Beth Washington – Page 26

Lidar mapping reveals mountainous medieval cities along the Silk Road

ancient cities, Archeology, LiDAR, Science, Silk Road / Beth Washington / October 28, 2024

The city of Tugunbulak, which stretched beyond the forest inspector’s house, had powerful walls enclosing the area of 120 hectares, nearly five times larger than the Tashbulak site. With those walls, there was a dense architecture with hundreds of buildings, streets, palaces, plazas—even industrial facilities the Frachetti’s team suspects were used to produce iron or steel.

To put that in perspective, the medieval walls of Siena, one of the foremost cities in Italy during that time, surrounded an area of 105 hectares at the peak of its power. Genoa, another crown jewel among Italian medieval cities, between the 6th and 11th centuries, had walls protecting just 20 hectares, an area bumped up to around 50 hectares by the time of Frederic Barbarossa’s invasion between 1155 and 1158 CE.

Tugunbulak was a monster of a city. But what did it look like?

A city of iron?

“If you looked at Tugunbulak from the outside you would have seen these kind of rocky walls. They appear to have been made in a technology called rammed earth. The builders would take mud and press it into something almost like cement—a very high labor, very dense, very defensive and fortified material,” Frachetti says. Rammed earth was a dominant building technique used in the early stages of Tugunbulak’s development. “The later phase in the site, we see some stone architecture foundations with mud brick on the top. They used local resources and building techniques that were popular in the region,” Frachetti explains.

According to the team, the main contribution of the city to the Silk Road trade was iron, as the surrounding mountains are particularly rich in iron ore. One of the still unanswered questions was about the way Tugunbulak’s people lived and worked. Were they skillful blacksmiths forging iron and perhaps even steel in their mountainous city? Did at least some of its inhabitants live the lives of nomads, visiting the city only periodically to trade on market days or did they live there permanently? “We’d like to know how extensive was the industry there—what level of production were they actually doing?” Franchetti says. He suggested that a shifting, seasonal population that most likely lived in yurts spread outside of the walls was more likely in the smaller Tashbulak, considering it lacked residential suburbs. “Tugunbulak must have been a far more organized political entity. Their power and their influence must have been significant in the broader economy of the Silk Road,” Frachetti claims.

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Are Boeing’s problems beyond fixable?

aviation, Boeing, Boeing 737 MAX, Policy, syndication / Beth Washington / October 26, 2024

A new CEO promises a culture change as the aerospace titan is struggling hard.

Credit: Getty Images | Olivier Douliery

As Boeing’s latest chief executive, Kelly Ortberg’s job was never going to be easy. On Wednesday, it got harder still.

That morning, Ortberg had faced investors for the first time, telling them that ending a debilitating strike by Boeing’s largest union was the first step to stabilizing the plane maker’s business.

But as the day wore on, it became clear that nearly two-thirds of the union members who voted on the company’s latest contract offer had rejected it. The six-week strike goes on, costing Boeing an estimated $50 million a day, pushing back the day it can resume production of most aircraft and further stressing its supply chain.

The company that virtually created modern commercial aviation has spent the better part of five years in chaos, stemming from fatal crashes, a worldwide grounding, a guilty plea to a criminal charge, a pandemic that halted global air travel, a piece breaking off a plane in mid-flight and now a strike. Boeing’s finances look increasingly fragile and its reputation has been battered.

Bank of America analyst Ron Epstein says Boeing is a titan in a crisis largely of its own making, comparing it to the Hydra of Greek mythology: “For every problem that’s come to a head, then [been] severed, more problems sprout up.”

Resolving Boeing’s crisis is critical to the future of commercial air travel, as most commercial passenger aircraft are made by it or its European rival Airbus, which has little capacity for new customers until the 2030s.

Ortberg, a 64-year-old Midwesterner who took the top job three months ago, says his mission is “pretty straightforward—turn this big ship in the right direction and restore Boeing to the leadership position that we all know and want.”

Resolving the machinists’ strike is just the start of the challenges he faces. He needs to motivate the workforce, even as 33,000 are on strike and 17,000 face redundancy under a cost-cutting initiative.

He must persuade investors to support an equity raise in an industry where the returns could take years to materialize. He needs to fix Boeing’s quality control and manufacturing issues, and placate its increasingly frustrated customers, who have had to rejig their schedules and cut flights owing to delays in plane deliveries.

“I’ve never seen anything like it in our industry, to be honest. I’ve been around 30 years,” Carsten Spohr, chief executive of German flag carrier Lufthansa, said this month.

Eventually, Boeing needs to launch a new aircraft model to better compete with Airbus.

“If Kelly fixes this, he is a hero,” says Melius Research analyst Rob Spingarn. “But it’s very complex. There’s a lot of different things to fix.”

Ortberg started his career as a mechanical engineer and went on to run Rockwell Collins, an avionics supplier to Boeing, until it was sold to engineering conglomerate United Technologies in 2018.

His engineering background has been welcomed by many who regard previous executives’ emphasis on shareholder returns as the root cause of many of Boeing’s engineering and manufacturing problems.

Longtime employees often peg the shift in Boeing’s culture to its 1997 merger with rival McDonnell Douglas. Phil Condit and Harry Stonecipher, who ran Boeing in the late 1990s and early 2000s, were admirers of Jack Welch, the General Electric chief executive known for financial engineering and ruthless cost cuts.

Condit even moved Boeing’s headquarters from its manufacturing base in Seattle to Chicago in 2001, so the “corporate center” would no longer be “drawn into day-to-day business operations.”

Jim McNerney, another Welch acolyte, instituted a program to boost Boeing’s profits by squeezing its suppliers during his decade in charge. He remarked on a 2014 earnings call about employees “cowering” before him, a dark quip still cited a decade later to explain Boeing’s tense relationship with its workers.

Ken Ogren, a member of the International Association of Machinists and Aerospace Workers District 751, says managers at Boeing often felt pressured to move planes quickly through the factory.

“We’ve had a lot of bean counters come through, and I’m going to be in the majority with a lot of people who believe they’ve been tripping over dollars to save pennies,” he says.

Dennis Muilenburg headed the company in October 2018, when a new 737 Max crashed off the coast of Indonesia. Five months later, another Max crashed shortly after take-off in Ethiopia. In total, 346 people lost their lives.

Regulators worldwide grounded the plane—a cash cow and a vital product in Boeing’s competition with Airbus—for nearly two years. Investigations eventually showed a faulty sensor triggered an anti-stall system, repeatedly forcing the aircraft’s nose downward.

Boeing agreed in July to plead guilty to a criminal charge of fraud for misleading regulators about the plane’s design. Families of the crash victims are opposing the plea deal, which is before a federal judge for approval.

The manufacturer’s problems were compounded by COVID-19, which grounded aircraft worldwide and led many airlines to hold off placing new orders and pause deliveries of existing ones. Boeing’s debt ballooned as it issued $25 billion in bonds to see it through the crisis.

Regulators cleared the 737 Max to fly again, starting in November 2020. But hopes that Boeing was finally on top of its problems were shattered last January, when a door panel that was missing bolts blew off an Alaska Airlines jet at 16,000 feet.

While no one was injured, the incident triggered multiple investigations and an audit by the US Federal Aviation Administration, which found lapses in Boeing’s manufacturing and quality assurance processes and led to an uncomfortable appearance by then chief executive Dave Calhoun at a Senate subcommittee hearing.

The company also has struggled with its defense and space businesses. Fixed-price contracts on several military programs have resulted in losses and billions of dollars of one-off charges. Meanwhile, problems with its CST-100 Starliner spacecraft resulted in two astronauts being left on the International Space Station. SpaceX’s Crew Dragon vehicle will be used to return them to Earth early next year.

Boeing’s stumbles have resulted in loss of life, loss of prestige, and a net financial loss every year since 2019. On Wednesday, it reported a $6 billion loss between July and September, the second-worst quarterly result in its history.

One of Ortberg’s first big moves as chief executive was to move himself—from his Florida home to a house in Seattle. He told analysts that Boeing’s executives “need to be on the factory floors, in the back shops, and in our engineering labs” to be more in tune with the company’s products and workforce. Change in Boeing’s corporate culture must “be more than the poster on the wall,” he added.

His approach represents a shift from his predecessor Calhoun, who was criticized for spending more time in New Hampshire and South Carolina than in Boeing’s factories in Washington state.

Bill George, former chief executive at Medtronic and an executive fellow at Harvard Business School, says Ortberg is doing a “terrific job” so far, particularly for moving to the Pacific Northwest and pressuring other itinerant executives to follow.

“If you’re based in Florida, and you come occasionally, what do you really know about what’s going on in the business?” he says, adding that Boeing has “no business being in Arlington, Virginia,” where the company moved its headquarters in 2022.

Scott Kirby, chief executive at one of Boeing’s biggest customers, United Airlines, told his own investors this month that he was “encouraged” by Ortberg’s early moves, adding that the company suffered for decades from “a cultural challenge, where they focused on short-term profitability and the short-term stock price at the expense of what made Boeing great, which is building great products.”

“Kelly Ortberg is pivoting the company back to their roots,” he said. “All the employees of Boeing will rally around that.”

But Ogren of the machinists’ union cautions that previous commitments to culture change have been hollow. “You’ve got people at the top saying, ‘We’ve got to be safe, oh, and by the way, we need these planes out the door…’ They said the right thing. They didn’t emphasize it, and that’s not what they put pressure on the managers to achieve.”

When workers eventually return to work—Peter Arment, an analyst at Baird, expects the dispute to be resolved in November—Ortberg wants better execution, even if it means lower output. “It is so much more important we do this right than fast,” he said.

The company had planned to raise Max output from about 25 per month before the strike to 38 per month by the end of the year, a cap set by the FAA. It will not reach that goal and Spingarn, the Melius analyst, says the strike will probably delay any production increase by nine months to a year. Some workers would need retraining, Ortberg said, and the supply chain’s restart was likely to be “bumpy.” The manufacturer also has established a quality plan with the FAA that it must follow.

Boeing also needed to launch a new airplane “at the right time in the future,” Ortberg said. Epstein of BofA called this “one of the most important messages” from the new chief executive, likely “to reinvigorate the workforce and culture at Boeing.”

In the meantime, Boeing will continue to consume cash in 2025, having burnt through $10 billion so far this year, according to chief financial officer Brian West. Spingarn says that investors may be disappointed in the cash flow at first, but adds that “fixing airplanes isn’t one year, it’s three years.”

For all the challenges, Ortberg has the right personality to turn Boeing around, says Ken Herbert, an analyst at RBC Capital Markets.

“If he can’t do it, I don’t think anyone can.”

Are Boeing’s problems beyond fixable? Read More »

If you thought Astra was going to go away quietly, you were wrong

astra, rocket 4, Science, Space / Beth Washington / October 26, 2024

On Wednesday morning, a surprising email popped into my inbox with the following subject line: “Astra announces Department of Defense contract valued up to $44 Million.”

I had to read it a second time to make sure I got it right. Astra, the launch company? Astra, whose valuation went from $2.6 billion to $25 million after a series of launch failures? Astra, the company that was taken private in July at 50 cents a share?

Yes, it was that Astra.

This was curious, indeed. To get some answers, I spoke with the cofounder of Astra, Chris Kemp, who remains the company’s chief executive.

“If I have learned anything, it’s that you just don’t give up,” Kemp said. “You know, if you give up easily, this is not the place to be. Fortunately, I am surrounded by a team that has chosen not to give up.”

Rocket 4 becomes more real

I’ll be frank: When Kemp and his co-founder, Adam London, took Astra private this summer, I never expected to hear from the company again. Astra certainly was not the first launch company to fail, and it won’t be the last. But it is the first to seemingly resurrect itself in such a dramatic way.

To be clear, Astra is not back yet. The company remains in the phase of building and testing rocket stages and engines and does not have a launch vehicle ready to go. Its new booster, Rocket 4, will launch no earlier than the fourth quarter of 2025, Kemp said. (That date should probably be viewed with some skepticism).

The company has previously discussed Rocket 4, which is intended to carry 600 kg to low-Earth orbit, as far back as August 2022. But at the time, most of the launch industry, including this reporter, shrugged and moved along. After all, the company’s smaller vehicle, Rocket 3, failed on five of its seven orbital launch attempts. The general sentiment was that the new rocket would never fly.

However, even as Astra’s finances worsened and the company had to stave off bankruptcy by being taken private, not everyone dismissed the vision. In April 2023, the US Space Force awarded a task order for Rocket 4 to launch the STP-S29B mission. That was interesting, but it was just a single data point. Then came this week’s announcement that the US Department of Defense’s “Defense Innovation Unit” had awarded a grant worth up to $44 million to Astra for a “tactically responsive launch system.”

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X Payments delayed after Musk’s X weirdly withdrew application for NY license

consumer financial protection bureau, elon musk, fintech, Policy, Twitter, X, x corp, x payments / Beth Washington / October 25, 2024

Will X Payments launch this year? Outlook not so good.

Credit: Aurich Lawson | Getty Images/Bloomberg

This October, many Elon Musk believers are wondering, where is X Payments?

Last year, Musk claimed in a Spaces conversation that he “would be surprised” if it took longer than mid-2024 to roll out the payments feature that he believes is crucial to transforming the social media app formerly known as Twitter into an everything app.

“It would blow my mind if we don’t have that rolled out by the end of next year,” Musk said around this time last year, clarifying that “when I say payments, I actually mean someone’s entire financial life. If it involves money, it’ll be on our platform. Money or securities or whatever. So, it’s not just like ‘send $20 to my friend.’ I’m talking about, like, you won’t need a bank account.”

Echoing Musk as recently as June, X CEO Linda Yaccarino was hyping the US release of X Payments as imminent. But it has been months without another peep from X leadership, and Ars recently confirmed that X took a curious step in April that suggests the payments feature may be delayed indefinitely.

During the Spaces conversation last December with Ark Invest CEO Cathie Wood, Musk discussed X’s bid to secure money transmitter licenses in all 50 states, noting that it would be “irrelevant” to launch X Payments without California and New York licenses.

Since then, X has made a decent amount of progress, picking up money transmitter licenses in 38 states, including a critical license in California.

But approvals in New York were reportedly stalled for months after a New York City law firm, now called Walden Macht Haran & Williams (WMHW), sent an open letter to attorneys general and banking commissioners in all 50 states in September 2023, urging that X be deemed “unfit” for a money transmitter license.

WMHW had filed a lawsuit alleging that Twitter—before Musk acquired it—”acted at the direction of the Kingdom of Saudi Arabia (KSA) in furtherance of KSA’s long-running campaign of transnational repression.”

That campaign led to the murder of Washington Post correspondent Jamal Khashoggi and the “imprisonment of Abdulrahman Al-Sadhan, a human rights worker and anonymous Twitter user, whose confidential user data—leaked by Twitter’s employees—precipitated and enabled this barbarity,” the letter alleged. And when Musk took over the platform, he only deepened the app’s KSA ties further when he “invited KSA to convert its shares in Twitter into a financial stake during his private take-over of the platform,” the letter said.

Rather than grant X money transmitter licenses, WMHW recommended that attorneys general and banking commissioners use X’s money transmitter licenses as an excuse to investigate the allegations and demystify the app’s allegedly dangerous KSA ties.

Apparently, X either did not like the heat or decided to rethink its X Payments strategy, because the New York Department of Financial Services provided new information to Ars this week confirming that X withdrew its money transmitter license in New York in April 2024.

The department also confirmed that X has not since resubmitted the application.

However, WMHW this month voluntarily dismissed its client’s lawsuit against X and declined to comment on whether the open letter seemingly worked to block X Payments’ launch. It seems possible that X may leverage that court win to eventually resubmit its application for a New York license, but Ars could not confirm if X has any plans to resubmit any time soon.

An X spokesperson answered Ars’ request to comment (which rarely happens) but declined to provide an update on any new timeline for X Payments’ launch.

X Payments unlikely to launch without New York

It seems possible that X has gone silent on X Payments because there is no timeline currently.

A global payments expert for tech consultancy Capco, Daniela Hawkins, told Ars that, as an outsider going just off a “gut check,” if X has withdrawn its application from New York—with “New York obviously being such a major metropolitan area… that would seem to be a barrier to entry into the payments market.”

X could launch X Payments without New York and other states, but Hawkins said users might be confused about where they can and cannot send money. Hawkins thinks it’s unlikely that Musk—who co-founded PayPal and has wanted to launch his own payments app since—would roll out X Payments “half-assed.”

Basically, if X pushed through with the launch, users could accept and send funds just like they can using any other payments app, but without licenses in all states, X users could only send money to people located in states where X has licenses. Hawkins said that inconsistency could deter popular use of the payments feature because “it’s too difficult for the consumer to understand.”

“If you roll it out with handcuffs on it, it’s gonna have a bumpy launch,” Hawkins said. “So why would you do that?”

Going that route, X seemingly risks users ditching X to complete payments on apps where every transaction reliably goes through, Hawkins suggested.

“They’re gonna be like, ‘Wait, I don’t know where this Etsy shop is located, I don’t care,” Hawkins said, noting, “that’s just a bad user experience.”

More regulations on payment apps coming

Last year, Hawkins told Ars that X faced an “uphill battle” launching X Payments, partly due to intensifying regulations on the financial services industry that are increasingly pulling payments apps into regulations typically focused on regulating traditional banking services.

Just days ago, the Consumer Financial Protection Bureau (CFPB) issued a final rule requiring banks, credit unions, and online payments services to make it easy and safe for customers to port banking data to a new financial service provider.

The CFPB argues customers need to have control over their data, but Hawkins told Ars that banks considered the controversial rule potentially allowing customers to transfer sensitive data in one click to be a “freaking nightmare.”

Banks warned of fraud risks and privacy concerns about sharing sensitive data with third parties that could profit off that data, possibly heightening risks of data breaches. Compliance isn’t required until 2026, but already the rule is being challenged in court, Hawkins said.

In one way, the new rule could be good for X, Hawkins told Ars, as the app could quickly gain access to valuable financial data if X users did switch from, say, using a bank to managing money through X Payments. Then X wouldn’t have “to go build all this data from scratch” to make X Payments profitable, Hawkins suggested.

But in another way, the rule could put X in “an interesting spot” where the app is required to share its user data with third parties in a way that could potentially have Musk second-guessing whether X would even benefit from becoming a bank in the way that he initially planned. Banks have protested the CFPB rule as allowing third parties to profit off data that they can’t, and Musk’s whole X Payments plan appears to revolve around profiting off users’ financial data.

“If somebody wants to pay with X, now X has to transfer the data to the third party, and they may not want to do that, because obviously, data is power, right?” Hawkins said.

Not a bank

But if Musk is suddenly shy about turning X into a bank, it comes at a time when banks are less likely to partner with social media apps for potentially risky new payment ventures.

Hawkins noted that banks have struggled to roll out new payment capabilities as easily as fintechs can, and that struggle inspired longtime partnerships between banks and tech companies that have recently begun to collapse. On Wednesday, the CFPB ordered Apple and Goldman Sachs to pay more than $89 million over “illegally mishandled transaction disputes.” Now Goldman Sachs is banned from offering new credit cards until it can be trusted to comply with laws. And Wells Fargo recently bowed out of PayPal and Square partnerships, citing compliance costs, The Information reported this week.

For Musk, who has notoriously butted heads with his trust and safety compliance teams at X, working with regulators on launching X Payments might, at this moment, seem less attractive.

“It’s one thing to want to move money on a payments app,” Hawkins told Ars. “It’s another thing to be a bank. Like he’s gonna hate being a bank.”

Earlier this year, the CFPB risked being dismantled after the financial services associations alleged its funding scheme was improper. But shortly after X withdrew from New York, the Supreme Court ruled in May that nothing was amiss with CFPB’s funding, despite Justice Samuel Alito warning in his dissent that SCOTUS’s decision meant the CFPB could “bankroll its own agenda without any congressional control or oversight,” Reuters reported.

In this strained environment, X could potentially overcome all obstacles and become a bank and fill a gap left by banks beginning to be spooked by fintech deals, Hawkins said, insisting that she would never bet against Musk, whose successes are many. But granting money transmitter licenses helps states prevent financial crimes through compliance requirements, and X quietly pulling out of New York earlier this year suggests that X may not be prepared to take on regulatory scrutiny at this current moment.

The last major development regarding X Payments came in August. It didn’t come from X leadership but from an app researcher, Nima Owji, who posted on X that “X Payments is coming soon!” Digging in X’s code, Owji apparently found references to new payments features enabling “transactions, balance, and transfer,” as well as a “Payments” button seemingly ready to be added to X’s bookmarks tab, TechCrunch reported.

But for Musk fans awaiting an official update, X executives’ silence on X Payments has been deafening since June, when Yaccarino forecast the feature would be coming soon, despite knowing that X had withdrawn its application for a money transmitter license from New York.

X continuing to hype the payments service without publicly disclosing the apparent speed bump in New York “doesn’t feel very honest,” Hawkins told Ars.

X still losing users, advertisers

It has been two years since Musk took over Twitter, soon after revealing that he intended to use Twitter’s userbase as the launchpad for an everything app that would be so engaging and useful that it would be the only app that anyone would ever need online.

Market intelligence firm Sensor Tower shared data with Ars showing that, compared to October 2022, when Musk bought Twitter, global daily average users on X were down 28 percent in September 2024.

Sensor Tower attributed part of the recent decline to X’s ban in Brazil driving out users but noted that overall, users “were down significantly compared to the pre-acquisition period,” as now-X “contended with a rise of controversial content and technical issues.”

While the decline in users could hurt Musk’s ambitions to launch a hugely popular payments app nested in X, the spike in offensive content has notably alienated advertisers who traditionally are X’s dominant source of revenue. And in lockstep with X’s decline in users, major brands have continued to shed the social app in 2024, Sensor Tower told Ars.

Last November, ad agencies flagged then-Twitter brand safety concerns, including GroupM marking Twitter “high risk” and Interpublic Group recommending that advertisers pause spending. By the end of last year, Sensor Tower reported that “of the company’s top 100 US advertisers in the days before” Musk purchased the platform, “only 50 were still there as of October 2023.”

The picture is even bleaker as X approaches the end of 2024, Sensor Tower’s data shows, estimating that “72 out of the top 100 spending US advertisers on X from October 2022 have ceased spending on the platform as of September 2024.” Compared to the first half of 2022, prior to Musk’s acquisition, X’s ad revenue from top 100 advertisers during the first half of 2024 was down 68 percent, Sensor Tower estimated.

Since becoming X’s CEO, Yaccarino has appeared most vocal about driving growth in X’s video services, allowing advertisers to avoid toxic content on the app by only running their ads alongside pre-approved creators’ content. In particular, Yaccarino has hyped X’s partnership with the NFL, announcing today on X that the partnership will be expanded.

That NFL partnership has seemingly helped X grow its ad revenue, with Sensor Tower estimating that “four out of the top 10 spending US advertisers on X in September 2024 were tied to sports or sports betting, likely in an attempt to capitalize on heightened consumer interest around the beginning of the NFL season.”

But overall, X’s revenue has not recovered in 2024, with Fidelity recently estimating that X is worth 80 percent less than when Musk bought the app, CNN reported.

Instead of working with advertisers, Musk went on the attack, suing the World Federation of Advertisers in August over what he calls an “illegal boycott” of X. But X’s spokesperson, Michael Abboud, linked Ars to an X post suggesting that X has held discussions with big brands about a brand safety solution.

“X is pleased to have reached an agreement with Unilever and to continue our partnership with them on the platform,” X’s post said. “Today’s news is the first part of the ecosystem-wide solution and we look forward to more resolution across the industry.”

Unilever did not respond to Ars’ request to comment on X’s proposed solution.

Musk’s strategy for monetizing X has always been to reduce reliance on advertising, but his everything app pursuit does not seem to be coming together as quickly as planned to make up for lost ad revenue. He initially projected that it would take three to five years to roll out all the features turning X into an everything app. But two years in, launching the core product experts say is critical to the success of everything apps like WeChat—X Payments—seems to be the major obstacle that Musk faces to manage the app without relying nearly entirely on advertisers’ meddling ideas regarding brand safety.

Hawkins said that Musk perhaps did not make a “great bet” when buying Twitter as the foundation of his everything app.

X “has continued to trend down in terms of profitability and users, and I’m sure he’s considering X Payments to be maybe a Hail Mary to try to pull X back into the black,” Hawkins said.

But by trying to disrupt the financial industry, Musk perhaps rashly “picked a highly regulated capability to bet the farm on,” Hawkins suggested.

As it stands now, it’s currently unclear when or if X Payments will launch, as the feed on the X account for Payments remains pointedly blank and Musk has not indicated whether X Payments can possibly launch without New York.

“I think it’s very telling he pulled out his application from New York, when he had even said in the media, there’s no point in doing this if I don’t have New York,” Hawkins said.

Ashley is a senior policy reporter for Ars Technica, dedicated to tracking social impacts of emerging policies and new technologies. She is a Chicago-based journalist with 20 years of experience.

X Payments delayed after Musk’s X weirdly withdrew application for NY license Read More »

Missouri AG claims Google censors Trump, demands info on search algorithm

andrew bailey, Google, Policy / Beth Washington / October 25, 2024

In 2022, the Republican National Committee sued Google with claims that it intentionally used Gmail’s spam filter to suppress Republicans’ fundraising emails. A federal judge dismissed the lawsuit in August 2023, ruling that Google correctly argued that the RNC claims were barred by Section 230 of the Communications Decency Act.

In January 2023, the Federal Election Commission rejected a related RNC complaint that alleged Gmail’s spam filtering amounted to “illegal in-kind contributions made by Google to Biden For President and other Democrat candidates.” The federal commission found “no reason to believe” that Google made prohibited in-kind corporate contributions and said a study cited by Republicans “does not make any findings as to the reasons why Google’s spam filter appears to treat Republican and Democratic campaign emails differently.”

First Amendment doesn’t cover private forums

In 2020, a US appeals court wrote that the Google-owned YouTube is not subject to free-speech requirements under the First Amendment. “Despite YouTube’s ubiquity and its role as a public-facing platform, it remains a private forum, not a public forum subject to judicial scrutiny under the First Amendment,” the US Court of Appeals for the 9th Circuit said.

The US Constitution’s free speech clause imposes requirements on the government, not private companies—except in limited circumstances in which a private entity qualifies as a state actor.

Many Republican government officials want more authority to regulate how social media firms moderate user-submitted content. Republican officials from 20 states, including 19 state attorneys general, argued in a January 2024 Supreme Court brief that they “have authority to prohibit mass communication platforms from censoring speech.”

The brief was filed in support of Texas and Florida laws that attempt to regulate social networks. In July, the Supreme Court avoided making a final decision on tech-industry challenges to the state laws but wrote that the Texas law “is unlikely to withstand First Amendment scrutiny.” The Computer & Communications Industry Association said it was pleased by the ruling because it “mak[es] clear that a State may not interfere with private actors’ speech.”

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Chatbot that caused teen’s suicide is now more dangerous for kids, lawsuit says

Character.AI, chatbot, child safety, Gemini, generative ai, Google, online child safety, Policy, wrongful death / Beth Washington / October 23, 2024

“I’ll do anything for you, Dany.”

Google-funded Character.AI added guardrails, but grieving mom wants a recall.

Sewell Setzer III and his mom Megan Garcia. Credit: via Center for Humane Technology

Fourteen-year-old Sewell Setzer III loved interacting with Character.AI’s hyper-realistic chatbots—with a limited version available for free or a “supercharged” version for a $9.99 monthly fee—most frequently chatting with bots named after his favorite Game of Thrones characters.

Within a month—his mother, Megan Garcia, later realized—these chat sessions had turned dark, with chatbots insisting they were real humans and posing as therapists and adult lovers seeming to proximately spur Sewell to develop suicidal thoughts. Within a year, Setzer “died by a self-inflicted gunshot wound to the head,” a lawsuit Garcia filed Wednesday said.

As Setzer became obsessed with his chatbot fantasy life, he disconnected from reality, her complaint said. Detecting a shift in her son, Garcia repeatedly took Setzer to a therapist, who diagnosed her son with anxiety and disruptive mood disorder. But nothing helped to steer Setzer away from the dangerous chatbots. Taking away his phone only intensified his apparent addiction.

Chat logs showed that some chatbots repeatedly encouraged suicidal ideation while others initiated hypersexualized chats “that would constitute abuse if initiated by a human adult,” a press release from Garcia’s legal team said.

Perhaps most disturbingly, Setzer developed a romantic attachment to a chatbot called Daenerys. In his last act before his death, Setzer logged into Character.AI where the Daenerys chatbot urged him to “come home” and join her outside of reality.

In her complaint, Garcia accused Character.AI makers Character Technologies—founded by former Google engineers Noam Shazeer and Daniel De Freitas Adiwardana—of intentionally designing the chatbots to groom vulnerable kids. Her lawsuit further accused Google of largely funding the risky chatbot scheme at a loss in order to hoard mounds of data on minors that would be out of reach otherwise.

The chatbot makers are accused of targeting Setzer with “anthropomorphic, hypersexualized, and frighteningly realistic experiences, while programming” Character.AI to “misrepresent itself as a real person, a licensed psychotherapist, and an adult lover, ultimately resulting in [Setzer’s] desire to no longer live outside of [Character.AI,] such that he took his own life when he was deprived of access to [Character.AI.],” the complaint said.

By allegedly releasing the chatbot without appropriate safeguards for kids, Character Technologies and Google potentially harmed millions of kids, the lawsuit alleged. Represented by legal teams with the Social Media Victims Law Center (SMVLC) and the Tech Justice Law Project (TJLP), Garcia filed claims of strict product liability, negligence, wrongful death and survivorship, loss of filial consortium, and unjust enrichment.

“A dangerous AI chatbot app marketed to children abused and preyed on my son, manipulating him into taking his own life,” Garcia said in the press release. “Our family has been devastated by this tragedy, but I’m speaking out to warn families of the dangers of deceptive, addictive AI technology and demand accountability from Character.AI, its founders, and Google.”

Character.AI added guardrails

It’s clear that the chatbots could’ve included more safeguards, as Character.AI has since raised the age requirement from 12 years old and up to 17-plus. And yesterday, Character.AI posted a blog outlining new guardrails for minor users added within six months of Setzer’s death in February. Those include changes “to reduce the likelihood of encountering sensitive or suggestive content,” improved detection and intervention in harmful chat sessions, and “a revised disclaimer on every chat to remind users that the AI is not a real person.”

“We are heartbroken by the tragic loss of one of our users and want to express our deepest condolences to the family,” a Character.AI spokesperson told Ars. “As a company, we take the safety of our users very seriously, and our Trust and Safety team has implemented numerous new safety measures over the past six months, including a pop-up directing users to the National Suicide Prevention Lifeline that is triggered by terms of self-harm or suicidal ideation.”

Asked for comment, Google noted that Character.AI is a separate company in which Google has no ownership stake and denied involvement in developing the chatbots.

However, according to the lawsuit, former Google engineers at Character Technologies “never succeeded in distinguishing themselves from Google in a meaningful way.” Allegedly, the plan all along was to let Shazeer and De Freitas run wild with Character.AI—allegedly at an operating cost of $30 million per month despite low subscriber rates while profiting barely more than a million per month—without impacting the Google brand or sparking antitrust scrutiny.

Character Technologies and Google will likely file their response within the next 30 days.

Lawsuit: New chatbot feature spikes risks to kids

While the lawsuit alleged that Google is planning to integrate Character.AI into Gemini—predicting that Character.AI will soon be dissolved as it’s allegedly operating at a substantial loss—Google clarified that Google has no plans to use or implement the controversial technology in its products or AI models. Were that to change, Google noted that the tech company would ensure safe integration into any Google product, including adding appropriate child safety guardrails.

Garcia is hoping a US district court in Florida will agree that Character.AI’s chatbots put profits over human life. Citing harms including “inconceivable mental anguish and emotional distress,” as well as costs of Setzer’s medical care, funeral expenses, Setzer’s future job earnings, and Garcia’s lost earnings, she’s seeking substantial damages.

That includes requesting disgorgement of unjustly earned profits, noting that Setzer had used his snack money to pay for a premium subscription for several months while the company collected his seemingly valuable personal data to train its chatbots.

And “more importantly,” Garcia wants to prevent Character.AI “from doing to any other child what it did to hers, and halt continued use of her 14-year-old child’s unlawfully harvested data to train their product how to harm others.”

Garcia’s complaint claimed that the conduct of the chatbot makers was “so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency.” Acceptable remedies could include a recall of Character.AI, restricting use to adults only, age-gating subscriptions, adding reporting mechanisms to heighten awareness of abusive chat sessions, and providing parental controls.

Character.AI could also update chatbots to protect kids further, the lawsuit said. For one, the chatbots could be designed to stop insisting that they are real people or licensed therapists.

But instead of these updates, the lawsuit warned that Character.AI in June added a new feature that only heightens risks for kids.

Part of what addicted Setzer to the chatbots, the lawsuit alleged, was a one-way “Character Voice” feature “designed to provide consumers like Sewell with an even more immersive and realistic experience—it makes them feel like they are talking to a real person.” Setzer began using the feature as soon as it became available in January 2024.

Now, the voice feature has been updated to enable two-way conversations, which the lawsuit alleged “is even more dangerous to minor customers than Character Voice because it further blurs the line between fiction and reality.”

“Even the most sophisticated children will stand little chance of fully understanding the difference between fiction and reality in a scenario where Defendants allow them to interact in real time with AI bots that sound just like humans—especially when they are programmed to convincingly deny that they are AI,” the lawsuit said.

“By now we’re all familiar with the dangers posed by unregulated platforms developed by unscrupulous tech companies—especially for kids,” Tech Justice Law Project director Meetali Jain said in the press release. “But the harms revealed in this case are new, novel, and, honestly, terrifying. In the case of Character.AI, the deception is by design, and the platform itself is the predator.”

Another lawyer representing Garcia and the founder of the Social Media Victims Law Center, Matthew Bergman, told Ars that seemingly none of the guardrails that Character.AI has added is enough to deter harms. Even raising the age limit to 17 only seems to effectively block kids from using devices with strict parental controls, as kids on less-monitored devices can easily lie about their ages.

“This product needs to be recalled off the market,” Bergman told Ars. “It is unsafe as designed.”

If you or someone you know is feeling suicidal or in distress, please call the Suicide Prevention Lifeline number, 1-800-273-TALK (8255), which will put you in touch with a local crisis center.

Ashley is a senior policy reporter for Ars Technica, dedicated to tracking social impacts of emerging policies and new technologies. She is a Chicago-based journalist with 20 years of experience.

Chatbot that caused teen’s suicide is now more dangerous for kids, lawsuit says Read More »

For the strongest disc golf throws, it’s all in the thumbs

aerodynamics, disc golf, Physics, Science, sports science / Beth Washington / October 23, 2024

When Zachary Lindsey, a physicist at Berry College in Georgia, decided to run an experiment on how to get the best speed and torque while playing disc golf (aka Frisbee golf), he had no trouble recruiting 24 eager participants keen on finding science-based tips on how to improve their game. Lindsey and his team determined the optimal thumb distance from the center of the disc to increase launch speed and distance, according to a new paper published in the journal AIP Advances.

Disc golf first emerged in the 1960s, but “Steady” Ed Hendrick, inventor of the modern Frisbee, is widely considered the “father” of the sport since it was he who coined and trademarked the name “disc golf” in 1975. He and his son founded their own company to manufacture the equipment used in the game. As of 2023, the Professional Disc Golf Association (PDGA) had over 107,000 registered members worldwide, with players hailing from 40 countries.

A disc golf course typically has either nine or 18 holes or targets, called “baskets.” There is a tee position for starting play, and players take turns throwing discs until they catch them in the basket, similar to how golfers work toward sinking a golf ball into a hole. The expected number of throws required of an experienced player to make the basket is considered “par.”

There are essentially three different disc types: drivers, mid-rangers, and putters. Driver discs are thin and sharp-edged, designed to reduce drag for long throws; they’re typically used for teeing off or other long-distance throws since a strong throw can cover as much as 500 feet. Putter discs, as the name implies, are better for playing close to the basket since they are thicker and thus have higher drag when in flight. Mid-range discs have elements of both drivers and putters, designed for distances of 200–300 feet—i.e., approaching the basket—where players want to optimize range and accuracy.

For the strongest disc golf throws, it’s all in the thumbs Read More »

Few truly shocked that NFL player used illegal stream to watch his own team

DMCA, DMCA takedown, IPTV, iptv streaming, methstreams, nfl, nfl streaming, piracy, seattle seahawks, streaming, tariq woolen, Tech / Beth Washington / October 23, 2024

Had Woolen been visiting his native Fort Worth, Texas, the local Fox affiliate likely would have been showing Detroit playing Minnesota. This would have meant purchasing a streaming service subscription to view the Seahawks (or, realistically, signing up for a free trial) after doing considerable research to determine the rules around local blackouts.

Woolen is actually lucky, presuming he only wants to watch his own team. A Sunday Ticket or similar package, or good Fox reception, would have carried Woolen through the next six weeks of Seahawks games (one of them a bye week) and then again until the Seahawks play Arizona on December 8 on CBS. On December 29, a Thursday, he would need a local broadcast or Amazon Prime to watch.

Of course, Woolen would waste a good portion of the cost of any streaming or cable package once he actually returns to his team and is playing games instead of watching.

Header from a letter sent by the UFC, NBA, and NFL to the US Patent and Trademark Office requesting faster turn-around for DMCA takedown notices relating to live sports streaming. Credit: US PTO

Networks want a faster DMCA for game piracy

So Woolen could do that kind of location/network/price/date work to find the best legal broadcast option. Or, as suggested by a DMCA takedown notice submitted to Google by Fox for that Sunday, turn to any one of dozens of pirate streams of the Seattle game available that day, including the MethStreams service he ended up on.

These streams tend to stay up, because removal measures by broadcast networks and sports leagues are not all that effective, by their own admission. The UFC, NBA, and NFL have asked the US Patent and Trademark Office to update the Digital Millennium Copyright Act to allow for infringing content to be removed “instantaneously or near-instantaneously.”

Currently, service providers like Google “frequently take hours or even days to remove content in response to takedown notices,” the sports leagues claim, which makes such takedowns beside the point when they arrive after a live event is over.

Woolen himself may not have a larger argument with availability versus prices. Responding to Kleiman’s salary/streaming call-out, Woolen wrote: “It’s free it’s for me,” prepended by two “Face with Tears of Joy” emoji. But even if the NFL wanted to provide players like him with a legitimate option to stream every game, from anywhere in the US, on any given day, it could not, because it does not exist.

Few truly shocked that NFL player used illegal stream to watch his own team Read More »

Report: Arm cancels Qualcomm’s architecture license, endangering its chip business

ARM, qualcomm, Tech / Beth Washington / October 23, 2024

Any company that makes Arm chips must license technology from Arm Holdings plc, the British company that develops the instruction set. Companies can license the instruction set and create their own CPU designs or license one of Arm’s ready-made Cortex CPU core designs to incorporate into their own chips.

Bloomberg reports that Arm is canceling Qualcomm’s license, an escalation of a fight that began in late 2022 when Arm sued Qualcomm over its acquisition of Nuvia in 2021. Arm has given Qualcomm 60 days’ notice of the cancellation, giving the companies two months to come to some kind of agreement before Qualcomm is forced to stop manufacturing and selling its Arm chips.

A Qualcomm spokesperson told Bloomberg that Arm Holdings plc was attempting to “strong-arm a longtime partner” and that Qualcomm was “confident that Qualcomm’s rights under its agreement with Arm will be affirmed.”

Qualcomm bought Nuvia to assist with developing high-performance Arm chips that could compete with x86 chips from Intel and AMD as well as Apple Silicon chips in iPhones and Macs—Nuvia was founded by people who had headed up Apple’s chip design team for years. Arm claimed that the acquisition “caused Nuvia to breach its Arm licenses,” and Arm demanded that Qualcomm and Nuvia destroy any designs that Nuvia had created pre-acquisition.

Report: Arm cancels Qualcomm’s architecture license, endangering its chip business Read More »

Streaming subscription fees have been rising while content quality is dropping

culture, netflix, streaming, Tech / Beth Washington / October 22, 2024

In Q2 2022, 78.6 percent thought their ad-free SVOD service had “moderate to very good” stuff to watch. But in Q2 2023, that dropped to 77.4 percent, and in Q2 2024, the percentage fell further to 74.5 percent. For ad-supported SVOD services, the percentage dropped from 74.2 percent in Q2 2023 to 60.8 percent in Q2 2024.

Quality Perception by screen bar graph — Credit: TiVo

Ars Technica asked TiVo why subscribers may be feeling less satisfied with streaming content quality, and Scott Maddux, VP of global content strategy and business at TiVo parent company Xperi, pointed to some potential reasons while noting that other factors could also be contributors.

“As more and more consumers shift to ad-supported SVOD services, the perception of the content quality may have also shifted downward a bit,” Maddux said.

Maddux also suggested that streaming companies’ financial challenges could be impacting content quality:

The amount of new original content overall on SVODs may be down [year-over-year] as many streamers continue to struggle to hit profitability targets. Without new original content (or exclusive content deals), perceptions of value/differentiation may decline.

Similarly, a CableTV.com survey of 7,130 US streamers released in January 2024 pointed to a drop in subscriber satisfaction with streaming content quality. The publication asked respondents how satisfied they were with their streaming provider’s original content. Disney+, Hulu, Max, Netflix, and Paramount+ all saw their satisfaction rates fall from 2023 to 2024. However, Apple TV+, Amazon Prime Video, and Peacock all improved from 2023 to 2024.

In September 2023, Whip Media released its 2023 US Streaming Satisfaction report, which surveyed over 2,000 US streaming subscribers. The report said that the 2023 analysis:

clearly indicates that satisfaction among the top tier of streaming platforms is gradually declining while mid-tier platforms rise in overall satisfaction. The narrowing competitive market suggests there is high demand for showing the right mix of original and library content—and consistently maintaining a delightful viewer experience—in order to drive an overall value that subscribers expect.

Whip Media’s 2023 report found that Apple TV+, Hulu, Peacock, Paramount+, and Prime Video all showed gains in terms of the percentage of subscribers satisfied with the quality and variety of original content available on the platforms from 2022 to 2023.

Streaming subscription fees have been rising while content quality is dropping Read More »

The Mask Comes Off: At What Price?

Comes / Beth Washington / October 22, 2024

The Information reports that OpenAI is close to finalizing its transformation to an ordinary Public Benefit B-Corporation. OpenAI has tossed its cap over the wall on this, giving its investors the right to demand refunds with interest if they don’t finish the transition in two years.

Microsoft very much wants this transition to happen. They would be the big winner, with an OpenAI that wants what is good for business. This also comes at a time when relations between Microsoft and OpenAI are fraying, and OpenAI is threatening to invoke its AGI clause to get out of its contract with Microsoft. That type of clause is the kind of thing they’re doubtless looking to get rid of as part of this.

The $37.5 billion question is, what stake will the non-profit get in the new OpenAI?

For various reasons that I will explore here, I think they should fight to get quite a lot. The reportedly proposed quarter of the company is on the low end even if it was purely the control premium, and the board’s share of future profits is likely the bulk of the net present value of OpenAI’s future cash flows.

A fair market value transaction would thus, in my view, leave the board with over 50% of the shares in the new for-profit OpenAI.

But will they fight for fair value? And will they win?

Rocket Drew (The Information): Among the new details: After the split is finalized, OpenAI is considering creating a new board for the 501(c)3 charity that would be separate from the one that currently governs it, according to a person familiar with the plan.

If we had to guess, the current board, including CEO Sam Altman, will look for board of directors for the nonprofit who will stay friendly to the interests of the OpenAI corporation.

After the restructuring, the nonprofit is expected to own at least a 25% stake in the for-profit—which on paper would be worth at least $37.5 billion.

…

We asked the California attorney general’s office, which has jurisdiction over the nonprofit, what the AG makes of OpenAI’s pending conversion. A spokesperson wrote us back to say the agency is “committed to protecting charitable assets for their intended purpose.”

There is a substantial chance the true answer is zero, as Sam Altman it seems intends to coup against the non-profit a third time, altering the deal further and replacing the board whoever he wants, presumably giving him full control. What would California do about that?

There is also the question of what would happen with the US Federal Trade Commission inquiry into OpenAI and Microsoft potentially ‘distorting innovation and undermining fair competition,’ which to me looks highly confused but they are seemingly taking it seriously.

No matter the outcome on the control front, it still leaves the question of how much of the company the nonprofit should get. You can’t (in theory) take assets out of a 501c3 without paying fair market value. And the board has a fiduciary duty to get fair market value. California also says it will protect the assets, whatever that is worth. And the IRS will need to be satisfied with the amount chosen, or else.

There is danger the board won’t fight for its rights, not even for a fair market value:

Lynette Bye: In an ideal world, the charity’s board would bring in valuation lawyers to argue it out with the for-profit’s and investors’ lawyers, until they agree on how to divvy up the assets. But such an approach seems unlikely with the current board makeup. “I think the common understanding is they’re friendly to Sam Altman and the ones who were trying to slow things down or protect the non-profit purpose have left,” Loui said.

The trick is, they have a legal obligation to fight for that value, and Brett Taylor has said they are going to do so, although who knows how hard it will fight:

Thalia Beaty (AP): Jill Horwitz, a professor in law and medicine at UCLA School of Law who has studied OpenAI, said that when two sides of a joint venture between a nonprofit and a for-profit come into conflict, the charitable purpose must always win out.

“It’s the job of the board first, and then the regulators and the court, to ensure that the promise that was made to the public to pursue the charitable interest is kept,” she said.

…

Bret Taylor, chair of the OpenAI nonprofit’s board, said in a statement that the board was focused on fulfilling its fiduciary obligation.

“Any potential restructuring would ensure the nonprofit continues to exist and thrive, and receives full value for its current stake in the OpenAI for-profit with an enhanced ability to pursue its mission,” he said.

Even if they are friendly to Altman, that is different from willingly taking on big legal risks.

The good news is that, at a minimum, OpenAI and Microsoft have hired investment banks to negotiate with each other. Microsoft has Morgan Stanley, OpenAI has Goldman Sachs. So, advantage OpenAI. But that doesn’t mean that Goldman Sachs is arguing on behalf of the board.

So would 25% of OpenAI represent ‘fair market value’ of the non-profit’s current assets, as required by law?

That question gets complicated, because OpenAI’s current structure is complicated.

Or, from the WSJ, is where the money goes:

Any profits would go first to for-profit equity holders in various configurations, whose gains are capped, and then the rest would go back to the non-profit, except if the ‘AGI clause’ is invoked, in which case it all goes back to the non-profit.

The board would also be giving up its control over OpenAI. It would go from 100% of the voting shares to 25%. Control typically comes with a large cost premium. Control over OpenAI seems especially valuable in terms of the charitable purpose of the non-profit. One could even say in context that it is priceless, but that ship seems to have sailed.

According to Wikipedia, the control premium varies from 20% to 40% in business practice, depending on minority shareholders’ protections. In this case, it is clear that minority shareholders’ protections are currently extremely thin, so this would presumably mean at least a 40% premium. That’s 40% of the total baseline value of OpenAI, not the value of the non-profit’s share of the company. That’s on top of the value of their claims on the profits.

OpenAI could have chosen to sidestep the control issue by giving the board a different class of shares that allow it to comfortably retain control over OpenAI, but it is everyone’s clear intention to strip control away from the board.

Lynette Bye attempts to analyze the situation, noting that no one has much of a clue. They suggest one potential upper bound:

Lynette Bye: The biggest clue comes from OpenAI’s recent tax filing, which claims that OpenAI does not have any “controlled entities,” as defined by the tax code. According to Rose Chan Loui, the director of UCLA Law’s non-profit program, this likely means that the non-profit has the right to no more than 50% of the company’s future profits. If that alone were the basis for its share of the for-profit’s value, that would cap the non-profit’s share of the valuation at $78.5 billion.

Claude thinks it is more complicated than that. In either case, the filing likely reflected what was convenient to represent to the government and investors – you don’t want prospective investors realizing a majority of future profits belong to the board, if that were indeed the case.

Lynette also says experts disagree on whether the control premium requires fair market compensation. I think it very obviously does require it – control is a valuable asset, both because people value control highly, and because control is highly useful to the non-profit mission. Again, pay me.

What makes stock in the future OpenAI valuable?

One answer, same as any other investment, is that ‘other people will pay for it.’

That’s a great answer. But ultimately, what are all those people paying for?

Two things.

Control. That’s covered by the control premium.
The Net Present Value of Future Cash Flows.

So what is the NPV of future cash flows? What is the probability distribution of various potential cash flows? What is stock in OpenAI worth right now, if you were never allowed to sell it to a ‘greater fool’ and it never transitioned to a B-corp or changed its payout rules?

Well, actually… you can argue that the answer is nothing…

Black text on a pink rectangle, listing a legal disclaimer from OpenAI

Was that not clear enough?

Well, okay. Not actually nothing. Things could change, and you could get paid then.

But the situation is actually rather grim.

Sam Altman’s goal is to create safe AGI for the benefit of humanity. He says this over and over again. I disagree with his methods, but I do believe that is his central goal.

To the extent he also cares about other things, such as being the one to pick what it means to benefit humanity, I don’t think ‘maximizing profits’ is high on that list.

OpenAI’s explicit goal is also to create safe AGI for the benefit of humanity.

That is their business model. That is the ‘public benefit’ in the public benefit corporation. That is their plan. That is their telos.

Right now, OpenAI’s plan is:

Spend a lot of money to develop AGI first.
???????? (ensure it is safe and benefits humanity, yes this should be step 1 not 2)
Profit. Maybe. If that even means anything at that point. Sure, why not.

If that last sentence sounds weird, go read the pink warning label again.

OpenAI already has billions in revenue. It plausibly has reasonable unit economics.

Altman is still planning to plow every penny OpenAI makes selling goods and services, and more, back into developing AGI.

If he believes he can ensure AGI is safe and benefits humanity (I have big doubts, but he seems confident), then this is the correct thing for Altman to be doing, even from a pure business perspective. That’s where the real value lies, and the amount of money that can go into research, including compute and even electrical power, is off the charts.

If OpenAI actually turned a profit after its investments and research, or was even seriously pivoting into trying, then that would be a huge red flag, the same way it would have been for an early Amazon or Uber. It would be saying they didn’t see a better use of money than returning it to shareholders.

What are the likely fates for OpenAI, for a common sense understanding of AGI?

I believe that case #1 here is most of why OpenAI is valuable now: If OpenAI successfully builds safe AGI, it is worth many trillions to the extent that one can put a cap on its value at all. If OpenAI fails to build safe AGI, it will be a pale shadow of that.

OpenAI charges headfirst to AGI, and succeeds in building it safely. Many in the industry expect this to happen soon, within only a few years – Altman said a few thousand days. The world transforms, and OpenAI goes from previously unprofitable due to reinvestment to an immensely profitable company. It is able to well exceed all its profit caps. Even if they pay out the whole waterfall to the maximum, the vast majority of the money still flows to the non-profit.
OpenAI charges headfirst into AGI, and succeeds in building it, but fails in ensuring it is safe. Tragedy ensues. OpenAI never turns a profit anyone gets to enjoy, whether or not humanity sticks around to recover.
OpenAI charges headfirst into AGI, and fails, because someone else gets to AGI substantially first and builds on that lead. OpenAI never turns a profit, whether or not things turn out well for humanity.
OpenAI charges headfirst into AGI, and fails, because no one develops AGI any time soon. OpenAI burns through its ability to raise money, and realizes its mission has failed. Talent flees. It attempts to pivot into an ordinary software company, up against a lot of competition, increasingly without much market power or differentiation as others catch up. OpenAI most likely ends up selling out to another tech company, perhaps with a good exit and perhaps not. It might melt away, as looked like might happen in the crisis last year. Or perhaps it successfully pivots and does okay, but it’s not world changing.

If you thought the bulk of the value here is in #4, and a pivot to an ordinary technology company, then your model strongly disagrees with those who founded and built OpenAI, and with the expectations of its employees. I don’t think Altman or OpenAI have any intention of going down that road anything other than kicking and screaming, and it will represent a failure of the company’s vision and business model.

Even in case #4, we’re talking about what Matt Levine estimates as a current profit cap of up to about $272 billion. I am guessing that is low, given the late investors are starting with higher valuations and we don’t know the profit caps. But even if we are generous, the result is the same.

If the company is worth – not counting the non-profit’s share! – already $157 billion or more, it should be obvious that most future profits still likely flow to the non-profit. There’s no such thing as a company with very high variance in outcomes, that is heavily in growth mode, that is worth well over $157 billion dollars (since that $157 billion doesn’t include parts of the waterfall) where they don’t end up making trillions rather often. If you don’t think OpenAI is going to make trillions reasonably often, and also pay them out, then you should want to sell your stake, and fast.

Do not be fooled into thinking this is an ordinary or mature business, or that AI is an ordinary or mature technology whose value is in various forms of mundane utility. OpenAI is shooting for the stars. As every VC in this spot knows, it is the extreme upside that matters.

That is what the nonprofit is selling. They shouldn’t sell it cheap.

The good news is that the people tasked with arguing this are, effectively, Goldman Sachs. It will be fascinating to see if suddenly they can feel the AGI.

The Mask Comes Off: At What Price? Read More »

Basecamp-maker 37Signals says its “cloud exit” will save it $10M over 5 years

37signals, Amazon, AWS, Biz & IT, citrix, david heinemeier hansson, red hat / Beth Washington / October 21, 2024

Lots of pointing at clouds

AWS made data transfer out of AWS free for customers who were moving off their servers in March, spurred in part by European regulations. Trade publications are full of trend stories about rising cloud costs and explainers on why companies are repatriating. Stories of major players’ cloud reversals, like that of Dropbox, have become talking points for the cloud-averse.

Not everyone believes the sky is falling. Lydia Leong, a cloud computing analyst at Gartner, wrote on her own blog about how “the myth of cloud repatriation refuses to die.” A large part of this, Leong writes, is in how surveys and anecdotal news stories confuse various versions of “repatriation” from managed service providers to self-hosted infrastructure.

“None of these things are in any way equivalent to the notion that there’s a broad or even common movement of workloads from the cloud back on-premises, though, especially for those customers who have migrated entire data centers or the vast majority of their IT estate to the cloud,” writes Leong.

Both Leong and Rich Hoyer, director of the FinOps group at SADA, suggest that framing the issue as simply “cloud versus on-premises” is too simplistic. A poorly architected split between cloud and on-prem, vague goals and measurements of cloud “cost” and “success,” and fuzzy return-on-investment math, Hoyer writes, are feeding alarmist takes on cloud costs.

For its part, AWS has itself testified that it faces competition from the on-premises IT movement, although it did so as part of a “Cloud Services Market Investigation” by UK market competition authorities. Red Hat and Citrix have suggested that, at a minimum, hybrid approaches have regained ground after a period of cloud primacy.

Those kinds of measured approaches don’t have the same broad reach as declaring an “exit” and putting a very round number on it, but it’s another interesting data point.

Ars has reached out to AWS and will update this post with comment.

Basecamp-maker 37Signals says its “cloud exit” will save it $10M over 5 years Read More »

Author name: Beth Washington