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    Indiana Tests if the Heartland Can Transform Into a Chip Hub

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    Over the past 14 months, Indiana began converting 10,000 acres of corn and bean fields into an innovation park. State leaders met with the chief executives of semiconductor giants in South Korea, Taiwan and Japan. And they hosted top Biden administration officials to show off a $100 million expansion of chip research and development facilities at a local university.The actions were driven by one main goal: to turn Indiana into a microchip manufacturing and research hub, almost from scratch.“We’ve never done anything at this scale,” said Brad Chambers, who was Indiana’s commerce secretary in charge of economic development. “It’s a multibillion-dollar commitment by the state to be ready for the transitions that are happening in our global economy.”“We’ve never done anything at this scale,” said Brad Chambers, Indiana’s commerce secretary.Kaiti Sullivan for The New York TimesIndiana’s moves are a test of the Biden administration’s efforts to stimulate regional economies through the $52 billion CHIPS and Science Act, a landmark package of funding that is planned to begin going out the door in the next few months. The program is intended to bolster domestic manufacturing and research of semiconductors, which act as the brains of computers and other products and have become central to the U.S. battle with China for tech primacy.The Biden administration has promised that the CHIPS Act will seed high-paying tech jobs and start-ups even in places with little foundation in the tech industry. In a speech in May last year, Commerce Secretary Gina Raimondo, who oversees the chips program, said she was looking at how the program would help “different places in the heartland of America.”She added, “I think we will really unleash an unbelievable torrent of entrepreneurship and capital opportunity.”Gina Raimondo, the U.S. secretary of commerce, is overseeing the CHIPS Act program. Jared Soares for The New York TimesThat makes Indiana a prime case study for whether the administration’s efforts will pan out. Unlike Arizona and Texas, which have long had chip-making plants, Indiana has little experience with the complicated manufacturing processes underlying the components, beyond electric vehicle battery manufacturing and some defense technology projects that involve semiconductors.Indiana now wants to catch up to other places that have landed big chip manufacturing plants. The push is supported by Senator Todd Young, a Republican from Indiana, who was a co-author on the CHIPS Act and has been a leading voice on increasing funds for tech hubs. Companies and universities in Indiana have applied for multiple CHIPS Act grants, with the aim of winning awards not only for chip manufacturing but also for research and development.Some economists said the Biden administration’s goals of turning farmland into advanced chip factories might be overly ambitious. It took decades for Silicon Valley and the Boston tech corridor to thrive. Those regions succeeded because of their strong academic research universities, big anchor companies, skilled workers and investors.Many other areas don’t have that combination of assets. Indiana has for decades faced a brain drain among some of its more educated young people who flock to larger cities for work, according to the Indiana Chamber of Commerce. Some industrial policy proponents see the investments as a way to reverse that exodus, as well as a broader trend toward deindustrialization that hollowed out communities in the Rust Belt.But it’s unclear whether the program can achieve such ambitious goals — or whether the Biden administration will judge it to be more effective to spread out investments around the country or concentrate them in a few key hubs.“Many pieces have to come together,” said Mark Muro, a senior fellow at the Brookings Institution. He added that the federal government’s plan to initially put $500 million into tech hubs was too small and estimated it would take $100 billion in government aid to create 10 sustainable tech hubs.Indiana does have some advantages. The state has ample land and water — which are necessary for large chip factories that use water to cool equipment and rinse silicon wafers — and it has relatively stable weather for the highly sensitive production process. It also has Purdue University, with an engineering school that has promised to turn out the technicians and researchers needed for chip production.Yet the state faces stiff competition. In January 2022, Indiana lost a bidding war to Ohio over plans by Intel, the big U.S. chip-maker, to build two factories valued at $20 billion.“We learned a lot of lessons,” Mr. Chambers said about the failure. The biggest, he said, was to have a more attractive package of land, infrastructure and work force programs ready to offer big chip companies.A year later, Indiana won a $1.8 billion investment from SkyWater, a Minneapolis-based chip-maker, to build a factory with 750 jobs adjacent to Purdue’s campus.SkyWater, a Minneapolis-based chip maker, plans to invest $1.8 billion in a factory in Indiana. SkyWaterIndiana beat out four other states vying for SkyWater’s chip facility.SkyWaterState leaders acknowledge that any tech transformation could take years, especially if there is no anchor plant by even larger chip manufacturers such as TSMC, the world’s biggest maker of cutting-edge chips.Mr. Young said he and other state leaders were in talks with big chip makers for a contract that would compare to the $20 billion that Intel committed to Ohio. But “all net new job creation in my lifetime has been created by new firms and young firms,” he said.Indiana’s chip-making metamorphosis is now centered on a tech park, LEAP Innovation District, in the town of Lebanon near Interstate 65, which connects Indianapolis and Purdue in West Lafayette. The town is surrounded by 15,000 square miles of corn and bean farms.The park began taking shape along with the CHIPS Act. In 2019, Mr. Young was a co-author of the Endless Frontier Act with Senator Chuck Schumer, a Democrat of New York and then the Senate minority leader. The bill was the precursor to the CHIPS Act.As the bill wound through Congress, Mr. Young was in regular contact with Eric Holcomb, Indiana’s governor, and Mitch Daniels, then Purdue’s president, on details of the proposal. Mr. Young said Indiana’s manufacturing roots would be its asset, if the state’s factory sector could transition to making advanced chips.“I realized that Indiana and, more broadly, the heartland stood to disproportionately benefit from the investments that we would be making,” he said in an interview last month.Mr. Holcomb and Mr. Chambers then created a plan for a tech manufacturing park. Within months, they began buying corn and bean farms in Lebanon for what became the LEAP Innovation District.In September, Ms. Raimondo and Secretary of State Antony Blinken toured Purdue University’s clean rooms, seen here, for chip research.Kaiti Sullivan for The New York TimesPurdue is also working on a $100 million expansion of semiconductor research and development.Kaiti Sullivan for The New York TimesIn May 2022, Mr. Holcomb unveiled LEAP and began installing new water and power lines and a new road there. Mr. Holcomb, Mr. Chambers and Mr. Young also traveled to more than a dozen countries to meet with the executives of chip companies like SK Hynix and TSMC. They offered cheap rent in the LEAP district, tax incentives, access to labs and researchers at Purdue, and training programs at the local Ivy Tech Community College.Some of the work paid off. When Indiana beat out four other states for SkyWater’s $1.8 billion chip facility, the company said it was impressed by the coordination between state leaders and Purdue’s new president, Mung Chiang, who launched the nation’s first semiconductor degree programs to nurture workers for chip makers.Mung Chiang, Purdue University’s president, has rolled out a semiconductor degree program to nurture chip workers. Kaiti Sullivan for The New York TimesIn September, Mr. Chiang invited Ms. Raimondo and Secretary of State Antony J. Blinken to tour Purdue’s clean rooms for chip research and to see plans for a $100 million expansion of semiconductor research and development, including 50 new faculty to work on advanced chip science.“I think you have all the ingredients,” Ms. Raimondo said in a discussion with Mr. Holcomb and Mr. Chiang during the visit. Indiana officials now await word on how much CHIPS Act funding they may get. Some early results from the LEAP district initiative offer a mixed picture of where things might go.In May 2022, the park landed its first tenant — Eli Lilly, the pharmaceutical company, not a chip maker. More

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    Tech Firms Once Powered New York’s Economy. Now They’re Scaling Back.

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    For much of the last two decades, including during the pandemic, technology companies were a bright spot in New York’s economy, adding thousands of high-paying jobs and expanding into millions of square feet of office space.Their growth buoyed tax revenue, set up New York as a credible rival to the San Francisco Bay Area — and provided jobs that helped the city absorb layoffs in other sectors during the pandemic and the 2008 financial crisis.Now, the technology industry is pulling back hard, clouding the city’s economic future.Facing many business challenges, large technology companies have laid off more than 386,000 workers nationwide since early 2022, according to layoffs.fyi, which tracks the tech industry. And they have pulled out of millions of square feet of office space because of those job cuts and the shift to working from home.That retrenchment has hurt lots of tech hubs, and San Francisco has been hit the hardest with an office vacancy rate of 25.6 percent, according to Newmark Research.New York is doing better than San Francisco — Manhattan has a vacancy rate of 13.5 percent — but it can no longer count on the technology industry for growth. More than one-third of the roughly 22 million square feet of office space available for sublet in Manhattan comes from technology, advertising and media companies, according to Newmark.Consider Meta, which owns Facebook and Instagram. It is now unloading a big chunk of the more than 2.2 million square feet of office space it gobbled up in Manhattan in recent years after laying off around 1,700 employees this year, or a quarter of its New York State work force. The company has opted not to renew leases covering 250,000 square feet in Hudson Yards and for 200,000 square feet on Park Avenue South.Spotify is trying to sublet five of the 16 floors it leased six years ago in 4 World Trade Center, and Roku is offering a quarter of the 240,000 square feet it had taken in Times Square just last year. Twitter, Microsoft and other technology companies are also trying to sublease unwanted space.“The tech companies were such a big part of the real estate landscape during the last five years,” said Ruth Colp-Haber, the chief executive of Wharton Property Advisors, a real estate brokerage. “And now that they seem to be cutting back, the question is: Who is going to replace them?”Ms. Colp-Haber said it could take months for bigger spaces or entire floors of buildings to be sublet. The large amount of space available for sublet is also driving down the rents that landlords are able to get on new leases.“They are going to undercut every landlord out there in terms of pricing, and they have really nice spaces that are already all built out,” she said, referring to the tech companies.The tech sector has been a driver of New York’s economy since the late-90s dot-com boom helped to establish “Silicon Alley” south of Midtown. Then, after the financial crisis, the expansion of companies like Google supported the economy when banks, insurers and other financial firms were in retreat.Spotify is trying to sublet five of the 16 floors it leased six years ago in 4 World Trade Center, right.George Etheredge for The New York TimesSmall and large tech companies added 43,430 jobs in New York in the five years through the end of 2021, a 33 percent gain, according to the state comptroller. And those jobs paid very well: The average tech salary in 2021 was $228,620, nearly double the average private-sector salary in the city, according to the comptroller.The growth in jobs fueled demand for commercial space, and tech, advertising and media companies accounted for nearly a quarter of the new office leases signed in Manhattan in recent years, according to Newmark.Microsoft and Spotify declined to comment about their decision to sublet space. Twitter and Roku did not respond to requests for comment. Meta said in a statement that it was “committed to distributed work” and was “continuously refining” its approach.A few big tech companies are still expanding in New York.Google plans to open St. John’s Terminal, a large office near the Hudson River in Lower Manhattan, early next year. Including the terminal, Google will own or lease around seven million square feet of office space in New York, up from roughly six million today, according to a company representative. (Google leases more than one million square feet of that space to other tenants.) The company has more than 12,000 employees in the New York area, up from over 10,000 in 2019.Amazon, which in 2019 canceled plans to build a large campus in Queens after local politicians objected to the incentives offered to the company, has nevertheless added 200,000 square feet of office space in New York, Jersey City and Newark since 2019. The company will have added roughly 550,000 square feet of office space later this summer, when it opens 424 Fifth Avenue, the former Lord & Taylor department store, which it bought in 2020 for $1.15 billion.“New York provides a fantastic, diverse talent pool, and we’re proud of the thousands of jobs we’ve created in the city and state over the past 10 years across both our corporate and operations functions,” Holly Sullivan, vice president of worldwide economic development at Amazon, said in a statement.And though many tech companies continue to let employees work from home for much of the week, they are also trying to woo workers back to the office, which could help reduce the need to sublet space.Salesforce, a software company that has offices in a tower next to Bryant Park, said it was not considering subletting its New York space.“Currently I’m facing the opposite problem in the tower in New York,” said Relina Bulchandani, head of real estate for Salesforce. “There has been a concerted effort to continue to grow the right roles in New York because we have a very high customer base in New York.”New York is and will remain a vibrant home for technology companies, industry representatives said.“I have not heard of a single tech company leaving, and that matters,” said Julie Samuels, the president of TECH:NYC, an industry association. “If anything, we are seeing less of a contraction in New York among tech leases than they are seeing in other large cities.”Google plans to open St. John’s Terminal, right, a new campus near the Hudson River in Lower Manhattan, early next year.Tony Cenicola/The New York TimesFred Wilson, a partner at Union Square Ventures, said tech executives now felt less of a need to be in Silicon Valley, a shift that he said had benefited New York. “We have more company C.E.O.s and more company founders in New York today than we did before the pandemic,” Mr. Wilson said, referring to the companies his firm has invested in.David Falk, the president of the New York tristate region for Newmark, said, “We are right now working on several transactions with smaller, young tech firms that are looking to take sublet space.”Many firms are still pulling back, however.In 2017 and 2019, Spotify, which is based in Stockholm, signed leases totaling more than 564,000 square feet of space at 4 World Trade Center, becoming one of the largest tenants there. It soon had a space with all the accouterments you would expect at a tech firm — brightly colored flexible work areas, eye-popping views and Ping-Pong tables.But in January, Spotify said it was laying off 600 people, or about 6 percent of its global work force. The company, which allows employees to choose between working fully remotely or on a hybrid schedule, is also reducing its office space, putting five floors up for sublet.“On days when I’m by myself, I end up sitting in a meeting room all day for focus time,” said Dayna Tran, a Spotify employee who regularly works at the downtown office, adding that the employees who come in motivate themselves and create community by collaborating on an office playlist. More

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    Biden Administration Unveils Tougher Guidelines on Mergers

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    The proposed road map for regulatory reviews, last updated in 2020, includes a focus on tech platforms for the first time.The Biden administration’s top antitrust officials unveiled tougher guidelines against tech mergers on Wednesday, signaling their deepening scrutiny of the industry despite recent court losses in their attempts to block tech deal-making.Lina Khan, the chair of the Federal Trade Commission, and Jonathan Kanter, the top antitrust official at the Department of Justice, released draft guidelines for merger reviews that for the first time include a focus on digital platforms and how dominant companies can use their scale to harm future rivals.The guidelines — which generally provide a road map for whether regulators block or approve deals — show the Biden administration’s commitment to an aggressive antitrust agenda aimed at curtailing the power of companies like Google, Meta, Apple and Amazon.The guidelines, which aren’t enforced by law, follow a losing streak in the courts. A ruling last week prevented the F.T.C. from delaying the closing of Microsoft’s $69 billion acquisition of the video game maker Activision Blizzard. In January, a court sided against the F.T.C. in its lawsuit to stop Meta’s purchase of Within, a virtual reality app maker.The forceful antitrust posture is a pillar of President Biden’s agenda to stamp out economic inequality and encourage greater competition. “Promoting competition to lower costs and support small businesses and entrepreneurs is a central part of Bidenomics,” a senior administration official said in a call with reporters.The new guidelines would apply to all deals across the economy. But they highlight obstacles to competition among digital platforms, including how an acquisition of a nascent rival may be intended to kill off future competition. Such deals, known as killer acquisitions, are prevalent in the tech industry and at the heart of an F.T.C. antitrust lawsuit against Meta, which owns Facebook, Instagram and WhatsApp. The agency has accused Meta of buying Instagram in 2012 and WhatsApp in 2014 to prevent future competition.The F.T.C. and Justice Department also said they would look at how companies used their scale, including their large number of users, to ward off competition. These so-called network effects have helped companies like Meta and Google maintain their dominance in social media and internet search.The agencies also laid out ways in which mergers involving “platform” businesses, the model used by Amazon’s online store and Apple’s App Store, could harm competition. An acquisition could hurt competition by giving a platform control over a significant stream of data, the draft guidelines said, echoing concerns that tech giants use their vast troves of information to squash rivals.“As markets and commercial realities change, it is vital that we adapt our law enforcement tools to keep pace so that we can protect competition in a manner that reflects the intricacies of our modern economy,” Mr. Kanter said in a statement. “Simply put, competition today looks different than it did 50 — or even 15 — years ago.”While they lack the force of law, the guidelines can influence how judges look at challenges to mergers and acquisitions. The effort to update the guidelines has been closely watched by businesses and corporate lawyers that navigate regulatory scrutiny of megadeals.The guidelines were last updated in 2020. In 2021, Mr. Biden ordered the Justice Department and the F.T.C. to update them again as part of a broader effort to improve competition across the economy. The agencies will take public comment on the proposals and could make amendments before final guidelines are adopted.“These guidelines contain critical updates while ensuring fidelity to the mandate Congress has given us and the legal precedent on the books,” Ms. Khan said in a statement.While the F.T.C. experienced the recent court losses, it has forced some companies, including the chip-maker Nvidia and the aerospace giant Lockheed Martin, to abandon some large deals. The Justice Department blocked the publisher Penguin Random House from buying Simon & Schuster, using an unusual argument that the merger would harm authors who sold the publication rights to their books. More

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    As Businesses Clamor for Workplace A.I., Tech Companies Rush to Provide It

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    Amazon, Box, Salesforce, Oracle and others have recently rolled out A.I.-related products to help workplaces become more efficient and productive.Earlier this year, Mark Austin, the vice president of data science at AT&T, noticed that some of the company’s developers had started using the ChatGPT chatbot at work. When the developers got stuck, they asked ChatGPT to explain, fix or hone their code.It seemed to be a game-changer, Mr. Austin said. But since ChatGPT is a publicly available tool, he wondered if it was secure for businesses to use.So in January, AT&T tried a product from Microsoft called Azure OpenAI Services that lets businesses build their own A.I.-powered chatbots. AT&T used it to create a proprietary A.I. assistant, Ask AT&T, which helps its developers automate their coding process. AT&T’s customer service representatives also began using the chatbot to help summarize their calls, among other tasks.“Once they realize what it can do, they love it,” Mr. Austin said. Forms that once took hours to complete needed only two minutes with Ask AT&T so employees could focus on more complicated tasks, he said, and developers who used the chatbot increased their productivity by 20 to 50 percent.AT&T is one of many businesses eager to find ways to tap the power of generative artificial intelligence, the technology that powers chatbots and that has gripped Silicon Valley with excitement in recent months. Generative A.I. can produce its own text, photos and video in response to prompts, capabilities that can help automate tasks such as taking meeting minutes and cut down on paperwork.To meet this new demand, tech companies are racing to introduce products for businesses that incorporate generative A.I. Over the past three months, Amazon, Box and Cisco have unveiled plans for generative A.I.-powered products that produce code, analyze documents and summarize meetings. Salesforce also recently rolled out generative A.I. products used in sales, marketing and its Slack messaging service, while Oracle announced a new A.I. feature for human resources teams.These companies are also investing more in A.I. development. In May, Oracle and Salesforce Ventures, the venture capital arm of Salesforce, invested in Cohere, a Toronto start-up focused on generative A.I. for business use. Oracle is also reselling Cohere’s technology.Salesforce recently rolled out generative A.I. products used in sales, marketing and its Slack messaging service.Jeenah Moon for The New York Times“I think this is a complete breakthrough in enterprise software,” Aaron Levie, chief executive of Box, said of generative A.I. He called it “this incredibly exciting opportunity where, for the first time ever, you can actually start to understand what’s inside of your data in a way that wasn’t possible before.”Many of these tech companies are following Microsoft, which has invested $13 billion in OpenAI, the maker of ChatGPT. In January, Microsoft made Azure OpenAI Service available to customers, who can then access OpenAI’s technology to build their own versions of ChatGPT. As of May, the service had 4,500 customers, said John Montgomery, a Microsoft corporate vice president.Aaron Levie, chief executive of Box, said generative A.I. creates “a complete breakthrough in enterprise software.”Michael Short/BloombergFor the most part, tech companies are now rolling out four kinds of generative A.I. products for businesses: features and services that generate code for software engineers, create new content such as sales emails and product descriptions for marketing teams, search company data to answer employee questions, and summarize meeting notes and lengthy documents.“It is going to be a tool that is used by people to accomplish what they are already doing,” said Bern Elliot, a vice president and analyst at the I.T. research and consulting firm Gartner.But using generative A.I. in workplaces has risks. Chatbots can produce inaccuracies and misinformation, provide inappropriate responses and leak data. A.I. remains largely unregulated.In response to these issues, tech companies have taken some steps. To prevent data leakage and to enhance security, some have engineered generative A.I. products so they do not keep a customer’s data.When Salesforce last month introduced AI Cloud, a service with nine generative A.I.-powered products for businesses, the company included a “trust layer” to help mask sensitive corporate information to stop leaks and promised that what users typed into these products would not be used to retrain the underlying A.I. model.Similarly, Oracle said that customer data would be kept in a secure environment while training its A.I. model and added that it would not be able to see the information.Salesforce offers AI Cloud starting at $360,000 annually, with the cost rising depending on the amount of usage. Microsoft charges for Azure OpenAI Service based on the version of OpenAI technology that a customer chooses, as well as the amount of usage.For now, generative A.I. is used mainly in workplace scenarios that carry low risks — instead of highly regulated industries — with a human in the loop, said Beena Ammanath, the executive director of the Deloitte A.I. Institute, a research center of the consulting firm. A recent Gartner survey of 43 companies found that over half the respondents have no internal policy on generative A.I.“It is not just about being able to use these new tools efficiently, but it is also about preparing your work force for the new kinds of work that might evolve,” Ms. Ammanath said. “There is going to be new skills needed.”Panasonic Connect began using Microsoft’s Azure OpenAI Service to make its own chatbot in February.Panasonic ConnectPanasonic Connect, part of the Japanese electronics company Panasonic, began using Microsoft’s Azure OpenAI Service to make its own chatbot in February. Today, its employees ask the chatbot 5,000 questions a day about everything from drafting emails to writing code.While Panasonic Connect had expected its engineers to be the main users of the chatbot, other departments — such as legal, accounting and quality assurance — also turned to it to help summarize legal documents, brainstorm solutions to improve product quality and other tasks, said Judah Reynolds, Panasonic Connect’s marketing and communications chief.“Everyone started using it in ways that we didn’t even foresee ourselves,” he said. “So people are really taking advantage of it.” More

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    Facial Recognition Spreads as Tool to Fight Shoplifting

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    Simon Mackenzie, a security officer at the discount retailer QD Stores outside London, was short of breath. He had just chased after three shoplifters who had taken off with several packages of laundry soap. Before the police arrived, he sat at a back-room desk to do something important: Capture the culprits’ faces.On an aging desktop computer, he pulled up security camera footage, pausing to zoom in and save a photo of each thief. He then logged in to a facial recognition program, Facewatch, which his store uses to identify shoplifters. The next time those people enter any shop within a few miles that uses Facewatch, store staff will receive an alert.“It’s like having somebody with you saying, ‘That person you bagged last week just came back in,’” Mr. Mackenzie said.Use of facial recognition technology by the police has been heavily scrutinized in recent years, but its application by private businesses has received less attention. Now, as the technology improves and its cost falls, the systems are reaching further into people’s lives. No longer just the purview of government agencies, facial recognition is increasingly being deployed to identify shoplifters, problematic customers and legal adversaries.Facewatch, a British company, is used by retailers across the country frustrated by petty crime. For as little as 250 pounds a month, or roughly $320, Facewatch offers access to a customized watchlist that stores near one another share. When Facewatch spots a flagged face, an alert is sent to a smartphone at the shop, where employees decide whether to keep a close eye on the person or ask the person to leave.Mr. Mackenzie adds one or two new faces every week, he said, mainly people who steal diapers, groceries, pet supplies and other low-cost goods. He said their economic hardship made him sympathetic, but that the number of thefts had gotten so out of hand that facial recognition was needed. Usually at least once a day, Facewatch alerts him that somebody on the watchlist has entered the store.Mr. Mackenzie adds one or two new faces a week to the Facewatch watch list that stores in the area share.Suzie Howell for The New York TimesA sign at a supermarket that uses Facewatch in Bristol, England. Suzie Howell for The New York TimesFacial recognition technology is proliferating as Western countries grapple with advances brought on by artificial intelligence. The European Union is drafting rules that would ban many of facial recognition’s uses, while Eric Adams, the mayor of New York City, has encouraged retailers to try the technology to fight crime. MSG Entertainment, the owner of Madison Square Garden and Radio City Music Hall, has used automated facial recognition to refuse entry to lawyers whose firms have sued the company.Among democratic nations, Britain is at the forefront of using live facial recognition, with courts and regulators signing off on its use. The police in London and Cardiff are experimenting with the technology to identify wanted criminals as they walk down the street. In May, it was used to scan the crowds at the coronation of King Charles III.But the use by retailers has drawn criticism as a disproportionate solution for minor crimes. Individuals have little way of knowing they are on the watchlist or how to appeal. In a legal complaint last year, Big Brother Watch, a civil society group, called it “Orwellian in the extreme.”Fraser Sampson, Britain’s biometrics and surveillance camera commissioner, who advises the government on policy, said there was “a nervousness and a hesitancy” around facial recognition technology because of privacy concerns and poorly performing algorithms in the past.“But I think in terms of speed, scale, accuracy and cost, facial recognition technology can in some areas, you know, literally be a game changer,” he said. “That means its arrival and deployment is probably inevitable. It’s just a case of when.”‘You can’t expect the police to come’Simon Gordon, the owner of Gordon’s Wine Bar in London, founded Facewatch in 2010. As a business owner, “you’ve got to help yourself,” he said. Suzie Howell for The New York TimesFacewatch was founded in 2010 by Simon Gordon, the owner of a popular 19th-century wine bar in central London known for its cellarlike interior and popularity among pickpockets.At the time, Mr. Gordon hired software developers to create an online tool to share security camera footage with the authorities, hoping it would save the police time filing incident reports and result in more arrests.There was limited interest, but Mr. Gordon’s fascination with security technology was piqued. He followed facial recognition developments and had the idea for a watchlist that retailers could share and contribute to. It was like the photos of shoplifters that stores keep next to the register, but supercharged into a collective database to identify bad guys in real time.By 2018, Mr. Gordon felt the technology was ready for commercial use.“You’ve got to help yourself,” he said in an interview. “You can’t expect the police to come.”Facewatch, which licenses facial recognition software made by Real Networks and Amazon, is now inside nearly 400 stores across Britain. Trained on millions of pictures and videos, the systems read the biometric information of a face as the person walks into a shop and check it against a database of flagged people.Facewatch’s watchlist is constantly growing as stores upload photos of shoplifters and problematic customers. Once added, a person remains there for a year before being deleted.‘Mistakes are rare but do happen’Every time Facewatch’s system identifies a shoplifter, a notification goes to a person who passed a test to be a “super recognizer” — someone with a special talent for remembering faces. Within seconds, the super recognizer must confirm the match against the Facewatch database before an alert is sent.Facewatch is used in about 400 British stores.Suzie Howell for The New York TimesBut while the company has created policies to prevent misidentification and other errors, mistakes happen.In October, a woman buying milk in a supermarket in Bristol, England, was confronted by an employee and ordered to leave. She was told that Facewatch had flagged her as a barred shoplifter.The woman, who asked that her name be withheld because of privacy concerns and whose story was corroborated by materials provided by her lawyer and Facewatch, said there must have been a mistake. When she contacted Facewatch a few days later, the company apologized, saying it was a case of mistaken identity.After the woman threatened legal action, Facewatch dug into its records. It found that the woman had been added to the watchlist because of an incident 10 months earlier involving £20 of merchandise, about $25. The system “worked perfectly,” Facewatch said.But while the technology had correctly identified the woman, it did not leave much room for human discretion. Neither Facewatch nor the store where the incident occurred contacted her to let her know that she was on the watchlist and to ask what had happened.The woman said she did not recall the incident and had never shoplifted. She said she may have walked out after not realizing that her debit card payment failed to go through at a self-checkout kiosk.Madeleine Stone, the legal and policy officer for Big Brother Watch, said Facewatch was “normalizing airport-style security checks for everyday activities like buying a pint of milk.”Mr. Gordon declined to comment on the incident in Bristol.In general, he said, “mistakes are rare but do happen.” He added, “If this occurs, we acknowledge our mistake, apologize, delete any relevant data to prevent reoccurrence and offer proportionate compensation.”Approved by the privacy officeA woman said Facewatch had misidentified her at the Bristol market. Facewatch said the system had ”worked perfectly.”Suzie Howell for The New York TimesCivil liberties groups have raised concerns about Facewatch and suggested that its deployment to prevent petty crime might be illegal under British privacy law, which requires that biometric technologies have a “substantial public interest.”The U.K. Information Commissioner’s Office, the privacy regulator, conducted a yearlong investigation into Facewatch. The office concluded in March that Facewatch’s system was permissible under the law, but only after the company made changes to how it operated.Stephen Bonner, the office’s deputy commissioner for regulatory supervision, said in an interview that an investigation had led Facewatch to change its policies: It would put more signage in stores, share among stores only information about serious and violent offenders and send out alerts only about repeat offenders. That means people will not be put on the watchlist after a single minor offense, as happened to the woman in Bristol.“That reduces the amount of personal data that’s held, reduces the chances of individuals being unfairly added to this kind of list and makes it more likely to be accurate,” Mr. Bonner said. The technology, he said, is “not dissimilar to having just very good security guards.”Liam Ardern, the operations manager for Lawrence Hunt, which owns 23 Spar convenience stores that use Facewatch, estimates the technology has saved the company more than £50,000 since 2020.He called the privacy risks of facial recognition overblown. The only example of misidentification that he recalled was when a man was confused for his identical twin, who had shoplifted. Critics overlook that stores like his operate on thin profit margins, he said.“It’s easy for them to say, ‘No, it’s against human rights,’” Mr. Ardern said. If shoplifting isn’t reduced, he said, his shops will have to raise prices or cut staff. More

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    Generative A.I. Can Add $4.4 Trillion in Value to Global Economy, Study Says

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    The report from McKinsey comes as a debate rages over the potential economic effects of A.I.-powered chatbots on labor and the economy.“Generative artificial intelligence” is set to add up to $4.4 trillion of value to the global economy annually, according to a report from McKinsey Global Institute, in what is one of the rosier predictions about the economic effects of the rapidly evolving technology.Generative A.I., which includes chatbots such as ChatGPT that can generate text in response to prompts, can potentially boost productivity by saving 60 to 70 percent of workers’ time through automation of their work, according to the 68-page report, which was published early Wednesday. Half of all work will be automated between 2030 and 2060, the report said.McKinsey had previously predicted that A.I. would automate half of all work between 2035 and 2075, but the power of generative A.I. tools — which exploded onto the tech scene late last year — accelerated the company’s forecast.“Generative A.I. has the potential to change the anatomy of work, augmenting the capabilities of individual workers by automating some of their individual activities,” the report said.McKinsey’s report is one of the few so far to quantify the long-term impact of generative A.I. on the economy. The report arrives as Silicon Valley has been gripped by a fervor over generative A.I. tools like ChatGPT and Google’s Bard, with tech companies and venture capitalists investing billions of dollars in the technology.The tools — some of which can also generate images and video, and carry on a conversation — have started a debate over how they will affect jobs and the world economy. Some experts have predicted that the A.I. will displace people from their work, while others have said the tools can augment individual productivity.Last week, Goldman Sachs released a report warning that A.I. could lead to worker disruption and that some companies would benefit more from the technology than others. In April, a Stanford researcher and researchers at the Massachusetts Institute of Technology released a study showing that generative A.I. could boost the productivity of inexperienced call center operators by 35 percent.Any conclusions about the technology’s effects may be premature. David Autor, a professor of economics at M.I.T. cautioned that generative A.I. was “not going to be as miraculous as people claim.”“We are really, really in the early stage,” he added.For the most part, economic studies of generative A.I. do not take into account other risks from the technology, such as whether it might spread misinformation and eventually escape the realm of human control.The vast majority of generative A.I.’s economic value will most likely come from helping workers automate tasks in customer operations, sales, software engineering, and research and development, according to McKinsey’s report. Generative A.I. can create “superpowers” for high-skilled workers, said Lareina Yee, a McKinsey partner and an author of the report, because the technology can summarize and edit content.“The most profound change we are going to see is the change to people, and that’s going to require far more innovation and leadership than the technology,” she said.The report also outlined challenges that industry leaders and regulators would need to address with A.I., including concerns that the content generated by the tools can be misleading and inaccurate.Ms. Yee acknowledged that the report was making prognostications about A.I.’s effects, but that “if you could capture even a third” of what the technology’s potential is, “it is pretty remarkable over the next five to 10 years.” More

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    The AI Boom Is Pulling Tech Entrepreneurs Back to San Francisco

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    Doug Fulop’s and Jessie Fischer’s lives in Bend, Ore., were idyllic. The couple moved there last year, working remotely in a 2,400-square-foot house surrounded by trees, with easy access to skiing, mountain biking and breweries. It was an upgrade from their former apartments in San Francisco, where a stranger once entered Mr. Fulop’s home after his lock didn’t properly latch.But the pair of tech entrepreneurs are now on their way back to the Bay Area, driven by a key development: the artificial intelligence boom.Mr. Fulop and Ms. Fischer are both starting companies that use A.I. technology and are looking for co-founders. They tried to make it work in Bend, but after too many eight-hour drives to San Francisco for hackathons, networking events and meetings, they decided to move back when their lease ends in August.“The A.I. boom has brought the energy back into the Bay that was lost during Covid,” said Mr. Fulop, 34.The couple are part of a growing group of boomerang entrepreneurs who see opportunity in San Francisco’s predicted demise. The tech industry is more than a year into its worst slump in a decade, with layoffs and a glut of empty offices. The pandemic also spurred a wave of migration to places with lower taxes, fewer Covid restrictions, safer streets and more space. And tech workers have been among the most vocal groups to criticize the city for its worsening problems with drugs, housing and crime.But such busts are almost always followed by another boom. And with the latest wave of A.I. technology — known as generative A.I., which produces text, images and video in response to prompts — there’s too much at stake to miss out.Investors have already announced $10.7 billion in funding for generative A.I. start-ups within the first three months of this year, a thirteenfold increase from a year earlier, according to PitchBook, which tracks start-ups. Tens of thousands of tech workers recently laid off by big tech companies are now eager to join the next big thing. On top of that, much of the A.I. technology is open source, meaning companies share their work and allow anyone to build on it, which encourages a sense of community.“Hacker houses,” where people create start-ups, are springing up in San Francisco’s Hayes Valley neighborhood, known as “Cerebral Valley” because it is the center of the A.I. scene. And every night someone is hosting a hackathon, meet-up or demo focused on the technology.In March, days after the prominent start-up OpenAI unveiled a new version of its A.I. technology, an “emergency hackathon” organized by a pair of entrepreneurs drew 200 participants, with almost as many on the waiting list. That same month, a networking event hastily organized over Twitter by Clement Delangue, the chief executive of the A.I. start-up Hugging Face, attracted more than 5,000 people and two alpacas to San Francisco’s Exploratorium museum, earning it the nickname “Woodstock of A.I.”More than 5,000 people attended the so-called Woodstock of A.I. in San Francisco in March.Alexy KhrabrovMadisen Taylor, who runs operations for Hugging Face and organized the event alongside Mr. Delangue, said its communal vibe had mirrored that of Woodstock. “Peace, love, building cool A.I.,” she said.Taken together, the activity is enough to draw back people like Ms. Fischer, who is starting a company that uses A.I. in the hospitality industry. She and Mr. Fulop got involved in the 350-person tech scene in Bend, but they missed the inspiration, hustle and connections in San Francisco.“There’s just nowhere else like the Bay,” Ms. Fischer, 32, said.Jen Yip, who has been organizing events for tech workers over the past six years, said that what had been a quiet San Francisco tech scene during the pandemic began changing last year in tandem with the A.I. boom. At nightly hackathons and demo days, she watched people meet their co-founders, secure investments, win over customers and network with potential hires.“I’ve seen people come to an event with an idea they want to test and pitch it to 30 different people in the course of one night,” she said.Ms. Yip, 42, runs a secret group of 800 people focused on A.I. and robotics called Society of Artificers. Its monthly events have become a hot ticket, often selling out within an hour. “People definitely try to crash,” she said.Her other speaker series, Founders You Should Know, features leaders of A.I. companies speaking to an audience of mostly engineers looking for their next gig. The last event had more than 2,000 applicants for 120 spots, Ms. Yip said.In Founders You Should Know, a series run by Jen Yip, leaders of A.I. companies speak to an audience of mostly engineers looking for their next gig.Ximena NateraBernardo Aceituno moved his company, Stack AI, to San Francisco in January to be part of the start-up accelerator Y Combinator. He and his co-founders had planned to base the company in New York after the three-month program ended, but decided to stay in San Francisco. The community of fellow entrepreneurs, investors and tech talent that they found was too valuable, he said.“If we move out, it’s going to be very hard to re-create in any other city,” Mr. Aceituno, 27, said. “Whatever you’re looking for is already here.”After operating remotely for several years, Y Combinator has started encouraging start-ups in its program to move to San Francisco. Out of a recent batch of 270 start-ups, 86 percent participated locally, the company said.“Hayes Valley truly became Cerebral Valley this year,” Gary Tan, Y Combinator’s chief executive, said at a demo day in April.The A.I. boom is also luring back founders of other kinds of tech companies. Brex, a financial technology start-up, declared itself “remote first” early in the pandemic, closing its 250-person office in San Francisco’s SoMa neighborhood. The company’s founders, Henrique Dubugras and Pedro Franceschi, decamped for Los Angeles.Henrique Dubugras, a co-founder of Brex, in 2019. After decamping to Los Angeles, he recently returned to the Bay Area.Arsenii Vaselenko for The New York TimesBut when generative A.I. began taking off last year, Mr. Dubugras, 27, was eager to see how Brex could adopt the technology. He quickly realized that he was missing out on the coffees, casual conversations and community happening around A.I. in San Francisco, he said.In May, Mr. Dubugras moved to Palo Alto, Calif., and began working from a new, pared-down office a few blocks from Brex’s old one. San Francisco’s high office vacancy rate meant the company paid a quarter of what it had been paying in rent before the pandemic.Seated under a neon sign in Brex’s office that read “Growth Mindset,” Mr. Dubugras said he had been on a steady schedule of coffee meetings with people working on A.I. since his return. He has hired a Stanford Ph.D. student to tutor him on the topic.“Knowledge is concentrated at the bleeding edge,” he said.Ms. Fischer and Ms. Fulop said they would miss Bend but craved the Bay Area’s sense of urgency and focus.Will Matsuda for The New York TimesMr. Fulop and Ms. Fischer said they would miss their lives in Bend, where they could ski or mountain bike on their lunch breaks. But getting two start-ups off the ground requires an intense blend of urgency and focus.In the Bay Area, Ms. Fischer attends multiday events where people stay up all night working on their projects. And Mr. Fulop runs into engineers and investors he knows every time he walks by a coffee shop. They are considering living in suburbs like Palo Alto and Woodside, which has easy access to nature, in addition to San Francisco.“I’m willing to sacrifice the amazing tranquillity of this place for being around that ambition, being inspired, knowing there are a ton of awesome people to work with that I can bump into,” Mr. Fulop said. Living in Bend, he added, “honestly just felt like early retirement.” More

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    New York City Moves to Regulate How AI Is Used in Hiring

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    European lawmakers are finishing work on an A.I. act. The Biden administration and leaders in Congress have their plans for reining in artificial intelligence. Sam Altman, the chief executive of OpenAI, maker of the A.I. sensation ChatGPT, recommended the creation of a federal agency with oversight and licensing authority in Senate testimony last week. And the topic came up at the Group of 7 summit in Japan.Amid the sweeping plans and pledges, New York City has emerged as a modest pioneer in A.I. regulation.The city government passed a law in 2021 and adopted specific rules last month for one high-stakes application of the technology: hiring and promotion decisions. Enforcement begins in July.The city’s law requires companies using A.I. software in hiring to notify candidates that an automated system is being used. It also requires companies to have independent auditors check the technology annually for bias. Candidates can request and be told what data is being collected and analyzed. Companies will be fined for violations.New York City’s focused approach represents an important front in A.I. regulation. At some point, the broad-stroke principles developed by governments and international organizations, experts say, must be translated into details and definitions. Who is being affected by the technology? What are the benefits and harms? Who can intervene, and how?“Without a concrete use case, you are not in a position to answer those questions,” said Julia Stoyanovich, an associate professor at New York University and director of its Center for Responsible A.I.But even before it takes effect, the New York City law has been a magnet for criticism. Public interest advocates say it doesn’t go far enough, while business groups say it is impractical.The complaints from both camps point to the challenge of regulating A.I., which is advancing at a torrid pace with unknown consequences, stirring enthusiasm and anxiety.Uneasy compromises are inevitable.Ms. Stoyanovich is concerned that the city law has loopholes that may weaken it. “But it’s much better than not having a law,” she said. “And until you try to regulate, you won’t learn how.”The law applies to companies with workers in New York City, but labor experts expect it to influence practices nationally. At least four states — California, New Jersey, New York and Vermont — and the District of Columbia are also working on laws to regulate A.I. in hiring. And Illinois and Maryland have enacted laws limiting the use of specific A.I. technologies, often for workplace surveillance and the screening of job candidates.The New York City law emerged from a clash of sharply conflicting viewpoints. The City Council passed it during the final days of the administration of Mayor Bill de Blasio. Rounds of hearings and public comments, more than 100,000 words, came later — overseen by the city’s Department of Consumer and Worker Protection, the rule-making agency.The result, some critics say, is overly sympathetic to business interests.“What could have been a landmark law was watered down to lose effectiveness,” said Alexandra Givens, president of the Center for Democracy & Technology, a policy and civil rights organization.That’s because the law defines an “automated employment decision tool” as technology used “to substantially assist or replace discretionary decision making,” she said. The rules adopted by the city appear to interpret that phrasing narrowly so that A.I. software will require an audit only if it is the lone or primary factor in a hiring decision or is used to overrule a human, Ms. Givens said.That leaves out the main way the automated software is used, she said, with a hiring manager invariably making the final choice. The potential for A.I.-driven discrimination, she said, typically comes in screening hundreds or thousands of candidates down to a handful or in targeted online recruiting to generate a pool of candidates.Ms. Givens also criticized the law for limiting the kinds of groups measured for unfair treatment. It covers bias by sex, race and ethnicity, but not discrimination against older workers or those with disabilities.“My biggest concern is that this becomes the template nationally when we should be asking much more of our policymakers,” Ms. Givens said.“This is a significant regulatory success,” said Robert Holden, center, a member of the City Council who formerly led its committee on technology.Johnny Milano for The New York TimesThe law was narrowed to sharpen it and make sure it was focused and enforceable, city officials said. The Council and the worker protection agency heard from many voices, including public-interest activists and software companies. Its goal was to weigh trade-offs between innovation and potential harm, officials said.“This is a significant regulatory success toward ensuring that A.I. technology is used ethically and responsibly,” said Robert Holden, who was the chair of the Council committee on technology when the law was passed and remains a committee member.New York City is trying to address new technology in the context of federal workplace laws with guidelines on hiring that date to the 1970s. The main Equal Employment Opportunity Commission rule states that no practice or method of selection used by employers should have a “disparate impact” on a legally protected group like women or minorities.Businesses have criticized the law. In a filing this year, the Software Alliance, a trade group that includes Microsoft, SAP and Workday, said the requirement for independent audits of A.I. was “not feasible” because “the auditing landscape is nascent,” lacking standards and professional oversight bodies.But a nascent field is a market opportunity. The A.I. audit business, experts say, is only going to grow. It is already attracting law firms, consultants and start-ups.Companies that sell A.I. software to assist in hiring and promotion decisions have generally come to embrace regulation. Some have already undergone outside audits. They see the requirement as a potential competitive advantage, providing proof that their technology expands the pool of job candidates for companies and increases opportunity for workers.“We believe we can meet the law and show what good A.I. looks like,” said Roy Wang, general counsel of Eightfold AI, a Silicon Valley start-up that produces software used to assist hiring managers.The New York City law also takes an approach to regulating A.I. that may become the norm. The law’s key measurement is an “impact ratio,” or a calculation of the effect of using the software on a protected group of job candidates. It does not delve into how an algorithm makes decisions, a concept known as “explainability.”In life-affecting applications like hiring, critics say, people have a right to an explanation of how a decision was made. But A.I. like ChatGPT-style software is becoming more complex, perhaps putting the goal of explainable A.I. out of reach, some experts say.“The focus becomes the output of the algorithm, not the working of the algorithm,” said Ashley Casovan, executive director of the Responsible AI Institute, which is developing certifications for the safe use of A.I. applications in the workplace, health care and finance. More