How AI Fits Into the Longshoreman Strike

0:00Today on the AI Daily Brief, what the longshoreman strike has to do with artificial intelligence. Before that in the headlines, are we about to see the beginning of an AI IPO wave? The AI Daily Brief is a daily podcast and video about the most important news and discussions in AI. To join the conversation, follow the Discord link in our show notes.

0:24Welcome back to the AI Daily Brief Headlines Edition, all the daily AI news you need in around five minutes. We kick off today with what some wonder might kick off a wave of AI-related IPOs. Specifically, chip-making startup Cerebris Systems has filed for an IPO, and as part of that, we got a bunch of information about the company. The financial documents that were filed reveal what is undeniably a fast-growing but still relatively small company. Cerebris reported$136 million in sales for the first half of this year, with a net loss of$66 million. That is a massive increase from the$8.7 million in sales they did in the same period of last year, while recording$77 million in net losses.

1:03A more interesting part of the filings disclosed that sales to Abu Dhabi's Group 42, or G42, were responsible for around 83 % of the firm's revenue. Cerebris claims to have the required licensing to export their chips to UAE, but so far the sales are all intended to be installed in U.S. data centers. The company's IPO valuation hasn't been revealed at this stage, but Bloomberg suggested the company would target$1 billion of share sales at a$7-8 billion valuation. Of course, how successful Cerebrus' IPO would be might be less about Cerebrus or even AI, and more about the IPO market in general. The IPO window was slammed shut in 2022 and is frankly yet to reopen.

1:40According to some recent statistics, the last three years have seen just 14 tech IPOs in the US, a stretch that is worse than those following the dot-com bubble and the financial crisis. One of Cerebrus' competitors, Ampere Computing, was recently rumored to be exploring a potential sale instead of an IPO. Last month, Bloomberg wrote, The move suggests that Ampere doesn't see an easy path to an initial public offering. Though the company stands to benefit from the continuing AI frenzy, the market has grown more competitive, with several large tech companies rushing to develop the same kind of chips Ampere makes.

2:08Now, when it comes to people's reactions, there was on the one hand some amount of optimism. Investor Bill Gurley tweeted,

2:17Others, though, were more skeptical. Mid-Journey researcher Finbar writes,

2:33Nikolai Yakovenko tweets The Financial Times was somewhere between circumspect and outright skeptical, though. In Alphaville, which frankly is kind of notoriously antagonistic towards the industries they cover, calls this a test case of the AI frenzy. Editor Robin Wigglesworth writes, Cerebrus is an unprofitable AI company utterly dependent on selling chips to one of its biggest investors, which might not actually be able to take them out of the country. Naturally, it is seeking an IPO with an$8 billion valuation. Then again, the demand might be there. An unnamed VC said, there has been a near-unsatiable desire from public investors to find and back the next NVIDIA.

3:11This isn't just about chasing the latest trend. The momentum is also benefiting several VC-funded chip startups that have been toiling away for nearly a decade. Moving over into regulation land, Malaysia is planning to introduce AI regulations focused on the ethical use of the technology. The country has seen substantial investment from global tech firms over the past year to cater to growing demand for cloud and AI services. As part of the broader policy, the company is planning to establish a national AI office. Prime Minister Anwar Ibrahim said, We aim to position Malaysia as a hub for generative AI, and investments from tech partners will be critical in building a robust and secure digital infrastructure.

3:45The new government AI agency will be tasked with coordinating initiatives establishing a five-year technology action plan, as well as creating a regulatory framework to increase adoption within the next 12 months. Meanwhile, over in Europe, the chief executive of Europe's largest software firm has warned against overregulation of AI. During a visit to Silicon Valley, SAP's Christian Klein told the Financial Times, quote, I'm totally against regulating the technology. It would harm the competitiveness of Europe a lot if I can better test my AI models here. If we overregulate using data for developing new AI in Europe, but in the US it is still okay, then you're at a massive disadvantage.

4:20At this stage, all of the worst concerns about the EU's AI bill have kind of started to play out. In recent weeks, of course, we've seen OpenAI and Meta roll out new voice features, each with the caveat that they will not be available in the EU. Lack of access to the latest models also leaves EU-based SaaS companies unable to keep up. Both Salesforce and Oracle are racing to implement AI features in their product suites, while leading EU competitors are held back by regulation. SAP's Klein, however, suggested that EU lawmakers are beginning to see the problem. Again, to the Financial Times, he said, I'm super close to all the discussions in Europe, and as the biggest software company, we have a certain voice in that.

4:53I think the right discussion is happening in Europe right now. How can we regulate the impact on businesses on end users? Don't regulate the technology, regulate the outcome. Lastly today, a report from the land of agents. Politico has teamed up with a Y Combinator-backed AI startup called Capital AI to create a type of agent that will effectively allow readers to more easily consume Politico's content. Semaphore writes, the new AI tool will aim to help users quickly pull together information from Politico and Politico Pro content to create comprehensive reports on topics instantly. Capital AI CEO said, this is not about automating journalism.

5:28It's about unlocking the end user, the lobbyist, the government affairs person at Uber, at SpaceX, at Airbnb, to better understand what's happening in Washington, what regulations are coming, and making business decisions quickly. Instead of having to parse through huge volumes of bill text, you can put in a prompt and our generative model looks through that rich information from Politico and gives you a report back. Now, this is definitely part of a larger trend where instead of deals between publishers and AI companies being just about getting access to the back catalogs from those publishers to train their new models, instead it's more about new types of products at the intersection of publishing and AI.

6:01In many cases with OpenAI in particular, that's been all about how a particular outlet's content appears in the results of a chat GPT prompt. And this is another example of how new types of products will be built that allow people to interact with content in new ways. Y Combinator's Gary Tan said, agentic LLMs are going to be the biggest revenue drivers for media brands. It's a research assistant and persuasive writer at your fingertips. Interesting to see agents finally go into production mode, something we will be watching here closely for sure. For now though, that is going to do it for today's AI Daily Brief headlines.

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8:22Go to besuper.ai and check it out today. Welcome back to the AI Daily Brief. Today, we are talking about not AI in the context of some new model or even in the context of some new regulation. Instead, we are talking about AI and more broadly automation in society and the sort of social and economic upheaval that we can expect as a part of the transition to a different type of world. At the time of recording, the International Longshoremen Association is set to go on strike with the potential for significant disruption to the U.S. economy. Before we get into the specifics and how it relates to artificial intelligence, let's listen to Harold Daggett, the chief negotiator for the Longshoremen, discussing what the impact of this could be.

9:06They died out there with the virus. We all got sick with the virus. We kept them going. From Canada to Maine to Texas, Great Lakes, Puerto Rico, now the Bahamas, Everybody went to work during COVID. Nobody stayed home. Well, I want to be compensated for that. I'm not asking for the world. They know what I want. They know what I want. And if they don't, well, then I have to go into the street, and we have to fight for what we rightfully deserve. These people today don't know what a strike is. Right. When my men hit the streets from Maine to Texas, every single port were locked down. you know what's going to happen?

9:49I'll tell you. First week, be all over the news every night, boom, boom. Second week, guys who sell cars can't sell cars because the cars ain't coming in off the ships. They get laid off. Third week, malls start closing down. They can't get the goods from China. They can't sell clothes. They can't do this. Everything in the United States comes on a ship. they go out of business. Construction workers get laid off because the materials aren't coming in. The steel's not coming in. The lumber's not coming in. They lose their job. Everybody's hating the longshoremen now because now they realize how important our jobs are.

10:35Now, Harold goes on to discuss what would happen if President Biden did impose the Taft-Hartley Act, requiring longshoremen to go back to work for 90 days, and basically said they would show up at their minimum viable capacity, and there would still be huge disruptions. Basically, Harold is saying, there's an unbelievable amount of disruption here. You have to come to the table and negotiate. So let's get into some of the details of this thing. First of all, the strike is set to impact 36 East Coast and Gulf ports, stretching from Maine to Houston. The ports include Baltimore, Boston, Charleston, South Carolina, Jacksonville, Miami, and many more.

11:09The ILA is looking for a wage increase as part of a new contract with the United States Maritime Alliance, which is the organization that represents the shipping companies that employ the workers. We don't necessarily have a ton of details, although the Wall Street Journal cited one unnamed source who said that the union sought a 77 % increase. In terms of recent precedent, this is obviously East Coast stock workers, but the West Coast stock workers engaged in contract negotiations for more than a year before reaching an agreement last September, September 2023, which raised the pay of union members by 32 % or$4.62 an hour.

11:40Now, the estimates of how disruptive this can be vary wildly, but all tell the same story of incredible disruption. Anderson Economic Group estimates$2.1 billion a week. The Conference Board estimates$3.7 billion a week. Oxford Economics says up to$7.5 billion a week. And some J.P. Morgan estimates put the potential of disruption at up to$5 billion per day. Already, ship diversions are up over 400 % just based on the fear of the strike. 73 % of agricultural imports come through these ports, which also handle 14 % of agricultural exports. The ports also handle around 68 % of all containerized exports, including food, raw materials, or electronics, and 56 % of all containerized imports.

12:19Now, it's a little bit beyond the scope of this particular show to get into all of the details of the strike. The USMX has said that for months it's reached out to the ILA to negotiate a new contract, with the ILA not agreeing to a schedule, while the ILA accuses the USMX of blocking the path forward on a new contract without specifying how. Where this starts to intersect with our particular part of the story is that outside of wages, one of the key demands is a total ban on automation. Now, like I said, this is bigger than just generative AI that we talk to, but is clearly part of the same overall story.

12:50Chief union negotiator Harold Daggett again said, we do not believe that robotics should take over a human being's job, especially a human being that's historically performed that job. And so in this, the story clearly is tapping into a major fear that we've seen around AI, which is that huge segments of the population will see their jobs disappear or dramatically change. Now, interestingly, when it comes to generative AI, one of the things that makes it fascinating from a historical perspective is that it's a shift that is happening to not blue-collar jobs first, but to white-collar jobs. One of the big groups that is worried currently is, for example, software developers who are seeing what they do automated in a way that didn't seem possible just a few years ago.

13:27At the same time, AI is clearly converging with robotics in a way that could impact industries like these jobs on the docks. And for evidence of that, all we have to do is look at China. Jason Smith tweeted this video of a Chinese port where ships are unloaded remotely with 5G and then AI vehicles are automatically driven to the containers to trucks and load them without human assistance. Of course, this leads to a port being operated more efficiently with a reduced workforce, which is exactly what the longshoremen in the United States fear. As you might imagine, then, the strike has triggered a wave of discussion throughout the tech sector.

13:56And a lot of the commentary, if sympathetic to the challenge of disruption, also recognizes that there is a sort of inexorable progress here that is going to be impossible for the longshoremen to fight against forever. Sar Harabhakti writes, The port union is demanding total ban on automation at 36 U.S. ports. He quotes again Harold, who we just quoted before, saying we do not believe that robotics should take over a human being's job, especially a human being that's historically performed that job. Sar writes, by this logic, we would all still be farmers. He continues, At this point, the port union should just call for banning the very idea of using containers.

14:28Let's just have humans carry everything one by one by hands. that will massively boost employment. We used to do that, after all, not too long ago before we invented containers. Now, obviously, SAR is being tongue-in-cheek, but interestingly enough, that was sort of part of what happened in the 1970s during the move to containerization. The Longshoremen Union back then walked off the job for 130 days in 1971, in part due to disagreements on rules governing what was then the new technology, which was containers. An essay from the University of Washington reads, In the years leading up to the 1971 strike, the ILWU had been suffering substantial losses in its marketplace bargaining power.

15:01This was a direct result of the introduction of technology, specifically containerization, and the weak economy of the early 1970s. During most of the union's history, longshore work was break bulk cargo or goods shipped by boxes, pallets, or other individual units instead of packaging them all together in containers. For longshoremen, shipping this kind of cargo required a large number of workers willing to perform a dangerous job. For employers, it was costly, labor-intensive, and slow. Technology was introduced to automate and mechanize longshore work, the adoption of which the ILWU initially opposed, fearing job loss.

15:29Point being, this has happened before. This conversation, in fact, has happened before. Investor Bill Gurley quote tweeted that same sentiment and said, If this is true, the federal government should intervene. Outlawing the effective use of technology will unquestionably doom our nation. We will become globally uncompetitive. Kit Eaton from Inc. Magazine writes about both sides of this. When a container ship arrives at a dock, every one of those multi-ton shipping containers would be shackled to a crane's cable, lifted off the ship, moved ashore, stacked, organized, and moved around by trucks and hoists, each with a human at the controls.

15:58This is dangerous, heavy-duty work, and in many cases it requires an expert driver. Forklifts and cranes are complicated machines, and in the case of cranes, it's often necessary to understand the physics of which type of load is being moved by the cable in order to safely lift it. The danger present in this industry is typified by dozens of articles each year documenting crane or container-related accidents at ports around the world. But herein lies the problem. Accidents at ports risk not only physically harming people, but mean potential economic hits through damaged cargo or expensive dockside machinery or shipboard equipment.

16:25Apart from accidents, mislabeling or misdirecting cargo at a port could also hit businesses' revenue. Replacing failable human workers could thus save port operators a lot of money. Now, there is some similarity here with the issues that were discussed in the 2023 SAG-AFTRA strikes. Those strikes were also in part about giving current workers rights in the context of an AI-powered future. Of course, the difference here is that this strike is on an entirely different scale of impact, given the potential disruption to supply chains such as those for food. One of the things that I've frequently talked about here is that I anticipate that the rise of AI will bring with it a commensurate rise and return of labor unions.

17:01To the extent that you're looking for a bright side in all of this, one of the things that I believe will slow down how fast AI enters the world is this human inertia. And while that might be painful along the way, involving big disagreements and big fights, the hopeful side of it is the space that it will create for us to have broader society-level conversations around what the social contract looks like in a world where AI and robots can do a lot of the jobs of today. I am firmly in the camp that the net impact of AI is going to be radically more creation, production, basically radically more of everything.

17:34But I'm also in the camp that on the path to that, there are going to be some painful transitions, transitions that we need to manage. With the longshoreman strike, we are living inside another example of that. And for that reason alone, it is worth your attention. I'll bring you updates as they come, but for now, that is going to do it for today's AI Daily Brief. Appreciate you listening or watching. as always, and until next time, peace.