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G100 Network Notebook | January 2017

“Alexa, What’s Next?”

More voice-enabled objects and conversational bots in unexpected places, thanks to an increasing number of partnerships between Amazon and other companies, reports Backchannel:

It turns out having microphones in your environment is a lot more convenient than pulling out your phone.

Do advances in the cloud and voice recognition portend a shift away from mobile devices or does it broaden our thinking about mobility? John Lanchester of the London Review of Books offers a glimpse of the technology’s promise beyond hands-free radio and weather updates:

If we add to voice operation the ability to use ‘natural language’, to talk to the machine normally and without obeying specific conventions, then that really is a big opening up of access to many millions of the ‘digitally excluded’. It may sound like a luxury, rich-world problem, but in fact it is the poor and old who at the moment suffer most if they can’t access the net, especially as more and more government services go online.

Can AI Unlock Exponential Growth?

Depressing new research on growth finds a sharp decline in the productivity of ideas relative to the substantial number of researchers in computing, agriculture, and medical research. The implications are profound for talent development, the flow of ideas, and global economic growth, as Alex Tabarrok observes:

Artificial intelligence or brain emulations could greatly increase ideas and growth, especially as we can create AIs or EMs [emulations] faster at far lower cost than we can create more natural intelligences. That sounds great but if computers and the Internet haven’t already had such an effect one wonders how long we will have to wait to break the slump.

Far more optimistic is Ray Kurzweil, chief engineer of Google Brain, who predicted the cloud and mobile revolutions. But this impressive list of past and future predictions offers a better idea of why he earned the title of futurist.

The Silicon Valley of Canada

Investments in quantum computing and AI could make the Toronto-Waterloo region much like Boston and Silicon Valley, tech clusters that drive national productivity and growth. The economic case for this “transformative growth opportunity” comes from an op-ed co-authored by entrepreneur Daniel Debow, formerly of Salesforce and Workbrain:

The potential economic benefits to building a Canadian supercluster could be massive: a $50-billion increase in equity value, a $17.5-billion annual increase in GDP and more than 170,000 high-quality jobs.

This video from Ajay Agrawal, a leading expert on AI economics from the University of Toronto, explains in detail how automation impacts labor:

Machine intelligence is a complement to human judgment. … As the cost of prediction falls, the value of human judgment increases.

When Cybersecurity Gets Personal

Turns out, not even Brian Krebs is safe. The cybersecurity blogger known for breaking news of the most prominent hacks suffered a massive DDoS attack late last year that took down his site for days. After months of investigation, Krebs unmasks authors of malware coopting vulnerable IoT devices into a botnet army capable of large cyberattacks. What emerges from his exhaustive report is the profile of a modern day hacker and the dark side of protecting Minecraft servers. This long read is Krebs at his best:

Just like in any other market, there is a high degree of competition between cybercrooks who are constantly seeking to add more zombies to their DDoS armies, and they often resort to unorthodox tactics to knock out the competition. As we’ll see, this kind of internecine warfare is a major element in this story.

ObamaCare Repeal?

Don’t bet on it, says two Fortune 500 CEOs in the healthcare industry who help cut through today’s charged rhetoric. Michael Neidorff, CEO of Centene, a large benefactor of Medicaid expansion, downplays Obamacare repeal as impractical effort, both economically and politically. He also urges Republicans to rethink proposed alternatives, says this report:

Using block grants for Medicaid, an idea that would result in less federal spending on the state-run program, would hurt states with a growing Medicaid population but help those with a shrinking population.

Equally skeptical on explicit repeal is George Barrett, CEO of Cardinal Health, which did not see added business volume from Obamacare. In this video, Barrett reveals what needs changing in ACA and explains how Cardinal’s strategy is well positioned to weather shocks from a Trump administration:

Demographics don’t lie. We are an aging population that demands more healthcare products and services. In the short term, that is being distorted by benefit design. But fundamentally you cannot escape the fact that we are going to have 20+ million people over the age of 80 in US in the next seven/eight years. That is a huge economic and healthcare issue.

The Economics of Population Aging

A new study questions the common wisdom that aging populations strain economies with less labor participation, productivity, and investment. Automation may change the secular stagnation debate:

Countries experiencing more rapid aging have grown more in recent decades. We suggest that this counterintuitive finding might reflect the more rapid adoption of automation technologies.

Lessons from Transformation Leaders

The proposed $8 billion merger of Samsung and Harman Industries represents a big win for CEO and turnaround expert Dinesh Paliwal, whose focus on talent helped rekindle growth and innovation. A recent McKinsey interview with Hrvatski Telekom CEO Davor Tomašković reveals a similar approach to his transformation:

Everything starts with the managers. In every organization I joined, I started by making changes at the top; I have never made changes from the bottom up. At HT, I also replaced five of the six board members within my first year, for the simple reason that I did not think they had the right mind-set or the will to effectively implement change, primarily because they perceived that to do so would be an admission of past wrongdoing.

How to Treat Corporate Taxes

Eliminate them deliberately. Otherwise, rate fluctuations feed a system of lobbyists while consumers and workers bear the burden in higher prices and lower wages, says John Cochrane of the Hoover Institution. His reasoned perspective on the corporate tax debate clarifies fundamental misconceptions, arguing the time is right for the US to start taxing consumption, rather than income:

No corporate tax, a large consumption tax, no tax on rates of return, fit well together. … One easy way to move towards a progressive consumption tax by the way would just be to remove all limits in IRA, 401(k), etc. I think the ideal is a uniform VAT — with eliminating corporate, income, and estate taxes — plus on-budget transfers for progressivity.