Jul 1, 2018

Axios Future

By Bryan Walsh
Bryan Walsh

Welcome back to Future. Thanks to Alison Snyder for her exceptional stewardship while I was away on vacation, and to you for subscribing. Consider inviting your friends and colleagues to sign up.

I want to officially welcome and introduce Kaveh Waddell, who has joined the Future team as our San Francisco-based artificial intelligence reporter. Kaveh formerly wrote at The Atlantic and just spent a year as a foreign correspondent in Beirut.

We continue to be in exceptional times. I'd love to hear what you think we ought to cover, are getting wrong, or anything else you care to share. Just hit reply to this email or shoot me a message at steve@axios.com. Let's start with ...

1 big thing: China's love-hate of blockchain

Illustration: Lazaro Gamio/Axios

China had a short, whirlwind relationship with Bitcoin before unceremoniously dumping it last September. Now, President Xi Jinping calls the underlying blockchain technology a "breakthrough."

Axios' Erica Pandey writes: Xi is differentiating between cryptocurrencies and blockchain. In his view, Bitcoin and other cryptocurrencies could fuel financial risk and even jeopardize Communist Party authority. But in blockchain, the powerful Xi sees something he cherishes — even greater government control.

How it works:

  • Blockchain uses a network of computers to create a record of any string of events, from financial transactions to the origin of an oyster. Every time the thing being tracked changes hands, it's publicly recorded, so its legitimacy can be verified while eliminating human intermediaries.
  • Cryptocurrencies — Bitcoin being the most prominent — are digital monies that live on the blockchain.

When Bitcoin came to China, it was hugely popular...

Until February 2017, Chinese exchanges accounted for some 95% of official global Bitcoin trading, when it fell to 20%, says Lauren Gloudeman, who analyzes China's markets at the Rhodium Group.

  • In 2013, the People's Bank of China began to regulate Bitcoin, saying it couldn't be legal tender but that people were still free to trade.
  • In February 2017, PBoC froze withdrawals for four months.
  • Then, seven months later, domestic Chinese exchanges officially exited cryptocurrency markets.

In banning Bitcoin trading, authorities had three main aims: Preventing undetected capital flight, a tulip-mania of gambling by grandmothers in cryptocurrencies, and a crime wave of tax evasion or drug deals.

Yet none of this discredited the underlying technology. China wants to be at the cutting-edge of an innovation that many experts forecast will experience a commercial boom in the coming years. No one knows precisely how blockchain will be used, but among its applications could be trackable and ethical food.

  • One example — alcohol tracking: Ant Financial — Alibaba's mobile payments arm — is working on a way to trace and verify the authenticity of Maotai, a pricey brand of Chinese liquor (白酒).

But, but, but: Xi might have other ideas.

  • Beijing could use it as a tool to monitor citizens' financial activities, says Yao Zhao, an economist at Beijing Normal University who formerly worked at the People’s Bank on its cryptocurrency regulation. The PBoC is working on a "Central Bank Digital Currency," an effort to move China — already largely cashless in big cities — even further away from traditional currency, though Zhao says that's still a long way in the future.

Read Erica's whole post.

2. FBI mum on Russian meddling

Putin, in July. Photo: Dennis Grombkowski/Getty

As President Trump prepares to meet Russia's Vladimir Putin, U.S. intelligence agencies are failing to help tech companies inoculate themselves against meddling in the November midterm elections, experts and reports say.

Why it matters: Facebook and other tech companies have said that, while they are working intensely to eliminate their vulnerability to fake and manipulated news, much of it from Russia, they can't guarantee 100% success. This is why any outside advice from intelligence agencies, with their own sources of information, could prove crucial.

In interviews on CBS and Fox today, national security adviser John Bolton said Trump will raise election intrusions with Putin. Bolton said he himself raised the issue with Putin last week, but that the Russian leader denied any state role.

  • But in terms of actual action, tech companies say they have been left largely on their own.

"The Trump administration clearly perceives a critical link between America’s digital technology industry and national security," Gregory Allen, a fellow at the Center for a New American Security, tells Axios. "But, there’s a major disconnect when it comes to Russia. Tech companies are asking the U.S. intelligence community for help in understanding Russian cyber threats to their companies, and they aren’t getting it."

  • Last week, the NYT's Sheera Frenkel and Matthew Rosenberg described a May meeting at Facebook headquarters between eight big tech companies and officials from the FBI and the Department of Homeland Security.
  • The subject was Russian election meddling ahead of the midterms. The tech companies described their internal experiences, but neither of the government officials "was willing or able to share specific information about threats the tech companies should anticipate."
  • More broadly, the piece says, "In public and behind closed doors, intelligence officials have offered scant details about what Russia is doing, prompting frustration from Silicon Valley to Capitol Hill."

Says Allen: "If the national security community is going to ask the commercial tech industry to share their expertise in understanding and utilizing AI technology, they must be willing to return the favor by sharing their expertise about ongoing cyber threats. That means addressing Russia’s cyber-hostilities head on."

3. When Amazon isn't so tough

Baidu's upcoming Raven R smart speaker. Photo: Baidu

Last week, all Amazon had to do was buy a pharmacy startup to wipe $15 billion in value off competing drug chains. But in the booming market for smart assistants, it's Amazon that's getting its clock cleaned.

Axios' Kaveh Waddell writes that Amazon had a several-year head start with its Echo lineup, which it launched in 2014. But now it's losing ground:

  • In the first quarter of 2016, Amazon Echo held 80% of the global smart assistant market, according to CB Insights. Chinese companies were so far behind that they registered zero.
  • But just a year later, Amazon collapsed to a 28% market share, behind Google Home's 36%, and ahead of China's Alibaba and Xiaomi, with a combined 19%.

In China, the government is favoring local makers. Regulations restrict foreign cloud platforms, which voice assistants generally require in order to process and apply voice inputs.

Chinese manufacturers have also been aggressive on price, and U.S. companies barely seem to be trying:

  • Chinese companies are making extremely inexpensive smart speakers. Alibaba's Tmall Genie can be bought for $15 on sale, and Baidu recently dropped one of its models from $39 to $14, according to the report.
  • Major foreign voice assistants are nowhere to be seen in the Chinese market.
  • One reason — they have mostly failed even to get the language right. Apple's Siri has cracked China's notoriously difficult languages, speaking two dialects each of Cantonese and Mandarin, but the company's HomePod speaker only has English and — in any case — isn't for sale in China. Amazon's Alexa and Google Assistant offer no Chinese language support.

Read Kaveh's whole post.

4. Worthy of your time

Photo: Tomohiro Ohsumi/Getty Images

Making in-vitro fertilization cheaper (The Economist)

The strange brain of the world's greatest solo climber (J.B. MacKinnon - Nautilus)

The U.S. future of fewer foreign tech workers (Stef Kight - Axios)

Migrant millennials are redrawing the U.S. map (Andrew Edgecliffe-Johnson - FT)

Capitalism in an age of robots (video and paper) (Adair Turner - INET)

It can happen here (Cass Sunstein - NY Review)

5. 1 foodie thing: Fast seafood in Shanghai
Serving food at Hema. GIF from Alibaba video

Select some live seafood in one of Alibaba's Hema grocery stores in Shanghai, get it rung up and bagged, and a robotic arm will whisk it away to a kitchen, wheeling down a raised highway. Minutes later, a robotic pod will appear, pulling up to your table with your bowl under a transparent dome.

Kaveh writes: A highway of robot pods has replaced human waitstaff in already high-tech Hema, with humans mostly left to the greeting and cooking.

The big picture: Robot food runners may seem like a gimmick to get diners through the door. But if they become commonplace, it will be because high labor costs make them more cost-efficient than living, breathing waiters.

The context: In some cities around the world, waitstaff are expensive enough to be done away with, turning even higher-end restaurants into Chipotle-style cafeterias where you order at a counter, grab utensils, and bus you own table.

Some are going entirely robotic:

  • JD.com, Alibaba's main e-c0mmerce competitor, says that next month, it will open a fully automated restaurant, staffed with no human cooks or servers, reports Daisuke Harashima of Nikkei Asian Review. By 2020, it will operate about 1,000 of them, JD says.
  • The company — fiercely competing with Alibaba — has already taken the lead in commercial robotization with a wholly automated warehouse staffed with just four humans, all of whom service the robots.

But, but, but: In most cases, humans are still part of the equation. The automated Hema experience, for instance, still includes frail mortals welcoming customers, explaining the ordering system, taking payment, and — crucially — cooking the food.

Bryan Walsh