rival, United Microelectronics Corp. , Taiwanese authorities say they unearthed evidence of the documents, which detailed production-design secrets of Micron’s memory chips.

In August, Mr. Wang and others were indicted in Taiwan on charges of stealing Micron’s trade secrets for illegal use in China. Prosecutors allege Mr. Wang transferred the data to his new employer, which used the designs in service of a Chinese chip maker called Fujian Jinhua Integrated Circuit Co. Jinhua is now planning to mass produce its own version of the chips.

In Mr. Wang’s case, prosecutors say he has confessed to some charges. Mr. Wang couldn’t be reached, and his attorneys declined to comment. UMC declined to comment. Micron, in a separate lawsuit in California, alleges Jinhua masterminded the plan to take a shortcut through a thicket of knowledge Micron accumulated during decades of investment.

. . .

Around the time Mr. Wang left Micron Taiwan, in April 2016, the company conducted an internal investigation based on suspicions that he had made illegal copies of documents. When investigators raided UMC in February 2017, say Taiwanese prosecutors and Micron, Mr. Wang handed his personal cellphone to an assistant and instructed her to take it away—unaware that prosecutors had already obtained a court order to track the device, which investigators allege also contained incriminating information.

UMC, which Mr. Wang joined in April 2016 a few days after trying to erase files from his laptop, had in January 2016 struck a deal with Jinhua to supply the designs to mass-produce DRAM in exchange for more than $700 million in fees, equipment and a cut of future licensing revenues. Before then, UMC was mostly a foundry that made other companies’ designs. Micron alleges in its civil lawsuit that Jinhua knew that the technology to be delivered under the deal would be based on Micron’s designs.

. . .

“The Micron trade secrets that Wang stole proved invaluable to UMC’s development effort and critical to the timeline of the Jinhua DRAM project,” Micron said in its filing.

The speed of UMC’s design development helped Jinhua in October 2016 to start marketing its first two DRAM products, which it called F32 and F32S—names that Micron says were identical to the ones used for chips it produced at its Taiwan facility.

For the full story, see:

Chuin-Wei Yap. “China Targets Taiwan’s Tech Secrets.” The Wall Street Journal (Monday, July 2, 2018): A1 & A8.

(Note: ellipses added.)

(Note: the online version of the story has the date July 1, 2018, and has the title “Taiwan’s Technology Secrets Come Under Assault From China.”)

To Compete with Electric Engines, Aramco Incrementally Improving Fuel Efficiency of Combustion Engines

(p. B1) NOVI, Mich.—The world’s largest oil company has 30 engineers working away in this Detroit suburb on a project that sounds counterintuitive: an engine that burns less oil.

But there is a common-sense explanation for why the Saudi Arabian Oil Co., known as Saudi Aramco, wants a more efficient internal combustion engine. It is trying to protect its market share by slowing a potential exodus to electric vehicles.

David Cleary, head of Saudi Aramco’s Detroit Research Center, said the company’s goal with its research is to preserve the market for fuel. To that end, he said, any breakthroughs in better-engine designs would be widely shared.

“We are trying to get technology into production, and we want to be very fast,” Mr. Cleary said.

While electric-vehicle adoption remains small globally, and is expected to rise gradually, the prospect of a large-scale shift is setting up a showdown between oil companies and utilities over who will power tomorrow’s cars.

For the full story, see:

Russell Gold. “Big Oil Reinvents Engines to Survive.” The Wall Street Journal (Monday, July 16, 2018): B1-B2.

(Note: the online version of the story has the date July 15, 2018, and has the title “Oil, Utilities Fight to Fuel Vehicles of the Future.”)

Productivity Rises at Fastest Rate in Almost 10 Years

(p. A2) WASHINGTON—U.S. workers’ efficiency improved during the past year at the best pace in nearly a decade, laying groundwork for stronger wage growth and continued economic expansion.

The productivity of nonfarm workers, measured as the output of goods and services for each hour on the job, increased at a 3.6% seasonally adjusted annual rate in the first quarter from the prior three months, the Labor Department said Thursday [May 2, 2019]. From a year earlier, productivity rose 2.4%. That was the best gain year-over-year since the third quarter of 2010, when the economy was just emerging from a deep recession.

Productivity tends to be strong in the early days of an economic cycle. Accelerating improvement nearly 10 years after the recession ended raises hopes that a combination of more efficient workers and Americans rejoining the labor force could provide necessary fuel to extend one of the longest expansions in the post-World War II era.

For the full story, see:

Eric Morath. “Productivity Rises at Fastest Pace in Years.” The Wall Street Journal (Friday, May 3, 2019): A2.

(Note: bracketed date added.)

(Note: the online version of the story has the date May 2, 2019, and has the title “U.S. Worker Productivity Advances at Best Rate Since 2010.”)

Robots Allow Walmart to Better Use “Workers for New Tasks”

(p. B4) Walmart plans to use autonomous robots in more stores by next year to scan shelf inventory to be able to detect products that are out of stock and direct workers and shoppers to precise product locations, Mark Ibbotson, head of central operations for Walmart U.S., said in an interview.

Walmart is also adding automatic conveyor belts to backrooms that sort products to speed the process of unloading the roughly nine trucks that arrive at a typical store each week, executives said at a presentation in June. The conveyor belts cut the number of workers needed to unload trucks by half, from around eight to four, they said.

The changes give Walmart more labor dollars to spend on “pickers,” workers who roam the store to compile online orders that are picked up by customers in store parking lots, said Mr. Ibbotson.

“It’s a savings” that allows Walmart to keep labor costs steady, through attrition and better using workers for new tasks, he said.

For the full story, see:

Sarah Nassauer. “Retailers Bring on Robots.” The Wall Street Journal (Monday, July 2, 2018): B4.

(Note: the online version of the story has the date July 1, 2018, and has the title “Target, Walmart Automate More Store Tasks.”)

F.A.A. Regulations Slow Drone Innovation

(p. B2) Chinese aviation administrators, . . . , have already approved drone deliveries by the e-commerce giant JD.com and delivery giant SF Holding Co. But in the United States, it will depend on whether regulators eventually allow drone companies to have autonomous systems in which multiple aircraft are overseen by one pilot and whether they can fly beyond the vision of that pilot. Current regulations do not permit multiple drones per operator without a waiver. Operators like Wing, the drone-delivery company owned by Google parent Alphabet, have that capability.

. . .

Wing is . . .  one of several companies participating in a pilot program in Virginia. As with its testing in Finland and Australia, Wing will focus on the delivery of consumer goods, including food.

The Virginia site, in Blacksburg, near Virginia Tech, is one of 10 chosen by the Federal Aviation Administration as part of its Unmanned Aircraft Systems Integration Pilot Program.

The 10 were culled from 149 applications from “state, local and tribal governments,” agency spokesman Les Dorr said in an email. Those in the industry didn’t apply directly, but could show their interest, he said, and more than 2,800 companies responded.

. . .

While the F.A.A. has chosen the 10 pilots, the programs still need to apply for agency waivers because they will fly beyond the visual line of sight, fly at night and fly over people, fundamentals not allowed under current law. The agency is seeking comments on expanding permissible uses under current law; it is also testing to evaluate the parameters of regulation.

As a practical matter, this means that some of the pilot programs are not yet operational as they await F.A.A. approval.

That’s O.K., said James Pearce, a spokesman for the North Carolina Department of Transportation, which prefers to ensure that the drones can safely fly and that those on the ground are not exposed to any risks, including those that are self-inflicted. “We need to make sure that people know not to try to grab the drones.”

. . .

While the deliberate pace may seem slow, Mr. Levitt, like others interviewed, remains sanguine. “It’s like the red flag laws when cars began to populate the roads. You had to have someone walking ahead with a flag to warn others. That’s where we are today with drones — not being able to fly beyond the visual line of sight is like not allowing a car to drive faster than a person can walk.”

For the full story, see:

Ellen Rosen.  “No Drones at Your Doorstep, but Don’t Rule Them Out Yet.”  The New York Times (Monday, ):  B2.

(Note:  ellipses added.)

(Note:  the online version of the story has the date March 19, 2019, and has the title “Skies Aren’t Clogged With Drones Yet, but Don’t Rule Them Out.”)

Boeing Tech Kludge Designed to Avoid Cost of Re-Certification Regulations

(p. A18)  . . . , Boeing engineers created the automated anti-stall system, called MCAS, that pushed the jet’s nose down if it was lifting too high. The software was intended to operate in the background so that the Max flew just like its predecessor. Boeing didn’t mention the system in its training materials for the Max.

Boeing also designed the system to rely on a single sensor — a rarity in aviation, where redundancy is common. Several former Boeing engineers who were not directly involved in the system’s design said their colleagues most likely opted for such an approach since relying on two sensors could still create issues. If one of two sensors malfunctioned, the system could struggle to know which was right.

Airbus addressed this potential problem on some of its planes by installing three or more such sensors. Former Max engineers, including one who worked on the sensors, said adding a third sensor to the Max was a nonstarter. Previous 737s, they said, had used two and managers wanted to limit changes.

“They wanted to A, save money and B, to minimize the certification and flight-test costs,” said Mike Renzelmann, an engineer who worked on the Max’s flight controls. “Any changes are going to require recertification.” Mr. Renzelmann was not involved in discussions about the sensors.

For the full story, see:

Jack Nicas and Julie Creswell.  “Boeing’s 737 Max: ’60s Design Meets ’90s Computing Power.”  The New York Times (Tuesday,  2019):  A1 & A18.

(Note:  ellipsis added.)

(Note:  the online version of the story has the date , and has the title “Boeing’s 737 Max: 1960s Design, 1990s Computing Power and Paper Manuals.”)

Turing Award Winners’ Neural Networks “Are Still a Very Long Way from True Intelligence”

(p. B3) On Wednesday [March 27, 2019], the Association for Computing Machinery, the world’s largest society of computing professionals, announced that Drs. Hinton, LeCun and Bengio had won this year’s Turing Award for their work on neural networks. The Turing Award, which was introduced in 1966, is often called the Nobel Prize of computing, and it includes a $1 million prize, which the three scientists will share.

. . .

Though these systems have undeniably accelerated the progress of artificial intelligence, they are still a very long way from true intelligence. But Drs. Hinton, LeCun and Bengio believe that new ideas will come.

“We need fundamental additions to this toolbox we have created to reach machines that operate at the level of true human understanding,” Dr. Bengio said.

For the full story, see:

Cade Metz.  “Pioneers Whose Neural Networks Are Bringing A.I. to Life Win Turing.”  The New York Times (Thursday, , 2019):  B3.

(Note:  ellipsis, and bracketed date, added.)

(Note:  the online version of the story has the date , 2019, and has the title “Turing Award Won by 3 Pioneers in Artificial Intelligence.”)

“Ridiculous” to Project “Our Psychology into the Machines”

(p. A8)  . . .  the soft-spoken, 55-year-old Canadian computer scientist, a recipient of this year’s A.M. Turing Award — considered the Nobel Prize for computing — prefers to see the world though the idealism of “Star Trek” rather than the apocalyptic vision of “The Terminator.”

“In ‘Star Trek,’ there is a world in which humans are governed through democracy, everyone gets good health care, education and food, and there are no wars except against some aliens,” said Dr. Bengio, whose research has helped pave the way for speech- and facial-recognition technology, computer vision and self-driving cars, among other things. “I am also trying to marry science with how it can improve society.”

. . .

Cherri M. Pancake, the president of the Association for Computing Machinery, which offers the $1 million award, credited Dr. Bengio and two other luminaries who shared the prize, Geoffrey Hinton and Yann LeCun, with laying the foundation for technologies used by billions of people. “Anyone who has a smartphone in their pocket” has felt their impact, she said, noting that their work also provided “powerful new tools” in the fields of medicine, astronomy and material sciences.

Despite all the accolades, Dr. Bengio recoils at scientists being turned into celebrities. While Dr. Hinton works for Google and Dr. LeCun is the chief A.I. scientist at Facebook, Dr. Bengio has studiously avoided Silicon Valley in favor of a more scholarly life in Montreal, where he also co-founded Element A.I., a software company.

“I’m not a fan of a personalization of science and making some scientists stars,” said Dr. Bengio, a self-described introvert, who colleagues say is happiest when hunched over an algorithm. “I was maybe lucky to be at the right time and thinking the right things.”

Myriam Côté, a computer scientist who has worked with Dr. Bengio for more than a decade, described him as an iconoclast and freethinker who would feel stymied by the strictures of Silicon Valley. A communitarian at heart, she said, he shuns hierarchy and is known for sharing the profits from his own projects with younger, less established colleagues.

“He wants to create in freedom,” she said. Citing the credo of student rebels in 1968 in Paris, where Dr. Bengio was born, she said his philosophy was: “It is forbidden to forbid.”

That, in turn, has informed his approach to A.I.

Even as Stephen Hawking, the celebrated Cambridge physicist, warned that A.I. could be “the worst event in the history of our civilization,” and the billionaire entrepreneur Elon Musk has cautioned it could create an “immortal dictator,” Dr. Bengio has remained more upbeat.

. . .

. . .  he dismissed the “Terminator scenario” in which a machine, endowed with human emotions, turns on its creator. Machines, he stressed, do not have egos and human sentiments, and are not slaves who want to be freed. “We imagine our creations turning against us because we are projecting our psychology into the machines,” he said, calling it “ridiculous.”

For the full story, see:

Dan Bilefsky.  “THE SATURDAY PROFILE; Teaching a Generation of Machines, Far From the Spotlights of Silicon Valley.”  The New York Times (Saturday, March 30, 2019):  A8.

(Note:  ellipses added.)

(Note:  the online version of the story has the date March 29, 2019, and has the title “THE SATURDAY PROFILE;  He Helped Create A.I. Now, He Worries About ‘Killer Robots’.”)

Innovative Entrepreneurs Bring Prosperity to the Poor

(p. A17) As the economist Joseph Schumpeter observed: “The capitalist process, not by coincidence but by virtue of its mechanism, progressively raises the standard of life of the masses.”

For Schumpeter, entrepreneurs and the companies they found are the engines of wealth creation. This is what distinguishes capitalism from all previous forms of economic society and turned Marxism on its head, the parasitic capitalist becoming the innovative and beneficent entrepreneur. Since the 2008 crash, Schumpeter’s lessons have been overshadowed by Keynesian macroeconomics, in which the entrepreneurial function is reduced to a ghostly presence. As Schumpeter commented on John Maynard Keynes’s “General Theory” (1936), change–the outstanding feature of capitalism–was, in Keynes’s analysis, “assumed away.”

Progressive, ameliorative change is what poor people in poor countries need most of all. In “The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty,” Harvard Business School’s Clayton Christensen and co-authors Efosa Ojomo and Karen Dillon return the entrepreneur and innovation to the center stage of economic development and prosperity. The authors overturn the current foreign-aid development paradigm of externally imposed, predominantly government funded capital- and institution-building programs and replace it with a model of entrepreneur-led innovation. “It may sound counterintuitive,” the authors write, but “enduring prosperity for many countries will not come from fixing poverty. It will come from investing in innovations that create new markets within these countries.” This is the paradox of the book’s title.

Continue reading “Innovative Entrepreneurs Bring Prosperity to the Poor”