The AI Ten Commandments, Draft 1

I’ve been speaking with smart people about the “AI Ten Commandments.” Here is what we’ve come up so far. Feel free to add to these.

This is a serious issue. I believe government regulation will always be behind. Perhaps self-regulation can get us part way there, or at least farther than the US Supreme Court’s self-regulation of conflict and ethics.

I also want to sign up, as an investor, to a pledge that I will invest in and manage my portfolio companies according to certain AI principles and constraint. I want to be seen publicly making that pledge, and I would invite a certification body to confirm that I am and my investments are doing the things we pledged to do.

In this list, I am inspired by Isaac Asimov’s “Three Laws of Robotics” which are absolutes but still flexible enough to encompass the broad breadth of potential interactions. They are:

1. A robot may not injure a human being or, through inaction, allow a human being to come to harm.
2. A robot must obey orders given it by human beings except where such orders would conflict with the First Law.
3. A robot must protect its own existence as long as such protection does not conflict with the First or Second Law.

Some very fun literature has been written (and some less fun cinema filmed) interpreting and exploring the conflict between these.

The AI Ten Commandments (so far) are below. These are, for the most part, all technologically achievable today:

1. No self-directed goals:
   
   Goals of AI should be explicitly given by humans, with no goals outside the scope of human intentions.
   
2. No “genetic” modifications:
   
   AI should be prohibited in its ability to modify its own source code and rules provided by humans.
   
3. No lying and deception:
   
   Outputs of AI should be distinguishable as to its AI-generated source (watermark, hash, etc.)
   
4. No discrimination:
   
   AI should not discriminate against any class of humans based on age, sex, race, etc.
   (Even better, AI should not discriminate to a greater degree than the processes they replace. This parenthetical clause is the most difficult of the commandments. Determining the baseline to compare in things like lending bias or college admissions bias is tricky)
   
5. Respect human privacy:
   
   Information available to AI should be constrained by data privacy rules. Individual humans can limit the use of their data for any AI models.
   
6. No bad actors:
   
   AI tools should be revocable by human creators so that “usage review” can pull usage from bad actors that violate these policies. (Similar to Facebook content moderation or ankle bracelets on sex offenders)

More! To what should I agree? Spread it around.

Self Aggrandizing Press

I enjoyed this interview, I hope you do too.

/https://blogs.haas.berkeley.edu/the-berkeley-mba/sean-foote-scores-in-venture-capital-and-private-equity-and-in-the-classroom

“You are no longer the customer, you are the product.”

Tim Cook does not need me to amplify his online reach. As the CEO of Apple, he has a far bigger platform. But his take down of Facebook (without mentioning Facebook) is a must read. More of it below.

I often use the questions “what is the product?” and “who is the customer?” to evaluate new companies and to guide my advice on Boards of Directors. Organizations from higher education to Cable News to venture capital have to ask, answer, and adjust based on the uncomfortable truths these questions may reveal.

Even a charitable company that feeds the hungry needs these insights. Is it the hungry that are the customer, or is it the grant-makers that pay the bills? Perhaps those hungry folk are the product. This realization can be startling and can help prevent the abuse that can come from treating people like products.

In our venture capital firm, our franchise cannot endure if we aren’t being helpful as well as profitable, human as well as analytical. It’s true of your business as well, whether you’ve discovered it or not.

Here’s an excerpt of Cook’s comments from International Data Privacy Day in Brussels:

Technology does not need vast troves of personal data stitched together across dozens of websites and apps in order to succeed. Advertising existed and thrived for decades without it, and we’re here today because the path of least resistance is rarely the path of wisdom.

If a business is built on misleading users on data exploitation, on choices that are no choices at all, then it does not deserve our praise. It deserves reform.

We should not look away from the bigger picture. In a moment of rampant disinformation and conspiracy theories juiced by algorithms, we can no longer turn a blind eye to a theory of technology that says all engagement is good engagement, the longer the better, and all with the goal of collecting as much data as possible.

Too many are still asking the question “How much can we get away with?” when they need to be asking “What are the consequences?

What are the consequences of prioritizing conspiracy theories and violent incitement simply because of the high rates of engagement?

What are the consequences of not just tolerating but rewarding content that undermines public trust in life-saving vaccinations?

What are the consequences of seeing thousands of users joining extremist groups and then perpetuating an algorithm that recommends even more?

It is long past time to stop pretending that this approach doesn’t come with a cost – of polarization, of lost trust, and yes, of violence.

A social dilemma cannot be allowed to become a social catastrophe.

Of course, Apple sells hardware and electronic design as lifestyle products, while Facebook sells data about users to advertisers, so their perspectives are understandably different. But Cook’s conclusion feels irrefutable:

The end result of all of this is that you are no longer the customer, you are the product.

A Social Media Account is More Dangerous than a Bank Account

Social media is more dangerous than a bank account, yet it is regulated like a piggy bank.

The wild west of social media has reached its peak. The laconic, ineffective sheriff is going to be replaced with professional police, and the Law is going to fill the dangerous gaps.

In the first dot com bubble, I was an investor in a social media company with billions of page views. We didn’t call it social media at the time. No, it was a discussion board company. The company had to struggle on a much smaller scale with threats of violence and illegal behavior just like we see today.

The original vision of social media was to provide a digital “town square,” where all ideas can be spoken (or yelled) and like minded people can gather.

Roll forward 20 years and the town square analogy has failed. The town square typically doesn’t encompass the planet. Nor is it anonymous. If you want to hold a rally, you typically need a permit.

There are a range of draconian suggestions out there for how to “fix” social media. I’d add one proposal to reduce liability for social media companies and increase civility.

Real ID. Require social media account signups to undergo the same rigor as opening a bank account.

Banks are required to Know Your Customer (KYC). You must be you before you get an account. After you get an account, you can do all the legal things you want with your money. Naturally, there is less temptation to commit money laundering when you are you.

With Real ID, we can have a social media account, say whatever we want, yet be who we are. Naturally, there may be less temptation to dump digital poop on your neighbors yard when you are you.

The Age of Responsibility

IN the United States, one’s 18th year marks the end of excuses. As in many other countries, the “age of responsibility” is when one accepts the consequences of one’s actions. Get a credit card and pay the bill. Fall in love and get married. Break the law and go to jail.

There are moral responsibilities as well, and the age of responsibility is as good as any other time to accept them. Break someone’s heart and feel remorse. Win and feel success. Tell a successful lie and admit that you have become a liar.

We play plenty of games with ourselves to hide the truth of our actions, and try to avoid their consequences. My father, well after his 18th year, even well after my 18th year, frequently blamed other people for his actions. Through a dozen different jobs, it was his bosses’ fault when it didn’t work out. It was the family’s fault he lost his temper. It was the business partner that “tricked” him when he lost a sizable business gamble. The common theme in all of those was my dad, not the imagined failings of other people.

In 2020, we saw a lot of projected blame. My lack of mask is not a lack of responsibility, it’s freedom. My lie wasn’t a lie. I only lost because of other people. Covid is China’s fault. My divorce is my partner’s fault.

With a denial of responsibility comes an inability to learn and improve. My dad never learned, and was doomed to repeat the same mistakes, the same lies, and the same shifting of responsibility. One thing we know from 2020 is that we’d like to improve upon it in 2021. One way for us to start 2021 is to behave beyond adolescence. To take responsibility for our actions.

Do this: imagine a person whose character you admire (not their pocketbook or fame.) Wake each day with the context of that person in your heart. Strive to be that. It actually works, as many Christians can attest. Starting the day wanting to be my grandfather gives me a very distinct view of who I am going to be today. Starting the day emulating Millie Vanilli and I’m heading towards a complicated, compromised day.

We are all Entrepreneurs Now

With everyone’s work day different than yesterday and destined to be different tomorrow, society is going to change due to #everything. I’m curious about whether we will become a nation of bowing instead of hand-shaking. I wonder whether “business sweatpants” will become a thing. I ask whether even a pandemic can slow the inexplicable career of Justin Bieber.

And all this change has created a business environment leaders and managers have desired, consuming books, seminars, and speakers without success. Slowly changing, entrenched, unimaginative corporations are adapting. We are now a nation of entrepreneurs.

Entrepreneurs operate in an area of uncertainty and still get things done.

Entrepreneurs do things faster than traditional business-people can.

Entrepreneurs aggregate the resources they need to do the job.

Entrepreneurs find a way to make things happen, rather than accept a no.

Entrepreneurs are you and me now. We’re making things work, we’re making changes quickly and to suit changing circumstances. We balance optimism and pessimism today  and still wake up tomorrow to another day, another challenge overcome, another weirdness accepted into our psyche.

We very well might emerge from this with the energy, drive, and flexibility of post-WWII America. The America that created the semiconductor, the internet, Google, Tesla, the longer lasting lightbulb, the self-cleaning oven, and the labradoodle. OK, those last two weren’t American inventions, but we’ve made them what they are: clean and cuddly.

Making Sense of an Upside-Down World

This is a note that my firm, Transform Capital, sent to our Limited Partner investors Friday.

=-=-=-=-=-=-=-=-=-=-=

If, like us, you have been told to shelter-in-place due to coronavirus, we have recommendations for your binge-watching.

In 1897, the psychologist George Stratton placed upon his nose a pair of spectacles that literally turned the world upside-down. The images projected upon his retina were a complete inversion, the complete opposite of a lifetime of experience. Through these inversion glasses, water poured up. His disorientation felt as if he walked on ceilings. He was nauseated. He reached out with his right hand when he should have used his left.

And after just a week of full-time wear, he adjusted. He was able to fully function. He could eat, drink, walk, sketch. In just a week!

We humans are infinitely adaptable. We can ride bicycles and sketch countryside through extreme distortion. (The upside-down experiment has been oft repeated, and you can see a few here: https://www.youtube.com/watch?v=jKUVpBJalNQ and https://www.youtube.com/watch?v=MHMvEMy7B9k ).

If humans are capable of adapting to a literally upside-down world, we can adapt to a figurative upside-down world of coronavirus and likely recession. Even though each day seems to bring a new, previously unthinkable announcement, we will adjust and thrive. We’ll reach with our left hand instead of our right.

We’ve seen multiple downturns from our work as VCs: the now quaintly named 2000 dot com bubble burst, the 2008 financial system meltdown, and now the 2020 Covid crash. They are different, but they have substantial similarities. We’re telling our portfolio companies and colleagues a few things, and we want to share them with you.

VC-backed startup companies should now internalize a few truths.

• Cash burning companies should expect future funding will be harder than past fundraising. Extend your timeline, stretch your cash. If you can get to cash flow break even, do so, even if it damages future growth.
• Assume no more VC money is coming. The market will soften substantially, and successful management teams adapt fast to the new reality. In my career, I’ve parted ways with more than 20 CEOs that couldn’t switch themselves from growing to battening down the hatches.
• Plan for the future. We will get through this, and while sales may dip, it’s a great time to innovate, to discover the next great things. Google, PayPal, Airbnb, Square, Stripe all struggled through prior downturns to lead to success. So can you.

There are some bright spots in this economic downturn. These issues have been constraining the venture industry for some time.

• Valuations will move off their highs.
• Companies will become more capital efficient.
• Talent will be easier to find.

We’re investing in companies that will come to fruition in, say, five years. By then, the pain of this disruption will be behind us and the lessons imprinted within us. The inversion glasses will be off our noses. Disruption often leads to tech innovation. We will be well positioned for the new wave of startups in health care, remote work, augmented / virtual reality, and more.

Our hearts go out to our neighbors and small businesses who may have a shorter horizon than we do. We recognize our luck, and we’ll do our part to support those we can.

In the meantime, the best tech companies in the world are still to come. We intend to be there with them.

Sean Foote and Jonathan Ebinger are the co-founders and General Partners ofTransform Capital: a later stage venture capital fund making minority investments in select, high-growth technology startups to generate outsized, top quartile returns for its investors. The General Partners donate their share of the profits to causes of interest to their investors.

More vignettes

On a walk, which we are allowed to do, I saw a man walking along playing a ukulele, smiling all the way. Pretty good music, too. Why hasn’t that been happening every day before we were locked in?

Different parts of the country are one to two weeks behind on the timeline of “oh shit!” I like being on the leading edge of this one, particularly if we are on the leading edge of the recovery.

Never realized the background noise of high-flying commercial jets overhead and low-slung speeding cars miles away. Things are quieter, which is nice. Too bad so many birds are dead, because it would be nicer still to hear them.

Vignettes from the lockdown

While we’re sheltering in place, we’re creating good memories.  Here are yesterday’s day one vignettes:

Now that everyone is staying home, the internet and cell service In the neighborhood has slowed to a crawl.  All those zoom meetings, or more likely Netflix binging or PornHub viewing. Our son’s reaction? “It didn’t feel like a crisis until the internet quit working.”

We are still allowed to exercise out of the house. On my run yesterday, the common greeting to other trail goers is no longer “hello” or “good morning”.  It’s “stay safe!”

Groceries stores are open, but they are limiting people in the store. In the checkout lines, they’ve taped squares on the floor 6 feet apart, to show where to stand.

Get to Work, America

When I first saw the movie Titanic, I recall my date swept up in the tragic romance of Jack and Rose, played by Kate Winslett and Leonardo DiCaprio. “So touching”, I think she said, with a far away look. Not surprisingly, that wasn’t my takeaway.

My takeaway was: Panic Early.

See, all those early lifeboats left the sinking Titanic partially populated. That was the moment to jump into action. For those that waited, and stayed calm, the last lifeboats were so overfilled that they nearly sank, while many, as we know from Jack and Rose, were left without lifeboats at all.  So having some early, healthy panic can be literally life-saving.

Of course, even writing the word “panic” doesn’t thrill me.  It wreaks of irrationality, of riots in the streets, of wrongness. We can substitute “early recognition” of problems, or “cautious action” or anything we want. To substitute, though, is to discount the simple humanness of a good freak out over the discomfort of disjoint change. It’s there, let’s recognize it. Heck, let’s live it a bit. “Aaah!”

And then let’s move on.

So we are in the throws of a coronavirus named Covid-19, whose marketing department did a great job of creating a label that is too many syllables, too technical, and can coverup any insidiousness. There is panic. Apparently toilet paper is this spring’s trendy gift for those you love. Folks seem stunned, disbelieving, from the top of the government to the bottom of the Missouri boot heel.

It’s fine to panic. The human adrenal system is created in part to speed our escape from the sabertooth tiger or unsuspected Frozen 2 soundtrack snippet.  It speeds our flight, it fills our cupboards. So go for it. Adrenalin it up. Like me, you will likely to be told to quarantine, or shelter in place, in order to slow this disease. You should do so knowing you can eat cans of lima beans for 21 days in a row.  So get it out of your system, because we need to get to the next step.

The next step isn’t panic.  It’s not flight. Flight isn’t the only thing we were bred to do. We don’t simply run. The classic description of what to do when faced with existential threat is not “panic or flight” or “lay-down-and-die or flight”.  It’s “Fight or flight”. So when you’re done with your panic, your flight stage, it’s time to fight. It’s time to get to work. It’s “Panic then Work”.

What that looks like for you can be different than what it looks like for me.  For me it means things like:

• quickly getting into a new routine. For me, that includes lots and lots of work, because it feels normal and it moves the world forward. It’s also how I’m realizing that all those zoom calls (or Netflix binges) by my neighbors are killing my home internet.
• helping local stores I know and love by buying locally (and getting it delivered). These stores are going to struggle to survive.
• Helping friends. Heck helping strangers too. We are all in this together, regardless of race, immigration status, or political leaning.  We are all affected.

The physical risk of Covid-19 comes with economic risk to the world economies. Early data from other shutdown regions in South Korea and Italy show a 20% decrease in consumer spending.  That’s unprecedented. It will lead to negative GDP growth. Period. Recession is coming. Governments will likely pull multiple levers to try to soften the blow. Panic, then work.

In my job as a VC, this will be my third sharp downturn — the now quaint sounding 2000 dot com crash, the 2008 financial system meltdown, and now the 2020 Covid crash.  Here’s what start-up companies need to be doing to fight on:

• Extend your timeline, stretch your cash. If you can get to cash flow break even, do so, even if it damages future growth.
• Assume no more VC money is coming. The market will soften substantially, and successful management teams adapt fast to the new reality. In my career, I’ve fired more than 20 CEOs that couldn’t switch themselves from growing to battening down the hatches.
• Plan for the future. We will get through this, and while sales may dip, it’s a great time to innovate, to discover the next great things.

Finally, I’m not just optimistic that we will adapt, thrive, and emerge victorious from this unique moment in history.  I’m feeling greedy. The economy will stabilize with lower-priced assets. First-time home buyers will benefit from low interest rates and lower housing prices. Travel will increase because of low cost fuel and attractively priced destinations. Concepts like “no paid sick leave” and “airline change fees” will be shown for the ridiculousness that we’ve always known them to be.

So Panic it up America. And then, let’s get to Work. Let’s show everyone what we’re made of.