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Tech titans curb hiring in a ‘challenging macro environment’

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Amazon ramped up hiring to handle soaring online shopping demand during the pandemic only to find itself overstaffed as inflation tightens consumer budgets.
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From e-commerce colossus Amazon to social networking star Facebook, US tech firms that once grew with abandon have reined in hiring to endure tumultuous times.

Internet giants that saw business boom during the pandemic have taken a hit from inflation, war, supply-line trouble and people returning to pre-Covid lifestyles.

Corporate belt-tightening was a common theme as big tech firms reported earnings from the first three months of this year.

Facebook parent Meta told analysts that hiring goals were being adjusted as it continued to look to a bright future.

“We regularly re-evaluate our talent pipeline according to our business needs, and in light of the expense guidance given for this earnings period, we are slowing its growth accordingly,” a Meta spokesperson told AFP.

“However, we will continue to grow our workforce to ensure we focus on long-term impact.”

Seattle-based Amazon,  the second largest employer in the United States, revealed that its ranks are overly plump after ending last year with more than twice as many workers as it had in 2019.

As the spread of the Omicron variant of Covid-19 slowed during the first quarter of this year and workers returned from time off, Amazon “quickly went from being understaffed to overstaffed,” chief financial officer Brian Olsavsky told analysts.

Twitter confirmed that it has flat-out suspended hiring, and even showed a few senior executives the exit, as it faces a takeover by Elon Musk, the richest person on the planet.

Musk sent mixed messages Friday about his proposed Twitter acquisition.

In an early-morning tweet, Musk said the $44 billion takeover was “temporarily on hold,” pending questions over the social media company’s estimates of the number of fake accounts or “bots.”

Two hours later, the unpredictable Tesla chief executive tweeted that he was “still committed to acquisition.”

“Our industry is in a very challenging macro environment — right now,” Twitter chief executive Parag Agrawal said Friday in a tweet.

“I won’t use the deal as an excuse to avoid making important decisions for the health of the company, nor will any leader at Twitter.”

At ride-share pioneer Uber, CEO Dara Khosrowshahi said they will “treat hiring as a privilege,” according to an email to employees seen by CNBC.

While big tech players have steered clear of budget-driven layoffs, such is not the case for stock trading platform Robinhood or Cameo, an app that sells custom video messages from celebrities.

Robinhood said in April that it will cut nearly 350 positions, about 9 percent of its workforce. Cameo terminated the contracts of 80 employees recently, according to news website The Information.

– Reasons behind the cuts –

Reasons for hiring curbs, freezes or cuts vary.

Meta, for example, put some blame on a tweak Apple made to software running its popular mobile devices that stymies the gathering of user data to target ads more effectively.

Uber, meanwhile, reported it was hit with a big loss in the first three months of the year, despite a rebound in its ride-share business.

The loss was due almost entirely to revaluation of its stakes in Grab and Didi in Asia and US-based autonomous driving firm Aurora, the earnings report said.

A common factor for many internet firms, though, was that brisk hiring done while demand was spiking during the pandemic has led to overweight staffing in leaner times.

“Many tech companies have been fulfilling this demand with notable growth in digital services, and as such, recruited and grew their business notably during the past two years,” said Terry Kramer, an assistant professor at the UCLA business school.

“A reasonable part of what we’re seeing now I believe is the normal maturity of technology adoption – where companies can’t/don’t need to continue growing at the same rate.”

Another factor weighing heavily is inflation, which has driven up costs overall and tightened consumer budgets.

The US central bank has been steadily raising interest rates this year, making it more expensive for companies to borrow money.

On Wall Street, an S&P 500 index comprising tech sector stocks has fallen more than 22 percent since the start of the year, and the tech-heavy Nasdaq is down slightly more overall.

Wedbush analyst Daniel Ives advised investors not to fear a recurrence of the epic Dot-com crash of the late 1990s.

“This is not a Dot-com Bubble 2.0,” Ives said in a note to investors.

“It’s a massive overcorrection in a higher rate environment that will cause a bifurcated tech tape, with clear haves and have-nots.”

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How has US wealth evolved since the 1980s?

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How do people allocate their wealth? The Wealth Enhancement Group analyzed data published by the Federal Reserve to answer this question.
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America’s economy has exploded since 1989.

Gross domestic product, which measures all of the goods and services produced in a year, grew from $9.9 trillion to $22.5 trillion from 1989 to 2023 (after accounting for inflation), according to the Bureau of Economic Analysis. This figure represents a massive increase in economic output.

This increased productivity has fed into a similarly significant increase in wealth. The Wealth Enhancement Group used data from the Federal Reserve to look at how the assets held by U.S. households has evolved over time.

Data shows that American households owned a combined $161 trillion in assets in the third quarter of 2023, up from $24 trillion in 1989. That makes for a roughly 570% increase, or 170% after adjusting for inflation.

After accounting for debt, such as mortgages, America’s total household net worth grew to $142 trillion, up from $20 trillion. Although the number is down by about 1% from its peak in the second quarter of 2022, it still reflects a dramatic increase over time.

The most valuable asset class the typical American family holds is real estate. Besides a significant drop during the 2000s subprime mortgage crisis and a brief dip following interest rate hikes in 2022, housing has been a reliable generator of wealth for the middle class.


Line chart showing the rise of household assets in the US between 1989 and 2023, which rose from $24 trillion to $161 trillion.

Wealth Enhancement Group

Household assets have skyrocketed since 1989

For Americans in the bottom half of the wealth distribution, housing made up 51% of their assets. Wealthier households, in contrast, tend to have higher shares of their savings in equities.

Households in the top 0.1% held 60% of their assets in shares of public and private companies in 2023. Meanwhile, households in the bottom half of wealth in the United States held only around 6% of assets in equities.

Yet, despite how much housing has grown in value, its ascent pales compared to the fastest-growing asset class: public equities.

Between 1989 and 2023, the value of public stocks held by American households grew by nearly 1,700%, rising from $2 trillion in value to $37 trillion. This trend, coupled with the fact that shares in companies are held disproportionately by the rich, has caused the share of American household assets held by the top 0.1% to increase from 8% to 12%.

A stacked bar chart showing the top 0.1% have most of their wealth in equities where housing makes up for 51% of the assets of people in the bottom half of wealth in the United States.

Wealth Enhancement Group

The wealthy tend to own shares in companies

Some economists argue that, in theory, the ratio of a country’s wealth to its economy, as measured by GDP, should be constant over time.

Yet, data from the Bureau of Economic Analysis and the Federal Reserve data shows that the ratio of the net worth of American households and nonprofit organizations to GDP rose from around 3.6 in the 1980s to 5.5 in the third quarter of 2023.

In 2022, YiLi Chien and Ashley Stewart, two researchers at the St. Louis Federal Reserve, offered a few theories to explain how this ratio has increased over time. They suggest that American companies might now have greater market power, allowing them to charge more. The authors also note that since the internet era, many of America’s biggest companies, such as Meta and Google, offer their services to consumers for free—while investors may value their economic contributions, they do not count for much in the GDP numbers.

However, assets are not net worth. The rich are more likely to own their homes outright. In the third quarter of 2023, households from the top 0.1% owned $1.83 trillion worth of real estate while owing just $70 billion in mortgages. In contrast, households in the bottom 50% of wealth owned $4.87 billion of real estate against $3 billion of housing debt.

Story editing by Ashleigh Graf. Copy editing by Kristen Wegrzyn.

This story originally appeared on Wealth Enhancement Group and was produced and
distributed in partnership with Stacker Studio.

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Deepfakes cause 30% of organizations to doubt biometrics, Gartner finds

A look at AI deepfakes, it’s impact on security, and ways to mitigate the risks

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A fake moustache and trenchcoat isn’t a convincing disguise, right? But a digitally altered video that makes your face identical to someone else’s? 

That’s a different story. 

Deepfakes are artificial images or videos that imitate a person’s likeness so convincingly that it can be nearly impossible to recognize they’re fake. Hackers use them to impersonate people’s faces and voices. This can have monumental impacts — even $25 million worth, which is what one undisclosed company lost in a deepfake scam. 

Even with all the money a company spends on voice authentication and facial biometrics, it can all be in vain if a deepfake hacker manages to fool them. 

Gartner explores the impact of deepfakes on organizational policy, and we’ll share some risk management considerations to address the trend. 

30% of organizations can’t rely on facial recognition software and biometrics

Biometrics rely on presentation attack detection (PAD) to assess a person’s identity and liveness. The problem now is that today’s PAD standards don’t protect against injection attacks from AI deepfakes. Once a bulletproof security strategy, biometrics are now inefficient for 30% of companies surveyed by Gartner. 

“These artificially generated images of real people’s faces, known as deepfakes, can be used by malicious actors to undermine biometric authentication or render it inefficient,” 

— Akif Khan, VP Analyst at Gartner 

The solution is a demand for more innovative cybersecurity tech. Gartner advises organizations to update their minimum requirements from cybersecurity members to include all of the following 

  • PAD
  • Injected attacks detection (IAD)
  • Image inspection

On top of that, you can beef up security with: 

  • Device identification: Numerical values or codes to identify a user’s device
  • Behavioural analytics: Machine learning algorithms to detect any shifts in day-to-day online behaviour

So, how can you account for deepfakes risks and mitigation in practice? Here are a few more tips to consider: 

  • Educate employees: Hold monthly or quarterly meetings with experts in the field to help your employee identify common signs of deepfakes, including blurred or pixelated images in a person’s video, or distorted audio. Greater awareness of what to look out for can allow employees to flag suspicions. 
  • Don’t rely on one authentication process: Multi-factor authentication demands 2+ pieces of evidence to verify a user before admitting them into a network. Include email, phone, or voice verification in addition to biometrics. 
  • Invest in deepfake detection software: Consider a subscription Sensity AI, Deepware Scan, Truepic, or Microsoft Video Authenticator. 

Gartner plans to share more findings and research on deepfakes at their security and risk management summits taking place in various countries around the world. 

Read more about those summits and see the news release here.

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Where companies have adopted AI—and where they are planning to do so in the near future

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Verbit analyzed survey data from the Census Bureau to see which states have the most companies that are enthusiastic about artificial intelligence.
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On Nov. 30, 2022, OpenAI launched ChatGPT, a chatbot driven by artificial intelligence. The app spread like wildfire. Not only did it provide an entertaining companion to chat with, but it also showed promise as a piece of productivity software.

ChatGPT allows users to ask questions about myriad topics and get useful responses in a way that search engines like Google cannot provide. Similar technologies have emerged in all kinds of domains, including image generation, language translation, transcription, computer programming, and more.

Firms across the U.S. are embracing artificial intelligence. To find out which regions are the most enthusiastic about AI, Verbit analyzed data from surveys taken by the Census Bureau in December 2023. Overall, 4.9% of businesses said they were using AI to produce goods or services in the past two weeks, while 6.7% say they plan to within the next six months.

Unsurprisingly, information technology companies are the most eager to use artificial intelligence—22% of respondents from American tech companies said they had used AI for their products or services within the past two weeks. That number actually understates AI’s impact in the field. A survey of computer programmers conducted by JetBrains, a software company, found that 77% of respondents used ChatGPT, while 46% used GitHub Copilot, an AI coding assistant.

Professional, scientific, and technical services were the second-most likely type of firm to respond that they used AI tools, according to the Census Bureau. Law firms are using tools to scan through thousands of past cases. And, according to Tess Bennett, a technology reporter for Financial Review, consultants and accountants are using AI to create PowerPoint presentations and conduct exploratory data analysis.


A map of showing which states have the highest share of companies who are currently using AI to produce goods and services.

Verbit

Top adopters

Some businesses have been quicker to adopt AI than others. Companies in Rhode Island lead the way on this front—8.7% of businesses in the state are currently using AI, nearly twice the rate of companies in the United States as a whole.

Companies on the West Coast and the Southwest tended to be more AI-friendly, while companies in the Rust Belt were likelier to have the lowest interest in using AI tools.

This story matches the Census survey numbers with data on what kinds of companies each state has within its borders and the education level of its workforce to understand why these disparities across states exist.

In general, states with a higher share of businesses in the technology sector also were likely to have more businesses use AI to produce goods and services. However, the weak correlation suggests that despite all of the hype surrounding AI, companies have still been slow to change their practices to adopt the technology.

A map showing which states have the highest share of companies which plan to use AI to produce goods and services in the next 6 months.

Verbit

Getting on the bandwagon

Businesses in Washington D.C., were the most likely to say they planned to adopt AI in the next six months, at 13.7%. Meanwhile, about 9% of businesses in Maryland, Alaska, New Mexico, Rhode Island, and Florida said they planned on implementing AI. Alabama and Delaware were the least enthusiastic about AI adoption—only 3.3% of businesses in the two states reported plans to implement AI.

This analysis of Census data found a much stronger correlation between how many of a state’s firms are in the tech sector and their willingness to implement AI in their business practices in the near future.

Similar trends were found when it came to states with highly educated workforces—in general, the higher the share of a state’s residents with college degrees, the more likely its businesses were to say they were planning on implementing AI. Artificial intelligence might be the future. But Census data reveals it is still early days.

Story editing by Ashleigh Graf. Copy editing by Kristen Wegrzyn.

This story originally appeared on Verbit and was produced and
distributed in partnership with Stacker Studio.

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