The algorithm kingdom

China may match or beat America in AI

Its deep pool of data may let it lead in artificial intelligence
AT THE start of this year, two straws in the wind caught the attention of those who follow the development of artificial intelligence (AI) globally. First, Qi Lu, one of the bosses of Microsoft, said in January that he would not return to the world’s largest software firm after recovering from a cycling accident, but instead would become chief operating officer at Baidu, China’s leading search engine. Later that month, the Association for the Advancement of Artificial Intelligence postponed its annual meeting. The planned date for the event in January conflicted with the Chinese new year.

These were the latest signals that China could be a close second to America—and perhaps even ahead of it—in some areas of AI, widely considered vital to everything from digital assistants to self-driving cars. China is simply the place to be, explains Mr Lu, and Baidu the country’s most important player. “We have an opportunity to lead in the future of AI,” he says.

Other evidence supports the claim. In October 2016 the White House noted in a report that China had overtaken America in the number of published journal articles on deep learning, a branch of AI. PwC, a consultancy, predicts that AI-related growth will boost global GDP by $16trn by 2030; nearly half of that bonanza will accrue to China, it reckons. The number of AI-related patent submissions by Chinese researchers has increased by nearly 200% in recent years, although America is still ahead in absolute numbers (see chart)

To understand why China is so well placed, consider the inputs needed for AI. Of the two most basic, computing power and capital, it has an abundance. Chinese firms, from giants such as Alibaba and Tencent to startups such as CIB FinTech and UCloud, are building data centres as fast as they can.

The market for cloud computing has been growing by more than 30% in recent years and will continue to do so, according to Gartner, a consultancy. In 2012-16 Chinese AI firms received $2.6bn in funding, according to the Wuzhen Institute, a think-tank. That is less than the $17.9bn that poured into their American peers, but the total is growing quickly.

Yet it is two other resources that truly make China a promised land for AI. One is research talent. As well as strong skills in maths, the country has a tradition in language and translation research, says Harry Shum, who leads Microsoft’s AI efforts. Finding top-notch AI experts is harder in China than in America, says Wanli Min, who oversees 150 data scientists at Alibaba.

But this will change over the next couple of years, he predicts, because most big universities have launched AI programmes. According to some estimates, China has more than two-fifths of the world’s trained AI scientists.

The second advantage for China is data, AI’s most important ingredient. In the past, software and digital products mostly obeyed rules laid down in code, giving an edge to those countries with the best coders. With the advent of deep-learning algorithms, such rules are increasingly based on patterns extracted from reams of data. The more data are available, the more algorithms can learn and the smarter AI offerings will be.

China’s sheer size and diversity provide powerful fuel for this cycle. Just by going about their daily lives, the country’s nearly 1.4bn people generate more data than almost all other nations combined.

Even in the case of a rare disease, there are enough examples to teach an algorithm how to recognise it. Because typing Chinese characters is more laborious than Western ones, people also tend to use voice-recognition services more often than in the West, so firms have more voice snippets with which to improve speech offerings.

The Saudi Arabia of data
What really sets China apart is that it has more internet users than any other country: about 730m. Almost all go online from smartphones, which generate far more valuable data than desktop computers, chiefly because they contain sensors and are carried around. In the big coastal cities, for instance, cash has all but disappeared for small purchases: people settle with their devices using services such as Alipay and WeChat Pay.

Chinese do not seem to be terribly concerned about privacy, which makes collecting data easier. The country’s bike-sharing services, which have taken big cities by storm, for example, not only provide cheap transport but are what is known as a “data play”. When riders hire a bicycle, some firms keep track of renters’ movements using a GPS device attached to the bike.

Young Chinese appear particularly keen on AI-powered services and relaxed about use of their data. Xiaoice, an upbeat chatbot operated by Microsoft, now has more than 100m Chinese users. Most talk to it between 11pm and 3am, often about the problems they had during the day. It is learning from interactions and becoming cleverer. Xiaoice no longer just provides encouragement and tells jokes, but has created the first collection of poems written with AI, “Sunshine Lost Its Window”, which caused a heated debate in Chinese literary circles over whether there can be such a thing as artificial poetry.

Another important source of support for AI in China is the government. The technology figures prominently in the country’s current five-year plan. Technology firms are working closely with government agencies: Baidu, for example, has been asked to lead a national laboratory for deep learning. It is unlikely that the government will burden AI firms with over-strict regulation.

The country has more than 40 laws containing rules about the protection of personal data, but these are rarely enforced.

Entrepreneurs are taking advantage of China’s talent and data strengths. Many AI firms got going only a year or two ago, but plenty have been progressing more rapidly than their Western counterparts. “Chinese AI startups often iterate and execute more quickly,” explains Kai-Fu Lee, who ran Google’s subsidiary in China in the 2000s and now leads Sinovation Ventures, a venture-capital fund.

As a result, China already has a herd of AI unicorns, meaning startups valued at more than $1bn.

Toutiao, a news aggregator based in Beijing, employs machine learning to recommend articles using information such as a reader’s interests and location; it also uses AI to filter out fake information (which in China mainly means dubious health-care announcements). Another AI startup, iFlytek, has developed a voice assistant that translates Mandarin into several languages, including English and German, even if the speaker uses slang and talks over background noise. And Megvii Technology’s face-recognition software, Face++, identifies people almost instantaneously.

Skynet lives
At Megvii’s headquarters, visitors are treated to a demonstration. A video camera in the lobby does away with the need for showing ID: employees just walk in without showing their badges.

Similar devices are positioned all over the office and their feeds are shown on a video wall.

When a face pops up on the wall, it is immediately surrounded by a white rectangle and some text giving information about that person. In the upper right-hand corner of the screen big letters spell “Skynet”, the name of the AI system in the Terminator films that seeks to exterminate the human race. The firm already enables Alipay and Didi, a ride-hailing firm, to check the identity of new customers (their faces are compared with pictures held by the government).

Reacting to the success of such startups, China’s tech giants, too, have begun to invest heavily in AI. Baidu, Alibaba and Tencent, collectively called BAT, are working on many of the same services, including speech- and face-recognition. But they are also trying to become dominant in specific areas of AI, based on their existing strengths.

Tencent has so far kept the lowest profile; it established its AI labs only in recent months. But it is bound to develop a big presence in AI: it has more data than the other two. Its WeChat messenger service has nearly 1bn accounts and is also the platform for thousands of services, from payments and news to city guides and legal help. Tencent is also a world-beater in games with blockbusters such as League of Legends and Clash of Clans, which have more than 100m players each globally.

Alibaba is already a behemoth in e-commerce and is investing billions to become number one in cloud computing. At a conference in June in Shanghai it showed off an AI service called “ET City Brain” that uses video recognition to optimise traffic in real time. It uses footage from roadside cameras to predict the behaviour of cars and can adjust traffic lights on the spot. In its home town of Hangzhou, Alibaba claims, the system has already increased the average speed of traffic by 11%. Alibaba is also planning to beef up what it calls “ET Medical Brain”, which will offer AI-powered services to discover drugs and diagnose medical images. It has signed up a dozen hospitals to get the data it needs.

But it is Baidu whose fate is most tied to AI, in part because the technology may be its main chance to catch up with Alibaba and Tencent. It is putting most of its resources into autonomous driving: it wants to get a self-driving car onto the market by 2018 and to provide technology for fully autonomous vehicles by 2020. On July 5th the firm announced a first version of its self-driving-car software, called Apollo, at a developer conference in Beijing.

Getting Apollo right will not only involve cars safely navigating the streets, but managing a project that is open to outsiders. Rivals such as Waymo, Google’s subsidiary, and Tesla, an electric-car firm, jealously guard their software and the data they collect. Baidu is planning not only to publish the recipe for its programs (making them “open-source”, in the jargon), but to share data. The idea is that carmakers that use Baidu’s technology will do the same, creating an open platform for data from self-driving cars—the “Android for autonomous vehicles”, in the words of Mr Lu.

Drive like a Beijinger
It remains to be seen how successful Chinese firms will be in exporting their AI products—for now, only a tiny handful are used abroad. In theory they should travel well: a self-driving car trained on China’s chaotic streets ought to have no problem navigating the more civilised traffic in Europe (in contrast, a vehicle trained in Germany may not get far beyond the first intersection in Beijing). But consumers in the West may hesitate to use self-driving cars that have been trained in a laxer safety environment that is more tolerant of accidents. Chinese municipalities are said to be falling over themselves to be testing grounds for autonomous vehicles.

There is another risk. Data are the most valuable input for AI at the moment, but their importance may yet diminish. AI firms have started to use simulated data, including those from video games.

New types of algorithms may be capable of getting smart with fewer examples. “The danger is that we stop innovating in algorithms because of our advantage in data,” warns Gansha Wu, chief executive of UISEE, a Beijing startup which is developing self-driving technology. For now, though, China looks anything but complacent. In the race for pre-eminence in AI, it will run America close.

Three steps the EU can take to show global leadership
Current account surpluses and debt crises must end, but defence spending must rise
by: Wolfgang Münchau

Angela Merkel called for the EU to become less dependent on the US, but this would require an increase in defence spending to more than 2 per cent © Getty

Angela Merkel has been the first person to dismiss suggestions that she is about to become the leader of the western world. It is hard to say whether this is testimony to false modesty or sober realism, but the statement is correct. However angry you may be about the behaviour of US president Donald Trump or about Brexit, you would be seriously mistaken to jump to hasty conclusions about geopolitical power shifts. Like conspiracies, they do happen from time to time, but they are very rare.

There has been a lot of euphoria about Europe after the election of Emmanuel Macron as president of France. The eurozone is enjoying what appears to be a broad-based cyclical upturn, the first since the start of the financial crisis 10 years ago. There is global political goodwill towards the EU in general, and politicians like Mr Macron and Ms Merkel in particular. It would indeed be a good moment for the EU to grasp a geopolitical leadership role. It is there for the taking. But for that to happen, the EU would need to do three things differently. The chances of that happening are zero.

The first and most important is for EU nations to stop running large and persistent current account surpluses. Forget the German surplus. It is the eurozone’s surplus that matters — of which the German surplus is naturally a constituent part. The eurozone’s current account surplus stood at 3.4 per cent of gross domestic product last year.

European politicians and economists tend to have a small country perspective. Their declared objective is for their own nations to become more competitive. Theirs is not the mindset of a global power. Probably the biggest disappointment of almost 20 years of monetary union is the failure to shift away from this way of thinking. Jacques Delors, a former president of the European Commission, once remarked that the EU consists of two sorts of member states — small countries that know they are small, and those that do not. They will eventually need to get over this.

The eurozone is indisputably large — it is the world’s second-largest economy. What it does matters to the rest of the world. But unlike Americans, Europeans are not used to thinking about the international consequences of their actions. Those who criticise Mr Trump’s “America First” rhetoric should realise that EU countries have been doing exactly the same forever.

The second action is to put an end to the eurozone’s revolving crises. Several member states have unsustainable levels of debt. Banking systems are still weak. Intra-eurozone imbalances are close to an all-time record, as evidenced among other things by Germany’s growing surpluses in the European Central Bank’s Target 2 payment system. The cyclical upswing will not fix any of these problems. The presence of an economic cycle does not qualify you for the position of economic superpower.

Will Mr Macron and Ms Merkel manage to reboot the eurozone’s governance system? What I am hearing from Germany is that there is indeed readiness to engage with Mr Macron. But Germany regards a fiscal union primarily as a vehicle to deliver more austerity. Enjoy!

The third area that needs attention is the EU’s persistent refusal to increase defence spending. There is no way that Germany in particular will fulfil its promise of an increase in defence spending to 2 per cent of GDP — domestic politics has been moving in the opposite direction. In her seminal beer-tent speech in Munich recently, Ms Merkel called for the EU to become less dependent on the US. But she failed to point out that this would require an increase in defence spending to far more than the 2 per cent of GDP Nato commitment.

All three points have in common that the EU’s natural perspective is inward-looking. Even if we take the most optimistic view about a reinvigorated Franco-German agenda, we should not automatically infer that the EU is willing and ready to take on a global leadership role. Neither leader has even begun to prepare their electorates for the shifts in domestic policy that are required.

While Germans would generally agree with Ms Merkel’s suggestion that the EU should stand on its own feet, they would not agree to a single one of the measures that would be required to achieve this — on defence, on the obsession with the fiscal surpluses, and transfer of sovereignty.

Of all EU countries, France is probably more ready than others in the area of defence, but when it comes to free trade you may find it hard to find objective differences between Mr Trump and Mr Macron.

One of the many lessons of the eurozone crisis is that leadership vacuums do not necessarily get filled, because leadership is not a zero-sum game. By far the most probable outcome of an American retreat from global leadership is simply less global leadership.

How Cuba Runs Venezuela

Havana’s security apparatus is deeply embedded in the armed forces.

By Mary Anastasia O’Grady

      Nicolás Maduro in Havana, Dec. 14, 2016. Photo: Agence France-Presse/Getty Images

The civilized world wants to end the carnage in Venezuela, but Cuba is the author of the barbarism. Restoring Venezuelan peace will require taking a hard line with Havana.

Step one is a full-throated international denunciation of the Castro regime. Any attempt to avoid that with an “engagement” strategy, like the one Barack Obama introduced, will fail. The result will be more Venezuelas rippling through the hemisphere.

The Venezuelan opposition held its own nationwide referendum on Sunday in an effort to document support for regularly scheduled elections that have been canceled and widespread disapproval of strongman Nicolás Maduro’s plan to rewrite the constitution.

The regime was not worried. It said it was using the day as a trial run to prepare for the July 30 elections to choose the assembly that will draft the new constitution.

The referendum was an act of national bravery. Yet like the rest of the opposition’s strategy—which aims at dislodging the dictatorship with peaceful acts of civil disobedience—it’s not likely to work. That’s because Cubans, not Venezuelans, control the levers of power.

Havana doesn’t care about Venezuelan poverty or famine or whether the regime is unpopular.

It has spent a half-century sowing its ideological “revolution” in South America. It needs Venezuela as a corridor to run Colombian cocaine to the U.S. and to Africa to supply Europe.

It also relies heavily on cut-rate Venezuelan petroleum.

To keep its hold on Venezuela, Cuba has embedded a Soviet-style security apparatus. In a July 13 column, titled “Cubazuela” for the Foundation for Human Rights in Cuba website, Roberto Álvarez Quiñones reported that in Venezuela today there are almost 50 high-ranking Cuban military officers, 4,500 Cuban soldiers in nine battalions, and “34,000 doctors and health professionals with orders to defend the tyranny with arms.” Cuba’s interior ministry provides Mr. Maduro’s personal security. “Thousands of other Cubans hold key positions of the State, Government, military and repressive Venezuelan forces, in particular intelligence and counterintelligence services.”

Every Venezuelan armed-forces commander has at least one Cuban minder, if not more, a source close to the military told me. Soldiers complain that if they so much as mention regime shortcomings over a beer at a bar, their superiors know about it the next day. On July 6 Reuters reported that since the beginning of April “nearly 30 members of the military have been detained for deserting or abandoning their post and almost 40 for rebellion, treason, or insubordination.”

The idea of using civilian thugs to beat up Venezuelan protesters comes from Havana, as Cuban-born author Carlos Alberto Montaner explained in a recent El Nuevo Herald column, “Venezuela at the Edge of the Abyss.” Castro used them in the 1950s, when he was opposing Batista, to intimidate his allies who didn’t agree with his strategy. Today in Cuba they remain standard fare to carry out “acts of repudiation” against dissidents.

The July 8 decision to move political prisoner Leopoldo López from the Ramo Verde military prison to house arrest was classic Castro. Far from being a sign of regime weakness, it demonstrates Havana’s mastery of misdirection to defuse criticism.

Cuba’s poisonous influence in Latin America could be weakened if the international community spoke with one voice. The regime needs foreign apologists like former Spanish Prime Minister José Luis Rodríguez Zapatero and the leftist wing of the Vatican. It also needs the continued support of American backers of the Obama engagement policy, who want the U.S. to turn a blind eye to human-rights abuses.

Yet there are limits to what can be brushed off. When opposition congressmen were attacked by Cuban-style mobs on July 5, and their bloodied faces showed up on the front pages of international newspapers, the Zapateros of the world began to squirm. That was Havana’s cue to improve the lighting for Mr. Maduro.

First Mr. Maduro claimed he knew nothing about it, though his vice president was on the floor of the legislature while it was happening. That was not believable. Three days later came the sudden decision to move Mr. López from military prison to house arrest. Mr. Maduro said it was a “humanitarian” gesture. Defense Minister Vladimir Padrino, an acolyte of Fidel, said that it was a “product of dialogue and tolerance.”

Thus the images of the savagery in the National Assembly receded while photos of Mr. López, kissing a Venezuelan flag atop a wall outside his home, popped up everywhere. Mission accomplished and Mr. López remains detained.

For too long the world has overlooked the atrocities of the Cuban police state. In 1989 Fidel was even a special guest at the inauguration of Venezuelan President Carlos Andrés Pérez. Today the “special guests” are brutalizing Venezuela as the world wonders what went wrong.

miércoles, julio 26, 2017



Why Do Cities Become Unaffordable?

Robert J. Shiller

Unaffordable housing

NEW HAVEN – Inequality is usually measured by comparing incomes across households within a country. But there is also a different kind of inequality: in the affordability of homes across cities. The impact of this form of inequality is no less worrying.
In many of the world’s urban centers, homes are becoming prohibitively expensive for people with moderate incomes. As a city’s real-estate prices rise, some inhabitants may feel compelled to leave.
Of course, if that inhabitant already owned a house there that they can sell, they may regard the price increase as a windfall that they can claim by departing. If not, however, they may be forced out with no compensation.
The consequences are not just economic. People may be forced out of cities where they have spent their entire lives. Leaving amounts to losing lifelong connections, and therefore can be traumatic. If too many lifelong inhabitants are driven out by rising housing prices, the city itself suffers from a loss of identity and even culture.
As such people depart, an expensive city gradually becomes an enclave of high-income households, and begins to take on their values. With people of various income levels increasingly divided by geography, income inequality can worsen and the risk of social polarization – and even serious conflict – can grow.
As this year’s Demographia International Housing Affordability Survey shows, there are already massive disparities across major global cities (measured by the ratio of median home prices to median household income). A high ratio correlates with high pressure for people to leave.
This year’s survey, which covered 92 cities in nine countries, showed that, as of late 2016, Hong Kong had the least affordable housing, with a price-to-income ratio of 18.1. That means that paying off a 30-year mortgage on a median-price home would cost a median-income buyer more than half of their income – and that is without interest. Mortgage rates are low in Hong Kong, but not zero, suggesting it is just about impossible for a median-income household to purchase a home there without access to additional funds from, say, a parent, or, if the buyer is an immigrant, from abroad.
After Hong Kong, the list continues with Sydney (12.2), Vancouver (11.8), Auckland (10), San Jose/Silicon Valley (9.6), Melbourne (9.5), and Los Angeles (9.3). Next come London and Toronto – at 8.5 and 7.7, respectively – where housing is extremely expensive, but incomes are also high.
Meanwhile, some attractive world cities are quite affordable, relative to incomes. In New York City, the median home price stands at 5.7 times median household income. In Montreal and Singapore, that ratio is 4.8; in Tokyo and Yokohama, it is 4.7; and in Chicago, it is 3.8.
Maybe the figures for these outlier cities aren’t precise. They are hard to check, and there must be inconsistencies across cities, countries, and continents. For example, the geographical boundaries of the areas used to compute median price and median rent may vary. In some cities, higher-priced homes may tend to turn over more rapidly than in others. And some cities may be inhabited by larger families, implying bigger houses than in other cities.
But it seems unlikely that the errors could be so significant that they would change the basic conclusion: home affordability around the world is highly variable. The question, then, is why residents of some cities face extremely – even prohibitively – high prices.
In many cases, the answer appears to be related to barriers to housing construction. Using satellite data for major US cities, the economist Albert Saiz of MIT confirmed that tighter physical constraints – such as surrounding bodies of water or land gradients that make properties unsuitable for extensive building – tend to correlate with higher home prices.
But the barriers may also be political. A huge dose of moderate-income housing construction would have a major impact on affordability. But the existing owners of high-priced homes have little incentive to support such construction, which would diminish the value of their own investment. Indeed, their resistance may be as intractable as a lake’s edge. As a result, municipal governments may be unwilling to grant permits to expand supply.
Insufficient options for construction can be the driving force behind a rising price-to-income ratio, with home prices increasing over the long term even if the city has acquired no new industry, cachet, or talent. Once the city has run out of available building sites, its continued growth must be accommodated by the departure of lower-income people.
The rise in housing prices, relative to income, is unlikely to be sudden, not least because speculators, anticipating the change, may bid up prices in advance. They may even overshoot, temporarily pushing the ratios even higher than necessary, creating a bubble and causing unnecessary angst among residents.
But this tendency can be mitigated, if civil society recognizes the importance of preserving lower-income housing. Many of the calls to resist further construction, residents must understand, are being made by special interests; indeed, they amount to a kind of rent seeking by homeowners seeking to boost their own homes’ resale value. In his recent book The New Urban Crisis, the University of Toronto’s Richard Florida decries this phenomenon, comparing opponents of housing construction to the early-nineteenth-century Luddites, who smashed the mechanical looms that were taking their weaving jobs.
In some cases, a city may be on its way to becoming a “great city,” and market forces should be allowed to drive out lower-income people who can’t participate fully in this greatness to make way for those who can. But, more often, a city with a high housing-price-to-income ratio is less a “great city” than a supply-constrained one lacking in empathy, humanitarian impulse, and, increasingly, diversity. And that creates fertile ground for dangerous animosities.