Jul 4, 2018

Axios Future

By Bryan Walsh
Bryan Walsh

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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: The road to recession

Illustration: Lazaro Gamio/Axios

Look for global stock markets to crater and economies to dive into recession if President Trump proceeds with his desire to withdraw from another international accord — this time the World Trade Organization, economic experts tell me.

The big picture: Thus far, Trump has mostly damaged U.S. prestige with his anti-globalization actions — withdrawing from the Trans-Pacific Partnership, the trade accord with 11 Pacific-facing nations, and the Paris climate agreement, as well as threatening to pull out of NAFTA. He's also caused global stock markets to gyrate by threatening tariffs against Europe, Canada, and China, and oil prices to rise by pulling out of the Iran nuclear deal.

  • But "the financial shock would be very, very large" should he withdraw from the WTO, a pillar of the global economy since its founding 71 years ago, said Gary Hufbauer of the Peterson Institute for International Economics.

What they're saying:

  • "Business confidence in the system would be severely shaken," he told Axios, and there would be "quite a hit" to long-term investment in plants and equipment.
  • "You don't need much of a slowdown in these areas, and you have recession," Hufbauer said. Said Brookings' David Wessel, "If he persists, if this is more than bluster or a negotiating ploy, he is putting the prosperity of the world at risk."

The backdrop: Last week, Axios' Jonathan Swan was leaked draft legislation, ordered by Trump, that would abandon key tenets of the WTO. Swan's sources tell him that Trump routinely vows to withdraw entirely, and on Monday, the president publicly threatened that "we will be doing something" should the WTO not "treat us properly."

But but but: While Eswar Prasad, a professor at Cornell University, expects a huge fallout, he suggests it will be more muted than a full-scale economic reversal.

  • "Trump’s repudiation of the WTO could prove a body blow to the rules underpinning the global trading system," he tells me. "The prospect of that and further disruption could hurt the stock market, but is unlikely to derail U.S. growth momentum sufficiently to tip the economy into recession."

What to watch: The first signal of what's to come will be Friday, when stiff tariffs ordered by Trump on China take effect, following tariffs already enacted on Europe and Canada, along with reciprocal tariffs on the U.S. That is, unless he halts U.S. action at the last moment, which some suspect he will.

Read the whole post.

2. ... and beckoning the 1930s

Car of Texas migrants, 1937, in California's Coachella Valley. Photo: Dorothea Lange/Resettlement Administration/LIFE/Getty

Trump’s every-man-for-himself foreign policy resembles the world of the 1930s, when Europe was dominated by populist and nationalistic politics and veering toward a catastrophic war, according to the co-author of a new book on geopolitics.

Why it matters: With his assault on institutions set up seven decades ago to soften the frictions that led to World War II, Trump risks re-igniting the emotions that put nations at each other's throats, says Ivo Daalder, president of the Chicago Council on Global Affairs.

The big picture: The world is nowhere near an economic depression, unlike the 1930s. And while there are growing numbers of populist leaders, led by Trump, none seems hellbent on genocidal war.

  • But many other fundamental realities of the 1930s are back: That includes great migrations of people and deep political grievance across Europe, the dynamics that underpinned political resentment then and now.
  • Out of that you get "political leaders willing to exploit resentment for their own political purposes," says Daalder, co-author of the forthcoming book, "The Empty Throne: America's Abdication of Global Leadership."
Daalder's forthcoming book

The lessons of war: Once WWII was over, the great debate was over how to overcome what seemed like a suicidal drive among the European states. So was born the idea of a European economic and political federation, which slowly took shape, eventually becoming the EU. To further prevent a new catastrophe, the U.S. took the lead in establishing the World Trade Organization, the World Bank, the United Nations, and NATO, which became the pillars of the world order.

  • "It was all kept together by American leadership, and it's that ingredient that's being removed" by Trump, Daalder said.
  • Today, he added, "we are in an era of rapid technological change, and because of globalization and inequality created by that, you see the polarization of political forces that believe they are left behind."

Read the whole post

3. Tech's rift with government

Robotics competition, funded in 2015 by DARPA, the Pentagon's radical innovation lab. Photo: Chip Somodevilla/Getty

Amid the global race for supremacy in artificial intelligence, two more tech companies have joined Google in refusing to work on military and police surveillance projects. Axios' Kaveh Waddell writes that the moves reflect a brewing rift between tech players and the government.

Why it matters: Some experts worry that, to the degree AI-focused companies go their own way, the field may lose the long-term, fundamental focus of government-funded programs that have produced some of the world's most hallowed inventions.

What's going on: Over the decades, numerous foundational technologies have emerged from U.S. military-funded research: among them, semiconductors, cryptography, the internet, GPS and mobile phones. "They arose out of war — or the fear of war" that characterized the Cold War era, says Will Carter of the Center for Strategic and International Studies.

  • But recently Google, facing an internal rebellion by employees, bowed out of work on a Pentagon contract called Project Maven. Over the last week, facial recognition companies Kairos and Affectiva said they, too, will shun such work.
  • This has coincided with a different pathway for AI development: The large majority of AI funding in the U.S. is coming from impatient private investors, not the federal government.

This shift in the balance of power between AI funding and development means the private sector is leading in an area with "massive national security implications," says Gregory Allen, an adjunct fellow at the Center for a New American Security.

  • “Fundamental, long-term, deep technical research and development: That’s always been the province of government,” Carter said.
  • But private actors typically want results in three or so years. Carter says the private horizon is too short to create meaningful AI advances.
  • One risk: While some longer-range, patient government funding for basic AI research continues, Carter says private money will focus on low-hanging fruit, such as new applications for existing deep-learning concepts that can turn a quick profit.

Go deeper: Why the U.S. needs a "Sputnik moment" in technology

Read the whole post.

4. Worthy of your time

Ford assembly line, 1913, in Highland Park, MI. Photo: Bettmann

Musk shouted, snapped, pulled (Alexandria Sage, Salvador Rodriguez — Reuters)

AI and the future of insurgency (Chris Meserole — Lawfareblog)

Startup raises $250m to automate "mundane" jobs (Dan PrimackAxios)

An AI roadblock for self-driving cars (Russell Brandom — The Verge)

WeWork's valuation, ripped to shreds (Elaine Moore and Eric Platt — FT)

International applications plunge for U.S. physics Ph.Ds (Alexis Wolfe — AIP)

5. 1 automated thing: Fashion of the future

Mix and match in the new Alibaba-Guess fashion shop. Photo: Alibaba

Everything is automated and powered by artificial intelligence — or soon will be — in a new fashion shop opening tomorrow in Hong Kong. From the time you enter, using an app to trigger open a locked electronically sliding glass door, until you leave with your stuff, you may never see another human, apart from other shoppers.

The big picture: Last month, I toured a model of the store on Alibaba's Hangzhou campus. Steven Keyang Shi, who leads the Alibaba tech team creating the store, told me that the objective is to merge e-commerce and brick-and-mortar retail — to make shoppers see them as one organism.

The details: The shop, the first of its kind, features fashions marketed by Guess. It was devised in a collaboration between a tech team at China's Alibaba and students at Hong Kong Polytechnic University, where the pop-up store will be open through Saturday.

  • A primary challenge was devising what Shi called "the rules" of mixing and matching — training an AI system to instantly suggest genuinely apt shoes, a bag, or a blouse to go with the pants a customer has selected off the rack.

How it works: In this first iteration of what Alibaba calls "FashionAI," you are given a gold token that recognizes you. Within the store, you browse L-shaped displays with racks of clothing on the left and a full-length mirror on the right.

  • When you take say a pair of shorts off the rack, a window opens instantly on the mirror. It displays the shorts, and suggests pairing them with a matching blouse, shoes, and a bag from the existing inventory (see photo above). When you hit a second tab, the suggestions become more personalized, based on what you've previously bought on Alibaba's giant Taobao online store in the last three months.
  • If you want to try on the shorts, you press the link for your shopping cart, and go to a fitting room. Walk inside, and there your selection is waiting. Is the size is too large, or the color not quite right? Press that on the mirror, and the new item appears on a hanger.
  • To buy, you can take the clothing with you or have it delivered within two days. You also choose to make a decision later on, and the app will remember everything you looked at, so that you purchase it later.

What's next: As of now, these items are delivered to the fitting rooms by staff in the back who monitor shopper requests on a large tablet. The next iteration will be far more automated — you will be recognized using just your app, and receive your stuff in the fitting room by machine, rather than humans, Shi says.

Watch this video and read the full post.

Bryan Walsh