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Letter sent on Aug 6, 2016

Future Imperfect #35: The (Uber) Short

Welcome to Future Imperfect! This week I’ve been reading about shorting Uber, the AI revolution, senior citizens getting back to work, the fourth organization to plan a trip to the Moon, and a look at a post-climate change salvage team. Oh, and a little thing called the Olympics.

As many of you might not know, I also write for and edit a Medium publication called Digital Trends Index through my work for Atlantic Media Strategies. I wrote a piece this week on how video is not the (only) future of media—a counterpoint to Facebook’s (and many others’) narrative that video will comprise the majority (if not the totality) of content in five years. If your interest in futurism lines up with publishing and social media, I’d recommend that you take a look!

The (Uber) Short

There was a really popular cover story from The Atlantic in 1982, “Have You Ever Tried to Sell a Diamond?” that asked a previously unconsidered, and nearly inconceivable, question. This week, Steve Levine asks (via Quartz) have you ever tried to short a unicorn? In his view, Uber is a titan waiting to crumble under the weight of its hemorrhaging cash flows.

With Uber, you have a singular brand with a credible story. The question is whether that brand and that credibility, plus the other assets on Uber’s balance sheet, add up to $62.5 billion. Here is a business under siege by rivals big and Lilliputian, in the midst of a cannibalistic pricing race to the bottom, bleeding cash and losing money while battling well-heeled, technologically savvy incumbents displaying every intention of owning the space themselves.
Notwithstanding how often it is repeated, the central Uber thesis — that half the population will eschew car ownership, and that we will be surrounded by robotic taxis by the early 2030s or so — is not in fact axiomatic. Uber does have a solid business, but it is not manifestly a new Amazon, Facebook, or Google, a behemoth poised to sit athwart the next big thing. It could reasonably end up as merely a more massive Hertz with a better phone app, albeit one that delivers sushi or enchiladas from the local restaurant.

Add in a rash of funding that increased value by 50 percent in just two years as well as Uber’s $1 billion foray into subprime lending through Xchange—a car-leasing business, and you have the potential for a bubble ready to burst. Uber shareholders are under no delusions themselves.

Uber investors are starting to lose faith in the current valuation: Six of the 16 mutual funds that own Uber shares have appraised them at prices implying a lower valuation, according to data compiled for Quartz by Morningstar. In regulatory reports filed from March through May, Putnam and Optimum valued their Uber holdings at prices 10% lower than the going valuation, Morningstar said. John Hancock reported its shares at 7% below. Most of the mutual funds bought during earlier rounds, so their holdings are still in the money. But that is not the case for T. Rowe Price, which obtained shares at the December 2015 peak; just four months later, T. Rowe Price marked those holdings down by 6%.

Why does this matter? If the question is “Is Uber really a sure thing?”, the answer is assuredly no. But Levine finds that, much like in The Big Short, there are few avenues to make a bet against the company.

Typically, if a publicly-traded company is losing billions each year (with little hope in the short term of escaping that “cannibalistic pricing race to the bottom,” there’s an open (and active) market for betting against the company. In this case, what secondary markets exist are limited in scope and (to date) poorly regulated.

Unfortunately for you, if the crash comes, you’re not likely to be able to make a profit off of the failure of VCs to accurately value the firm. But I don’t think it’s a stretch to say that you should be able to. Levine is right that many startups will resist efforts to open up the secondary market to open trading, but maybe a more active secondary market will encourage startups to pursue a more sustainable business model over scale at all costs.

Your primer to the AI Revolution

Do you know the difference between Artificial General Intelligence and Artificial Super Intelligence? Are you aware of the concept of the Singularity? If the answer to those questions is “no,” then AI Revolution, by Pawel Sysiak, is for you.

This essay, originally published in eight short parts, aims to condense the current knowledge on Artificial Intelligence. It explores the state of AI development, overviews its challenges and dangers, features work by the most significant scientists, and describes the main predictions of possible AI outcomes. This project is an adaptation and major shortening of the two–part essay AI Revolution by Tim Urban of Wait But Why. I shortened it by a factor of 3, recreated all images, and tweaked it a bit. Read more on why/how I wrote it here.
Assuming that human scientific activity continues without major disruptions, artificial intelligence may become either the most positive transformation of our history or, as many fear, our most dangerous invention of all. AI research is on a steady path to develop a computer that has cognitive abilities equal to the human brain, most likely within three decades (timeline in chapter 5). From what most AI scientists predict, this invention may enable very rapid improvements (called fast take-off), toward something much more powerful — Artificial Super Intelligence — an entity smarter than all of humanity combined (more on ASI in chapter 3). We are not talking about some imaginary future. The first level of AI development is gradually appearing in the technology we use everyday (newest AI advancements in chapter 2). With every coming year these advancements will accelerate and the technology will become more complex, addictive, and ubiquitous. We will continue to outsource more and more kinds of mental work to computers, disrupting every part of our reality: the way we organize ourselves and our work, form communities, and experience the world.

Why does this matter? Because you need to inform yourself about one of the biggest ethical, technological, and societal issues of our time. No one, no matter who you are or where you live, is exempt from the AI revolution to come. That’s all there really is to say.

Get back to work

A few things have historically been sacrosanct in American society. Owning a home. Having 2.1 kids. And, until recently, retiring at 65. It turns out that this luxury is no longer a reality for many of America’s senior citizens.

A recent Pew Research Center analysis of federal employment data lays out the numbers. In May 2000, 12.8 percent of those older than 65 held a job. By this May, the number had climbed substantially, to 18.8 percent.
“This is not a blip,” said Drew DeSilver, a senior writer and the author of the report. After a longtime trend toward early retirement reversed during the 1980s, seniors’ employment has been rising steadily. (The Pew numbers don’t include those seeking jobs, just people who have them.)…
Over 16 years, employment rose not only among 65- to 69-year olds (close to a third now work), but also among those 70 to 74 (about a fifth). In the 75-plus population, the proportion still working increased to 8.4 percent from 5.4 percent.
Moreover, Mr. DeSilver found, older workers are increasingly less likely to be part-timers. Nearly two-thirds of workers older than 65 hold full-time jobs, defined by the Bureau of Labor Statistics as requiring at least 35 hours a week.
Economists point to a long list of reasons, a complex mix of pushes and pulls. Retirement policies have shifted: Fewer employees have fixed pensions, which tend to move people into retirement because at some point, they’ve earned maximum benefits and more years of work don’t bring more income.

Why does this matter? Our lifespans are longer than ever, thanks to the benefits of better healthcare and technology. But when senior citizens lack the savings for those extra years to retire … they don’t. Social Security as it currently stands isn’t enough to offset a lack of retirement fund—the average monthly benefit of ~$1,335 is barely more than the poverty line for a single retiree.

This is a pretty damning observation of both the effectiveness of America’s social safety net as well as our inclination to save for the future. After all, nearly half of Americans would have trouble finding $400 to pay for an emergency, let alone retirement. There are a lot of potential solutions, from shoring up Social Security to instituting a universal basic income program. But any solution needs to be launched in tandem with either campaigns or programs to encourage personal saving.

To the Moon…and beyond!

In 2017, the United States, Russia, and China will get some company in that small group with Moon-landing experience. And no, they won’t be joined by another country. Instead, they’ll be joined by a startup.

Moon Express has officially become the first private company in the world to receive permission to travel beyond Earth’s orbit. After months of conversations with government officials, the company received the green light from the FAA to venture to the moon in 2017.
“We are now free to set sail as explorers to Earth’s eighth continent, the moon, seeking new knowledge and resources to expand Earth’s economic sphere for the benefit of all humanity,” said Bob Richards, co-founder and CEO of Moon Express.
The announcement marks an important milestone for private companies in the space industry because, so far, all commercial space activities have been limited to operations within Earth’s orbit.
Moon Express was born out of the Google Lunar X-PRIZE, an international contest with $30 million up for grabs for a private company who can soft-land on the moon and travel across its surface.
If successful, Moon Express will become the fourth entity in history to soft-land on the moon. The first three were all superpowers — the U.S., USSR and China — while Moon Express is privately funded and comprises 26 entrepreneurs and engineers.

Why does this matter? A lot of companies have talked a big game, from asteroid mining to going to Mars. The big obstacle that people forget about is the legal ramifications of doing so. Moon Express is the first to get government authorization and, even if not technically a legal precedent, the hope is that their experience will make it easy for companies to launch space missions in the future.

Green > Gray

Some aspects of climate change are predictable. Sea level rising. Uninhabitable territory. But leave it to sci-fi to think about the changes to human society and what society values in a post-climate change world. From Terraform, Rootbreakers.

Twenty-year-old Ron Park, wiry and energetic, burst into the tent-covered sleeping platform jabbering about rain.
“I’m too old to rush,” Keegan said, shaving in a mirror fastened to a tree branch. A wet plop sounded on the A-frame’s fabric.
“It’s very gray out,” Park said.
Keegan had noticed the strange quality of light as soon as his eyes had opened. “Gray’s my favorite color.”
It was green he couldn’t stand. The world was covered in green, billions of leaves waving triumphantly over all arable land like flags of an invading army.
Once people had feared for trees. Turned out they could fend for themselves. The New Conditions had spawned new kinds, which grew as fast as bamboo and tough as ironwood. When the old nations began to break apart, the trees moved in, covering everything with green.
Gray was the color of steel, man’s best weapon against lignin.

GIF of the Week: German Nationalism

Olympic Event of the Week: 10-meter Air Rifle. USA! USA! USA!

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