Steve LeVine
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Future of Work

Welcome back. Please invite your friends and colleagues to join the conversation. Tell me anything on your mind, including what you think about what you are reading here and in the daily stream. Just reply to this email, or reach me at steve@axios.com.

Let's start with ...

1 big thing: rock-bottom pay

Animation: Lazaro Gamio / Axios

For many years, the economic rules were supported by both common sense and the data: When unemployment falls, wages rise soon after. But since the turn of the century and before, that relationship has broken down across the developed world, according to data from the OECD.

Stagnant wages aren't just an American problem: Workers in the wealthier nations are facing similar headwinds, like declining union membership, increased competition from foreign workers in a global marketplace, and slow productivity growth. But no one knows precisely why economics are failing to observe the traditional supply-and-demand rules.

The question is not academic: Frustrated by stagnant income, fears for their children's future, and the deterioration of their towns and cities, ordinary people in the U.S. and across Europe are taking it out on migrants and mainstream politicians, shaking up the western-led political system.

Look here for the complete interactive by my colleague Lazaro Gamio.

2. Coming home

Illustration: Sam Jayne / Axios

It's no secret that many Midwestern cities have lost population as jobs have evaporated in recent decades. But while traveling through four cities last week, my colleague Kim Hart heard a surprising number of people talking about the opposite: the younger generation coming back home.

Why it matters: Over the last three or so decades, many young graduates left their home towns for larger cities like San Francisco, New York and Chicago, creating a brain drain at home. But fast forward seven or eight years, and they get married, look at buying a house, think about starting a family — and want the lifestyle they grew up with.

Here are some of the people Kim spoke with:

  • Jesse Vollmar grew up on a farm in rural Michigan. His farm management software startup, FarmLogs, raised funding through the Y Combinator program in San Francisco, so he moved there. But all his customers were Midwestern farmers. "Every time we wanted to get in front of a customer, we had to get on a plane," he said. So he moved his company to Ann Arbor in Michigan. As a result, "we've gained more trust with customers. ... We're not seen as some technology company from Silicon Valley telling them how to run their business."
  • Michigan native Nathan Labenz graduated from Harvard, then moved to New York and on to San Francisco to start his company Waymark, which creates automated video ads. He was surprised when he read about Twitter opening an office in Detroit, and decided to make the move back. He lost a few investors in the process — " few people thought it was weird," he said. But he doesn't regret the decision. "It was the right move."
  • Haley Altman moved from Indianapolis to San Francisco to work at the law firm Wilson Sonsini. She moved back a few years ago and left an equity partner position at the firm to start her company Doxly, a legal transaction management platform. "This is where my family is, and it's where I want to raise my family," she said.

3. Bonus video: Axios' Hart talks about tech in the Midwest

Axios' Kim Hart and Eli Sinkus. Screenshot from Axios Sourced Video

Watch Kim speak with the Axios video team about her trip across the Midwest with Steve Case. Case, CEO of Revolution, the VC firm, has taken several "Rise of the Rest" tours over the past three years to highlight innovation in cities that are typically overlooked by venture capital investors. Revolution itself focuses on companies in non-traditional tech hubs between the coasts.

4. Life in the warehouse

Boxed headquarters, Union City, NJ. Photo: Christopher Matthews / Axios

At Boxed headquarters in Union City, NJ, you'll find lighthearted employees working right alongside an automated picking machine that retrieves items without human help, and two miles of conveyor belts that move items faster than people can possibly do so. The online retailer, a competitor of Costco and Sam's Club, has attracted years of fawning publicity for carrying out all this automation at its warehouses without laying off a single employee, and even raising salaries.

The cruel twist: Boxed is shrinking the number of added workers required for expansion — one executive told my colleague Chris Matthews that to triple business at the warehouse, he'll only need to hire 33% more labor. That aligns with an axiom of automation — that jobs offering the best chance of rising pay are usually in industries that are growing and at the same time adding labor-saving technologies, before the number of jobs eventually declines.

  • To meet demand, Boxed CEO Chieh Huang says he must add both technology and workers. And Boxed may end up being an outlier to the larger trends — after all, Amazon, too, is reporting big hiring plans even while automating aggressively.
  • But the bigger picture is a process that is disruptive to workers' lives. "We find that industry-level employment robustly falls as industry productivity rises, implying that technically progressive sectors tend to shrink," writes MIT's David Autor, who examined 19 countries over 35 years, and showed that automation doesn't kill overall employment, but reduces jobs within automating sectors.

Read the rest of Chris' post here.

5. Worthy of your time

Facebook's Sheryl Sandberg with Axios' Mike Allen. Screenshot from Axios

"Men are bad at running the world" (Axios)

The right questions — and some explanation — about AI (Google's Yonatan Zunger)

Dollar General and its bet on the underclass (Bloomberg's Mya Frazier)

The new rad lab (The Atlantic's Derek Thompson)

An interview with Douglas Hofstadter (Quartz's Nikhil Sonnad and Dave Gershgorn)

6. 1 singular thing

Data: Crunchbase; Axios reporting; Chart: Chris Canipe / Axios

In a Sept. 20 speech in New York, Masayoshi Son, founder of the Tokyo company SoftBank, forecast that by 2047, the Earth will be populated by an equivalent number of humans and robots — 10 billion each. And the robots, he said, will be "smarter than mankind." Over the last year, Son has been investing in that moment, which the tech community calls the "singularity."

Son's objective: When it comes to artificial intelligence, Son appears to intend to be every bit as big or bigger commercially than the U.S. and Chinese tech titans otherwise believed to be dominating AI research — Alibaba, Facebook, Google, Microsoft, Tencent, and so on. Toward that aim, Son's $93 billion Vision Fund has put down large investments in at least a dozen promising AI startups (chart above).

Looking for outright acquisitions: Son also has been vacuuming up companies. In June, he acquired two serious robotics companies — Boston Dynamics and Schaft — for undisclosed sums. "What is my belief and vision for this investment? I have only one belief — [the] singularity," he said in New York.

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Jobs are plentiful for rock-bottom pay across the West

For many years, the economic rules were supported by both common sense and the data: when unemployment falls, wages rise soon after. But since the turn of the century and before, that relationship has broken down across the developed world, according to data from the OECD (scroll over the chart below for detail).

Data: Unemployment and annual wage data from the OECD; Chart: Lazaro Gamio / Axios

Stagnant wages aren't just an American problem: Workers in the wealthier nations are facing similar headwinds, like declining union membership, increased competition from foreign workers in a global marketplace, and slow productivity growth. But no one knows precisely why economics are failing to observe the traditional supply-and-demand rules.

The question is not academic: Frustrated by stagnant income, fears for their children's future, and the deterioration of their towns and cities, ordinary people in the U.S. and across Europe are taking it out on migrants and their traditional politicians, shaking up the western-led political system.

Featured

SoftBank wants to become a major AI player

In a Sept. 20 speech in New York, Masayoshi Son, founder of the Tokyo company SoftBank, forecast that by 2047, the Earth will be populated by equivalent number of humans and robots — 10 billion each. And the robots, he said, will be "smarter than mankind." Over the last year, Son has been investing in that moment.

Data: Crunchbase; Axios reporting; Chart: Chris Canipe / Axios

Why it matters: Son appears intent on becoming as big in artificial intelligence as the U.S. and Chinese tech titans that have dominated AI research — Alibaba, Facebook, Google, Microsoft, Tencent and so on. Toward that aim, over the last year, Son's $93 billion Vision Fund has put down large investments in at least a dozen promising AI startups.

Son has also been on the looking for outright acquisitions. In June, he acquired two serious robotics companies — Boston Dynamics and Schaft — for undisclosed sums. The goal is to get ready for what's called “the singularity" — the time when robots and people reach equal numbers.

"What is my belief and vision for this investment? I have only one belief — [the] singularity," he said in New York.

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How history readied Putin to disrupt the U.S. election

Illustration: Lazaro Gamio / Axios

U.S. investigators are probing whether Russia relied on clandestine American help to identify political soft spots and pressure points in its campaign to disrupt the 2016 election. But experts say that, even without local assistance, Russia's own history of exploiting animosities and jealousies across its empire gave it unusual know-how to stir up existing American tensions.
Be smart: Russia's divide-and-rule advantages do not mean it had no local help. But they may better explain how, given the raw data and tools, it managed to so skillfully execute its efforts on social media and elsewhere.

Russia targeted America's soft underbelly: Congressional and FBI investigations are not over, but data collected and collated by Columbia University's Jonathan Albright give us the shape and some of the granularity of a Russian social media campaign apparently designed to inflame some of America's greatest national sensitivities.

Facebook pages that turned into hundreds of millions of interactions combined the subjects of nationalism, Trump, illegal immigration, and law.

In the week of Aug. 8-15, 2015, a page called "Being Patriotic" used the words:

  • “Illegal" 584 times, "alien" 200 times, and the combined phrase "illegal alien" 156 times.
  • “Border" 214 times; "Trump" 247 times; and "law" 231 times.
  • “Criminal alien" (19 times); "sharia law" (21 times); "country illegally" (19 times); and "alien leech" (five times).

The intrigue: One thread of the U.S. election investigation is whether someone connected to the Trump campaign, or any other American, helped the Russians. The reason: although Americans generally were aware of the strong nationalist emotions in their midst, few thought they could or would turn the election.

Except, that is, for the Trump campaign, which carried out an unprecedented micro-targeting program that sought simultaneously to stoke anger, fear and other emotions, and to get Hillary Clinton voters to stay home on election day.

Russia, however, is pre-disposed to such awareness: Going back to the Czarist era, ethnicity, race and religion — whether Ukrainian, Jewish, Chechen, and so on — played a prime role in Russian politics.

  • In the Soviet period, and the rule of Josef Stalin, Moscow particularly turned divide-and-rule into a central policy.
  • Stalin stoked ethnic tensions by establishing pockets of certain national groupings right in the middle of antagonistic republics. That helped to keep Armenians and Azeris preoccupied with their mutual hatred.
  • The same strategy applied to Georgians and Abkhazians; Uzbeks and Kyrgyz; and so on.

This Russian policy endures through today under President Vladimir Putin, a former KGB officer.

So did Russia have help? I canvassed experts on Russia. Some didn't rule out American help, but there was no dismissing that Russia was naturally prepared for this operation.

Charles King, a professor at Georgetown University and former chairman of its School of Foreign Service:

"Russians were very practiced in seeing the world through an 'ethnicist' lens — the whole Soviet system was built on top of a particular understanding of the role of ethnicity (which translates as 'race' in American) and ethnic cleavages in their own society. If what they were doing was basically exporting this to America, the irony is that it happened to accord pretty well with some core cleavages in this society."

Stephen Kotkin, professor at Princeton University and author of a thus-far two-volume biography of Stalin:

"'Swing states' and 'swing voters' are ubiquitous in open-source discussions. I do not think it takes sophistication, or even their domestic experience, to understand these basic issues of American political life."

Jonathan Elkind, former director for Russian, Ukrainian, and Eurasian Affairs on the U.S. National Security Council:

"No way to micro-target the messaging as they did without contractual or other help."

Richard Kauzlarich, a former U.S. ambassador, deputy assistant secretary of state, and National Intelligence Officer for Europe:

"My sense (speculation) is that there is a KGB playbook that applies generally to influence operations. I'm sure their own experiences in the near abroad are part of that. Still, I'm not sure they understand our political system well enough to do what they did in the presidential campaign without American 'consultants.'

The bottom line: Putin may have had help — answering that question is a priority of special counsel Robert Mueller's investigation for the Justice Department. But, instinctually himself and institutionally within the Russian system, Putin also knew what he was doing.

Featured

Future of Work

Welcome back. Please invite your friends and colleagues to join the conversation. Tell me anything on your mind, including what you think about what you are reading here and in the daily stream. Just reply to this email, or reach me at steve@axios.com.

Let's start with ...

1 big thing: The EU and tech scofflaws

Coke, beer and Apple in Barcelona. Photo: Marimba James / Creative Commons

The European Union, arguing that U.S. tech titans have unfair — and in some cases illegal — advantages over competitors, is cracking down in what it calls leveling the playing field and saving local businesses and the jobs connected to them, writes my colleague Alayna Treene.

What's happening: EU regulators have been far more aggressive in policing tech companies than their counterparts in the U.S., and their plans for heftier taxes and fines around antitrust and privacy regulations suggest that they have no intention of curbing their efforts.

Some of the biggest regulatory actions are underway in Europe, and they will reshape how U.S. tech companies do business abroad moving forward. They include:

  • New tax rules: Last month, EU regulators, saying that international tax laws are outdated, laid out new mandates to be proposed if there is no rewrite by next spring. Among recommendations are an "equalization" tax on digital revenue, and a "withholding" tax on digital transactions with companies outside the EU.
  • More open data: One sweeping new EU regulation, set to roll out in 2018, would require that EU citizens receive more information about what data tech collects and why. Companies will face fines of up to 4% of their global annual revenue for non-compliance and breaches.
  • Cookie regulation: A revised EU directive, set to be enacted in May 2018, will add greater regulation of cookies, tracking, and opt-out options.

The bottom line: "The political pressure for EU action comes from the perception that U.S. tech giants are not paying their fair share of tax in Europe," says Argi Sampedro, EU public affairs account executive at Cicero, a London and Brussels-based consulting firm. "They are also seen as companies with enormous power that take no responsibility" for illegal online content, fake news and data protection.

Read the rest of Alayna's post here.

2. Trump, taxes and jobs

Illustration: Rebecca Zisser / Axios

For generations, the Republican Party has pitched the cure of tax cuts for whatever ails the American economy, and 2017 is no different.

In an era of unprecedented disunity within the GOP, the only thing the White House and Congress can seem to agree on is taxes. As President Trump puts it, "Our country and our economy cannot take off like they should unless we dramatically reform America's outdated, complex, and extremely burdensome tax code."

Back to the supply side: Because tax cuts big enough to make a splash cost a lot of money, proponents like to argue that their reforms will cause so much economic activity as to make the cut costless, writes my colleague Chris Matthews. This goes back to supply-side economics and Arthur Laffer, whose famous "Laffer Curve" posits government revenue pours in after the tax-cut elixir. Without citing him, the administration is promoting this theory now.

But there's little evidence to support Laffer: Even the Tax Foundation, which has long advocated lower business taxes, says that when adjusting for economic growth, a Trump proposal for faster expensing of capital equipment would cost $1.5 trillion in revenue over ten years, while adding just 800,000 new jobs and raising wages by 3.6% in the long run.

The bottom line: George W. Bush was the last president to try the supply-side method, but his record makes it difficult for conservatives to argue that large new income tax cuts for the top bracket will do much for the broader economy. The evidence from the Reagan era in the 1980s offers a stronger case for slashing business taxes, but even so, the benefits of tax cuts are uncertain, while the costs are known, and significant.

Read the rest of Chris' post here.

3. Intel joins fight against money launderers

Illustration: Sam Jayne / Axios

Intel today released intelligent software that targets money laundering, often used by corrupt autocrats, narcotics traffickers, and sanctions-busters to legitimize their illicit cash.

Why it matters: The announcement comes amid a broad commercial struggle between Intel and chip rivals like Nvidia, with which it is in a death grip for the rich future of enabling artificial intelligence. Intel is putting markers on the board with this announcement, showing off its know-how in the serious and exotic space of tracking illicit cash, which is harder and harder to detect amid the sea of data coursing through the global financial system.

The scale is immense: In 2016, between $800 billion and $2 trillion in illicit cash, equivalent to 2%–5% of global GDP, was laundered in various ways, according to the United Nations. In just one series of transactions, western banks including Citi, Barclays and Deutsche Bank were conduits for $22 billion illicitly shipped out of Russia from 2011 to 2014, according to an investigation by the Organized Crime and Corruption Reporting Project and Russia's Novaya Gazeta.

How it's usually investigated: Gayle Sheppard, vice president of the Saffron AI Group, an artificial intelligence subsidiary that Intel acquired two years ago, tells Axios that standard software models attempt to attack these industrial-scale criminal operations by studying financial transactions. But ferreting through the data can take weeks or months, she said.

What AI can offer: Intel is using a form of AI known as "associative memory," which Sheppard said incorporates transactions and suggestive personality behaviors, meaning the people and organizations that carry out the money laundering.

Read the rest of the post here.

4. Exclusive: Getting to the We

CEO Adam Neumann (on right). Photo: WeWork

WeWork, the $20 billion office leasing startup, today announced a push into the think-tank space — via a partnership with Steve Jobs biographer Walter Isaacson and the tony Aspen Institute for a series of studies on the future of work and cities.

Like Uber and Airbnb, WeWork has attained an astronomical valuation while changing how cities around the world operate. With the move into public policy, co-founder Adam Neumann seeks to better understand — and, if he can, influence — what happens next in those cities.

Adding it up: Data is said to be the new oil, and artificial intelligence to have a future as big as electricity. But WeWork reflects today's reality in Silicon Valley, whose splashiest companies are selling something wholly different — the intangibles of emotional intelligence and mood music.

The culture starts here: Neumann and co-founder Miguel McKelvey have been the recipients of years of fawning media coverage. Most of these articles and videos point out their fondness for new-agey language (like this 2015 appearance in which, it was noted, Neumann said the word community "at least a dozen times"), and the 6-foot-5 Neumann's looks ("he resembles a rock star," one writer said flatly).

Enter emotional intelligence: Neumann clearly wants to add substance to WeWork's public persona — for lack of better phrase, to show that he is not just a pretty face. He is making no quiet thing out of his leap into public policy — the company is doing a big rollout of the partnership with Aspen.

The research: With the reams of data collected and collated on its work spaces every day, WeWork has the unusual makings of a comprehensive understanding of how work is really done today in 18 countries and counting. The relationship with Aspen intends to help cities understand the economic impact of innovation clusters, with research into these concentrations of startups and surveys of WeWork's far-flung membership (Isaacson is leaving Aspen at the end of the year for a professorship at Tulane University).

Read the rest of the post here.

5. Worthy of your time

The gender gap is alive and well (The Economist)

The fintech war (Axios)

Portable leaders need people skills (The FT's Andrew Hill)

Japanese work themselves to death (NYT's Makiko Inoue and Megan Specia)

Fixing the worker interest gap in manufacturing (Axios)

6. 1 smart thing: Sensing when we fall down

A senior living community in Silver Spring, Md. Photo: Jacquelyn Martin / AP

Artificial intelligence is coming to your sportswear: Sensoria Health Powered by Genesis uses sensors in socks and shoes to detect pressure points and balance, and track and help prevent life-threatening falls. The partnership combines products from the smart garments company Sensoria and expertise on senior citizens from Genesis Rehab Services, writes my colleague Shannon Vavra.

  • One important number: Every 11 seconds an older adult is treated in the emergency room for a fall.
  • "Smart garments": Sensoria plans to roll out the wearable tech at some 450 skilled nursing centers and senior living communities owned by Genesis, per GeekWire.
  • A growing market: AI could increasingly become an asset to the elderly caretaker industry since by 2060 the 65-and-older population's share of the country is on track to jump from 15% to 24%, per the Population Reference Bureau.

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Intel takes on money launderers

Illustration: Sam Jayne / Axios

Intel today released intelligent software that targets money-laundering — the methods that corrupt autocrats, narcotics traffickers, and sanctions-busters use to legitimize their illicit cash.

Why it matters: There's a broad commercial struggle going on between Intel and chip rivals like Nvidia, with which it is in a death grip for the rich future of enabling artificial intelligence. With the announcement, Intel is putting points on the board, showing off know-how in the serious and exotic space of tracking illicit cash, which is harder to detect amid the sea of data coursing through the global financial system.

In 2016, between $800 billion and $2 trillion in illicit cash, equivalent to 2%-5% of global GDP, was laundered in various ways, according to the United Nations. In just one series of transactions, western banks including Citi, Barclays and Deutsche Bank were conduits for $22 billion illicitly shipped out of Russia from 2011 to 2014, according to an investigation by the Organized Crime and Corruption Reporting Project and Russia's Novaya Gazeta.

How it's usually investigated: Gayle Sheppard, vice president of the Saffron AI Group, an artificial intelligence subsidiary that Intel acquired two years ago, tells Axios that standard software models attempt to attack these industrial-scale criminal operations by studying financial transactions. But ferreting through the data can take weeks or months, she said.

What AI can offer: Intel is using a form of AI known as "associative memory," which Sheppard said incorporates transactions and suggestive personality behaviors, meaning the people and organizations that carry out the money laundering.

How it works: The software rapidly looks for hidden patterns in reams of emails, texts and other bank and insurance data that can indicate criminal behavior. Then it flags any anomalous data for human investigators, who check whether in fact money laundering is going on. Sheppard said this process can be carried out "in real-time."

Bottom line: The market for such software is banks and insurance firms that worry of reputational damage and fines should they be caught allowing money laundering. In January, for instance, Deutsche Bank was fined $630 million by the United States in a $10 billion money laundering case involving Russia.

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WeWork founder says we've lost community

Selling the intangibles of emotional intelligence and mood music (WeWork).

WeWork, the $20 billion office leasing startup, announced a push into the think-tank space today — a partnership with Steve Jobs biographer Walter Isaacson and the tony Aspen Institute for a series of studies on the future of work and cities.

Like Uber and Airbnb, WeWork has attained an astronomical valuation while changing and defining how many people live and work in cities around the world. With the move into public policy, co-founder Adam Neumann seeks to better understand — and, if he can, influence — what happens next in those cities.

Adding it up: Data is said to be the new oil, and artificial intelligence to have a future as big as electricity. But WeWork reflects today's reality in American startups, whose splashiest members start with something wholly different — the intangibles of emotional intelligence and mood music.

Here's how it works: WeWork leases out multiple, sprawling floors in office buildings in the world's biggest cities in 18 countries and counting, and decks them out with working and relaxing spaces big and small. Those are then rented to individual workers, startups and established companies at rates averaging $650 a month per person. While definitely working spaces, they are more akin in feel and appearance to upscale boutique hotels, meticulously designed and managed (check out the images here). On giant screens at headquarters on West 18th Street in New York, executives and technicians monitor the empire, including what type of maintenance has been requested in each building, and whether it's been done; month-by-month going into next year, what deals and what office developments are coming next; and how precisely its spaces are used.

  • Given that WeWork offices currently host about 150,000 workers (whom it calls "members,"), that is substantial cash flow. In August, a $4.4 billion investment from Japan's SoftBank lifted WeWork's valuation to $20 billion, which elevated it into a tie for sixth place among the world's most-valuable startups.
  • There are copycats, but WeWork seems to set the pace, selling an incredibly energetic atmosphere and the convenience of someone else taking care of everything — you just walk in and start working, probably with a latte at your fingertips.
  • The model demonstrates yet again that people — investors, anyway — will pay handsomely for the equivalent of mood music along with a quality product.

The culture starts here: Neumann and co-founder Miguel McKelvey have been the recipients of years of fawning media coverage. Most of these articles and videos point out their fondness for new-agey language (like this 2015 appearance in which, it was noted, Neumann said the word community "at least a dozen times"), and the 6-foot-5 Neumann's looks ("he resembles a rock star," one writer said flatly).

And it's true that Neumann is well situated — a billionaire at 38, No. 12 on Fortune's list of 40 under 40; his portrait on the current cover of Forbes; married to a cousin of Gwyneth Paltrow.

Enter emotional intelligence: Neumann clearly wants to add substance to WeWork's public persona — for lack of better phrase, to show that he is not just a pretty face. He is making no quiet thing out of his leap into public policy — the company is doing a big rollout of the partnership with Aspen.

The research: With the reams of data collected and collated on its work spaces every day, WeWork has the unusual makings of a comprehensive understanding of how work is really done today around the world. The relationship with Aspen intends to help cities understand the economic impact of innovation clusters, with research into these concentrations of startups and surveys of WeWork's far-flung membership (Isaacson is leaving Aspen at the end of the year for a professorship at Tulane University).

On a ride with him to Battery Park (taken, how else, by Lyft), I asked why the high-profile leap. He points to his t-shirt, which says, "We are human." When he and McKelvey began the company seven years ago, he says, "it was always about the future of work, the future of 'we.'" It's high concept. "We were promised that through technology, we would all come together. But instead it feels that people are more disconnected than ever."

Lostness is what ails us: Neumann, with WeWork — and a slowly developing urban residential offering called WeLive — said he hopes to help re-establish some of the lost community (there is that word again). Going back centuries, the residents of urban areas were glued together in part through town halls, gatherings in taverns, cafes and open spaces to hash out the subjects of the day. "We would like to try to be that now," Neumann tells me.

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Elon Musk and the elusive "iPhone moment"

The slow production of the Tesla Model 3 is a reality check for Musk. Photo: Justin Pritchard / AP

A new analysis and some recent hiccups are putting a fresh spotlight on whether Tesla can transform its pioneering role in electric vehicles (EVs) into a dominant, sustained market position when EVs move into wider commercial deployment. The reality check moment: Barclays analysts warned Monday that Tesla's slow production of its mass-market Model 3 electric sedan could shake some investors' confidence that the Silicon Valley automaker is primed for an "iPhone moment" for its product.

The bottom line: The Model 3 production numbers are a sign of growing pains, and this isn't a crisis. But they do underscore the need for Tesla CEO Elon Musk to focus more on actually building cars at a mass scale, rather than his other interests, like the hyper loop and space travel. His credibility — and Tesla's future — rides on the Model 3.

Flashback: Tesla, citing "bottlenecks," acknowledged in early October that it produced less than 20% of the third quarter target of 1,500 of the vehicles.

Why it matters: Even though Tesla's said there are "no fundamental issues" with the Model 3 production, revelation of the badly missed target arrives as mainstream automakers like GM are ramping up their plans for expanded EV offerings, and new players are entering the market.

In their words: Three Barclays analysts say in their research note many investors have viewed the Model 3's summer launch as evidence that Tesla's "iPhone moment," wherein the world "appreciates the revolutionary potential of the product," will happen by mid-2018.

  • "And indeed, with no competition imminent, it's easy for some to believe how Tesla could have the market to itself... However, amid production delays, it could mean that the Model 3 ramp could be dragged into 2H'18 or even into 2019, when the competitive threat will likely become more imminent. And in the face of increased competition, the 'iPhone moment' appears less certain," they write.
  • Continued production delays could shake the confidence of some stockholders by reducing the credibility of the "Tesla story."

Big picture: Tesla's technology has long wowed tech and auto enthusiasts as Musk has positioned the company as a leader even though Tesla — which saw its market capitalization temporarily surpass GM's earlier this year — is not yet profitable.

But while Musk warned in advance of "production hell," the company's Model 3 ramp-up will be under the microscope after the Oct. 2 announcement of slow production. In addition, a widely circulated Wall Street Journal report Friday said that as recently as early September, "major portions of the Model 3 were still being banged out by hand, away from the automated production line."

And Tesla announced over the weekend that it's delaying the unveiling of its electric semi-truck prototype from the month until mid-November. "Diverting resources to fix Model 3 bottlenecks & increase battery production for Puerto Rico & other affected areas," Musk said on Twitter.

Pushing back: Tesla, in a statement to Axios and other outlets, called the WSJ report inaccurate and misleading, claiming that "every Model 3 is being built on the Model 3 production line," and that "every vehicle manufacturing line in the world has both manual and automated processes."

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Future of Work

Welcome back. Please invite your friends and colleagues to join the conversation. Tell me anything on your mind, including what you think about what you are reading here and in the daily stream. Just reply to this email, or reach me at steve@axios.com.

Let's start with how ...

1 big thing: Robots are coming for other people

Illustration: Rebecca Zisser / Axios

Nearly two-thirds of Americans expect humans to struggle to find work in a future of robots, all humans except themselves, that is — they are not worried about losing their own jobs to automation, according to a study released today by Pew Research.

The study confirms prior research that, despite the knowledge that a powerful new technological force is gathering momentum, most Americans remain unworried about their own well-being, leaving themselves potentially vulnerable to personal financial crisis. "For many people, this isn't real until it actually happens to them," Pew's Aaron Smith, who led the project, told my colleague Stef Kight.

  • What they have yet to recognize, Smith said, is that "it's not just something that's going to happen to fast food workers and insurance clerks," but to people just like themselves.

The bottom line: Numerous experts challenge such pessimism — the economy, they say, will produce new professions that we cannot currently imagine. But there is very little dispute that a lot of jobs will vanish, cutting across industries. The unknowns include how long it will take for these new jobs to materialize, and who will get them — will it include most of those whose jobs are eliminated?

Be smart: In a study last month, Bloomberg Beta, a venture capital firm, found that just 12% of Americans worry about their own job being wiped out. But should dislocation occur on the scale some forecasters project, experts fear social chaos. "Some people will be taken by surprise, and nothing leads to instability more than frustrated expectations," Bloomberg Beta's Roy Bahat told Axios.

2. The resistance against Big Tech

Illustration: Lazaro Gamio / Axios

Big Tech's main virtue — its very bigness — is getting it in trouble. Facebook, Google and Twitter are on the hot seat for their credulousness about Russian intelligence operations. And Amazon always seems on the verge of swallowing up another retail sector. Now, there are calls to break them up over their perceived domination of technologies of the future, chiefly artificial intelligence.

One example of the resistance: LiftIgniter, a San Francisco-based AI startup, says it has devised a predictive algorithm that allows smaller players to perform one of the main functions that make Big Tech so financially successful — to forecast in real time what a user wants to click on next, and then provide it. This "flywheel effect" is what keeps people returning to click on Google and Facebook, CEO Indraneel Mukherjee tells Axios. But if Big Tech's dominance in AI isn't curbed, he says, "the rest of the Internet will stop existing."

But isn't there now a new trap? Having loosened Big Tech's grip on Internet users, doesn't Mukherjee's company now go on to contribute to the country's echo chamber, in which people — aided by algorithms created by the same Big Tech — read and listen only to voices with which they already agree?

Mukherjee agreed that is a risk, but he said that an algorithm can also be programmed to provide regular, diverse content — half the suggested material being for the clicks, and the other half containing different "clusters of topics," he said. "Technology is powerful enough to do the right thing," he said. "It's being pushed to emphasize something not completely moral."

Read the rest of the post here.

3. Trump's trade deficit

Illustration: Lazaro Gamio / Axios

Trade was a defining issue for candidate Donald Trump in 2016, when he lambasted American NAFTA negotiators for "the worst trade deal maybe ever signed anywhere" and an unconscionable strike against U.S. manufacturing jobs. As president he upended the Trans-Pacific Partnership for similar reasons. His biggest data point, wielded like a cudgel: America's $500 billion annual trade deficit.

But the numbers are going against Trump so far: the U.S. trade deficit was $44 billion in August, for example, above the monthly average of $42 billion in 2016, Barack Obama's last full year in office, writes my colleague Chris Matthews. As you see in the chart above, the 2017 monthly average of $45.6 billion is far worse than any year of Obama's presidency apart from 2011, when the deficit was $45.7 billion.

Why it matters: Trump may come to regret using the trade deficit as an economic scorecard, because its overall size is driven by forces over which the U.S. exercises only limited influence, like foreign central bank actions or trade policies.

The tale of steel: The recent struggles of the American steel and aluminum industries exemplify the shortcomings of Trump's trade policy. In April, he announced an investigation into global steel, to learn whether foreign competition was damaging U.S. national security by limiting American steel and aluminum manufacturing capacity.

  • Imports erupted: The first thing that happened was a surge in U.S. steel imports, as buyers sought cheap steel before tariffs were enacted and U.S. trade partners retaliated.
  • Now exporters have the worst of both worlds: Trump's tough trade talk is causing uncertainty in exporting industries, and Republican opposition to protectionist policies. Meanwhile, his unwillingness to ruffle Chinese feathers amid the North Korean nuclear standoff means the enactment of no new, tough tariffs or other punitive measures.

Read the rest of Chris's post here.

4. Worthy of your time

Amazon's Bezos the destroyer (Photo: Ted S. Warren)

AI's one-trick pony (MIT Tech Review's James Somers)

Work like Elon (Axios)

'I'm going to work until I die.' Growing old in America (WP's Mary Jordan and Kevin Sullivan)

Formerly all-livestock, 4-H shifts to STEM (Axios)

What will Amazon destroy next? (WSJ video with NYU's Scott Galloway)

5. 1 fun thing: For Springsteen, a future of work on West 48th

Creative Commons

Adam Silverstein has seen about three dozen Bruce Springsteen concerts, and his father, Mark, around 150. Last night, they went again, this time to the Walter Kerr Theatre in New York, where Springsteen was debuting before next week's official start of his first appearance on Broadway.

When it's the Boss, there are no political parties: The man who has made a career of describing the pain, love and sorrow of the working class cut through the vitriol outside. "In a day where our politics are so polarizing, no one goes to a show and looks at the person next to them and wonders if they're a Democrat or a Republican or an independent," Silverstein told my colleague Haley Britzky by phone today.

Springsteen is a habit for a lot of people: Lynn Klein-Rosner was seeing him for the 75th time. She was with her wife, Nicole. Klein-Rosner gave this snapshot of the show: "He moved around from guitar to piano like he did on the Devils and Dust tour, but the intimacy of the place and his stories made it feel like we were a guest in his home."

  • She said, "Even if you aren't a huge fan of his music you would still enjoy hearing him talk about his childhood, his jokes about he never held an honest job yet that is all he sings about, and the way he so lovingly talks about his mother."

Featured

Americans just don't fear robots

Illustration: Rebecca Zisser / Axios

Nearly two-thirds of Americans expect humans to struggle finding work in a future of robots — all humans except themselves, that is. According to a study released today by Pew Research, they worry far less about losing their own jobs to automation.

Why it matters: The study confirms prior research that, despite the knowledge that a powerful new technological force is gathering momentum, Americans remain unperturbed about their own well-being, leaving themselves potentially vulnerable to personal financial crisis.

"For many people, this isn't real until it actually happens to them," Pew's Aaron Smith, who led the project, told Axios. What they have yet to recognize is that "it's not just something that's going to happen to fast food workers and insurance clerks," he said, but to people just like themselves.

What the studies say: The Pew report is a followup to a study it issued last year with similar findings. Likewise, a survey last month by Bloomberg Beta, a venture capital firm, found that just 12% of Americans worry about losing their job to automation. The surveys spring in large part from much-discussed 2013 research from Oxford University that said 47% of American jobs are at risk of automation by 2033.

The bottom line: Numerous experts challenge such pessimism, but regardless of what anyone thinks, there is very little dispute that a lot of people are going to lose their jobs. The only questions are whether they will find new work, and if so, how long it will take. Should dislocation occur on the scale some forecasters project, experts fear social chaos. "Some people will be taken by surprise, and nothing leads to instability more than frustrated expectations," Bloomberg Beta's Roy Bahat told Axios.

According to Pew, here are the percentage of Americans who think robots will replace ...

  • Fast food workers - 77%
  • Insurance claims processors - 65%
  • Software engineers - 53%
  • Legal clerks - 50%
  • Teachers - 36%
  • Their own jobs - 30%
  • Nurses - 20%
Other takeaways from the latest Pew study:
  • Paying attention: About 94% had heard of efforts to develop driverless vehicles, and 85% know that machines could take many jobs one day.
  • Partisan solutions: Democrats were far more likely to support universal income (77% to 38% Republicans) and a national service program (66% to 46%) if machines take over a substantial number of jobs. Regardless of party affiliation, the majority of respondents (85%) favored using robots for dirty or dangerous jobs, and comparable numbers of Republicans and Democrats (60% to 54%) support limiting the number of jobs that can be replaced with machines.
  • Common people vs. driverless experts: 30% said they believe driverless cars will lead to more, not fewer, deaths in accidents, a repudiation of reports that autonomous vehicles will save millions of lives. And a whopping 87% want a human in the driver's seat in case of an emergency.
  • Faith in humanity: in terms of artificial intelligence trained to hire employees, 57% felt better about an algorithm that still involved a human interview. Indeed, Smith said, whether it's "decision making, or creativity, or compassion in the case of robot caregivers, or the ability to assess other human beings in the case of hiring algorithms ..., the value people place on human brains at the expense of machines clearly was one of the overwhelming themes that came through all of this."