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Any stories we should be chasing? Hit reply to this email or message me at steve@axios.com. Kaveh Waddell is at kaveh@axios.com and Erica Pandey at erica@axios.com.

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1 big thing: Living in a lab

Riding in an Uber self-driving car in Pittsburgh. Photo: Angelo Merendino/AFP/Getty

The companies backing smart city technologies, surveillance and autonomous vehicles are among the most powerful entities on the planet, worth hundreds of billions of dollars and led by larger-than-life CEOs.

But the testing grounds for their innovations are second-tier cities. Desperate to compete with coastal superstars for jobs and talent, these smaller-fry metros — like Tempe, Arizona, and Kyle, Texas — are offering themselves up to these companies as living labs.

Erica writes: The ultimate payoff for these cities, however, can be meager: mere morsels, or often — nothing. "There’s a huge asymmetry in power and knowledge," says Jake Dunagan of the Institute for the Future.

By the numbers:

  • Since the financial crash, big metros like Boston, New York and San Francisco — with populations over 1 million and massive company headquarters — have vacuumed up 72% of the country's employment growth, per Brookings.
  • Smaller cities, home to 50,000–250,000 people, have seen just 6%.
  • The average GDP per capita in superstar cities is $68,000, according to McKinsey Global Institute. In many of the second-tier cities, the range is in the $20,000s and $30,000s.

Not all the second-tier cities are suffering: A handful, like Nashville and Austin, Texas, are thriving alongside the superstars. Austin hosts major campuses of Amazon, Google, Apple and Facebook. And Nashville was a secondary winner of the HQ2 pageant, gaining 5,000 jobs.

But most of the second tier is like Shreveport, Louisiana, a city of about 200,000 near the Texas border. It's dreaming of high-paying tech jobs and satellite campuses, seeing an Amazon HQ2 or Foxconn as the only way to grow materially. "It's so important to leverage technology to be more important and stand out and to compete with the bigger cities," says Shreveport Mayor Adrian Perkins.

Effectively locked out of the bidding for prized Big Tech campuses, second-tier cities have found themselves the venues for experiments.

One of their principal roles — tracks for the nascent driverless car industry.

Uber set its self-driving cars loose in Tempe. In March 2018, one of them struck and killed a pedestrian. Last week, Arizona prosecutors declined to press charges against Uber.

  • Arizona has the laxest AV regulations in the country, as it attempts to brand itself as a hub for the technology and scoop up future jobs, says Axios autonomous vehicles reporter Joann Muller.
  • A separate negligence lawsuit has been filed against Arizona Gov. Doug Ducey by the family of the woman killed.

The Texas cities of Kyle and Orange last year saw different consequences of being a tech company's lab when they let in Vigilant Solutions, a firm that makes automated license plate readers.

  • The company offered the readers, which police officers use to nab speeders, for free, but insisted that the cities sign non-disparagement agreements preventing them from saying anything negative about the tech.
  • On top of that, Texas police gave Vigilant access to the data for "nearly unlimited commercial use," writes the Electronic Frontier Foundation.

Several Florida cities started testing Harris Corp.'s StingRay, a cellphone surveillance device, in 2014 and signed airtight NDAs.

  • The agreements were so strong that police officers lied to judges about how they caught suspects to keep StingRay a secret, reports Wired.

The companies did not respond to requests for comment.

Bonus: Small cities, big companies

Illustration: Lazaro Gamio/Axios

When you are a second-tier city, courting a Big Tech company can backfire.

  • As we've reported, cities have struck big-ticket deals with tech companies, typically surrendering tax and other subsidies, only to have the incoming firms frequently fail to deliver.
  • As mentioned above, second-tier cities across the country have made themselves labs for the infant AV industry. Those experiences have sometimes led to tragic outcomes, including the fatal June 2018 accident in Tempe.

Erica writes: For the Big Tech companies, the payoff is usually data. In its recent search for an HQ2, Amazon solicited applications from 238 cities, large and small. On the way to settling on New York and a Virginia suburb of Washington, D.C., Amazon ended up with a massive, granular database of American cities, a goldmine of inside dope as it expands.

But almost always, the smaller metros end up disadvantaged:

One city that spilled its secrets to Amazon: With big hopes for the $100,000-a-year jobs the company dangled in front of the bidding cities, Spokane, Washington, submitted a bid for HQ2.

  • Spokane's proposition, Mayor David Condon told Erica, included the very practical advantage that it's affordable.
  • In the end, Spokane, a near sister city of Seattle five hours away from the main Amazon HQ, won a booby prize — an Amazon warehouse that will employ around 1,500 people at about $15 an hour.
  • Even to get the warehouse, the city had to build new infrastructure, Condon says — roads to accommodate increased truck traffic to and from the building.

Albuquerque is arguably better placed as a destination for Big Tech, with a population around 600,000 and four universities. Indeed, it has already attracted a handful of major satellite campuses, including a 3,300-strong Intel office.

But even Albuquerque gets played by Big Tech:

  • Instead of a Facebook office, it has a Facebook data center, which has created thousands of short-term construction gigs, but will ultimately employ just 300 people long term.
  • And to get Facebook even to go that far required $30 billion in industrial revenue bonds on the company’s behalf, which will result in tax breaks over the next 30 years, per the Albuquerque Business Journal. Meanwhile, there are side effects: Facebook has taken such a huge share of the city's construction workforce that airport renovations are delayed.
  • Netflix made waves in Albuquerque when it decided to put its North American studio headquarters in the city. It promised to spend at least $1 billion producing TV shows and movies in Albuquerque over the next decade. But Netflix paid just $30 million for the existing facility it will occupy, a complex that cost the city $91 million to build.

Albuquerque Mayor Tim Keller defends the Netflix deal. "No one has any bad taste in their mouth."

The companies did not respond to requests for comment.

2. A new call to limit facial recognition

Illustration: Sarah Grillo/Axios

Pre-identified photos of half the U.S. adult population are searchable in law enforcement databases. Jake Laperruque, a contributor to Axios Expert Voices and senior counsel with the Constitution Project at the Project on Government Oversight, explores the risks around facial recognition technologies and how lawmakers may respond.

The expanded use of facial recognition by law enforcement agencies poses significant risks, from misidentifications and unlawful targeting to the danger of disclosing sensitive information about people's daily lives.

Both federal and state lawmakers are trying to address these risks while responding to pressure from law enforcement and from Big Tech companies like Amazon and Microsoft.

The big picture:

  • The technology threatens to end anonymity, a right critical to common sensitive activities and recognized by the Supreme Court as a key First Amendment shield. In China, a facial recognition surveillance dragnet can quickly track down individuals in cities of millions. U.S. networks are not far behind.
  • It could endanger public safety. One study of real-time facial recognition found misidentifications were 10 times more frequent than proper identifications, and MIT research has revealed high error rates for women and people of color. Without proper checks, a computer error could lead officers to arrest or use force against innocent individuals.
  • It could limit free exercise of protected rights. Baltimore police used facial recognition to disrupt a lawful protest by identifying and arresting anyone with an outstanding warrant. An FBI presentation includes the use of facial recognition to identify attendees at political rallies.

What's needed: Limiting the use of facial recognition to serious crimes and requiring police to secure a judge's permission to use the technology, based on probable cause, could lower the risk of abuse.

  • Approval might be granted to identify a suspect committing a crime on a security camera, for example, but not to build a database of attendees at a political event.

Go deeper: 

3. AI and groupthink

Photo: Tatyana Makeyeva/TASS/Getty

A central promise of artificial intelligence is to automate away tedious routine tasks, but a lingering worry is that it will chip away at our humanity, causing people to lean on computers to the detriment of their ability to think critically.

Kaveh writes: A new survey from the PR firm Edelman, conducted last summer with 1,000 Americans, shows widespread worry around the social effects of swiftly advancing AI.

  • 74% said "intelligent and human-like" devices will lessen the need for interactions with other people and lead to more isolation.
  • 67% said AI increases the possibility of "digitally enhanced group think, lessening creativity and freedom of thought."
  • 71% said AI will lead to a "dumbing down of people."
"People tend to trust the information they are presented by their digital devices, and it’s possible with AI — given the vast amounts of personal data that drive those systems — to steadily persuade individuals and entire groups to a certain point of view."
— Gary Grossman, head of Edelman's AI center
4. Worthy of your time

Illustration: Rebecca Zisser/Axios

Banks and money laundering (The Economist)

The very different world of Chinese driverless cars (Patrick Lozada — Axios)

Black entrepreneurs shift from Silicon Valley to the South (Jessica Guynn, Nicquel Terry Ellis — USA Today)

Peak California (Byrne Hobart — Medium)

Murdoch company calls for Google breakup (Jamie Smyth — FT)

5. 1 mush thing: Iditarod's rebel dogs

Iditarod, 2015. Photo: Joshua Corbett/dpa/Getty

Nicolas Petit, a contestant in Alaska's storied Iditarod dogsled race, was sitting pretty with a five-hour lead when his dogs quit on him Monday.

Kaveh writes: Two of Petit's dogs had been fighting, and the French musher — the dogsled equivalent of a horse jockey — shouted at one, AP reports.

  • “I yelled at Joey, and everybody heard the yelling, and that doesn’t happen,” Petit said, according to the Iditarod Insider website. “And then they wouldn’t go anymore. Anywhere. So we camped here.”
  • Libby Riddles, winner of the 1985 Iditarod, told AP that "one sour grape" can take down a dog team.
  • “One dog that has a bad attitude, and it infects the whole rest of the team.”