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Axios Future

Artificial intelligence is becoming a true industry, with all the pluses and minuses that entails, according to a sweeping new report.

Why it matters: AI is now in nearly every area of business, with the pandemic pushing even more investment in drug design and medicine. But as the technology matures, challenges around ethics and diversity grow.

Driving the news: This morning, the Stanford Institute for Human-Centered Artificial Intelligence (HAI) released its annual AI Index, a top overview of the current state of the field.

A majority of North American AI Ph.D.s — 65% — now go into industry, up from 44% in 2010, a sign of the growing role that large companies are playing both in AI research and implementation.

"The striking thing to me is that AI is moving from a research phase to much more of an industrial practice," says Erik Brynjolfsson, a senior fellow at HAI and director of the Stanford Digital Economy Lab.

By the numbers: Even with the pandemic, private AI investment grew by 9.3% in 2020, a bigger increase than in 2019.

For the third year in a row, however, the number of newly funded companies decreased, a sign that "we're moving from pure research and exploratory small startups to industrial-stage companies," says Brynjolfsson.

While academia remains the single-biggest source worldwide for peer-reviewed AI papers, corporate-affiliated research now represents nearly a fifth of all papers in the U.S., making it the second-biggest source.

The drug and medical industries took in by far the biggest share of overall AI private investment in 2020, absorbing more than $13.8 billion — 4.5 times greater than in 2019 and nearly three times more than the next category of autonomous vehicles.

The catch: While the field has experienced sudden busts in the past — the "AI winters" that vaporized funding — there's little indication such a collapse is on the horizon. But industrialization comes with its own growing pains.

Cutting-edge AI increasingly requires huge amounts of computing and data, which puts more power in the hands of fewer big players.

Conversely, the commoditization of AI technologies like facial recognition means more players in the field, both domestically and internationally, which makes it more difficult to regulate their use. 

As AI grows, the ethical challenges embedded in the field — and the fact that 45% of new AI Ph.D.s are white, compared to just about 2% who are Black — will mean "there's a new frontier of potential privacy violations and other abuses," says Brynjolfsson.

The AI Index found that while the field of AI ethics is growing, the interest level of big companies is still "disappointingly small," says Brynjolfsson.

Details: Those growing pains are at play in one of the most exciting applications in AI today: massive text-generating models. 

Systems like OpenAI's GPT-3, released last year, swallow hundreds of billions of words along the way to producing original text that can be eerily human-like in its execution.

Text-generating AI models could help polish human-written resumes for job search, but could also potentially be used to spam corporate competitors with realistic computer-generated applicants, not to mention warp our shared reality.

"What we increasingly have with these models is a double-edged sword," says Kristin Tynski, a co-founder and senior VP at Fractl, a data-driven marketing company.

What to watch: The growing geopolitical AI competition between the U.S. and China.

The National Security Commission on Artificial Intelligence warned in a major report this week that "China possesses the might, talent, and ambition to surpass the United States as the world’s leader in AI in the next decade if current trends do not change."

"We don’t have to go to war with China," former Google CEO Eric Schmidt, who chaired the committee that authored the report, told my Axios colleague Ina Fried. "We do need to be competitive."

Yes, but: While researchers in China publish the most AI papers, the U.S. still leads on quality, according to the Stanford survey.

And while a majority of AI Ph.D.s in the U.S. are from abroad, more than 80% remain in the country when they take jobs — a sign of the lasting attraction of the U.S. tech sector.

The bottom line: AI still has a long way to go, but the challenges the field faces are shifting from what it can do to what it should do.

AI is industrializing

The challenges AI faces are shifting from what the field can do to what it should do

Illustration of an briefcase filled with binary code

Artificial intelligence

Surveillance

Misinformation

Automation and AI

From the Valley to D.C., Big Tech players like Facebook, Google and Amazon are under more scrutiny than ever as new technology develops and privacy and antitrust concerns grow in lockstep with companies’ ambitions.

Technology

AXIOS on HBO: FireEye CEO Kevin Mandia on threats to cybersecurity (Clip) | HBO

Any future real-world conflict between the United States and an adversary like China or Russia will have direct impacts on regular Americans because of the risk of cyber attack, Kevin Mandia, CEO of cybersecurity company FireEye, tells "Axios on HBO."

What they're saying: "The next conflict where the gloves come off in cyber, the American citizen will be dragged into it, whether they want to be or not. Period."

"Apps won't work. Appliances may not work. People don't even know all the things they depend on. All of a sudden, the supply chain starts getting disrupted because computers don't work."

Why he matters: As CEO of the company that was first to discover the massive SolarWinds hack, Mandia sits at the nexus of online security and attempts by criminals, mischief makers and foreign governments to break into computer systems around the world.

Mandia warns that unclear rules or criteria for retaliation will lead to continued attacks that leave us "shocked but not surprised."

"The problem is nobody knows what the rules are. There's no written document on what the rules are," he said.

"And I don't know if you will get people to agree to rules on espionage because of the asymmetry where most countries can't beat us with tanks, can't beat us with airplanes. But in cyber, maybe that's where they can make investments and beat us."

The bottom line: "It's as simple as if you can be hacked, you are hacked."

"We're in an environment right now where we're playing goalie and there are slap shots coming at us every millisecond. And, by the way, blocking 99.99999999% of all the attacks means you're gonna get compromised everywhere."

Cyber CEO: Next war will hit regular Americans online

"The American citizen will be dragged into it," FireEye CEO Kevin Mandia tells "Axios on HBO."

Axios on HBO

Data privacy

China is becoming the most formidable rival America has faced, and the risk of confrontation with Russia, North Korea or Iran still looms. Authoritarians are rising, the chaotic Afghanistan exit revealed the limits of U.S. power, and the pandemic, climate change and other critical challenges continue to pose grave threats.

World

The arrests and charges in the aftermath of the Jan. 6 Capitol Hill insurrection made clear the power of facial recognition, even as efforts to restrict the technology are growing.

Why it matters: With dozens of companies selling the ability to identify people from pictures of their faces — and no clear federal regulation governing the process — facial recognition is seeping into the U.S., raising major questions about ethics and effectiveness.

Driving the news: The Minneapolis City Council voted on Friday to bar its police department from using facial recognition technology, Axios Twin Cities' Nick Halter reports.   

Minneapolis will join other cities that have restricted the technology, including Portland, San Francisco and Boston. 

The big picture: Even as efforts to restrict facial recognition at the local level are gathering momentum, the technology is being used across U.S. society, a trend accelerated by efforts to identify those involved in the Capitol Hill insurrection.

Clearview AI, one of the leading firms selling facial recognition to police, reported a 26% jump in usage from law enforcement agencies the day after the riot.

Cybersecurity researchers employed facial recognition to identify a retired Air Force officer recorded in the Capitol that day, and after the attack Instagram accounts popped up purporting to name trespassers.

By the numbers: A report by the Government Accountability Office found that between 2011 and 2019, law enforcement agencies performed 390,186 searches to find facial matches for images or video of more than 150,000 people. 

The Black Lives Matter protests over the summer also led to a spike in use in facial recognition among law enforcement agencies, according to Chad Steelberg, the CEO of Veritone, an AI company. "We consistently signed an agency a week, every single week."

U.S. Customs and Border Protection used facial recognition on more than 23 million travelers in 2020, up from 19 million in 2019, according to data released on Thursday.

How it works: In Veritone's facial recognition system, crime scene footage is uploaded and compared to faces in a known offenders database — though as agencies begin to share information across jurisdiction, that possible database has been getting larger.

Veritone's system returns possible matches with a confidence interval that police can use — together with other data, like whether someone has a violent record — to identify possible suspects.

The big questions: Does it work? And should it work?

Facial recognition is notoriously less accurate on non-white faces, and a 2019 federal study found Asian and Black people were up to 100 times more likely to be misidentified than white men, depending on the individual system.

There have been two known cases so far of wrongful arrest based on mistaken facial recognition matches.

What they're saying: "Today's facial recognition technology is fundamentally flawed and reinforces harmful biases," FTC Commissioner Rohit Chopra said last month, following a settlement with a photo storing company that used millions of users' images to create facial recognition technology it marketed to the security and air travel industries.

The other side: Facial recognition companies counter that humans on their own are notoriously biased and prone to error — a 2014 study found 1 in 25 defendants sentenced to death in the U.S. are later shown to be innocent — and that the models are improving over time.

"There's nothing inherently evil about the models and the bias," says Steelberg. "You just have to surface that information so the end user is aware of it."

Be smart: At its most basic level the underlying technology isn't that sophisticated, which makes it difficult to control.

Big tech companies like Microsoft can decide not to sell facial recognition software to police departments, but there are plenty of startups to take their place.

And as Jan. 6 showed, even individuals can tap facial recognition with ease to become cyber-sleuths — or cyber-vigilantes.

 "The core technology isn't limiting. It's really more of a legal jurisdiction question, which is where the rubber will meet the road."

The coming conflict over facial recognition

"It's really more of a legal jurisdiction question, which is where the rubber will meet the road."

Illustration of a photograph of a shadowy figure with a magnifying glass revealing an eye. 

Future

Facial recognition system

Secretary of State Mike Pompeo said in a Friday evening interview that "we can say pretty clearly that it was the Russians" behind a massive cyber attack that breached dozens of government agencies, think tanks and companies.

Driving the news: Pompeo's comments on "The Mark Levin Show" are the first from a Trump administration official publicly linking Russia to the hack. President Trump has yet to address the issue.

The State Department is one on a list of federal agencies found to have been attacked, per the Washington Post.

The Cybersecurity and Infrastructure Agency said Thursday that the breach was "a grave risk to the federal government."

Russian President Vladimir Putin has denied involvement in the hacking, the Post writes.

What he's saying: "I can’t say much more as we’re still unpacking precisely what it is, and I’m sure some of it will remain classified," Pompeo said.

[T]here was a significant effort to use a piece of third-party software to essentially embed code inside of U.S. Government systems and it now appears systems of private companies and companies and governments across the world as well," he continued. 

"This was a very significant effort, and I think it’s the case that now we can say pretty clearly that it was the Russians that engaged in this activity."

Catch up quick via Axios' Ina Fried: The attack, attributed to Russia, began with the targeting of security firm SolarWinds. Gaining access there allowed the nation-state hackers access to information from a variety of high-profile agencies and companies, including the Treasury, Commerce and Homeland Security departments.

CISA issued an "emergency directive" last Sunday requiring all federal civilian agencies to review their networks and immediately disconnect SolarWinds Orion software products, following a suspected Russian hack on the Treasury and Commerce Department.

Of note: President-elect Biden released a statement saying his administration "will make cybersecurity a top priority" and he "will not stand idly by in the face of cyber assaults on our nation."

Pompeo says Russia is "pretty clearly" behind cyberattack on U.S.

Pompeo is the first member of the Trump administration to publicly link Russia to the cyberattack.

Mike Pompeo. Photo: Jessica McGowan/Getty Images

Politics

Cyber crime

Donald Trump

Russia

President Biden has made the COVID-19 crisis and a post-Trump return to national unity and traditional democratic ideals his top priorities. From vaccinations to stimulus to schools, Biden is seeking bipartisan compromise while showing a willingness to use executive authority and bare Democratic majorities in the U.S. House and Senate to implement his policies. Republican leaders are navigating deep party divisions over if and how to move beyond former President Trump.

Politics & Policy

A cybersecurity firm is working with the Vatican to defend its priceless collection of digitized writings from hacking efforts.

Why it matters: Digitizing library archives can provide an invaluable backup should the originals be lost or destroyed, but they're also vulnerable to cyberattacks. Without stout defenses, digital libraries can be looted or even vandalized.

What's happening: The more than 500-year-old Vatican Library, which holds among other historical treasures the oldest surviving copy of the Bible, has been in the process of digitizing over 80,000 of its rarest documents.

The digital archive "allows more people to explore the world’s history firsthand," says Manlio Miceli, chief information officer for the Vatican Library. 

But the archive also presents a tempting target to hackers, which is why the Library announced last month that it would begin working with the cyber AI company Darktrace to defend its digital treasures.

How it works: Justin Fier, the director for cyber intelligence and analysis at Darktrace, says the company has been defending the library against about 100 hacking attempts per month.

As part of its cyberdefense efforts, Darktrace is employing what it calls an "enterprise immune system," which develops an ongoing understanding of normal activity within the Vatican Library's digital operations, so it can quickly detect when something is off.

"What we can do is tell you what's usual and what's unusual," says Fier. "And 90% of the time, the unusual turns out to be either intentionally or unintentionally malicious."

The bottom line: As a former Catholic altar server, I just want to know whether hacking the Pope counts as a venial or a mortal sin. 

Cyber AI firm helps Vatican digitize its library archives

Darktrace has been defending the library against about 100 hacking attempts per month.

Illustration of The Creation of Adam with Adam's hand replaced with a hand cursor.  

Cybersecurity

Axios Finish Line

Microsoft has a new tool called "Productivity Score" that lets managers track how often their workforces are using Word and Excel, how many emails they're sending on Outlook, and how many video meetings they're attending on Teams or Skype.

The big picture: After fielding backlash over privacy concerns, Microsoft no longer allows companies to collect individual employee data with the tool. Firms can just look at aggregate numbers to track how they're using different products.

Why it matters: Just as the coronavirus pandemic has acted as an accelerant for the adoption of remote work, it has also normalized increased surveillance and data collection such as the "Productivity Score."

Some employers are taking workers' temperatures and collecting medical histories in the name of safety.

Others are using trackers to surveil their remote employees because they might doubt their ability to get work done at home.

The bottom line: Integrating such invasive surveillance technology into the workplace can swiftly erode workers' trust in their bosses and push them to quit.

Go deeper: The pandemic is ushering in a new era of workplace surveillance

Editor's note: This story has been corrected to reflect that Microsoft's "Productivity Score" no longer allows companies to collect individual employee data.

Breaking down Microsoft's "Productivity Score" tool

The pandemic has normalized increased surveillance and data collection such as the "Productivity Score."

Illustration of a surveillance camera and someone at a desk

Business

Microsoft

After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

Codebook

The Swiss intelligence service has known since at least 1993 that Switzerland-based encryption device maker Crypto AG was actually a front for the CIA and its German counterpart, according to a new report released by the Swiss Parliament, but Swiss leaders were in the dark until last year.

Why it matters: Switzerland’s intra-governmental information gap is unlikely to be welcome news in Europe, which already looks warily upon the U.S.’ expansive surveillance practices. Still, Crypto AG provided information of incalculable value to U.S. policymakers over many decades.

Catch up quick: Crypto AG was controlled from 1970 on by the CIA and the West German BND intelligence agency. It sold encryption devices — often employed in diplomatic communications — that were used by over 120 countries through the 2000s.

In an incredible intelligence coup, the U.S. and Germans were therefore able to decrypt these communications at will.

Where it stands: The CIA and BND did not spy on Switzerland using Crypto AG machines, says the new parliamentary findings, but Switzerland did take advantage of the surveillance tech itself, per Swissinfo.

The parliamentary report raises questions about why Switzerland’s civilian leadership was not informed for decades about the U.S. and German front company.

Report: Swiss government long in dark over CIA front company

A parliamentary report raises questions about why Switzerland’s civilian leadership was not informed for decades about the U.S. and German front company.

Photo by: Godong/Universal Images Group via Getty Image

Switzerland

Governments around the world have seized on the coronavirus crisis as an opportunity to expand digital surveillance and harvest more data on their citizens, according to a report out Wednesday from Freedom House, a democracy and human rights research group.

Why it matters: Privacy advocates have warned since early in the pandemic that the tech behind efforts to conduct contact tracing and enforce quarantines and other public safety protocols could be abused and made permanent, particularly in authoritarian countries like China. 

What's happening, according to the report: 

Dozens of countries have rolled out government-backed contact-tracing apps without effective laws to protect people from overly expansive data collection.

China, Russia, India, Singapore, Ecuador and Bahrain were among the countries that Freedom House found implemented apps that either send reams of data unchecked to government servers or make invasive data and health documentation demands.

Governments in at least 28 countries censored websites and social media posts to suppress information like unfavorable health statistics and corruption allegations.

Many have also imprisoned those who speak out online against government mishandling of the pandemic, and some have at times imposed total internet blackouts on their citizens.

By the numbers: As documented in a release summing up the findings:

Authorities censored reporting on the virus in 28 countries and arrested online critics in 45 countries.

In at least 20 countries, the pandemic was cited as a justification to impose vague or overly broad restrictions on speech. Residents of at least 13 countries experienced internet shutdowns...

In at least 30 countries, governments are invoking the pandemic to engage in mass surveillance in direct partnership with telecommunications providers and other companies. 

Of note: China was found to have the world's worst conditions for internet freedom for the sixth consecutive year, but the U.S. was not far behind — in 7th place, with internet freedom worsening for the fourth year running, Freedom House found.

Digital surveillance around the Black Lives Matter movement as well as disinformation and threats to social media companies pushed by President Trump contributed to the nation's poor showing.

Iceland boasts the greatest internet freedom, the report found.

What they're saying: "History has shown that technologies and laws adopted during a crisis tend to stick around," Adrian Shahbaz, Freedom House's director for technology and democracy and a coauthor of the report, said in a statement. "As with 9/11, we will look back on COVID-19 as a moment when governments gained new, intrusive powers to control their populations."

COVID is worsening global internet freedom, report finds

Freedom House says governments are using COVID-19 to seize "new, intrusive powers."

A photo of smartphones displaying Singapore's TraceTogether contact-tracing app

Singapore's TraceTogether contact-tracing app. Photo: Catherine Lai/AFP via Getty Images

COVID-19

The militia groups who had allegedly plotted to kidnap Michigan Gov. Gretchen Whitmer (D) also discussed kidnapping Virginia Gov. Ralph Northam (D) during a June meeting in Ohio, an FBI agent testified in court on Tuesday.

The big picture: FBI agent Richard Trask was part of the investigation that thwarted an extremist plot last week to kidnap Whitmer and overthrow state governments and law enforcement. Six Michigan residents were arrested in connection with the plot, while seven others linked to the militia group Wolverine Watchmen were arrested for allegedly planning to attack the Michigan Capitol.

Details: Since early 2020, the FBI has been tracking violent extremist groups via social media sites. The FBI had an inside source at the meeting held in June, in which attendees from "four or five" states allegedly went over their plans.

“They discussed possible targets, taking a sitting governor, specifically issues with the governor of Michigan and Virginia based on the lockdown orders,” Trask said at Tuesday's hearing. 

The common thread between both politicians was their strict initial responses to the coronavirus, although many of the restrictions have since been lifted.

A spokesperson for Northam said that members of his security detail had been alerted by the FBI throughout the investigation.

What they're saying: "Here's the reality: President Trump called upon his supporters to 'LIBERATE VIRGINIA' in April — just like Michigan," the Northam spokesperson said in a statement.

"In fact, the President regularly encourages violence against those who disagree with him. The rhetoric coming out of this White House has serious and potentially deadly consequences. It must stop."

Of note: The prosecution of the six men charged with the intent to kidnap Michigan's governor is ongoing and the defendants face up to life in prison if convicted.

FBI says Virginia governor was a potential target for militia kidnapping plot

An FBI agent testified during a hearing about the alleged plot to kidnap Michigan's governor.

Virginia Gov. Ralph Northam (D) speaks during a news conference. Photo by Zach Gibson/Getty Images

Virginia Gov. Ralph Northam (D) speaks during a news conference. Photo: Zach Gibson/Getty Images

Ralph Northam

Big Tech

Jessica Rosenworcel, a Federal Communications Commissioner, said Tuesday that she hopes smart cities and 5G could eventually predict and ensure the safety of its residents, even from natural disasters like wildfires.

What she's saying: "Wouldn’t it be fantastic if we knew those kind of things well in advance, if we had a predictive ability that exceeds what we have today because we are looking at patterns at a scale that previously we haven’t been able to do? I think that those things are real and they are not so in the far-off future," she told Axios' Erica Pandey at a virtual event. 

Why it matters: Much of the FCC's work involves overseeing the country's use of broadband, 5G development, satellite, cable and other technologies in both the public and private sectors. 

5G is the next generation of broadband, Rosenworcel said, that boost cities' internet speed and incorporate technology into infrastructure. 

The state of play: Rosenworcel, one of two Democrats on the five-member commission, cited several instances that smart-city technology could help solve problems for Americans' every day lives: 

Health: Sensors installed to monitor environmental qualities could collect data on long-term air quality, the prevalence of asthma and frequently traveled routes.

Commute: "If we can find ways to make sure our traffic lights talk to one another and then talk to our cars and talk to our vehicles, and reduce our commute times, I think we really will improve quality of life for a lot of people who go to work every day," she said.

Agriculture: Technology could also help farmers understand how to best use chemicals, fertilizer and water without waste and damage to the environment for better yields, she said.  

Watch the event, Axios' Smart Main Street, on Axios.com.

FCC: 5G could eventually help cities predict and prevent wildfires

"I think that those things are real and they are not so in the far off future."

Jessica Rosenworcel, commissioner of the Federal Communications Commission

Axios' Erica Pandey, (left) with Jessica Rosenworcel (right), Federal Communications Commissioner. Photo: Axios.

Federal Communications Commission (FCC)

Cities

Transportation

President Trump's crackdown on TikTok suggests that the U.S. government is starting to see the internet more like China does — as a network that countries can and should control within their borders.

The big picture: Today's global internet has split into three zones, according to many observers: The EU's privacy-focused network; China's government-dominated network; and the U.S.-led network dominated by a handful of American companies. TikTok's fate suggests China's model has U.S. fans as well.

Why it matters: As the global internet splinters further, the U.S. and China look set to enter a Cold War-style battle for the hearts and minds of global users and developing nations. In this fight, U.S. nationalism may make a weaker case to the world than the ideal of internet freedom and open networks that the U.S. once evangelized.

Driving the news: President Trump's threat to ban TikTok from the U.S. has fast-tracked an effort to force the video-sharing app's Chinese owners to sell it to a U.S. company (Microsoft is in talks).

Be smart: The move puts other foreign-owned companies on notice that the U.S. intends to favor American-owned businesses in the digital world. 

That's a giant break from a long-established bipartisan consensus that American interests are best served by a U.S. marketplace, online and off, managed as a level playing field.

China started this game — it was the first country to self-isolate from the global internet. 

China controls information flows inside its borders, and its "great firewall" keeps most information the government dislikes from entering the country. 

The Chinese government has ensured that its most widely used search and social services are domestically owned, and its laws now require any internet service to share data with the authorities.

Meanwhile, the EU's new privacy rules have created a different kind of internet zone  governed by a stringent set of standards for handling individual user data.

Last month, a major EU ruling struck down the Privacy Shield, an arrangement between the EU and the U.S. that enabled companies to transfer data into and out of EU nations without risk. 

Trump's crackdown on TikTok suggests that the U.S. is now adopting a more China-like perspective on what kinds of actions governments should take toward internet companies, including:

The U.S. is now playing by China's internet rules

China believes in nationalist control over digital networks, and increasingly, so does the White House.

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