Sam Altman, president of Y Combinator
Patrick T. Fallon | Bloomberg | Bloomberg | Getty Images
Artificial intelligence companies could become so powerful and so wealthy that they’re able to provide a universal basic income to every man, woman and child on Earth.
That’s how some in the AI community have interpreted a lengthy blog post from Sam Altman, the CEO of research lab OpenAI, that was published earlier this month.
In as little as 10 years, AI could generate enough wealth to pay every adult in the U.S. $13,500 a year, Altman said in his 2,933 word piece called “Moore’s Law for Everything.”
“My work at OpenAI reminds me every day about the magnitude of the socioeconomic change that is coming sooner than most people believe,” said Altman, the former president of renowned start-up accelerator Y-Combinator earlier this month. “Software that can think and learn will do more and more of the work that people now do.”
But critics are concerned that Altman’s views could cause more harm than good, and that he’s misleading the public on where AI is headed.
Glen Weyl, an economist and a principal researcher at Microsoft Research, wrote on Twitter: “This beautifully epitomizes the AI ideology that I believe is the most dangerous force in the world today.”
One industry source, who asked to remain anonymous due to the nature of the discussion, told CNBC that Altman “envisions a world wherein he and his AI-CEO peers become so immensely powerful that they run every non-AI company (employing people) out of business and every American worker to unemployment. So powerful that a percentage of OpenAI’s (and its peers’) income could bankroll UBI for every citizen of America.”
Altman will be able to “get away with it,” the source said, because “politicians will be enticed by his immense tax revenue and by the popularity that paying their voter’s salaries (UBI) will give them. But this is an illusion. Sam is no different from any other capitalist trying to persuade the government to allow an oligarchy.”
One of the main thrusts of the essay is a call to tax capital — companies and land — instead of labor. That’s where the UBI money would come from.
“We could do something called the American Equity Fund,” wrote Altman. “The American Equity Fund would be capitalized by taxing companies above a certain valuation 2.5% of their market value each year, payable in shares transferred to the fund, and by taxing 2.5% of the value of all privately-held land, payable in dollars.”
He added: “All citizens over 18 would get an annual distribution, in dollars and company shares, into their accounts. People would be entrusted to use the money however they needed or wanted — for better education, healthcare, housing, starting a company, whatever.”
Altman said every citizen would get more money from the fund each year, providing the country keeps doing better.
“Every citizen would therefore increasingly partake of the freedoms, powers, autonomies, and opportunities that come with economic self-determination,” he said. “Poverty would be greatly reduced and many more people would have a shot at the life they want.”
Matt Clifford, the co-founder of start-up builder Entrepreneur First, wrote in his “Thoughts in Between” newsletter: “I don’t think there is anything intellectually radical here … these ideas have been around for a long time — but it’s fascinating as a showcase of how mainstream these previously fringe ideas have become among tech elites.”
Meanwhile, Matt Prewitt, president of non-profit RadicalxChange, which describes itself as a global movement for next-generation political economies, told CNBC: “The piece sells a vision of the future that lets our future overlords off way too easy, and would likely create a sort of peasant class encompassing most of society.”
He added: “I can imagine even worse futures — but this the wrong direction in which to point our imaginations. By focusing instead on guaranteeing and enabling deeper, broader participation in political and economic life, I think we can do far better.”
Richard Miller, founder of tech consultancy firm Miller-Klein Associates, told CNBC that Altman’s post feels “muddled,” adding that “the model is unfettered capitalism.”
Michael Jordan, an academic at University of California Berkeley, told CNBC the blog post is too far from anything intellectually reasonable, either from a technology point of view, or an economic point of view, that he’d prefer not to comment.
In Altman’s defense, he wrote in his blog that the idea is designed to be little more than a “conversation starter.” Altman did not immediately reply to a CNBC request for an interview.
An OpenAI spokesperson encouraged people to read the essay for themselves.
Not everyone disagreed with Altman. “I like the suggested wealth taxation strategies,” wrote Deloitte worker Janine Moir on Twitter.
Founded in San Francisco in 2015 by a group of entrepreneurs including Elon Musk, OpenAI is widely regarded as one of the top AI labs in the world, along with Facebook AI Research, and DeepMind, which was acquired by Google in 2014.
The research lab, backed by Microsoft with $1 billion in July 2019, is best known for creating an AI image generator, called Dall-E, and an AI text generator, known as GPT-3. It has also developed agents that can beat the best humans at games like Dota 2. But it’s nowhere near creating the AI technology that Altman describes, experts told CNBC.
Daron Acemoglu, an economist at MIT, told CNBC: “There is an incredible mistaken optimism of what AI is capable of doing.”
Acemoglu said algorithms are good at performing some “very, very narrow tasks” and that they can sometimes help businesses to cut costs or improve a product.
“But they’re not that revolutionary, and there’s no evidence that any of this is going to be revolutionary,” he said, adding that AI leaders are “waxing lyrical about what AI is doing already and how it’s revolutionizing things.”
In terms of the measures that are standard for economic success, like total factor productivity growth, or output per worker, many sectors are having the worst time they’ve had in about 100 years, Acemoglu said. “It’s not comparable to previous periods of rapid technological progress,” he said.
“If you look at the 1950s and the 1960s, the rate of TFP (total factor productivity) growth was about 3% a year,” said Acemoglu. “Today it’s about 0.5%. What that means is you’re losing about a point and a half percentage growth of GDP (gross domestic product) every year so it’s a really huge, huge, huge productivity slowdown. It’s completely inconsistent with this view that we’re just getting an enormous amount of benefits (from AI).”
Technology evangelists have been saying AI will change the world for years with some speculating that “artificial general intelligence” and “superintelligence” isn’t far away.
AGI is the hypothetical ability of an AI to understand or learn any intellectual task that a human being can, while superintelligence is defined by Oxford professor Nick Bostrom as “any intellect that greatly exceeds the cognitive performance of humans in virtually all domains of interest.”
But some argue that we’re no closer to AGI or superintelligence than we were at the start of the century.
“One can say, and some do, ‘oh it’s just around the corner.’ But the premise of that doesn’t seem to be very well articulated. It was just around the corner 10 years ago and it hasn’t come,” said Acemoglu.
How Amazon fought the union drive in Alabama
People protest in support of the unionizing efforts of the Alabama Amazon workers, in Los Angeles, California, March 22, 2021.
Lucy Nicholson | Reuters
Amazon last week soundly defeated a union drive at one of its Alabama warehouses, a major win for the e-commerce giant which has long fought unionization attempts at its facilities.
Workers at the Bessemer, Alabama, warehouse voted overwhelmingly in favor of rejecting unionization, with fewer than 30% of the votes tallied in favor. The Retail, Wholesale and Department Store Union, which led the union drive, intends to challenge the outcome, arguing that Amazon broke the law with some of its anti-union activity before and during voting.
The outcome delivers a setback to organized labor, which had hoped the Bessemer election would help establish a foothold at Amazon. But unions, worker advocates, and some employees at the Bessemer facility, known as BHM1, said they believe that the Bessemer election will fuel further organizing attempts at other warehouses across the country. Labor leaders say the Bessemer election also revealed to the general public the lengths to which employers will go to prevent unions.
According to multiple workers and union representatives who described the tactics, Amazon unleashed an aggressive public relations campaign at BHM1, including text messages to employees, leaflets, a website that urged workers to “do it without dues” and fliers posted in bathrooms that urged workers to “vote ‘NO.'”
Amazon sent out text messages and mailers urging workers at its Bessemer, Alabama, facility to “vote NO.”
Amazon’s greatest opportunity to influence workers came in the form of so-called captive audience meetings, which workers were required to attend during their shift. Amazon held the meetings weekly from late January up until ballots were sent out in early February. Workers sat for approximately 30 minutes through PowerPoint presentations discouraging unionization and were given the opportunity to ask Amazon representatives questions.
Captive audience meetings are a common tactic used by employers during union campaigns. Supporters of proposed labor law reforms, such as the Protecting the Right to Organize (PRO) Act that awaits passage in the Senate, have argued that captive audience meetings serve as a forum for employers to deliver anti-union messages “without giving the union an opportunity to respond.” The PRO Act would prohibit employers from making these meetings mandatory.
Amazon said it hosted ongoing meetings in small groups as a way for employees to get all the facts about joining a union and about the election process itself.
The company also defended its response to the union campaign more broadly, arguing in a statement following the result that workers “heard far more anti-Amazon messages from the union, policymakers and media outlets than they heard from us.”
Amazon’s messaging in the meetings was more convincing for some BHM1 workers than others.
One Bessemer employee, who started working at Amazon last year, said he felt Amazon used some scare tactics when talking to workers about the union, but also told CNBC he didn’t understand how the union would help workers at BHM1. This person, who asked for anonymity to prevent retaliation, said the RWDSU did not explain what they were going to do for workers, and did not respond to his request for information about how they had helped employees at other job sites.
Beyond his doubts about the RWDSU, this employee said he’s also had a primarily positive experience working for Amazon. While some workers complained about the stressful, demanding nature of the job, he said a previous construction job prepared him for the physical labor of warehouse work, so he finds it easy. Amazon’s pay and benefits are also a step up from his previous job.
In the end, this worker voted against unionization.
In private Facebook groups where Amazon workers engage with each other, other BHM1 employees shared their thoughts about the union campaign. One worker feared that if the union was voted in, employees would lose access to certain benefits provided by Amazon, such as its upskilling program, where Amazon pays a percentage of tuition costs to train warehouse workers for jobs in other high-demand fields.
Another worker felt that a union wasn’t necessary, asserting that if you work hard you can succeed at Amazon: “I voted no. Amazon is just a game, with rules. Learn the rules, play the game, move up, win.”
Some BHM1 workers found Amazon’s anti-union messaging too aggressive.
One BHM1 employee who works as a stower, which involves transferring items into vacant storage bins throughout the facility, said Amazon designed the texts, fliers and mandatory meetings to convey a message that the union wouldn’t help anybody. This worker requested anonymity out of concern for losing their job.
The worker, who voted for the union, said he was wary of showing support for unionization in front of Amazon and his coworkers, and was nervous to ask questions, instead playing dumb to avoid getting fired.
Aerial view of the Amazon facility where workers will vote on wether to unionize, in Bessemer, Alabama, March 5, 2021.
Dustin Chambers | Reuters
In one mandatory meeting held before ballots were distributed in February, this worker said, Amazon sought to cast doubts about how workers’ dues would be spent by telling workers that the RWDSU spent more than a hundred thousand dollars a year on vehicles for employees. The worker was skeptical of Amazon’s presentation, thinking that Amazon likely spent a lot more on cars each year than the union did.
Union President Stuart Appelbaum said in an interview that the RWDSU purchases cars for some representatives whose job it is to travel from workplace to workplace for organizing campaigns.
Amazon said it wanted to explain to workers, particularly those with no previous knowledge of unions, that a union is a business that collects dues, and explain how those dues may be used.
In another mandatory meeting, the two Bessemer workers told CNBC, Amazon circulated examples of previous contracts the RWDSU had won, trying to highlight the union’s shortcomings. Amazon also asserted that the RWDSU was primarily a poultry workers’ union who had limited experience representing warehouse workers.
Appelbaum said poultry workers make up a significant share of the RWDSU’s membership in Alabama, and many of the organizers who led the campaign, and approached Amazon workers outside BHM1 as they wrapped up their shifts, came from nearby poultry plants. The union also represents workers in other industries, including retail, food production, non-profit and cannabis, said RWDSU spokesperson Chelsea Connor.
In response to questions about whether it characterized the RWDSU as a poultry union, Amazon said it sought to highlight to workers how well (or poorly) the union might understand their employer.
During the meetings, Amazon also sought to highlight negative outcomes that could arise from voting for the union. Amazon told workers the union could force workers to go on strike and that employees could lose their benefits in the future, workers told CNBC.
The RWDSU’s Mid-South office, which led the organizing at Amazon, countered Amazon’s claim that the union would force BHM1 workers to go on strike, calling it a “fear tactic,” according to communications distributed to workers.
“Amazon has insinuated that the union will ‘pull you out on a strike,'” said Randy Hadley, president of the Mid-South Council, in a February letter to workers, which also addresses other claims made by Amazon. “Here are the facts, our membership and our membership ONLY controls whether or not to strike by a super majority. This means nearly 4,000 Amazon workers would have to vote to go on strike. A strike can be useful when needed, but it is also very, very rare. This is yet another fear tactic by Amazon.”
Amazon said it sought to point out to workers that if a union is voted in, the union could call for a strike, as it’s the union’s main leverage over an employer.
In response to questions asking whether it told workers they could lose their benefits if a union is voted in, Amazon said it looked to inform employees, as part of general education about unions, that there are many outcomes that can result from collective bargaining negotiations.
Amazon employees, labor leaders and worker advocates are hopeful that the loss in Alabama won’t be the last attempt at organizing the retail giant’s sprawling workforce.
There may be future campaigns at BHM1, too. The worker who voted for the union said some pro-union employees have discussed the possibility of approaching the Teamsters and pursuing a future union campaign at their warehouse.
Elsewhere, Amazon workers and labor unions are considering different organizing strategies. The Teamsters is communicating with Amazon drivers and warehouse workers at a facility in Iowa and considering paths to rally workers beyond the election process. Amazon workers in Chicago have formed a group to organize employees at facilities in the area, called Amazonians United Chicagoland.
A worker at an Amazon facility in New Jersey, who also requested anonymity, said they previously approached a union about organizing their facility. After seeing the outcome in Bessemer, the worker said they’re going back to the drawing board and looking into more informal tactics for achieving leverage.
Susan Schurman, a professor at Rutgers’ School of Management and Labor Relations, pointed to the Alphabet Workers Union, a recently formed union of more than 800 Google employees, as a potential model for Amazon workers.
Unlike a traditional union, minority unions don’t represent the majority of workers. They also aren’t recognized by the NLRB and they don’t act as bargaining agents with employers.
However, Schurman said minority unions can serve as a “pathway to majority unions” and can be a powerful tool for building worker support even before launching a formal campaign with the NLRB.
“Why not stay and build an organization and keep at it?” Schurman said. “Let workers recruit new members and demonstrate the value of a collective negotiating power.”
Appelbaum, the RWDSU president, said a minority union strategy is “well worth thinking about.”
“We haven’t made a decision on that yet, but I think we’ll look at it,” Appelbaum said. “We know we’re not going away.”
Investors look for hints of inflation in earnings in the week ahead
Traders on the floor of the New York Stock Exchange.
Earnings will be the major focus for investors in the week ahead, as they home in on whether rising costs are squeezing margins and signaling a build in inflationary pressures.
So far, with one week in, companies are beating earnings estimates by a wide margin of more than 84%, according to Refinitiv.
This three-month period is the first to be compared to year earlier profits that were affected by the pandemic. Profit growth for the S&P 500 is a stunning 30.2% for the quarter so far, based on actual reports and estimates.
That makes it the best three-month period since the third quarter of 2010, according to FactSet.
The S&P 500 ended the week at a record high of 4,185, a gain of 1.4%. The Dow, higher for a fourth week, gained 1.2 to end the week at a record 34,200. Nasdaq gained 1.1% for the week, finishing at 14,052.
Utilities was the best performing major S&P sector, gaining 3.7%, followed by materials, up 3.2% and health care, up 2.9%. Technology was up 1%. Financials were up 0.7%, while industrials were up 0.6%.
Lori Calvasina, head of U.S. equity strategy at RBC, said she is watching the coming week’s earnings for signs of margin pressures from higher commodity prices, supply chain issues and other cost factors.
“Those big forces that are threatening margins right now don’t really apply to financials. They apply more to industrial companies, the material companies and consumer companies,” she said.
“I think [sectors] like the industrials will give you color on margins,” Calvasina added. “Margins really are the big question mark going forward. I’m definitely watching and listening to see what companies are going to say about taxes.”
President Joe Biden has proposed raising corporate taxes to 28% from 21% to help pay for his infrastructure plan.
While the fate of the tax hike is still not clear, the increase in other costs is apparent. Fuel costs have risen sharply with a 30% rise in oil prices since the beginning of the year. Lumber prices in the futures market are at an all-time high and copper futures are up about 17% year-to-date.
Calvasina said companies face a headwind and a tailwind.
“Companies are saying we found new ways to cut costs. When revenues come back, margins are going to explode to the upside,” she said. “Some of the Covid-related costs will come down. Those are some of the positives.”
But not every company will see those benefits. “We could start to see wage pressures come back. Rising commodity costs — increases in PPI and increases in CPI — those are negatives for margins,” Calvasina said, referring to the producer price and consumer price indexes.
Peter Boockvar, chief investment officer at Bleakley Advisory Group, said he is also watching the margin comments carefully for impact on individual stocks, but also for what they broadly say about inflation seeping into the economy.
“What’s going to be the most interesting thing about earnings are profit margins. Some companies are going to get squeezed because they’re going to see price increases and others aren’t because they can pass it on,” said Boockvar.
He said he will pay close attention to whether the semiconductor shortage is showing up in tech companies’ earnings. Automakers have already taken a hit and have scaled back production due to the lack of chips.
The CPI for March showed a pick-up in headline inflation to 2.6% year-over-year. A 9.1% jump in gasoline prices contributed to the gain.
Some of the gains in inflation this spring are expected to be temporary because of the comparison to very low levels last year when the economy was shutdown.
Other than earnings, the week should be fairly quiet. Federal Reserve speakers have taken a hiatus and are in a blackout period ahead of the late April meeting.
“It’s really going to be attention shifting to earnings and the inflation story,” said Boockvar.
In the past week, economic reports underscored how strong the economic momentum could be in the second quarter. Retail sales for March were up nearly 10%, and jobless claims were the lowest of the recovery.
There is little data in the week ahead, aside from PMI manufacturing and services data Friday. But the markets will keep a close eye on unemployment figures after Thursday’s report of 576,000 new claims — the lowest level since the early days of the pandemic.
“The large claims decline suggests that job separation rates may finally be normalizing, a good sign for April payrolls,” note Barclays economists. A surprise 916,000 jobs were added in March, and economists have said they now expect a string of reports showing payrolls are up by 1 million or more.
However, Stephen Stanley, chief economist at Amherst Pierpont, says it may be too early to read too much into the claims data, and the coming week’s report will be important.
He said the drop in claims was driven by sharp drops in a number of states, including more than half in California and even larger percentage declines in Kentucky and Virginia.
“Unfortunately, I have no confidence that these moves won’t be at least partially reversed next week,” he wrote. “Continuing claims in the special pandemic programs continue to seesaw up and down every week, with the latest reading, for the period ended March 27, being a down week.”
Stock investors will also be watching the bond market, where yields declined in the past week and then reversed. The 10-year Treasury was at 1.59% Friday, after tumbling sharply on Thursday.
Yields move opposite price, and the 10-year is the most widely watched bond security, as it impacts mortgage rates and other loans.
“The 10-year will now trade in the 1.50% to 1.75% trading range,” said Boockvar.
“It’ll break below that if inflation is transitory and it will break above if it’s proven to be otherwise,” he added. “I think we priced in the last inflation stats and then we’ll take into account what the real world is saying, from companies.”
Earnings: Johnson & Johnson, Travelers, Procter and Gamble, Netflix, Abbott Labs, CSX, Lockheed Martin, Intuitive Surgical, Tenet Healthcare, Philip Morris, Northern Trust, Fifth Third, KeyCorp, Comerica
Earnings: Verizon, Chipotle, Whirlpool, Nasdaq, Baker Hughes, Anthem, Netgear, Spirit Airlines, Canadian Pacific Railway, Lam Research, Discover Financial, SLM, Halliburton, Knight-Swift Transportation
Earnings: AT&T, Intel, D.R. Horton, American Airlines, Union Pacific, Alaska Air, Pentair, Tractor Supply, Celanese, Seagate Technology Biogen, Dow, Credit Suisse, SAP, Boston Beer, Mattel, Snap, Valero Energy, Freeport-McMoRan, Quest Diagnostics
7:45 a.m. European Central Bank rate decision
8:30 a.m. Initial jobless claims
10:00 a.m. Existing home sales
9:45 a.m. Manufacturing PMI
9:45 a.m. Services PMI
11:00 a.m. New home sales
Amazon’s ‘Lord of the Rings’ will cost at least $465 million
Still from “Lord of the Rings: The Fellowship of the Ring.”
New Line Cinema
Amazon’s ‘Lord of the Rings’ television show is shaping up to be a costly endeavor for the tech company.
On Friday, New Zealand’s minister for economic development and tourism revealed that the fantasy drama will be one of the most costly television series ever made, with its season one price tag coming in at around $465 million.
“But what I can tell you is Amazon is going to spend about $650 million in season one alone,” Stuart Nash told Morning Report. The figure he provided was in local currency.
The production figure is massive and likely the largest sum any studio has spent to produce a single season of television. For comparison, HBO’s “Game of Thrones” cost around $100 million per season. Season one episodes cost around $6 million each and eventually rose to around $15 million by season eight.
Amazon shelled out around $250 million for the rights to the Tolkien property in 2017.
“This will be the largest television series ever made,” Nash said.
The figures, released as part of the New Zealand government’s Official Information Act, were first reported by the New Zealand-based outlet Stuff. Their report indicated that Amazon is looking to film five seasons in the country and possibly produce a spin-off series.
Amazon’s spending in New Zealand will trigger a tax rebate of around $114 million and has been flagged as a “significant financial risk” by the country’s treasury. There’s no cap on how much Amazon is allowed to spend, and therefore, New Zealand could be on the hook for hundreds of millions of dollars to help subsidize the project.
However, the production will likely bring a large financial boost to the local economy, as Amazon pays for local labor, hotels and food, among other things. Then there is the future tourism bump. Peter Jackson’s “Lord of the Rings” and “Hobbit” trilogies were a big boon to New Zealand, as they brought in travelers from around the world.
The “Lord of the Rings” series is currently in production and expected to debut in late 2021.
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