Homelessness in the Silicon Valley: Is Inclusive Growth Impossible Here?

Last week, I was at the Singularity University Global Summit in downtown SF giving a presentation on Autonomous Vehicles. It was at the Hilton on Union Square. One lunch break, I hopped out for a bite. Turning the corner, I found a street lined with homeless people sleeping on cardboard. Waste filled streets and it smelled like a public toilet. It was jarring – the contrast between a high-energy, lavish tech conference solving “exponential problems”, and the poverty right at our doorstep.

Bringing it even closer to home, did you know that one-third of school children in East Palo Alto are homeless? They live in trailer parks and the back of cars with their families. This is happening just 10 minutes away from Palo Alto, Mountain View and Menlo Park, some of the richest districts in the world.

homelesschildren.jpg
Source: https://www.theguardian.com/society/2016/dec/28/silicon-valley-homeless-east-palo-alto-california-schools#img-1

The incredible wealth in the Valley has raised some troubling societal issues. Daniel Saver, senior staff attorney in charge of the housing program at Community Legal Services in East Palo Alto, has dealt with many cases of tenants receiving massive unanticipated rent increases — often of $400-$600 dollars a month, or even up to $1,000 or $1,200 a month. This is a functional eviction notice for many.

Even the highest paid tech workers are not spared, but the burden has disproportionately fallen on middle to low-income service workers – cooks, cleaners, security officers in tech companies – where minority races (African-American, Latino) are over-represented. Teachers, nurses and other service professionals are also affected because their salaries can’t keep pace with the housing prices.

“Inclusive” and “Growth”: Can we have both?

The problem I highlighted above isn’t particularly a “tech” or “Silicon Valley” problem, although it certainly is exaggerated here. Any region undergoing rapid growth experiences a surge in demand for services and infrastructure (such as homes, healthcare and roads). When infrastructure growth can’t catch up, people at the lower end of the income spectrum are priced out. In the case of the Silicon Valley, they move further out and commute to work, or live in trailer parks. Some leave the region altogether. In this way, the Silicon Valley has become an exclusive bubble of wealth.

Singapore’s earliest leaders understood the trade-off between growth and inclusiveness acutely. They knew that the problem I outlined above would be many orders worse in an island whose total land area is half the size of Los Angeles, with little room to expand: in large countries like America, people who are priced out of one region can move to a cheaper region. People make their money in one state and retire in another. A large land area is a natural buffer against economic upheaval.

This was not an option for Singapore: our little island needed rapid economic growth to stand a chance for survival. At the same time, we couldn’t afford to push people out when the cost of living increased. We had to remain a comfortable home for people at all life stages and all incomes across many cycles of economic change.

Four social policies served as bastions for inclusiveness as our economy grew:

  • First: our housing policy. 80% of all Singaporeans live in public housing built by the Government. Families earning below S$170K a year (about USD$115K) are eligible for public housing. Public housing in Singapore is very different from how Americans imagine: They are not gray, dingy rental facilities serving low-income neighborhoods. Apartment blocks are modern and undergo periodic regeneration. Urban planners design each public housing estate to include libraries, parks, common spaces, transportation networks and schools. Our public housing is highly subsidized, with lower-income families receiving higher subsidies. This policy keeps homes affordable for the large majority of the population.

 

  • Second, our healthcare policy. You can read about it comprehensively in this New York Times article, but I will point out one aspect: universal healthcare insurance. Instead of leaving insurance completely to free market providers – which potentially prices people out of this critical good – the Singapore Government provides a basic layer of healthcare insurance for all Singaporeans, called “Medishield”. Singaporeans are free to buy additional plans and riders from private insurers, but these are built on top of the basic, universal medical insurance.

 

  • Third, our education policy. We have a universal education system covering ages 7-16. Education is almost free. Schools are centrally resourced, not by the tax districts they are in.

 

Singapore’s social policies are not perfect. There are many issues we are reviewing, some of which I worked on prior to my current job. However, our approach demonstrates an active and systematic attempt to tackle the trade-off between economic growth and inclusiveness – I have not seen the equivalent in the United States.

How can the Valley achieve Inclusive Growth?

The United States has a very different context. The Government has not traditionally played a large role in social policy, and there is great political resistance to a change in this direction (for example, the attempt to repeal Obamacare).

Who will step in to fill this large gap in basic public services? I’ve always admired Americans’ ability to self-organize and provide for the needs of their community, which Daniel Saver is doing through his work in East Palo Alto. However, the magnitude of the problem – especially in the Silicon Valley – calls for someone to take more radical responsibility in ensuring basic services for the local community.

I believe technology companies can, and should take on greater responsibility to demonstrate that inclusive growth is possible. Much like how they might form a “Partnership in AI” to recommend rules and ethics in making socially-responsible AI, I believe they can come together to discuss how they may systematically contribute to inclusive development in their local backyard.

  • Could the technology companies provide subsidized housing in their own backyards? Facebook plans to build a new campus that will offer 1500 apartments at subsidized rent to the public. It’s a great step, but very small in the grand scheme. Perhaps they can commit to providing some subsidized housing for every X sqft of new development (the local governments should commit to opening new land for this too).
  • Can the large army of contract workers be offered better healthcare insurance and retirement benefits?
  • Can we help to invest in educational districts that are traditionally under-resourced?
  • Can we contribute to the thriving of the teaching, nursing, and social services community in the Bay Area?

Conclusion 

The problems in the Valley are certainly not caused by the technology companies alone. Failing infrastructure, outdated policies and politics are a huge part of the problem. However, tech companies are becoming more powerful and rich than many states today, and it is worth asking what new responsibilities come with that.

Tech companies have made exceptional contributions to worldwide causes – from education to hunger and healthcare. I would like to see them applying their tremendous intellect and resources to problems in their own backyard. Perhaps we can make the Silicon Valley an example of inclusive growth, rather than a picture of super fast growth plus ugly inequality. Now, isn’t that something we want to scale throughout the world? It would give many countries and people a greater hope as they seek to emulate us.

homelessinSF.jpg
Source: http://www.businessinsider.com/silicon-valleys-homelessness-problem-2014-3
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Cutting Through the Hype of AI: Why and How

The field of AI has progressed significantly in recent years. Breakthroughs in machine learning have enabled computers to mimic humans in areas such as image understanding and speech processing. However, many problems remain unsolved, such as teaching computers to read and understand anything. It will be decades before we have Artificial General Intelligence which surpasses human intelligence, including runaway bots that humans can no longer control.

For now, we must be realistic about what AI can achieve for several reasons.

The Risks of Unrealistic Expectations in AI

First, unrealistic expectations create incentives to deploy unsafe or unreliable systems. Take autonomous vehicles for example. AI systems enable a car to accurately perceive its environment, plan and execute its path. Ensuring that these systems work safely and reliably together is a mammoth task. There is a reason Waymo has not made commercial deployments despite having tested for years.

Unrealistic expectations from investors and customers on the timeline for commercial autonomous vehicles may pressure companies to deploy unsafe or unreliable vehicles prematurely. Uber’s deployment last December was one such example. In this case, regulators were able to clamp down quickly. However, cases will become less clear cut in the future, and will depend on self-regulation of technologists. Premature testing puts human life at risk, and when public opinion plunges due to an accident, the entire industry is delayed from delivering the enormous safety benefits of autonomous vehicles.

Second, hype about Artificial General Intelligence misfocuses our attention. We often forget that as technology has progressed, humans and organizations have historically evolved to master it. We should focus our attention on facilitating this evolution, for example, by enabling a cycle of re-skilling and job re-design so that people increasingly play roles which machines cannot. New value arises when people focus on what they do best. For example, pharmacists in Singapore provide better patient counselling now that intelligent robots manage medicine packing.

Finally, AI researchers need a reliable stream of funding to make long-term investments in basic research that yield step changes in the field. Unrealistic expectations make the field of AI susceptible to funding crashes, hindering progress – the history of AI winters demonstrates this. One side effect is that during these winters, only large players with deep pockets can continue to cement their advantages. If this privilege is not used responsibly, what does this mean for the distribution of benefits arising from AI? On a side note, this is  why I think that Governments should commit long-term funding to basic AI research.

How Can We Better Distinguish Reality and Hype?

The hype surrounding AI can be detrimental, but how can we help people better distinguish reality and hype?

Personally, I feel that reality and hype are best distinguished in the context of problem-solving. The AI community needs to work closely with people who own problems such as improving preventive health, boosting educational equality and solving unemployment. What can, and cannot be solved through AI? What are the risks? How can AI systems be designed to supplement humans? Google set up People + AI Research (PAIR) to explore this. However, the onus is not on the AI community alone. Problem owners must become advocates and critics of AI in their own contexts. They must play a role in public education.

One challenge in distinguishing hype from reality in AI is the competitiveness in the community. The market incentive is for emerging companies to upsell what AI can deliver to raise investment.

On some issues, the AI community needs to lay down their guns and unite. Educating the public to differentiate hype and reality in AI is one of them, and big companies have to take a disproportionate share of responsibility because their existence is less dependent on their ability  to upsell. The technical community must also work together to solve problems such as AI safety, which should not be a basis for competition. This is the intent of the Partnership in AI. I personally hope to see the Partnership build strong relationships not just within the commercial community, but with third parties such as Governments and Non-Profits who, in some contexts, are trusted as neutral arbiters on technology issues.

Ultimately, what is at stake is the tremendous value AI can bring to humanity if it progresses quickly, safely, and with the trust and collaboration of users. To this end, fostering realistic expectations about AI is instrumental.

Elon
Image credit: http://money.cnn.com/2017/04/21/technology/elon-musk-brain-ai/index.html

 

 

Regulation and startups: An unexpected opportunity (Katarina Hasbani)

This is a contributed post from Katarina Hasbani. Drawing from her deep experience in the energy sector, Katarina gives advice to start-ups looking to work in highly-regulated sectors, arguing that regulation is not always the enemy.

Katarina is a specialist in policy and regulation surrounding the energy sector. She has almost 15 years of experience from Europe, Middle East and South-East Asia. She moved to Singapore from Dubai, where she was directing Dubai Government’s efforts to reduce the Emirate’s energy consumption by 30% in the horizon of 2030. In the European Commission, she was involved with EU’s gas diversification efforts in its Easter and Southern Neighborhood along with policy work on electricity and gas market liberalization, increased use of renewables and improvements in energy efficiency.

Guest Article Katarina

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Regulation and startups: An unexpected opportunity (Katarina Hasbani)

For tech startups, government regulation can be more than just necessary evil to deal with. Regulation can be an opportunity for growth, partnerships and influencing future direction of regulatory regimes for new products and services. Take a wild leap of faith and read on.

Is marriage between regulation and start-ups set up for a crash landing? Let’s revisit the reasons why some might think so.

There are inherent conflicts in the operating speed and style of start-ups and Governments. Governments use regulation to protect the environment or consumers’ health, and to correct market failures. The process of government regulation is a long, formalized and yes, boring process.

On the other hand, startups are created with the purpose of challenging the status quo. Their new services and products are created where there is a need. Startups work fast and iterate often as they advance in their execution. Because of the need for speed, they have tended to take the approach of “going in first and dealing with regulations later”. As a result, many start-ups have experienced regulatory backlash:

  • Airbnb is facing tough restrictions to its operations in several cities, including Amsterdam where Airbnb guests cannot rent their premises for longer than 60 days a year.
  • Zenefits, a corporate benefits software startup, hit a significant regulatory snag in 2015 when media reports revealed that its insurance offerings were being sold by salespeople who were not licensed in the heavily regulated insurance industry.
  • In June 2016, new U.S. government regulations limited commercial drone service for deliveries and squashed Amazon’s drone delivery service plans in the country. Amazon took its plans to the U.K., which doesn’t have such strict regulations, and completed its first drone delivery in December 2016.

However, this is only one side of the story: Government regulation does provide opportunities for start-ups, and founders would be wise to pay attention to where this is happening.

Government regulation sometimes helps to introduce competition and foster innovation in a market, creating opportunities for start-ups. One way to do this is to regulate entities with a dominant position in the market. Start-ups can benefit from competitive market situation and push through a new product and service. Tech unicorns of today might forget that it was the breaking down of telecommunication giants in the US by government regulation, which brought about greater innovation in this space.

Regulating competitive practices is central to the role of the European Commission (EC), which has been systematically assessing impacts of mergers on innovation. Interesting evidence is emerging to illustrate the impact of mergers and consequently dominant position in a market on innovation. The research states that mergers, both horizontal and vertical, may reduce innovation by, inter-alia, decreasing budges allocated to R&D. The EC has been eying tech industry and dominant position by some of its key players in an attempt to spur competition. Its ruling against Google for abusing dominance in its market comes with an astonishing fine of 2.42 billion EUR. Google’s case might incentivize other large tech players to open up their respective market segments, resulting in more competition, innovation and opportunities for start-ups.

Regulating on data availability is another way that governments can create opportunities for building businesses. UK land registry publishes data on house transactions allowing Zoopla to create a model valuing all UK properties. Transport for London makes its data freely available spurring a plethora of apps to help with journey planning. The Competition and Markets Authority in UK is reshaping the energy market: Energy supply data on customers will soon have to be made available so that customers can be approached with a lower price offer from one of the alternative suppliers.

How to capitalize on regulation: Lessons for startups

I’ve argued that Government regulation is not always detrimental to start-ups. But how can start-ups find opportunities in highly-regulated sectors? If you are a start-up looking to enter a highly-regulated industry, here are three tips from the experiences of the energy sector, which I have worked in for many years:

  1. First, Government regulation can be a market opportunity but you need a transition plan in case regulation changes.

European governments decided few decades ago to give favourable treatment to electricity produced from renewable energy sources. The mechanism used was a feed-in-tariff, which provides renewable energy generators a remuneration above retail rates of electricity. What came about in Europe was a renewable energy boom and pressure to innovate among technology providers. The number of patents in renewable energy increased three times in Germany between 2007 and 2013. Three years in a row (2010 -2012) Germany added on annual basis more than 7 GW of solar installed capacity, which equals to half of Singapore’s total power generation capacity.

Until today, Several German companies stay technologically ahead of the game despite the competitive pressures from China and its cheaper products. Would the renewable energy revolution happen anyway without government regulatory support? It might but it would not happen as fast.

  1. Second, not all the governments regulate the same way and there is always a window of opportunity that can be used to pioneer your product or service with a friendly government regulator.

The case of hydraulic fracking represents the contrast between regulatory approaches in the US and the EU. The US regulates only when any issues of public concern arise, the EU takes preventive measures to avoid any possible negative public impacts.

Fracking involves injection of highly pressurized liquid in the rock to extract natural gas and petroleum from previously unreachable locations. The technology was pioneered and actively pursued in the US with relatively limited regulation until some of the negative impacts started emerging. Accidents and exposure to harmful substances used at fractured wells were raised as main concerns, which resulted in ban on hydraulic fracking in some states (Vermont and New York). While controversial in its environmental and public health impacts, hydraulic fracking is widely credited for the comeback of US energy independence based on its domestic production of natural gas and reduced role of the Middle East in global energy supply.

This contrasted with the EU approach, which has taken preventive rather than reactive approach and has banned the fracking before larger application by the industry. France banned fracking in 2011 and other countries in Europe introduced measures limiting fracking in subsequent years.

  1. Third, follow how government regulations are shaping their industry and/or market in country of their operation and worldwide. Regulatory changes might make incumbents more open to potential partnerships.

Finally, the German utilities sector offers an additional view on potential macro-consequences of government regulation. RWE (now Innogy) and EoN, two of Germany’s largest utilities are changing their business models completely as an unintended result of the government policies and regulations in German energy market. A mix of renewable energy targets and obligations to improve energy efficiency has forced both companies to restructure. The traditional energy assets remain with the legacy company while a new entity was created by both entities with a focus on services in decentralized energy and energy efficiency. The move puts incumbents on equal footing with number of young, agile startups, which are exploring the energy services space. Incumbents are keen to create partnerships to capture new market niche faster.

In summary, my advice for start-ups seeking to enter highly-regulated sectors is that Government regulation will have a profound impact on your startup, whether you want it or not: so make sure it works to your advantage.

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Thanks, Katarina!