Economics

Technology and Innovation

  • United States
    The Missing Ingredients of Growth
    This post is co-authored by Karen Karniol-Tambour, Head of Investment Research at Bridgewater Associates. Several positive macroeconomic trends suggest that the global economy could finally be in a position to achieve sustained and inclusive growth. But whether that happens will depend on whether governments can muster a more forceful response to changing economic and technological conditions. MILAN/NEW YORK—Most of the global economy is now subject to positive economic trends: unemployment is falling, output gaps are closing, growth is picking up, and, for reasons that are not yet clear, inflation remains below the major central banks’ targets. On the other hand, productivity growth remains weak, income inequality is increasing, and less educated workers are struggling to find attractive employment opportunities. After eight years of aggressive stimulus, developed economies are emerging from an extended deleveraging phase that naturally suppressed growth from the demand side. As the level and composition of debt has been shifted, deleveraging pressures have been reduced, allowing for a synchronized global expansion. Still, in time, the primary determinant of GDP growth—and the inclusivity of growth patterns—will be gains in productivity. Yet, as things stand, there is ample reason to doubt that productivity will pick up on its own. There are several important items missing from the policy mix that cast a shadow over the realization of both full-scale productivity growth and a shift to more inclusive growth patterns. First, growth potential cannot be realized without sufficient human capital. This lesson is apparent in the experience of developing countries, but it applies to developed economies, too. Unfortunately, across most economies, skills and capabilities do not seem to be keeping pace with rapid structural shifts in labor markets. Governments have proved either unwilling or unable to act aggressively in terms of education and skills retraining or in redistributing income. And in countries like the United States, the distribution of income and wealth is so skewed that lower-income households cannot afford to invest in measures to adapt to rapidly changing employment conditions. Second, most job markets have a large information gap that will need to be closed. Workers know that change is coming, but they do not know how skills requirements are evolving, and thus cannot base their choices on concrete data. Governments, educational institutions, and businesses have not come anywhere close to providing adequate guidance on this front. Third, firms and individuals tend to go where opportunities are expanding, the costs of doing business are low, prospects for recruiting workers are good, and the quality of life is high. Environmental factors and infrastructure are critical for creating such dynamic, competitive conditions. Infrastructure, for example, lowers the cost and improves the quality of connectivity. Most arguments in favor of infrastructure investment focus on the negative: collapsing bridges, congested highways, second-rate air travel, and so forth. But policymakers should look beyond the need to catch up on deferred maintenance. The aspiration should be to invest in infrastructure that will create entirely new opportunities for private-sector investment and innovation. Fourth, publicly funded research in science, technology, and biomedicine is vital for driving innovation over the long-term. By contributing to public knowledge, basic research opens up new areas for private-sector innovation. And wherever research is conducted, it produces spillover effects within the surrounding local economy. Almost none of these four considerations is a significant feature of the policy framework that currently prevails in most developed countries. In the United States, for example, Congress has passed a tax-reform package that may produce an additional increment in private investment, but will do little to reduce inequality, restore and redeploy human capital, improve infrastructure, or expand scientific and technological knowledge. In other words, the package ignores the very ingredients needed to lay the groundwork for balanced and sustainable future growth patterns, characterized by high economic and social productivity trajectories supported by both the supply side and the demand side (including investment). Ray Dalio describes a path featuring investment in human capital, infrastructure, and the scientific base of the economy as path A. The alternative is path B, characterized by a lack of investment in areas that will directly boost productivity, such as infrastructure and education. Though economies are currently favoring path B, it is path A that would produce higher, more inclusive, and more sustainable growth, while also ameliorating the lingering debt overhangs associated with large sovereign debt and non-debt liabilities in areas like pensions, social security, and publicly funded health care. It may be wishful thinking, but our hope for the new year is that governments will make a more concerted effort to chart a new course from Dalio’s path B to path A. This article originally appeared on project-syndicate.org.
  • China
    Chinese Technology Development and Acquisition Strategy and the U.S. Response
    Adam Segal testifies before the House Subcommittee on Financial Services, Monetary Policy, and Trade about reforming the Committee on Foreign Investment in the United States (CFIUS) and China's technology and innovation strategy.
  • China
    China’s Artificial Intelligence Strategy Poses a Credible Threat to U.S. Tech Leadership
    Absent new funding and a strategic vision, the United States might lose the race for supremacy in artificial intelligence research to China.
  • China
    To Make China’s Female Entrepreneurs Count, Let’s Go Beyond Just Counting Them
    Natalie Au is an intern for Asia Studies at the Council on Foreign Relations. This week, the eighth annual Global Entrepreneurship Summit began in Hyderabad, India, focusing on the theme of “Women First, Prosperity For All.” For the first time in the history of this summit that brings together entrepreneurs and high-level politicians from around the world, women make up a majority of the 1500 entrepreneurs selected to attend. In her Opening Plenary speech, senior White House advisor Ivanka Trump articulated the increase in women entrepreneurs all over the globe and a vision of building a greater future by empowering even more women. Against this backdrop, what is the state of women's entrepreneurship in China—a nation home to the highest number of self-made female billionaires in the world and that has set a record high in venture capital investments last year despite a global slowdown? In recent years, China has often been regarded as one of the models for gender equality in women’s business and entrepreneurship. The situation does seem to be cause for optimism: in September this year, the first government-sponsored China Women’s Entrepreneurship and Innovation Contest held its finals in Hangzhou, the capital of the Zhejiang Province. Co-hosted by the state-backed nonprofit All-China Women’s Federation and the Zhejiang people’s government, the contest is said to be a response to the CCP’s call to “encourage people to do business creatively and drive innovation” that takes into account the unique circumstances of women. Indeed, China’s government and private sector have been more proactive in boosting women’s entrepreneurship than those in many other countries. China appears to appreciate the instrumental value of gender equality and women’s empowerment—that investing in women’s growth and leadership in business is not only the right thing to do, but the smart move to make for economic development. Yet making women count requires beyond simply counting women, startups, and investments. While many areas of gender inequality in China—such as politics, as discussed in a recent post by Maylin Meisenheimer—are still at the stage where merely getting enough women at the table poses a challenge, it is important to also look beneath the surface and examine what constitutes true equality even in issues where the numbers look (relatively) good. What do the numbers not reveal about the state of female entrepreneurship in China? What are the barriers remaining? And most importantly, what could the Chinese government and the private sector do to ensure both female entrepreneurs and the “She Economy” reaches its potential? It’s A Big Deal There are two main reasons why having more women entrepreneurs—or more broadly, gender equality in work—benefit China’s economic growth. First, the gender gap in work means that women are not contributing to the GDP as much as they are able to. A 2015 report by the McKinsey Global Institute estimates that in a “best-in-region” scenario where all the countries match the progress toward gender parity of the fastest-improving countries in their respective regions, China could boost GDP by $2.5 trillion in 2025, which is 20 percent more than in a “business-as-usual” case. Further, in a theoretical “full-potential” scenario where women have the same role in the labor market as men do, $4.2 trillion, or 26 percent, could be added to China’s annual GDP in 2025. Second, multiple studies have demonstrated the benefits of having women as founders or in other leadership roles in companies. For example, a study last year by the Peterson Institute for International Economics analyzed 21,980 firms in ninety-one countries and found a “positive correlation between the proportion of women in corporate leadership and firm profitability.” While correlation does not mean causation, such studies have found strong statistical links that should not be ignored. Similarly, research conducted by the Center for Talent Innovation and featured in the Harvard Business Review highlights that while most companies target women as end-users, “few effectively leverage the talent most likely to know what these end-users want and need: female employees.” This study found that for companies targeting female consumers, having women on the team improves the likelihood of success by 144 percent. Indeed, it is important to target women consumers in China: nearly 60 percent of women control family finances, managing their husbands’ salaries and deciding what to spend them on. Women are also crucial in China’s booming e-commerce market. While there are more male than female online shoppers, the latter spend more and shop online more frequently. To put the numbers into perspective, the number of online shoppers in China has steadily increased over the past decade, and as of 2016 has hit 466.7 million—more than the entire population of the United States. Tie all this together, and not being more proactive in promoting women in entrepreneurship becomes not just a matter of neglecting gender equality but also poor business sense. With all this in place, what does female entrepreneurship currently look like in China? Women Mean Business Female entrepreneurs and venture capitalists are building successful businesses in China, and make up a significant portion of the creativity and innovation that the government is trying to promote. According to the All-China Women’s Federation, Chinese women entrepreneurs have risen to a quarter of total entrepreneurs as of April this year. Moreover, China is home to both the highest number of self-made female billionaires in the world and the world’s richest self-made woman, Zhou Qunfei. Women were able to “flourish after capitalism started to take hold” due to the Communist Party promoting gender equality under Mao Zedong, explains Huang Yasheng, professor at MIT and expert in China’s entrepreneurial class. According to a white paper released by the government last year, over half of the startups in the internet plus business field are women. While the white paper never defines “internet business” and leads many to believe that this statistic refers to any business that uses the web rather than to technology startups, the statistic is nonetheless a sign of encouraging progress in women’s participation in the Chinese economy. Again focusing on e-commerce, Alibaba’s C2C e-commerce platform Taobao, the biggest in China, also reports that over 50 percent of store owners on the site are female and 46 percent of transactions are from female vendors. Barriers Remain Yet the fact that gender equity is moving forward does not mean that there are no obstacles. Currently, women entrepreneurs face a range of cultural and institutional barriers. Culturally, sexism in China is not yet a thing of the past. Earlier this year in Beijing, a Chinese investor shared his insights to success in a public presentation: “Rule number 10: we usually don’t invest in female CEOs.” Chinese technology companies invite Japanese porn stars to corporate events. Local tech firms hire “pretty cheerleaders” to “give male programmers motivation.” Women are labelled as “leftover” if unmarried by twenty-seven and pressured by their families and government campaigns to leave their careers in favor of finding a husband. Just two decades ago, sex-selective abortion and female infanticide were common, mainly due to the state’s enforced One-Child Policy and the country’s prevalent culture of son preference. These are just a few examples of deep-rooted sexism that manifest as challenges for the female entrepreneur; there are many more practices that entrench gender discrimination as the norm. Institutionally, the biggest obstacle that women entrepreneurs face is access to business capital. A 2014 Goldman Sachs report highlighting the state of female-owned small and medium sized enterprises in ten G20 countries estimates a credit gap—formal financing needed but not available—of 1.5 percent of GDP in China. Traditional assessments of credit risk rely on land ownership, credit history, and availability of collateral, disproportionately disadvantaging women and often putting them in a catch-22 situation. The report points out the need to improve formal financing for women, especially through strengthening financial infrastructure (including things such as credit bureaus and collateral registries) and developing new credit risk assessments and terms for female clients. Moving Forward Women’s entrepreneurship in China faces two main obstacles: 1) the tangible—the dearth of finance and support networks, and 2) the intangible—the cultural and societal norms that have favored men as being superior to women for centuries. The two are intertwined and alleviating one helps to curb the other. Already there are a number of government and non-governmental programs underway. From founding local business accelerators to starting Chinese chapters of international organizations, women in China have been increasingly proactive in building networks, providing training, and raising venture capital in support of each other’s entrepreneurial endeavors. The corporate sector is also stepping up: the China branch of programs such as Goldman Sachs’ “10,000 Women,” Mastercard’s “Women’s Entrepreneurship Fund,” Ernst & Young’s “Entrepreneurial Winning Women Asia-Pacific Program,” give us many reasons to be optimistic. Government initiatives have also partnered with financial institutions to issue a total of over 290 billion yuan of government-subsidized microcredit to women entrepreneurs. Moreover, while this piece focuses on tech and internet plus startups and recognizes that the challenges facing rural women’s enterprises warrant their own analysis, non-governmental programs such as the China arm of the Asia Foundation’s “Accelerate Growth” that put emphasis on rural and migrant women entrepreneurs are also crucial in ensuring that a diverse demographic can contribute to the economy and reap the benefits. What is further needed now, however, are initiatives that explicitly straddle support for innovation and women as workers. Policies that promote entrepreneurship with a gender perspective, as well as continued collaboration with non-governmental initiatives, will serve to further the potential of China’s She Economy to the benefit of not only women, but economic growth for all. Financial reforms are also necessary. The Chinese government and businesses should establish forms of credit risk assessments more suited for women, improvement of women’s property and land ownership laws, and new financial offerings that target the female entrepreneur in order to level the playing field. Only with such proactive measures will the recent surge in campaigns for women entrepreneurs truly improve both the women’s access to opportunities as well as China’s economy.
  • Economics
    The Global Economy in 2018
    The global economy will confront serious challenges in the months and years ahead, and looming in the background is a mountain of debt that makes markets nervous—and that thus increases the system's vulnerability to destabilizing shocks. Yet the baseline scenario seems to be one of continuity, with no obvious convulsions on the horizon. HONG KONG—Economists like me are asked a set of recurring questions that might inform the choices of firms, individuals, and institutions in areas like investment, education, and jobs, as well as their policy expectations. In most cases, there is no definitive answer. But, with sufficient information, one can discern trends, in terms of economies, markets, and technology, and make reasonable guesses. In the developed world, 2017 will likely be recalled as a period of stark contrast, with many economies experiencing growth acceleration, alongside political fragmentation, polarization, and tension, both domestically and internationally. In the long run, it is unlikely that economic performance will be immune to centrifugal political and social forces. Yet, so far, markets and economies have shrugged off political disorder, and the risk of a substantial short-term setback seems relatively small. The one exception is the United Kingdom, which now faces a messy and divisive Brexit process. Elsewhere in Europe, Germany’s severely weakened chancellor, Angela Merkel, is struggling to forge a coalition government. None of this is good for the UK or the rest of Europe, which desperately needs France and Germany to work together to reform the European Union. One potential shock that has received much attention relates to monetary tightening. In view of improving economic performance in the developed world, a gradual reversal of aggressively accommodative monetary policy does not appear likely to be a major drag or shock to asset values. Perhaps the long-awaited upward convergence of economic fundamentals to validate market valuations is within reach. In Asia, Chinese President Xi Jinping is in a stronger position than ever, suggesting that effective management of imbalances and more consumption- and innovation-driven growth can be expected. India also appears set to sustain its growth and reform momentum. As these economies grow, so will others throughout the region and beyond. When it comes to technology, especially digital technology, China and the United States seem set to dominate for years to come, as they continue to fund basic research, reaping major benefits when innovations are commercialized. These two countries are also home to the major platforms for economic and social interaction, which benefit from network effects, closure of informational gaps, and, perhaps most important, artificial-intelligence capabilities and applications that use and generate massive sets of valuable data. Such platforms are not just lucrative on their own; they also produce a host of related opportunities for new business models operating in and around them, in, say, advertising, logistics, and finance. Given this, economies that lack such platforms, such as the EU, are at a disadvantage. Even Latin America has a major innovative domestic e-commerce player (Mercado Libre) and a digital payments system (Mercado Pago). In mobile online payments systems, China is in the lead. With much of the country’s population having shifted directly from cash to mobile online payments—skipping checks and credit cards—China’s payments systems are robust. Earlier this month on Singles’ Day, an annual festival of youth-oriented consumption that has become the single largest shopping event in the world, China’s leading online payment platform, Alipay, processed up to 256,000 payments per second, using a robust cloud computing architecture. There is also impressive scope for expanding financial services—from credit assessments to asset management and insurance—on the Alipay platform, and its expansion into other Asian countries via partnerships is well underway. In the coming years, developed and developing economies will also have to work hard to shift toward more inclusive growth patterns. Here, I anticipate that national governments may take a back seat to businesses, subnational governments, labor unions, and educational and non-profit institutions in driving progress, especially in places hit by political fragmentation and a backlash against the political establishment. Such fragmentation is likely to intensify. Automation is set to sustain, and even accelerate, change on the demand side of labor markets, in areas ranging from manufacturing and logistics to medicine and law, while supply-side responses will be much slower. As a result, even if workers gain stronger support during structural transitions (in the form of income support and retraining options), labor-market mismatches are likely to grow, sharpening inequality and contributing to further political and social polarization. Nonetheless, there are reasons to be cautiously optimistic. For starters, there remains a broad consensus across the developed and emerging economies on the desirability of maintaining a relatively open global economy. The notable exception is the U.S., though it is unclear at this point whether President Donald Trump’s administration actually intends to retreat from international cooperation, or is merely positioning itself to renegotiate terms that are more favorable to the U.S. What does seem clear, at least for now, is that the U.S. cannot be counted on to serve as a principal sponsor and architect of the evolving rules-based global system for fairly managing interdependence. The situation is similar with regard to mitigating climate change. The U.S. is now the only country that is not committed to the Paris climate agreement, which has held despite the Trump administration’s withdrawal. Even within the U.S., cities, states, and businesses, as well as a host of civil-society organizations, have signaled a credible commitment to fulfilling America’s climate obligations, with or without the federal government. Still, the world has a long way to go, as its dependence on coal remains high. The Financial Times reports that peak demand for coal in India will come in about ten years, with modest growth between now and then. While there is upside potential in this scenario, depending on more rapid cost reductions in green energy, the world is still years away from negative growth in carbon dioxide emissions. All of this suggests that the global economy will confront serious challenges in the months and years ahead. And looming in the background is a mountain of debt that makes markets nervous and increases the system’s vulnerability to destabilizing shocks. Yet the baseline scenario in the short run seems to be one of continuity. Economic power and influence will continue to shift from west to east, without any sudden change in the pattern of job, income, political, and social polarization, primarily in the developed countries, and with no obvious convulsions on the horizon. This article originally appeared on project-syndicate.org.
  • Women and Economic Growth
    Can Tackling Childcare Fix STEM’s Gender Diversity Problem?
    Voices from the Field features contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is authored by Rudaba Zehra Nasir, an employment specialist in IFC’s Gender Secretariat. Nasir works with IFC client companies and partner organizations to advance women’s recruitment, retention, and promotion in the workforce through business case research, advisory services, and partnerships, such as SheWorks and Tackling Childcare. Join the conversation online about #TacklingChildcare with @WBG_Gender and @RudabaNasir.
  • Women and Economic Growth
    A Conversation with Valerie Jarrett
    I recently hosted a CFR roundtable meeting with Valerie Jarrett, senior advisor to the Obama Foundation, a board member of Lyft and Ariel Financial, and a senior advisor to the media company Attn. As one of President Obama’s closest and most trusted senior advisors from 2008 to 2016, Jarrett raised gender issues to the top of the agenda when she chaired President Obama’s White House Council on Women and Girls and oversaw the Offices of Public Engagement and Intergovernmental Affairs. While working in the Obama White House, Jarrett promoted policies like equal pay, a higher minimum wage, paid leave and sick days, affordable childcare, as well as international women’s human rights. Since leaving office, Jarrett has continued to champion women’s issues, for example in launching and co-chairing the Galvanize Program, which seeks to support women for leadership roles in political and economic life. As a new member of the board of directors for the ride-sharing app Lyft, Jarrett shared her perspective on how the gig economy can benefit women as both employees and passengers of the company. As for the software side of the gig economy, it is well known that women are under-represented in science, math, engineering, and technology—or so-called STEM jobs. As I noted in a CFR report I co-authored last year—“Women in Tech as a Driver of Economic Growth”—training more women to undertake such jobs could help close the gap in the shortage of skilled workers in the tech sector. While that report focused on low- and middle-income countries in information and communication technology, women are also under-represented in the tech sector in affluent countries such as the United States. Lyft itself issued a diversity report indicating that, though 42 percent of its total workforce identifies as female, only 18 percent of its tech team does. According to tech publication Recode, this may be comparable to—or even slightly better than—women’s representation in tech and engineering jobs at other ride-sharing services. Women and people of color appear to be underrepresented not only in jobs at the well-known ride-sharing app companies, but also at big tech companies, such as Google. The same is true of science and engineering jobs more broadly. The National Science Foundation found that, while there is gender parity in educational attainment in science and engineering, the same is not true of employment in the field. Only 18 percent of computer science employees are women, for example. And Blacks, Latinos, and Native Americans are underrepresented in both education and employment in science and engineering. As for the percentage of drivers who are women, while only twelve percent of taxi drivers nationally are women (and only one percent of cabbies in New York City), Jarrett noted that 27 percent of drivers at Lyft are women.  One survey indicates some evidence to suggest that women who drive for ride-sharing apps may earn less than men—by nearly $2 an hour—in part because women are less likely to drive peak shifts late at night on Fridays and Saturdays. One theory is that women have safety concerns about driving strangers late at night. In response to concerns about safety for female drivers and passengers, there has been a steady rise in women-only ride-sharing apps, like Safr and See Jane Go. Other countries, like India and Germany, have instituted women-only train cars. Mexico City and Jerusalem have some gender-segregated buses—motivated, respectively, by concerns about sexual harassment and by ultra-orthodox religious views concerning the mingling of men and women. Are women-only transportation options a step back—towards self-segregation or even forced segregation? Jarrett acknowledged the problem of women’s safety and discussed some of the ways in which ride-sharing services are addressing it—like the accountability provided when such ride-sharing services display a photo and the license plate of the driver. She noted that technology can be used in innovative ways to address safety concerns in this sector. The benefits for women in the gig economy include flexibility and having greater control over working hours. Drawing on her own experience of raising a daughter as a single mother, Jarrett underscored how critical such flexibility can be. The inevitable trade-off in the gig economy, however, is that flexible hours often come with less job stability, inherent in the reality of being a contingent worker. Collecting data and maintaining transparency is critical to closing the pay gap and addressing other workforce issues, Jarrett noted. She told a story about Salesforce. Two female employees approached the CEO Marc Benioff and told him that they didn’t make the same amount as their male counterparts. Benioff, known as a champion of corporate values, was surprised. He checked the numbers, found that the two women were right, and worked to close the pay gap. In STEM jobs, the issue is not just about hiring, but also about retaining women in these jobs. Women stay on average three years in computer science fields, Jarrett pointed out. The number one reason why they leave: culture. The first step to changing this culture, Jarrett implied, is to collect the data that identifies the real issue. Having women in leadership positions within a company (and on the boards of such firms) is important to changing this culture. Maiya Moncino assisted in the preparation of this post.
  • Technology and Innovation
    The Future of Artificial Intelligence and its Impact on Society
    Play
    THOMPSON: All right. Hello, everybody. Welcome to the closing session of the Council on Foreign Relations 22nd Annual Term Member Conference with Ray Kurzweil. I’m Nicholas Thompson. I will be presiding over today’s session. I’d also like to thank Andrew Gundlach, him and the Anna-Maria and Stephen Kellen Foundation, for their generous support of the CFR Term Member Program. I was a term member a couple years ago. I love this program. What a great event. I’m so glad to be here. (Laughter.) I’m also glad to be here with Ray. All right, I’m going to read Ray’s biography, and then I’m going to dig into some questions about how the world is changing, and he will blow your mind. (Laughter.) So Ray Kurzweil is one of the world’s leading inventors, thinkers, and futurists, with a 30-year track record of accurate predictions. It’s true. If you look at his early books, they’re 96 percent, 98 percent accurate. Called “the restless genius” by The Wall Street Journal, “the ultimate thinking machine” by Forbes magazine, he was selected as one of the top entrepreneurs by Inc. magazine, which described him as the rightful heir to Thomas Edison. PBS selected him as one of the 16 revolutionaries who made America. Reading his bio, I was upset that he quotes all of my competitors, so I’m going to add a quote from Wired magazine, which is “His mission is bolder than any voyage to space”—Wired magazine. (Laughter.) Ray was the principal inventor of the first CCD flat-bed scanner, the first omni-font optical character recognition, the first print-to-speech reading machine for the blind, the first text-to-speech synthesizer, the first music synthesizer capable of recreating the grand piano and other orchestral instruments, and the first commercially marketed large-vocabulary speech recognition. Among Ray’s many honors, he received a Grammy Award for outstanding achievements in music technology, he is the recipient of the National Medal of Technology, was inducted into the National Inventors Hall of Fame, holds 21 honorary Doctorates, and honors from three U.S. presidents. Amazing. Ray has written five national bestselling books, which you should all buy immediately if you’re on your phones, including New York Times bestsellers “The Singularity Is Near” and “How To Create A Mind.” He is co-founder and chancellor of Singularity University; and director of engineering at Google, heading up a team developing machine intelligence and natural language understanding. He also, as I learned walking here, is the father of one of my sister’s friends from grade school, who referred to him as the cool dad with the electric pianos, so. (Laughter.) Welcome, Ray. KURZWEIL: Great to be here. THOMPSON: All right. So some of you are probably familiar with his work. Some of you may not be. But let’s begin, Ray, by talking about the law of accelerating returns, what that means for technology. Lay out a framework for what’s about to happen, and then we’ll dig into how foreign policy is going to be turned on its head. KURZWEIL: Sure. Well, that’s the basis of my futurism. In 1981 I realized that the key to being successful as an inventor was timing. The inventors whose names you recognize, like Thomas Edison or my new boss—my first boss, Larry Page, were in the right place with the right idea at the right time. And timing turns out to be important for everything from writing magazine articles to making investments to romance. You got to be at the right place at the right time. So I started with the common wisdom that you cannot predict the future, and I made a very surprising discovery. There’s actually one thing about the future that’s remarkably predictable, and that is that the price, performance, and capacity not of everything, not of every technology, but of every information technology follows a very predictable path. And that path is exponential, not linear. So that’s the law of accelerating returns. But it bears a little explanation. So I had the price/performance of computing—calculations per second per constant dollar—going back to the 1890 Census through 1980 on a logarithmic scale, where a straight line is exponential growth. It was a gradual, second level of exponential, but it was a very smooth curve. And you could not see World War I or World War II or the Great Depression or the Cold War on that curve. So I projected it out to 2050. We’re now 36 years later. It’s exactly where it should be. So this is not just looking backward now and overfitting to past data, but this has been a forward-looking progression that started in 1981. And it’s true of many different measures of information technology. And the progression is not linear. It’s exponential. And our brains are linear. If you wonder why we have a brain, it’s to predict the future. But the kind of challenges we had, you know, 50,000 years ago when our brains were evolving were linear ones. We’d look up and say: OK, that animal’s going that way, I’m coming up the path this way, we’re going to meet at that rock. That’s not a good idea. I’m going to take a different path. That was good for survival. That became hardwired in our brains. We didn’t expect that animal to speed up as it went along. We made a linear projection. The primary difference between myself and my critics, and many of them are coming around, is we look at the same world. They apply their linear intuition. For example, halfway through the Genome Project, 1 percent of the genome had been collected after seven years. So mainstream critics said: I told you this wasn’t going to work. Here you are, seven years, 1 percent. It’s going to take 700 years, just like we said. My reaction at the time was, well, we finished 1 percent, we’re almost done, because 1 percent is only seven doublings from 100 percent, and have been doubling every year. Indeed, that continued. The project was finished seven years later. That’s continued since the end of the Genome Project. That first genome cost a billion dollars. We’re now down to $1,000. And every other aspect of what we call biotechnology—understanding this data, modeling, simulating it, and, most importantly, reprograming it, is progressing exponentially. And I’ll mention just one implication of the law of accelerating returns, because it has many ripple effects and it’s really behind this remarkable digital revolution we see, is the 50 percent deflation rate in information technologies. So I can get the same computation, communication, genetic sequencing, brain data as I could a year ago for half the price today. That’s why you can buy an iPhone or an Android phone that’s twice as good as the one two years ago for twice the price. You put some of the improved price performance in price and some of it into performance. So you asked me actually just a few minutes a question that I was also asked by Christine Lagarde, head of the IMF, at her annual meeting recently: How come we don’t see this in productivity statistics? And that’s because we factor it out. We put it in the numerator and the denominator. So when this girl in Africa buys a smartphone for $75, it counts as $75 of economic activity, despite the fact that it’s literally a trillion dollars of computation circa 1960, a billion dollars circa 1980. It’s got millions of dollars of free information apps, just one of which is an encyclopedia far better than the one I saved up for years as a teenager to buy. All that counts for zero in economic activity because it’s free. So we really don’t count the value of these products. And people who compile these statistics say, well, we take into consideration quality improvement in products, but really using models that use the old linear assumption. So then Christine said, yes, it’s true the digital world’s amazing. We can do all these remarkable things. But you can’t wear information technology. You can’t eat it. You can’t wear it. You can’t live in it. And that’s—and my next point is all of that’s going to change. We’ll be able to print out clothing using 3-D printers. Not today. We’re kind of in the hype phase of 3-D printing, but the 2020s—early 2020s, we’ll be able to print out clothing. There’ll be lots of cool open-source designs you can download for free. We’ll still have a fashion industry, just like we still have a music and movie and book industry. Coexistence of free, open-source products—which are a great leveler—and proprietary products. We’ll print—we’ll be able to create food very inexpensively using 3-D—vertical agriculture, using hydroponic plants for fruits and vegetables, in-vitro cloning of muscle tissue for meat. The first hamburger to be produced this way has already been consumed. It was expensive. It was a few hundred thousand dollars, but—(laughter)—but it was very good. (Laughter.) THOMPSON: A free side—that’s, like, what it costs. KURZWEIL: But that’s research costs. So it’s a long discussion, but all of these different resources are going to become information technologies. A building was put together recently, as a demo, using little modules snapped together, Lego-style, printed on a 3-D printer in Asia. Put together a three-story office building in a few days. That’ll be the nature of construction in the 2020s. 3-D printers will print out the physical things we need. She said, OK, but we’re getting very crowded. Land is not expanding. That’s not an information technology. And I said, well, actually, there’s lots of land. We just have decided to crowd ourselves together so we can work and play together. Cities was an early invention. We’re already spreading out with even the crude virtual and augmented reality we have today. Try taking a train trip anywhere in the world, and you’ll see that 97 percent of the land is unused. THOMPSON: All right. So lots coming. (Laughter.) Let’s talk about intelligence. So, like, the phone in my pocket. It’s better than I am at math. It’s better than I am at Go. It’s better than I am at a lot of things. When will it be better at me at holding a conversation? When will the phone interview you instead of me? KURZWEIL: We do have technologies that can have conversations. I mean, my team at Google created Smart Replies, you know. THOMPSON: And when you—Ray actually answers all of your emails, is another way to describe his job at Google. Which is amazing. KURZWEIL: Yeah. So we’re writing millions of emails. And it has to understand the meaning of the email it’s responding to, even though the proposed suggestions are brief. But your question really is a Turing equivalent question. You need—it’s equivalent to the Turing test. And I’m a believer that the Turing test is a valid test on the full range of human intelligence. You need the full flexibility of human intelligence to pass a valid Turing test. There’s no sort of simple, natural language-processing tricks you can do to do that. That’s where a human judge can tell the difference between talking over what you call teletype lines, basically instant messaging, with an AI versus a human. And if the human judge can’t tell the difference, then we consider the human—the AI to be at human levels, which is really what you’re asking. I’ve been—that’s been a key prediction of mine. I’ve been consistent in saying 2029. In 1989, in the age of intelligent machines, I bounded that between early 2020s and late 2030s. And in the age of spiritual machines, in ’99, I said 2029. The Stanford—the Stanford AI department found that daunting, so they held a conference. And the consensus of the AI experts at that time was hundreds of years. Twenty-five percent thought it would never happen. My view, and the consensus view, or the median view, of AI experts have been getting closer together, but not because I’ve been changing my view. (Laughter.) And in 2006 there was a Dartmouth conferenced called AI 50, celebrating the 50th anniversary of the 1956 Dartmouth conference where AI—artificial intelligence got its name, by John McCarthy and Marvin Minsky, who was my mentor for over 50 years. And the consensus then was 50 years. So at that time I was saying 23 years. We just had, actually, an AI ethics conference at Asilomar, patterned on the successful biotech Asilomar conference of 40 years earlier. And the consensus view there was about 20 to 30 years. I’m saying, well, at that time, 13. So the median view now is—I’m still more optimistic, but not by that much. And there’s a growing group of people who think I’m too conservative. I think that a key issue I didn’t mention with the law of accelerating returns is not only does the hardware progress exponentially, but so does the software. And that’s a long discussion. But we can see now the daunting pace of progress—with one milestone after another falling to AI. And we can talk about some of the techniques. But so I’m feeling more and more confident. I think the AI community is gaining confidence that we’re not far off from that milestone. THOMPSON: All right. So I’ve got 12 more years I can do this kind of thing. So anybody in the CFR booking department, please keep inviting me because I do enjoy doing these and time is limited. (Laughter.) Let’s talk a little bit about regulation. There are a lot of people in this— KURZWEIL: Well, let me comment on that. This is not an alien invasion of intelligent machines from Mars. We create tools to extent our reach. We couldn’t reach that fruit at that higher branch a thousand years ago, so we invented a tool that extended our reach. Who here could build this building with our bare hands? But we created machines that extends and leverage out muscles. We can now access all of human knowledge with a few keystrokes. And we’re going to literally merge with this technology, with AI, to make us smarter. It already does. I mean, these devices are brain-extenders. And people really think of it that way. And that’s a new thing. I mean, people didn’t think of their smartphones that way just a few years ago. They’ll literally go inside our bodies and brains. But I think that’s an arbitrary distinction. Even though they’re outside our bodies and brains they’re already brain extenders. And they will make us smarter and funnier. (Laughter.) THOMPSON: Well, I could use some of that. That’ll probably be five years ago. So let’s talk about how to make this future go forward in the best way. So we have an opportunity here. You have 300 people who are going to be making some of the most important policy decisions. I see people from tech companies here, making big decisions at tech companies, people in Congress, people in the White House, people probably in foreign ministries. Explain the sort of—the framework for policymakers and how they should think about this accelerating technology, what they should do, and what they should not do. KURZWEIL: Well, I mean, there has been a lot of focus on AI ethics, now to keep the technology safe. And it’s kind of a polarized discussion, like a lot of discussions nowadays. I’ve actually talked about both promise and peril for quite a long time. Started in the 1990s, and did extensively in ’99. You might remember Bill Boy’s cover story in Wired. THOMPSON: I wasn’t there at the time. KURZWEIL: Right. But that was a reflection on my book, “Age of Spiritual Machines,” which had just come out, talking about the great promise and peril. And he focused on the peril, and created quite a firestorm then. 2006, chapter eight of “The Singularity is Near” is the deeply intertwined promise versus peril of GNR, genetics, nanotechnology, and robotics. Technology has always been a double-edged sword. Fire kept us warm, cooked our food, and burned down our houses. These technologies are much more powerful. It’s also a long discussion, but I think we should go through three phases, at least I did, in contemplating this. First is delight at the opportunity to overcome age-old afflictions—poverty, disease, and so on. Then alarm, that these technologies can be destructive and cause even existential risks. And finally, I think where we need to come out is an appreciation that we have a moral imperative to continue progress in these technologies, because despite the progress we’ve made—and that’s a whole ’nother issue. People think things are getting worse, but they’re actually getting better and we can talk about that. But there’s still a lot of human suffering to be overcome. It’s only continued progress, particularly in AI, that’s going to enable us to continue overcoming poverty and disease and environmental degradation, while we attend to the peril. And there’s a good framework for doing that. Forty years ago—I alluded to this a moment ago—there were visionaries who saw both the promise and the peril of biotechnology. Basically, reprogramming biology away from disease and aging, neither of which was feasible 40 years ago. So they held a conference called the Asilomar Conference at the conference center in Asilomar. They came up with ethical guidelines and strategies—how to keep these technologies safe. So now it’s 40 years later. We are getting clinical impact of biotechnology. It’s a trickle today. It’ll be a flood over the next decade. The number of people who have been harmed either accidentally or intentionally by abuse of biotechnology so far has been zero. That doesn’t mean we can cross it off our list—OK, we took care of that one. But it is—because we have to keep revising these guidelines because the technology keeps getting more sophisticated—but it’s a good model for how to proceed. And we just had our first Asilomar conference on the AI ethics. And a lot of these ethical guidelines—particularly in the case of, say, biotechnology—have been fashioned into law. So I think that’s the goal. It’s the first thing to understand. The extremes are, oh, let’s band the technology. Let’s slow it down. That’s really not the right approach. Let’s guide it in a constructive manner. There are—there are strategies to do that. That’s another complicated discussion. THOMPSON: Well, let’s delve into that complicated discussion, at least—at least for a minute or two. What—you know, you can imagine—you can imagine some rules that, say, Congress could say, that anybody working on a certain kind of technology has to make their data open, right, for example, or has to be willing to share their data sets, and at least to allow competitive markets over these incredibly powerful—these incredibly powerful tools. You can imagine the government saying—actually, there’ll be a big government-funded option and we’re going to have kind of like open AI, but run by the government. You can imagine a huge national infrastructure movement to build out this technology. So at least people with public interest at heart have control over some of it. What would you—what would you recommend? KURZWEIL: Well, I think open source data and algorithms in generally is a good idea. Google put all of its AI algorithms in the public domain with TensorFlow, which is open-source. A lot of data is open source. I think that’s a good direction to go in. I think it’s really the combination of open source and the ongoing law of accelerating returns that will bring us closer and closer to the ideals. I remember in fourth grade my social studies teacher put on the board, “From each according to his ability, to each according to his need.” And he asked the class: Well, what’s wrong with that? And we said, oh, that’s great. And he said, well, that’s the premise of communism. And we were like, oh my God, is he a secret commie? (Laughter.) But that is a good goal. Forced collectivism was a bad strategy. (Laughter.) But I think we can get to that goal through a combination of open source and the ongoing exponential progress in both hardware and software. So I think it’s a good direction to go in. There are lots of issues, such as privacy, that are critical to maintain. And I think people in this field are genuinely concerned about the issues. There was a lot of representation by Google in DeepMind or at this Asilomar conference. It’s not clear what the right answers are. I think we want to keep—continue the progress. But when you have so much power, even with good intentions, there can be abuses. THOMPSON: What worries you? I mean, your view of the future is very optimistic. That’s very encouraging to hear. But what worries you? KURZWEIL: Well, I’ve been accused of being an optimist, and you have to be an optimist to be an entrepreneur because if you knew all the problems that you were going to encounter you’d probably never start any project. (Laughter.) But I have, as I say, been concerned about, written about the downsides, which are existential. We had the first existential risk to humanity when I was in grade school. We would have these civil defense drills where we would get under our desks and put our hands behind our heads to protect us from the thermonuclear war. And it worked. (Laughter.) THOMPSON: Mmm hmm. It’s true. KURZWEIL: So we have—we have new existential risks. These technologies are very powerful. And so I do worry about that, even though I’m an optimist. And I’m optimistic that we’ll make it through. I’m not as optimistic that there won’t be difficult episodes. World War II, 50 million people died. And that was certainty exacerbated by the power of technology at that time. I think it’s important, though, for people to recognize we are making progress. There was a poll taken of 24,000 people in 26 countries recently, and asked: Has poverty worldwide gotten better or worse? Ninety percent said incorrectly it’s gotten worse. Only 1 percent said correctly that it has fallen by 50 percent or more. There’s a general pessimism that things are getting worse, the world’s getting more violent. So I said, oh, this is the most peaceful time human history. And people seem to have—don’t you pay attention to the news? Because there was an incident a few days ago, and a few days before that. Well, our information about what’s wrong with the world is getting exponentially better. And certainly it’s far from a perfect world, but your chance of actually—Steven Pinker documents this in his book “The Better Angles of our Nature,” that there’s been an exponential decline in the likelihood of your being killed by interpersonal or state-sponsored violence. So that’s another long discussion, but— THOMPSON: Well, assuming people are not going to be killed, we’re going to have a Q&A in about five minutes. So I’m going to ask you one more question, which is about their futures, which is: What should they do, right? They’re about to enter a world where the career choices are career choices mapped onto a world with completely different technology. So in your view, what advice do you give to people in this room? KURZWEIL: Well, it really is an old piece of advice, which is to follow your passion, because there’s really no area that’s not going to be affected or that isn’t a part of this story. My father knew he had a passion for music from a very young age. And music is relevant to this story. The neocortex is a hierarchy of modules. And we got an additional amount of neocortex 2 million year ago when we got these big foreheads. And what we did with it is put it at the top of the neocortical hierarchy. And that was the enabling factor for us to invent music. Every human culture ever discovered has music and no other animals have music. Humor came with that additional neocortex, language, art, science, technology, magazines. We’re going to do it again. We’re going to merge with neocortex—simulated neocortex in the cloud. So, again, we’ll be smarter and we’ll create new forms of communication that are as profound as music is. Try explaining music to an animal that doesn’t understand that concept. So everything is really relevant. And it’s not going to—my view is not that AI is going to displace us. It’s going to enhance us. It does already. I mean, who can do their work without these brain extenders we have today? And that’s going to continue to be the case. And say, oh, only the wealthy are going to have these tools. And I say, yeah, like smartphones, of which there are 3 billion. I just—I just—I was saying 2 billion, but I just read the new statistic now it’s 3 billion. It’ll be six billion in a couple years. That’s because of this fantastic price performance explosion. So these technologies—only the wealthy will be able to have these technologies at a point in time where they don’t work. By the time they work well, they’re virtually free. (Laughter.) So, you know, find where you have a passion. Some people have complex passions that are not easily categorized. And so find a way of contributing to the world that—where you think you can make a difference. Use the tools that are available. The reason I came up with the law of accelerating returns literally was to time my own technology projects so I could start them a few years before they were feasible. So try to anticipate where technology is going. And it’s—people forget where we have come from. I mean, just a few years ago we had little devices that looked like a smartphone but they didn’t work very well. So that revolution, and mobile apps, for example, you know, hardly existed five years ago. The world will be comparably different in five years. So try to time your projects to kind of meet the train at the station. THOMPSON: All right, if Council on Foreign Relations term members do not have questions for Ray Kurzweil I will eat my shoes. And already we have half the front two rows. (Laughter.) So right here. Please say—state your affiliation, ask the question. A reminder, this meeting is on the record. So your words can and will be used against you. Q: So Adedayo Banwo, Deutsche Bank. With all due respect, sir, you’re so smart it’s kind of scary. (Laughter.) And I think the same holds true for the technology. So I was wondering what sort of strategies do you envision for people in your spaces of explaining this and to make it less scary for normal people? KURZWEIL: Well, the unknown is scary. So part of my mission is going to try to explain where we’re going, and show how it has been beneficial. We’ve overcome—I mean, human life used to be extremely difficult. If you want to read something scary, read about life 200 years ago. Thomas Hobbes describes it as short, brutish, disaster-prone, disease and poverty filled. And there was no understanding of the germ theory of disease. People got diseases all the time. There was no antibiotics. A routine infection would throw a family into economic desperation. There were no social safety nets. Life expectancy was 37 in 1800. And even the kings and queens didn’t have amenities a century or two ago that the poor have today, like flush toilets, and refrigerators, and radio, TV, computers. So the future really will provide an opportunity to continue to overcome human affiliation and add to our creativity. There’s a lot of fear about jobs, but the movement has also been in the right direction. If I were a prescient futurist in 1900, I’d say, well, 38 percent of you work on farms and 25 percent of you work in factories. That’s two-thirds of the population. But I predict in 100 years that’ll be 2 percent on farms and 9 percent in factories. And everybody would go, oh my God, we’re going to be out of work. And I’d say, don’t worry, for every job we destroy at the bottom of the skill ladder, we’re going to create more than one job at the top of the skill ladder. And people would go, oh, great. What new jobs? And I’d say, well, I don’t know, they haven’t been invented yet. (Laughter.) Which is part of the problem. We can clearly see today—we can see even better because we have better communication and knowledge, the jobs going away. If you’re driving a truck or a car, you’ve probably heard about self-driving vehicles. And we can’t see what’s coming. If I were really prescient in 1900, I’d say, well, you’ll be creating websites and doing data analytics and apps for mobile devices. And nobody would have any idea what I’m talking about. So some economists say, yes, that’s all true, but it’s slowed down in recent years. That’s not true. The whole mobile app economy, which is many different ways to make money, didn’t exist five years ago. And so most importantly, not everybody’s thrilled with their job but an increasing fraction of people actually get some of their self-identification and gratification and self-actualization from their employment, which wasn’t the case 100 years ago. So I try to articulate the benefits and what we can see that’s positive about the future. THOMPSON: In the very front right here. And I’d like to say and I’m glad we don’t all drop dead at 37. Thank you, Ray. (Laughter.) Q: Hi. KURZWEIL: Well, I gave a talk to junior high school kids—13- and 14-year-old science winners from around the country. And I said to them: If it hadn’t been for the scientific progress we’ve made, you all would be senior citizens because life expectancy was 19 1,000 years ago. Q: Hi. Alana Ackerson. And I just did a doctorate looking at how the development of newer and better technology is a way that we, as humans, express faith in a better future for humanity. And so from that lens, I’d love to hear your thinking on—as we are now—as intelligence is now transcending us as humans in some ways, what are your thoughts about how we are going to be redefining our understanding of who we are as humans. And taking your phrase, an age of spiritual machines, how we are from a spiritual perspective? So how is this going to fundamentally change, you know, our lens on these things? KURZWEIL: Right. Well, great question. We are the species that changes ourselves and changes who we are. That came with that additional neocortex 2 million years ago, and that we could then conceptualize different futures. We had one other evolutionary change, which is this modest appendage, opposable thumbs. So I could imagine I could take the branch and I could strip off the leaves and create a tool. And then I had the dexterity to actually carry it out. So we created a whole new evolutionary process of evolution of technology. You mentioned spirituality. I think this is all a spiritual process. Our theory is basically one of evolution. So what do we see in evolution? Both biological evolution and technological evolution, which is really a continuation of biological evolution—I have a chart showing the acceleration of change, which goes very smoothly from biological to technological evolution. It took hundreds of millions of years for mammals to evolve, for example, and now we have paradigm shifts in just a few years’ time. But what happens to entities in evolution? They get more complicated. They get more knowledgeable. They get more creative. They get more beautiful. So if we look at how God has been described in different religious traditions—I grew up in a Unitarian church where we studied all the world’s religions. And there was a common theme. Although they all have different metaphors and different stories, God was described as an ideal, as being unlimited in, what, in those very same qualities—all knowing, infinitely intelligent, infinitely creative, infinitely loving, and so on. And that—so we actually improved those very qualities at an exponential rate through an evolutionary process. Never achieving an infinite level, but growing explosively in that direction. So we never become God, but we become more God-like in these various qualities. So you could say that evolution is a spiritual process, bringing us closer to God. And the other implication that spiritual—and really where that title, “Age of Spiritual Machines” comes from—is what is this—what is spiritual? It’s really a word for consciousness. Our whole moral system, our sense of values is that consciousness is the precious thing. That’s the sort of underlying debate in animal rights. Conscious entities are what’s important. Non-conscious entities are only important insofar as they affect the conscious experience of conscious entities. So who and what are conscious is a key question. And that’s the underlying question in animal rights. That’ll be the question when it comes to the AI. So I alluded to earlier, we are going to merge with this technology. I’d say we already have done that to some extent. Medical nanorobots will go inside our brain, connect our neocortex to the cloud. So your smartphone, even though it is itself a billion times more powerful per dollar than the computer I used when I was an undergraduate at MIT, it multiples itself again a millionfold by connecting to millions of computers in the cloud. We can’t do that directly from our neocortex. We do it indirectly through these devices. We’ll do it directly in the 2030s. and not just to do things like search and translation directly from our brains, although we’ll do that, but to actually connect to more neocortex. So it’ll be just like what happened 2 million years ago when we got these big foreheads, and we got this additional neocortex and put it at the top of the hierarchy. That was the enabling factor for humor, and language, music, and so on. We’ll do it again. Only, unlike 2 million years ago, it won’t be a one-shot deal. We couldn’t keep growing this enclosure without making birth impossible. The cloud is pure information technology. It’s not limited by a fixed enclosure. So we will become more and more non-biological. So people say, oh, we’re going to lose our humanity. Well, if you define human as being necessarily purely biological, I think we’re already not purely human anymore, because we’re not purely biological anymore. And we’re going to become increasingly nonbiological. But that’s who we are. I mean, that is the definition of a human, the species that changes itself, it creates tools, it goes beyond our limitations. THOMPSON: Are there any conscious in the back of the room? How about way back there in red? Dark hair, yeah. Maybe you’re not in red, but. Q: Thank you. It’s more of a pink, I think. (Laughter.) THOMPSON: My glasses aren’t enhanced enough. (Laughter.) Q: Remo (ph) with Senator Dick Durbin’s office. Thank you. This was the most elegant description of the robots coming that I have ever heard. And I am just curious, you know, so much of the emphasis has been on sort of the really lovely side of human nature, on science and exploration. And I’m curious as we sort of move more towards our robot partners, what about the dark side? What about war and war machines and violence? I think already in some early AI experiments there has been this issue of sort of when you take the internet in aggregate there is, you know, sort of a hostility or negative in verbiage that is put into the—you know, put into some of these machines. And, you know, what is—I guess, what is your thinking on that, or what is the reaction, or what are the controls for that? And I asked as someone—I’m an optimist. And I just I think—at least, from sitting in Washington—one of the worries about this is, you know, how do you—how do you filter for that? And we haven’t even been able to answer that question for the internet yet. KURZWEIL: Yeah. Well, let me come back to what I think can be done about that. But just to make an overriding point that the increase in communications, I think, has fostered democracy and peace. So that started with books in the middle ages. And then we had other forms of communication. You can count the number of democracies a century ago on the fingers of one hand. You could count the number of democracies two centuries on the fingers of one finger. The world is not a perfect democracy today, but that has been accepted as the ideal and people at least argue as to how they are a democracy. That’s become the model. That wasn’t the case a century ago. There wasn’t that consensus. And the world has become more peaceful, as I just mentioned. And there’s a lot of documentation on that. Doesn’t appear to be the case because our information about what’s wrong with the world is getting exponentially better. And there’s actually an evolutionary preference for bad news, because it was actually in your interest, you know, tens of thousands of years ago for you to pay attention to bad news. A little rustling in the leaves that might be a predator, that was important to pay attention to. The fact that your crops were 1 percent better than last year, that was not critical for your survival for you to be aware of. That being said, you know, we’re learning a lot about how these platforms can be used to amplify all kinds of human inclinations, and be manipulated. And a lot of this is fairly recent information that we’re learning. But we can—so, AI learns from examples. There’s a motto in the field that life begins at a billion examples. And the best way to get examples is to learn from people. So AI very often learns from people. Not always. AlphaGo Zero just learned from itself, by playing Go games against itself. But that’s not always feasible, particularly when you’re trying to deal with more complex, real-world issues. There’s a major effort in the field—it’s going on in all the major companies and in open-source research as well-to debias AI, because it’s going to pick up biases from people if it’s learning from people. And people have biases. And so to overcome gender bias and other types of—racial bias, that can actually be a goal. As humans, we pick up biases from all of the things we’ve seen, a lot of it’s subconscious. We then learn, as educated humans, to recognize bias and try to overcome it. And we can have conflicts within our own minds. The metaphor that my mentor Marvin Minsky used in the title of his book, “Society of Mind,” I think is a good one, because I very often hear the society of my own mind bickering about some issue. And there’s different factions for different issues. But there is a whole area of research to debias AI and to overcome the biases it may pick up from people. So that’s one type of research that can overcome problems with machine intelligence. And in these ways, machine intelligence, you know, can be actually less bias than the humans that it learned from. Overall, though, I think despite the promise and peril that’s intertwined in social media, it’s overall been a very beneficial thing. I walk through airports, and every child over the age of two is on their devices. And it’s become a world community. And I think the generation now growing up, more so than any other generation, feels that they are citizens of the world, because they’re really in touch with all the cultures of the world. THOMPSON: Right here in the front, Adam. Q: Adam Ghetti with Ionic Security. Ray, really appreciate all the work you keep doing on singularity. But I do want to leap forward to 2030 timeframe. We’ve got the nanobots. We’re connected. You know, I’ve got a collective set of kind of thought and almost infinite capacity comparative to where are today. KURZWEIL: That won’t be till 2035. Q: All right, 2035. We’re there. That happens. And kind on the same progression of more information has created more peace, better kind of understanding of a global community versus these isolated communities. When we have the ability to have that kind of much higher bandwidth access to this extraordinary processing and intelligence infrastructure, does that deeper appreciation now of everybody else and every other culture, because we have the bandwidth to absorb it and process it, what are the implications you see on nation-state structures and global governing structures when the world is truly connected that way? KURZWEIL: I mean, we are already part of the way there. You know, there’s some issue the retirement funds in Italy and the whole world is not only aware of it, but it affects everyone. So we are not isolated islands, and haven’t been that way for a long time. And there’s appreciation how pieces, issues of economics or our affairs anywhere in the world have an immediate effect on us. It’s not just that we care about these other people. And, you know, old institutions continue. There are still horses and buggies not far from here. There’s still mechanical typewriters. Religion is still an institution, but has much less effect than it did, say, a century ago. It wasn’t that long ago in human history that it really governed and had deep influence on every facet of everyone’s life. It now has a role that varies depending on the person, but it’s a much less pervasive force. The same thing’s true of nation-states. I mean, people really are increasingly identifying as citizens of the world. And I think over time nation-states will becomes less influential. I mean, I think we’re on that path. THOMPSON: Wait, can I just—in the last year in this country, we have not grown closer to the rest of the world. I know a lot of people would say our democracy has not gotten better. Is this a blip in the ongoing continuing progress and mankind coming together? Or is this—or are many people misinterpreting that? KURZWEIL: Well, I mean, the polarization in politics in the United States and in some other places in the world is unfortunate. I don’t think it is an issue for the kinds of things that we’ve been talking about today. We’ve had, you know, major blips in the world. World War II was a pretty big blip. And actually, didn’t affect these trends at all. I mean, one of the remarkable things I noted in ’81, when I first noticed this, is where is World War II or World War I on these graphs? So it kind of has a mind of its own. And there may be things that we don’t like in, say, certain government officials or the government. But there’s very robust discussion. We’re not in a totalitarian era, where you can’t voice your views. I’d be more concerned if we moved in that direction, but I don’t see that happening. So not to diminish the importance of government and who’s in power and so forth, but it’s at a different level. The kinds of issues we’re talking about are not really affected by these issues. There are existential risks that I worry about, that I mentioned, because technology is a double-edged sword. THOMPSON: On the far left. Q: Hi. Aubrey Hruby, Africa expert. And my question is about inequality. From a human history perspective, maybe we started out very equal and hunter and gatherer, but there were a lot of phases of most of human history where inequality is quite high. And I’m wondering whether you think that the 20th century was an anomaly in that sense, and how the diffusion of technology is going to impact inequality if you look at Gini coefficients worldwide. KURZWEIL: Well, I think there’s been a worldwide movement towards greater equality. Ancient societies were not equal. First of all, gender roles were very rigid and there was no concept of gender equality. My own family’s been involved in this. My daughter’s right here, but my great grandmother started the first school in Europe that provided higher education for girls in 1868, taken over by her daughter, who became the first woman to get a Ph.D. in chemistry, and wrote about this. The title of her book is, “One Life is Not Enough,” which kind of presaged my interest in life extension. But if you talk about gender equality, you’ve come a long way. But there’s all kinds of issues. I mean, slavery was considered the norm certainly here in the United States, but around the world, not that long ago in human history. And there’s been, you know, recent issues with gay rights and gay marriage. And there’s a continual progression, I think, of human rights. This Unitarian church I grew up in, one motto was “many paths to the truth,” so we studied all the world religious traditions, but they were also focused on the here and now and civil liberties. And we went to civil rights marches in the South in the 1950s. So I think we are making progress. I mean, there wasn’t even discussion of these issues not that long ago. I mean, when I was— Q: (Off mic)—economic inequality from, like, a global perspective. KURZWEIL: Economic equality is getting better. Poverty in Asia has fallen by over 90 percent according to the World Bank. In the last 20 years, they’ve gone from primitive agrarian economies to thriving information economies. Africa and South America have growth rates that are substantially higher than the developed world. So any snapshot you take, there’s inequality, but it’s dramatically moving in the right direction. Poverty worldwide has fallen 50 percent in the last 20 years, and there’s many other measures of that. People say the digital divide, but, you know, the internet, smart phones are very strong in Africa. That’s a change just in the last few years. So we’re moving in the right direction. At any one point in time, there’s grave inequality and people who are suffering, but the numbers are growing in the right direction. THOMPSON: In the far, very far back, last man against the wall. Q: Hi. My name is Lester Malpin (ph). I guess my question is a question very generic that you probably get asked every day. And I’m the father of four kids, so I think about it all the time. And that is really, why—we have people like yourself, but in our country, why do we pour—why do we score so poorly in STEM? Why do you think that happens? And what do you think is the answer to that, because I’m trying to get my kids prepared for 2035? KURZWEIL: Well, it’s an interesting dichotomy. We do, on various measures, fall behind on STEM. There’s still a gender issue with STEM. The girls are right up there with the boys up through junior high school, but then they tend to drop out and we don’t fully understand the reasons for that. There seem to be powerful cultural issues at work and people are working on overcoming that, but we don’t fully understand it. But despite all that, the United States leads in STEM. I mean, the most—the leading high-tech companies are American. Certainly, other countries like China are moving rapidly. But we do have kind of an entrepreneurial leadership. There’s a frontier mentality that comes from the United States being a place that you went to overcome oppression and to seek a better life that is, I think, engrained in the American character. And also, we are the land of all the world’s peoples, so we understand all the different markets around the world because all those people are here and that’s what makes up America. That’s not true of most other countries. There’s some diversity in some countries, but nothing like the United States. I do think STEM, literacy, scientific, technological, digital literacy should be an important part of education. It’s shocking to me that many high schools don’t have—don’t teach computer software. They should be teaching programming in elementary school. It’s a good way to think, it’s a good way to develop intellectual skills, and a good way to view the world. So I think this is a good thing for us to focus on. As a nation we’re doing well in STEM. I think just to be a world citizen, it’s important to actually have literacy in these areas. THOMPSON: Right there in the middle. Q: Adam Pearlman with the U.S. courts. Taking your hypothesis of, you know, a connected, collective consciousness maybe—maybe collective, maybe not—what does that do to individuality, comparative advantage on an individual level and the concept of leadership if we’re all connected through implants or anything else? KURZWEIL: Well, yeah, people—another way of asking that is, aren’t we going to all become the same if we all have access to all this knowledge and thinking capacity? I think we’ll actually become more different. We’re actually pretty much the same as, you know, unenhanced, we all have a very similar architecture of 300 million neocortical modules, so fixed capacity. We’ll be able to delve much more deeply into specific issues or skills or areas of insight as we enhance our thinking capacity. And we can do that already to the extent that we have these brain extenders. It was very hard to write a book 30 years ago. My most important information technology was a roll of quarters to feed the copier in the public library. So we do have the ability to think more deeply, so people will—I mean, we already see a tremendous diversity, for example, of musical feelings. I mean, when I was a kid there was pop music and there was jazz and classical music and that was it, and now there’s hundreds of genres. So that will continue. There will be a tremendous diversity of ways you can approach subjects. And I think people will become more different when they have more capacity to think more deeply. THOMPSON: Right back here in the front row. Last question because time always moves exponentially at the end of these, and so we are out of it. Q: Jaime Yassif from the Open Philanthropy Project. Thank you for coming to speak with us today. I hear from your remarks that you’re making a prediction that artificial general intelligence is 12 years out. And you’ve mentioned a couple of times that, notwithstanding your optimism, you are concerned somewhat about existential risks, so I was wondering if you could elaborate a little bit more on what you mean by that. And what is the most important thing that you think technologists should be doing to reduce those risks? KURZWEIL: Well, I mean, existential risks are risks that threaten the survival of our civilization. So the first existential risk that humanity ever faced was nuclear proliferation. We have had the ability to destroy all of humanity some number of times over; there’s debate about what that number is, but it doesn’t really matter. And these new technologies, it’s not hard to come up with scenarios where they could be highly destructive or destroy all of humanity. So biotechnology, for example, we have the ability to reprogram biology away from disease. Immunotherapy, for example, which is a very exciting breakthrough in cancer, I think it’s going to be quite revolutionary, it’s just getting started. That’s reprogramming the immune system to go after cancer, which it normally doesn’t do. But a bioterrorist could reprogram a virus to be more deadly and more communicable and more stealthy and create a superweapon. And that was the specter that spawned this first Asilomar conference 40 years ago. And there’s been recurring conferences to make these ethical guidelines and safety protocols and strategies more sophisticated, and so far it’s worked. But we keep making the technology more sophisticated, so we have to, you know, reinvent them over and over again. So we just had our first Asilomar conference on AI ethics. We came up with a set of ethics which we all signed off on. A lot of them are somewhat vague. I think if you look back at the Asilomar guidelines for biotech 40 years ago it was the same thing. They’ve gotten more teeth and more specificity and more significance over time. I think it’s an important issue to give a high priority to. You know, there’s—we’re finding we have to build ethical values into software. A classic example is your self-driving car. The whole motive—the whole motive for self-driving cars is they’ll, you know, they’ll eliminate 99 percent of the 2 million deaths a year from human drivers. But it will get into a situation where it has to make an ethical decision. Should it drive towards the baby carriage or towards the elderly couple or towards the wall and perhaps kill your passenger? Do you have an ethical guideline to your passenger when I own you? You can’t send an email to the software designers in that circumstance of, gee, what should I do? It’s got to be built into the software. So those are practical issues, and there’s a whole area of AI ethics growing over this. But how do we deal with the more existential risks, weaponization of AI, which is not something in the future? I mean, defense departments all around the world have been applying AI. There was a document going around asking people to agree to ban autonomous weapons, which sounds like a good idea. And the example that’s used is, well, we banned chemical weapons, so why not autonomous AI weapons? It’s a little more complicated because, you know, we can get by without anthrax and without small pox. It’s OK to just ban them. But autonomous—an autonomous weapon is a dual-use technology. The Amazon drone that’s delivering your frozen waffles or medicine to a hospital in Africa could be delivering a weapon. It’s the same technology, and kind of the horse is already out of the barn, which is just to say that it’s a more complicated issue how to deal with that. But the goal is to reap the promise and control the peril. There’s no simple sort of algorithms, there’s no little subroutine we can put in our AI as, OK, put this subroutine in and it will keep your AIs benign. There are technical strategies when it comes to biotechnology and nanotechnology. But intelligence is inherently uncontrollable. You know, if there’s some entity that’s more powerful than you and I and it’s out for our destruction, the best strategy is not to get in that situation in the first place. And failing that, the best next strategy would be to get some other AI that’s even more intelligent than the one that’s out for you on your side. (Laughter.) Intelligence is inherently uncontrollable. So my strategy, which is not foolproof, is to practice the kind of ethics and morality and values we’d like to see in the world in our own human society. Because future society SSA, it’s not some invasion from Mars of intelligent machines. It’s going to—it is emerging from our civilization today. It’s going to be an enhancement of who we are. And so if we’re practicing the kind of values we cherish in our world today, that’s the best strategy to have for a world in the future that embodies those values. THOMPSON: All right, that is the perfect note to end on. We will all go now to an autonomous, weapon-free cocktail reception. Thank you very much, Ray Kurzweil. (Applause.) (END)
  • Venezuela
    October 26, 2017
    Podcast
    Opposition groups face new hurdles in Venezuela and U.S. technology and media giants arrive in Washington D.C. for intelligence hearings. 
  • China
    China Is Poised to Take Over This Industry. America Can’t Let It Happen.
    Ashley Feng is a research associate for China Studies at the Council on Foreign Relations. Sagatom Saha is a Fulbright researcher studying energy reform. The future of transportation will be electric vehicles (EV). As battery costs come down and countries turn away from internal combustion engine vehicles, the most aggressive outlooks see EVs making up one-third of the global car fleet by 2040. Given the pressing need to decarbonize the global transportation sector, this seems like positive news. However, China, the emerging market leader, would stifle innovation if given the chance to dominate. Without competition from inventive American firms, the impending EV revolution would be one that slows the industry and speeds climate change in the long run. If Chinese innovation in the EV market is at all similar to its role in the solar panel industry, the world will only see “good enough” innovation; because there is no competition or pressing problem to stimulate technological breakthroughs, China will settle for minimum advances in EVs. For the past decade, China has identified new energy vehicles (NEVs), which includes electric vehicles, as a strategic and emerging industry, unlocking strong financial and political support from top leadership. Recent trends have demonstrated Beijing will not shy away from using the law to force non-defense related companies to transfer technology or store their data on Chinese servers. In 2013, Kawasaki, a Japanese company, found itself competing against its own designs abroad when CSR Sifang, its former partner in China, used transferred technology to export Japanese-designed high-speed rails to new markets in Europe. For foreign automakers to do business in China, they must have a joint venture with a domestic company as majority owner. The Chinese government also requires automakers to incorporate NEV technologies in their electric vehicles if they have them. Due to these stringent requirements, foreign companies end up forfeiting their intellectual property to Chinese competitors they are forced to work with, boosting domestic Chinese industry and harming their own bottom lines in the long run. Despite this, foreign companies have quickly realized that China is the hottest market for EVs and are still willing to compete there at any cost. Ford, the quintessential American automaker, is exploring developing its new line of electric cars in China, which would then be exported to America. Through leveraging its market size and government-directed economy, China is looking to lead the EV market. By poaching critical technologies and forcing joint ventures, China has leapfrogged to become the world’s second-largest producer in a fraction of the time it took foreign competitors to develop their products. The bad news is this situation will only result in incremental improvements that will not ultimately benefit the environment. Chinese companies are widely known for dumping products to create monopolies and bankrupt competitors, creating an uncompetitive environment in which China could fashion itself as a leader with little merit. While this practice is unproductive across the board, it could be truly damaging in the energy sector. Imagine a world where leading companies only improve marginally on cost and performance. Incremental progress will not sufficiently combat climate change. The U.S. needs to expand funding for research and development of new, innovative vehicle technologies, as government support is crucial to the commercialization of EVs and nearly all energy technologies, often defraying the upfront cost before mass-market viability. The Trump administration has correctly identified the danger that America’s unbalanced trade relationship with China poses to national security and should fight for fair market access for automakers in China. Even under unfair conditions, the U.S. still managed to export $8.9 billion worth of cars in 2016, indicating latent Chinese demand. Congress and the administration should work together to codify and fund the next generation of infrastructure needs, pouring financial support behind charging stations around the country to incentivize domestic EV sales. The U.S. has sustained economic growth through promoting fair and open markets, prioritizing R&D, and investing in national infrastructure. U.S. policymakers should now lead the transformation of America’s transportation sector, lest they leave the next generation in the Beijing’s hands. This piece originally appeared in Fortune.
  • China
    Chinese Investment in Critical U.S. Technology: Risks to U.S. Security Interests
    In July 2017, the Council on Foreign Relations’ Maurice R. Greenberg Center for Geoeconomic Studies held a workshop to explore the scale and scope of Chinese investment in U.S. technology, its national security implications, and potential policy responses. The workshop, hosted by then CFR Senior Fellow Jennifer M. Harris, was made possible by the support of the Carnegie Corporation of New York. The views described here are those of workshop participants only and are not CFR or Carnegie Corporation positions. The Council on Foreign Relations takes no institutional positions on policy issues and has no affiliation with the U.S. government. Introduction Chinese firms, both private and state-owned, have in recent years invested billions of dollars in the U.S. technology industry, raising concerns that a powerful rival has gained or could soon gain access to sensitive and, in some cases, critical technologies that underpin American military superiority and economic might. At the workshop entitled “Chinese Investment in Critical U.S. Technology: Risks to U.S. Security Interests,” held in San Francisco, on July 18, 2017, CFR convened nearly thirty current and former government officials, academics, bankers, investors, and corporate executives to explore whether the large and growing early-stage Chinese investment in critical U.S. technology poses a threat to U.S. national security, and, if so, to outline policies that mitigate the risks of unbridled Chinese investment and to bolster U.S. competitiveness. Show Me the Money: The Scope of Chinese Investment in U.S. Technology In 2016, Chinese investors, venture capital funds, and state-owned enterprises (SEOs) poured more money into all stages of U.S. technology development than ever before (see figure). This included acquisitions of not just established firms but also early-stage businesses and new initiatives from existing companies in nascent or newly developed technologies, in health and pharmaceuticals, in artificial intelligence (AI), and in other advanced technologies that could have cutting-edge military applications. Participants largely agreed that, while most of the Chinese investments come from nominally private-sector firms, U.S. policymakers should view them as being made at the behest of the Chinese government, whether due to the availability of financing from state-owned banks or due to the Communist Party of China’s influence over significant private-sector companies. There is little functional distinction between private firms and SEOs, one participant noted; another underscored the role that Chinese state financing plays in lending a political overtone to what might otherwise appear to be private-sector investment decisions. China’s Game: The Goals of Investing in U.S. Technology Some participants argued that the investment flows are a natural extension of China’s decade-long quest to develop indigenous technologies to fuel economic growth: while Beijing once copied or simply stole technologies from advanced economies, now it is also buying them. Others pointed to Chinese economic plans—such as Made in China 2025, the Belt and Road Initiative, and China’s goal of reaching developed country status by the Communist government’s centennial in 2049—to argue that technology investments are being centrally directed toward concrete goals. Other participants were more skeptical, pointing to what they described as a limited correlation between Chinese investment in U.S. technology and the Chinese government’s stated economic goals. Some investors could simply be chasing returns in the less-saturated U.S. market. Others underscored that a desire to get money out of mainland China could be driving “scattershot” investment across a range of U.S. economic sectors with minimal central direction or oversight. Or it could be a bit of everything at once; chasing returns, moving capital offshore, and meeting party goals are not mutually exclusive. One participant summed up the difficulties in tracing and analyzing Chinese investment thus: “We know who is investing in whom. [But] we don’t know who owns them. And we don’t know why” they are investing. Ultimately, participants concurred, while U.S. foreign direct investment in China still greatly exceeds Chinese investment in the United States, the playing field is “increasingly tilted” in favor of Chinese investors due to the essentially open nature of the U.S. economy. Though Chinese investors trying to purchase U.S. firms face low regulatory hurdles, the obstacles facing U.S. firms in China are much greater. U.S. banks operating in China, for instance, often cannot use the local currency; firms in other sectors face concerted challenges, from forced technology sharing to mandatory joint ventures, that foreign firms in the United States are not subjected to. “We don’t enjoy free trade today,” one participant argued. “It’s only in one direction.” Risks of Chinese Investment to U.S. Security Several participants agreed that increased Chinese investment in new U.S. technology sectors could have two main national security implications: a direct threat to the U.S. military’s technological superiority, and, more broadly, an undermining of U.S. competitiveness in what one participant called the ongoing economic war with Beijing. Some participants, however, cautioned against exaggerating the potential threat posed by Chinese investment, particularly the risk of a return to a Cold War mentality. The Department of Defense, in an unpublished 2017 report, has noted possible risks from Chinese tech investment to the so-called Third Offset, the U.S. military’s effort to ensure continued qualitative advantages over potential rivals, including China. The Third Offset—like its predecessors in the Cold War and through the post–Cold War period—seeks to both deter potential foes and reassure allies that the United States intends to maintain technological dominance over its rivals. Extensive Chinese investment in sensitive technologies—such as guidance systems, AI, and light sensors that aid unmanned aviation systems—could erode or even eliminate that technological edge, some participants warned, potentially diminishing the United States’ ability to credibly defend allies, especially in Asia. Moreover, Chinese investment in high-tech firms could, in many cases, preclude U.S. government or military investment and cooperation with those same companies. Beyond purely defense-related technologies, several participants stressed the risk that Chinese acquisition of novel technologies—especially in foundational technology such as AI that enables advances in a wide range of other areas—could ultimately undermine U.S. economic competitiveness. Some participants warned that Chinese access to precision data on genomics and pharmaceutical development could steal the mantle from U.S. companies currently dominating health care and related fields. Likewise, Chinese efforts to gain access to core communications and digital technologies could give Beijing the ability to harden its own cyber defenses while sharpening its cyberattack potential against the digital and telecommunications infrastructure of the United States and other countries. The Third Offset: More Than Just Technology Although potential threats to the U.S. military’s technological superiority dominated concerns about the implications of Chinese investment, some participants cautioned that the recent U.S. technological edge is a historical anomaly; therefore, the ending of this dominance would be a return to normality, not a revolutionary development. Historically, few armies ever rode technological superiority to any lasting edge over their opponents, because most military technology, once encountered, is readily replicable, some participants noted. The introduction of the chariot, stirrup, firearms, automatic weapons, and armored vehicles were important but none remained dominant for long or conferred a lasting advantage. Instead, participants stressed, military doctrine, training, and operations are more reliable ways to ensure the ability to successfully wage war. A flexible command structure and battle-tested operational doctrines—rather than whizbang technology—provide a surer path to victory. Blitzkrieg was based not on superior technology—German tanks were initially lighter and weaker than their counterparts—but on doctrine and organization. Germany’s foes, especially the United States and the Soviet Union, copied much of that doctrine and organization in turning mobile tank warfare back against its creator. Even when clearly a superior technology emerges, such as France’s development of the first true machine gun, the desire to keep the technology secret and proprietary can erode all of its advantages: the mitrailleuse conspicuously failed to win the Franco-Prussian War because it was too secret for the French troops to be trained in. How the United States Should Respond With respect to countering security threats from Chinese investment in U.S. critical technology, participants overwhelmingly preferred playing offense to defense: policymakers should boost innovation in the U.S. economy as a way to maintain a technological edge rather than seek to block or restrict Chinese investment or to limit the export of certain technologies. To encourage innovation, many participants stressed the need for an industrial-competitive strategy in the United States, which would connect government and the private sector in planning, just as Chinese firms and their government coordinate. Some recommended institutionalizing public-private cooperation in the United States, while safeguarding free-market principles. Several cited the historical examples of government-funded and -directed basic research, epitomized by Bell Laboratories, as ways to ensure continued dominance of foundational technologies that ensure economic primacy. However, nearly all participants also acknowledged that the current political climate makes such cooperation difficult. Budget pressures on basic government research already threaten the network of national labs. Meanwhile, populist rhetoric favoring defensive measures such as tariffs and blacklists makes it harder for policymakers to make the case that a more open economy is ultimately more resilient. Participants vigorously debated how to bolster U.S. protections against Chinese access to critical technologies, including an expanded mandate for the Committee on Foreign Investment in the United States (CFIUS), targeted restrictions on critical technologies such as aeronautics and guidance systems that are vital to defense, and an insistence on Chinese reciprocity in investment and market access. CFIUS, a government panel that screens foreign investment for possible national security implications, has for decades been the default tool to limit foreign access to sensitive parts of the U.S. economy. But many participants argued that CFIUS is outdated, under-resourced, and applies too narrow a definition of national security to be particularly useful in limiting either the extent or the impact of Chinese investment. While a majority of participants agreed that CFIUS should be expanded, with added resources to handle an already large volume of cases, they contended that even a new and improved CFIUS would at best be a “piece of the pie” in dealing with Chinese investment in U.S. technology. Similarly, participants noted that U.S. policymakers have struggled since the end of the Bill Clinton administration to limit Chinese access to potentially sensitive technologies, especially those that could have both civilian and military applications. Some participants argued that a more targeted approach, meant not to block all or most Chinese investment but just that in the most critical technologies—such as machine learning and AI—would mitigate the damage. However, other participants countered that the U.S. government is not well equipped to identify which specific technologies will be game changers or which could pose a future security threat, rendering such an approach useless and potentially counterproductive. Soviet acquisition of precision-guided missiles was ultimately enabled by ball bearing technology, for example, something no U.S. government agency foresaw. Participants agreed that China has, in recent years, taken advantage of the traditionally open U.S. economy by investing freely in the United States while enforcing export controls and rigorously vetting investments and acquisitions on its shores. Most agreed that U.S. policymakers should therefore seek to make reciprocity—more equal access in China for U.S. investors, banks, and firms—a priority objective. And the United States currently has leverage over China to level the playing field. Participants differed, however, in how to do so. Some argued that privately urging China to open up would be more consistent with Chinese sensibilities, while others insisted that only by raising a “vocal stink” with Chinese authorities could unfair practices be rescinded.
  • Space
    The Outer Space Treaty’s Midlife Funk
    The following is a guest post by Kyle Evanoff, research associate in international economics and U.S. foreign policy at the Council on Foreign Relations. Today marks the fiftieth anniversary of the Outer Space Treaty’s entry into force. The UN agreement, which took effect on October 10th, 1967, created a binding legal regime for the cosmos (Earth notwithstanding). Declaring outer space to be the “province of all mankind” and dictating that it be used for peaceful purposes, the treaty eased U.S.-Soviet tensions, helping to lay the groundwork for the détente of the following decade. The agreement was, in many respects, a triumph for multilateralism. Half a century later, however, the Outer Space Treaty has entered something of a funk. Despite the universal aspirations of the UN Committee on the Peaceful Uses of Outer Space, which molded the document into its completed form, many of the principles enshrined within the text are less suited to the present than they were to their native Cold War milieu. While the anachronism has not reached crisis levels, current and foreseeable developments do present challenges for the treaty, heightening the potential for disputes. At the crux of the matter is the ongoing democratization of space. During the 1950s and ‘60s, when the fundamental principles of international space law took shape, only large national governments could afford the enormous outlays required for creating and maintaining a successful space program. In more recent decades, technological advances and new business models have broadened the range of spacefaring actors. Thanks to innovations such as reusable rockets, micro- and nanosatellites, and inflatable space station modules, costs are decreasing and private companies are crowding into the sector. This flurry of activity, known as New Space, promises nothing less than a complete transformation of the way that humans interact with space. Asteroid mining, for example, could eliminate the need to launch many essential materials from Earth, lowering logistical hurdles and enabling largescale in-space fabrication. Companies like Planetary Resources and Deep Space Industries, by extracting and selling useful resources in situ, could help to jumpstart a sustainable space economy. They might also profit from selling valuable commodities back on terra firma. As a recent (bullish) Goldman Sachs report noted, a single football-field-sized asteroid could contain $25 to $50 billion worth of platinum—enough to upend the terrestrial market. With astronomical sums at stake and the commercial sector kicking into high gear, legal questions are becoming a major concern. Many of these questions focus on Article II of the Outer Space Treaty, which prohibits national appropriation of space and the celestial bodies. Since another provision (Article VI) requires nongovernmental entities to operate under a national flag, some experts have suggested that asteroid mining, which would require a period of exclusive use, may violate the agreement. Others, however, contend that companies can claim ownership of extracted resources without claiming ownership of the asteroids themselves. They cite the lunar samples returned to Earth during the Apollo program as a precedent. Hoping to promote American space commerce, Congress formalized this more charitable legal interpretation in Title IV of the 2015 U.S. Commercial Space Launch Competitiveness Act. Luxembourg, which announced a €200 million asteroid mining fund last year, followed suit with its own law in August. Controversies like the one surrounding asteroid mining are par for the course when it comes to the Outer Space Treaty. The agreement’s insistence that space be used “for peaceful purposes” has long been the subject of intense debate. During the treaty-making process, Soviet jurists argued that peaceful meant “non-military” and that spy satellites were illegal; Americans, who enjoyed an early lead in orbital reconnaissance, interpreted peaceful to mean “non-aggressive” and came to the opposite conclusion. Decades later, the precise meaning of the phrase remains a matter of contention. While the Outer Space Treaty has survived past disputes intact, some experts and policymakers believe that an update is in order. Senator Ted Cruz (R-TX), for instance, worries that legal ambiguity could undermine the nascent commercial space sector—a justifiable concern. Russia and Brazil, among other countries, hold asteroid mining operations to constitute de facto national appropriation. And while there are plenty of asteroids to go around for now (NASA has catalogued nearly 8,000 near earth objects larger than 140 meters in diameter), more supply-side saturation could lead to conflicts over choice space rocks. The absence of clear property rights makes this prospect all the more likely. Plans to establish outposts on the moon and Mars present a bigger challenge still. Last week, prior to the first meeting of the revived National Space Council, Vice President Mike Pence described the need for “a renewed American presence on the moon, a vital strategic goal” in an op-ed for the Wall Street Journal. His piece came on the heels of SpaceX Founder and Chief Executive Officer Elon Musk’s announcement at the 2017 International Astronautical Congress of a revised plan to colonize the red planet, with the first human missions slated for 2024. Musk hopes for the colony to house one million inhabitants within the next fifty years. While mining might require only temporary use of the celestial bodies, full-fledged colonies would necessarily be more permanent affairs. With some national governments arguing that mining operations would constitute territorial claims, lunar and Martian bases are almost certain to enter the legal crosshairs. And, even under the favorable U.S. interpretation of the Outer Space Treaty, states and private companies would need to avoid making territorial claims. If viable colony locations are relatively few and far between, fierce competition could make asserting control a practical necessity. Even so, policymakers should avoid hasty attempts to overhaul the Outer Space Treaty. The uncertainties associated with altering the fundamental principles of international space law are greater than any existing ambiguities. Commercial spacefaring already entails high levels of risk; adding new regulatory hazards to the mix would jeopardize investment and could slow progress in the sector. While the current property rights regime may be untenable over longer timelines, it remains workable for now. The United States, for its part, should exercise transparency wherever misunderstandings are possible. International cooperation, especially for missions that would establish settlements on the celestial bodies, could preempt accusations of national appropriation while increasing the expertise and resources brought to bear. Likewise, civilian rather than military agencies should operate any permanent crewed installations, so as to alleviate concerns over whether U.S. purposes are in fact peaceful. After decades of stalled progress, humanity may finally be on the verge of creating a multiplanetary civilization. Extensive off-world operations would open possibilities for scientific exploration, inspire future generations, and provide a life-raft in case of global catastrophe. With the technical and financial barriers to space development falling, policymakers must ensure that laws and treaties help to expand rather than limit the sphere of human activity.
  • China
    Beijing’s AI Strategy: Old-School Central Planning with a Futuristic Twist
    China's new artificial intelligence strategy is a signal that Beijing wants to be a leader in AI. How it gets there is a different story.
  • Women and Economic Growth
    Girls' STEM Education Can Drive Economic Growth
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    Rachel Brown is a research associate in Asia Studies at the Council on Foreign Relations. The pageantry at last month’s Belt and Road Forum in Beijing highlighted the two major prongs of China’s Belt and Road Initiative: the Silk Road Economic Belt, which runs through Central Asia to Europe, and the 21st Century Maritime Silk Road, which runs through Southeast Asia, Africa, and Europe.  But a third prong of the initiative – the “digital new silk road” or “information silk road” – received less attention. Yet this component could generate significant consequences. The idea of incorporating digital sectors like telecommunications, internet of things infrastructure, and e-commerce into One Belt, One Road (OBOR) is not new. The March 2015 white paper articulating the vision for OBOR called for growth in digital trade and the expansion of communications networks to develop “an information silk road”. A few months later, Lu Wei, then director of the Cyberspace Administration of China, told the China-EU digital cooperation roundtable that, “We can build a digital silk road, a silk road in cyberspace”. The concept even received a shout out in the joint communiqué from the recent Belt and Road Forum, with a pledge to support “innovation action plans for e-commerce, digital economy, smart cities and science and technology parks.” But outside the bland formulations of policy documents, what will the digital new silk road actually look like? Many aspects of the concept are a natural extension of the “going out” policies pursued by Chinese telecommunications companies and could fill unmet needs for digital connectivity; greater connectivity could in turn open new markets for Chinese firms in e-commerce and other areas. But overall, the digital new silk road looks less like a cohesive concept and more like a catchall phrase applied to everything from earth observation projects at the Chinese Academy of Sciences to cell phone sales by Xiaomi. So are companies and officials simply paying lip service to Xi Jinping’s One Belt, One Road vision when they speak of the digital new silk road or is there the potential for something more? The three sectors below offer insights into the ambitions for – and possible pitfalls of – OBOR’s third prong: 1. Telecommunications and Satellites In addition to new railways, ports, and power plants, another infrastructure priority under OBOR is improving “international communications connectivity” through “the construction of cross-border optical cables and other communications trunk line networks”. State-owned enterprises including China Telecom, China Unicom, and China Mobile have already embarked on OBOR-related projects and are building out the infrastructure to underlie the digital new silk road. Among the ambitious programs are the construction by China and Russia of overland cable links between Asia and Europe. Private companies like Huawei and ZTE have also gotten into the game with projects including a fiber optic cable network in Afghanistan. In addition to cable networks, OBOR also offers the Chinese government a chance to encourage the adoption of its Beidou satellite network, a competitor to GPS, through a “space-based silk road”. The government aims to roll out basic services along the Belt and Road route by 2018 and the State Council Information Office is promoting Beidou’s use in everything from power transmission to transportation. Already, limited use of Beidou has been piloted in Karachi, Pakistan. These new projects will not only enhance digital connectivity in underserved Central and Southeast Asian countries but also facilitate faster and easier to maintain data connections. However, telecommunications cables built by China and Russia could also lead to network splintering if countries seek to insulate their data from traveling through the United States or Europe due to surveillance fears. Additionally, while the expansion of the Beidou system could improve the accuracy of consumer satellite navigation, it could also squeeze foreign companies out of satellite navigation markets in China and certain OBOR nations. Beidou’s development could also have implications in the national security realm as the People’s Liberation Army improves its weapons and tracking capabilities. 2. Smart Cities Another digital infrastructure frontier for Chinese firms is the construction of “smart cities”. Smart cities are broadly defined as urban areas that integrate information and communications technology to improve city operations in everything from traffic flows to water conservation to crime prevention. In recent years, ZTE and Huawei have expanded their efforts to supply smart city projects in OBOR nations such as Malaysia, Kenya, and Germany. Even China’s model smart city, Yinchuan, lies along the path of the path of the original silk road in a region now poised to benefit from new trade routes. Yinchuan offers citizens an array of innovative services including access to city information via QR codes and the ability to pay bus fares upon boarding through facial recognition software. Last December, ZTE’s chief information and strategy officer, Chen Jie, stressed the company’s commitment to sharing its smart cities know-how across the OBOR route. One of the company’s subsidiaries, ZTEsoft, has even co-opted the Belt and Road name for its new initiative the “Data Belt, Information Road”. The program will work with Singapore’s StarHub telecommunications to promote cross-border collaboration on smart city development, operations, and technology. Such collaborations could help modernize cities, increase their efficiency, and promote greater standardization of technologies.  However, the increasing reliance of cities on technology also raises cybersecurity risks given the susceptibility of internet of things devices to hacking. Moreover, for countries with often tense relationships with China, there could be broader worries about depending on digital infrastructure supplied by Chinese firms. For example, the City of Pearl, a planned “city within a city” in Manila, is being touted as the largest OBOR project in the Philippines. The project aims to integrate artificial intelligence to regulate city functions, but will be built by the Hong Kong and mainland China-affiliated UAA Kinming Group, which could raise security concerns. 3. E-Commerce Increased internet connectivity could also pave the way for more Chinese e-commerce sales along the Belt and Road route. Two of China’s e-commerce giants – Alibaba and JD.com – have already sought to link their global expansion to OBOR. According to Xinhua, JD.com plans to set up “more than 20 overseas warehouses to store and transfer goods from over 100 countries and regions including those along the Belt and Road Initiative.” Alibaba founder Jack Ma has cited countries along the OBOR route as among the most important regions for his company and plans further expansion in Russia, Central Asia, and Southeast Asia. This year, the company went even further and partnered with the Malaysian government to establish the first “digital free-trade zone”. The project will offer logistics and fulfillment capabilities as well as an online services platform. At the free trade zone’s launch, Ma argued that, “For human beings the first globalization was the silk road... today in the internet [age], I think we should transfer the silk road to an e-road”. This is a common refrain from Ma, who has argued for integrating standards and reducing trade barriers in e-commerce via an “electronic world trade platform”. Ma’s dream of promoting greater global online trade is consistent with OBOR’s mission of expanding commerce along new routes. But despite their apparent enthusiasm, Chinese e-commerce firms could become disillusioned in certain Belt and Road nations as they face competition from local firms, infrastructure challenges, and regulatory obstacles. OBOR projects may smooth some existing challenges such as limited shipping routes and high-speed broadband access, but other impediments will remain including customs policies and a lack of trust regarding e-commerce fulfillment. Given these hurdles, companies may not make money right away. But Ma appears willing to play a long game with his international e-commerce ambitions, much like Chinese leaders themselves with the entire OBOR project.  Surveying the digital landscape under the auspices of One Belt, One Road, many projects still appear linked by political rhetoric rather than a coherent strategy. But if the digital new silk road overcomes the challenges highlighted above and emerges as more than a catchy phrase, it will be an important step in knitting other countries into Chinese networks and could limit the influence of  the U.S. government and multinationals strategically and economically.