Hello there!
We took a ‘thought break’ last week to contemplate ‘what the internet is now’ because the internet - and it’s increasingly entrenched walled gardens - is becoming a confusing, fractured place full of division and fandoms. It got even more confusing this weekend when the CEO of OpenAI, Sam Altman, got fired by his Board of Directors, then promptly got hired again by Microsoft, OpenAI’s lead investor - and now might be returning to OpenAI again? If that sounds like tech-bubble tea-time drama, it kinda is - but given OpenAI and Microsoft’s determination to upend the future of work via generative AI, it feels like this could have some unintended long-term effects on how AI increasingly creeps into the tools we already heavily rely on. The whole thing is also disturbingly opaque given the ‘AI-panic’ that’s recently gripped governments and business models alike.
But we also took a ‘thought break’ last week because our early November take on the state of Small Business was a little…pessimistic. We needed some metaphorical space to go pet a kitten, walk in a field, stare at a tree, make jam, etc. However, now we roll into the thick of November, those ever-static interest rates seem to be piling things up into an end-game of sorts - or at least an end-of-year-game. We hate to be proven right.
WeWork failed. Not entirely unexpected, given their business model was to be a commercial landlord that didn’t actually own any property. I’m not sure if you’ve ever been a tenant of a WeWork, but if you have then you’ll know it was all about having a sexy, sleek, shared office space with free kombucha and beer - instead of spending a fortune renting / building your own downtown perk-culture. And for a lot of millennial-led early stage businesses, it was a quick and easy way to break out of the tired office space trope while also freeing up cashflows with a side-order of retaining employees in a central location with branded snacks. In many ways WeWork was a victim of it’s own success - it certainly transitioned the businesses it touched into a ‘hot-desk’ cult mindset with pay-per-desk per-diems, which ultimately made home-working less of a cultural leap of fantasy for many progressive business owners. But WeWork’s failure is also the tip of an increasingly undervalued commercial real estate market which is still struggling with high rates of lending - and lower margin clients occupying less prime-location square footage.
High rates of lending are also putting pressure on the residential real estate market too. The CREA are reporting listings to its Multiple Listing Service are down 5.6%. For those not geeky on MLS stats, December is usually a hibernation period in Real Estate - because who wants random people trampling through their house at Xmas complaining about the colour of your kitchen cabinets? But this annual reoccurring freeze has now crept into October and November too. The cause? Of course it’s the cost of lending. Buyers pre-approved at, say, $500K at 3% saw their stress-tested lending amounts drop as the rates crept up - and in some areas, that drop in lending amounts is preventing purchasing entirely. There’s now a glut of buyers unable to afford the property they need, and a glut of sellers unable to move to their next property without the reality-shock of what their money can afford - especially if their incumbent mortgage rate is sitting at 2%, up for renewal and available rental rates are at an all time high.
Expensive lending causing expensive living is, by-proxy, putting more pressure on labour. Sobeys, Loblaws, Starbucks, General Motors, Ford - to name a few, are seeing staff strike over pay - simply because they can’t afford to shop in the places they work, even with the employee discount. Pay equity advocacy is also - relatedly - on the rise in BC, PEI and now Ontario, with new laws being enacted to force employers to disclose salary information on job postings.
"At a time when many companies are posting record profits, it is only fair they communicate transparently about how they pay workers," said David Piccini, Ontario's Minister of Labour, Immigration, Training and Skills Development
This is a well-trodden story of ‘record profits’ not reaching workers, which is an easy ‘out’ for federal policies that (for better or worse) are keeping the cost of living so high. For many Small Businesses though, ‘record profits’ are something of a cliched news headline that doesn’t align with any sort of reality on the ground. Revenues might be up if you’re lucky, but the cost of doing business - along with hangover pandemic debt - means that profits - and possibilities - are lower than ever.
The more we read about ‘record profits’ in press conferences from politicians, the more it becomes obvious that Small Business has a communication problem which no Chamber of Commerce is intent on tackling. While some larger corporations further up the supply chain are riding a wave of windfalls, many Small Businesses are struggling to communicate that the reality of increased revenues not equating to increased profits is preventing the sustainability of their day-to-day operations - or to put it another way - is forcing them to do more with less, or, inevitably, increase their prices to simply cover their base.
What the current labour movement - and political movement - is doing is forcing communication from those businesses with rocket-ship financials to hide. As they should! But for many Small Businesses with nothing to hide but the stark reality of spiralling costs, communication on margins and prices - while inevitably complex - is becoming an increasingly essential step in doing basic business.
As customers strain from bloated costs - and labour struggles to make ends meet at the dinner table - communication might be the only way to get everyone facing the facts together and pushing on through to lower lending costs in the coming year.
Maybe it’s time to talk.
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AGI: Anyone’s Guess Indeed
This week Jay Dort has been checking out our entirely rational fears about our robots overlords.
Sam Altman has been ousted as CEO of OpenAI and there’s a lot of speculation going on as to what could’ve prompted such a dramatic shift. Altman was officially let go for failure to be “consistently candid in his communications with the board,” but the leading speculation is that OpenAI’s board generally disagreed with his bold pace of experimentation and production.
OpenAI is essentially split into two wings –they have a non-profit (OpenAI INC) and a capped-profit division (OpenAI Global LLC), the non-profit OpenAI INC has a lofty mandate to adapt AI technologies for the good of humanity while ensuring that its intelligence doesn’t become the kind of intelligent that solves world hunger by forcing us to eat gruel and live underground. OpenAI Global is focused on the practical side of things, mainly GPT-4 and a move towards AGI (Artificial General Intelligence), AGI is like AI that functions less like a hyper-intelligent parrot, and more like a hyper-intelligent… well, that’s the hard part, nobody really knows.
AGI has been written and dreamed about for decades, Asimov made an entire career around it, but the truth is that we have no idea how a non-human super intelligence would behave, and this is an existential problem that OpenAI INC might be willing to jackknife its trajectory over.
There’s a huge movement to put a pause (or a complete stop) on AI tech until we can figure out how to ensure that we can keep it from becoming a global malevolent dictator with a penchant for thermal paste and silicon, but creating a kill-switch for something potentially much smarter than us is as complicated as it sounds.
Detractors of the AI safety movement claim that limiting progress just because “it sounds scary” is just the kind of regressive thinking that keeps us from having a fully automated luxury life where human and machine can coexist in peace and harmony.
Microsoft has been circling OpenAI like a vulture waiting to see what it can scavenge, Microsoft has investments totalling 13 billion in OpenAI, and has proclaimed that it hired Altman and the OpenAI President immediately after they were ousted. When one of the world’s largest corporations makes a snap decision, you know they are really putting their momentum on AI, and Altman in general.
While trillion dollar companies fight over scraps, the rest of us are largely trepidatious. Polls indicate that 72% of Americans are in favour of pumping the brakes, and that 82% don't trust big tech companies to handle the regulation of AI.
When 86% of the population feel that there’s potential for a catastrophic event, when is it necessary for The Powers That Be to sway to the tides?