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1 big thing: America's wage crisis
Stuck wages for most U.S. workers looks like more than a blip in the booming economy, and some mainstream economists say the government may have to step in.
What's going on: Wages fell over the last year for ordinary, non-management workers, according to the Bureau of Labor Statistics, further evidence that companies are managing to avoid paying amid one of the tightest labor markets in decades.
By the numbers:
- From June 2017 to June 2018, wages fell by 0.2%.
- It was the second consecutive month — in May, average hourly wages fell by 0.1%, the BLS said.
- In both months, workers earned more, but that is because they worked more hours, the BLS said.
Between the lines: When accounting for estimated 2.9% inflation over the last year, the wage numbers become even worse, says Joe Brusuelas, chief economist at RSM, an auditing firm.
The big picture: The conundrum of stuck wages has vexed economists for more than a decade, but their underlying assumption had been that as joblessness drops — it's at 4% now — companies will be forced to push up wages to attract and retain workers. Now that that hasn't happened, the feeling is beginning to creep in that this is the new normal.
- One reality is that central banks like the Federal Reserve treat wage increases not as a public good, but a source of inflation, and thus something to resist.
- But a number of economists are starting to blame large companies, for example in e-commerce, warehousing and shipping.
- Such companies, they say, are responsible for a large proportion of new hiring, and thus enjoy inordinate market power to hold down wages.
"It's becoming fairly clear the U.S. economy has a monopsony problem," Brusuelas tells Axios.
- "It suggests that the Congress at one point will have to look at using its anti-trust powers against large firms."
2. The Big Tech drugs gambit ...
The multi-hundred-billion-dollar retail prescription drugs market is the new battleground for Big Tech, relying on its usual brute force in an effort to keep growing.
- But in neither the U.S. nor China is it proving as easy to crack as groceries, writes Axios' Erica Pandey.
What's going on: In the U.S. and China, retail drugs are too big to ignore — last year, Americans spent $466.6 billion on pharmaceuticals, and the Chinese forked out $122.6 billion in a market growing at about 9% a year.
In the U.S.:
- In June, Amazon cratered the share prices of retail chains like Rite Aid and CVS when it paid $1 billion for PillPack, an on-line pharmacy licensed in all 50 U.S. states.
- The acquisition gave Amazon an immediate perch in the much larger health care value chain ecosystem, says Steve Kraus, head of health care investing at Bessemer Venture Partners.
- But but but ... unlike the grocery coup Amazon achieved a year ago by buying Whole Foods, retail pharmaceuticals are fragmented and will be more difficult to dominate, writes Alex Moazed at Inc.
- Alibaba's health care arm, AliHealth, is limited to selling over-the-counter pharmaceuticals because of government ban decreed last year on online sale of prescription drugs.
- But, but, but: There are questions about how serious the government is about the ban, and Cairns thinks retail online prescription drugs will ultimately be permitted.
- Both Alibaba and rival Tencent are already casting a wide net in the broader health care sector. Look for more. "Chinese companies do not face the same level of regulatory or infrastructural roadblocks as Amazon in the United States," says Nikhil Krishnan, a senior intelligence analyst with CB Insights.
Go deeper: Read Erica's whole post.
3. ... and a struggle over AI in China
American tech companies and research institutions — involved in the development of artificial intelligence in both the U.S. and China — face elevated ethical questions as the two superpowers race for dominance in the field.
What's going on: China’s prestigious Tsinghua University recently laid out "civil-military-fusion," a vision for developing AI for military applications, flagging a close relationship between academia, private companies, and the armed forces, Axios' Kaveh Waddell writes.
For U.S. researchers working in China, the speech, by You Zheng, a Tsinghua VP, raises questions about whether their projects could end up bolstering Beijing's goal of dominating global civilian and military AI.
- Seven months ago, Google launched an AI research center in Beijing, and the company's chief of AI, Jeff Dean, recently joined Tsinghua's computer-science advisory committee.
- And MIT is collaborating with China's iFlyTek, a private company with ties to China's surveillance state.
Such partnerships are numerous enough that the U.S. government has considered restricting them, Reuters reported in April.
Google did not respond to requests for comment. But if U.S. labs pull back from China, something might have to give, Elsa Kania of the Center for a New American Security tells Axios.
- Said Lorand Laskai, a research associate at the Council on Foreign Relations, "If there’s enough blowback, I suspect we’ll see Chinese entities carefully consider whether they want to associate with initiatives like civil–military fusion."
Go deeper: Read Kaveh's whole post
4. Worthy of your time
The Russian intel agents behind Guccifer 2.0 (Joe Uchill - Axios)
The future of Chinese basketball (Wayne Ma - WSJ)
A neutrino from the ages is detected (Alison Snyder, Andrew Freedman - Axios)
Amid a shrinking population, rented relatives (Elif Batuman - New Yorker) (h/t Auren Hoffman)
The business of quantum computing (Massimo Russo, Anant Thaker,
Suhare Adam - BCG) (h/t Azeem Azhar)
5. 1 blast from the past: AI and small bucks
AI's brightest minds today earn six- and seven-figure salaries, but the field didn't always command the big bucks.
Kaveh writes: "I was reminded of this last week on stumbling over reactions to a famous 18-year-old Wired essay by computer pioneer Bill Joy, then chief scientist at Sun Microsystems."
- The 2000 piece, called "Why the future doesn't need us," argued that new forms of technology were potentially dangerous and could render humans obsolete.
- But Joy got some pushback. One impassioned reaction was from Richard Wallace, a chatbot expert who created ALICE, the inspiration for Spike Jonze's Her, and who now works at Pandorabots.
"I found it slightly disingenuous for Joy to announce that robotics is the next big threat to mankind, when most people working in robotics and AI are barely scratching out a living. We would all like to found successful companies like Sun and become wealthy philosophers. But the last thing we need right now is more government regulations or the kind of negative publicity that gives pause to our investors. Our small startups are hardly as threatening as nuclear proliferation."
- Kaveh emailed Andrew Moore, dean of computer science at Carnegie Mellon University and a former VP of engineering at Google, for some perspective on the piece and the reaction.
- Moore responded that AI researchers are well-compensated, but that pay disparity is a real problem. He said:
"If a recent grad can get an overall compensation package of 180K for working on AI for web search engines and a comp package of much less than half of that for (say) working for USDA on AI for preventing food-borne outbreaks, then we are going to see public safety and welfare losing out in AI adoption."