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Mike Mayo Keeps the Hoodie on as Banks Turn to Tech
(Bloomberg) -- Wall Street’s focus on Silicon Valley has helped lift shares of Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. to new highs and is likely to keep fueling gains for the biggest bank stocks, according to analyst Mike Mayo. “I’m living in my hoodie” as long as tech keeps boosting banks’ revenue and trimming their expenses, said Mayo, who covers the sector at Wells Fargo, in a phone interview. In October, Mayo shed his suit jacket on Bloomberg TV to show his commitment to transforming himself into a “techie” from a bank analyst. Mayo reaffirmed Citigroup, BofA and JPMorgan as his top picks as the sector continues to focus on fintech opportunities such as digital banking, electronic payments and the use of artificial intelligence. The three were the best performers among the top 40 banks, by assets, in 2019, with Citigroup soaring about 53% while BofA and JPMorgan both gained 43%. Those gains outpaced the KBW Bank Index, which rallied 32% last year, and the S&P 500, which rose 29%. © Bloomberg Shares topped other banks and broader market last year The three banks extended gains in Thursday trading, with Citigroup touching the highest since January 2018 and JPMorgan at one point rallying to a record. In September, Mayo said the 2020s would be the “decade of technology for banks,” citing a shift to digital delivery, via computers and software, from physical delivery, via branches and people. Mayo noted that bank stocks had a great year in 2019 even though “traditional” metrics, like net interest margins and lending growth, were less than stellar, and even as capital markets were “sluggish.” While some of the bank stocks’ gains were “catch-up” after 2018’s underperformance, he said the three largest banks “trouncing” the rest of the sector reflected the “revamping of banking with technology.” The third quarter was a “turning point,” he added, as revenue grew faster than expenses. He expects revenue growth will keep outpacing costs in 2020, “enabled by the tech transformation.” JPMorgan and Citigroup are due to report fourth-quarter earnings on Jan. 14. Read more: Earlier, Wells Fargo Cut at Baird as It’s ‘Getting Weird’ for Banks --With assistance from Vonnie Quinn. To contact the reporter on this story: Felice Maranz in New York at fmaranz@bloomberg.net To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Jennifer Bissell-Linsk For more articles like this, please visit us at bloomberg.com ©2020 Bloomberg L.P.
Why breakout consumer tech hits have become harder to find
The Consumer Electronics Show, which takes place in Las Vegas next week, is an annual orgy of technology and gadgets. It also provides a fascinating glimpse of new categories of tech struggling to be born. More than 10 years ago, one of the hits at the show was an LG “watch phone”, complete with a music player and built-in camera for video conferencing. Throwing these capabilities together turned out to be harder than it looked, and it took the genius of Apple to produce the first coherent packaging of wristwear technology in the shape of its Watch. As a new decade dawns, the gadget enthusiasts will be out in force once again. But the factors animating the consumer electronics world have changed. Rather than technology and devices, the main forces behind today’s must-have products are services and ecosystems. Often, it is powerful companies from the tech and media worlds, operating in the background, who are pulling the strings. One sign of this change is the way that breakout hits — the things that CES-goers most hope to find — have become few and far between. In the new world of connected devices, a standalone device capable of breaking the mould is now a rarity. When new things do break through — like GoPro’s wearable cameras — they struggle to maintain a lead without the motor of a compelling service to keep consumers interested and buying more. A trail of disappointments from CE start-ups in 2019 make the point. One of the most technically accomplished companies in the field of personal robotics, Anki, failed after its run of well-received robotic toys ran out. Fitbit, which has been struggling to turn its fitness trackers into more useful health devices, sold itself to Google. And fans of augmented reality spent another year waiting in vain for Magic Leap, which has raised more than $2.5bn, to kick-start a new AR ecosystem of gadgets and content. No wonder start-up investors have gone cold on the sector. According to figures from Crunchbase, US investors put $1.74bn into CE start-ups last year, down nearly 30 per cent from 2018 and the lowest level for four years. It was always hard to launch a company in the low-margin, hit-driven hardware world, but making it in the world of connected devices is even harder. Exercise equipment maker Peloton beat the odds with its successful IPO last June, thanks to its built-in service and subscription revenue stream. But it is still far too soon to tell if it can go the distance, and this year’s CES will be full of copies, as well as people trying to apply the Peloton model to other areas of personal tech. Services are now a vital force driving personal tech. Video streaming, for instance, was one of the biggest stories of 2019, as media and entertainment companies lined up to launch premium services. Voice assistants — led by Amazon’s Alexa and Google’s Assistant — have become the animating force behind many gadgets, making it more difficult for hardware makers to differentiate their products. This year’s show is also likely to provide glimpses of the next cloud services lining up to disrupt consumer tech. These include cloud gaming, where Google’s recent entry into the market points to a world where much of the computing power that was once at consumers’ fingertips disappears into the data centre, even as a new generation of gaming consoles is about to be launched. All of these services drive demand for more digital gadgets — but the subscription streams and other new business models they support are likely to yield higher returns for the services companies than the hardware makers. The second force at work behind the scenes is the power of consumer tech ecosystems. Brand and technology integration are the factors that hold these together, along with a growing reliance on personal data. In the field of smart home devices, these factors are making Amazon and Google formidable competitors. The most effective consumer tech ecosystem company, Apple, will not be at CES. Its impact will be felt everywhere — for instance, in the large number of companies trying to copy the success of its wireless AirPods. For consumers already living in Apple’s world, these will hold little appeal. None of this will prevent the race to build the next breakout hit products. “Smart” and “connected” have been the watchwords that defined the frontiers of consumer electronics over the past few years. A technology revolution is now in the offing, as 5G connectivity and AI that can work at the level of the individual device bring a new impetus. Next week will see the usual creative attempts to package these into the next must-have gadgets. But when the dust settles, most will have joined LG’s watch phone on the digital scrapheap. richard.waters@ft.com
Ex-Google policy chief dumps on the tech giant for dodging human rights
Google’s ex-head of international relations, Ross LaJeunesse — who clocked up more than a decade working government and policy-related roles for the tech giant before departing last year — has become the latest (former) Googler to lay into the company for falling short of its erstwhile “don’t be evil” corporate motto. Worth noting right off the bat: LaJeunesse is making his own pitch to be elected as a U.S. senator for the Democrats in Maine, where he’s pitting himself against the sitting Republican, Susan Collins. So this lengthy blog post, in which he sets out reasons for joining (“making the world better and more equal”) and — at long last — exiting Google does look like an exercise in New Year reputation “exfoliation,” shall we say. One that’s intended to anticipate and deflect any critical questions he may face on the campaign trail, given his many years of service to Mountain View. Hence the inclusion of overt political messaging, such as lines like: “No longer can massive tech companies like Google be permitted to operate relatively free from government oversight.” Still, the post makes more awkward reading for Google. (Albeit, less awkward than the active employee activism the company continues to face over a range of issues — from its corporate culture and attitude toward diversity to product dev ethics.) LaJeunesse claims that (unnamed) senior management actively evaded his attempts to push for it to adopt a company-wide Human Rights program that would, as he tells it, “publicly commit Google to adhere to human rights principles found in the UN Declaration of Human Rights, provide a mechanism for product and engineering teams to seek internal review of product design elements, and formalize the use of Human Rights Impact Assessments for all major product launches and market entries.” “[E]ach time I recommended a Human Rights Program, senior executives came up with an excuse to say no,” LaJeunesse alleges, going on to claim that he was subsequently side-lined in policy discussions related to a censored search project Google had been working on to enable it to return to the Chinese market. The controversial project, code-named Dragonfly, was later shut down, per LaJeunesse’s telling, after Congress raised questions — backing up the blog’s overarching theme that only political scrutiny can put meaningful limits on powerful technologists. (Check that already steady drumbeat for the 2020 U.S. elections.) He writes: At first, [Google senior executives] said human rights issues were better handled within the product teams, rather than starting a separate program. But the product teams weren’t trained to address human rights as part of their work. When I went back to senior executives to again argue for a program, they then claimed to be worried about increasing the company’s legal liability. We provided the opinion of outside experts who re-confirmed that these fears were unfounded. At this point, a colleague was suddenly re-assigned to lead the policy team discussions for Dragonfly. As someone who had consistently advocated for a human rights-based approach, I was being sidelined from the on-going conversations on whether to launch Dragonfly. I then realized that the company had never intended to incorporate human rights principles into its business and product decisions. Just when Google needed to double down on a commitment to human rights, it decided to instead chase bigger profits and an even higher stock price. Reached for comment, a Google spokesman sent us this statement, attributed to a Google spokeswoman: “We have an unwavering commitment to supporting human rights organisations and efforts. That commitment is unrelated to and unaffected by the reorganisation of our policy team, which was widely reported and which impacted many members of the team. As part of this reorganisation, Ross was offered a new position at the exact same level and compensation, which he declined to accept. We wish Ross all the best with his political ambitions.” LaJeunesse’s blog post also lays into Google’s workplace culture — making allegations that bullying and racist stereotyping were commonplace. Including even apparently during attempts by management to actively engage with the issue of diversity… It was no different in the workplace culture. Senior colleagues bullied and screamed at young women, causing them to cry at their desks. At an all-hands meeting, my boss said, “Now you Asians come to the microphone too. I know you don’t like to ask questions.” At a different all-hands meeting, the entire policy team was separated into various rooms and told to participate in a “diversity exercise” that placed me in a group labeled “homos” while participants shouted out stereotypes such as “effeminate” and “promiscuous.” Colleagues of color were forced to join groups called “Asians” and “Brown people” in other rooms nearby. We’ve asked Google for comment on these allegations and will update this post with any response. It’s clearly a sign of the “techlash” times that an ex-Googler, who’s now a senator-in-the-running, believes there’s political capital to be made by publicly unloading on his former employer. “The role of these companies in our daily lives, from how we run our elections to how we entertain and educate our children, is just too great to leave in the hands of executives who are accountable only to their controlling shareholders who — in the case of Google, Amazon, Facebook and Snap — happen to be fellow company insiders and founders,” LaJeunesse goes on to write, widening his attack to incorporate other FAANG giants. Expect plenty more such tech giant piñata in the run up to November’s ballot.
Fintechs Will Have Some Big Tech Competition In 2020
null Getty Fintechs may be the apple of venture capitalists eyes but they won’t be transforming the financial services market alone in 2020. They will have some of the nation’s biggest tech companies to contend with. This year has been all about the financial technology startups that raised hundreds of millions of dollars in venture capital, some now sporting valuations of more than $1 billion. These fintechs have been busy disrupting everything from banking to investing, landing millions of customers along the way. Some have out grown the traditional players, forcing entire industries to waive fees and slash commissions. That hasn’t been lost on technology companies, which began testing the waters in 2019. Take Apple. It entered the financial services market earlier in 2019, teaming up with Goldman Sachs in August to launch the Apple Credit Card. Apple has been tight lipped about its performance since then but David Solomon, Goldman Sach’s CEO was quick to tout the success of the Apple Card’s launch this summer. Then there’s Google. In November the Wall Street Journal reported its gearing up to roll out checking accounts in 2020. Code-named Cache, Google is reportedly working with Citigroup and Stanford Federal Credit Union to make that a reality. Facebook and Uber are also eyeing the market. Facebook is in the throes of trying to drum up support for Libra its cryptocurrency and Uber has a credit card and recently created a new unit Uber Money to go after digital payments and other financial services. “Many tech companies are embedding financial services into their products, and this trend will not be slowing down any time soon,” said Ramneek Gupta, Managing Director & Co-Head of Venture Investing at Citi Ventures. “Fintech will soon become a native component of how companies operate, and we’re already starting to see that shift with products like Uber Money.” That means the new year should bring further announcements on the part of big tech centered around financial services. It may come in the form of product launches, partnerships and/or acquisitions. The fintechs may be enjoying red hot growth but the interest on the part of tech companies should give them pause. These tech companies have huge amounts of cash in the coffers ready to direct toward fintech services. They also realize the stakes are high. The tech companies see financial services as a way to help customers spend more whether it’s buying gadgets through Google Shopping or more rides with Uber. It also gives the tech companies deeper insight into the financial behaviors of their customers and their purchasing choices. That can be powerful when courting advertisers. With so much to gain and with tech companies sitting on mounds of cash it won’t be too surprising to see them offer banking, wealth management and insurance putting pure play fintechs at risk. If consumers can get everything from a Google or an Apple they won’t need a separate mobile only bank or digital insurance provider. That’s not to say it will be completely smooth sailing for these tech companies as they navigate the highly regulated financial services industry. As some of the leading fintechs have learned it’s not always so easy to offer financial products and stay within the confines of regulations. Tech companies have an added layer to that. They are under intense scrutiny by regulators and lawmakers over how they handle data. That could hurt their ability to offer financial services. Facebook’s woes with Libra are a cautionary tale of what could go wrong. With lawmakers and privacy groups already worried about how Facebook handles data there has been immense push-back to Libra. That’s resulted in Visa, Mastercard, Stripe, eBay and PayPal quitting the Libra initiative. “In 2020 I think we’ll see fewer companies and entrepreneurs using the ‘move fast and break things’ model. While this ideology has never worked in financial services, we’re seeing that it is having continued negative repercussions for big tech,” said Citi Ventures Gupta. “With privacy and regulation becoming a top concern for consumers, more companies will be pumping the breaks before launching into new business plans.”
AI Weekly: Facial recognition, deepfakes, privacy, and jobs automation defined 2019
As the year draws to a close, it’s instructive to look back at the months preceding to see what the future has in store. History is cyclical in nature, and this is true of the field of AI. Consider that backpropagation, an algorithm widely used in the training of machine learning systems, appeared as a theory as early as 1980, but it wasn’t until the 2010s that it returned thanks in part to cheap, powerful graphics card-based machines. This year, four key issues in AI and machine learning rose to the fore: facial recognition; deepfakes and self-censorship in academia; privacy; and automation. In anticipation of 2020, here’s a look back at some of the issues that defined the industry in 2019. Facial recognition Facial recognition found itself in the news this year perhaps more than any other application of AI. In early January, a team of MIT scientists alleged that Amazon Web Services’ facial recognition and analysis platform — Rekognition — distinguished gender among certain ethnicities less accurately than did competing solutions. Specifically, it failed to determine the sex of female and darker-skinned faces in select scenarios, mistakenly identifying pictures of women as men and darker-skinned women as men 19% and 31% of the time, respectively. Amazon’s disputations aside, the study presciently spotlighted the types of biases to which AI can easily become susceptible. Research published by the National Institute of Standards and Technology (NIST) just last week found that, when conducting a particular type of database search, a number of facial recognition algorithms falsely identified black and Asian faces 10-to-100 times more often than Caucasian faces. Beyond the bias problem, facial recognition technology’s scalability makes it ripe for abuse. This year, the NYPD ran a picture of actor Woody Harrelson through a facial recognition system because officers thought the suspect seen in drug store camera footage resembled the actor. We learned how China employs facial recognition to track the movements of its Uighur Muslim population. And AnyVision, a startup based outside of Tel Aviv, has come under scrutiny following reports that its products are used to watch Palestinians living in the West Bank. A growing number of activists, academics, and lawmakers have called for restrictions or outright bans on facial recognition technology. This fall, California imposed a three-year moratorium on facial recognition use in law enforcement body cameras, and in May, San Francisco banned facial recognition use by police or city departments. Oakland followed suit in June, after which Berkeley passed a ban of its own. And in two House Oversight and Reform committee hearings last summer, some of the most prominent Republicans and Democrats in the U.S. Congress joined together in proposals for legislative reform, following the introduction of the Commercial Facial Recognition Privacy Act of 2019, which would require businesses to receive consent before using facial recognition software. Given the fierceness of the debate in Congress, academia, statehouses, and public forums like Capitol Hill, it’s fair to say that facial recognition was and will remain a hot-button topic. Self-censorship and deepfakes In a break from academic norms, OpenA in February opted not to make public the corpus used to train its state-of-the-art natural language processing model, known as GPT-2, nor the training code that accompanied it. In a blog post justifying its decision, OpenAI expressed concern that they might be used to generate synthetic financial news about specific companies, for instance, or screeds of racist or sexist text and fake reviews on sites like Amazon or Yelp. OpenAI subsequently released several smaller and less complex versions of GPT-2 and studied their reception as well as the data sets on which they trained on. After concluding that there was “no strong evidence” of misuse, it published the full model — which was trained on eight million text documents scraped from the web — last month. Critics of OpenAI’s decision argued that the firm exaggerated the danger posed by their work, and that it inadvertently stoked mass hysteria about AI and machine learning in the process. This aside, they assert that OpenAI disadvantaged researchers by depriving them of access to breakthrough AI techniques, and that it effectively prevented the research community from identifying faults in GPT-2 or coming up with potential countermeasures. They have a point, but OpenAI’s fears weren’t entirely unfounded. Deepfakes, or media that takes a person in an existing image, audio recording, or video and replaces them with someone else’s likeness using AI, multiplied quickly in 2019. Deeptrace found 14,698 deepfake videos on the internet during its most recent tally in June and July, up 84% from last December. That’s troubling not only because deepfakes might be used to sway public opinion during an election or to implicate someone in a crime they didn’t commit, but because they’ve already been used to produce pornographic material and to swindle companies out of hundreds of millions of dollars. Tech giants including Facebook, Microsoft, and Amazon have teamed up with academic partners including MIT and Cornell to help fight the spread of AI-originated misleading media, but OpenAI’s hesitancy to release its model is a bellwether of the challenges ahead. Indeed, Experian predicts that in 2020, cyber criminals will use AI technology to disrupt commercial enterprises’ operations and create geopolitical confusion among nations. Privacy For all the good they’ve done, AI and machine learning algorithms have a major privacy problem. The Royal Free London NHS Foundation Trust, a division of the U.K.’s National Health Service based in London, provided Alphabet’s DeepMind with data on 1.6 million patients without their consent. Google (whose health data-sharing partnership with Ascension became the subject of scrutiny in November) abandoned plans to publish scans of chest X-rays over concerns that they contained personally identifiable information. This past summer, Microsoft quietly removed a data set (MS Celeb) with more than 10 million images of people after it was revealed that some weren’t aware they had been included. And ImageNet, an open source library commonly used to train computer vision algorithms, was revealed to have at some point contained depictions of intimate acts scraped from Google, Flickr, and elsewhere. Separately, tech giants including Apple and Google have been the subject of reports uncovering the potential misuse of recordings collected to improve assistants like Siri and Google Assistant. In April, Bloomberg revealed that Amazon employs contract workers to annotate thousands of hours of audio from Alexa-powered devices, prompting the company to roll out user-facing tools that quickly delete cloud-stored data. That’s all problematic given that increasingly, privacy isn’t merely a question of philosophy but table stakes in the course of business. Laws at the state, local, and federal levels aim to make privacy a mandatory part of compliance management. Hundreds of bills that address privacy, cybersecurity, and data breaches are pending or have already been passed in 50 U.S. states, territories, and the District of Columbia. Arguably the most comprehensive of them all, the California Consumer Privacy Act was signed into law roughly two years ago. That’s not to mention the Health Insurance Portability and Accountability Act (HIPAA), which requires companies to seek authorization before disclosing individual health information. In response, Google and others have released libraries such as TensorFlow Privacy and PySyft for machine learning frameworks including TensorFlow and PyTorch, which provide strong privacy guarantees with techniques like differential privacy. Simultaneously, they’ve pursued techniques including federated learning, which trains AI across decentralized devices or servers (i.e., nodes) holding data samples without exchanging those samples, and homomorphic encryption, a form of cryptography that enables computation on plaintext (file contents) encrypted using an algorithm (also known as ciphertexts). And on the fully managed services side of the equation, tech giants like Amazon have moved to make their offerings comply with regulations like HIPAA. Automation While fears of job-stealing AI might have been overblown, automation is eroding the need for human labor. A McKinsey Global Institute report published earlier this year found that women predominate in occupations that will be adversely changed by AI and machine learning. About 40% of jobs where men make up the majority in the 10 economies contributing over 60% of GDP collectively could be displaced by automation by 2030, compared with the 52% of women-dominated jobs with high automation potential. These sentiments jibe with a March 2019 report from the U.K. Office for National Statistics (ONS), which found that 10% of the U.K.’s workforce (about 1.5 million workers) occupy jobs that are at “high risk” of automation. ONS forecasted that service workers — chiefly waiters and waitresses, retail inventory restockers, and entry-level salespeople — would be disproportionately affected, as well as those in agricultural, automotive, and service industries. And the department predicted that women, who in 2017 held 70.2% of high-risk jobs, would bear the brunt of the coming labor market shifts. Whether they take up new work or acquire new skills in their current fields, it’s anticipated that tens of millions of workers will have to make some sort of occupational transition by 2030. Forrester found that automation could eliminate 10% of U.S. jobs in the coming months. And the World Economic Forum, PricewaterhouseCoopers, McKinsey Global Institute, and Gartner have forecast that AI could make redundant as many as 75 million jobs by 2025. Perhaps unsurprisingly, various forms of universal basic income, such as regular payments to citizens regardless of income, have the endorsements of luminaries such as Richard Branson and Elon Musk. U.S. presidential candidate Andrew Yang made it a central part of his campaign for the Democrats’ nomination — he asserts that payments furnished by a value-added tax could kick-start economic development in regions of the U.S. that haven’t benefited from a wellspring of venture capital. As for Bill Gates, he’s suggested imposing a “robot tax,” whereby the government would extract a fee every time a business replaces an employee with automated software or machines. Looking ahead The challenges with AI are formidable. Facial recognition remains a potent and largely unregulated application of machine learning that’s enhancing — and in some cases creating — surveillance states. Deepfakes weigh heavily on tech companies and academics, along with the general public. Definitive solutions to the privacy questions in AI are elusive. And no matter whether workers reskill, automation is predicted to impact the livelihoods of millions. What answers might 2020 hold? Tough to say. But for all the dilemmas posed by AI, it’s effected enormous positive change. AI this year achieved the state of the art in protein folding, which could pave the way for new therapies and medications. Various implementations of machine learning are being used to tackle global climate change. And AI has allowed people with speech and hearing impediments to use products that were previously unavailable to them. As with any paradigm shift, there’s invariably some bad with the good. The industry’s task — and indeed, our task — is doing all within its power to advance the latter at the former’s expense. For AI coverage, send news tips to Khari Johnson and Kyle Wiggers and AI editor Seth Colaner — and be sure to subscribe to the AI Weekly newsletter and bookmark our AI Channel. Thanks for reading, Kyle Wiggers AI Staff Writer
CES 2018: Your guide to the biggest consumer electronics show
Jake Tivy tries Realmax’s new 100-degree mobile Augmented Reality Glasses. (Photo: Robert Hanashiro, USA TODAY) This week is a great time to love technology. Las Vegas plays is playing host to CES, formerly known as the Consumer Electronics Show, the annual tech confab dedicated to the latest in consumer technology. When attendees aren't dodging multiple varieties of drone and robot, they are checking out new gadgets from super-fast laptops to TVs as thin as a credit card. Last year, more than 184,000 people attended CES, as did more than 4,000 companies. Here's what's happening. Autoplay Show Thumbnails Show Captions Last SlideNext Slide Augmented reality. Who would have ever guessed this wave of interest in AR would start with Pikachu? Since the arrival of mobile game Pokemon Go, AR is a hot topic. Self-driving cars. Those autonomous rides are opening up a bit more to the masses. Ride-hailing service Lyft is offering up self-driving options for attendees at CES. Also, with CES morphing into more of an auto show, prepare to hear more from car makers ready to roll out driverless rides. More: Fisker's first all-electric car takes on Tesla: Exclusive details More: Intel's CES keynote: CEO vows quick fix to security flaw before unleashing the drones Health tech. It's more than just Fitbits and smartwatches. Technology such as AI and wearables beyond the wrist could transform how we monitor our health. Robots. Really, is there anything better? More: 5 more cool things we saw at CES 2018 What announcements should I expect? Sunday and Monday are press days, which means loads of press conferences and announcements. On Sunday, chip maker Nvidia is the heavy hitter presenting. The following day, tech giants including LG, Panasonic, Samsung and Sony take the stage. Then there are panels on the future of TV and mobile. If you want to find out about those quirky gadgets (think the smart fork or smart belt), those discoveries surface starting Tuesday when the show floor opens. More: 6 coolest gadgets from CES you'll likely see in your house this year Tech reporters Ed Baig, Jefferson Graham, and Mike Snider will be there, along with our weekly tech columnists Jennifer Jolly and Marc Saltzman. If you're lucky, you might spot them on Facebook Live.
(Bloomberg) -- Wall Street’s focus on Silicon Valley has helped lift shares of Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. to new highs and is likely to keep fueling gains for the biggest bank stocks, according to analyst Mike Mayo. “I’m living in my hoodie” as long as tech keeps boosting banks’ revenue and trimming their expenses, said Mayo, who covers the sector at Wells Fargo, in a phone interview. In October, Mayo shed his suit jacket on Bloomberg TV to show his commitment to transforming himself into a “techie” from a bank analyst. Mayo reaffirmed Citigroup, BofA and JPMorgan as his top picks as the sector continues to focus on fintech opportunities such as digital banking, electronic payments and the use of artificial intelligence. The three were the best performers among the top 40 banks, by assets, in 2019, with Citigroup soaring about 53% while BofA and JPMorgan both gained 43%. Those gains outpaced the KBW Bank Index, which rallied 32% last year, and the S&P 500, which rose 29%. © Bloomberg Shares topped other banks and broader market last year The three banks extended gains in Thursday trading, with Citigroup touching the highest since January 2018 and JPMorgan at one point rallying to a record. In September, Mayo said the 2020s would be the “decade of technology for banks,” citing a shift to digital delivery, via computers and software, from physical delivery, via branches and people. Mayo noted that bank stocks had a great year in 2019 even though “traditional” metrics, like net interest margins and lending growth, were less than stellar, and even as capital markets were “sluggish.” While some of the bank stocks’ gains were “catch-up” after 2018’s underperformance, he said the three largest banks “trouncing” the rest of the sector reflected the “revamping of banking with technology.” The third quarter was a “turning point,” he added, as revenue grew faster than expenses. He expects revenue growth will keep outpacing costs in 2020, “enabled by the tech transformation.” JPMorgan and Citigroup are due to report fourth-quarter earnings on Jan. 14. Read more: Earlier, Wells Fargo Cut at Baird as It’s ‘Getting Weird’ for Banks --With assistance from Vonnie Quinn. To contact the reporter on this story: Felice Maranz in New York at fmaranz@bloomberg.net To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Jennifer Bissell-Linsk For more articles like this, please visit us at bloomberg.com ©2020 Bloomberg L.P.
Why breakout consumer tech hits have become harder to find
The Consumer Electronics Show, which takes place in Las Vegas next week, is an annual orgy of technology and gadgets. It also provides a fascinating glimpse of new categories of tech struggling to be born. More than 10 years ago, one of the hits at the show was an LG “watch phone”, complete with a music player and built-in camera for video conferencing. Throwing these capabilities together turned out to be harder than it looked, and it took the genius of Apple to produce the first coherent packaging of wristwear technology in the shape of its Watch. As a new decade dawns, the gadget enthusiasts will be out in force once again. But the factors animating the consumer electronics world have changed. Rather than technology and devices, the main forces behind today’s must-have products are services and ecosystems. Often, it is powerful companies from the tech and media worlds, operating in the background, who are pulling the strings. One sign of this change is the way that breakout hits — the things that CES-goers most hope to find — have become few and far between. In the new world of connected devices, a standalone device capable of breaking the mould is now a rarity. When new things do break through — like GoPro’s wearable cameras — they struggle to maintain a lead without the motor of a compelling service to keep consumers interested and buying more. A trail of disappointments from CE start-ups in 2019 make the point. One of the most technically accomplished companies in the field of personal robotics, Anki, failed after its run of well-received robotic toys ran out. Fitbit, which has been struggling to turn its fitness trackers into more useful health devices, sold itself to Google. And fans of augmented reality spent another year waiting in vain for Magic Leap, which has raised more than $2.5bn, to kick-start a new AR ecosystem of gadgets and content. No wonder start-up investors have gone cold on the sector. According to figures from Crunchbase, US investors put $1.74bn into CE start-ups last year, down nearly 30 per cent from 2018 and the lowest level for four years. It was always hard to launch a company in the low-margin, hit-driven hardware world, but making it in the world of connected devices is even harder. Exercise equipment maker Peloton beat the odds with its successful IPO last June, thanks to its built-in service and subscription revenue stream. But it is still far too soon to tell if it can go the distance, and this year’s CES will be full of copies, as well as people trying to apply the Peloton model to other areas of personal tech. Services are now a vital force driving personal tech. Video streaming, for instance, was one of the biggest stories of 2019, as media and entertainment companies lined up to launch premium services. Voice assistants — led by Amazon’s Alexa and Google’s Assistant — have become the animating force behind many gadgets, making it more difficult for hardware makers to differentiate their products. This year’s show is also likely to provide glimpses of the next cloud services lining up to disrupt consumer tech. These include cloud gaming, where Google’s recent entry into the market points to a world where much of the computing power that was once at consumers’ fingertips disappears into the data centre, even as a new generation of gaming consoles is about to be launched. All of these services drive demand for more digital gadgets — but the subscription streams and other new business models they support are likely to yield higher returns for the services companies than the hardware makers. The second force at work behind the scenes is the power of consumer tech ecosystems. Brand and technology integration are the factors that hold these together, along with a growing reliance on personal data. In the field of smart home devices, these factors are making Amazon and Google formidable competitors. The most effective consumer tech ecosystem company, Apple, will not be at CES. Its impact will be felt everywhere — for instance, in the large number of companies trying to copy the success of its wireless AirPods. For consumers already living in Apple’s world, these will hold little appeal. None of this will prevent the race to build the next breakout hit products. “Smart” and “connected” have been the watchwords that defined the frontiers of consumer electronics over the past few years. A technology revolution is now in the offing, as 5G connectivity and AI that can work at the level of the individual device bring a new impetus. Next week will see the usual creative attempts to package these into the next must-have gadgets. But when the dust settles, most will have joined LG’s watch phone on the digital scrapheap. richard.waters@ft.com
Ex-Google policy chief dumps on the tech giant for dodging human rights
Google’s ex-head of international relations, Ross LaJeunesse — who clocked up more than a decade working government and policy-related roles for the tech giant before departing last year — has become the latest (former) Googler to lay into the company for falling short of its erstwhile “don’t be evil” corporate motto. Worth noting right off the bat: LaJeunesse is making his own pitch to be elected as a U.S. senator for the Democrats in Maine, where he’s pitting himself against the sitting Republican, Susan Collins. So this lengthy blog post, in which he sets out reasons for joining (“making the world better and more equal”) and — at long last — exiting Google does look like an exercise in New Year reputation “exfoliation,” shall we say. One that’s intended to anticipate and deflect any critical questions he may face on the campaign trail, given his many years of service to Mountain View. Hence the inclusion of overt political messaging, such as lines like: “No longer can massive tech companies like Google be permitted to operate relatively free from government oversight.” Still, the post makes more awkward reading for Google. (Albeit, less awkward than the active employee activism the company continues to face over a range of issues — from its corporate culture and attitude toward diversity to product dev ethics.) LaJeunesse claims that (unnamed) senior management actively evaded his attempts to push for it to adopt a company-wide Human Rights program that would, as he tells it, “publicly commit Google to adhere to human rights principles found in the UN Declaration of Human Rights, provide a mechanism for product and engineering teams to seek internal review of product design elements, and formalize the use of Human Rights Impact Assessments for all major product launches and market entries.” “[E]ach time I recommended a Human Rights Program, senior executives came up with an excuse to say no,” LaJeunesse alleges, going on to claim that he was subsequently side-lined in policy discussions related to a censored search project Google had been working on to enable it to return to the Chinese market. The controversial project, code-named Dragonfly, was later shut down, per LaJeunesse’s telling, after Congress raised questions — backing up the blog’s overarching theme that only political scrutiny can put meaningful limits on powerful technologists. (Check that already steady drumbeat for the 2020 U.S. elections.) He writes: At first, [Google senior executives] said human rights issues were better handled within the product teams, rather than starting a separate program. But the product teams weren’t trained to address human rights as part of their work. When I went back to senior executives to again argue for a program, they then claimed to be worried about increasing the company’s legal liability. We provided the opinion of outside experts who re-confirmed that these fears were unfounded. At this point, a colleague was suddenly re-assigned to lead the policy team discussions for Dragonfly. As someone who had consistently advocated for a human rights-based approach, I was being sidelined from the on-going conversations on whether to launch Dragonfly. I then realized that the company had never intended to incorporate human rights principles into its business and product decisions. Just when Google needed to double down on a commitment to human rights, it decided to instead chase bigger profits and an even higher stock price. Reached for comment, a Google spokesman sent us this statement, attributed to a Google spokeswoman: “We have an unwavering commitment to supporting human rights organisations and efforts. That commitment is unrelated to and unaffected by the reorganisation of our policy team, which was widely reported and which impacted many members of the team. As part of this reorganisation, Ross was offered a new position at the exact same level and compensation, which he declined to accept. We wish Ross all the best with his political ambitions.” LaJeunesse’s blog post also lays into Google’s workplace culture — making allegations that bullying and racist stereotyping were commonplace. Including even apparently during attempts by management to actively engage with the issue of diversity… It was no different in the workplace culture. Senior colleagues bullied and screamed at young women, causing them to cry at their desks. At an all-hands meeting, my boss said, “Now you Asians come to the microphone too. I know you don’t like to ask questions.” At a different all-hands meeting, the entire policy team was separated into various rooms and told to participate in a “diversity exercise” that placed me in a group labeled “homos” while participants shouted out stereotypes such as “effeminate” and “promiscuous.” Colleagues of color were forced to join groups called “Asians” and “Brown people” in other rooms nearby. We’ve asked Google for comment on these allegations and will update this post with any response. It’s clearly a sign of the “techlash” times that an ex-Googler, who’s now a senator-in-the-running, believes there’s political capital to be made by publicly unloading on his former employer. “The role of these companies in our daily lives, from how we run our elections to how we entertain and educate our children, is just too great to leave in the hands of executives who are accountable only to their controlling shareholders who — in the case of Google, Amazon, Facebook and Snap — happen to be fellow company insiders and founders,” LaJeunesse goes on to write, widening his attack to incorporate other FAANG giants. Expect plenty more such tech giant piñata in the run up to November’s ballot.
Fintechs Will Have Some Big Tech Competition In 2020
null Getty Fintechs may be the apple of venture capitalists eyes but they won’t be transforming the financial services market alone in 2020. They will have some of the nation’s biggest tech companies to contend with. This year has been all about the financial technology startups that raised hundreds of millions of dollars in venture capital, some now sporting valuations of more than $1 billion. These fintechs have been busy disrupting everything from banking to investing, landing millions of customers along the way. Some have out grown the traditional players, forcing entire industries to waive fees and slash commissions. That hasn’t been lost on technology companies, which began testing the waters in 2019. Take Apple. It entered the financial services market earlier in 2019, teaming up with Goldman Sachs in August to launch the Apple Credit Card. Apple has been tight lipped about its performance since then but David Solomon, Goldman Sach’s CEO was quick to tout the success of the Apple Card’s launch this summer. Then there’s Google. In November the Wall Street Journal reported its gearing up to roll out checking accounts in 2020. Code-named Cache, Google is reportedly working with Citigroup and Stanford Federal Credit Union to make that a reality. Facebook and Uber are also eyeing the market. Facebook is in the throes of trying to drum up support for Libra its cryptocurrency and Uber has a credit card and recently created a new unit Uber Money to go after digital payments and other financial services. “Many tech companies are embedding financial services into their products, and this trend will not be slowing down any time soon,” said Ramneek Gupta, Managing Director & Co-Head of Venture Investing at Citi Ventures. “Fintech will soon become a native component of how companies operate, and we’re already starting to see that shift with products like Uber Money.” That means the new year should bring further announcements on the part of big tech centered around financial services. It may come in the form of product launches, partnerships and/or acquisitions. The fintechs may be enjoying red hot growth but the interest on the part of tech companies should give them pause. These tech companies have huge amounts of cash in the coffers ready to direct toward fintech services. They also realize the stakes are high. The tech companies see financial services as a way to help customers spend more whether it’s buying gadgets through Google Shopping or more rides with Uber. It also gives the tech companies deeper insight into the financial behaviors of their customers and their purchasing choices. That can be powerful when courting advertisers. With so much to gain and with tech companies sitting on mounds of cash it won’t be too surprising to see them offer banking, wealth management and insurance putting pure play fintechs at risk. If consumers can get everything from a Google or an Apple they won’t need a separate mobile only bank or digital insurance provider. That’s not to say it will be completely smooth sailing for these tech companies as they navigate the highly regulated financial services industry. As some of the leading fintechs have learned it’s not always so easy to offer financial products and stay within the confines of regulations. Tech companies have an added layer to that. They are under intense scrutiny by regulators and lawmakers over how they handle data. That could hurt their ability to offer financial services. Facebook’s woes with Libra are a cautionary tale of what could go wrong. With lawmakers and privacy groups already worried about how Facebook handles data there has been immense push-back to Libra. That’s resulted in Visa, Mastercard, Stripe, eBay and PayPal quitting the Libra initiative. “In 2020 I think we’ll see fewer companies and entrepreneurs using the ‘move fast and break things’ model. While this ideology has never worked in financial services, we’re seeing that it is having continued negative repercussions for big tech,” said Citi Ventures Gupta. “With privacy and regulation becoming a top concern for consumers, more companies will be pumping the breaks before launching into new business plans.”
AI Weekly: Facial recognition, deepfakes, privacy, and jobs automation defined 2019
As the year draws to a close, it’s instructive to look back at the months preceding to see what the future has in store. History is cyclical in nature, and this is true of the field of AI. Consider that backpropagation, an algorithm widely used in the training of machine learning systems, appeared as a theory as early as 1980, but it wasn’t until the 2010s that it returned thanks in part to cheap, powerful graphics card-based machines. This year, four key issues in AI and machine learning rose to the fore: facial recognition; deepfakes and self-censorship in academia; privacy; and automation. In anticipation of 2020, here’s a look back at some of the issues that defined the industry in 2019. Facial recognition Facial recognition found itself in the news this year perhaps more than any other application of AI. In early January, a team of MIT scientists alleged that Amazon Web Services’ facial recognition and analysis platform — Rekognition — distinguished gender among certain ethnicities less accurately than did competing solutions. Specifically, it failed to determine the sex of female and darker-skinned faces in select scenarios, mistakenly identifying pictures of women as men and darker-skinned women as men 19% and 31% of the time, respectively. Amazon’s disputations aside, the study presciently spotlighted the types of biases to which AI can easily become susceptible. Research published by the National Institute of Standards and Technology (NIST) just last week found that, when conducting a particular type of database search, a number of facial recognition algorithms falsely identified black and Asian faces 10-to-100 times more often than Caucasian faces. Beyond the bias problem, facial recognition technology’s scalability makes it ripe for abuse. This year, the NYPD ran a picture of actor Woody Harrelson through a facial recognition system because officers thought the suspect seen in drug store camera footage resembled the actor. We learned how China employs facial recognition to track the movements of its Uighur Muslim population. And AnyVision, a startup based outside of Tel Aviv, has come under scrutiny following reports that its products are used to watch Palestinians living in the West Bank. A growing number of activists, academics, and lawmakers have called for restrictions or outright bans on facial recognition technology. This fall, California imposed a three-year moratorium on facial recognition use in law enforcement body cameras, and in May, San Francisco banned facial recognition use by police or city departments. Oakland followed suit in June, after which Berkeley passed a ban of its own. And in two House Oversight and Reform committee hearings last summer, some of the most prominent Republicans and Democrats in the U.S. Congress joined together in proposals for legislative reform, following the introduction of the Commercial Facial Recognition Privacy Act of 2019, which would require businesses to receive consent before using facial recognition software. Given the fierceness of the debate in Congress, academia, statehouses, and public forums like Capitol Hill, it’s fair to say that facial recognition was and will remain a hot-button topic. Self-censorship and deepfakes In a break from academic norms, OpenA in February opted not to make public the corpus used to train its state-of-the-art natural language processing model, known as GPT-2, nor the training code that accompanied it. In a blog post justifying its decision, OpenAI expressed concern that they might be used to generate synthetic financial news about specific companies, for instance, or screeds of racist or sexist text and fake reviews on sites like Amazon or Yelp. OpenAI subsequently released several smaller and less complex versions of GPT-2 and studied their reception as well as the data sets on which they trained on. After concluding that there was “no strong evidence” of misuse, it published the full model — which was trained on eight million text documents scraped from the web — last month. Critics of OpenAI’s decision argued that the firm exaggerated the danger posed by their work, and that it inadvertently stoked mass hysteria about AI and machine learning in the process. This aside, they assert that OpenAI disadvantaged researchers by depriving them of access to breakthrough AI techniques, and that it effectively prevented the research community from identifying faults in GPT-2 or coming up with potential countermeasures. They have a point, but OpenAI’s fears weren’t entirely unfounded. Deepfakes, or media that takes a person in an existing image, audio recording, or video and replaces them with someone else’s likeness using AI, multiplied quickly in 2019. Deeptrace found 14,698 deepfake videos on the internet during its most recent tally in June and July, up 84% from last December. That’s troubling not only because deepfakes might be used to sway public opinion during an election or to implicate someone in a crime they didn’t commit, but because they’ve already been used to produce pornographic material and to swindle companies out of hundreds of millions of dollars. Tech giants including Facebook, Microsoft, and Amazon have teamed up with academic partners including MIT and Cornell to help fight the spread of AI-originated misleading media, but OpenAI’s hesitancy to release its model is a bellwether of the challenges ahead. Indeed, Experian predicts that in 2020, cyber criminals will use AI technology to disrupt commercial enterprises’ operations and create geopolitical confusion among nations. Privacy For all the good they’ve done, AI and machine learning algorithms have a major privacy problem. The Royal Free London NHS Foundation Trust, a division of the U.K.’s National Health Service based in London, provided Alphabet’s DeepMind with data on 1.6 million patients without their consent. Google (whose health data-sharing partnership with Ascension became the subject of scrutiny in November) abandoned plans to publish scans of chest X-rays over concerns that they contained personally identifiable information. This past summer, Microsoft quietly removed a data set (MS Celeb) with more than 10 million images of people after it was revealed that some weren’t aware they had been included. And ImageNet, an open source library commonly used to train computer vision algorithms, was revealed to have at some point contained depictions of intimate acts scraped from Google, Flickr, and elsewhere. Separately, tech giants including Apple and Google have been the subject of reports uncovering the potential misuse of recordings collected to improve assistants like Siri and Google Assistant. In April, Bloomberg revealed that Amazon employs contract workers to annotate thousands of hours of audio from Alexa-powered devices, prompting the company to roll out user-facing tools that quickly delete cloud-stored data. That’s all problematic given that increasingly, privacy isn’t merely a question of philosophy but table stakes in the course of business. Laws at the state, local, and federal levels aim to make privacy a mandatory part of compliance management. Hundreds of bills that address privacy, cybersecurity, and data breaches are pending or have already been passed in 50 U.S. states, territories, and the District of Columbia. Arguably the most comprehensive of them all, the California Consumer Privacy Act was signed into law roughly two years ago. That’s not to mention the Health Insurance Portability and Accountability Act (HIPAA), which requires companies to seek authorization before disclosing individual health information. In response, Google and others have released libraries such as TensorFlow Privacy and PySyft for machine learning frameworks including TensorFlow and PyTorch, which provide strong privacy guarantees with techniques like differential privacy. Simultaneously, they’ve pursued techniques including federated learning, which trains AI across decentralized devices or servers (i.e., nodes) holding data samples without exchanging those samples, and homomorphic encryption, a form of cryptography that enables computation on plaintext (file contents) encrypted using an algorithm (also known as ciphertexts). And on the fully managed services side of the equation, tech giants like Amazon have moved to make their offerings comply with regulations like HIPAA. Automation While fears of job-stealing AI might have been overblown, automation is eroding the need for human labor. A McKinsey Global Institute report published earlier this year found that women predominate in occupations that will be adversely changed by AI and machine learning. About 40% of jobs where men make up the majority in the 10 economies contributing over 60% of GDP collectively could be displaced by automation by 2030, compared with the 52% of women-dominated jobs with high automation potential. These sentiments jibe with a March 2019 report from the U.K. Office for National Statistics (ONS), which found that 10% of the U.K.’s workforce (about 1.5 million workers) occupy jobs that are at “high risk” of automation. ONS forecasted that service workers — chiefly waiters and waitresses, retail inventory restockers, and entry-level salespeople — would be disproportionately affected, as well as those in agricultural, automotive, and service industries. And the department predicted that women, who in 2017 held 70.2% of high-risk jobs, would bear the brunt of the coming labor market shifts. Whether they take up new work or acquire new skills in their current fields, it’s anticipated that tens of millions of workers will have to make some sort of occupational transition by 2030. Forrester found that automation could eliminate 10% of U.S. jobs in the coming months. And the World Economic Forum, PricewaterhouseCoopers, McKinsey Global Institute, and Gartner have forecast that AI could make redundant as many as 75 million jobs by 2025. Perhaps unsurprisingly, various forms of universal basic income, such as regular payments to citizens regardless of income, have the endorsements of luminaries such as Richard Branson and Elon Musk. U.S. presidential candidate Andrew Yang made it a central part of his campaign for the Democrats’ nomination — he asserts that payments furnished by a value-added tax could kick-start economic development in regions of the U.S. that haven’t benefited from a wellspring of venture capital. As for Bill Gates, he’s suggested imposing a “robot tax,” whereby the government would extract a fee every time a business replaces an employee with automated software or machines. Looking ahead The challenges with AI are formidable. Facial recognition remains a potent and largely unregulated application of machine learning that’s enhancing — and in some cases creating — surveillance states. Deepfakes weigh heavily on tech companies and academics, along with the general public. Definitive solutions to the privacy questions in AI are elusive. And no matter whether workers reskill, automation is predicted to impact the livelihoods of millions. What answers might 2020 hold? Tough to say. But for all the dilemmas posed by AI, it’s effected enormous positive change. AI this year achieved the state of the art in protein folding, which could pave the way for new therapies and medications. Various implementations of machine learning are being used to tackle global climate change. And AI has allowed people with speech and hearing impediments to use products that were previously unavailable to them. As with any paradigm shift, there’s invariably some bad with the good. The industry’s task — and indeed, our task — is doing all within its power to advance the latter at the former’s expense. For AI coverage, send news tips to Khari Johnson and Kyle Wiggers and AI editor Seth Colaner — and be sure to subscribe to the AI Weekly newsletter and bookmark our AI Channel. Thanks for reading, Kyle Wiggers AI Staff Writer
CES 2018: Your guide to the biggest consumer electronics show
Jake Tivy tries Realmax’s new 100-degree mobile Augmented Reality Glasses. (Photo: Robert Hanashiro, USA TODAY) This week is a great time to love technology. Las Vegas plays is playing host to CES, formerly known as the Consumer Electronics Show, the annual tech confab dedicated to the latest in consumer technology. When attendees aren't dodging multiple varieties of drone and robot, they are checking out new gadgets from super-fast laptops to TVs as thin as a credit card. Last year, more than 184,000 people attended CES, as did more than 4,000 companies. Here's what's happening. Autoplay Show Thumbnails Show Captions Last SlideNext Slide Augmented reality. Who would have ever guessed this wave of interest in AR would start with Pikachu? Since the arrival of mobile game Pokemon Go, AR is a hot topic. Self-driving cars. Those autonomous rides are opening up a bit more to the masses. Ride-hailing service Lyft is offering up self-driving options for attendees at CES. Also, with CES morphing into more of an auto show, prepare to hear more from car makers ready to roll out driverless rides. More: Fisker's first all-electric car takes on Tesla: Exclusive details More: Intel's CES keynote: CEO vows quick fix to security flaw before unleashing the drones Health tech. It's more than just Fitbits and smartwatches. Technology such as AI and wearables beyond the wrist could transform how we monitor our health. Robots. Really, is there anything better? More: 5 more cool things we saw at CES 2018 What announcements should I expect? Sunday and Monday are press days, which means loads of press conferences and announcements. On Sunday, chip maker Nvidia is the heavy hitter presenting. The following day, tech giants including LG, Panasonic, Samsung and Sony take the stage. Then there are panels on the future of TV and mobile. If you want to find out about those quirky gadgets (think the smart fork or smart belt), those discoveries surface starting Tuesday when the show floor opens. More: 6 coolest gadgets from CES you'll likely see in your house this year Tech reporters Ed Baig, Jefferson Graham, and Mike Snider will be there, along with our weekly tech columnists Jennifer Jolly and Marc Saltzman. If you're lucky, you might spot them on Facebook Live.
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