Category Archives: Economy and Meltdown

The Dirty Big Secret Behind Warren Buffett’s Billions

Authored by David Dyden via TheNation.com,

America’s favorite investor loves monopoly, not free markets…

After the worst financial collapse since the Great Depression, three officials from the Financial Crisis Inquiry Commission visited Warren Buffett at his office in Omaha, Nebraska. They wanted to ask America’s most successful investor about his 24 million shares in the credit-rating agency Moody’s. The commission would later identify Moody’s and other rating agencies as “key enablers of the financial meltdown,” for granting super-safe triple-A ratings to securities that were backed by junk mortgages. Trillions of dollars’ worth of rotten financial instruments—the fuel of the crisis—“could not have been marketed and sold without [the rating agencies’] seal of approval,” the commission concluded.

During that May 26, 2010, meeting, Buffett deflected responsibility for Moody’s actions. “I knew nothing about the management of Moody’s,” he told the federal investigators, explaining candidly why he owned so much stock: Moody’s faced practically no market competition.

“The single most important decision in evaluating a business is pricing power,” Buffett said. “If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business.” The “big three” rating agencies—Moody’s, Standard & Poor’s, and Fitch—controlled 95 percent of the rating-agency market, an insurmountable advantage over would-be competitors.

“If you’ve got a good enough business, if you have a monopoly newspaper or if you have a network television station,” Buffett concluded, “your idiot nephew could run it.”

Warren Buffett is America’s favorite tycoon. The business community hangs on his every word. The annual meetings at Berkshire Hathaway, Buffett’s conglomerate, have been dubbed “Woodstock for capitalists.” Barack Obama and Hillary Clinton hailed his endorsements in their campaigns for president; even Bernie Sanders has supported Buffett’s position on taxes. The press treats him like a Kardashian, publishing quirky features about his bad eating habits, frugal spending, and hobnobbing with celebrities (an actual headline last November: “Katy Perry Wants to Know What Warren Buffett Thinks of Bitcoin”). An old cartoon show called Warren Buffett’s Secret Millionaires Club featured the so-called “Oracle of Omaha” teaching children how to get rich.

This Nation investigation documents how Buffett’s massive wealth has actually been built: on monopoly power and the unfair advantages it provides. Companies in Buffett’s portfolio have extorted windfall profits, evaded US taxes, and abused customers. In the two specific cases discussed below, in the banking and high-tech industries, Buffett’s investments have prompted federal investigations for anticompetitive or other illegal practices.

Buffett did not respond to repeated interview requests for this article, nor did he reply to questions submitted to his office at Berkshire Hathaway.

Buffett makes no secret of his fondness for monopoly. He repeatedly highlights the key to his personal fortune: finding businesses surrounded by a monopoly moat, keeping competitors at bay. “[W]e think in terms of that moat and the ability to keep its width and its impossibility of being crossed,” Buffett told the annual Berkshire Hathaway meeting in 2000. “We tell our managers we want the moat widened every year.”

America isn’t supposed to allow moats, much less reward them. Our economic system, we claim, is founded on free and fair competition. We have laws over a century old designed to break up concentrated industries, encouraging innovation and risk-taking. In other words, Buffett’s investment strategy should not legally be available, to him or anyone else.

Over the past 40 years, however, the United States has not only failed to build bridges across monopoly moats; it has stocked those moats with alligators. Two-thirds of all US industries were more concentrated in 2012 than in 1997, The Economist has documented. Since the Reagan era, the federal government has abandoned antitrust enforcement, with markets for products like eyeglasses, toothpaste, beef, and beer whittled down to a few suppliers. This consolidation has vastly inflated corporate profits, damaged workers and consumers, stunted economic growth, and supercharged economic inequality.

Buffett professes to be an innocent witness to this perversity, a passive investor observing markets from afar. He is feted as the conscience of American capitalism, a multibillionaire who speaks out about taxing the rich (Democrats even named their tax-fairness plan the “Buffett rule”) and donates his fortune to charity. But Buffett’s example has helped intensify US monopolization, as other investors mimic his approach of finding companies surrounded by moats. The ownership class has subsequently built up unwarrantedly large holdings, concentrating its investment in companies that further increase market power. In other words, Buffett isn’t following America on the road to oligarchy; he’s leading it.

Americans falsely look to these oligarchs to solve our problems, allowing them to amass more power. For example, the recent joint effort by Buffett’s Berkshire Hathaway, Amazon, and JPMorgan Chase to transform the US health-care system is vague and rather mundane—most large companies try to drive down health-care costs by leveraging their size. But when three of the age’s biggest monopolists follow the trend, it’s uncritically treated as front-page news, sending health-care stocks plummeting. A stray press release from Buffett can move billions of dollars in his favor.

Bill Gates of Microsoft, Jeff Bezos of Amazon, and Warren Buffett control more wealth than the 160 million poorest Americans combined. And Buffett doesn’t mind working the system to keep it that way. His net worth as of January is $87 billion, but Buffett says he paid only $1.8 million in taxes in 2015—a mere 0.002 percent of his wealth. According to Barclays, the new Republican tax law is projected to net his business a staggering $37 billion a year.

Free markets are for chumps— Warren Buffett insists on monopoly moats.

Warren Buffett should not be celebrated as an avatar of American capitalism; he should be decried as a prime example of its failure, a false prophet leading the nation toward more monopoly and inequality.

You probably didn’t realize that the same avuncular billionaire controls such diverse companies and products as See’s Candies, Duracell batteries, Justin Boots, Benjamin Moore Paints, and World Book encyclopedias. But Buffett has transformed Berkshire Hathaway, initially a relatively small textile manufacturer, into the world’s largest non-technology company by market value. Berkshire Hathaway owns over 60 different brands outright. And through Berkshire, Buffett also invests in scores of public corporations. The conglomerate closed 2016 with over $620 billion in assets.

The money mainly comes from Berkshire’s massive insurance business, composed of the auto insurer GEICO, the global underwriter General Reinsurance Corporation, and 10 other subsidiaries. Insurance premiums don’t get immediately paid out in claims; while the cash sits, Buffett can invest it. This is known as “float,” and Berkshire Hathaway’s float has ballooned from $39 million in 1970 to approximately $113 billion as of last September. It’s a huge advantage over rival investors—effectively the world’s largest interest-free loan, helping to finance Buffett’s pursuit of monopoly. “[W]e enjoy the use of free money—and, better yet, get paid for holding it,” Buffett said in his most recent investor letter. Indeed, as a 2017 Fortune article noted, with almost $100 billion in cash at the end of that year’s second fiscal quarter, Buffett’s Berkshire Hathaway literally has more money than it knows what to do with.

The dominant narrative around Buffett is that he invests in big, blue-chip companies whose products he enjoys, like Coca-Cola or Heinz ketchup. But Buffett’s taste for junk food cannot match his hunger for monopoly, and he scours the investment landscape to satisfy it. For example, he’s a major investor in the most profitable company you’ve never heard of—one used by hundreds of millions of people worldwide, mostly without their knowledge.

The company is called Verisign, and it operates an essential backbone of the Internet: registries for the domain names .com and .net, among others. If you want to create, for example, MyWebsite.com, you buy the name from a retailer like GoDaddy. But Verisign controls the global registry for .com, so GoDaddy relies on Verisign to connect users to MyWebsite.com. Verisign collects a small fee for this service, usually less than $10 a year. But drawing that fee from an enormous pool of websites results in a massive revenue stream.

As of September 2017, two of Verisign’s domain-name registries, the aforementioned .com and .net, accounted for 145.8 million of the 330.7 million websites in existence, or nearly one in two. Take away the 144.7 million sites tied to a specific country (like .us, or .cn for China), and it’s more like four out of five. Any company controlling 80 percent of a given market can safely be termed a monopoly, though a spokesperson for Verisign said in a statement that “we believe competition is thriving in the market.”

The nonprofit Internet Corporation for Assigned Names and Numbers (ICANN), the registry industry’s main regulator, granted Verisign exclusive contracts to operate .com and .net. Verisign can automatically renew the contracts as long as it meets certain performance metrics. The company was also initially permitted to raise prices gradually, despite the fact that the costs of managing a registry decline over time because the necessary infrastructure is already established.

“If you’re giving a near monopoly in an industry where prices are falling, you would think that you would have terms in the contract to lower the price,” said economist Dean Baker, a critic of government-granted monopolies. Instead, prices for .net domain names can rise 10 percent per year; they’ve more than doubled since 2005, from $3.50 to $9.02 (Verisign’s statement called this price “lower than most competing legacy [top-level domains]”). Prices for .com domain names have also risen, though they are now frozen at $7.85 per year, due to an amended contract executed in 2012. Competitors have offered to run registries at significantly cheaper rates, yet ICANN hasn’t altered Verisign’s contract terms.

Normally, companies with regulated prices aren’t profit-making juggernauts. But in the third quarter of 2017, Verisign’s operating income as a percentage of revenue hit 61.9 percent, putting it near the top of all companies in the S&P 500. This number has climbed steadily since 2006. If the trend continues, sometime in the next decade Verisign will post the highest rate of profitability of any public company on earth.

That may explain why Buffett owns nearly 13 million shares of Verisign stock, worth $1.47 billion as of mid-January 2018. Buffett is famously averse to Internet stocks, but he does like a sure thing. So does the rest of the market: Verisign stock jumped nearly 44 percent in 2017. Buffett’s seal of approval tends to boost fortunes on Wall Street, so more money flows into monopolies.

In 2016, ICANN arranged a blind auction to sell the rights to the .web domain name, seen as a promising competitor to .com. To the surprise of industry observers, an obscure company named Nu Dot Co outbid six rivals for .web, offering a record-shattering $135 million. The mystery was clarified four days later, when Verisign issued a brief press release announcing that it had provided all $135 million for Nu Dot Co’s bid. Already in control of .com and .net, Verisign had wrested control of one of the only plausible alternatives. In its statement, Verisign said that “We intend to launch .web to bring choice and reliability to consumers world-wide.”

Though there were signs of Nu Dot Co operating as a straw purchaser before the auction, ICANN refused to delay the proceedings. Competitors cried foul, arguing that they would have bid higher if they’d known a deep-pocketed foe like Verisign was involved. “ICANN has a history of sweetheart deals with Verisign,” said Jon Nevett, co-founder of Donuts, a competing registry that unsuccessfully sued ICANN to block the .web auction. (The case is now under appeal.)

The Justice Department opened a yearlong investigation into the potential rigging of the .web auction, but in January, the department closed the case. In a research note, JPMorgan Chase called Verisign’s acquisition of the domain name “a very good defensive strategic move, keeping .web out of the hands of the potential competitor.” Verisign’s monopolies remain well guarded—and a continuing source of profits for Warren Buffett.

In 2007, Buffett joked in an investor letter: “If a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville [Wright] down…. I have an 800 number that I can call if I get the urge to buy an airline stock,” he added. ” ‘My name is Warren and I’m an air-acholic,’ and then they talk me down.”

Nine years later, Buffett shook off his aversion to airlines. A 2016 stock-buying binge led to Buffett holding approximately 47 million shares in American Airlines, 53 million in Delta, 48 million in Southwest, and 28 million in United, for a total investment of over $9 billion. One day in April 2017, Buffett made $104 million on his airline holdings in a single trading session. The bet is not predicated on any one airline prospering: Buffett holds close to a 10 percent stake in all four major US carriers. (Investments controlling over 10 percent of company stock trigger various paperwork burdens and disclosures, and Buffett has said he likes to stay beneath that threshold.)

What changed between 2007 and 2016? With the blessing of federal regulators, the airline industry became an oligopoly. Four mega-mergers—combining Delta and Northwest, United and Continental, Southwest and AirTran, and American and US Airways—solidified major-carrier dominance in the United States. Today, four airlines control 80 percent of domestic-seat capacity. In 93 of the top 100 airports, either one or two manage a majority of all seats sold.

Market concentration has resulted in higher profits for the airlines and for Buffett, but misery for the passengers: crowded planes, more connections, and a cascade of nickel-and-dime fees. Perversely, by making flying worse, airlines further loosen passengers’ wallets, enticing those who can afford it to buy more legroom, or priority boarding to ensure that their bag gets in the overhead bin. Ancillary fees represented a little over 10 percent of the airlines’ total revenue in 1995; today, it’s more than 25 percent. The public wouldn’t stand for such fleecing if they had a choice, but market consolidation forces customer acceptance.

And it’s not just Buffett: Large index-fund providers like Vanguard and BlackRock have significant industry-wide airline holdings, a factor that may distort competition. “It’s not crazy to think that the CEO of Delta has figured out that Buffett doesn’t like it all that much for him to compete with United,” says Martin Schmalz, an assistant professor at the University of Michigan’s Ross School of Business. Schmalz, José Azar, and Isabel Tecu revised a research paper last year showing that airfares on the average route are 3 to 7 percent higher under common ownership by large investors than they would be under separate ownership. “This is not collusion; it’s not a crime,” Schmalz adds. “But it’s an antitrust problem that increases prices.”

David Dao learned the harsh realities of monopoly air travel last April, after refusing to relinquish his seat to solve an overbooking problem on a United flight. Security agents violently dragged Dao, a 69-year-old physician, down the aisle and out of the aircraft, breaking his nose and knocking out two teeth. The incident gave United a public-relations black eye—video of Dao’s ordeal was viewed over 9 million times, and United’s CEO was hauled before Congress—but it didn’t damage the company’s bottom line. The Department of Transportation declined to prosecute, United’s stock price recovered after an initial dip, and seats remained filled to near capacity.

Throughout the controversy, Buffett stood by United. Assaulting Dao was a “terrible mistake,” he said to CNBC, but “it wouldn’t change the investment strategy.”

Buffett has similarly defended Wells Fargo, his largest single investment, through one damaging scandal after another. In 2016, the bank was caught signing up customers for around 3.5 million fake accounts. Since then, Wells Fargo has also been dinged for issuing clients unwanted insurance and home-warranty products, falsifying records to increase fees on mortgage applicants, overcharging foreign-exchange clients to ring up bonuses, initiating secret changes to mortgage terms for homeowners in bankruptcy, and repossessing the cars of service members while they were on active duty. The federal investigations and fines over this misconduct continue to roll in.

Millions have been harmed by this mix of rank incompetence and outright fraud. But with the five biggest commercial banks—Wells Fargo, Bank of America, Citigroup, JPMorgan Chase, and US Bancorp—controlling nearly half of all assets, as well as robust branch and ATM networks, it can be inconvenient or even impossible not to use their services.

Last August, Buffett called Wells Fargo “a terrific bank…. There were some things that were done very wrong there, but they are being corrected.” In October, he got tougher, blaming Wells Fargo’s board of directors for failing to “remove the stain” on the business and musing about clawing back five years of compensation. But Buffett had supported the same board members for reelection just months earlier. It resembled his decision in 2014 to criticize the board of Coca-Cola for excessive executive compensation, but to abstain from voting on the pay package. At the time, Buffett’s son Howard sat on Coke’s board.

In other words, while Buffett’s wealth and the media attention he attracts enable him to create change inside the boardroom, he takes virtually no responsibility as a major shareholder for the companies he invests in. “He’s following his wallet, not his conscience,” says David Nelson, chief strategist at Belpointe Asset Management.

Windfall profits, taxpayer rip-offs, customer abuse—it’s all in a day’s work for the Oracle of Omaha.

In fact, Buffett is completely enamored with the big banks whose actions sparked the Great Recession, despite a rap sheet as large as Wells Fargo’s. Asked to name his favorite bank in a CNBC interview last October, Buffett replied: “What’s your favorite child?”

As of last September, Buffett’s financial-industry holdings approximate an astonishing $66.9 billion—more than 37 percent of his portfolio. He is Wells Fargo’s largest shareholder, and he recently became the largest shareholder in Bank of America as well, the result of a post-financial-crisis deal allowing Buffett to convert an injection of capital into common stock. That conversion earned him $12 billion overnight. A similar crisis-era investment in Goldman Sachs spawned a $3 billion payday.

Buffett also holds major stakes in Bank of New York Mellon, US Bancorp, and M&T Bank. He has a hand in every major credit-card issuer: American Express, Visa, MasterCard, and Synchrony Financial, which provides private-label credit cards to retailers. While Buffett doesn’t own stock in JPMorgan Chase, his top deputy Todd Combs sits on the board, obviously aware of the activities of the leading competitor to his boss’s banking investments.

You may think you have a choice of financial institutions, but when you pull out a piece of plastic to pay for anything, chances are you’re enriching Warren Buffett.

It would be one thing if Buffett were passive about investments he doesn’t totally control but scrupulous regarding the businesses owned within Berkshire Hathaway’s portfolio. But only 25 people work at Berkshire’s headquarters, overseeing 63 companies and more than half a trillion dollars in assets. It’s impossible for Buffett to be anything but an absentee owner, instructing portfolio managers to gain market share but ignorant of how they do it. And anyone who has watched Buffett operate over the past 40 years knows his preferred path to wealth: through monopoly.

Among his first investments were newspapers, including the 1977 purchase of the Buffalo Evening News. Buffett immediately targeted the News’s rival, the Courier-Express, by launching a Sunday edition. By 1982, the Courier-Express was out of business, and Buffett’s local monopoly became his largest single investment. Even today, despite the Internet, Buffett owns 31 daily newspapers, most of them local monopolies.

A more brutal example involves Berkshire Hathaway subsidiaries Clayton Homes, the nation’s largest mobile-home builder, and Vanderbilt Mortgage, its companion lender. A series of journalistic investigations in 2015 found that the companies targeted minorities with high-pressure sales tactics, issuing loans swollen with hidden fees. African-American, Native American, and Latino borrowers received higher interest rates, even if their fellow white borrowers earned less. When the loans failed, Clayton repossessed and resold the homes, earning more fees each time. The Consumer Financial Protection Bureau’s complaint databases are littered with hundreds of comments about Clayton and Vanderbilt. “This type of behavior by any lender is despicable and absolutely intolerable,” wrote one complainant.

Buffett has publicly defended the businesses, which earned $744 million in 2016. He even tried to attack the credibility of a critical reporter, because the reporter’s sister worked at a law firm that sued Clayton. In 2017, Buffett vowed that Clayton Homes would grow, despite admitting that it foreclosed on one out of every 40 properties the previous year—over three times the national average.

Last December, the House of Representatives passed a bill to further deregulate the manufactured-home industry, eliminating consumer protections and disclosure requirements under statutes like the Truth in Lending Act. If the bill becomes law, Clayton Homes salespeople could legally steer borrowers to high-cost loans, which traditional mortgage brokers are barred from doing. As Maxine Waters, ranking Democrat on the House Financial Services Committee, said on the House floor, “This bill makes it easier for financial titans like billionaire Warren Buffett to earn even more profits, at the expense of some of the most vulnerable consumers in this country.”

The disparity between Buffett’s words and actions is an enduring feature. His main entry into the political arena involves a plea for tax fairness, to “stop coddling the super-rich.” But Buffett’s third most valuable stock holding (after Wells Fargo and Kraft Heinz) is a $22.8 billion investment in Apple, perhaps America’s most notorious corporate-tax evader, famous for stashing profits in offshore tax havens.

Buffett takes full advantage of tax loopholes. He uses Berkshire Hathaway, a valuable tax shelter, for his investments. The Republican tax bill will save Berkshire an estimated $37 billion, because the firm habitually defers its tax liabilities, which will now be paid off at a much lower rate. Even the infamous ”private-jet tax break” in the bill is really an extrajudicial attempt to settle a dispute between the IRS and NetJets, a private-plane company wholly owned by Berkshire Hathaway.

“I think idolizing buffett is unhealthy,” says Robin Harding, Tokyo bureau chief for the Financial Times, who offered a rare note of criticism of the billionaire investor in the business press last September. “We should lionize entrepreneurs…who take bold risks by investing to make our lives better,” Harding adds. “Buffett’s whole method…is to minimize risk by building moats while investing to buy a greater share of what already exists.”

Former Supreme Court Justice Louis Brandeis called businesses like Buffett’s, which use other people’s money to create personal fortunes, the “Money Trust.” These financier middlemen “bestride as masters of America’s business world, so that practically no large enterprise can be undertaken successfully without their participation or approval,” Brandeis wrote. Buffett routinely takes advantage of opportunities unavailable to ordinary investors: The mega-bank Goldman Sachs created an internal “brain trust” solely to pitch deals to people like Buffett. “The kind of trades he does today no one else can do—you gotta be that big,” explains David Nelson of Belpointe Asset Management.

Buffett’s fortune reflects a change in whom modern capitalism serves. Former labor secretary Robert Reich, whose latest book, Saving Capitalism, was recently adapted into a Netflix documentary, explained that the wealth generated through corporations used to be shared somewhat more with workers, communities, and the broader economy in what he termed “stakeholder capitalism.” “That changed in the 1980s, when the corporate raiders insisted that CEOs only focus on maximizing shareholder returns,” Reich says. “Even if companies wanted to be sustainable, they’re not able to under the current system.”

Amazingly, Buffett has spearheaded an effort to promote “commonsense corporate governance principles,” joining the CEOs of America’s largest corporations, from General Motors to JPMorgan Chase. The group’s manifesto states that “[o]ur financial markets have become too obsessed with quarterly earnings forecasts,” recommending that institutional investors make informed decisions about the direction of the companies they hold. But this is precisely what Buffett never does; he openly ignores management performance in favor of finding businesses with moats. This has become his perfect excuse: Buffett evades responsibility for abuses of market power, preserving his pristine reputation by passing the buck.

Nor does Buffett acknowledge his role in driving further monopolization. The investment-research firm Morningstar has created the “economic moat” index to track the 20 companies with the highest walls around their businesses. The money-management firm VanEck sells an exchange-traded fund based on that index called “MOAT.” Companies like Valeant Pharmaceuticals scoop up lifesaving drugs that nobody else makes and jack up the prices; it’s the moat strategy taken to its logical extreme. “We’re seeing this almost spontaneous decision across whole industries that they’re going to milk existing market positions rather than compete aggressively,” Harding says.

Buffett says he supports fairer taxes, but owns $22 billion of tax evader Apple.

What’s the answer? First off, aggressive antitrust enforcement. “What the framers of the antitrust laws…were concerned about is unreasonable market power that gives companies the chance to engage in predatory behavior of consumers and political power,” Reich says. Companies like Verisign, which exploit their monopolies, should face greater scrutiny. Dominant players in industries like airlines and banks should be downsized. Sprawling investors like Buffett also present concerns. “If we didn’t allow Buffett to own substantial stakes in all air carriers, the problem would be significantly reduced,” says the University of Michigan’s Martin Schmalz.

We must also consider disproportionate capital concentration. The top 1 percent owns a significant portion of all wealth, and it increasingly makes money just from having money. Globally, 82 percent of the wealth generated in 2017 flowed to that top 1 percent, according to Oxfam. Through dividends, interest payments, and rising investments—Buffett-style passive ownership—the holders of capital capture about 30 percent of national income, according to research by Thomas Piketty, Emmanuel Saez, and Gabriel Zucman. “If you’re well diversified and you just chill out, you will make a lot of money without doing much for it,” says Matt Bruenig, founder of the People’s Policy Project.

Bruenig has proposed a wealth tax, with the revenue directed into a stock-accumulating sovereign-wealth fund. Citizens could receive a direct dividend from the gains, the way Alaskans receive a check from the state’s Permanent Fund. Instead of someone like Buffett hoarding wealth to extract income, we would all benefit in service to a fairer society. And as with Norway’s wealth fund, the government could involve itself more directly in corporate governance, as a countervailing force to shareholder tyranny.

Getting serious about taming monopolies also means ceasing the endless praise of Warren Buffett. Leading Democrats and the press have given him a pass for decades. But the path to solving America’s inequality crisis goes through Omaha and the cuddly billionaire whose love of monopoly is contributing to national desperation. “He’s a really good investor,” David Nelson says of Buffett. “I’m not sure he’s much of an example on anything else.”

Burger-Flipping Robot Set For Big Rollout In California

Miso Robotics, a Pasadena developer and manufacture of artificial intelligence-driven robots that assist chefs in making food at restaurants, has secured a $10 million Series-B from Acacia Research and Levy Restaurants in its latest round of VC funding according to Tech Crunch.

In total, Acacia Research has plowed about $14 million into the deal. The company, which has developed artificial intelligence-driven hamburger-cooking robots will begin flipping burgers at CaliBurger in Pasadena, California in the second-half of 2018 and expand to over fifty locations by the end of 2019.

“We’re super stoked to use this funding to develop and scale our capabilities of our kitchen assistants and AI platform,” CEO/co-founder Dave Zito said on a call with TechCrunch ahead of the announcement.

“Our current investors saw an early look at our progress, and they were so blown away that they doubled-down.”

Flippy, an industrial robotic arm mounted to the ground and modified for use in a commercial kitchen, is really nothing more than a knock-off of Intuitive Surgical’s da Vinci Surgical System, but instead of the EndoWrist performing complex surgeries, there is a metal spatula flipping burgers. The core of the robotic arm is manufactured by Fanuc America and incorporates “Miso Robotics’ cloud AI platform to operate the robot using a combination of cameras, thermal scanners, and lasers,” said Venture Beat.

Miso cofounder David Zito told VentureBeat in a phone interview:

“Flippy can detect cheeseburgers and remove cheeseburgers. After they’re flipped, it can change spatulas while it’s working so that we’re actually adhering to food safety guidelines, and will switch to a grill scraper and be able to clean off portions of the grill after it’s done cooking burgers,” he said.

“The proceeds for this will allow us to build a robotic kitchen assistant,” Zito said. “You’re not going to see BB-8 coming out of our shop; you’ll likely see us continue to refine this — the general hardware platform that we have, but then we will see it beginning to get more collaborative and adaptable.”

In October, we reported on Zumba Pizza, a Silicon Valley-based storeless food delivery startup that uses robots to bake pies.

The company, which first began delivering pizzas last year, was founded on two core concepts: robotic automation and on-route cooking. Robotic automation is easy enough to understand. Zume, which sources machines from industrial robot maker ABB, employs these devices for tasks like dispensing the perfect amount of sauce, spreading that sauce, removing pizzas from ovens, and, now, spreading the dough with just the right thinness and crust-to-pie ratio. The various robots work in unison with humans in an assembly line-style work space attached to the company’s Mountain View facility.

Of course, if Flippy is successful, it will unleash the first wave of layoffs that could amount to hundreds of low-wage millennial burger flippers at CaliBurger’s California locations from the second half of 2018 through 2019. Then after that, a much larger second wave of layoffs could amount to hundreds of thousands if not millions of layoffs as major food and dining corporations will be forced to automate their kitchen lines.

But don’t tell Trump that a majority of the jobs added over the past 12 months have been employment in food services and drinking places, he’ll just call that fake news, as his administration is about to feel the wrath of a tech-induced surge of unemployment leading into the next elections in 2020.

Father Of Artificial Intelligence: “Singularity Is Less Than 30 Years Away”

Authored by Mac Slavo via SHTFplan.com,

The father of artificial intelligence has sounded the alarm, and the clock is ticking down to the singularity.  For those who haven’t been following the advancements in AI, maybe now’s the time, because we are approaching the point of no return.

Singularity is the point in time when humans can create an artificial intelligence machine that is smarter. Ray Kurzweil, Google’s chief of engineering, says that the singularity will happen in 2045

Louis Rosenberg claims that we are actually closer than that and that the day will be arriving sometime in 2030. MIT’s Patrick Winston would have you believe that it will likely be a little closer to Kurzweil’s prediction, though he puts the date at 2040, specifically.

Jürgen Schmidhuber, who is the Co-Founder and Chief Scientist at AI company NNAISENSE, the Director of the Swiss AI lab IDSIA, and heralded by some as the “father of artificial intelligence” is confident that the singularity “is just 30 years away. If the trend doesn’t break, and there will be rather cheap computational devices that have as many connections as your brain but are much faster,” he said.

“There is no doubt in my mind that AIs are going to become super smart,” Schmidhuber says.

When biological life emerged from chemical evolution, 3.5 billion years ago, a random combination of simple, lifeless elements kickstarted the explosion of species populating the planet today. Something of comparable magnitude may be about to happen.

 “Now the universe is making a similar step forward from lower complexity to higher complexity,” Schmidhuber beams.

“And it’s going to be awesome.”

But will it really be awesome when human beings are made obsolete by their very creations?

Artifical intelligence has already had an impact on humanity. A recent warning from the Institute for Public Policy Research (IPPR) declared that thousands of jobs are being lost to robots and those with those on lowest wages are likely to be hardest hit. As it becomes more expensive to hire people for work because of government intervention like minimum wage hikes and overbearing regulations, more companies are shifting to robotics to save money on labor.

Kurzweil has said that the work happening right now “will change the nature of humanity itself.” He said robots “will reach human intelligence by 2029 and life as we know it will end in 2045.”  There is a risk that technology will overtake humanity and make human society irrelevant at best and extinct at worst.

Is New Zealand A Doomsday Preppers’ Paradise?

Earlier today, we reported that Peter Thiel, the Bay Area’s most prominent conservative and one of President Trump’s most outspoken supporters from the LGBT community, announced that he was relocating to Los Angeles – and taking his investment firm with him – because of the famously intolerant culture in Silicon Valley.

The announcement of the move conjured up images of street harassment for Thiel, who is loathed in Silicon Valley and by the mainstream media because of his role in bringing down Gawker as part of a nearly decade-long revenge plot…

Interestingly, the Guardian also happened to publish today a profile about Thiel’s decision to build another potential domicile much, much further south: In New Zealand, where it was reported last year that he had become a citizen in 2011, and later that he purchased a large tract of land nearly the size of Manhattan that used to be a sheep station on New Zealand’s southern island.

Thiel

Of course, the wealthy have many options for doomsday preparedness, as we’ve noted time and time again – from personal bunkers to memberships to luxury post-apocalyptic communities.

But New Zealand represents something different: A sparsely populated island with plenty of resources – essentially clay for wealthy capitalists to mold a new society from the ashes of the old after the collapse sets in…

But while Thiel’s New Zealand investment was more of a novelty news story in the US, in New Zealand, it has become a major scandal, sparking a national debate over how much leeway wealthy individuals should be given to become citizens and provide property.

And Thiel isn’t the only one: The Guardian points out that several other wealthy Silicon Valley figures have also taken an interest in the country…

When Nippert broke the story, there was a major public scandal over the question of whether a foreign billionaire should be able to effectively purchase citizenship. As part of his application, Thiel had agreed to invest in New Zealand tech startups, and had implied that he would use his new status as a naturalised Kiwi to promote the country’s business interests abroad. But the focus internationally was on why Thiel might have wanted to own a chunk of New Zealand roughly the size of lower Manhattan in the first place. And the overwhelming suspicion was that he was looking for a rampart to which he could retreat in the event of outright civilisational collapse.

Because this is the role that New Zealand now plays in our unfurling cultural fever dream: an island haven amid a rising tide of apocalyptic unease. According to the country’s Department of Internal Affairs, in the two days following the 2016 election the number of Americans who visited its website to enquire about the process of gaining New Zealand citizenship increased by a factor of 14 compared to the same days in the previous month. In particular, New Zealand has come to be seen as a bolthole of choice for Silicon Valley’s tech elite.

In the immediate aftermath of Trump’s election, the theme of American plutocrats preparing for the apocalypse was impossible to avoid. The week after the inauguration, the New Yorker ran another piece about the super-rich who were making preparations for a grand civilisational crackup; speaking of New Zealand as a “favored refuge in the event of a cataclysm”, billionaire LinkedIn founder Reid Hoffman, a former colleague of Thiel’s at PayPal, claimed that “saying you’re ‘buying a house in New Zealand’ is kind of a wink, wink, say no more”.

There’s little dispute that belief that the end times – or at least a massive civilizational collapse – are looming just over the horizon as some of the social fabric underpinning society unravels, and economic inequality skyrockets – reinforcing the idea that those who survive will be those who can afford it.

Everyone is always saying these days that it’s easier to imagine the end of the world than the end of capitalism. Everyone is always saying it, in my view, because it’s obviously true. The perception, paranoid or otherwise, that billionaires are preparing for a coming civilisational collapse seems a literal manifestation of this axiom. Those who are saved, in the end, will be those who can afford the premium of salvation. And New Zealand, the furthest place from anywhere, is in this narrative a kind of new Ararat: a place of shelter from the coming flood.

Thiel isn’t the first wealthy individual with apocalyptic views. Indeed, the authors of “The Sovereign Citizen” formed a group to purchase – like Thiel – a giant sheep station on the southern top of the North Island…

Davidson and Rees-Mogg identified New Zealand as an ideal location for this new class of sovereign individuals, as a “domicile of choice for wealth creation in the Information Age”. Byrt, who drew my attention to these passages, had even turned up evidence of a property deal in the mid-1990s in which a giant sheep station at the southern tip of the North Island was purchased by a conglomerate whose major shareholders included Davidson and Rees-Mogg. Also in on the deal was one Roger Douglas, the former Labour finance minister who had presided over a radical restructuring of New Zealand economy along neoliberal lines in the 1980s. (This period of so-called “Rogernomics”, Byrt told me – the selling off of state assets, slashing of welfare, deregulation of financial markets – created the political conditions that had made the country such an attractive prospect for wealthy Americans.)

Thiel’s interest in New Zealand was certainly fuelled by his JRR Tolkien obsession: this was a man who had named at least five of his companies in reference to The Lord of the Rings, and fantasised as a teenager about playing chess against a robot that could discuss the books. It was a matter, too, of the country’s abundance of clean water and the convenience of overnight flights from California. But it was also inseparable from a particular strand of apocalyptic techno-capitalism. To read The Sovereign Individual was to see this ideology laid bare: these people, the self-appointed “cognitive elite”, were content to see the unravelling of the world as long as they could carry on creating wealth in the end times.

As the Guardian points out – and as we have previously noted – New Zealand isn’t entirely free from exposure to massive, catastrophic natural disasters…

I remarked on the strangeness of all these Silicon Valley geniuses supposedly apocalypse-proofing themselves by buying up land down here right on the Pacific Ring of Fire, the horseshoe curve of geological fault lines that stretches upward from the western flank of the Americas, back down along the eastern coasts of Russia and Japan and on into the South Pacific.

“Yeah,” said Byrt, “but some of them are buying farms and sheep stations pretty far inland. Tsunamis aren’t going to be a big issue there. And what they’re after is space, and clean water. Two things we’ve got a lot of down here.”

The following day, I went to the gallery in downtown Auckland to take a look at The Founder’s Paradox. Denny, a neat and droll man in his mid-30s, talked me through the conceptual framework. It was structured around games – in theory playable, but in practice encountered as sculptures – representing two different kinds of political vision for New Zealand’s future. The bright and airy ground floor space was filled with tactile, bodily game-sculptures, riffs on Jenga and Operation and Twister. These works, incorporating collaborative and spontaneous ideas of play, were informed by a recent book called The New Zealand Project by a young leftwing thinker named Max Harris, which explored a humane, collectivist politics influenced by Māori beliefs about society.

…The story also explains a parallel between Thiel’s apocalyptic worldview and the popular board game “Settlers of Catan”.

Catan

In “Catan”, players battle for resources in a setting that, as the Guardian aptly points out, mirrors colonialism…

Beneath all the intricacy and detail of its world-building, The Founder’s Paradox was clearly animated by an uneasy fascination with the utopian future imagined by the techno-libertarians of Silicon Valley, and with New Zealand’s role in that future. The exhibition’s centrepiece was a tabletop strategy game called Founders, which drew heavily on the aesthetic – as well as the explicitly colonialist language and objectives – of Settlers of Catan, a cult multiplayer strategy board game. The aim of Founders, clarified by the accompanying text and by the piece’s lurid illustrations, was not simply to evade the apocalypse, but to prosper from it. First you acquired land in New Zealand, with its rich resources and clean air, away from the chaos and ecological devastation gripping the rest of the world. Next you moved on to seasteading, the libertarian ideal of constructing manmade islands in international waters; on these floating utopian micro-states, wealthy tech innovators would be free to go about their business without interference from democratic governments. (Thiel was an early investor in, and advocate of, the seasteading movement, though his interest has waned in recent years.) Then you mined the moon for its ore and other resources, before moving on to colonise Mars. This last level of the game reflected the current preferred futurist fantasy, most famously advanced by Thiel’s former PayPal colleague Elon Musk, with his dream of fleeing a dying planet Earth for privately owned colonies on Mars.

New Zealand’s appeal as a potential oasis during an all-out societal collapse is understandable: It’s association with lush rolling hills, large quantities of fresh, potable water and plentiful arable farmland only enhance its appeal.

But a bigger question for the local government is whether these foreign oligarchs buying up property is good for the local economy. Already, property in Auckland has become a popular investment for foreigners – leading to a bubble that inspired the Labour party have formally signed a coalition agreement, introducing new policies focusing on climate change, regional development, and poverty which translates into hunting the hated rich…

Playboy Model Details 9 Month Covert Affair With Trump: New Yorker

In a bombshell New Yorker report from Ronan Farrow, who was the first reporter to expose Democratic donor Harvey Weinstein for his decades-long history of sexual assault, Karen McDougal, a former Playboy Model who first met President Trump in 2006 during a pool party at the Playboy mansion, shared details about her alleged relationship with the president, and his relationship with National Enquirer owner David Pecker (and holding company American Media Inc), a longtime “personal friend” who once reportedly paid her $150,000 for the exclusive rights to her story, only to let it never see the light of day.

In the world of tabloid journalism, this process is called “catch and kill“. Though McDougal’s story was first reported in 2016 by the Wall Street Journal, Farrow’s account is the first time she’s shared her story – which she “corroborated with an eight-page handwritten account taken at the time of the affair” – in full detail.

McDougal

The two first met after a taping of Trump’s show, the Apprentice, at the Playboy mansion. Trump was reportedly “all over her” and one of the show’s producers even remarked “you could be his next wife.” According to the New Yorker, McDougal kept handwritten notes about the affair, which she said began in 2006, after the taping of “The Apprentice” episode.

Over a period of nine months, Trump ferried her to meet him both in LA and around the country, taking care not to leave a paper trail. During their meetings, McDougal said she would first be led to meet Trump by Keith Schiller, his former bodyguard.

Pecker’s relationship with Trump is an advantageous one for him, because Pecker is likely one of the few people who knows where “all the bodies are buried” for the most powerful man in the world. Trump has denied the affair.

McDougal, in her first on-the-record comments about A.M.I.’s handling of her story, declined to discuss the details of her relationship with Trump, for fear of violating the agreement she reached with the company. She did say, however, that she regretted signing the contract. “It took my rights away,” McDougal told me. “At this point I feel I can’t talk about anything without getting into trouble, because I don’t know what I’m allowed to talk about. I’m afraid to even mention his name.”

A White House spokesperson said in a statement that Trump denies having had an affair with McDougal:

“This is an old story that is just more fake news. The President says he never had a relationship with McDougal.”

American Media said that an amendment to McDougal’s contract—signed after Trump won the election—allowed her to “respond to legitimate press inquiries” regarding the affair. The company said that it did not print the story because it did not find it credible.

Six former A.M.I. employees told me that Pecker routinely makes catch-and-kill arrangements like the one reached with McDougal. “We had stories and we bought them knowing full well they were never going to run,” Jerry George, a former A.M.I. senior editor who worked at the company for more than twenty-five years, told me. George said that Pecker protected Trump. “Pecker really considered him a friend,” George told me. “We never printed a word about Trump without his approval.” Maxine Page, who worked at A.M.I. on and off from 2002 to 2012, including as an executive editor at one of the company’s Web sites, said that Pecker also used the unpublished stories as “leverage” over some celebrities in order to pressure them to pose for his magazines or feed him stories. Several former employees said that these celebrities included Arnold Schwarzenegger, as reported by the Los Angeles Times, and Tiger Woods. (Schwarzenegger, through an attorney, denied this claim. Woods did not respond to requests for comment.) “Even though they’re just tabloids, just rags, it’s still a cause of concern,” Page said. “In theory, you would think that Trump has all the power in that relationship, but in fact Pecker has the power – he has the power to run these stories. He knows where the bodies are buried.”

While there’s no evidence Pecker has ever used his leverage over Trump, several of his former employees said he would often use “killed” stories as leverage to get celebrities like Tiger Woods to feed him stories.

During their relationship, McDougal noted that Trump would always order the same meal (steak and potatoes with no alcohol) and that he often would send her press clippings about himself or his children. McDougal’s account shared some amusing similarities with an account of an affair with Trump offered by former adult film actress Stormy Daniels. For instance, both Daniels and McDougal said Trump watched Discovery Channel’s “Shark Week” programming with them. Daniels famously revealed that Trump told her he hates sharks.

After their first sexual encounter, McDougal said Trump offered to pay her – to which she declined.

As the pool party at the Playboy Mansion came to an end, Trump asked for McDougal’s telephone number. For McDougal, who grew up in a small town in Michigan and worked as a preschool teacher before beginning her modelling career, such advances were not unusual. John Crawford, McDougal’s friend, who also helped broker her deal with A.M.I., said that Trump was “another powerful guy hitting on her, a gal who’s paid to be at work.” Trump and McDougal began talking frequently on the phone, and soon had what McDougal described as their first date: dinner in a private bungalow at the Beverly Hills Hotel. McDougal wrote that Trump impressed her. “I was so nervous! I was into his intelligence + charm. Such a polite man,” she wrote. “We talked for a couple hours – then, it was “ON”! We got naked + had sex.” As McDougal was getting dressed to leave, Trump did something that surprised her. “He offered me money,” she wrote. “I looked at him (+ felt sad) + said, ‘No thanks – I’m not ‘that girl.’ I slept w/you because I like you – NOT for money’ – He told me ‘you are special.’

The New Yorker also described the elaborate system that was created to conceal Trump’s alleged affair:

Afterward, McDougal wrote, she “went to see him every time he was in LA (which was a lot).” Trump, she said, always stayed in the same bungalow at the Beverly Hills Hotel and ordered the same meal—steak and mashed potatoes—and never drank. McDougal’s account is consistent with other descriptions of Trump’s behavior. Last month, In Touch Weekly published an interview conducted in 2011 with Stephanie Clifford in which she revealed that during a relationship with Trump she met him for dinner at a bungalow at the Beverly Hills Hotel, where Trump insisted they watch “Shark Week” on the Discovery Channel. Summer Zervos, a former contestant on “The Apprentice,” alleged that Trump assaulted her at a private dinner meeting, in December of 2007, at a bungalow at the Beverly Hills Hotel. Trump, Zervos has claimed, kissed her, groped her breast, and suggested that they lie down to “watch some telly-telly.” After Zervos rebuffed Trump’s advances, she said that he “began thrusting his genitals” against her. (Zervos recently sued Trump for defamation after he denied her account.) All three women say that they were escorted to a bungalow at the hotel by a Trump bodyguard, whom two of the women have identified as Keith Schiller. After Trump was elected, Schiller was appointed director of Oval Office Operations and deputy assistant to the President. Last September, John Kelly, acting as the new chief of staff, removed Schiller from the White House posts. (Schiller did not respond to a request for comment.)

Over the course of the affair, Trump flew McDougal to public events across the country but hid the fact that he paid for her travel. “No paper trails for him,” she wrote. “In fact, every time I flew to meet him, I booked/paid for flight + hotel + he reimbursed me.” In July, 2006, McDougal joined Trump at the American Century Celebrity Golf Championship, at the Edgewood Resort, on Lake Tahoe. At a party there, she and Trump sat in a booth with the New Orleans Saints quarterback Drew Brees, and Trump told her that Brees had recognized her, remarking, “Baby, you’re popular.” (Brees, through a spokesman, denied meeting Trump or McDougal at the event.) At another California golf event, Trump told McDougal that Tiger Woods had asked who she was. Trump, she recalled, warned her “to stay away from that one, LOL.”

Trump promised to buy McDougal a condo – which he never did – and also introduced her to members of his family.

McDougal, who had earlier kept quiet for fear of reprisal, said she ended the affair in April 2007 because she felt “tremendously guilty” (though Trump had revealed to her that he and his wife Melania maintained separate bedrooms).

McDougal ended the relationship in April, 2007, after nine months. According to Crawford, the breakup was prompted in part by McDougal’s feelings of guilt. “She couldn’t look at herself in the mirror anymore,” Crawford said. “And she was concerned about what her mother thought of her.” The decision was reinforced by a series of comments Trump made that McDougal found disrespectful, according to several of her friends. When she raised her concern about her mother’s disapproval to Trump, he replied, “What, that old hag?” (McDougal, hurt, pointed out that Trump and her mother were close in age.) On the night of the Miss Universe pageant McDougal attended, McDougal and a friend rode with Trump in his limousine and the friend mentioned a relationship she had had with an African-American man. According to multiple sources, Trump remarked that the friend liked “the big black dick” and began commenting on her attractiveness and breast size. The interactions angered the friend and deeply offended McDougal.

Speaking carefully for fear of legal reprisal, McDougal responded to questions about whether she felt guilty about the affair, as her friends suggested, by saying that she had found God in the last several years and regretted parts of her past. “This is a new me,” she told me. “If I could go back and do a lot of things differently, I definitely would.”

Trump also hooked up with McDougal at the Lake Tahoe golf tournament in 2006 where he also met Daniels. While McDougal said she voluntarily sold her story to the Enquirer, she insists that the way the deal was done was “exploitative.”

She sold the story during the 2016 presidential election, after a friend suggested it, and brokered the transaction – though she was fearful of going public for fear that Trump’s supporters might harass her. McDougal says she is a Republican. She signed her agreement with the Enquirer on Aug. 5, 2016, about a month before the infamous “Access Hollywood” tape broke, and while Daniels was also trying to negotiate selling her story to “Good Morning America” and Slate.