Nov 30, 2018

Axios Future

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1 big thing: For Amazon, success breeds enemies

Illustration: Sarah Grillo/Axios

In two decades, Amazon has erupted into one of the most successful juggernauts in history, pushing forward absent any apparent limits to its horizons, including this week into high-end computer chips. But its pathway has become decidedly more bruising, straddled by a groundswell of public recriminations in both the U.S. and Europe.

Axios' Erica Pandey writes: While it marches from industry to industry, Amazon has become a larger target with more dangerous enemies. "Any regulator that doesn't have one eye on Amazon is not doing their job," says Tim Wu, author of "The Curse of Bigness."

The big picture: In Amazon's biggest couple of years yet, it briefly surpassed $1 trillion in value, only the second company ever to do so. It barreled into groceries, pharma and package delivery. It pulled off one of the most successful public relations campaigns ever, capturing more than a year of rapt global attention for what amounted to a mere search for added office space. And yesterday, it unveiled a new chip for the application of artificial intelligence.

  • One of Amazon's biggest plays of all is the cloud, in which it was an early mover, giving it a formidable position alongside Microsoft and IBM.
  • In a note to clients after Amazon's announcement yesterday, Jefferies analyst Brent Thill said its cloud business could more than double in value by 2022, to $350 billion, from about $130 billion today. Amazon's entire current market cap is $818 billion.

But all this high-profile activity has come at a cost, including calls for Amazon's breakup. Critics say that while it has offered cheap goods quickly delivered, it has also steamrollered business after business, and contributed to the national epidemic of relatively low, flat wages.

As we've reported before, analysts speculated that Amazon's decision to place a massive new office complex in the D.C. area was in part driven by a strategy to ward off anti-trust activism.

  • In September, Mark May, a retail analyst with Citi, said Amazon should consider preemptively splitting its retail and cloud businesses to steer clear of any regulatory threat.

But, but, but: Thill, the Jefferies analyst, tells Axios that he does not perceive any real danger of a forced breakup. And Amazon Web Services CEO Andy Jassy told CNBC that AWS has no plans to spin out the business.

2. Labor unrest comes to Amazon

GMB protest in the U.K. on Black Friday. Photo: GMB.

As Amazon sets the standard for fast and free consumer shipping in the U.S. and Europe, it also confronts a new challenge — employees who are rising up against what they say are unfair working conditions.

Erica writes: On Black Friday and Cyber Monday, GMB, a union in the U.K., organized protests against Amazon's 24 warehouses in the country for dangerous working conditions as supervisors demand faster and faster work. Their slogan was "we are not robots." And Amazon workers in three other European countries — Italy, Germany and Spain — walked out as well.

The labor unrest is in the U.S., too: In Minnesota, Somalian-born workers at an Amazon warehouse have entered negotiations with the company after protests of their working conditions, reports the NYT's Karen Weise. “Amazon has ended up becoming a flash point and a symbol for inequality in modern society,” says Beth Gutelius of the Great Cities Institute at the University of Chicago.

  • Over the last three years, says Michael Rix, a GMB adviser, ambulances were called about 600 times to Amazon warehouses.
  • The incidents ranged from breathing problems to miscarriages.
  • "The expectations that are trickling down to the warehouse floor are really being borne by the workers themselves," Gutelius tells Axios.

In the U.S., a Whole Foods worker who did not want to be identified told Axios that organizing efforts have picked up since Amazon's announcement two weeks ago that it will build giant new office complexes in New York and northern Virginia. "I've personally seen, in just the last month, a lot of Amazon organizing groups popping up, and we're all trying to coordinate," the worker said.

  • In a statement, an Amazon spokesperson said, "The safety and well-being of our employees is our number-one priority. Amazon has operations around the world and we deeply value our connection to the communities where we are located. Each community is a little different and in each one, we work to ensure our employees have a great experience with the most important element being our direct connection to our employees."
3. AI companies and government cozy up

Private companies are helping the Pentagon automatically identify objects in drone photographs. Photo: Eren Bozkurt/Anadolu Agency/Getty

Google made headlines for walking away from a contract to provide intelligent software for the Pentagon — but its hesitation, a response to a staff uprising, may be an anomaly rather than an omen.

Increasingly, big tech companies and startups are flocking to show military and security officials their wares for everything from surveillance and detecting fake content to disaster relief.

Axios' Kaveh Waddell reports: Two events in the D.C. area this week — one hosted by the Pentagon and the other by the intelligence community — drew hundreds of private sector participants.

  • Top defense, law enforcement, and intelligence officials asked companies and academics for help developing AI-driven applications for security applications.
  • More than 300 companies attended the Defense Department’s unclassified event yesterday, and around 100 gave private presentations to officials, said Graham Gilmer, an AI expert at Booz Allen Hamilton, who participated.
  • Gilmer also attended the intelligence community’s classified event the day before, which featured speakers from the FBI, Homeland Security, and the Office of the Director of National Intelligence.

In one example of the stakes, the Army announced yesterday that it had awarded a $480 million contract to Microsoft to develop an augmented reality system.

Turnout at the Defense Department event was "striking," said Gilmer. The organizers said attendance tripled since the first AI industry day last year, and Gilmer says the companies attending this year were considerably more diverse.

  • "You can tell the DoD has industry's attention," he said.
  • Booz Allen Hamilton works on Project Maven, the contract Google pulled away from. But yesterday, Gilmer presented a less controversial project: a smartphone app that can detect problems in a generator just by listening to it.
  • Predictive maintenance is one of several non-surveillance goals for which the Defense Department wants to use AI. Others include process automation and humanitarian assistance.

When it’s not inviting companies to its doorstep, the Pentagon is sending officials around the country to present a friendly face to the tech industry — and not just the defense stalwarts.

  • On the sidelines of a recent conference in Austin, Texas, the Air Force’s Jennifer Sovada told Axios that the government is responding to a shift in who develops technology.
  • "We are relying too heavily on old contractors," she said. Her focus is to reel in startups that might be jumpy about military contracting.

Go deeper: Microsoft defends work with U.S. military

4. Worthy of your time

Yemeni soldiers in Sanaa. Photo: Mohammed Hamoud/Getty

China accelerates spying on U.S. tech (David Sanger and Steven Myers — NYT)

How Yemen's civil war went cyber (Joe Uchill — Axios)

Inside Google’s secret China project (Ryan Gallagher — The Intercept)

U.S. life expectancy drops further (Betsy McKay — WSJ)

What happened when a private-equity firm took over nursing homes (Peter Whoriskey, Dan Keating — WashPost)

1 shaky thing: A seismic mystery

A crater lake in Mayotte. Photo: Christian Vaisse/Gamma-Rapho via Getty Images

Two weeks ago, an odd pattern of seismic waves originating off the coast of Madagascar swept across continents and oceans, reaching as far as Hawaii.

But no one seems to have felt the waves despite 20 minutes of reverberation along a vast distance, reports Maya Wei-Haas for National Geographic.

Kaveh writes: An amateur seismologist who was watching real-time earthquake measurements picked up on the event, kicking off a worldwide hunt for the cause.

  • It’s still not clear what set off the weird waves. Scientists think it could have been the result of a collapsing magma chamber underground, and that the area’s unusual geology filtered out all the waves but one.
  • The slow, undulating waves were unusual in that they were not accompanied by the usual panoply of other, faster seismic waves.
  • "I don't think I've seen anything like it," Göran Ekström, a Columbia University professor who specializes in unusual earthquakes, told Wei-Haas.

The unfelt tremor appears related to a recent series of quakes centered near Mayotte, a French-owned island between Madagascar and the mainland, National Geographic reports.

  • The quakes might mean that the volcanoes that originally created the island are coming to life after 4,000 years of quiet.

Fun fact: Since mid-July, magma pushing its way toward the earth’s surface has moved the entire island of Mayotte more than 2.4 inches to the east and 1.2 inches to the south.