Oct 11, 2017

Axios Future

By Bryan Walsh
Bryan Walsh

Welcome back. Please invite your friends and colleagues to join the conversation. Tell me anything on your mind, including what you think about what you are reading here and in the daily stream. Just reply to this email, or reach me at steve@axios.com.

Let's start with ...

1 big thing: The EU and tech scofflaws

The European Union, arguing that U.S. tech titans have unfair — and in some cases illegal — advantages over competitors, is cracking down in what it calls leveling the playing field and saving local businesses and the jobs connected to them, writes my colleague Alayna Treene.

What's happening: EU regulators have been far more aggressive in policing tech companies than their counterparts in the U.S., and their plans for heftier taxes and fines around antitrust and privacy regulations suggest that they have no intention of curbing their efforts.

Some of the biggest regulatory actions are underway in Europe, and they will reshape how U.S. tech companies do business abroad moving forward. They include:

  • New tax rules: Last month, EU regulators, saying that international tax laws are outdated, laid out new mandates to be proposed if there is no rewrite by next spring. Among recommendations are an "equalization" tax on digital revenue, and a "withholding" tax on digital transactions with companies outside the EU.
  • More open data: One sweeping new EU regulation, set to roll out in 2018, would require that EU citizens receive more information about what data tech collects and why. Companies will face fines of up to 4% of their global annual revenue for non-compliance and breaches.
  • Cookie regulation: A revised EU directive, set to be enacted in May 2018, will add greater regulation of cookies, tracking, and opt-out options.

The bottom line: "The political pressure for EU action comes from the perception that U.S. tech giants are not paying their fair share of tax in Europe," says Argi Sampedro, EU public affairs account executive at Cicero, a London and Brussels-based consulting firm. "They are also seen as companies with enormous power that take no responsibility" for illegal online content, fake news and data protection.

Read the rest of Alayna's post here.

2. Trump, taxes and jobs

For generations, the Republican Party has pitched the cure of tax cuts for whatever ails the American economy, and 2017 is no different.

In an era of unprecedented disunity within the GOP, the only thing the White House and Congress can seem to agree on is taxes. As President Trump puts it, "Our country and our economy cannot take off like they should unless we dramatically reform America's outdated, complex, and extremely burdensome tax code."

Back to the supply side: Because tax cuts big enough to make a splash cost a lot of money, proponents like to argue that their reforms will cause so much economic activity as to make the cut costless, writes my colleague Chris Matthews. This goes back to supply-side economics and Arthur Laffer, whose famous "Laffer Curve" posits government revenue pours in after the tax-cut elixir. Without citing him, the administration is promoting this theory now.

But there's little evidence to support Laffer: Even the Tax Foundation, which has long advocated lower business taxes, says that when adjusting for economic growth, a Trump proposal for faster expensing of capital equipment would cost $1.5 trillion in revenue over ten years, while adding just 800,000 new jobs and raising wages by 3.6% in the long run.

The bottom line: George W. Bush was the last president to try the supply-side method, but his record makes it difficult for conservatives to argue that large new income tax cuts for the top bracket will do much for the broader economy. The evidence from the Reagan era in the 1980s offers a stronger case for slashing business taxes, but even so, the benefits of tax cuts are uncertain, while the costs are known, and significant.

Read the rest of Chris' post here.

3. Intel joins fight against money launderers

Intel today released intelligent software that targets money laundering, often used by corrupt autocrats, narcotics traffickers, and sanctions-busters to legitimize their illicit cash.

Why it matters: The announcement comes amid a broad commercial struggle between Intel and chip rivals like Nvidia, with which it is in a death grip for the rich future of enabling artificial intelligence. Intel is putting markers on the board with this announcement, showing off its know-how in the serious and exotic space of tracking illicit cash, which is harder and harder to detect amid the sea of data coursing through the global financial system.

The scale is immense: In 2016, between $800 billion and $2 trillion in illicit cash, equivalent to 2%–5% of global GDP, was laundered in various ways, according to the United Nations. In just one series of transactions, western banks including Citi, Barclays and Deutsche Bank were conduits for $22 billion illicitly shipped out of Russia from 2011 to 2014, according to an investigation by the Organized Crime and Corruption Reporting Project and Russia's Novaya Gazeta.

How it's usually investigated: Gayle Sheppard, vice president of the Saffron AI Group, an artificial intelligence subsidiary that Intel acquired two years ago, tells Axios that standard software models attempt to attack these industrial-scale criminal operations by studying financial transactions. But ferreting through the data can take weeks or months, she said.

What AI can offer: Intel is using a form of AI known as "associative memory," which Sheppard said incorporates transactions and suggestive personality behaviors, meaning the people and organizations that carry out the money laundering.

Read the rest of the post here.

4. Exclusive: Getting to the We

WeWork, the $20 billion office leasing startup, today announced a push into the think-tank space — via a partnership with Steve Jobs biographer Walter Isaacson and the tony Aspen Institute for a series of studies on the future of work and cities.

Like Uber and Airbnb, WeWork has attained an astronomical valuation while changing how cities around the world operate. With the move into public policy, co-founder Adam Neumann seeks to better understand — and, if he can, influence — what happens next in those cities.

Adding it up: Data is said to be the new oil, and artificial intelligence to have a future as big as electricity. But WeWork reflects today's reality in Silicon Valley, whose splashiest companies are selling something wholly different — the intangibles of emotional intelligence and mood music.

The culture starts here: Neumann and co-founder Miguel McKelvey have been the recipients of years of fawning media coverage. Most of these articles and videos point out their fondness for new-agey language (like this 2015 appearance in which, it was noted, Neumann said the word community "at least a dozen times"), and the 6-foot-5 Neumann's looks ("he resembles a rock star," one writer said flatly).

Enter emotional intelligence: Neumann clearly wants to add substance to WeWork's public persona — for lack of better phrase, to show that he is not just a pretty face. He is making no quiet thing out of his leap into public policy — the company is doing a big rollout of the partnership with Aspen.

The research: With the reams of data collected and collated on its work spaces every day, WeWork has the unusual makings of a comprehensive understanding of how work is really done today in 18 countries and counting. The relationship with Aspen intends to help cities understand the economic impact of innovation clusters, with research into these concentrations of startups and surveys of WeWork's far-flung membership (Isaacson is leaving Aspen at the end of the year for a professorship at Tulane University).

Read the rest of the post here.

5. Worthy of your time

The gender gap is alive and well (The Economist)

The fintech war (Axios)

Portable leaders need people skills (The FT's Andrew Hill)

Japanese work themselves to death (NYT's Makiko Inoue and Megan Specia)

Fixing the worker interest gap in manufacturing (Axios)

6. 1 smart thing: Sensing when we fall down

Artificial intelligence is coming to your sportswear: Sensoria Health Powered by Genesis uses sensors in socks and shoes to detect pressure points and balance, and track and help prevent life-threatening falls. The partnership combines products from the smart garments company Sensoria and expertise on senior citizens from Genesis Rehab Services, writes my colleague Shannon Vavra.

  • One important number: Every 11 seconds an older adult is treated in the emergency room for a fall.
  • "Smart garments": Sensoria plans to roll out the wearable tech at some 450 skilled nursing centers and senior living communities owned by Genesis, per GeekWire.
  • A growing market: AI could increasingly become an asset to the elderly caretaker industry since by 2060 the 65-and-older population's share of the country is on track to jump from 15% to 24%, per the Population Reference Bureau.
Bryan Walsh