For many years, the VC world and the media have been enamoured with unicorns and the unicorn phenomenon until Bill Gurley of Benchmark Capital started speaking about the potential death of these billion-dollar+ valuation companies last year. He also made some interesting psychological and other general insights into the unicorn or rather unicorpse phenomenon last week in his blog. I previously also wrote about Mr. Gurley's POV on late stage funding bubbles and the dangers of overvaluation last July.
* Investors are lured into last round fundings when it is often a desperate last act to raise capital
* Crooked investors, "sharks" are akin to ponzi scheme con-artists who use dirty term sheets to make a guaranteed return at the expense of other investors.
* Dirty term sheets to look out for often have the following clauses: guaranteed IPO returns, ratchets, PIK (Payment-In-Kind) Dividends, series-based M&A vetoes, and superior preferences or liquidity rights
* People who have already "banked" their return cannot mentally handle a down round investment (eg, taken loans off "paper gains" or other such nonsense before a liquidity event)
Mark Suster at Upfront Ventures refers to these "sharks" as "VC seagulls". Seagulls or sharks, it appears to refer to investors who are utilising legal loopholes to operate, essentially, a ponzi scheme, in which they may receive a return on their investment via liquidity preferences or other tactics such as "guaranteed IPO returns" even if the company faces a down round and many other investors lose their investment.
A lot of these sorts of tactics seems to center around Silicon Valley, although Bill Gurley mentions in his very long essay that these are not usually the standard for NorCal. However, many instances of these sorts of "shark" tactics come to mind: most recently Square's recent late stage funding in October of last year in which investors were guaranteed a 20% return even if the IPO flopped (NYSE: SQ) although currently Square is at or just slightly above its IPO offering price after losing 3/4 of its value in February.
However, most of Mr. Gurley's post seems to me, to be directed at Uber, where he sits on the Board of Directors. Major investors in Uber received a guaranteed 25% return. In fact, Benchmark Capital, as a a series C investor in Uber (along with Google Ventures and TPG) have a liquidity preference which guarantees them a 25% return, allowing them to get their money back before the common shareholders in case if Uber were to be acquired or wound down. This is also the case with Snapchat, another Benchmark Capital backed company whose investors are also guaranteed a return via preferred stock.
In the event of this sort of liquidity event, the main people who lose out are the entrepreneurs and early investors. “The level at which employees are getting diluted is much higher than it has been in the past. In the short term there is a real risk that employees just don’t understand how little their shares are going to be worth by the time an exit event occurs.”
I found Mr. Gurley's criticisms rather perplexing or perhaps made in good conscience, in perhaps, openly speaking out against what seems to be the "shark" policies of his own VC firm as well as other prominent ones in Silicon Valley. The bottom line Mr. Gurley seems to be pointing at is really aimed towards entrepreneurs: Don't become another Travis Kalanick. Raise as little money as possible. Don't go for the billion+ valuation.
In terms of setting a new kind of equity structure, former Groupon founder Andrew Mason set up a "Progressive Equity" structure for his new company which he detailed on his blog earlier this month which protects the employees from equity dilution. He also posted his legal template- free for anyone to use . Although I haven't read through the entire legal document, this sort of equity structure seems to protect the founders and employees from such VC sharks. Instead of creating a vast income divide at startups, Andrew writes in his post that he wants to create a landscape where more people become multi-millionaires rather than the few who become billionaires.
Andrew also explained via Hacker News that "the benefit to founders of progressive equity is that at a smaller exit, they still get a big return." I think this is something definitely worth considering for entrepreneurs and founders who are setting up their equity structure.
Mark Suster also gave some practical, abeit funny advice for founders this week in Both Sides of the Table; I had hoped he would elucidate more on some of these topics such as 22. The End of the Mexican Road and 23. Beg for Forgiveness as I was rather curious about the particular scenarios and the lessons learned.
However, the Key Takeaways here are:
*Intellectual Property, Founding team members, initial product and market valuation are the most critical early in the startup
*Learn to work with lawyers, despite the fact that perhaps a lot of people have a tendency to view them negatively
*Learn to flip burgers (eg, don't outsource every function of your company) Mark writes: In some companies the CEO does not have the complete grasp of every function of his/her company. They essentially outsource the thinking on technology, sales, customer service, whatever. This is always a warning sign to me. This post covers the lessons I learned the hard way, from trying to run a burger chain without first flipping burgers.
*Don't grant equity to advisers in an advisory board unless they invest in your company
*Getting an MBA is often paradoxical to working towards launching a start-up, as MBAs typically are risk-averse
*Health and fitness are very, very important
By Sierra Choi
Over the weekend, I was listening to a play by David Mamet called the Water Engine which was written in 1977 and takes place during the Great Depression.
It is a fascinating account of how an inventor's journey of attempting to patent a disruptive alternative energy technology and its suppression by corporate forces. In the Mamet play, the protagonist, Charles Lang produces an engine utilising water- although the specifics aren't given, the engine seems to be parallel to the process of hydroelectric power, which via a process of rotating turbines with reverse circuitry magnets by giving power to coils, use the hydrogen in the water to create electricity. This is similar in concept to the way lightning is generated, when a negative electrical charge at the base and a positive charge at the top are carried by water droplets and ice crystals.
The Water Engine takes place in 1934, two years before the the US would build its Hoover dam utilising hydroelectric power that would dominate the US for the next twenty years. Although in the play, the inventor, Charles Lang and his sister are ambiguously met with an uncertain fate, hydroelectric power in the US would increase in scope throughout the 30s and 40s via President FDR's New Deal construction plans that would make hydroelectric power account for 40% of the electricity produced in the US. Currently in the US, the majority of electricity generation is from fossil fuels (coal, natural gas and petroleum). Coal makes up 33%, Natural Gas 33%, Nuclear 20% whilst hydropower only makes up 6% and other renewables 7%.
The experimental Hoover Dam was built in the U.S. in 1936, which became a great source of hydroelectric power.
Hydroelectric power went into decline during the late 70s and 80s, when the Reagan Administration supported foreign policy to become allies with Saudi Arabia in order to topple the Soviet penetration of the oil market and influence in the Middle East. Although, currently all the major energy corporations, the oil and gas industries have been making incremental shifts since 2002 to hydrogen fuel cell technology (which utilises pressurised hydrogen to generate power with no release of carbon dioxide gases and the only byproduct being water) with Shell Global building the majority of the hydrogen fuel cell stations for cars in Europe and the United States, the current transition hasn't been a completely smooth one, as the markets have currently been seeing fluctuating oil prices as all producers are dumping their last drop of supplies, flooding the global market with cheap oil prices.
There has also been an interesting rivalry between electric battery powered cars (eg, Tesla Motors, Faraday Future) vs. hydrogen fuel cell cars (eg, Toyota, Honda etc). Tesla was primarily in decline until the Google founders injected capital into Tesla around 2009, and in the next 7 years we have seen its stock price surge to new highs. Although Tesla is marketed as a "green" car, the electric battery that powers the car is actually derived from fossil fuels, which is the main electric source in the US and around the world; this is in contrast to hydrogen fuel cell cars, which are powered by pressurised hydrogen and technically holds the title of the "green" car. Toyota recently announced in January of this year that it would make all of its fuel cell patents free to use in an act of solidarity to encourage the transition towards clean energy. Its plans to release the 2016 Toyota Mirai in the eastern parts of the US with free use of hydrogen fuel cell stations that they were planning to build were halted once again by the recent earthquake that Japan suffered from, just 5 years after its first attack from the tsunami-earthquake of 2011.
The Toyota Mirai, the 2016 winner of the World Green Car. Its plans to launch in the first half of this year in the U.S. have been halted by the recent Japanese earthquake this month.
Shell Global holds a winning position if either people adapt to electric battery cars or to hydrogen fuel cell cars as the world energy supply of electricity is significantly derived from gas, and in addition, Shell plans to build another 400 hydrogen fuel cell stations in Europe by 2023. As the premier UK corporation that holds vested interests in both electric and hydrogen fuel cell technology, the other possible energy competitors, such as UK's Intelligent Energy, which implements hydrogen fuel cell technology across a variety of sectors- from computers to mobile phones to telecomm stations in India, could potentially topple the gas giant's position in number 1 position, despite that the publicly traded company on the LSE (LON:IEH) has been facing some obstacles recently.
The UK's no. 1 corporation, Shell is planning to build the majority of the hydrogen fuel cell stations in both Europe and America.
Of course, as a consumer, the question is why do we need fueling stations in the first place? Why not just produce and distribute a car that runs on hydroelectric power and we can occasionally "fuel" using water from our homes instead of pressurised hydrogen at stations or electric charging stations? The answer to that, despite that there exists technology to develop and produce such cars, is that simply that profit margins would be in serious decline for car manufacturers and for energy corporations that depend on continual annual revenues for people to buy and refuel their cars and continually charge their consumer products and devices. In addition, since many governments are actively lobbied by these corporations, there exists no incentive for them to make a major change in policy to help developing startups that aim to disrupt the energy sector.
If we examine the history of green energy- and the lessons learned from KiOR, the Khosla-backed biofuel venture whose motto was to "declare war on oil" which later declared bankruptcy after it had amassed more than $600 million USD in funding; we can learn that it is not enough to develop a talented team and create innovative new ways of producing energy. Although the downfall of KiOR was briefly mentioned in the media as an oversight in management where too many PhDs had been employed who didn't know how to actually run the company, we can extrapolate that the deeper issue with KiOR is that in the energy sector, there are many interconnecting players- the manufacturers of cars and consumer electronics, the builders of homes, the current dominant energy industries, the distributors of those networks, and government regulations- that all stand in the way of preventing new technologies from becoming readily adapted by the public.
Khosla Ventures backed KiOR's "War on Oil" did not work out for them.
This is something David Mamet touches upon in his play, The Water Engine: How innovation can be violently suppressed in a system of corporativism when people are primarily motivated by profit and not by the collective good of all. However, we have to also remember that the individual people who work for corporations are not evil people who are set to destroy innovation. Rather, people are attracted to stability and familiarity and primarily motivated to provide for their own families. As I mentioned in my previous post on energy, I'd like to think that the oil industries were indirectly responsible for funding my education in both the US and the UK, where my father had been a long-time employee of the Chevron Corporation.
"The biggest danger to the European Union comes not from those who advocate change, but from those who denounce new thinking as heresy. In its long history Europe has experience of heretics who turned out to have a point." -David Cameron's EU speech in 2013
Instead of declaring "a war on oil", we should think of how we can work with the dominant energy industries (eg, BP, ExxonMobil, Shell Global et al) to integrate new solutions as part of a collective instead of focusing solely on disruption; the latter, an isolationist strategy that has not worked well in the history of energy.
By Sierra Choi
For those of you who have been to San Francisco, you might have noticed that in between the restaurants du jour, the strangely antiquated Muni system, the cable cars, the beautiful public library and the wonders of the DeYoung Museum that San Francisco has disappropriate numbers of homeless people. It seems untenable to think how a city that is only the size of 121 km2 and which is home to the most amount of billionaires in the U.S. and is the headquarters of nearly all of America's unicorn companies has such devastating numbers of homeless people?
Homeless people sitting and standing outside the San Francisco public library
It is estimated that approximately 25% of San Francisco's population are homeless. However, despite all the homeless that you see on the streets of San Francisco, the vast majority of the homeless are actually women and children. A couple of years ago, I had met up with one of my friends who is a political consultant, and his sister, who worked for homeless shelters during one of my visits to San Francisco, and his sister revealed something that was very surprising to me. She told me that the majority of the women were only allowed to stay at the homeless shelters for up to 2 months, and that there was a never ending waiting list for the shelter. Most of the homeless were women and children, not the people you see on the streets. These women often came out of physical abuse, and had left their husbands, but had nowhere to go; because they were usually stay-at-home parents, they found it very difficult to find jobs, and because they could only stay at the shelter for two months, that was not enough time for them to find a job. She told me the system was broken, and although the city reportedly spent about $167-241 million annually on homeless programmes, that they were largely ineffective.
You might wonder how a city that is home to the most amount of billionaires in America does absolutely nothing to take care of their own people? Certainly it is shocking. Even in the media, when Commando.io CEO Justin Keller recently wrote an open letter a few months ago to the San Francisco mayor complaining that:
"The wealthy working people have earned their right to live in the city. They went out, got an education, work hard, and earned it. I shouldn’t have to worry about being accosted. I shouldn’t have to see the pain, struggle, and despair of homeless people to and from my way to work every day." -Justin Keller, CEO Commando.io
His letter makes one cringe at the callousness and ignorance of many of our supposedly "educated" pool of young tech leaders. However, despite the fact that is it easy to find many examples of these antics of "cartoonishly entitled [tech entrepreneurs]" and their wanton lack of noblesse oblige and incomprehension of the homeless problem in San Francisco, I am sometimes also brilliantly moved by what other entrepreneurs are able to do and the manner in which they tackle a growing social problem.
Doniece Sandoval, Founder of LavaMae
Take for example, Doniece Sandoval, the Founder of LavaMae. LavaMae repurposes retired transportation buses into showers and toilets on wheels in order to deliver hygiene and restore dignity amongst the homeless in San Francisco.
Her entrepreneurial journey really stimulates the mind in how one person was able to create this sort of value with lasting effects by using materials that were headed for the dumpster.
The LavaMae bus: Watch their launch video here.
In a parallel and unprecedented way, recently Amazon has donated a 34,500 square-foot building in Seattle to give shelter to homeless people after Seattle Mayor Ed Murray declared a state of emergency on homelessness in November of 2015.
One of the main reasons of homelessness is that the cost of housing over the past two decades has vastly exceeded the amount of income that people earn making minimum-wage jobs or bring in from modest pensions, disability or welfare. Lava Mae, and Amazon have created novel and effective ways to counteract the growing social problem of the homeless in the United States. In the media, we often idolise entrepreneurs such as Travis Kalanick and Elon Musk, who have been caricatured in the media as alpha males with a love of money and fast cars. If you look for the bad in humankind expecting to find it, you surely will. However, lesser known entrepreneurs like Doniece Sandoval re-write our collective dialogue and makes one truly believe and say, "Yeah, it's crazy, and it's ambitious, but if you are committed to doing this thing, I will support you."
By Sierra Choi
I recently read a post by Dan Hynes last week in which he described that there was no tech talent shortage in Europe, but rather, there was a smart hiring shortage. In essence detailing the problems with the hiring structure of HR and other such talent recruitment agencies that use the outdated format of the résumé or the CV to look for the same limited number candidates on linkedin and other job finding sites, like Monster, then subsequently use a computerised task test for select candidates.
Contrary to popular media opinion, Dan Hynes argues that Europe does not have a talent shortage.
The problem with this methodology is similar to the education in US high schools. Tests rarely signify the smartest students- rather test takers are good at doing just that- taking tests during a limited time frame, and thus limiting the pool of applicants that could potentially be great employees. Google has a not-so-secret recruitment strategy in which they developed a software programme to select users who are searching for specific programming terms, then integrate a gaming method in which a pop up box asks the Google users if they would like to play a game? Users who continue to play this game and accomplish their goal are contacted for an interview to work at Google.
This kind of strategy works to find those unique candidates working under the radar that might somehow not be selected by traditional job outlets. Y-Combinator, similarly uses HackerNews contributors to select their candidates for the accelerator, which could be in part, to detect for the right culture match (ie, agree with everything Paul Graham has ever written).
Every company has a way of hiring employees, and most companies use traditional methods which have a tendency to select Type A personalities for the highest positions. I recall my own experiences with HR recruitment agencies in which the common feedback consisted of either: not enough experience or overqualified, in addition to the fact that I tended to jump from one position to another after a year or so as most HR agencies typically have a preference for candidates who have been in positions for 5+ years. The latter was partly because I was transitioning into different sectors and also preferred working for smaller companies and startups with less than 20 employees due to the flexibility and the self-directed work involved, in addition to the fact that I felt I was making an active contribution to the development of the company despite the fact that the average lifespan of a startup was around 3 years.
The Anti-Type A personality coping method I had learned from my days learning martial arts. In contrast, Type A personalities are typically characterised by competitive behaviours, impatience, hostility and aggressiveness coupled with controlling attitudes, micromanagment styles and self-described "stress junkies".
I did not want to work for a large corporation and be stuck in a routine and be another slave to the grind. What I was looking for was flexibility, ability to wear many different hats, be involved in many different roles, and also where I could interact with many different sorts of people. One of the things I loved about working for startups was that my schedule was different everyday. At the KidsApp mobile gaming startup in which I became initiated into startup culture, we would sometimes work late into the evening or start the day by taking walks in the park, or a day where I would be on several conference calls with VCs from Switzerland, Singapore and Hong Kong, or other days where I was engaged with product management and the tech team before a deadline. I would often meet with other companies at lunch, spend the hour at a conference and head back to the office. Our office had a flexible schedule, and we worked towards project deadlines and did not count the hours by sitting at our desks from 9-6. Sometimes, one of our developers who had a late night would be sleeping in one of the meeting rooms in the afternoon. It wasn't uncommon for us to have varied schedules. However, as a bit of digression, our main obstacle was user retention. Although we had hit a 3 million download of our apps, we had no idea how to harness those users to come back to download more apps, which at the time, was the problem with many EdTech startups. Without a monetisation policy in place, we were attempting to navigate through and re-define our revenue model, bleeding through cash and our sole source of revenue at the time came from B2B: from clients like Google and Samsung, becoming completely dependent on these corporations to keep us afloat.
After the mobile gaming startup I was working at was shut down in 2013, my cousin, who was then the Director of Marketing for a large corporation offered to recommend me for an opening position that was not advertised at his company and I turned down his offer, partly because I knew that the culture at that company was not a match for me. In addition, I had many friends at the company already who were under extreme stress due to the paranoid, backstabbing and sabotaging culture there. The philosophy at that company was "never accept responsibility nor blame". My renumeration would not be as much working for another startup, but that is what I chose to do.
I think the right culture match is something that is often overlooked by HR. Around the time of the financial crisis, as a producer and part of the management team, I was in charge of hiring all the new members of a new media company. I did not select them by looking at their résumé. I selected candidates based on their personal websites, and then I would have a brief conversation with them to open a dialogue about their interests and future plans, then invite the ones who I felt were sincere and actually had an interest in the content we were developing at the time. I probably overlooked a lot of people who had great technical skills and a great résumé, but when you are going to spend a great deal of time with the people you're working with, my philosophy is that is it better to train people in technical skills, as long as they had a willingness to learn and receive feedback rather than try to work with people with a closed communication style who are easily prone to anger. In my experience, I have found that many Type A personalities- especially those with multiple ivy league degrees or sitting on many laurels may have a closed communication style and will easily point the finger and project blame when something goes wrong, but often, they have the best looking résumés.
In addition, I also think hiring people from cross sectors with compatible skill sets can be advantageous. Sometimes, people who have worked for many years in one industry will be resistant to change partly because "it's always been done that way." Or they will have the attitude "we can't do that because it hasn't been done before." A product manager who has always been a product manager will do the same thing over and over again, even if the product is not a right fit for the demographic, and a stock trader with only a finance background will trade in the same exact way, even if his method is not working.
Despite the demise of Groupon, what I liked that former CEO and founder Andrew Mason did was that he hired out-of-work actors as his sales team, instead of people with sales backgrounds. His sales team was largely uncredited, but they were responsible for the astonomical growth of his company at the inception:
"We found that improv actors are usually quite empathetic, think quickly and really connect with customers, making them perfect customer service representatives."- Groupon's original management team when they achieved the highest rate of growth
Of course, the demise of Groupon was mainly due to scaling prematurely, perhaps from the pressure by VCs. David Jackson, founder of Seeking Alpha recently shared a slide deck of the most fatal mistake to avoid as a startup:
Although this might be true in the U.S., and apparently the strategy with many high profile unicorns, I have found that UK VCs differ in this regard and focus on the product first before scale. After assessment of one of my current ventures, Atelier.World, an eCommerce startup, one VC I spoke with discussed the necessity for quality control- and so we completely re-envisioned our tactic in that area by coming up with a tri-part strategy that uses a checks-and-balances system. I have also found that UK VCs do not push founders to scale prematurely but rather develop a well-honed revenue model.
In addition to some other differences between the UK and US: Silicon Valley VCs such as Vinod Khosla and Michael Mortiz have a rather particularly ageist view on hiring of new employees and strictly favour recent university graduates or those with less than 5 years experience:
Michael Moritz, of Sequoia Capital, said he was “an incredibly enthusiastic fan of very talented twenty-somethings starting companies.” His logic was simple:
“[Twenty-somethings] have great passion. They don’t have distractions like families and children and other things that get in the way.”-Michael Moritz, Sequoia Capital
In 2011, famed V.C. Vinod Khosla told a conference that “people over forty-five basically die in terms of new ideas.” I wonder what would happen if the above VCs happen to recruit people to replace their own positions? The entire irony of their statement of course, is that both those VCs are way over 45, so perhaps they are perpetuating an old idea that is no longer relevant in our current era but rather symptomatic of the bygone 70s-90s dotcom eras whose ideas were novel then (ie, the motto: "Don't trust anyone over 30") but are firmly established now as the norm.
I think though that VCs like Mr. Moritz bring up an interesting and important point regarding "distractions like families and children". One of the problems with many companies is the lack of flexibility in scheduling. Currently there is an untapped pool of potential employees: ranging from single mothers, which according to the U.S Census Bureau, there are about 12 million single parents in the U.S.: around 17.4 million, and nearly half living below the poverty line, and Britain has more single parents than almost any country in Europe, with 1/3 being unemployed. This represents a largely untapped area of potential candidates for flexible positions. It is the case that often single mothers cannot find work without also similarly paying for a child care provider and so many single mothers stay home and receive public funds instead.
Another demographic that has largely been untapped by HR are former military veterans. It is estimated that nearly 10% of military veterans in the U.S. are unemployed and make up 9% of the homeless with 50% of the homeless veterans being from age 18-50. In the UK, according to some surveys, 1 in 10 homeless is a military veteran.
One of the problems that military veterans face is that they lack civilian work experience. They might have other qualities: such as discipline and leadership, but their lack of direct experience in sectors that do not specialise in military functions become a huge obstacle for them when they leave the service. Also, I have found in my experience when speaking with military veterans, they often receive no support nor training from the government in how to look for jobs and positions as part of the transition into civilian life, and often aim towards entry level positions in sectors in which they are not familiar. Out of curiosity I decided to browse some military job recruitment boards for veterans, and it was an incredibly complex, disorganised database, and as a tech savvy person, I found it difficult to navigate the site itself without spending hours upon hours just looking for content that might fit particular skill sets as it was fairly clear there was no one actively managing this database in a user-friendly way with no algos to facilitate users with just information dumped on top of each other as it came in.
As part of a startup, I think one of the important long-term goals, aside from creating a product-fit, is also job creation. It is clear HR is in dire need of disruption itself, and could potentially be indirectly responsible for the false belief in the media that there is a "talent shortage" when in reality, we have these untapped populations of people that could potentially fit into a new model of how we hire and train people for positions.
For myself, I have a particular fondness for candidates with history, literature, philosophy and economics degrees because often, I find they have innovative minds and can differentiate between short-term and long-term trends and can connect many different ideas together without the myopic focus of a purely engineering degree or technical education (although I think the latter are also important as well for many functions). However, according to Peter Thiel, it's not all that important to even have an engineering, technical or any sort of degree at all. Despite that, I also think life experiences, and what is not written in the résumé or CV is just as important. It takes time to train people, but that amount of effort is worth it for any company when people have the motivation to learn. Since the dot-com era, we have heavily relied on job databases, HR recruitment agencies and VCs with "an unconscious bias" (a euphemism of saying those dreaded words: racism, sexism, ageism) to find our best talent. Perhaps it's time that we acknowledge some of these are outdated methods and look to the new.
By Sierra Choi
A lot has been mentioned about the recent Microsoft debacle of the AI bot Tay on twitter which, in less than 24 hours, had suddenly started to rant anti-semitic, misogynistic tweets, embarrassing Microsoft, which lead to its disappearance from social media.
Microsoft and its publicity team decided that Tay was influenced or rather, "hacked" by people on 4Chan who trained it to tweet remarks of a misogynistic and racist nature, but in reality, let's face it, algorithms are not designed to make ethical judgements, because meta-ethics often derives from a priori learning or via societal conditioning- something non-biological entities are not capable of.
However, recently, Azeem Azhar made an interesting post on linkedin in regards to ethical decision-making with regards to A.I. which I myself could not answer. Azeem Azhar curates a rather interesting selection of A.I publishings in his newsletter, The Exponential View, who I had been reading since Sept of 2015, after I had found the list as recommended by Nic Brisbourne in his equitykicker blog.
Azeem talks about the famous trolley problem of a simple moral dilemma that has probably been the opening topic in contemporary philosophy courses at university: You see a train running down a track. There are five people on the track who will surely die if the train continues this path. You happen to be standing by a switch that can change the path of the train. If you do that and pull the switch, the train will change tracks and hit and kill a single innocent standing on the other path. Do you pull it?
He explains that this is a simple dilemma that illustrates an ethical consideration that many AI systems will need to handle, but that the trouble is that we as humans don't agree with what to do in the Trolley problem:
A recent paper looks at cultural differences and variations of the Trolley problem. It finds that ordinary British people will pull the switch, and sacrifice the one to save the five, between 63 and 91% of the time. Chinese people faced the same quandary were more inclined to let nature run its fate. They would pull the switch about 20-30% less often; or between 33% and 71% of the time.
To be honest, I was never sure which I have would've chosen either. I do know that in Asian cultures, such as in South Korea, that people tend not to interfere in the business of other people who they do not know well, very similar to the norms of British society. However, if there is a wrongdoing, I tend to think Americans and Brits will make a point to interfere, even with people they do not know, whereas Asians might not be inclined to do so. Still, I am not sure how I would've reacted because it would be placing higher value on one life over another's life.
Hear no evil, see no evil, speak no evil. Does society teach us to look the other way when we see something that offends our sense of morality?
So which future system should we follow: the British or Chinese ethical standards? Azeem further asks: "How do we prevent unelected, unaccountable product managers and AI programmers determining personal or social outcomes through veiled black boxes? What if those programmers are untrained in ethics, philosophy or anthropology?"
This ethical dilemma also reminds me of one of my favourite childhood stories: The Lady or the Tiger? I also recall in 5th grade, one of the books I had been required to read was Mark Twain's Huckleberry Finn. In the book, Huckleberry has to make a moral choice- between his friend, the 'negro' and society's mores at the time which prevented him from becoming friends with someone outside his race, which was considered "unethical". In the end, he followed his heart.
The Lady or the Tiger? Are we taught to be selfish or generous?
We, as a society look towards "logic" to solve so many of our problems, and they end up being wrong. We disregard our instincts and feelings as being "irrational", but I do not think our biology is wrong. Demis Hassabis of DeepMind thinks that our learning is a result of the release of dopamine. Dopamine is released to reward positive behaviours which fuels our learning abilities. But is it as simple as that?
Steve Jobs said to, "Never settle. Follow your heart." And I think he is right; in terms of ethical decisions, we should follow our heart. Our intuition abides by a non-linear logic that encompasses our entire unconscious knowledge base, and when we go against what we not only believe or feel is wrong, we often feel the most disconnected with our own selves. Bertrand Russell says in Principia Mathematica that often children are "smarter" than adults because they have not yet been desensitised by institutionalised education. Our heart understands the bigger picture, our long-term investments, what matters to us in the long run, what we know is true, aside from the illusions of our ambitions. So often we become derailed by the lure of short-term profit, by the tyranny of sociological mores and peer pressure.
We feel this disconnect most when we don't trust our own intuition. Intuition has a higher form of logic than rationale and societal mores, and as Einstein said, "Imagination is more important than knowledge." We need to trust our own selves [and not an algorithm or other people] to make our most important decisions.
"Be hungry, be foolish." Steve Jobs.
By Sierra Choi