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special safety equipment and procedures. Do not attempt. 3. 2018 Lexus Hybrid base models compared to 2018 Lexus gas base models. ©2018 Lexus


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JULY 1, 2018 

FEATURES 

artificial intelligence: special report 

Unmasking 

A.I.’s Bias 

Problem 

BY JONATHAN VANIAN 

Can This 

Startup 

Break Big 

Tech’s Hold 

on A.I. ? 

By VAUHINI VARA 

VOLUME 178 /// NUMBER 1 

A.I. ILLUSTRATION BY DANIL KRIVORUCHKO; ROBOT: JOAN CROS— NURPHOTO VIA GETTY IMAGES 

A.I. 

. Special Report 

China’s two 

tech titans are 

battling for 

supremacy. 

The winner 

gets the 

world. 

By Adam 

Lashinsky 

Alibaba vs. Tencent 

ON THE COVER: 

ILLUSTRATION BY 

JUSTIN METZ 

Ma vs. Ma 

By ADAM LASHINSKY 

Jack Ma of Alibaba and 

Pony Ma of Tencent 

built the empires that 

dominate China’s 

digitaleconomy.Isthe 

world big enough for 

both of them? 

72 

PAGE NO. 

Business is betting 

billions on A.I., only to 

find that its algorithms 

and systems can 

amplify human prejudice. 

Can Silicon Valley 

keep bigotry at bay? 

54 

PAGE NO. 

The Dating 

Game 

By LEIGH GALLAGHER 

MatchGrouphaslong 

been the belle of the 

online dating ball, 

butwithBumbleand 

Facebook moving in 

on its turf, CEO Mandy 

Ginsberg must keep 

thecompanyfrom 

getting ghosted. 

84 

Montreal’s Element AI 

has the pedigree 

to push the boundariesofwhatispossible 

with artificial intelligence. 

64 


72 

5 

FORTUNE.COM // JULY.1.18

CONTENTS 

V OLUME 178 /// NUMBER 1 

DEPARTMENTS 

foreword 

8 Springtime for A.I. 

Machine-learning algorithms 

are making ever bigger breakthroughs—and 

raising important 

questions about their very human 

limitations. By CLIFTON LEAF 

briefing 

11 America: Who’ll Keep 

on Truckin’? 

Autonomous trucks may revolutionize 

the industry one day, but 

the U.S. could be facing an acute 

driver shortage well before then. 

By KIRSTEN KOROSEC 

14 Red Staters See Green 

in Hemp 

A crop from American history 

could be making a big comeback. 

By JEFF JOHN ROBERTS 

15 Forced Arbitration Enables 

Harassers 

The Supreme Court dealt a blow 

to women in the workplace. Here’s 

how we’re fighting back. 

By GRETCHEN CARLSON 

16 Online Success Doesn’t 

Come Cheap 

Target is holding its own against 

Amazon—but at too great a price, 

investors fear. By PHIL WAHBA 

17 Electronic Sports, Real 

Money 

A recent legal ruling could level up 

interest in e-sports. 

By JONATHAN SPERLING 

18 The 10 Best Workplaces 

for Millennials 

This generation finds lasting job 

satisfaction at firms with strong 

values. By CHRISTINA AUSTIN 

49 

focus 

tech 

23 This Game Is Out of Control 

E-sports has grown into a real 

profession, touting benefits and 

other full-time trappings. But as 

workplaces go, it’s brutal. 

By LISA MARIE SEGARRA 

26 “Black Mirror,” Slightly 

Broken 

China seeks A.I. supremacy 

through protectionism, state 

subsidies, and monopolies. That 

doesn’t mean the country will 

succeed. By CLAY CHANDLER 

28 To Catch a Bitcoin Thief, 

Call These Detectives 

Cryptoforensic firms are helping 

law enforcement track criminals 

and corporations maintain compliance. 

By JEFF JOHN ROBERTS 

30 Hit the Gym, Gently 

Exos, a firm known for training 

elite athletes, is using sophisticated 

tech to help desk jockeys 

stay healthy. By PHIL WAHBA 

34 Tech for the #MeToo Era 

Meet the blood alcohol 

concentration–tracking Buzz 

bracelet and the unorthodox 

design process that birthed it. 

By MCKENNA MOORE 

venture 

38 Where Autistic 

Workers Thrive 

People on the autism spectrum 

are making big contributions to 

Fortune 500 companies. 

By DINAH ENG 

invest 

41 Where to Hide From 

the Headlines 

Losing sleep over a looming trade 

war or other global conflicts? 

These stocks offer safety. 

By RYAN DEROUSSEAU 

44 Making Tech’s Future 

More Female 

Through her firm Pivotal 

Ventures, philanthropist 

Melinda Gates is backing tech 

projects whose leaders break 

the white-dudes-in-hoodies 

stereotype. 

Interview by POLINA MARINOVA 

passions 

49 Ecuador’s Enchanted Isles 

When it comes to far-flung 

escapes, few rival the Galápagos 

Islands. By ALEXANDRA KIRKMAN 

BAC K PAG E 

last byte 

96 Much to Lose for 

U.S. Farmers 

If a trade war breaks out, 

American agriculture is likely to 

pay a hefty price. 

Text by BRIAN O’KEEFE; graphic 

by NICOLAS RAPP 


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FOREWORD 

SPRINGTIME 

FORA.I. 

ON FEB. 24, 1956, ARTHUR LEE SAMUEL played a game of checkers on 

television. His opponent: a 36-bit vacuum tube computer made by 

International Business Machines. 

Samuel, then a 55-year-old researcher at IBM, had painstakingly 

assigned each of the 64 squares on the checkerboard a diferent set of 

machine-word identifiers, and done the same with each piece on each 

square. Then he programmed his IBM 701 computer to think: that is, to 

consider a few possible checkers moves “by evaluating the resulting board 

positions much as a human player might do,” Samuel would later write. 

“ ‘Looking ahead’ is prepared for by computing all possible next moves, 

starting with a given board position,” he explained. For each of those 

potential moves, the computer would redraw the board in its electronic 

brain with “the old board positions being saved to facilitate a return 

to the starting point,” and then the process would repeat. When the 

indicated move didn’t result in a better outcome, the IBM 701 would try 

another one, and so forth, until the machine was successful. 

In short, Samuel had programmed the “digital computer to behave in 

a way which, if done by human beings or animals, would be described as 

involving the process of learning,” he said. 

Before the televised match, IBM president Tom Watson—the namesake 

of IBM’s current-model thinking machine—predicted his company’s 

shares would soar after the demonstration. They did just that. 

What followed was a heady period of excitement during the 1950s and 

1960s, when computer scientists sketched out dreams and designs of 

advanced problem-solving machines that, in many cases, mirrored the 

robotic creations of science fiction novels. 

What followed that, however, was a long reality check—a period that, 

it turns out, was far less “cyborg” than incremental science. Over the next 

half-century, many of the most ambitious fantasies of artificial intelligence 

were often met with prosaic, real-world limitations. The progress 

was genuine, of course—from mathematical breakthroughs to major 

advances in computing power. But still the perceived failures led to long 

fallow periods that many in the field dubbed “A.I. winters.” 

Well, it’s spring again in the realm of A.I.—and the ambition (and 

hype) are blooming big-time. Big companies are now feverishly gobbling 

up startups—firms that are teaching machines to master the idiosyncrasies 

of human conversation, to expertly recognize the world around 

them, and to instantly scan terabytes of data to discover patterns that no 

mere mortal could recognize. 


Yes, a lot has changed, as 

we explore in our A.I. Special 

Report this issue (see the package 

of articles that begins on 

page 54). But as writers Jonathan 

Vanian and Vauhini Vara 

show, it’s time for another reality 

check. As the capacity of these 

algorithms grows exponentially, 

so do the questions about their 

potential biases and their risky 

assumptions. It’s an ongoing 

lesson that requires our own 

attempt at deep learning. The 

success of this latest stage of A.I. 

development may depend on it. 

Which brings me to our cover 

story. As “thoughtful” as some 

machines are becoming, there 

are none (yet) that can mimic 

the spark of creative energy at 

the heart of entrepreneurship. 

Creating a company and building 

it may be one of the most 

human things that humans do. 

Which is one of many reasons 

I find Adam Lashinsky’s feature 

story on Jack Ma and Huateng 

“Pony” Ma—the mightily ambitious 

founders, respectively, 

of Alibaba and Tencent—such 

an intoxicating read. In “Ma 

vs. Ma” (see page 72), Adam 

expertly depicts what may be the 

biggest corporate battle in China 

while taking us inside an Internet 

ecosystem that may spread 

rapidly around the world. 

For a grand tour of intelligence, 

both artificial and real, 

read on. And please, as always, 

let us know what you think. 

CLIFTON LEAF 

Editor-in-Chief,Fortune 

@CliftonLeaf 

8 


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THE 

WORLD IN 

8 

PAGES 

PAGE 

1 

TRUCK: OWAKI/KULLA— CORBIS/GETTY IMAGES; SIGN: PATRICK STRATTNER— GETTY IMAGES 

America: Who’ll 

Keep on Truckin’? 

Autonomous trucks may revolutionize the 

industry one day, but the U.S. could be facing 

an acute driver shortage well before then. 

By Kirsten Korosec 

THE TRUCKING INDUSTRY, 

TRANSPORTATION 

the backbone of the U.S. 

economy, is carrying more weight than ever 

despite a critical shortage of drivers. And now 

this compression point is sending waves of pain 

through the supply chain from distributors and 

wholesalers to retailers and consumers in the 

form of fast-rising shipping costs. Even Amazon 

and its Prime members are feeling the pinch. 

This predicament was a long time coming. An 

aging driver population that continues to 


11 


dwindle owing to 

retirement—combined 

with a lack of younger 

workers coming into 

the industry—is a 

problem that has been 

festering for 15 years. 

The Great Recession 

and the years of 

recovery that followed 

largely masked the 

problem. But by 2012, 

with the U.S. economy 

strengthening, fissures 

began to show. 

Trucks moved more 

than 70% of all U.S. 

freight and generated 

$719 billion in revenue 

in 2017, according to 

the American Trucking 

Associations (ATA). 

“We could see the 

demographics, and 

now they’re finally hitting 

home,” says Brian 

Fielkow, president and 

CEO of Jetco Delivery, 

a trucking and logistics 

company based in 

Houston. “This isn’t 

something we just 

woke up to.” 

The pain point is specific. 

The industry calls 

them “full-truckload, 

over-the-road nonlocal 

drivers,” jargon for 

drivers who haul goods 

over long distances, 

often days, if not weeks, 

before returning home. 

That lifestyle just isn’t 

attracting millennials 

and the incoming 

Gen Z cohort who place 

a greater emphasis on 

work/life balance. 

The long-haul sector, 

which employs around 

500,000, was in need 

of nearly 51,000 truck 

drivers by the end of 

WAYMO 

UBER 

NIKOLA 

HAULINGCASH 

1 

AUTONOMOUS TRUCKING 

has the potential to be a 

lucrative business, so it 

has naturally attracted 

big money and a number 

of players. Waymo(1), an 

Alphabet company, has 

integrated its self-driving 

system into Class 8 big-rig 

trucks and is testing them 

in California and Arizona. 

Uber(2) is also developing 

self-driving trucks but has 

temporarily suspended 

testing on public roads 

following a fatal accident 

involving its passenger car 

program. Other startups 

in the race include Starsky 

Robotics, Embark, Peloton, 

TuSimple, electric trucking 

company Nikola(3), and 

even Tesla. Established players 

like Volvo and Daimler, 

meanwhile, have been diligently 

working on increasingly 

advanced levels of 

automation in their trucks. 

2 

3 

2017, the worst shortage 

it had ever seen. 

The lack of qualified 

drivers—some trucking 

companies have 

complained only 1% to 

2% of applicants meet 

their requirements— 

has businesses competing 

for the same pool of 

workers. 

The shortage is 

creating a ripple efect. 

Companies vying for 

qualified workers are 

ofering higher pay and 

signing bonuses. The 

median pay for drivers in 

this category is $59,000, 

according to the ATA. 

Experienced drivers who 

work for private fleets 

can make as much as 

$86,000 a year. 

“I call it the free 

agency of trucking,” says 

Bob Costello, senior VP 

at the ATA, adding that 

the annualized turnover 

rate is 94%. 

To keep up, shipping 

rates are rising. In 2017, 

the average revenue 

per mile, excluding fuel 

surcharges, increased 

15% on a year-over-year 

basis. “I don’t think 

I’ve ever seen rates so 

high,” says Costello. But 

margins, which hover 

around 5%, haven’t 

budged because trucking 

companies pour 

that additional revenue 

into recruiting and 

retaining drivers. 

Consumers are just 

starting to feel the effects: 

Amazon recently 

increased its Prime 

membership fee, which 

includes free shipping, 

from $99 to $119 a year. 


The company, which 

saw shipping costs 

increase 38% in the 

first quarter compared 

with the same period 

last year, noted the rising 

price of transporting 

goods as one factor 

behind the decision. 

Though the common 

wisdom is that selfdriving 

technology will 

eliminate the need for 

human drivers, it could 

actually help in recruiting 

them and reducing 

costs, at least in the 

short term. 

“It begins with driver 

assistance systems— 

that technology is here 

today,” says Ted Alling, 

a managing partner 

at early stage venture 

firm Dynamo and 

cofounder and former 

CEO of logistics company 

Access America. 

Major truckmakers 

like Freightliner and 

Volvo are rolling out 

technologies such as 

lane-keep assist and 

adaptive cruise control 

that are already found 

in premium passenger 

vehicles. Those technologies 

could lower 

the barrier to nonlocal 

trucking and increase 

the pool of drivers that 

fleets can recruit from. 

“I do see technology 

as a way to bring drivers 

back into the truck, not 

as a way to kick them 

out,” says Fielkow. “And 

the day will come when 

we have autonomous 

infrastructure and autonomous 

trucks. I just 

don’t see it happening in 

the next five years.” 

COURTESY OF WAYMO, UBER, & NIKOLA 

12 


Seeing Trends 

ANALYTICS in the Data 

GALLUP 2018 GLOBAL LAW AND ORDER INDEX 

Based on people’s sense of personal security and their 

experiences with crime and law enforcement. 

44-50 (WORST) 

51-60 

61-70 

71-80 

81-90 

91-97 (BEST) 

N.A. 

NORWAY: 

93 

SINGAPORE MAY HAVE BEENthe perfect place for a 

summit to ease rising nuclear tensions. Based on a 

Gallup poll measuring how safe citizens feel and how 

confident they are in law enforcement, the city-state 

is the most secure nation among 142 countries 

surveyed. Venezuela finished dead last with just 24% 

of its citizens having faith in the police. The U.S. scored 

worse than 31 other countries, including Slovenia and 

India. (To read how global security affects your portfolio, 

see “Where to Hide From the Headlines” in this issue.) 

FINLAND: 

93 

PAGE 

3 

CANADA: 

90 

UZBEKISTAN: 

91 

MEXICO: 

58 

U.S.: 84 

ICELAND: 

93 

HONG KONG: 

91 

WORST SCORE: 

VENEZUELA: 44 

LIBERIA: 

56 

GABON: 

55 

AFGHANISTAN: 

45 

BEST SCORE: 

SINGAPORE: 97 

SOUTH AFRICA: 

58 

SOUTH SUDAN: 

54 

SOURCE: GALLUP 

NEVER UNPLUGGED 

It’s hard to imagine that 

anyone once predicted 

the death of the Internet. 

The changing nature of 

work and increasingly 

capable smartphones mean 

consumers today spend 

an ever-growing share of 

their waking hours online: 

about 5.9 hours in 2017, 

up 4% from a year earlier. 

Meanwhile, prices for goods 

sold online have fallen 

3% in the past two years, 

compared with 1% off-line. 

TIME SPENT 

DAILY WITH 

DIGITAL MEDIA 

PER ADULT IN 

THE U.S. 

4 

2 

0 

MOBILE 

OTHER 

5.9 

HOURS 

2008 2017 

MORE JOB OPENINGS 

THAN UNEMPLOYED 

Time to gussy up the old 

résumé. For the first time 

on record, U.S. job openings 

exceeded the number of 

unemployed in April, with 

6.7 million postings against 

15 million 

10 

UNEMPLOYED 

6.3 million seeking work. And 


5 

that trend may continue with 

the number of unemployed 

falling under 6.1 million in 

May. While wages for job 

stayers rose a muted 2.9% in 0 

April, job switchers gained 4%. 

RECESSION 

6.07 M 

JOB OPENINGS 

MAY 2003 MAY 2018 

SOURCES: KLEINER PERKINS; EMARKETER 

SOURCE: BLS, DATA SEASONALLY ADJUSTED, NONFARM JOB OPENINGS 

GRAPHICS BY NICOLAS RAPP, WORDS BY LUCINDA SHEN 

13 


PAGE 

4 

FREEAGENTS 

KING-SIZE 

CONTRACT? 

NO ATHLETE’S career 

draws quite as much 

attention as that of 

the NBA’s biggest star, 

LeBron James. 

The Cleveland 

Cavaliers forward 

can opt out of his 

current contract for 

the 2018–19 season, 

making him a free 

agent once again. If he 

re-signs with Cleveland, 

which has surrounded 

him with a supporting 

cast of questionable 

quality, he could earn 

a record $205 million 

over five years. 

James is VP of the 

NBA players’ union 

and has advocated for 

higher pay. So unlike 

with his move to the 

Miami Heat in 2010, 

don’t expect him to 

take a pay cut this time 

around. 

Red Staters See 

Green in Hemp 

A crop from American history could be 

making a big comeback after nearly five 

decades. By Jeff John Roberts 

ONCE GROWN ON the estates of Washington 

and Jeferson—and used 

FARMING 

in everything from textiles to food—hemp is as 

American as they come. And yet according to 

a recent report for Congress, the United States 

imported $78 million more of the green stuf than 

it exported in 2015. It’s the sort of trade imbalance 

some might call “Sad!” 

The reasons for the hemp deficit, however, 

have nothing to do with the policies of China and 

Canada, which are the two biggest suppliers to the 

U.S. Instead, the problem lies with increasingly 

outdated domestic drug laws. Hemp is derived 

from the same plant as marijuana (Cannabis 

sativa) but uses strains low in the psychoactive 

compound THC. Still, the association was enough 

to get the crop regulated under the Controlled 

Substances Act, passed in 1970, severely curtailing 

domestic production. 

There’s change afoot though, and the Trump 

administration appears poised to accelerate it. 

Agriculture Secretary Sonny Purdue expressed 


Hemp’s 

strong fibers 

are useful for 

making rope— 

and it used 

to be in U.S. 

currency. 

support in June for a 

Senate bill, authored 

by Majority Leader 

Mitch McConnell— 

who represents Kentucky, 

a state set to 

benefit from a hemp 

boom—that would 

expand the production 

of industrial 

hemp in the U.S. 

The bill has 

bipartisan support 

and comes at a time 

of growing awareness 

among policymakers 

that hemp and 

marijuana are not 

the same crop. 

Geof Whaling, who 

leads the National 

Hemp Association, 

says he’s optimistic 

about the crop’s future 

in the U.S., based on 

his conversations 

with Secretary Purdue’s 

oice and the 

growing support for 

hemp across corporate 

America. 

JAMES: JASON MILLER— GETTY IMAGES; HEMP: MARY EVANS/JOHN GAY/ENGLISH HERITAGE/EVERETT COLLECTION; $10: NATIONAL NUMISMATIC COLLECTION, NATIONAL MUSEUM OF AMERICAN HISTORY 

14 


PAGE 

5 

MPWSUMMIT 

SAUDIWOMEN 

OVERCOME 

MOST 

INFAMOUS 

HURDLE 

LAMA AL SULAIMAN had been counting down the days. “At 12:01, I 

will be driving,” the vice chair of the Jeddah Chamber of Commerce 

and Industry said of the June 24 lifting of Saudi Arabia’s 

ban on women drivers. “It became a burden,” she toldFortune’s 

Most Powerful Women International Summit in London. “No 

one wanted to discuss anything important happening in Saudi 

Arabia except that women can’t drive.” Al Sulaiman was elected 

in the country’s first coed municipal elections in 2015 and later 

resigned because of gender segregation at council meetings. 

“I’m excited to talk about other things.” —CLAIRE ZILLMAN 

CARLSON: ASTRID STAWIARZ— GETTY IMAGES; AL SULAIMAN: PETER DENCH— FORTUNE MAGAZINE 

Forced Arbitration 

Enables Harassers 

The Supreme Court dealt a blow to women in the 

workplace. Here’s how we’re fighting back. 

By Gretchen Carlson 

THE #METOO MOVEMENT has gotten a 

#METOO 

wake-up call from the U.S. Supreme 

Court’s ruling in Epic Systems Corp. v. Lewis. The 

ruling allows companies to make forced arbitration 

a condition of employment and prohibits workers 

from taking collective legal action against employers. 

It’s bad news for the 60 million Americans subject to 

forced arbitration, and even worse for the one in three 

women victimized by workplace sexual harassment. 

Forced arbitration 

is a sexual harasser’s 

best friend: It keeps 

proceedings secret, 

findings sealed, 

and victims silent. 

But its impact goes 

much further. Of 

the thousands of 

women I spoke to 

while writing my 

book Be Fierce, the 

vast majority who 

complained about 

harassment never 

worked in their 

chosen careers again. 

Blacklisting is common 

post-arbitration. 

Because the facts 

don’t come out in 

trial, victims are silenced, 

and predators 

often keep their jobs. 

Guess who controls 

the narrative in that 

scenario? With the 

ofended party out of 

the picture, workplaces 

become—in 

actor Asia Argento’s 

haunting words—a 

“hunting ground.” 

It was with immense 

pride that I 

joined legislators 

from both parties 

in December to 

introduce the Ending 

Forced Arbitration of 

Sexual Harassment 

Act, which restores 

victims’ constitutional 

Seventh 

Amendment right to 

a jury trial. The bill 

now has 17 bipartisan 

cosponsors, and it 

is my mission to get 

it through Congress 

and down to the 

President’s desk for 

signature this year. 

Companies can 

and must also step 

up. Microsoft and 

Uber have both ended 

forced arbitration for 

sexual harassment 

claims, and any company 

trying to recruit 

talented women must 

do the same. It’s a 

diferentiator, and 

trust me: The women 

are watching. 

Gretchen Carlson 

is a TV journalist 

and women’s 

empowerment 

advocate. Her 

most recent book 

is Be Fierce: Stop 

Harassment and Take 

Your Power Back. 


15 


PAGE 

6 

trade 

war deals 

its first 

blows 

Buckle up: 

President 

Trump’s battle 

with the U.S.’s 

largest trading 

partners is just 

getting started. 

$100 B 

TOTAL AMOUNT 

of reciprocal 

tariffs imposed 

by the United 

States and China 

on 1,761 goods 

$594 B 

GLOBAL 

MARKET CAP 

lost since 

tariffs were 

announced, as 

measured by 

S&P Global BMI 

-15% 

U.S. OIL 

DISCOUNT 

to world 

benchmark 

144 

DAYS ELAPSED 

since last 

S&P 500 

high—the 

longest period 

in the Trump 

presidency 

—LUCINDA SHEN 

DATA AS OF 6/18/18 

Online Success 

Doesn’t Come Cheap 

Target is holding its own against Amazon—but 

at too great a price, investors fear. By Phil Wahba 

BEING A CONTENDER 

E-COMMERCE 

can cost a lot 

of money. Target shareholders 

were reminded of that when the discount retailer 

recently reported strong online sales growth in its 

first quarter, figures that showed it is holding its 

own against Amazon and Walmart. 

Digital sales rose 28% even as more shoppers 

came to stores, showing that Target’s eforts to 

one-two punch web and brick-and-mortar retail is 

FORD’SICONICMOVE 

working. But that has 

come at a price that 

worries some investors, 

as the sharp 

drop in Target’s stock 

the day of that earnings 

result showed. 

Target’s operating 

income margin 

fell, and the retailer’s 

recent 40% cut to 

the price of next-day 

delivery will bite 

into profits, as will 

its $7 billion multiyear 

program to 

freshen up stores 

and improve its 

e-commerce. 

Walmart, Kohl’s, 

and Nordstrom 

have also poured 

billions into their 

e-commerce oferings 

and been periodically 

punished for it by 

Wall Street, despite 

building thriving 

online businesses. 

Investors may have 

to buck up about 

the expenses all this 

entails. It’s simply the 

cost of doing business 

in the Amazon era. 

MICHIGAN Central Station, 

CITIES 

the poster child for Detroit’s 

urban blight, could soon be a beacon for 

its regeneration after being bought by the 

Ford Motor Co. 

Abandoned for more than three decades, 

the monolith will form part of a 1.2-millionsquare-foot 

campus in the Corktown 

neighborhood and will house teams 

working on new mobility technologies. 


ARROWS: MIRONOV KONSTANTIN— GETTY IMAGES; MICHIGAN CENTRAL: SPENCER PLATT/GETTY IMAGES 

16 


PAGE 

7 

SOCCER 

HOW 

NAFTA 

CANSAVE 

FIFA 

TRADE TENSIONS between 

the three members of the 

North American Free Trade 

Agreement (NAFTA) may be 

at the highest levels in recent 

memory, but that didn’t 

deter the voting committee 

of soccer’s governing body 

FIFA from awarding the 2026 

World Cup to the U.S., Canada, 

and Mexico. 

Representatives of the 

winning bidders promised 

FIFA its World Cup would generate 

a record $11 billion in 

profit, not to mention countless 

dollars for the hospitality 

and advertising industries. 

Brands in particular will be 

looking to capitalize on the 

first men’s World Cup on the 

continent since 1994, hosted 

solely by the U.S., which was 

the most financially successful 

tournament in the 

competition’s history. For this 

year’s World Cup in Russia, 

long-serving advertisers 

Sony and Emirates declined 

to renew contracts with FIFA, 

which was rocked by a corruption 

scandal in 2015. The 

lure of NAFTA-bloc consumers 

in 2026 could give those 

companies, along with any 

others on the fence, reason to 

reconsider such a stance. 

With the competition 

expanding from 32 teams to 

48 in 2026, the event is bound 

to reward any brand willing to 

invest in FIFA. —ARIC JENKINS 

BALLS: MIKHAIL MISHCHENKO— GETTY IMAGES; TROPHY: MICHAEL REGAN— FIFA VIA GETTY IMAGES; FANS: ANDREW CULLEN— REUTERS 

Electronic Sports, 

Real Money 

A recent legal ruling could level up interest in 

e-sports. By Jonathan Sperling 

ODDSMAKERS REJOICED in May when the 

GAMING 

U.S. Supreme Court decided to strike 

down the Professional and Amateur Sports Protection 

Act, paving a way for states to legalize sports betting. 

Gambling on sporting events has come a long way 

in the more than 25 years in which PASPA was law. 

E-sports—that is, competitive computer gaming—has 

- 

quickly risen to become one of the premier vessels for 

sports betting, and 

with its rise come 

questions on how the 

ruling will afect the 

future of the industry. 

“For e-sports 

betting, the PASPA 

decision opened the 

door for any meaningful 

traction in 

the U.S.,” says Chris 

Grove, the managing 

director of Eilers 

& Krejcik Gaming, 

an industry research 

firm. “You never see 

[game] publishers 

get anywhere close to 

betting unless there 

is a tightly regulated 

market.” 

In a report that 

analyzed the intersection 

of gambling 

and e-sports, Grove 

projected that the 

total value of money 

and in-game items 

wagered on major 

e-sports titles would 

hit $12.9 billion by 

2020, with more 

than 6.5 million 

consumers placing 

wagers. (For comparison, 

the total size 

of the legal sports 

betting market in 

Nevada was $4.8 billion 

in 2017.) 

In terms of future 

dangers coming to 

e-sports as a result of 

the ruling, underage 

gambling and 

damage to competitive 

integrity could 

rise, but no more 

than they would in a 

gray market, according 

to Bryce Blum, a 

founding partner at 

firm ESG Law, which 

represents more than 

25 Western e-sports 

organizations. 

Says Blum: “We 

need to accept the 

fact that betting on 

e-sports is going to 

happen whether we 

like it or not and 

actively become part 

of the solution.” 


17 


03 

EDWARDJONES 

HQ.............. Des Peres, Mo. 

EMPLOYEES.............42,950 

MILLENNIALS.................24% 

According to one worker 

at this financial powerhouse, 

everyone “is genuinely 

concerned with 

helping you completely 

fulfill your potential.” 

07 

VETERANSUNITED 

HOMELOANS 

HQ............... Columbia, Mo. 

EMPLOYEES............... 2,395 

MILLENNIALS...............42% 

One military spouse was 

given an extra 80 hours 

of paid leave to spend 

with her husband before 

he was deployed and 

after he returns. 

PAGE 

8 

04 

WORKDAY 

08 

HYATTHOTELS 

The 10 Best 

Workplaces for 

Millennials 

Fortune worked with our long-standing research 

partner Great Place to Work to help us find the 

best employers for those born between 1981 and 

1997—a generation known for appreciating 

firms with strong values and for changing jobs 

frequently. The 10 companies highlighted here 

know how to make their teams stay put—and stay 

happy. By Christina Austin 

HQ.........Pleasanton, Calif. 

EMPLOYEES............... 5,473 

MILLENNIALS...............53% 

Workday has a timer that 

turns lights off at 6 p.m. 

to remind employees 

that it’s time to go home, 

encouraging a healthy 

work/life balance. 

05 

KIMLEY-HORN 

HQ.................. Raleigh, N.C. 

EMPLOYEES............... 2,942 

MILLENNIALS...............60% 

Associates at this planning 

and design firm love 

the open-door policy. 

Management also values 

the knowledge everyone 

brings to the table. 

HQ...........................Chicago 

EMPLOYEES.............35,309 

MILLENNIALS...............60% 

One millennial worker 

loves Hyatt’s strong, 

relatable values and that 

it accepts “all people, regardless 

of race, sexual 

orientation, and gender.” 

09 

KIMPTONHOTELS& 

RESTAURANTS 

HQ...............San Francisco 

EMPLOYEES................7,361 

MILLENNIALS........... 55.4% 

Kimpton “values individuals 

and celebrates 

people for who they are.” 

Its leadership also encourages 

employees to 

let their “freak flag fly.” 

01 

ULTIMATESOFTWARE 

HQ...................Weston, Fla. 

EMPLOYEES............... 4,723 

MILLENNIALS...............41% 

One worker says he’d be 

surprised if anyone could 

name all the great benefits 

“without forgetting 

at least one.” Many single 

out the firm’s integrity. 

02 

SALESFORCE 

HQ...............San Francisco 

EMPLOYEES......... 17,417 

MILLENNIALS...............28% 

Employees at this cloudsoftware 

firm like how 

much it gives back to the 

community. The transparency 

from top executives 

is also appreciated. 

06 

POWERHOME 

REMODELING 

HQ....................Chester, Pa. 

EMPLOYEES............... 2,440 

MILLENNIALS...............90% 


Notes one employee: 

“It doesn’t matter where 

you came from. At Power 

Home Remodeling, 

you’re at the same level 

as everyone else.” 

10 

PROGRESSIVE 

INSURANCE 

HQ..Mayfield Village, Ohio 

EMPLOYEES.............32,060 

MILLENNIALS................ N.A. 

This firm prides itself 

on its diversity. Management 

also provides many 

opportunities to change 

schedules to meet needs 

outside work. 

ILLUSTRATIONS BY JONATHAN CALUGI 

18 

FORTUNE.COM // JULY.1.18 

EMPLOYEE COUNTS ARE GLOBAL TOTALS. PERCENTAGE OF MILLENNIALS IS U.S.-ONLY. 

FIND THE FULL LIST AT FORTUNE.COM/BEST-WORKPLACES-MILLENNIALS.

FREE RETIREMENT PLANNER 

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© 2018 PERSONAL CAPITAL CORPORATION. ALL RIGHTS RESERVED.



See 

how the 

world 

connects 

with 

nature. 


View all the breathtaking winners of our 

2018 photo contest at nature.org/2018photos. 

WOCRD1854 © TANNER LATHAM

PRACTICAL 

EXPERTISE 

TECH 

ENTERTAINMENT 

An Overwatch 

League match at 

Blizzard Arena in 

Burbank, Calif. 

ROBERT PAUL— BLIZZARD ENTERTAINMENT 

THIS GAME IS 

OUT OF CONTROL 

E-sports has grown into a real profession, 

touting benefits and other full-time trappings. 

But as workplaces go, it’s brutal. 

By Lisa Marie Segarra 

FOR YEARS, THE IDEA OF MAKING A CAREER out of playing 

video games seemed to be little more than a pipe 

dream. Then the rise of e-sports leagues made it real. 

Today’s professional gamers enjoy salaries, benefits, retirement 

plans, and the envy of many a cubicle dweller. 

Yet as gaming has grown into a proper profession, so 

have its harassment problems—enough so that today’s 

virtual workplaces could use an HR department of 

their own. 

Consider the case of Félix Lengyel, better known by 

his digital moniker “xQc.” The 22-year-old Canadian 

gaming pro gave the Overwatch League, a division 

of entertainment company Activision Blizzard, 


23 


FOCUS 

TECH 

DON’T MISS 

BRAINSTORM 

TECH, 

FORTUNE’S 

FEEL-GOOD HIKE 

OF THE SUMMER 

Fans cheer during 

an Overwatch 

League match 

on May 4 at 

Blizzard Arena. 

quite a headache in January when he 

hurled a homophobic slur at a gay competitor. 

Lengyel was promptly suspended. It was far 

from his only infraction: Lengyel had racked 

up thousands of dollars in fines for his antics. 

This year, he used an “emote,” the name for 

the emoticons used on Twitch, the live online 

gaming channel, in a racially disparaging way 

toward a league emcee. (Lengyel said later that 

he didn’t realize he was being ofensive.) 

Lengyel is one of a half-dozen Overwatch 

League players who have received warnings, 

fines, or suspensions for their conduct on personal 

social media channels or oicial league 

streams. (“Playing in the Overwatch League 

is an amazing opportunity but also a big responsibility,” 

commissioner Nate Nanzer says.) 

But the problem isn’t limited to the 12-team 

Overwatch League, which was established last 

year. Today, e-sports groups are increasingly 

asking themselves the same question: How do 

we ensure that the talent doesn’t become 

a liability? 

The NBA 2K League, a 17-team organization 

in the midst of its inaugural season, is trying to 

confront the issue before it becomes a problem 

by looking to the policies of its real-world 

counterpart. (The virtual league is co-owned by 

the NBA and Take-Two Interactive, the game 

publisher known best for Grand Theft Auto.) 

Before this year’s e-season began, players were 

given a crash course in conduct, says league 

managing director Brendan Donohue. 

Still, most e-sports organizations are young 

and haven’t yet had to deal with bad behavior 

on a large scale. (Twitch, which is owned by 

Amazon, says it polices harassment using 

humans and algorithms alike.) But the gaming 

community’s toxic underbelly—on display 

during the Gamergate controversy in 2014— 

ofers reason to be concerned that e-sports’ 

growing platform would only magnify it. 

In the meantime, results may vary. Pro 

gamer Mychal “Trihex” Jeferson, who is 

African-American, says he sometimes sees 

racially disparaging jokes on Twitch, where 

he has more than 300,000 followers. “It can 

hurt,” he says. “It can take you out of it.” 

It can also motivate. Wendi Fleming, a 

female gamer who participated in this year’s 

NBA 2K League draft—no women were 

among the 102 players selected—says the 

dynamic fuels her competitive streak. 

“I purposely made my name ‘ALittleLady87’ 

so people would know that I’m a woman,” she 

says. “So you could know that a woman just 

beat you.” 


“HIKE,” OF COURSE, BECAUSE OUR ANNUAL summer retreat for Fortune 500 

leaders, tech entrepreneurs, and investors takes place on the bucolic 

campus of the Aspen Institute, nestled in the Rockies. This year’s mustsee 

program is a blast of crisp mountain air: JD.com’s Richard Liu, Grab’s 

Hooi Ling Tan, Lyft’s John Zimmer, AMD’s Lisa Su, Viacom’s Bob Bakish, 

and Air Force Gen. Ellen Pawlikowski—plus U.S. Transportation Secretary 

Elaine Chao and Uber CEO Dara Khosrowshahi, both pictured at left— 

will join us. Can’t make it this year? No problem. We’ll live-stream many 

sessions on Fortune.com. Tune in starting July 16. —Andrew Nusca 

FANS: ROBERT PAUL— BLIZZARD ENTERTAINMENT; CHAO: BILL CLARK— CQ ROLL CALL/GETTY IMAGES; KHOSROWSHAHI: CHRISTOPHE MORIN— BLOOMBERG VIA GETTY IMAGES 

24 


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FOCUS 

TECH 

‘BLACK MIRROR,’ 

SLIGHTLY BROKEN 

China seeks artificial intelligence supremacy through 

protectionism, state subsidies, and monopolies. But that 

doesn’t mean the country will succeed. By Clay Chandler 

STEP ASIDE, SHERLOCK. Detectives in China say 

they can catch criminals using artificial intelligence—and 

if you don’t believe them, consider 

the case of the potato thief at the pop concert. 

Oicials in the eastern Chinese city of Jiaxing 

in May used A.I.-powered facial-recognition 

technology to nab the alleged tater taker 

from a crowd of more than 20,000 people 

attending a performance by Hong Kong 

crooner Jacky Cheung. Moments after passing 

A screen 

supported by a 

facial-recognition 

system displays 

the image of a 

jaywalker at an 

intersection in 

Nanjing, China, 

in August 2017. 

through the concert’s security system, the unsuspecting 

suspect was busted: An algorithm 

matched his face with an image from a database 

of “most wanted” mug shots. Authorities 

seized the man on charges of stealing $17,000 

worth of potatoes. 

The thief was the third fugitive to be arrested 

at a Jacky Cheung concert in as many months 

using software developed by Beijing’s Megvii, 

among the many Chinese groups pioneering 

ways to combine A.I. and facial-recognition 

capabilities. Alibaba Group mobile payments 

ailiate Ant Financial uses a “smile to pay” 

feature to facilitate purchases at KFC. A high 

school in Hangzhou monitors students’ attentiveness 

in class. Traic police in Shenzhen 

and other cities spot jaywalkers and reckless 

bike couriers. A park near Beijing’s Temple of 

Heaven uses the technology in a public restroom 

to stop patrons from stealing toilet paper. 

All of this hints at the extraordinary 

zeal with which the world’s second-largest 

economy has embraced A.I. President Xi Jinping 

vows China will become the global leader 

in artificial intelligence by 2030, creating a 

domestic industry worth nearly $150 billion. 

Should the rest of the world be alarmed by 

China’s A.I. dreams? Perhaps not. Implicit 

in most assessments of the country’s eforts, 

whether by U.S. oicials or Chinese analysts, 

is the shared assumption that the programs 

will perform as advertised. Though Xi has 

certainly stepped up support for state-owned 

enterprises, tightened restrictions on foreign 

firms, and doled out massive subsidies to key 

sectors, his country’s future A.I. supremacy is 

far from guaranteed. “Many of the challenges 

of A.I. are global in nature,” reads a June report 

from McKinsey on the subject, and “not 

for government to solve alone.” 

Kai-Fu Lee, the former head of Google China, 

argues that A.I. is shifting from a U.S.-led Age 

of Discovery to an Age of Implementation in 

which China enjoys significant “structural advantages.” 

The main drivers? Data, computing 

power, and competent engineers—all of which 

favor the world’s most populous nation. 

Yet proponents of artificial intelligence 

warn that it could wipe out millions of jobs, a 

troubling prospect in a country that remains 

so heavily dependent on repetitive manufacturing 

jobs. How will China cope? Deep learning, 

it seems, can also raise deep questions. 


IMAGINECHINA 

26 


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FOCUS 

TO CATCH A 

BITCOIN THIEF, 

CALL THESE 

DETECTIVES 

Forensic firms specializing in digital 

currency are helping law enforcement track 

criminals—and helping companies maintain 

compliance too. By Jeff John Roberts 

BITCOIN AND OTHER DIGITAL CURRENCIES 

TECH 

caught on with criminals 

thanks to their reputation as an anonymous, untraceable 

way to move money around the Internet. That reputation may 

be overblown. Companies like Chainalysis have built fast-growing 

businesses helping law enforcement track the mysterious money. 

The New York City company employs a gaggle of doctoratewielding 

data scientists and statisticians who study Bitcoin’s 

blockchain—its indelible public ledger that records transactions— 

to gain clues about who owns given hoards of the digital currency. 

The practice is possible because the blockchain contains a series of 

digital “wallets” that have a unique identifier and show the flow of 

money into and out of the wallet. 

Though the “keys” that identify the wallets are random alphanumeric 

strings, Chainalysis can identify clusters of wallets tied to 

criminal activity, enabling law enforcement to look for other online 

clues to connect them to a real-life identity. The most famous example 

of this came in 2015 when forensic sleuthing by Chainalysis 

helped the FBI identify two corrupt federal agents who had been 

stealing Bitcoins from the owner of a notorious online drug market. 

Chainalysis isn’t the only Bitcoin detective out there. A California 

startup called CipherTrace infects its own computers with ransomware 

to observe the movement of Bitcoin paid to free the machines. 

The activity can provide clues about who is behind a given shakedown 

and, in some cases, help law enforcement recover the money. 

It’s not just Bitcoin the firms are chasing. “Other currencies such 

as Ethereum, Litecoin, and Ripple are rapidly expanding,” says 

Tom Robinson, cofounder of London-based forensic firm Elliptic. 

“Whatever form value is stored in, it can be used for illicit purpose.” 

Bitcoin detectives’ work may be cut out for them in the years 

ahead. The arrival of so-called privacy coins like Zcash do not leave 

Where 

technology and 

finance intersect. 

behind a transaction record like Bitcoin. But 

Chainalysis CEO Michael Gronager is not 

fazed. He says that relatively few people use 

them and that it’s still possible to glean some 

insight about those who do. 

Besides, tracking criminals is just one line 

of business for forensic firms. As cryptocurrency 

investing enters the mainstream, these 

companies are working to help banks, hedge 

funds, and others comply with “know your 

customer” and anti–money laundering laws. 

“These laws have been, and will continue to 

be, a hurdle for incumbent financial institutions 

becoming more comfortable with digital 

currencies,” says Tom Mason, an analyst with 

S&P Global Market Intelligence. 

Cryptoforensics could give rise to another 

intriguing business: detecting market trends. 

An uptick of Bitcoin activity in countries such 

as Venezuela or China, where governments 

impose capital controls, could indicate that 

a national currency is under stress. Insights 

could even help investors understand macroeconomic 

trends months before authorities 

make oicial statements about them. Call it 

putting your money where your mouth is. 


28 


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HIT THE GYM, 

GENTLY 

Exos, a firm known for training elite athletes, is using 

sophisticated tech (and lower-impact exercise) to help 

desk jockeys stay healthy. By Phil Wahba 

IMAGINE YOU’RE AT WORK, reaching to 

TECH 

grab a stack of papers, when your 

shoulder suddenly seizes up in pain. Do you 

(a) pop an Advil while debating whether to 

visit your doctor? Or (b) go see your oice’s 

on-site “wellness provider,” where you stand 

in a sensor-equipped machine that evaluates 

your movements, assesses the asymmetries 

and instabilities that could be causing the 

discomfort, and generates a regimen of quick, 

simple exercises to alleviate the pain? 

Exos is betting you’ll prefer (b) and that 

your boss will too. The self-described “human 

performance” company got its start nearly 

two decades ago coaching elite athletes. Now, 

AT-WORK 

WORKOUT 

Exos manages 

in-office fitness 

centers and 

cafeterias for a 

range of 

Fortune 100 

companies. 

as a tight labor market prods companies to 

invest in health-related employee perks, Exos 

is expanding its footprint among white-collar 

types—and relying on sophisticated technology 

to broaden its reach in the $7 billion corporate 

wellness market, where the firm says it 

serves some 1.2 million workers. 

Exos doesn’t aim at training only C-suite 

MAMILs (middle-aged men in latex) who 

want to kill it at an Ironman. It’s explicitly 

appealing to the rank and file, including those 

it euphemistically calls “non-movers.” The 

pain-analysis technology, known as 3D Movement 

Quotient (3DMQ), is a new feature (it 

debuted in May) and a key part of the campaign, 

because pain is a leading cause of lost 

productivity for athletes and couch potatoes 

alike. Another new Exos ofering: a speedy 

cardio assessment that relies on VO2 max, a 

measure of oxygen consumption, to help create 

individually tailored exercise programs. 

“This isn’t fitness, it isn’t wellness, it isn’t 

just disease prevention—it really is about 

an integrated mindset,” says president and 

founder Mark Verstegen. 

Exos is hitting its stride just as corporate 

wellness makes a comeback. Enthusiasm for 

such programs cooled after eforts to prove 


FROM LEFT: JOE GALL— COURTESY OF EXOS; COURTESY OF EXOS 

30 


FOCUS 

that they reduced medical costs were inconclusive, 

and today many consist of little more 

than perks such as on-site weight-loss clinics 

and rebates at local gyms. Still, according to 

the Society for Human Resource Management, 

59% of employers ofer some form of 

wellness program, and 24% ramped up their 

oferings in 2017. 

Instead of dwelling on cost reduction, Exos 

emphasizes the value of getting the most out 

of employees when they’re at work, while 

framing its services—from fitness coaching 

to preparing meals at company cafeterias—as 

perks that help retain staf. The company now 

serves 25Fortune 100 companies and a range 

of hedge funds and venture capital firms, 

among many others. Health insurer Humana, 

a client since 2015 for which Exos manages 

10 fitness centers, says the partnership has 

decreased absenteeism and become part of its 

strategy to keep top employees in the fold. 

Revenues at the privately held Exos are 

on track to hit $200 million this year, the 

company says, after registering percentage 

growth in the mid-teens in recent years. That 

trajectory has attracted A-list dealmakers: In 

March, Madrone Capital Partners, the investing 

vehicle of members of Walmart’s founding 

PAIN RELIEVER 

An Exos client 

gets an evaluation 

with 3D 

Movement 

Quotient (3DMQ), 

a diagnostic system 

designed to 

help reduce workrelated 

injuries. 

family, and BDT—the firm run by Byron Trott, 

Warren Bufett’s investment banker—together 

took a majority stake. (The firms declined to 

specify the dollar value of the investment.) 

Exos, based in Phoenix, was founded by 

Verstegen in 1999 as a company focusing on 

pro athletes. Early clients included soccer 

star Mia Hamm and NFL all-pro J.J. Watt; 

the company went on to serve elite military 

personnel, including Navy SEALs. 

By 2010, Exos had begun pivoting toward 

the corporate world, guessing that top execs 

would see a greater need for its services. “The 

key is to create a culture of health, and you 

really need corporate leadership to support 

that,” says Harry Liu, a researcher at think 

tank Rand who studies workplace health programs. 

To contribute to such a culture, it turns 

out, Exos had to acknowledge just how few 

people truly do hard-core exercise. The typical 

wellness program might attract 10% of a 

company’s workforce, Exos says, but it can get 

participation up to around 40% by focusing 

on lifestyle choices, nutrition, and ergonomic 

movement rather than boot-camp intensity. 

“What we’re riding is the dissatisfaction 

with reactive health care,” says Verstegen. And 

of course, “we’re riding the war for talent.” 


31 


FOCUS 

BUSINESS BY DESIGN 

NewDealDesign 

principal Gadi 

Amit says his goal 

was to make the 

Buzz bracelet 

look “airy on the 

wrist” yet signal 

that the wearer 

“is part of a social 

movement.” 

TECHNOLOGY FOR THE #METOO ERA 

Wearable, shareable consumer tech built to help and not harm the user? Believe it. Meet the blood alcohol 

concentration–tracking Buzz bracelet and the unorthodox design process that birthed it. By McKenna Moore 

CALL IT AN UNCOMFORTABLE TRUTH: 22% of undergraduates 

TECH 

experience unwanted sexual contact in college, and 70% of 

sexual assault cases on campus involve alcohol-induced incapacitation. 

The central issue is consent: Who gives it, and who isable to 

give it. Can tech help solve the problem? 

Ob/gyn Jennifer Lang and entrepreneur Rob Kramer started 

Los Angeles company Buzz to address the issue. Its namesake 

bracelet uses sensors to monitor blood alcohol concentration 

and alert the wearer and chosen contacts when that BAC is high 

enough to reduce his or her capacity to consent to sexual activity. 

(Buzz dubs it the “red zone.”) The wearer’s wingmen or wingwomen 

can then swoop in and make sure their friend is safe. 

Buzz partnered with San Francisco design 

consultancy NewDealDesign, known for its 

work for Fitbit and Google, in a highly unusual 

process. The firm assembled a skunkworks 

team of creatives—men and women 

alike—for often lively, sometimes uncomfortable 

conversations about what consent and 

privacy mean in the age of #MeToo. 

At a time of considerable “techlash,” it’s a 

refreshing approach. Says Lang, “This whole 

conversation about consent really has to begin 

with an act of courage.” 


COURTESY OF BUZZ AND NEWDEALDESIGN LLC 

34 




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changing the world.* 

If you are interested in joining our team, 

please visit us at: jobs.centene.com 

Leveraging technology to 

improve health outcomes. 

At Centene, we leverage cutting-edge technology 

to better serve our members. We never lose 

sight of our purpose: Transforming the health of 

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WHERE AUTISTIC WORKERS THRIVE 

People on the autism spectrum are making big contributions toFortune 500 companies. By Dinah Eng 

IT’S HARD getting a job 

VENTURE 

when you’re autistic. 

If you don’t look people in the eye 

when you talk, they dismiss you. 

Social interaction and communication 

skills can be a challenge 

for people with autism spectrum 

disorder, but companies looking 

to hire untapped talent for techrelated 

jobs are discovering that 

those with autism are unusually 

detail-oriented, highly analytical, 

and able to focus intensely 

on tasks, making them valuable 

employees. 

Last October, six companies— 

Ford Motor, DXC Technology, EY, 

Microsoft, JPMorgan Chase, and 

SAP—formed the Autism at Work 

Employer Roundtable to share 

best hiring and workplace practices 

and to help other companies 

see the return on investment in 

hiring autistic employees. 

An estimated 80% of people 

with autism go unemployed, even 

though many are highly educated 

and eager to work. 

One of the first companies to 

seek out autistic talent was SAP, 

a multinational software company 

that began hiring autistic 

employees to do software testing. 

“If we ship something with 

a bug, it’s very costly to fix,” says 

Jose Velasco, vice president of 

product management and head 

of the SAP Autism at Work program 

in the U.S. “In 2013, there 

was a significant software-testing 

need in India, so we hired four 

people there as a pilot. Now we’re 

hiring people on the spectrum in 

10 countries.” 

At SAP, autistic employees 

are placed in work teams with 


Anthony Moffa, a 

software engineer 

at Chase, was 

diagnosed with 

autism at age 48. 

38 


PHOTOGRAPH BY COLIN LENTON

FOCUS 

COURTESY OF AP/EY 

mentors to help them navigate corporate life. 

Getting a foot in the door is the first 

obstacle for job candidates who may answer 

questions in short, abrupt sentences or shy 

away from looking a recruiter in the eye. 

At Microsoft, the traditional interviewing 

process involves a one-day marathon of backto-back 

interviews. To better assess autistic 

applicants, the company developed a program 

in which 10 to 12 candidates are brought in 

at a time to meet with hiring teams over a 

4½-day period. 

“For the first two days, we do team exercises 

to observe who helps someone else, who takes 

the lead, and then we try to figure out the 

best teams,” explains Neil Barnett, director of 

inclusive hiring and accessibility at Microsoft. 

“On day three, we do practice interviews all 

day and give feedback. On day four and five, 

hiring managers do actual interviews.” 

Barnett says half of those hired had applied 

to Microsoft previously, but their résumés were 

passed over in the traditional process. “We 

train on how to interview someone who’s blind 

or deaf, so this is just making it more inclusive,” 

Barnett says. “It’s started a movement.” 

More than 70 autistic employees have been 

hired in the past three years at JPMorgan 

Chase, where job performance results have 

been stellar. 

“Our autistic employees achieve, on average, 

48% to 140% more work than their typical 

“youhave 

totrust 

thatpeople 

willaccept 

you,and 

don’ttakeit 

personally 

ifyouhave 

difficulties.” 

Account support 

associates who 

are part of EY’s 

Neurodiversity 

Centers of 

Excellence. 

colleagues, depending on the roles,” says James 

Mahoney, executive director and head of 

Autism at Work at Chase. “They are highly focused 

and less distracted by social interactions. 

There’s talent here that nobody’s going after.” 

While job opportunities at Chase started 

in tech-related jobs like software engineering 

and code writing, the categories have expanded. 

Today, openings for personal bankers and 

problem-resolution specialists are filled, with 

the highest-level autistic employee brought in 

at the vice president level. 

Managers are trained on how to work with 

the employees, who may not pick up on social 

cues and might start talking at inappropriate 

moments. Lessons include learning to be literal 

in descriptions, to give concise feedback, 

and to avoid asking open-ended questions. 

Providing a supportive work environment 

makes a diference, says Anthony Mofa, a 

software engineer in Chase’s Consumer and 

Community Banking division. 

Mofa, who has degrees in psychology and 

engineering psychology, had worked in technology 

for 20 years before he was diagnosed 

with autism at age 48. He struggled to keep 

jobs and get good performance evaluations, 

until he was hired through the Chase program 

in 2016. 

“You have to trust that people around you 

will accept you, and don’t take it personally if 

you have diiculties,” Mofa says. “Sometimes 

I don’t communicate well.” 

Companies in the Autism 

at Work Employer Roundtable 

are not the only ones to hire 

autistic employees. Google, HP, 

Salesforce, and others also have 

similar programs. 

Including the autistic in the 

workplace has become a point 

of pride for many, especially those 

who run the companies’ targeted 

hiring programs. 

“Mentoring some of the 

people we’ve hired has opened 

my eyes to challenges we take 

for granted,” Mahoney says. “I 

used to be impatient with a person’s 

communication style, and 

I’ve learned to see the value and 

merit of the individual standing 

before me.” 


39 


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WHERE TO HIDE FROM THE HEADLINES 

Losing sleep over a looming trade war or other global conflicts? These stocks offer safety. By Ryan Derousseau 

FOR A BUY-AND-HOLD INVESTOR, taking stock of the 

geopolitical landscape can feel like a disorienting, 

daily roulette-wheel spin to determine 

which news story will make you most jittery. 

What’ll it be: a nuclear face-of with Iran? 

High-stakes talks with North Korea? Trade 

spats between the U.S. and its allies? The 

crumbling of the European Union? Oh, and 

don’t forget the ongoing investigation into Russian 

influence on the 2016 election. (Excuse us 

as we mute CNBC and pop another Xanax.) 

It’s not your imagination: By some indicators, 

the world currently faces measurably 

more risks than usual. This year, two Federal 

Reserve economists unveiled a Geopolitical Risk (GPR) Index that 

tracks occurrences in news reports of “words related to geopolitical 

tensions.” When international conflict, terrorist threats, or nuclear 

posturing ramps up, the index spikes. Since 1985, the average daily 

GPR reading was 81; this May it hit 147—more than 80% above the 

mean. Investment giant BlackRock, meanwhile, recently launched 

its own statistical gauge for political risk. It stands nearly one 

standard deviation higher than its historical average—high enough, 

BlackRock says, for investors to consider portfolio adjustments. 

Here’s the good news: Conflict may be tough on your nerves, 

but it’s seldom the cause of tough times for stocks. Jefrey Kleintop, 

chief global investment strategist at Charles Schwab, recently 

looked at military actions going back to 1983. He found that even 

when major attacks occur—think the 2003 U.S. invasion of Iraq, 


ILLUSTRATION BY NAZARIO GRAZIANO 

41 


FOCUS 

INVEST 

or the 2011 toppling of Muammar Qaddafi 

in Libya—stock markets typically recover 

within five days. Still, geopolitics become a 

financial threat when they create stressful 

long-term conditions that hurt companies’ 

profits and discourage investment. That’s why, 

of all the items on the global-strife laundry 

list, analysts worry most about trade wars. 

Most economists agree that restrictive tarifs 

hurt growth—and could do more damage 

today, when more companies rely on global 

sales and supply chains to sustain profits. The 

restrictions often backfire on the industries 

they’re designed to protect: In the 1980s, for 

example, the U.S. placed tarifs on steel from 

Japan, but 10 of the 11 largest U.S. steel producers 

saw negative equity returns from 1982 

to 1986, according to the Brookings Institution. 

The current environment has an added 

wrinkle, notes Tina Fordham, chief global 

political analyst at Citi: Countries have considered 

microtargeting sanctions at specific companies 

or subsectors. It isn’t hard to envision, 

for example, China retaliating against Trump 

administration tarifs by punishing Boeing, 

which got 13% of its sales from China last year. 

SHRUGGINGOFFSCARYNEWS? 

A recent study by Federal Reserve economists suggests that 

geopolitical conflict seldom correlates with prolonged slumps 

in stock prices. Trade wars, however, are uncharted territory. 

600% 

400 

200 

0 

MONTHLY CHANGE IN “GPR” INDEX 

(Occurrence of words related to geopolitical 

tensions in major international newspapers) 

S&P 500 

2000 2005 2010 MAY 2018 

SOURCES: CALDARA AND IACOVIELLO, MEASURING GEOPOLITICAL RISK; S&P GLOBAL 

WHAT’S THE BEST WAY TO ADJUST to such uncertainty? Historically, the 

industries that have held up best amid geopolitical risk in general 

and trade tensions in particular are defense, oil, and consumer 

staples. Defense stocks look pricey these days, however. Over the 

past five years, they have risen 20% annually, compared with 11% 

for the S&P 500, as investors sought to cash in on a growing Pentagon 

budget. “All the good news is priced in,” says Chris Higgins 

of Morningstar. 

The oil patch looks more promising. Times of turmoil tend to 

boost crude prices, to the benefit of big U.S. producers—of which 

the best positioned right now is Chevron (CVX, $123). The company 

endured criticism for recent investments in new production, 

particularly in Australia, but many of those wells are coming 

online just in time to capitalize on rising prices. Then there’s 

Texas’s Permian Basin, whose stunning energy boom Jefrey Ball 

depicted in ourFortune 500 issue (June 1). Chevron’s production 

there has risen from less than 150,000 barrels a day in early 2017 

to about 250,000 today, en route to a planned 650,000 by 2022. 

Those capabilities, along with an enviable balance sheet—Chevron 

generated $20.5 billion in cash flow from operations in 2017— 

make the stock about 25% undervalued today, assuming an oil 

price of $65 a barrel, says Jeferies analyst Jason Gammel. 

Kinder Morgan (KMI, $17), a huge operator of pipelines and 

terminals, doesn’t benefit immediately from rising oil prices. But 

as the surge encourages producers to dig more wells and invest in 

new projects, they’ll sign more of the transportation contracts that 

account for most of Kinder’s revenue. The 

company’s $37 billion debt load, a by-product 

of an infrastructure building spree, has scared 

some investors away: It trades at a 35% 

discount to peers in pipeline and “midstream” 

energy based on estimated 2019 distributable 

cash flow, says Raymond James’s Darren 

Horowitz. But its stable income and dominant 

position in energy infrastructure make it an 

attractive long-term play. 

No amount of global angst will make you 

stop purchasing food or toilet paper, and 

analysts expect consumer-staples stocks to 

benefit if trade tensions hurt other industries. 

Investors haven’t been impressed so far by 

aggressive cost cutting at Kraft Heinz (KHC, 

$58); shares in the packaged-foods giant have 

fallen more than 35% since rival Unilever 

rejected its takeover bid in February 2017. 

But the company now boasts the best profit 


margins among its food peers, says Edward 

Jones analyst Brittany Weissman. If Kraft 

Heinz can start growing revenue again, “the 

stock will be rewarded for that,” Weissman 

says. And even if not, its healthy margins 

could make it look like a haven when 

investors scurry for safety. 

42 

FORTUNE.COM 

// JULY.1.18 

GRAPHIC BY NICOLAS RAPP

USGA CUSTOM CONTENT 

The Future 

is Now 

From a virtual tour of the 

Shinnecock Hills clubhouse 

to innovative drone flyovers, 

Deloitte and the USGA 

collaborate to bring fans 

closer to golf’s ultimate test 

What is the most 

exciting thing about the U.S. 

Open? Being there, of 

course. The chance to get 

an up-close view of the 

world’s greatest players, 

walk the grounds of iconic 

venues and see history 

unfold before your eyes is 

why attending the U.S. Open 

is a singular experience in 

the game. 

But what if the U.S. Open 

experience included not just 

being an observer, but a 

participant? 

The desire to give fans 

an inside look at the U.S. 

Open is what drives the 

collaboration between 

Deloitte and the USGA. 

The combined use of 

Digital Reality 

technologies— augmented 

reality (AR), virtual reality 

(VR) and 360° video— 

on-site at Shinnecock Hills 

Golf Club connects fans 

with the 118th U.S. 

Open like never before. It’s 

location-based 

entertainment that adds 

a digital element to the 

championship. 

Allan Cook, a managing 

director at Deloitte 

Consulting LLP, is 

passionate about this 

potential to transform 

experiences for golf fans. 

“Digital Reality could lead to 

more natural and intuitive 

ways for technology to 

better our lives and 

potentially change every 

aspect of them,” said Cook. 

“Our means of interfacing 

with digital information will 

likely no longer be through 

screens and hardware but 

with gestures, emotions 

and gazes. U.S. Open fans 

‘‘ 

will have the opportunity to 

get a first-hand glimpse of 

such breakthroughs.” 

Cook and his team 

designed several innovative 

experiences for this year’s 

U.S. Open at Shinnecock 

Hills, as part of the U.S. 

Open Virtual Experience 

created by Deloitte. The 

Deloitte VR fan activation 

uses a cutting-edge, 

tether-less virtual reality 

headset and leading game 

development technology to 

immerse the fan inside the 

ropes of the U.S. Open. 

Deloitte leveraged Digital 

Reality to give U.S. Open 

fans a look inside the 

landmark Shinnecock Hills 

clubhouse, taking a visual 

tour of the historic Trophy 

Room and picturesque 

views of Peconic Bay from 

Digital Reality could lead to 

more natural and intuitive ways 

for technology to better our 

lives and potentially change 

every aspect of them. 

—Allan Cook, managing director at Deloitte Consulting LLP 

the wrap-around porch and 

its iconic architecture. 

Visitors can also experience 

the first-person perspective 

of 1995 U.S. Open champion 

Corey Pavin, who explains 

his shots on the 18th hole 

that clinched his victory at 

Shinnecock. 

While the players are the 

primary draw of any U.S. 


Open, the venue is also a 

star. Since 2016, Deloitte 

and the USGA have worked 

together to produce aerial 

videos at the U.S. Open. 

These tee-to-green flyovers 

are shot using the latest 

drone technology, and they 

include embedded graphics 

detailing yardages, slopes 

and strategic details of 

each hole. Fans can visit 

the Course section of 

usopen.com to view the 

Shinnecock Hills flyovers 

and gain insights on golf’s 

ultimate test. 

The drones represent the 

most advanced aerial 

technology. The ability to 

start the flyovers lower 

to the ground, then ascend 

and hover over greens 

and other features, allow 

Deloitte and the USGA to 

bring the elements of golf’s 

ultimate test to the viewers 

in a way that is engaging 

and informative. 

A revolutionary experience 

with reality, and an exclusive 

look at the venue—just two 

examples of how Deloitte 

and the USGA are innovating 

and delivering immersive 

experiences to engage 

and delight golf fans around 

the world. 

FOLLOW THE ACTION Visit usga.org and follow @usga on Twitter and Instagram to stay up to date 

with the latest scores, videos and news from the 2018 USGA championship season.

FOCUS 

FORTUNE: What are some specific 

questions you’re asking fund managers 

before deciding to invest? 

GATES:I am looking at funds that 

over-index on women-led and 

minority-led businesses. How do 

fund leaders think about business? 

Where have they done a great job 

in the past? What is it about them 

that makes me think I’ll get a great 

return—because I care a lot about 

that—but also [that] wow, they’re 

going to find some new ideas. 

HIT SEEKER 

Gates says VC 

funds are “leaving 

money on the 

table” by ignoring 

products and 

services that 

focus on women 

and minorities. 

MAKING TECH’S FUTURE 

MORE FEMALE 

Through her firm Pivotal Ventures, philanthropist Melinda Gates 

is backing tech projects whose leaders break the white-dudesin-hoodies 

stereotype. Interview by Polina Marinova 

MELINDA GATES IS BEST KNOWN for philanthropy, but she’s now making 

waves as an investor too. Pivotal Ventures, the investment and 

INVEST 

incubation firm she launched in 2015, has recently put capital into several 

female-led or minority-focused venture firms, including Aspect Ventures, 

Female Founders Fund, and Defy Partners. Gates says tech companies are missing 

opportunities by ignoring products and services that women and minority 

customers want—and that the best way to change that dynamic is to invest in 

women and minority leaders. For more of our conversation, see fortune.com. 

These firms are relatively small. 

Can they challenge the established 

players on Sand Hill Road? 

You bet. Because the big VC funds 

are leaving money on the table. 

If they’re not seeing the latest 

innovative, disruptive technology—because 

they don’t understand 

it or they don’t understand 

things that women are spending 

money on—they’re not making 

great investments. And yes, some 

of these funds are still small, but 

as they get a proven track record, 

believe me—they’re going to get a 

lot more money. 

You’ve said the #MeToo movement 

could backfire if men stop taking 

meetings with women. How do you 

think change can occur? 

Real change can occur when the 

VC community starts to demand 

that the people it invests in have 

diversity, the right values, and the 

right behavior. It’s like the pressure 

that #MeToo has put on corporate 

boards. When men or women raise 

a sexual harassment claim, the 

board can’t just tuck it away anymore. 

When [VCs] wake up to the 

fact that they’ll have to expect the 

same things, you’ll see a big shift. 


What’s one industry that you’d like to 

see backed by more VC dollars? 

We need tech that focuses on 

positive mental-health outcomes 

for teenagers. This generation has 

gone online faster than any other, 

and they are dealing with the most 

severe negative consequences. 

KYLE JOHNSON—THE NEW YORK TIMES/REDUX 

44 






A hatchling 

marine iguana 

sits atop the 

head of an 

adult at Cape 

Douglas, on 

Fernandina 

Island. 

ELIZABETH WHITE— BBC 

TRAVEL 

ECUADOR’S ENCHANTED 

ISLES 

When 

it comes to far-flung escapes, 

few rival the Galápagos Islands. 

By Alexandra Kirkman 


ARRIVING ON FERNANDINA ISLAND, 

the youngest (at less than 1 million 

years old) and westernmost in 

the Galápagos, is like discovering 

a land that time forgot. Once you 

disembark from your inflatable 

panga at Punta Espinosa, its sole 

landing site, and make your way 

through the dense mangrove forest 

that fringes the coastline, you’re 

greeted by a colony of hundreds of 

charcoal-colored marine iguanas 

lounging atop one another and 

sneezing out salt water in a spirited 

chorus. 

La Cumbre volcano, one of the 

world’s most active with six eruptions 

in the past 50 years, dominates 

the landscape, its rippled 

lava fields extending in every direction. 

In its shadow, sea lions splash 

in the shallows, their distinctive 

barks intermingled with the crashing 

waves, as scarlet Sally Lightfoot 

crabs scuttle along the ebony 

shoreline and Galápagos hawks 

survey the scene from above. No 

foreign species has ever invaded 

Fernandina—human visitors 

aside—making it one of the world’s 

most pristine ecosystems. 

When it comes to far-flung 

escapes, few rival the Galápagos. 

Located in the Pacific Ocean some 

600 miles of the coast of mainland 

Ecuador, the archipelago of 

20 volcanic islands (and dozens 

more islets) remains an unspoiled 

utopia despite hosting more than 

200,000 annual visitors. Home to 

a slew of species found nowhere 

else on earth—the giant Galápagos 

tortoise, the Galápagos finch (13 

unique species in total), and the 

Galápagos penguin (the world’s 

49 


PASSIONS 

TRAVEL 

second-smallest), to name a few—the 

islands endure as a beacon of the conservation 

movement nearly 160 years after the 

publication of Charles Darwin’s seminal 

treatise on evolution by natural selection, 

On the Origin of Species, put them on the 

proverbial map. 

They’re also an exhilarating option for an 

active and educational adventure. Darwin 

once said, “A man who dares to waste one 

hour of time has not discovered the value 

of life,” which could well be the mantra of a 

Galápagos vacation. Whether you’re summiting 

the Mars-like terrain of Bartolomé 

Island (home to obelisk-shaped Pinnacle 

Rock, a Galápagos landmark), strolling 

the blinding white sands of Santa Cruz 

Island’s Bachas Beach (a prime nesting site 

for green sea turtles), or kayaking the coves 

of Isabela Island perusing penguins and 

brown pelicans, you’re largely in motion 

from dawn until cocktail hour (minus a 

leisurely lunch). If you’ve been neglecting 

Visitors photograph 

the bones of a whale 

found on Fernandina 

Island. 

your workouts, you’ll get back into your 

groove here. 

Or if it’s a sense of wonder that’s lacking 

from your daily routine, the Galápagos will 

replenish your reserves. Meander along the 

trails near Urbina Bay on Isabela Island 

(the largest at 82 miles long) and you’re likely 

to encounter at least a handful of giant 

Galápagos tortoises, many nearly a century 

old, as they mosey by. Snorkel to the bottom 

of Isabela’s pristine Tagus Cove in search 

of cobalt sea stars and white-tipped reef 

sharks alongside Galápagos cormorants 

(the world’s largest and only flightless cormorant) 

as they deftly dive for their lunch 

before rocketing back to the surface. And 

be sure to spend a couple of late-afternoon 

hours on the beach at Española Island’s 

Gardner Bay, perhaps the archipelago’s 

most dazzling stretch of sand, where dozens 

of tawny sea lions loll at the crystalline 

water’s edge, turning their whiskered faces 

upward, utterly unfazed, as you pass. 


BARRY LEWIS— IN PICTURES LTD./CORBIS VIA GETTY IMAGES 

50 


© 2018 glacéau. glacéau ® , smartwater ® and label are registered trademarks of glacéau. 


PASSIONS 

TRAVEL 

EXPLORING THIS TROVEof ecological treasures 

by live-aboard boat, vs. from a hotel 

on one of the larger islands, is essential: 

Since these ships move primarily by night, 

you wake each day in a new locale ready to 

jump right into the day’s itinerary, instead 

of frittering away valuable waking hours 

in transit. Smaller yachts also enjoy access 

to landing sites unavailable to larger 

cruise ships. 

Like many extraordinary environments, 

the Galápagos face a litany of threats 

to their fragile existence. Though the 

50,000-square-mile Galápagos Marine 

Reserve was designated in 1998 to protect 

the waters surrounding the islands, illegal 

fishing is rampant. Last year alone, more 

than 30 vessels, one of which contained 

tens of thousands of sharks and other fish, 

were captured within its bounds. The resulting 

imbalance in the marine ecosystem 

is already impacting the iconic blue-footed 

booby, whose population has decreased in 

recent years. 

The risk of introduced species, which 

grows in step with increased tourist 

arrivals, also looms large. Presently, an 

invasive parasitic fly threatens to render 

the endemic mangrove finch—of which only 

an estimated 100 remain—extinct. The 

Charles Darwin Foundation, a scientific 

research nonprofit dedicated to preserving 

the Galápagos, and the Galápagos National 

Park Directorate continue to work together 

to protect the archipelago: Recent successes 

include the ongoing repopulation 

of giant tortoises on the islands of Pinta, 

Floreana, and Santa Fé. To learn more 

about these groundbreaking initiatives, 

visit darwinfoundation.org. 

IfYouGo 

What to book 

Quasar Expeditions, a 

family-owned company 

founded in 1986, hosted 

Fortune. It operates two 

small ships that each run 

seven-night expedition 

cruises in the Galápagos. 

The M/VEvolution, which 

was entirely refurbished 

last year, sleeps 32, while 

the charming M/YGrace—a 

wedding gift to Grace Kelly 

and Prince Rainier from Aristotle 

Onassis in its former 

life—accommodates 18. 

Both yachts are available for 

charter.quasarex.com 

Getting to the archipelago 

There are multiple daily departures 

to the Galápagos 

from Quito and Guayaquil 

on mainland Ecuador. 

American Airlines, United, 

and Avianca, among others, 

fly regularly from the 

U.S. to both cities. 


The night before 

For a restful, refined stay 

before your Galápagos 

expedition, Casa Gangotena, 

a stunning converted 

Quasar Expeditions’ M/V 

Evolution sun deck with 

hot tub (left); a blue-footed 

booby (below); and sea lions 

(bottom) on the coast of 

Santa Fé Island. 

mansion, is an unparalleled 

choice in the historic center 

of Quito, which was named 

the first Unesco World 

Heritage site in 1978. The 

boutique hotel, which melds 

neoclassical and Art Deco 

elements to exceptional effect, 

overlooks the famous 

Plaza San Francisco and the 

city’s surrounding volcanoes.casagangotena.com 

SHIP: COURTESY OF QUASAR EXPEDITIONS; BOOBY: TUI DE ROY— MINDEN PICTURES/GETTY IMAGES; SEA LIONS: GUENTERGUNI— GETTY IMAGES 

52 


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unmasking 

a.i.’s 

bias 

problem 


54 


y jonathan vanian 

the business community 

is betting billions on 

artificial intelligence. 

but early experiments 

have unearthed troubling 

evidence about the ways 

that a.i.’s algorithms and 

“deep-learning” systems can 

amplify human prejudice. 

can big tech keep bigotry 


at bay? 

ILLUSTRATION BY GIACOMO CARMAGNOLA

A.I. SPECIAL REPORT 

W 

INVISIBLE Timnit 

Gebru has studied 

the ways that A.I. can 

misread, or ignore, 

information about 

minority groups. 

WHEN TAY MADE HER DEBUT in March 2016, Microsoft had high hopes 

for the artificial intelligence–powered “social chatbot.” Like the automated, 

text-based chat programs that many people had already 

encountered on e-commerce sites and in customer service conversations, 

Tay could answer written questions; by doing so on Twitter 

and other social media, she could engage with the masses. 

But rather than simply doling out facts, Tay was engineered to 

converse in a more sophisticated way—one that had an emotional 

dimension. She would be able to show a sense of humor, to banter 

with people like a friend. Her creators had even engineered her to 

talk like a wisecracking teenage girl. When Twitter users asked Tay 

who her parents were, she might respond, “Oh a team of scientists in 

a Microsoft lab. They’re what u would call my 

parents.” If someone asked her how her day had 

been, she could quip, “omg totes exhausted.” 

Best of all, Tay was supposed to get better 

at speaking and responding as more people 

engaged with her. As her promotional material 

said, “The more you chat with Tay the smarter 

she gets, so the experience can be more personalized 

for you.” In low-stakes form, Tay was 

supposed to exhibit one of the most important 

features of true A.I.—the ability to get smarter, 

more efective, and more helpful over time. 

But nobody predicted the attack of the trolls. 

Realizing that Tay would learn and mimic 

speech from the people she engaged with, 

malicious pranksters across the web deluged 

her Twitter feed with racist, homophobic, and 

otherwise ofensive comments. Within hours, 

Tay began spitting out her own vile lines on 

Twitter, in full public view. “Ricky gervais 

learned totalitarianism from adolf hitler, the 

inventor of atheism,” Tay said, in one tweet 

that convincingly imitated the defamatory, 

fake-news spirit of Twitter at its worst. Quiz 

her about then-president Obama, and she’d 

compare him to a monkey. Ask her about the 

Holocaust, and she’d deny it occurred. 

In less than a day, Tay’s rhetoric went from 

family-friendly to foulmouthed; fewer than 24 

hours after her debut, Microsoft took her ofline 

and apologized for the public debacle. 

What was just as striking was that the wrong 

turn caught Microsoft’s research arm of guard. 

“When the system went out there, we didn’t 

plan for how it was going to perform in the 

open world,” Microsoft’s managing director of 

research and artificial intelligence, Eric Horvitz, 

toldFortune in a recent interview. 

After Tay’s meltdown, Horvitz immediately 

asked his senior team working on “natural 

language processing”—the function central 

to Tay’s conversations—to figure out what 

went wrong. The staf quickly determined 

that basic best practices related to chatbots 

were overlooked. In programs that were more 

rudimentary than Tay, there were usually 

protocols that blacklisted ofensive words, but 

there were no safeguards to limit the type of 

data Tay would absorb and build on. 

Today, Horvitz contends, he can “love the 

example” of Tay—a humbling moment that 

Microsoft could learn from. Microsoft now 

deploys far more sophisticated social chatbots 


CODY O’LOUGHLIN: THE NEW YORK TIMES— REDUX; PREVIOUS SPREAD, STATUE: ARTNELI/ALAMY 

56 


SEUNG IL RYU—ZUMA WIRE 

around the world, including Ruuh in India, 

and Rinna in Japan and Indonesia. In the 

U.S., Tay has been succeeded by a social-bot 

sister, Zo. Some are now voice-based, the way 

Apple’s Siri or Amazon’s Alexa are. In China, 

a chatbot called Xiaoice is already “hosting” 

TV shows and sending chatty shopping tips to 

convenience store customers. 

Still, the company is treading carefully. It 

rolls the bots out slowly, Horvitz explains, and 

closely monitors how they are behaving with 

the public as they scale. But it’s sobering to realize 

that, even though A.I. tech has improved 

exponentially in the intervening two years, 

the work of policing the bots’ behavior never 

ends. The company’s staf constantly monitors 

the dialogue for any changes in its behavior. 

And those changes keep coming. In its early 

months, for example, Zo had to be tweaked 

and tweaked again after separate incidents 

in which it referred to Microsoft’s flagship 

Windows software as “spyware” and called the 

Koran, Islam’s foundational text, “very violent.” 

To be sure, Tay and Zo are not our future 

robot overlords. They’re relatively primitive 

programs occupying the parlor-trick end of 

the research spectrum, cartoon shadows of 

what A.I. can accomplish. But their flaws 

highlight both the power and the potential 

pitfalls of software imbued with even a sliver 

of artificial intelligence. And they exemplify 

more insidious dangers that are keeping 

technologists awake at night, even as the business 

world prepares to entrust ever more of its 

future to this revolutionary new technology. 

“You get your best practices in place, and 

hopefully those things will get more and more 

rare,” Horvitz says. With A.I. rising to the top 

of every company’s tech wish list, figuring out 

those practices has never been more urgent. 

EW DISPUTE that we’re on the 

verge of a corporate A.I. gold 

F rush. By 2021, research firm 

IDC predicts, organizations will 

spend $52.2 billion annually on 

A.I.-related products—and economists and analysts 

believe they’ll realize many billions more 

in savings and gains from that investment. 

Some of that bounty will come from the reduction 

in human headcount, but far more will 

come from enormous eiciencies in matching 

product to customer, drug to patient, solution 

to problem. Consultancy PwC estimates that 

A.I. could contribute up to $15.7 trillion to the 

global economy in 2030, more than the combined 

output of China and India today. 

the m&a of a.i. 

tech giants like ibm and google have invested billions internally 

in a.i. research, but the past few years have also 

seen a wave of acquisitions, as big companies buy up startups 

to obtain top talent and new data-crunching science. 

(acquisition figures are since 2010. source: cb insights) 

ALPHABET 

(14 ACQUISITIONS) 

> Google CEO Sundar 

Pichai has made the 

case that artificial 

intelligence is core 

to the search giant’s 

major businesses. It 

definitely shows in its 

acquisitions, including 

its 2014 purchase 

for over $600 million 

of U.K.–based Deep- 

Mind—whose software 

is best known 

for being the first to 

defeat a human champion 

at the strategy 

game Go (above). 

APPLE (13) 

> Apple kicked off 

its A.I. acquisition 

spree in 2010 when 

it bought Siri, whose 

voice-recognition 

interface has since 

become, for many, 

the embodiment of 

consumer-facing A.I. 

FACEBOOK (6) 

> The social networking 

giant is also an 

A.I. heavyweight, 

using deep learning 

to clean up its News 

Feed (though that’s 

very much a work in 

progress). Its recent 

big buys include the 

2017 acquisition of 

Ozlo to improve its 

messaging app. 

AMAZON (5) 

> It takes a lot of A.I. 

to fuel both its online 

retail (matching 

products to customer 

preferences) and its 

cloud-computing 

business. Amazon 

also uses A.I. to help 

screen the produce 

it ships through its 

grocery delivery 

business. 

INTEL (5) 

> Part of Intel’s push 

into A.I. involves 

researching new 

computer chip lines, 

outside of its breadand-butter 

CPUs 

that power PCs. Its 

outlets surface correctly 

in your feeds. 


recent acquisitions 

are aimed at helping 

it develop specialized 

chips for A.I. 

functionality. 

MICROSOFT (5) 

> As Microsoft shifts 

its focus from the 

Windows operating 

system to cloud 

computing, it’s also 

investing heavily in 

A.I.—whether it’s 

data-crunching tech 

it can sell to customers 

or its Cortana 

virtual assistant. 

MELTWATER (5) 

> Marketing and 

business intelligence 

firm Meltwater uses 

A.I. to help customers 

measure the 

effectiveness of their 

advertising and marketing 

campaigns. 

TWITTER (4) 

> Data-crunching 

tech working behind 

the scenes helps 

Twitter make sure 

that tweets from your 

preferred friends, 

celebrities, and media 

SALESFORCE (4) 

> Salesforce uses A.I. 

to help its software 

tools better parse 

emails and recommend 

sales prospects 

to its customers. 

57 


FORTUNE 

The A.I. renaissance has been driven in part by advances in 

“deep-learning” technology. With deep learning, companies feed 

their computer networks enormous amounts of information so that 

they recognize patterns more quickly, and with less coaching (and 

eventually, perhaps, no coaching) from humans. Facebook, Google, 

Microsoft, Amazon, and IBM are among the giants already using 

deep-learning tech in their products. Apple’s Siri and Google Assistant, 

for example, recognize and respond to your voice because of 

deep learning. Amazon uses deep learning to help it visually screen 

tons of produce that it delivers via its grocery service. 

And in the near future, companies of every size hope to use 

deep-learning-powered software to mine their data and find gems 

buried too deep for meager human eyes to spot. They envision 

A.I.-driven systems that can scan thousands of radiology images 

to more quickly detect illnesses, or screen multitudes of résumés 

to save time for beleaguered human resources staf. In a technologist’s 

utopia, businesses could use A.I. to sift through years of data 

to better predict their next big sale, a pharmaceutical giant could 

cut down the time it takes to discover a blockbuster drug, or auto 

insurers could scan terabytes of car accidents and automate claims. 

But for all their enormous potential, A.I.-powered systems 

have a dark side. Their decisions are only as good as the data that 

humans feed them. As their builders are learning, the data used to 

train deep-learning systems isn’t neutral. It can easily reflect the 

biases—conscious and unconscious—of the people who assemble it. 

And sometimes data can be slanted by history, encoding trends and 

patterns that reflect centuries-old discrimination. A sophisticated algorithm 

can scan a historical database and conclude that white men 

are the most likely to succeed as CEOs; it can’t be programmed (yet) 

to recognize that, until very recently, people who weren’t white men 

seldom got the chance to be CEOs. Blindness to bias is a fundamenartificial 

intelligence in pop culture: from benevolent ... 

tal flaw in this technology, and while executives 

and engineers speak about it only in the most 

careful and diplomatic terms, there’s no doubt 

it’s high on their agenda. 

The most powerful algorithms being 

used today “haven’t been optimized for any 

definition of fairness,” says Deirdre Mulligan, 

an associate professor at the University of 

California at Berkeley who studies ethics in 

technology. “They have been optimized to do 

a task.” A.I. converts data into decisions with 

unprecedented speed—but what scientists 

and ethicists are learning, Mulligan says, is 

that in many cases “the data isn’t fair.” 

Adding to the conundrum is that deep 

learning is much more complex than the 

conventional algorithms that are its predecessors—making 

it trickier for even the most 

sophisticated programmers to understand 

exactly how an A.I. system makes any given 

choice. Like Tay, A.I. products can morph to 

behave in ways that its creators don’t intend 

and can’t anticipate. And because the creators 

and users of these systems religiously guard 

the privacy of their data and algorithms, citing 

competitive concerns about proprietary 

technology, it’s hard for external watchdogs to 

determine what problems could be embedded 

in any given system. 

The fact that tech that includes these 

black-box mysteries is being productized and 

pitched to companies and governments has 

more than a few researchers and activists 

deeply concerned. “These systems are not just 

of-the-shelf software that you can buy and 

SCIENCE FICTION HAS A WAY OF BECOMING SCIENCE FACT, and businesses’ hopes and fears about A.I. reflect issues we’ve been working out at the 

movies and in our living rooms for years. Will A.I.-powered entities handle our drudgery for us, make us stronger, and become empathetic allies? 

A.I.: WARNER BROS. PICTURES/PHOTOFEST; BIG HERO 6, L3-37, IRON MAN: WALT DISNEY STUDIOS MOTION PICTURES/COURTESY EVERETT COLLECTION; 

MAX HEADROOM: ABC/PHOTOFEST; DATA: PARAMOUNT PICTURES/PHOTOFEST; C-3PO: LUCASFILM LTD./20TH CENTURY FOX FILM CORP./PHOTOFEST; 

WESTWORLD: JOHN P. JOHNSON/HBO—COURTESY EVERETT COLLECTION 


DAVID 

A.I. Artificial 

Intelligence 

BAYMAX 

Big Hero 6 

MAX HEADROOM 

The Max 

Headroom Show 

DATA 

Star Trek: The 

Next Generation 

C-3PO 

Star 

Wars 

L3-37 

Solo: A Star 

Wars Story 

J.A.R.V.I.S. 

Iron Man 

MAEVE 

Westworld 

harmless 

58 


MULLIGAN: BENJAMIN TICE SMITH; EX MACHINA: A24/COURTESY EVERETT COLLECTION; BATTLESTAR GALACTICA: FRANK OKENFELS—SCI-FI/PHOTOFEST; 

THE MATRIX: WARNER BROS./PHOTOFEST; METROPOLIS: UFA/PHOTOFEST; ULTRON: WALT DISNEY STUDIOS MOTION PICTURES/COURTESY EVERETT COLLECTION 

say, ‘Oh, now I can do accounting at home,’ ” 

says Kate Crawford, principal researcher 

at Microsoft and codirector of the AI Now 

Institute at New York University. “These are 

very advanced systems that are going to be 

influencing our core social institutions.” 

HOUGH THEY MAY not think of it as 

such, most people are familiar 

T with at least one A.I. breakdown: 

the spread of fake news 

on Facebook’s ubiquitous 

News Feed in the run-up to the 2016 U.S. 

presidential election. 

The social media giant and its data scientists 

didn’t create flat-out false stories. But the 

algorithms powering the News Feed weren’t 

designed to filter “false” from “true”; they were 

intended to promote content personalized to 

a user’s individual taste. While the company 

doesn’t disclose much about its algorithms 

(again, they’re proprietary), it has acknowledged 

that the calculus involves identifying 

stories that other users of similar tastes are 

reading and sharing. The result: Thanks to an 

endless series of what were essentially popularity 

contests, millions of people’s personal 

News Feeds were populated with fake news 

primarily because their peers liked it. 

While Facebook ofers an example of how 

individual choices can interact toxically with 

A.I., researchers worry more about how deep 

learning could read, and misread, collective 

data. Timnit Gebru, a postdoctoral researcher 

who has studied the ethics of algorithms at Mi- 


machine-learning 

algorithms “haven’t 

been optimized for any 

definition of fairness. 

They have been 

optimized to do a task.” 

> deirdre mulligan 

associate professor, uc berkeley school of information 

crosoft and elsewhere, says she’s concerned about how deep learning 

might afect the insurance market—a place where the interaction of 

A.I. and data could put minority groups at a disadvantage. 

Imagine, for example, a data set about auto accident claims. The 

data shows that accidents are more likely to take place in inner 

cities, where densely packed populations create more opportunities 

for fender benders. Inner cities also tend to have disproportionately 

high numbers of minorities among their residents. 

A deep-learning program, sifting through data in which these 

correlations were embedded, could “learn” that there was a relationship 

between belonging to a minority and having car accidents, and 

could build that lesson into its assumptions about all drivers of color. 

In essence, that insurance A.I. would develop a racial bias. And that 

bias could get stronger if, for example, the system were to be further 

“trained” by reviewing photos and video from accidents in inner-city 

neighborhoods. In theory, the A.I. would become more likely to conclude 

that a minority driver is at fault in a crash involving multiple 

drivers. And it’s more likely to recommend charging a minority 

driver higher premiums, regardless of her record. 

... to malevolent 

Or will they develop their own agendas, in pursuit of a colder logic that sees us as a distraction or a threat? It’s the “intelligence” of A.I., the facet 

that makes a computer almost human, that compels us to ask these questions again and again. —Matt Heimer and Armin Harris 


AVA 

Ex Machina 

NUMBER SIX 

Battlestar 

Galactica 

AGENT SMITH 

The Matrix 

FALSE MARIA 

Metropolis 

ULTRON 

Avengers: 

Age of Ultron 

pure evil 

59 


FORTUNE 

It should be noted that insurers say they do 

not discriminate or assign rates based on race. 

But the inner-city hypothetical shows how 

data that seems neutral (facts about where 

car accidents happen) can be absorbed and 

interpreted by an A.I. system in ways that 

create new disadvantages (algorithms that 

charge higher prices to minorities, regardless 

of where they live, based on their race). 

What’s more, Gebru notes, given the layers 

upon layers of data that go into a deep-learning 

system’s decision-making, A.I.-enabled software 

could make decisions like this without 

engineers realizing how or why. “These are 

things we haven’t even thought about, because 

we are just starting to uncover biases in the 

most rudimentary algorithms,” she says. 

What distinguishes modern A.I.-powered 

software from earlier generations is that 

today’s systems “have the ability to make 

legally significant decisions on their own,” says 

Matt Scherer, a labor and employment lawyer 

at Littler Mendelson who specializes in A.I. 

The idea of not having a human in the loop 

to make the call about key outcomes alarmed 

Scherer when he started studying the field. If 

flawed data leads a deep-learning-powered 

X-ray to miss an overweight man’s tumor, is 

anyone responsible? “Is anyone looking at the 

legal implications of these things?” Scherer 

asks himself. 

S BIG TECH PREPARES to embed 

deep-learning technology 

A in commercial software for 

customers, questions like this 

are moving from the academic 

“what if?” realm to the front burner. 

In 2016, the year of the Tay misadventure, 

Microsoft created an internal group called 

Aether, which stands for AI and Ethics in Engineering 

and Research, chaired by Eric Horvitz. 

It’s a cross-disciplinary group, drawing 

representatives from engineering, research, 

policy, and legal teams, and machine-learning 

bias is one of its top areas of discussion. “Does 

Microsoft have a viewpoint on whether, for 

example, face-recognition software should be 

applied in sensitive areas like criminal justice 

and policing?” Horvitz muses, describing some 

of the topics the group is discussing. “Is the 

A.I. technology good enough to be used in this 

area, or will the failure rates be high enough 

where 

today’s 

a.i. 

shines ... 

artificial 

intelligence 

is already 

helping 

businesses 

recognize 

patterns 

in data in 

valuable ways. 

FIGURING OUT 

WHAT YOU LIKE 

> Deep learning is 

great at analyzing 

your digital habits 

to determine 

what piques your 

interest. A.I. helps 

Netflix recommend 

new political 

thrillers to you 

after you’ve just 

binged on House 

of Cards, and it 

helps Amazon 

project when 

Prime subscribers 

will be ready for 

their next shipment 

of detergent. 

KILLING SPAM 

> If you’re noticing 

fewer annoying 

pitches for 

baldness cures or 

dating services 

in your in-box, it 

may be because 

email providers 

have found that 

machine learning 

is great at identifying 

and filtering 

out junk email. 

SAVING ENERGY 

> Google uses 

A.I. techniques 

to calibrate the 

cooling systems of 

its data centers, 

helping it cut energy 

bills. Startups 

like Vigilent are 

now selling similar 

predictive tech to 

other companies. 

where there has to be a sensitive, deep consideration 

for the costs of the failures?” 

Joaquin Quiñonero Candela leads Facebook’s 

Applied Machine Learning group, which 

is responsible for creating the company’s A.I. 

technologies. Among many other functions, 

Facebook uses A.I. to weed spam out of people’s 

News Feeds. It also uses the technology 

to help serve stories and posts tailored to their 

interests—putting Candela’s team adjacent 

to the fake-news crisis. Candela calls A.I. “an 

accelerator of history,” in that the technology is 

“allowing us to build amazing tools that augment 

our ability to make decisions.” But as he 

acknowledges, “It is in decision-making that a 

lot of ethical questions come into play.” 

Facebook’s struggles with its News Feed 

show how diicult it can be to address ethical 

questions once an A.I. system is already 

powering a product. Microsoft was able to 

tweak a relatively simple system like Tay by 

adding profanities or racial epithets to a blacklist 

of terms that its algorithm should ignore. 

But such an approach wouldn’t work when 

trying to separate “false” from “true”—there are 

too many judgment calls involved. Facebook’s 

eforts to bring in human moderators to vet 

news stories—by, say, excluding articles from 

sources that frequently published verifiable 

falsehoods—exposed the company to 

charges of censorship. Today, one of Facebook’s 

proposed remedies is to simply show less news 

in the News Feed and instead highlight baby 

pictures and graduation photos—a winning-byretreating 

approach. 

Therein lies the heart of the challenge: The 

dilemma for tech companies isn’t so much 

a matter of tweaking an algorithm or hiring 

humans to babysit it; rather, it’s about human 

nature itself. The real issue isn’t technical or 

even managerial—it’s philosophical. Deirdre 

Mulligan, the Berkeley ethics professor, notes 

that it’s diicult for computer scientists to 

codify fairness into software, given that fairness 

can mean diferent things to diferent 

people. Mulligan also points out that society’s 

conception of fairness can change over time. 

And when it comes to one widely shared ideal 

of fairness—namely, that everybody in a society 

ought to be represented in that society’s 

decisions—historical data is particularly likely 

to be flawed and incomplete. 

One of the Microsoft Aether group’s 

thought experiments illustrates the conundrum. 

It involves A.I. tech that sifts through 

a big corpus of job applicants to pick out the 

perfect candidate for a top executive position. 


60 


Programmers could instruct the A.I. software 

to scan the characteristics of a company’s best 

performers. Depending on the company’s history, 

it might well turn out that all of the best 

performers—and certainly all the highestranking 

executives—were white males. This 

might overlook the possibility that the company 

had a history of promoting only white 

men (for generations, most companies did), 

or has a culture in which minorities or women 

feel unwelcome and leave before they rise. 

Anyone who knows anything about corporate 

history would recognize these flaws—but 

most algorithms wouldn’t. If A.I. were to 

automate job recommendations, Horvitz says, 

there’s always a chance that it can “amplify 

biases in society that we may not be proud of.” 

EI-FEI LI, the chief scientist 

for A.I. for Google’s cloudcomputing 

unit, says that bias in 

F 

technology “is as old as human 

civilization”—and can be found in 

a lowly pair of scissors. “For centuries, scissors 

were designed by right-handed people, used 

by mostly right-handed people,” she explains. 

“It took someone to recognize that bias and 

recognize the need to create scissors for lefthanded 

people.” Only about 10% of the world’s 

people are left-handed—and it’s human nature 

for members of the dominant majority to be 

oblivious to the experiences of other groups. 

That same dynamic, it turns out, is present 

in some of A.I.’s other most notable recent 

blunders. Consider the A.I.-powered beauty 

contest that Russian scientists conducted in 

2016. Thousands of people worldwide submitted 

selfies for a contest in which computers 

would judge their beauty based on factors like 

the symmetry of their faces. 

But of the 44 winners the machines chose, 

only one had dark skin. An international 

ruckus ensued, and the contest’s operators later 

attributed the apparent bigotry of the computers 

on the fact that the data sets they used 

to train them did not contain many photos 

of people of color. The computers essentially 

ignored photos of people with dark skin and 

deemed those with lighter skin more “beautiful” 

because they represented the majority. 

This bias-through-omission turns out to 

be particularly pervasive in deep-learning 

systems in which image recognition is a major 

part of the training process. Joy Buolamwini, a 

researcher at the MIT Media Lab, recently collaborated 

with Gebru, the Microsoft researcher, 

on a paper studying gender-recognition 

and 

where 

it 

stumbles 

here are 

some arenas 

in which a.i. 

capability 

still falls 

far short of 

corporate 

america’s 

hopes. 

UNDERSTANDING 

LANGUAGE 

> While chatbots 

are getting good at 

answering simple 

questions, A.I. is 

easily stumped 

by more complex 

language. Don’t 

expect a bot to 

write your next 

business proposal 

or TPS report anytime 

soon. 

EXPLAINING 

ITSELF 

> Even researchers 

who train 

A.I. systems 

often struggle to 

understand how 

they reach specific 

conclusions. A.I. 

needs to be able 

to explain itself 

better before hospitals, 

financial 

firms, and other 

businesses can 

trust it with highstakes 

decisions. 

SPOTTING HOAXES 

> Researchers 

have used A.I. tech 

to create doctored 

photos that can 

foolother A.I. 

systems. That’s 

a cautionary tale 

for any companies 

that want to use 

A.I. for corporate 

security. 

technologies from Microsoft, IBM, and China’s 

Megvii. They found that the tech consistently 

made more accurate identifications of subjects 

with photos of lighter-skinned men than with 

those of darker-skinned women. 

Such algorithmic gaps may seem trivial in 

an online beauty contest, but Gebru points 

out that such technology can be used in much 

more high-stakes situations. “Imagine a selfdriving 

car that doesn’t recognize when it 

‘sees’ black people,” Gebru says. “That could 

have dire consequences.” 

The Gebru-Buolamwini paper is making 

waves. Both Microsoft and IBM have said they 

have taken actions to improve their imagerecognition 

technologies in response to the audit. 

While those two companies declined to be 

specific about the steps they were taking, other 

companies that are tackling the problem ofer a 

glimpse of what tech can do to mitigate bias. 

When Amazon started deploying algorithms 

to weed out rotten fruit, it needed to work 

around a sampling-bias problem. Visualrecognition 

algorithms are typically trained to 

figure out what, say, strawberries are “supposed” 

to look like by studying a huge database 

of images. But pictures of rotten berries, as 

you might expect, are relatively rare compared 

with glamour shots of the good stuf. And unlike 

humans, whose brains tend to notice and 

react strongly to “outliers,” machine-learning 

algorithms tend to discount or ignore them. 

To adjust, explains Ralf Herbrich, Amazon’s 

director of artificial intelligence, the online 

retail giant is testing a computer science technique 

called oversampling. Machine-learning 

engineers can direct how the algorithm learns 

by assigning heavier statistical “weights” 

to underrepresented data, in this case the 

pictures of the rotting fruit. The result is that 

the algorithm ends up being trained to pay 

more attention to spoiled food than that food’s 

prevalence in the data library might suggest. 

Herbrich points out that oversampling can 

be applied to algorithms that study humans too 

(though he declined to cite specific examples 

of how Amazon does so). “Age, gender, race, 

nationality—they are all dimensions that you 

specifically have to test the sampling biases for 

in order to inform the algorithm over time,” 

Herbrich says. To make sure that an algorithm 

used to recognize faces in photos didn’t discriminate 

against or ignore people of color, or 



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61 



Posner: “You are going to mitigate risks of bias 

if you have more diversity.” 

older people, or overweight people, you could add weight to photos 

of such individuals to make up for the shortage in your data set. 

Other engineers are focusing further “upstream”—making sure 

that the underlying data used to train algorithms is inclusive and 

free of bias, before it’s even deployed. In image recognition, for example, 

the millions of images used to train deep-learning systems 

need to be examined and labeled before they are fed to computers. 

Radha Basu, the CEO of data-training startup iMerit, whose 

clients include Getty Images and eBay, explains that the company’s 

staf of over 1,400 worldwide is trained to label photos on behalf of 

its customers in ways that can mitigate bias. 

Basu declined to discuss how that might play out when labeling 

people, but she ofered other analogies. iMerit staf in India may 

consider a curry dish to be “mild,” while the company’s staf in New 

Orleans may describe the same meal as “spicy.” iMerit would make 

sure both terms appear in the label for a photo of that dish, because 

to label it as only one or the other would be to build an inaccuracy 

into the data. Assembling a data set about weddings, iMerit would 

include traditional Western white-dress-and-layer-cake images—but 

also shots from elaborate, more colorful weddings in India or Africa. 

iMerit’s staf stands out in a diferent way, Basu notes: It includes 

people with Ph.D.s, but also less-educated people who struggled 

with poverty, and 53% of the staf are women. The mix ensures that 

as many viewpoints as possible are involved in the data labeling 

process. “Good ethics does not just involve privacy and security,” 

Basu says. “It’s about bias, it’s about, Are we missing a viewpoint?” 

Tracking down that viewpoint is becoming part of more tech companies’ 

strategic agendas. Google, for example, announced in June 

that it would open an A.I. research center later this year in Accra, 

Ghana. “A.I. has great potential to positively impact the world, and 

more so if the world is well represented in the development of new 

A.I. technologies,” two Google engineers wrote in a blog post. 

A.I. insiders also believe they can fight bias by making their 

workforces in the U.S. more diverse—always a hurdle for Big Tech. 

Fei-Fei Li, the Google executive, recently cofounded the nonprofit 

AI4ALL to promote A.I. technologies and education among girls 

and women and in minority communities. The group’s activities 

include a summer program in which campers visit top university 

A.I. departments to develop relationships with mentors and role 

models. The bottom line, says AI4ALL executive director Tess 

> ralf herbrich 

director of a.i., amazon 

“age, gender, race, 

nationality—they 

are all dimensions 

that you have to test 

the sampling biases 

for over time.” 

EARS BEFORE this more diverse 

generation of A.I. researchers 

Y reaches the job market, however, 

big tech companies will have 

further imbued their products 

with deep-learning capabilities. And even as 

top researchers increasingly recognize the 

technology’s flaws—and acknowledge that 

they can’t predict how those flaws will play 

out—they argue that the potential benefits, 

social and financial, justify moving forward. 

“I think there’s a natural optimism about 

what technology can do,” says Candela, the 

Facebook executive. Almost any digital tech 

can be abused, he says, but adds, “I wouldn’t 

want to go back to the technology state we 

had in the 1950s and say, ‘No, let’s not deploy 

these things because they can be used wrong.’ ” 

Horvitz, the Microsoft research chief, says 

he’s confident that groups like his Aether 

team will help companies solve potential bias 

problems before they cause trouble in public. 

“I don’t think anybody’s rushing to ship things 

that aren’t ready to be used,” he says. If anything, 

he adds, he’s more concerned about “the 

ethical implications of not doing something.” 

He invokes the possibility that A.I. could 

reduce preventable medical error in hospitals. 

“You’re telling me you’d be worried that my 

system [showed] a little bit of bias once in a 

while?” Horvitz asks. “What are the ethics of 

not doing X when you could’ve solved a problem 

with X and saved many, many lives?” 

The watchdogs’ response boils down to: 

Show us your work. More transparency and 

openness about the data that goes into A.I.’s 

black-box systems will help researchers spot 

bias faster and solve problems more quickly. 

When an opaque algorithm could determine 

whether a person can get insurance, or whether 

that person goes to prison, says Buolamwini, 

the MIT researcher, “it’s really important that 

we are testing these systems rigorously, that 

there are some levels of transparency.” 

Indeed, it’s a sign of progress that few 

people still buy the idea that A.I. will be 

infallible. In the web’s early days, notes Tim 

Hwang, a former Google public policy executive 

for A.I. who now directs the Harvard- 

MIT Ethics and Governance of Artificial 

Intelligence initiative, technology companies 

could say they are “just a platform that represents 

the data.” Today, “society is no longer 

willing to accept that.” 


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62 


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can this 

startup break 

big tech’s 

hold on a.i.? 

The Orwell focus room at 

Element AI’s Montreal 

offices (left); staffers hard 

at work at headquarters. 


64 


PHOTOGRAPHS BY GUILLAUME SIMONEAU

montreal’s element ai has 

the pedigree to push the 

boundaries of what is possible 

with artificial intelligence. 

the question is whether it 

can accomplish that without 

becoming what it despises. 


by vauhini vara 

65 


FORTUNE 

I 

IN THE MODERN FIELD OF ARTIFICIAL INTELLIGENCE, all roads seem to lead 

to three researchers with ties to Canadian universities. The first, 

Geofrey Hinton, a 70-year-old Brit who teaches at the University 

of Toronto, pioneered the subfield called deep learning that has 

become synonymous with A.I. The second, a 57-year-old Frenchman 

named Yann LeCun, worked in Hinton’s lab in the 1980s and 

now teaches at New York University. The third, 54-year-old Yoshua 

Bengio, was born in Paris, raised in Montreal, and now teaches at 

the University of Montreal. The three men are close friends and 

collaborators, so much so that people in the A.I. community call 

them the Canadian Mafia. 

In 2013, though, Google recruited Hinton, and Facebook hired 

LeCun. Both men kept their academic positions and continued 

teaching, but Bengio, who had built one of the world’s best A.I. 

programs at the University of Montreal, came to be seen as the last 

academic purist standing. Bengio is not a natural industrialist. He 

has a humble, almost apologetic, manner, with the slightly stooped 

bearing of a man who spends a great deal of time in front of computer 

screens. While he advised several companies and was forever 

being asked to join one, Bengio insisted on pursuing passion projects, 

not the ones likeliest to turn a profit. “You must realize how big 

his heart is and how well-placed his values are,” his friend Alexandre 

Le Bouthillier, a cofounder of an A.I. startup called Imagia, tells me. 

“Some people on the tech side forget about the human side. Yoshua 

does not. He really wants this scientific breakthrough to help society.” 

Michael Mozer, an A.I. professor at the University of Colorado 

at Boulder, is more blunt: “Yoshua hasn’t sold out.” 

Not selling out, however, had become a lonesome endeavor. 

Big tech companies—Amazon, Facebook, Google, and Microsoft, 

among others—were vacuuming up innovative startups and 

draining universities of their best minds in a bid to secure top 

A.I. talent. Pedro Domingos, an A.I. professor at the University 

of Washington, says he asks academic contacts each year if they 

know students seeking postdoc positions; he tells me the last time 

he asked Bengio, “he said, ‘I can’t even hold on to them before they 

graduate.’ ” Bengio, fed up by this state of afairs, wanted to stop 

the brain drain. He had become convinced 

that his best bet for accomplishing this was 

to use one of Big Tech’s own tools: the blunt 

force of capitalism. 

On a warm September afternoon in 2015, 

Bengio and four of his closest colleagues met 

at Le Bouthillier’s Montreal home. The gathering 

was technically a strategy meeting for a 

technology-transfer company Bengio had cofounded 

years earlier. But Bengio, harboring 

serious anxieties about the future of his field, 

also saw an opportunity to raise some questions 

he had been dwelling on: Was it possible 

to create a business that would help a broader 

ecosystem of startups and universities, rather 

than hurt it—and maybe even be good for 

society at large? And if so, could that business 

compete in a Big Tech–dominated world? 

Bengio especially wanted to hear from his 

friend Jean-François Gagné, an energetic 

serial entrepreneur more than 15 years his 

junior. Gagné had earlier sold a startup he 

cofounded to a company now known as JDA 

Software; after three years working there, 

Gagné left and became an entrepreneur-inresidence 

at the Canadian venture capital firm 

Real Ventures. Bengio was keen on getting 

involved in Gagné’s next project, provided it 

aligned with his own goals. Gagné, as it happened, 

had also been wrestling with how to 

survive in a Big Tech–dominated world. At 

the end of the three-hour meeting, as the sun 

began to set, he told Bengio and the others, 

“Okay, I’m going to flesh out a business plan.” 

That winter, Gagné and a colleague, Nicolas 

Chapados, visited Bengio at his small University 

of Montreal oice. Surrounded by 

Bengio’s professorial paraphernalia—textbooks, 

stacks of papers, a whiteboard covered 

in cat-scratch equations—Gagné announced 

that with Real Ventures’ blessing he had come 

up with a plan. He proposed cofounding a 

startup that would build A.I. technologies for 

startups and other under-resourced organizations 

that couldn’t aford to build their own 

and might be attracted to a non–Big Tech 

vendor. The startup’s key selling point would 

be one of the most talented workforces on 

earth: It would pay researchers from Bengio’s 

lab, among other top universities, to work 

for the company several hours a month yet 

keep their academic positions. That way, the 

business would get top talent at a bargain, the 

universities would keep their researchers, and 

Main Street customers would stand a chance 

of competing with their richer rivals. Everyone 

would win, except maybe Big Tech. 


66 



Control of resources has consolidated among the largest tech companies 

developing artificial intelligence, but Yoshua Bengio is among the few in the field 

who have resisted commercial overtures. His company, Element AI, changes that. 

OOGLE CEO Sundar Pichai 

declared earlier this year, “A.I. is 

G one of the most important 

things humanity is working on. 

It is more profound than, I 

dunno, electricity or fire.” Google and the 

other companies that together constitute the 

Big Tech threat that occupies Bengio have 

positioned themselves as forces to democratize 

A.I., by making it afordable for consumers 

and businesses of all sizes, and using it to 

better the world. “A.I. is going to make 

sweeping changes to the world,” Fei-Fei Li, the 

chief scientist for Google Cloud, tells me. “It 

should be a force that makes work, and life, 

and society, better.” 


When Bengio and Gagné began their 

discussions, the largest tech companies hadn’t 

yet been embroiled in the high-profile A.I. 

ethics messes—about controversial sales of 

A.I. for military and predictive policing, as 

well as the slipping of racial and other biases 

into products—that would soon consume 

them. But even then, it was clear to insiders 

that Big Tech companies were deploying A.I. 

to compound their considerable power and 

wealth. Understanding this required knowing 

that A.I. is diferent from other software. First 

of all, there are relatively few A.I. experts in 

the world, which means they can command 

salaries well into the six figures; that makes 

building a large team of A.I. experts too expensive 

for all but the wealthiest companies. 

Second, A.I. often requires more computing 

power than traditional software, which can 

be expensive, and good data, which can be 

diicult to get, unless you happen to be a tech 

giant with nearly limitless access to both. 

“There’s something about the way A.I. is 

done these days…that increases the concentration 

of expertise and wealth and power in the 

hands of just a few companies,” Bengio says. 

Better resources attract better researchers, 

which leads to better innovations, which brings 

in more revenue, which buys more resources. 

“It sort of feeds itself,” he adds. 

Bengio’s earliest encounters with A.I. 

anticipated the rise of Big Tech. Growing up 

in Montreal in the 1970s, he was especially 

taken with science fiction books like Philip K. 

Dick’s novel Do Androids Dream of Electric 

Sheep?—in which sentient robots created by a 

megacorporation have gone rogue. In college, 

Bengio majored in computer engineering; he was in graduate 

school at McGill University when he came across a paper by Geof 

Hinton and was lightning-struck, finding echoes of the sci-fi stories 

he had loved so much as a child. “I was like, ‘Oh my God. This 

is the thing I want to do,’ ” he recalls later. 

In time, Bengio, along with Hinton and LeCun, would become 

an important figure in a field known as deep learning, involving 

computer models called neural networks. But their research was 

littered with false starts and confounded ambitions. Deep learning 

was alluring in theory, but no one could make it work well in 

practice. “For years, at the machine-learning conferences, neural 

networks were out of favor, and Yoshua would be there cranking 

away on his neural net,” recalls Mozer, the University of Colorado 

professor, “and I’d be like, ‘Poor Yoshua, he’s so out of it.’ ” 

In the late 2000s it dawned on researchers why deep learning 

hadn’t worked well. Training neural networks at a high level 

67 


FORTUNE 

required more computing power than had been available. Further, 

neural networks need good digital information in order to learn, 

and before the rise of the consumer Internet there hadn’t been 

enough of it for them to learn from. By the late 2000s, all that 

had changed, and soon large tech companies were applying the 

techniques of Bengio and his colleagues to achieve commercial 

milestones: translating languages, understanding speech, recognizing 

faces. 

By that time, Bengio’s brother Samy, also an A.I. researcher, 

was working at Google. Bengio was tempted to follow his brother 

and colleagues to Silicon Valley, but instead, in October 2016, he, 

Gagné, Chapados, and Real Ventures launched their own startup: 

Element AI. “Yoshua had no material ownership in any A.I. platform, 

despite being hounded over the last five years to do so, other 

than Element AI,” says Matt Ocko, a managing partner at DCVC, 

which invested in the company. “He had voted with his reputation.” 

To win customers, Element relied on the star power of its 

researchers, the reputational glitz of its funding, and a promise of 

more personalized service than Big Tech could provide. But its executives 

also worked another angle: In an age in which Google was 

competing to sell A.I. to the military, Facebook had played host to 

rogue actors who influence elections, and Amazon was gobbling up 

the global economy, Element could position itself as a less predaceous, 

more ethical A.I. outfit. 

This spring, I visited Element’s headquarters in Montreal’s 

Plateau District. The headcount had expanded dramatically, to 

300, and judging from the colorful Post-it notes columned on the 

walls, so had the workload. In one meeting, a dozen Elementals, as 

employees call themselves, watched a demo of a product in development, 

in which a worker could enter questions on a Google-like 

an a-team 

for a.i. 

the advancement 

of artificial 

intelligence goes 

far beyond the 

“canadian mafia” 

of bengio, hinton, 

and lecun. here’s 

a look at other 

members of the 

brain trust pushing 

a.i. forward in 

academia, business, 

and beyond. 

by jonathan 

sperling 

ANDREW NG 

CEO, 

LANDING.AI 

> The well-known 

Stanford professor 

cofounded 

and led Google 

Brain, cofounded 

Coursera, and 

served as Baidu’s 

chief scientist 

before starting 

his latest venture, 

focused on A.I. for 

manufacturers. 

FEI-FEI LI 

CHIEF SCIENTIST 

OF A.I. 

GOOGLE CLOUD 

> Li, a computer 

vision specialist 

who also serves as 

the director of the 

Stanford Artificial 

Intelligence Lab, 

started a nonprofit 

called AI4ALL that 

focuses on promoting 

diversity in 

the field. 

screen—“What’s our hiring forecast?”—and 

get up-to-date answers. The answers would 

be based not just on existing information 

but also on the A.I.’s predictions about the 

future based on its understanding of business 

goals. As is typical at fast-growing startups, 

the employees I met seemed simultaneously 

energized and utterly exhausted. 

A persistent challenge for Element is the 

dearth of good data. The simplest way to train 

A.I. models is to feed them lots of well-labeled 

examples—thousands of cat images, or translated 

texts. Big Tech has access to so much 

consumer-oriented data that it’s all but impossible 

for anyone else to compete at building 

large-scale consumer products. But businesses, 

governments, and other institutions 

own huge amounts of private information. 

Even if a corporation uses Google for email, 

or Amazon for cloud computing, it doesn’t 

typically let those vendors access its internal 

databases about equipment malfunctions, or 

sales trends, or processing times. That’s where 

Element sees an opening. If it can access 

several companies’ databases of, say, product 

images, it can then—with customers’ permission—use 

all of that information to build a 

better product-recommendation engine. Big 

Tech companies are also selling A.I. products 

and services to businesses—IBM is squarely 

focused on it—but no one has cornered the 

market. Element’s bet is that if it can embed 

itself in these organizations, it can secure a 

corporate data advantage similar to the one 

RUSLAN 

SALAKHUTDINOV 

DIRECTOR OF A.I. 

RESEARCH, 

APPLE 


> The Canadian 

researcher—whose 

doctoral adviser 

was Geoff Hinton— 

developed Bayesian 

program learning, 

an alternative to 

deep learning. He 

teaches at Carnegie 

Mellon. 

RAMA AKKIRAJU 

DISTINGUISHED 

ENGINEER & 

MASTER INVENTOR, 

IBM WATSON 

> A longtime IBM researcher, 

Akkiraju 

works on inferring 

people’s personalities, 

emotions, 

and intentions 

using social 

media data and 

machine-learning 

techniques. 

NG: STEVE JENNINGS— GETTY IMAGES; LI: CARLOS CHAVARRIA— NEW YORK TIMES/REDUX; SALAKHUTDINOV: COURTESY OF APPLE; AKKIRAJU: COURTESY OF IBM; KARPATHY: COURTESY OF TESLA; LYONS: MIKE COPPOLA— GETTY IMAGES 

68 


Big Tech has in consumer products. 

Not that it has gotten anywhere close to 

that point. Element has signed up some prominent 

Canadian firms, including the Port of 

Montreal and Radio Canada, and counts more 

than 10 of the world’s 1,000 biggest companies 

as customers, but executives wouldn’t 

quantify their customers or name any non- 

Canadian ones. Products, too, are still in early 

stages of development. During the demo of 

the question-answering product, the project 

manager, François Maillet, who is not a native 

English speaker, requested information about 

“how many time” employees had spent on a 

certain product. The A.I. was stumped, until 

Maillet revised the question to ask “how much 

time” had been spent. Maillet acknowledges 

the product has a long way to go. But he says 

Element wants it to become so intelligent that 

it can answer the deepest strategic questions. 

The example he ofers—“What should we be 

doing?”—seemed to go beyond the strategic. It 

sounded quite nearly prayerful. 

OOK NO FURTHER than Google’s 

employee revolt over its decision 

L to provide A.I. to the Pentagon 

as evidence that tech companies’ 

stances on military use of A.I. 

have become an ethical litmus test. Bengio 

and his cofounders vowed early on to never 

build A.I. for ofensive military purposes. But 

earlier this year, the Korea Advanced Institute 

of Science and Technology, a research 

ANDREJ KARPATHY 

DIRECTOR OF A.I., 

TESLA 

> Advised on his 

dissertation by 

Fei-Fei Li, the Stanford 

Ph.D. grad 

was a research 

scientist at Open AI 

before moving 

to Elon Musk’s 

automaker to work 

on perception for 

Autopilot, its smart 

driving system. 

TERAH LYONS 

EXECUTIVE 

DIRECTOR, THE 

PARTNERSHIP ON AI 

> A Harvard grad, 

Lyons led a policy 

portfolio focused 

on machine intelligence 

when 

she served as 

policy adviser 

to the U.S. chief 

technology officer 

during the Obama 

administration. 

university, announced it would partner with the defense unit of the 

South Korean conglomerate Hanwha, a major Element investor, 

to build military systems. Despite Element’s ties with Hanwha, 

Bengio signed an open letter boycotting the Korean institute until 

it promised not to “develop autonomous weapons lacking meaningful 

human control.” Gagné, more discreetly, wrote to Hanwha 

emphasizing that Element wouldn’t partner with companies building 

autonomous weapons. Soon Gagné and the scientists received 

assurances: The university and Hanwha wouldn’t be doing so. 

Autonomous weapons are neither the only ethical challenge facing 

A.I. nor the most serious one. Kate Crawford, a New York University 

professor who studies the societal implications of A.I., has 

written that all the “hand-wringing” over A.I. as a future existential 

threat distracts from existing problems, as “sexism, racism, and 

other forms of discrimination are being built into the machinelearning 

algorithms.” Since A.I. models are trained on the data that 

engineers feed it, any biases in the data will poison a given model. 

Tay, an A.I. chatbot deployed to Twitter by Microsoft to learn 

how humans talk, soon started spewing racist comments, like “Hitler 

was right.” Microsoft apologized, took Tay of-line, and said it 

is working to address data bias. Google’s A.I.-powered feature that 

uses selfies to help users find their doppelgängers in art matched 

African-Americans with stereotypical depictions of slaves and 

Asian-Americans with slant-eyed geishas, perhaps because of an 

overreliance on Western art. I am an Indian-American woman, and 

when I used the app, Google delivered me a portrait of a copperfaced, 

beleaguered-looking Native American chief. I also felt beleaguered, 

so Google got that part right. (A spokesman apologized and 

said Google is “committed to reducing unfair bias” in A.I.) 

Problems like these result from bias in the world at large, but 

it doesn’t help that the field of A.I. is believed to be even less 

diverse than the broader computer science community, which is 

dominated by white and Asian men. “The homogeneity of the field 

is driving all of these issues that are huge,” says Timnit Gebru, a 

researcher who has worked for Microsoft and others and is an 

Ethiopian-American woman. “They’re in this bubble, and they 

think they’re so liberal and enlightened, but they’re not able to see 

that they’re contributing to the problem.” 

Women make up 33% of Element’s workforce, 35% of its leadership, 

and 23% of technical roles—higher percentages than at many 

big tech companies. Its employees come from more than 25 countries: 

I met one researcher from Senegal who had joined in part 

because he couldn’t get a visa to stay in the U.S. after studying there 

on a Fulbright. But the company doesn’t break down its workforce 

by race, and during my visit, it appeared predominantly white and 

Asian, especially in the upper ranks. Anne Martel, the senior vice 

president of operations, is the only woman among Element’s seven 

top executives, and Omar Dhalla, the senior vice president of industry 

solutions, is the only person of color. Of the 24 academic fellows 

ailiated with Element, just three are female. Of 100 students listed 

on the website of Bengio’s lab, MILA, seven are women. (Bengio said 

the website is out of date and he doesn’t know the current gender 

breakdown.) Gebru is close with Bengio but does not exempt him 



69 


FORTUNE 

NE COLD, BRIGHT MORNING this 

spring, Element’s staf gathered 

for an of-site training in 

O 

collaborative software design, 

in a high-ceilinged church that 

had been converted into an event space. The 

attendees, working in groups at round tables, 

had been assigned to invent a game to teach 

the fundamentals of A.I. I sat with some halfdozen 

employees, who had decided on a game 

about an A.I. named Sophia the Robot who 

had gone rogue and would need to be fought 

and captured, using, naturally, A.I. techniques. 

Mezei, the new VP for people, hapfrom 

her criticisms. “I tell him that he’s signing 

letters against autonomous weapons and 

wants to stay independent, but he’s supplying 

the world with a mostly white or Asian group 

of males to create A.I.,” she said. “How can you 

think about world hunger without fixing your 

issue in your lab?” 

Bengio said he is “ashamed” about the 

situation and trying to address it, partly by 

widening recruitment and earmarking funding 

for students from underrepresented groups. 

Element, meanwhile, has hired a new vice 

president for people, Anne Mezei, who set 

diversity and inclusion as a top priority. To address 

possible ethical problems with its products, 

Element is hiring ethicists as fellows, to 

work alongside developers. It has also opened 

an AI for Good lab, in a London oice directed 

by Julien Cornebise, a former researcher at 

Google DeepMind, where researchers are 

working, for free or at cost, with nonprofits, 

government organizations, and others on A.I. 

projects with social benefit. 

Still, ethical challenges persist. In early 

research, Element is basing some products 

on its own data; the question-answering tool, 

for example, is being trained partly on shared 

internal documents. Martel, the operations 

executive, tells me that because Element executives 

aren’t sure from an ethics standpoint 

how they might use A.I. for facial recognition, 

they plan to experiment with it on their own 

employees by installing video cameras that will, 

with employees’ permission, capture their faces 

to train the A.I. Executives will poll employees 

on their feelings about this, to refine their 

understanding of the ethical dimensions. “We 

want to figure it out through eating our own 

dog food,” Martel says. That means, of course, 

that any facial-recognition model will be based, 

at least at first, on faces that are not representative 

of the broader population. Martel says 

executives are aware of the issue: “We’re really 

concerned about not having the right level of 

representativeness, and we’re looking into solutions 

for that.” 

Even the question that Element’s product 

aims to answer for executives—What should 

we be doing?—is loaded with ethical quandaries. 

One could hardly fault a business-oriented 

A.I. for recommending whatever course of 

action maximizes profit. But how should it 

make those decisions? What social costs are 

5 richest 

a.i. 

startups 

the age of 

unicorns may 

be over, but 

investors 

are plowing 

lots of 

money into 

artificial 

intelligence 

companies. 

here’s a look 

at their top 

picks. 

BYTEDANCE 

City: Beijing 

Investment: $3.1 B 

> Known for 

“Jinri Toutiao,” 

or “Today’s 

Headlines,” this 

Chinese digital 

media company 

uses artificial 

intelligence 

to deliver 

personalized news 

recommendations. 

SENSETIME 

City: Beijing 

Investment: $1.6 B 

> This Alibababacked 

Chinese 

company 


intelligence to 

recognize text and 

images for use in 

financial services, 

surveillance, and 

security, retail, and 

consumer mobile 

Internet apps. 

tolerable? Who decides? As Bengio has acknowledged, 

as more organizations deploy A.I., 

millions of humans are likely to lose their jobs, 

though new ones will be created. Though Bengio 

and Gagné originally planned to pitch their 

services to small organizations, they have since 

pivoted to target the 2,000 largest companies 

in the world; Element’s need for large data sets 

turned out to be prohibitive for small organizations. 

In particular, they are targeting finance 

and supply-chain companies—the biggest of 

which aren’t exactly defenseless underdogs. 

Gagné says that as the technology improves, 

Element expects to sell it to smaller organizations 

as well. But until that happens, its plan 

to give an A.I. advantage to the world’s biggest 

companies would seem better-equipped to 

enrich powerful incumbent corporations than 

to spread A.I.’s benefits among the masses. 

Bengio believes the job of scientists is to 

keep pursuing A.I. discoveries. Governments 

should more aggressively regulate the field, he 

says, while distributing wealth more equally 

and investing in education and the social safety 

net, to mitigate A.I.’s inevitable negative efects. 

Of course, these positions assume governments 

have their citizens’ best interests in mind. 

Meanwhile, the U.S. government is cutting 

taxes for the rich, and the Chinese government, 

one of the world’s biggest funders of A.I. 

research, is using deep learning to monitor 

citizens. “I do think Yoshua believes that A.I. 

can be ethical, and that his can be the ethical 

A.I. company,” says Domingos, the University 

of Washington professor. “But to put it bluntly, 

Yoshua is a little naive. A lot of technologists 

are a little naive. They have this utopian view.” 

Bengio rejects the characterization. “As scientists, 

I believe that we have a responsibility 

to engage with both civil society and governments,” 

he says, “in order to influence minds 

and hearts in the direction we believe in.” 


70 


pened to be at this table. “I like the fact that 

it’s Sophia, because we need more women,” 

she interjected. “But I don’t like fighting.” 

There were murmurs of assent all around. 

An executive assistant suggested, “Maybe the 

goal is changing Sophia’s mindset so it’s about 

helping the world.” This was a more palatable 

version of the game, one better aligned with 

Element’s self-image. One employee told me, 

“At the oice, we’re not allowed to talk about 

Skynet”—the antagonistic A.I. system from 

the Terminator franchise. Anyone who slips 

up has to put a dollar into a special jar. A colleague 

added, in a tone of great cheer, “We’re 

supposed to be positive and optimistic.” 

Later I visited Bengio’s lab at the University 

of Montreal, a warren of carceral, fluorescentlit 

rooms filled with computer monitors and 

piled-up textbooks. In one room, some dozen 

young men were working on their A.I. models, 

exchanging math jokes, and contemplating 

their career paths. Overheard: “Microsoft has 

all these nice perks—you get cheaper airline 

tickets, cheap hotels.” “I go to Element AI 

once a week, and I get this computer.” “He’s 

a sellout.” “You can scream, ‘Sellout!’ in other 

fields, but not deep learning.” “Why not?” “Because 

in deep learning, everyone’s a sellout.” 

Bengio’s sellout-free vision, it seemed, had not 

quite been realized. 

Still, perhaps more than any other academic, 

Bengio has influence over A.I.’s future, by virtue 

of training the next generation of researchers. 

(One of his sons has become an A.I. researcher 

too; the other is a musician.) One afternoon I 

went to see Bengio in his oice, a small, sparse 

room whose main features were a whiteboard 

across which someone had scrawled the phrase 

“Baby A.I.,” and a bookcase featuring such titles 

as The Cerebral Cortex of the Rat. Despite being 

an Element cofounder, Bengio acknowledged 

that he hadn’t been spending a lot of time 

at the oices; he had been preoccupied with 

frontiers in A.I. research that are far from commercial 

application. 

While tech companies have been focused on 

making A.I. better at what it does—recognizing 

patterns and drawing conclusions from them— 

Bengio wants to leapfrog those basics and 

start building machines that are more deeply 

inspired by human intelligence. He hesitated to 

describe what that might look like. But one can 

imagine a future in which machines wouldn’t 

just move products around a warehouse but 

navigate the real world. They wouldn’t just 

respond to commands but understand, and 

empathize with, humans. They wouldn’t just 

AFFIRM 

City: San Francisco 

Investment: $725 M 

> Led by Pay- 

Pal cofounder 

Max Levchin, this 

next-generation 

financial services 

firm uses artificial 


estimate creditworthiness 

and 

issue personal and 

business loans. 

MEGVII 

City: Beijing 


> You can find this 

A.I. company’s 

Face++ facial 

recognition 

services in use 

in many Chinese 

cities for domestic 

surveillance. It’s 

also popular among 

banks and telecom 

companies for 

authentication. 

UPSTART 

City: San Carlos, 

Calif. 


Founded by Google 

veterans, this San 

Francisco Bay 

Area company 



price credit and 

automate the 

borrowing process 

for consumers as 

well as financial 

institutions. 


identify images; they’d create art. To that end, 

Bengio has been studying how the human 

brain operates. As one of his postdocs told me, 

brains “are proof that intelligent systems are 

possible.” One of Bengio’s pet projects is a game 

in which players teach a virtual child—the 

“Baby A.I.” from his whiteboard—about how 

the world operates by talking to the pretend 

infant, pointing, and so on: “We can use 

inspiration from how babies learn and how 

parents interact with their babies.” It seems 

far-fetched until you remember that Bengio’s 

once-outlandish notions now underpin some of 

Big Tech’s most mainstream technologies. 

While Bengio believes human-like A.I. 

is possible, he evinces impatience with the 

far-reaching ethical worries popularized by 

people like Elon Musk, premised on A.I.s 

outsmarting humans. Bengio is more interested 

in the ethical choices of the humans 

building and using A.I. “One of the greatest 

dangers is that people either deal with A.I. 

in an irresponsible way or maliciously—I 

mean for their personal gain,” he once told an 

interviewer. Other scientists share Bengio’s 

feelings, and yet, as A.I. research continues 

apace, it remains funded by the world’s most 

powerful governments, corporations, and 

investors. Bengio’s university lab is largely 

funded by Big Tech. 

At one point, during a discussion of the 

biggest tech companies, Bengio told me, “We 

want Element AI to become as large as one 

of these giants.” When I questioned whether 

he would then be perpetuating the same sort 

of concentration of wealth and power that he 

has decried, he replied, “The idea isn’t just to 

create one company and be the richest in the 

world. It’s to change the world, to change the 

way that business is done, to make it not as 

concentrated, to make it more democratic.” As 

much as I admired his position and believed 

in his intentions, his words didn’t sound much 

diferent from the corporate slogans once 

chosen by Big Tech. Don’t be evil. Make the 

world more open and connected. Creating an 

ethical business is less about founders’ intentions 

than about how, over time, business 

owners measure societal good against profit. 

What should we be doing? If computers are 

still struggling to answer that question, they 

should take some solace in knowing that we 

humans are not much better. 


DATA: CB INSIGHTS 


71 



MAVS. MA 

72 


ILLUSTRATION BY ALEXANDER WELLS


JackmaofALIBABAandponymaofTENCENTbuilttech 

empiresthatdominatechina’sdigitaleconomy.Istheworld 

bigenoughforbothofthem? BY ADAM LASHINSKY 

73 


THERE’S SOMETHING IRRESISTIBLE about a clash of titans. The fate of 

the world hung in the balance during the Cold War standof between 

the U.S. and the U.S.S.R. Coke vs. Pepsi once mattered mightily. Ali- 

Foreman defined a pugilistic era. And then there’s the celebrity spat 

pitting Taylor Swift against Kanye West. (Look what he made her do.) 

For sheer global commercial stakes, however, these epic clashes have 

nothing on the battle between the two heavyweights of the Chinese Internet 

industry, Alibaba and Tencent. Both have market capitalizations 

that hover around half a trillion U.S. dollars. Both command sectors of 

the rapidly growing Chinese digital landscape: Tencent owns the leading 

gaming and messaging platform, while Alibaba rules e-commerce. 


Both are aggressive investors inside and outside China. Each is the 

pride of their not-quite-first-tier hometowns: Alibaba of the ancient 

city of Hangzhou near Shanghai and Tencent of shiny-new Shenzhen 

across the border from Hong Kong. Finally, both touch an astounding 

percentage of the world’s most populous country: Alibaba’s various 

online marketplaces count 552 million active customers; Tencent’s 

TWeChat messaging service recently surpassed 1 billion accounts. 

CRI XI SZ— IMAGINECHINA 

74 


MA VS. MA 

IMAGEINGCHINA 

For all these similarities, Tencent and 

Alibaba are sharply distinct companies, as different 

in culture, style, and approach as Apple 

is from Google. The duo sprang from the same 

era, the late 1990s, when China was discovering 

the Internet, and for years they built giant 

businesses more or less out of each other’s way. 

Yet as they’ve grown, each inevitably has begun 

to encroach on the other’s turf. Tencent, for 

instance, is investing in retail and financial services, 

sectors that are Alibaba’s strength. Alibaba 

in turn sees an opening in Tencent’s domain, 

particularly by ofering mobile-messaging tools 

to its vast network of small-business partners. 

There’s one last unavoidable comparison 

between the two combatants. Their top leaders 

share a surname, though Alibaba’s Jack Ma 

and Tencent’s Pony Ma aren’t related. As the 

SHARING 

THE LOVE 

Left: Pony Ma, 

Tencent’s CEO, 

hands out “red 

envelope” 

financial gifts 

to Tencent 

employees. 

Above: Jack Ma, 

Alibaba’s executive 

chairman, 

takes part in an 

annual group 

wedding at Alibaba’s 

Hangzhou 

headquarters. 

Chinese character for Ma signifies a horse—the 

genesis of “Pony’s” English nickname—the contest 

between the two stallions of the Chinese 

Internet literally is a two-horse race. And the 

trophy they’re racing for is nothing less than 

the No. 1 position in a digital economy that’s 

growing faster and evolving more dynamically 

than any other nation’s. 

The two men, who’ve known each other for 

years, are quick to profess mutual respect. But 

as their rivalry heats up, those assertions are 

increasingly a prelude to damning the other 

with faint praise—or worse. 

Huateng “Pony” Ma, a reserved engineer 

who rarely speaks to Western media, lashed 

out at Alibaba at theFortune Global Forum in 

Guangzhou, China, in December, for example. 

Ma, who is 46, compared his nemesis 


75 


MA VS. MA 

to a greedy landlord because Alibaba’s market-leading Taobao 

e-commerce site charges merchants listing fees. “Our position is not 

to compete with our partners but to enable them,” said Ma, speaking 

in Mandarin through an interpreter. Alibaba, he noted, can raise 

the rent on its tenants whenever it wants, whereas “Tencent doesn’t 

have a mall where we rent the shops to vendors.” Instead, he argued, 

WeChat ofers a “decentralized” platform that partners can use to 

sell things independently from Tencent, with “no rental fee.” 

An Arms Race in Shopping Tech 

Alibaba and Tencent have made dozens of investments in smaller 

tech and retail players—with many focused on A.I., virtual reality, 

and other tech that can enhance shopping. The goal: to dominate 

both off-line and online retail for China’s fast-growing middle class. 

M&A AND INVESTMENT ACTIVITY SINCE JAN. 1, 2017 

NEW TECH 

ALIBABA 

24 

TOTAL: 54 DEALS 

20 

53 

OTHER 

TENCENT 

117 TOTAL: DEALS 

MEDIA 

BREAKDOWN OF NEW TECH DEALS, JAN. 2008–MAY 2018 

TENCENT 

2 AR/VR 

11 

19 

2 

21 

21 

RETAIL 

TOTAL: 57 

Months later, 53-year-old Jack Ma, a globetrotting 

business celebrity with a gift for gab, 

returns the volley without mentioning his 

competitor by name. Tencent has a reputation 

as a company adept at wringing profits out of 

its platform. “Culturally, we are very diferent,” 

the Alibaba founder says, speaking expressively 

in English, during a recent interview at 

Alibaba’s headquarters in Hangzhou. “We’re 

more idealistic. We want to do something 

good, while making money. We trust people 

more than our products.” 

There are limits to this archenemy motif. 

Alibaba and Tencent attack the market diferently, 

in ways that have often allowed them 

to grow without butting heads. Alibaba’s is 

largely a strategy of buying controlling stakes 

in businesses that are a fit with its commerce 

platform; Tencent takes hundreds of minority 

stakes in an array of businesses to win over 

partners and gain access to their technology. 

What’s more, the competition is hardly a zerosum 

game, thanks to the rapidly expanding 

Chinese middle class. 

Still, the companies can and do play hardball. 

In an economy in which e-commerce is 

dominant in ways unthinkable in the U.S., each 

company stymies the other’s payment service 

on their main platforms. And when Tencent 

and Alibaba sign on investment bankers, they 

reportedly make it a condition that the bankers 

work exclusively for them. (Many companies 

impose such restrictions, but they have greater 

consequences coming from Tencent and Alibaba 

given that the two also are major venture 

capital investors and the prohibitions could 

impinge on work with the companies in which 

they invest.) Even if the world is big enough for 

both of them, Tencent and Alibaba increasingly 

are in conflict. “Until recently, everyone played 

in their own sandbox,” says Deborah Weinswig, 

New York–based CEO of the China-focused 

retail consultancy Coresight Research. “Now 

the sand is starting to spill over.” 


H 

8 A.I./BIG DATA 8 SMART HOME/DEVICES 

ALIBABA 

5 AR/VR 

39 OTHER 

TOTAL: 44 

HANGZHOU is famous for its bucolic West Lake, 

and for being the terminus of a canal from 

13 A.I./BIG DATA 4 SMART DEVICES 22 OTHER SOURCE: AB BERNSTEIN 

76 


DIMAS ARDIAN— BLOOMBERG/GETTY IMAGES 

Beijing that a millennium ago made it one 

of the richest cities in China. Today, it is best 

known as the place where Jack Ma and 17 

friends started Alibaba in the drab Hupan 

apartment complex in 1999. 

Alibaba maintains the Hupan site in its 

original state, but not as a museum. Instead, 

the company uses it as a history-steeped 

new-business incubator. A short drive from 

Alibaba’s massive headquarters, a campus 

of steel-and-glass buildings that wouldn’t 

be out of place in Silicon Valley, the Hupan 

apartment is stuck in China’s pre-glamorous 

phase. A baby stroller and laundry drying on 

clotheslines sit outside the building, presumably 

belonging to people who, unlike Alibaba’s 

employees, actually live in the complex. Up a 

short flight of stairs, 40-some engineers are 

crammed into a four-bedroom apartment, 

where photos of the founding Alibaba team 

adorn the walls. A whiteboard bears a famous 

quote from late paramount leader Deng Xiaoping. 

“Development is the absolute principle,” 

it states, scribbled there by another paramount 

leader, Jack Ma himself. 

The fledgling business enlivening the 

apartment today is called DingTalk, and its 

placement in this grimy flat—a dilapidated 

microwave and spaghetti-wired server rack 

attest to its startup authenticity—is purposeful. 

DingTalk is meant to take on Tencent’s 

category-leading WeChat messaging service, 

you see, and its leaders have been bestowed 

the ultimate privilege of incubating a business 

here. The apartment is a “holy space,” says 

Chris Wang, head of global business development 

for DingTalk, noting three illustrious 

businesses that preceded DingTalk here: Alibaba 

itself, originally a website that matched 

vendors with suppliers; Taobao, its main retail 

platform, which dominates Alibaba’s business 

today; and Alipay, the payment product that 

became Ant Financial Services, a multibilliondollar 

operation in its own right. 

At first blush, the similarities between 

DingTalk and WeChat are striking. Users can 

employ it to send messages, make phone calls, 

and exchange contact information, just like 

WeChat. Yet the guts of DingTalk, a series of 

low-cost Slack- and Skype-like “enterprise 

communications and collaboration programs,” 

reflect Alibaba’s commercial orientation. 

Alibaba’s mission, any employee can tell you, 

Chess Pieces in Southeast Asia 

The markets of the Association of Southeast Asian Nations (ASEAN)— 

home to 640 million potential customers—have become the first 

battleground outside China for Alibaba and Tencent. By Clay Chandler 

REVVING UP Motorcycle drivers for Grab and Go-Jek in Jakarta, Indonesia. 

ALIBABA and Tencent 

each collect only a 

small fraction of their 

revenue outside China. 

But their overseas 

competition is heating 

up in Southeast Asia, 

where each has spent 

billions to secure 

major stakes in top 

startups. 

firm, to team up 

with Tencent. But in 

August, thanks partly 

to the intervention 

of SoftBank founder 

Masayoshi Son, an 

early Alibaba backer, 

Alibaba swooped in 

with a $1.1 billion 

funding round. 

A GAMING-PLUS PLAY 

Tencent owns 40% 

of SEA, a Singaporebased 

gaming-app 

company that raised 

more than $1 billion 

in an October listing 

on the New York Stock 

Exchange. Tencent 

has encouraged SEA to 

broaden its platform 

into e-commerce and 

financial payments. 

SEA has also invested 

heavily in its mobile 

e-commerce platform, 

Shopee.com—which 

ranks as a top five retailer 

in all the region’s 

major economies. 

$1.2 billion funding 

round for the venture 

last summer, has 

encouraged Go-Jek 

to transform its app 

into an all-purpose 

platform similar to 

Tencent’s WeChat. 

Go-Jek’s nemesis is 

Grab, the Singaporebased 

venture that 

dominates ride hailing 

in the region. Alibaba 

has reportedly been 

in talks for a stake in 

Grab, but other funding 

rounds have made 

headlines. In June, 

Grab secured a $1 billion 

investment from 

Toyota, valuing the 

company at more than 

$7 billion and making 

it the region’s most 

valuable startup. 

In March, Uber 

said it would sell 

its operations in 

Southeast Asia to 

Grab for $1.6 billion 

and a 27.5% equity 

stake. Immediately 

afterward, Go-Jek 

MORE E-COMMERCE 

Alibaba made the first 

major Chinese investment 

in the region’s 

tech sector in 2016 

when it bought a 51% 

stake in Singaporebased 

Lazada, 

Southeast Asia’s 

largest e-commerce 

platform; it has since 

bought most of the 

rest of the company. 

In February, Alibaba 

installed Lucy Peng, 

a past leader of its 

mobile payment affiliate 

Ant Financial, as 

Lazada’s CEO. Lazada 

has been overhauling 

its business model to 

mimic Alibaba’s, con- 

UP FOR GRAB(S) 

Tencent’s other major announced plans 


necting shoppers to investment in Southeast 

to expand into four 

outside vendors and 

outsourcing delivery; 

it now boasts 560 million 

customers. 

Analysts had 

expected Tokopedia, 

Indonesia’s biggest 

e-commerce 

Asia is Go-Jek, an 

Indonesian startup 

that began as a motorbike-on-demand 

service 

and has expanded 

into ride hailing for 

four-wheeled vehicles. 

Tencent, which led a 

markets where Grab 

operates—Thailand, 

Vietnam, Singapore, 

and the Philippines— 

and Tencent reportedly 

has offered Go-Jek an 

additional $1 billion as 

fuel for the fight. 

77 


MA VS. MA 

and other technology services, as well as a way 

to expand the customer base for the marketleading 

Alipay. “We always focus on commerce,” 

says Daniel Zhang, Alibaba’s CEO. 

(Jack Ma is executive chairman, having given 

up the CEO role five years ago.) 

Commerce, in fact, is the glue that holds 

together Alibaba’s disparate parts. It began 

Alipay as a way to let merchants collect from 

shoppers on Taobao. Now Alipay is part of Ant 

Financial, which recently raised $14 billion, 

thought to be the largest venture capital investment 

ever. Alibaba co-opted “Singles Day,” 

an unoicial holiday that celebrated unmarried 

adults, creating what Americans would 

call a “Hallmark holiday” by turning it into a 

nationwide orgy of e-commerce. Singles Day 

in 2017 rang up total sales of $25.3 billion— 

that’s almost $6 billion more than Americans 

spent online over the entire five-day Thanksis 

to “make it easy to do business anywhere.” 

DingTalk’s goal is to provide WeChat-like 

functionality to small businesses, and then 

to upsell them typical business-software fare 

like customer-relationship and cloud-storage 

tools. “Small and medium-size enterprises 

need something very low cost,” says Wang. 

“We at Alibaba have access to great technology” 

that smaller companies lack. 

After years of teaching businesses how to 

use technology, selling it to them directly is a 

major new thrust for Alibaba. It made significant 

investments in selling cloud-computing 

rental services, for example, and now it’s the 

leading provider in China, reaping $2.1 billion 

in revenue last year from that business. 

(Amazon began implementing a similar strategy 

in the U.S. around the same time.) And 

two years ago, Alibaba started pursuing a 

“new retail” concept of providing technology 

and services to traditional retailers, including 

grocers, department stores, and even momand-pop 

bodegas. 

The “new retail” push aims to digitize the 

most mundane businesses. On a lazy afternoon 

in late May, Huang An, who with his 

father runs a small market in Huangzhou 

near Zhejiang University, proudly demonstrates 

what he has learned as a guinea pig 

for Alibaba’s “integrated retail program.” 

He and his dad have rebranded their shop, 

about the size of a typical 7-Eleven, the Tmall 

Weijun Supermarket, Tmall being Alibaba’s 

online emporium for higher-end brands. The 

program brings this small operator modern 

tools like inventory-management software 

and sensors to monitor foot traic as well as 

camera-generated heat maps to show where 

customers are spending their time. “I don’t 

need to second-guess my judgment anymore 

because now it is based on data,” says Huang, 

who manages that data on a desktop computer 

as well as on his mobile phone. 

The Alibaba-ailiated store is just one part 

of the conglomerate’s so-called online-to-ofline 

strategy. Alibaba has taken stakes in an 

electronics chain, Suning, and a Costco-like 

hypermart, Sun Art. It has opened its own line 

of grocery stores called Hema, where affluent 

shoppers can choose a live fish from a tank 

and have it prepared for lunch. And it has 

bought outright Ele.me, a leading food-delivery 

service. Each is a customer for Alibaba’s cloud 

“until 

recently, 

everyone 

playedin 

theirown 


sandbox. 

Nowthe 

sandis 

startingto 

spillover.” 

78 


and really create exponential value. Whereas 

if you just make a financial investment, you’re 

counting an internal rate of return. You’re not 

creating real value.” 

I 

VCG VIA GETTY IMAGES 

giving weekend shopping period. Alibaba also 

stitched together an alliance of shipping companies 

to form a China-wide delivery giant 

called Cainiao, in which Alibaba has steadily 

increased its ownership stake. Its goal, as 

dictated by Jack Ma, is to be able to deliver 

merchandise anywhere in China within 24 

hours, no small feat, and globally in 72 hours, 

also a stretch goal. 

These disparate but coordinated parts 

encapsulate Alibaba’s commercial worldview, 

and also its view of how it matches up— 

favorably, if it does say so itself—with Tencent. 

“They don’t operate anything outside of 

China,” says Joe Tsai, Alibaba’s U.S.-educated 

vice chairman and Jack Ma’s longtime finance 

and strategy lieutenant. “They kind of want 

to take the shortcut approach by sprinkling 

some investments in these countries. Only 

when you operate can you generate synergies 

FRENEMIES, 

THEN FOES 

Jack Ma (left) 

and Pony Ma at 

the 2013 launch 

of ZhongAn, 

an insurance 

venture in which 

Alibaba and Tencent 

invested. 

Today, the companies 

avoid 

backing the 

same projects 

and often invest 

in rivals in the 

same industry. 

IF HANGZHOU is one of China’s oldest big cities, 

Shenzhen, the home of Tencent, is one 

of its newest. Once a small town on the way 

from Hong Kong to Guangzhou (formerly 

Canton), its fortunes changed in 1980, when 

central planners declared Shenzhen one of 

China’s first special economic zones. Factories 

flooded in, then “makers” who tinkered on the 

world’s next-generation gadgets, and finally 

global technology companies including drone 

star DJI and controversial smartphone maker 

ZTE. Today, Shenzhen is a massive city with 

broad, tree-lined boulevards and scores of 

skyscrapers, including the nearly 2,000-foottall 

Ping An Finance Center, the fourth-tallest 

building in the world. The building’s observation 

deck ofers a stunning view of distant 

Hong Kong as well as the Pearl River Delta, 

an expanse that local boosters like to call the 

Greater Bay Area. 

Tencent occupies several Shenzhen skyscrapers, 

including its just-opened headquarters 

that join two towers in a single lobby. The 

twin towers also are connected by an aerial 

bridge, and they ofer the latest in urbanworkplace 

comfort. Facial-recognition sensors 

grant workers access to elevators. A running 

track and swimming pool high in the sky 

are among the many amenities. The vibe in 

Tencent’s lobby is cosmopolitan and stylish, in 

pointed contrast to the suburban-nerd atmosphere 

at Alibaba’s campus. 

Tencent began life in 1998, and its first 

product, a messaging service for personal 

computers called QQ, was a copy of ICQ, the 

Israeli messaging service that also was the 

basis for AOL’s Instant Messenger. Tencent 

quickly got a rap as a copycat, but it excelled 

at innovating on top of what it borrowed. QQ 

ofered games, phone calls, and other Internet 

services embedded within the messaging 

platform, and Tencent made money by selling 


79 


MA VS. MA 

“virtual goods” within its games, like adding “energy” to make a 

game last longer. When the era of the smartphone hit, Tencent 

proved adept at competing against itself: A contest among several 

internal teams begat WeChat—and the group responsible for QQ 

did not win. 

It is diicult for those outside China to appreciate the ubiquitous 

power of WeChat. Tencent ingeniously appropriated an older 

technology, the two-dimensional QR code, in empowering WeChat 

to utilize a smartphone’s camera to scan all manner of information. 

QR codes are how people in China exchange their contacts or 

download coupons. Once Tencent added WeChat Pay in 2013, the 

codes became a convenient way to exchange money too. Says Pony 

Ma: “We have transformed WeChat from people-to-people connections 

to people-to-service connections.” 

Indeed, with WeChat recently having surpassed 1 billion accounts—some 

users have more than one—the service is becoming 

something akin to a digital operating system for the entire 

economy. This isn’t an accident. In 2014, WeChat ofered a digital 

product called a “red envelope” that mimicked the centuries-old 

custom of giving gifts of money at the Chinese New Year. The feature 

went viral, and by the end of last year, 800 million users had 

linked WeChat to their bank accounts. “Now everywhere in China, 

in parking lots, farmers’ markets, even at temples, and beggars on 

the streets, they all accept WeChat Pay with a simple scan,” boasts 

Pony Ma. 

The shrewd adoption of technology to cultural norms shows how 

both Tencent and Alibaba have moved well past copycat status. 

“Their success is due to their ability to be culturally innovative,” 

says Tricia Wang, a New York–based sociologist turned consultant 

who studies social digital behavior in China. “They got to where 

they are by hijacking the culture,” she says, citing Tencent’s red 

envelope success as well as Alibaba’s Singles Day stratagem. “They 

did a culture graft in the same way horticulturists perform grafts 

on plants.” This agility also has put the companies on a collision 

course. In 2014 Alipay powered 81% of online payments in China, 

per iResearch data. And while the mobile-pay market has grown 

some 16-fold since then, Alipay’s share has shrunk to 54%, while 

WeChat Pay now commands 38%. 

It’s also no coincidence that Tencent has identified as its next big 

thrust the online-to-of-line retail market that Alibaba also covets. 

Tencent calls its eforts “smart retail,” compared with Alibaba’s “new 

retail,” and Tencent’s oferings are centered around two features 

unique to WeChat. One is the “oicial account,” a kind of template 

for brands and other businesses to reach consumers through We- 

Chat. The other is the “mini-app,” a lightweight application inside 

WeChat that requires less development efort than a built-fromscratch 

app and doesn’t require consumers to download anything. 

Introduced only last year, mini-apps have taken Chinese e-commerce 

by storm. “Because of mini-apps, WeChat is starting to see this 

explosion of social commerce that is changing the face of China,” says 

Weinswig, the retail analyst. (This is an area America’s social media 

giants have attempted to exploit, with little success.) Weinswig says 

total 2017 retail sales were up 10.2% in China, compared with 4.2% 

in the U.S., and that WeChat added about as 

many mini-apps in a year as Apple’s online 

store added apps in its first four years. 

Like Alibaba, Tencent has invested in 

retailers and service providers. The two most 

prominent are publicly held JD.com, Alibaba’s 

biggest e-commerce competitor, and Meituan 

Dianping, the food-delivery foe of Alibaba’s 

recently acquired Ele.me and a hot IPO 

prospect. Tencent frames its interest in retailing 

not as an attack on Alibaba as such but 

rather as a logical progression of its business. 

“Retail is 40% to 45% of the GDP of China,” 

says Davis Lin, Tencent’s strategy chief and 

head of its “smart retail” efort, in an interview 

in Shenzhen. (The comparable figure in the 

U.S. is only about 26%.) Retail “is related to 

every bit of a user’s life,” Lin goes on, evoking 

Tencent’s mission of “enhancing the quality of 

human life through Internet services.” Many 

of WeChat’s services are free, making payments 

a key gateway to cashing in on all this 

activity. “We’ve been able to climb to where we 

are in roughly four years, which took Alipay 

more than 10 years,” says Lin, referring to the 

number of users on WeChat Pay. “Now it’s a 

real competition.” 

The Battle for Mobile Money 

China’s consumers are far more comfortable 

than most with cashless commerce, and its 

mobile payment market accounted for $9 trillion 

worth of transactions last year. 

CHINA MOBILE PAYMENT TRANSACTION VOLUME 

$10 trillion 

8 

6 

4 

2 

0 

TOTAL VOLUME: $9.0 TRILLION 

OTHER 


WECHAT 

ALIPAY 

$0.7 

$3.4 

$4.8 

2014 2015 2016 2017 

80 


SOURCE: IRESEARCH GLOBAL

F 

FROM LEFT: EAMON BARRETT; MARTIN CHAN— SOUTH CHINA MORNING POST 

FOR YEARS ALIBABA and Tencent were rivals 

only in the sense that both were successful 

and prominent examples of the Chinese 

Internet phenomenon. At first they weren’t 

even that successful. “We were little brothers 

in the Internet industry playground,” Pony Ma 

reflects, compared with the leading “portals” 

of the late 1990s. “We were second- or even 

third-tier companies.” 

Over time, the two probed the other’s 

perimeter, to relatively little efect. Alibaba, 

for instance, launched a gaming division and 

a social network, neither of which caught 

fire. Tencent built an e-commerce site, called 

Paipai, but eventually sold it to JD.com. The 

rapid rise of WeChat, however, made Tencent 

a societal phenomenon, and in 2013, Jack Ma 

publicly urged employees to band together 

to “kill penguins,” an unmistakable swipe at 

Tencent’s flightless mascot. (Corporate China 

loves its animal-themed standard-bearers: 

The mascot of Alibaba’s high-end shopping 

site is the Tmall Cat, its Hema grocery store’s 

logo is a lovable-looking hippo, and Ant Financial’s 

namesake is self-evident.) 

Jack Ma was right to be concerned about 

WeChat. Tencent launched its red envelope 

program in early 2014, and suddenly Alipay 

had a credible competitor in mobile financial 

services. The Alibaba executive chairman, 

writing on an Alibaba social media site, 

labeled Tencent’s action a “Pearl Harbor attack” 

that had been “beautifully planned and 

executed.” That led to skirmishes in market 

segments like payments, retail, cloud computing, 

artificial intelligence, health care initiatives, 

and more. Pony Ma says he has counted 

more than 10 areas “where we fight Alibaba 

fiercely.” Perhaps too many. “Every now and 

then I say, ‘Really, this area too?’ It bothers me 

sometimes.” 

Tencent’s chief may be bothered, but his 

counterparts at Alibaba seem downright 

agitated. Joe Tsai, the vice chairman, doesn’t 

mince words about his rival. He calls out Tencent’s 

games for being addictive, as have government 

agencies in China. “Think about it,” 

Tsai says over breakfast in Los Angeles. “They 

PONY MA Shek O JACK MA Victoria Peak 

2009 YEAR BOUGHT 2015 

8,000 SQUARE FEET SIZE WHEN BOUGHT 9,900 SQUARE FEET 

$7,625 PER SQUARE FOOT COST $19,500 PER SQUARE FOOT 

19,600 SQUARE FEET SIZE POST-RENOVATION (EST.) 12,400 SQUARE FEET 

Ma vs. Ma in Hong Kong: 

a Luxury Real Estate Rivalry 

The digital-economy billionaires bought huge homes in historic 

neighborhoods. Who made the better bet? By Clay Chandler 

IT’S A TASK that vexes 

every self-respecting 

Chinese billionaire: 

finding a suitable 

mansion in Hong Kong. 

The former British 

colony is small, and 

the stock of magnateworthy 

residences 

hasn’t kept pace with 

the ranks of rich mainland 

buyers. 

The two Mas have 

risen to the challenge 

in different ways, with 

each owning multiple 

residences, including 

one vast trophy home. 

In 2015, Hong Kong’s 

South China Morning 

Post identified Jack 

Ma, Alibaba’s cofounder 

and executive 

chairman, as the buyer 

of 22 Barker Road, 

atop Victoria Peak, 

home to Hong Kong’s 

elite since the colonial 

era. The Post said 

Jack had purchased 

a 9,900-square-foot, 

four-story house 

for a jaw-dropping 

$193 million, or 

$19,500 per square 

foot, which at the time 

made it Hong Kong’s 

most expensive residence 

per square foot. 

(Jack has declined to 

comment on reports 

that he was the buyer; 

Alibaba Group now 

owns the Post.) 

Jack’s Peak 

property includes a 

20,000-square-foot 

garden and killer 

views of Victoria Harbor. 

As of mid-June, 

that was almost all it 

included: Workers had 

razed the 1940s-era 

house to the foundation, 

presumably in a 

prelude to a rebuilding 

project. 

Pony’s trophy 

purchase is on the 

Shek O peninsula, in 

a neighborhood even 

more exclusive than 

the Peak. A 40-minute 

drive from the central 

business district, 

most of Shek O is a 

protected park; it’s 

famed for its beaches, 

craggy cliffs, and the 

spectacular vistas 

from its “Dragon’s 

Back” hiking trail. 

Tencent’s CEO 

bought 13 Big Wave 

Bay Road from a Hong 

Kong shipping tycoon 

in 2009. It’s one of 

about 20 mansions 

surrounding a golf 

course at the peninsula’s 

southern tip. The 

course is part of the 

Shek O Country Club, a 

historic and exclusive 


private club. Since 

the 1930s, Shek O 

Development, a secretive 

private company, 

has leased the land 

on which the luxury 

properties are built. 

Houses there cannot 

be sold, renovated, or 

even painted a different 

color without the 

entity’s permission. 

Pony paid $61 million 

for the home, 

and won approval to 

redevelop and more 

than double the size 

of the 8,000–squarefoot 

house. Analysts 

estimate that when 

the renovation is done, 

his property will have 

quadrupled in value. 

The only drawback: 

The development 

company’s rules could 

make it hard to sell. 

Pony’s property may 

be bigger and worth 

more on paper than 

Jack’s, notes Bruce 

Li, associate director 

at Asia Pacific 

Properties, but “if a 

seller can’t get approval 

from the Shek O 

shareholders, all that 

means nothing.” Indeed, 

Pony’s presence 

there may suggest 

he’s in Hong Kong for 

the long haul. 

81 


MA VS. MA 

make a product that’s addictive, that is not 

terribly healthy for kids. How’s that diferent 

from a cigarette company?” (Tencent’s reach in 

gaming is global: Tsai notes that his son has become 

an avid fan of the virally popular “battle 

royale” game Fortnite, published by North 

Carolina’s Epic Games, in which Tencent holds 

a 40% stake.) Tsai surmises that Tencent’s pivot 

to retailing is connected. “They probably came 

to an existential realization and said, ‘Wait a 

minute, we’re in the wrong business.’” 

Tsai may be misinterpreting Tencent’s motives, 

but regardless, he thinks Alibaba holds 

the stronger hand. “Tencent has woken up 

and decided that they also want to become 

somebody in e-commerce,” he says. “But we’ve 

been doing this for the last 19 years…It’s not 

just about developing an app or a product for 

users. It’s about creating an ecosystem and also 

the supply chains for the merchants.” 

Ecosystem is the operative word, and both 

companies can have sharp elbows when 

protecting their platforms. Each has invested 

aggressively in newfangled app-driven services 

like bike sharing and ride hailing, the better 

to lock in users to their ecosystems—and their 

respective payment services, key features, in a 

country where consumers are more than happy 

to forgo cash when they shop. (If you want to 

use Alibaba platform partner Ofo, for example, 

it is relatively inconvenient to pay with 

Tencent’s WeChat Pay; using Alipay is a hassle 

when renting with Mobike, the bike-share 

contestant in Tencent’s camp.) The two have 

efectively created “walled-garden” versions of 

the Internet, argues Tom Birtwhistle, a consultant 

with PwC in Hong Kong who has studied 

both companies extensively. “Consumers are 

blocked from traversing the two Internets.” You 

can’t move easily, for instance, from WeChat to 

Taobao. That’s a far less genteel approach than 

Silicon Valley’s titans take with one another: 

Apple hosts apps from Facebook and Google, 

for example. Those Western companies, argues 

Birtwhistle, may be “frenemies, but they’ve assembled 

together to form an integrated online 

experience.” Not so Tencent and Alibaba. 

On rare occasions, the two invest together, as 

they did in 2013 by starting an online insurance 

company, called ZhongAn, with insurer 

Ping An (whose CEO also is named Ma). Indeed, 

if history repeats, it’s possible that many 

of the companies’ jabs and feints at each other’s 

properties will amount to just that. “Internally, 

Tencent people hold Alibaba in high regard,” 

says one former Tencent insider. “They all buy 

on Taobao.” What’s more, Tencent would have 

to invest heavily and in a new way to match the 

physical logistics prowess of Alibaba and its 

Cainiao ailiate. “WeChat is positioned to be an 

important entry point, but no more,” says the 

insider. At the same time, as it focuses on business 

applications like DingTalk, Alibaba understands 

it can’t challenge WeChat’s dominance 

in consumer messaging. Acknowledges Daniel 

Zhang, Alibaba’s CEO: “Even I use WeChat.” 

T 

THE AREA WHERE the Tencent-Alibaba battle is 

most obvious is in their respective investment 

strategies. The two have been such assiduous 

dealmakers that the astute Hong Kong– 

based Bernstein analyst Bhavtosh Vajpayee 

counted 280 Tencent deals over the past three 

years and 174 for Alibaba. “Who can possibly 

fathom everything Alibaba and Tencent have 

invested in already?” Vajpayee writes in a report 

to clients. Branding the deal-crazy companies 

“shopaholics,” he wonders if they “have 

a record of their doings, [as] investments and 

stakes can get lost in the crevices somewhere, 

given the sheer numbers involved.” 

The two have clearly divergent styles. Alibaba 

tends to take large or controlling stakes, 

reflecting what Joe Tsai calls the company’s 

“operating mindset.” That’s been the case 

in Southeast Asia, where it took control of 

e-commerce site Lazada and installed Lucy 

Peng, an Alibaba cofounder and longtime 

executive, as CEO. Tencent, in contrast, favors 

multiple small stakes, such as its 5% share of 

U.S. gaming giant Activision Blizzard. And 

when it does take control, it typically leaves 

management in place. At Riot Games in Los 

Angeles, for example, Tencent invested alongside 

the company’s venture capitalists when it 

licensed Riot’s popular League of Legends title. 

Later it bought the company outright—but 

didn’t mess with how it’s run. “They were selfaware 

that it would destroy a lot of value if we 

had reported to some SVP of such and such,” 

says Marc Merrill, Riot’s cofounder. 

Being hands-of doesn’t mean Tencent 

always plays nice. Imitation is ingrained in 

its culture, and Tencent doesn’t shy away 

“internally, 

tencent 

peoplehold 

alibabain 

highregard,” 

saysone 

former 

insider. 

meanwhile, 


alibaba’s 

CEOadmits, 

“eveniuse 

[Tencent’s] 

wechat.” 

82 


from simultaneously licensing the products 

of its partners and creating similar oferings. 

“Tencent is both an investor and a competitor,” 

says Jef Smith, co-founder and CEO of 

San Francisco startup Smule, whose mobile 

apps allow a community of 50 million users 

to play and sing more than 20 million songs a 

day, often with each other. “Their views on the 

realpolitik of building successful technology 

companies reflect our own,” says Smith, citing 

the storied QQ-versus-WeChat competition. 

The entrepreneur calls Tencent a “great partner,” 

including, for example, the access Smule 

gets to Tencent’s content distribution network, 

a service that competes against Google and 

Amazon. Tencent, in turn, benefits from its 

broad investing by keeping close tabs on smart 

technology and talented people, even without 

owning their companies outright. 

Investment styles also inform the companies’ 

search for growth outside China. Their 

home country accounts for the lion’s share 

of overall revenue for both companies. But 

both have set their sights on Southeast Asia. 

Tencent owns a 40% stake in the publicly 

traded Singapore gaming company SEA and 

has reportedly been considering other large 

investments. Alibaba, given to grand strategic 

goals, has said it wants to serve 2 billion 

customers and will make Southeast Asia its 

first major expansion area. “These economies 

are very similar to how China grew up,” says 

Joe Tsai, citing youthful populations, high 

levels of mobile-phone penetration, and an 

underdeveloped retail sector. “These are very 

similar characteristics that we see in China, 

without the existing baggage of traditional 

industries,” says Tsai. (See “Chess Pieces in 

Southeast Asia.”) 

When the two Chinese giants might attack 

the more-developed U.S. market directly has 

been a perennial discussion point among their 

Silicon Valley counterparts. The short answer is 

not soon—a conclusion that may serve as some 

consolation for U.S. executives smarting at their 

near-total exclusion from the Chinese market. 

Despite having made many investments in U.S. 

companies, each has been swatted away from 

deals deemed sensitive on national-security 

grounds. Earlier this year, the intergovernmental 

Committee on Foreign Investment in the 

United States blocked Ant Financial’s attempt 

to buy U.S. remittance company MoneyGram. 

In a less closely watched move, CFIUS also 

nixed an investment by Tencent in Here Technologies, 

a Dutch digital mapping company 

with significant operations in the U.S. 

O 

ONE OF THE HALLMARKS of the Chinese Internet powerhouses is that 

they simultaneously move incredibly quickly and plan for the very 

long term—a tiring pace that demands a lot of the two horses who 

lead them. Jack Ma exudes that dual sense of urgency and longrange 

planning. His oice complex is tucked away in a corner of 

the Alibaba campus, across a small bridge from the chockablock 

buildings where his employees work. He has designed his compound 

in the fashion of the classical gardens of Suzhou, a treasured, 

ancient spot near Hangzhou. But the eclectic look of Ma’s 

corporate hideaway reflects his man-of-the-world sensibilities, 

with various cultures represented inside its walls. 

On a smoggy day in late May, the Alibaba founder chooses to 

meet in his Japanese sitting room, with tatami mats, low-slung 

chairs, and traditional Chinese instrumental music playing softly 

on wall speakers. Two bowls of cherries and two cups of steaming 

tea are set down before he arrives. Ma’s mind is very much on 

the future. He relates that a fellow Chinese corporate mogul has 

recently told him he’s tired, and asked Ma how he keeps going. “I 

work hard because I’m prepared for the day when I leave this company 

and I can enjoy a peaceful life,” says Jack Ma. “I won’t have 

to come back to do something, like fix the kitchen,” he says. “In the 

meantime, this is the thing that drives me and so many of my associates: 

We always want to do good things for society.” 

At the conclusion of this meeting, Ma hops in a car to go to an 

Alibaba auditorium to greet hundreds of new employees. He warns 

them that life at Alibaba won’t necessarily be easy. “It takes a year 

to even figure out what’s going on,” he cautions. “And you’re not a 

true ‘Aliren’ ”—the Alibaba analog to “Googler”—“before three years 

of service.” He tells the recruits Alibaba is idealistic, pragmatic, 

and optimistic, but that it’s not for everyone. “There’s still time to 

leave,” he deadpans to hearty gufaws in the room. 

The years of entrepreneurial battles are catching up with Pony 

Ma as well. At the Fortune conference in Guangzhou, he addressed 

criticism about the addictive and omnipresent nature of 

products like Tencent’s games by acknowledging society’s overattachment 

to their phones. “Even I get a bit anxious sitting here 

while my phone is ofstage,” he said. He allows that just recently 

his eyesight has gotten worse, which he attributes not so much to 

the onset of middle age as to too many hours spent staring at his 

phone. “I wish the next-gen instant-messaging platform would 

not be such a burden on your eyes,” he said. “If there’s a brain 

wave that can transmit the message to my consciousness, that 

would be perfect.” 

Give him time, and it just might happen. Wait a little longer, 

and Alibaba just might launch a brain-wave platform, too—with a 

cuddly critter for a mascot. 


Additional reporting by Eamon Barrett and Kurt Zhong 


83 


The 

Dating 

Game 


84 


Match Group has long 

been the belle of the 

online dating ball. But 

with Bumble and, yes, 

Facebook moving in on 

its territory, new CEO 

Mandy Ginsberg must 

keep the company from 

getting ghosted by fickle 

daters—and bring its 

users nothing less than 

the future of love. 

BY 

LEIGH GALLAGHER 


Match Group CEO 

Mandy Ginsberg 

took the reins in 

January. 

PHOTOGRAPH BY NANCY NEWBERRY 

85 


THE DATING GAME 

One day in early May, IAC CEO Joey Levin sat in a conference 

room at the company’s Frank Gehry–designed headquarters 

in Manhattan, along with Barry Diller, IAC’s founder and 

chairman, and a few others. The group was listening to one 

of their colleagues present a routine strategic plan when 

the executive happened to mention something about an 

ad-supported business. Suddenly Diller sprang to life. “That 

reminds me!” he said. “Sheryl called me last night to let me 

know they’re getting into the dating business, and they’re 

going to announce it tomorrow.” 

“Sheryl” is, of course, Sheryl Sandberg, Facebook’s 

chief operating oicer, and Facebook 

was indeed poised to reveal plans to enter 

the online dating space—in fact, CEO Mark 

Zuckerberg was at that very moment making 

the announcement at F8, the company’s 

annual developers conference. Levin turned 

to the huge screen in the room that displays 

the tickers of IAC and Match Group, the 

online dating conglomerate it spun of in 2015, 

where shares of both companies were already 

dropping. “My phone starts lighting up with 

texts, and each time I’m getting a text, the 

stock drops another 5%,” Levin recalls. All 

told, Match Group stock plunged 22% that 

day; IAC, almost 18%. 

Later, Levin issued a statement addressing 

his company’s new competitor (IAC owns 81% 

of Match Group): “Come on in. The water’s 

warm,” he said, deadpanning that Facebook’s 

product “could be great for U.S.-Russia 

relationships.” The media ate up the jab, but 

there’s no denying that the news was anything 

but a joke to Match and the rest of the online 

dating industry. 

The Facebook reveal is just the latest bombshell 

in a business that’s in the midst of more 

drama than a bad online date. In the past few 

months alone, Match Group, the $12 billion 

parent of Match.com, OkCupid, Tinder, and 

Plenty of Fish, among many others, filed a lawsuit 

against its white-hot startup challenger, 

Bumble, for patent infringement and stealing 

trade secrets. Bumble published an acerbic 

letter in response and filed its own countersuit. 

This is on top of the already 

fraught history between the two 

companies: Bumble’s founder, 

Whitney Wolfe Herd, was a 

Tinder cofounder who sued for 

sexual harassment after being 

forced out, won a settlement, 

and a few months later started 

the competitor. After all of this 

fracas, the Facebook news was, 

at least, professional, complete 

with courtesy call. 

But Zuckerberg’s announcement 

marks a major turning 

point for the industry—and 

perhaps most significantly, for 

market leader Match Group. 

The market for using technology 

to connect singletons the world 

over has flourished in recent 

years, but its real potential has 

yet to be unlocked. Globally, 

there are 600 million singles online—a number 

that’s expected to jump to 700 million by 

2020—yet the industry’s biggest player by far, 

Match Group, is estimated to claim just 10% 

of that. So while skeptics have plenty of (valid) 

questions about whether Facebook can actually 

persuade people to trust it with their romantic 

lives, there’s no doubt that the behemoth’s 

decision to enter the market will go a long 

way toward legitimizing digital courtship and 

bringing more of those would-be daters online. 

Still, even as a rising tide has the potential 

to lift all boats, it also tends to roil the water. 

If Match Group wants to stay No. 1, it will 

need to defend its turf. 

Managing that feat falls not to Levin but 

to Mandy Ginsberg, the 12-year company vet 

who took over as CEO in January, replacing 

Greg Blatt, the onetime general counsel who 

became chief of IAC before moving to Match 

Group at the time of the spinof. Ginsberg, 48, 

a self-described “hands-on operator” who rose 

up the ranks and most recently served as CEO 

of the company’s North American operations, 

has her work cut out for her. In addition to 

propelling Match Group over the hurdles 

thrown up by competitors like Facebook and 

Bumble, she has to maintain and manage the 


explosive growth rate of the company’s crown 

jewel, Tinder, the swiping app that took the 

world by storm when it was launched in 2012, 

as well as oversee an ambitious international 

expansion. All the while, she’ll need to keep 

the company on the cutting edge of innovation 

as it strives to use A.I., machine learn- 

86 


ing, and other tools to get ever closer to this 

industry’s holy grail: accurately predicting 

chemistry between two strangers. 

Those who know her say Ginsberg is likely 

to be up to the task. Having joined the company 

in 2006, she knows the industry inside 

and out. Though married with two daughters, 

she takes Match’s mission almost as a personal 

responsibility. “This isn’t about making, 

I don’t know, tables,” she says. “I really 

believe that we are having a profound impact 

on people’s lives.” When the topic turns to 

my own relationship status, and I share that 

I have just split up with my boyfriend of five 

years, she becomes the first person to actually 

brighten at hearing the news. “That’s exciting!” 

she says. When I raise my eyebrows, she 

continues: “No, it is. The idea that you can go 

out there now and meet all these interesting 

people, it’s great.” 

F 

OR ALL THE ATTENTION it garners, online 

dating is not a large industry—total 

U.S. revenue last year was $2.9 billion, 

according to IBISWorld. But it is fastgrowing: 

Usage of online dating platforms 

tripled among users ages 18–24 between 2013 

and 2015, according to Pew Research Center. 

It’s also highly profitable. Though often 

overlooked for its FANG brethren (Facebook, 

Amazon, Netflix, Google), Match Group 

shares outperformed them all last year and 

has profit margins that are better than the A, 

N, and G. In addition to a huge and largely 

untapped market, the industry has strong tailwinds, 

including increasing millennial spending 

power, longer work hours, and young 

people delaying marriage. Industry revenue is 

expected to grow 25% through 2020, according 

to Evercore ISI. 

Match Group is the conglomerate parent 

to 40-plus brands in more than 42 languages, 

including Match.com, the granddaddy of the 

industry most popular with 30- to 50-year-old 

relationship-seekers; OkCupid, which took 

hold among urban hipsters by asking daters 

to answer a list of quirky ice-breaker questions 

(“Would you ever sleep with a serial 

killer?” “Are you annoying?”); Plenty of Fish, 

popular in the non-coastal U.S.; and Tinder, 

the revolutionary dating app that gave the 

world the “swipe” and all that came with it. 

The company’s biggest competitors include 

eHarmony, known for its ads featuring founder 

Neil Clark Warren and its focus on long-term 

relationships; Spark Networks, the $3.8 billion 

publicly traded (ticker symbol: LOV) parent 

TOPDATING 

APPSBYU.S. 

ACTIVE 

USERS,2017 

No. 1 

TINDER 

No. 2 

PLENTY 

OF FISH 

No. 3 

BUMBLE 

No. 4 

OKCUPID 

SOURCE: APP ANNIE, 

AVERAGE MONTHLY DATA 

of Jdate, Christian Mingle, and others; Badoo, 

which claims 380 million users worldwide but 

is used primarily overseas; and Bumble, the 

fast-growing upstart created in 2014, which 

allows only women, not men, to initiate contact. 

For those singles who want something a 

bit more, well, specific, there are hundreds of 

other special-interest sites, from FarmersOnly 

.com to GlutenFreeSingles to ClownDating.com 

(slogan: “Everybody loves a clown…let a clown 

love you”). 

I’ve been an on-again, of-again user of 

online dating sites over the years. I met the 

ex from whom I told Ginsberg I had recently 

separated on Match.com in 2012. (Fun fact: 

Over the years, I even went on online dates 

with not one but two former CFOs of IAC.) 

But until I started working on this article, I’d 

never “swiped.” 

In 2012, IAC—through an internal incubator, 

Hatch Labs—launched Tinder, a simple 

but addictive app that turned dating profiles 

into a deck of cards with a “swipe” mechanism: 

Users quickly sort through dater photos, 

swiping left for “nope,” right for “like.” If both 

parties swipe right, a match is made, and 

you can start messaging. This feature—the 

technical name for it is “double-blind opt in”— 


No. 5 

GRINDR 

ILLUSTRATIONS BY GABRIEL SILVEIRA 

87 



eliminates the embarrassment of rejection, 

and the swiping methodology makes dating 

something you can do fast and on the go (unlike 

Match.com, which, at least when I did it, 

required sitting down at a computer, logging 

in, and rolling up your sleeves for a long email 

session). Tinder “gamified” dating, and it took 

of, especially among college students and 

millennials. By 2014, it was registering a billion 

swipes a day and had become a cultural 

phenomenon: The Oxford English Dictionary 

even added the terms “swipe left” and “swipe 

right.” All told, there have been 242 million 

Tinder downloads. 

The app is the rare example of a breakthrough 

innovation coming not from a startup 

but from inside a large company. “It’s probably 

one of the great internal incubations of 

all time,” boasts IAC CEO Levin. Tinder also 

nailed a business triple axel: Since millennials 

weren’t previously big users of online dating 

sites, it unlocked an entirely new customer 

group. It grew virally all over the world with 

almost no marketing expenditure. And even 

now it’s posting impressive numbers, with 

paid subscribers nearly doubling from 2016 

to 2017. When Ginsberg reported Match’s 

first-quarter results in early May, the company 

raised its revenue outlook for the year by 

$100 million—largely on Tinder’s growth. 

But nothing is ever that easy, in dating or 

in life. And for all its growth, Tinder has also 

been the source of many problems. Between 

speed-swiping, the heavy reliance on photos, 

and perhaps the life stage of its intended 

demographic, it almost immediately earned 

a reputation as a hookup app. And while that 

hasn’t seemed to impact its popularity, it’s not 

the image Match, a company selling love and 

relationships, is after. 

Nor did a blockbuster harassment suit help 

matters. In 2014, cofounder and former head 

of marketing Wolfe Herd (then just Wolfe) 

filed suit against IAC, Match.com, and Tinder, 

claiming sexual harassment and discrimination, 

submitting ugly and abusive messages 

from Tinder cofounder Justin Mateen to 

Wolfe Herd—the two had dated—as evidence. 

The companies denied wrongdoing, 

but Tinder quickly suspended Mateen (who 

later resigned) and settled the suit. Sean Rad, 

also a cofounder, was pushed out as CEO, 

THEBUZZ 

ONBUMBLE 

WHITNEY 

WOLFE HERD 

The ex-Tinderite 

turned Bumble 

founder vows 

she’ll “never” 

sell to Match. 

ANDREY ANDREEV 

Wolfe Herd may 

be the face of 

the women-first 

dating app, but 

the Russian 

billionaire still 

owns 79% of 

the company. 

returned, then six months later went from 

CEO to chairman before finally exiting the 

company for good last fall. The incident was 

a huge black mark and amplified the perception 

that Tinder was an inhospitable place for 

women to work. 

Ginsberg wasn’t at Match at the time of the 

scandal and its aftermath—it occurred during 

a 2½-year stint that she spent running IAC’s 

Tutor.com and Princeton Review businesses. 

But she says Tinder’s cultural problems have 

been “stomped out.” “I think it was a young culture, 

and it grew really fast, and I don’t think 

there were as many experienced hires and 

grownups,” she says. “And now there are.” One 

of those grownups is Elie Seidman, a fintech 

and online travel veteran (he founded online 

travel site Oyster.com) whom Ginsberg had 

brought in in 2016 to run OkCupid. One of her 

first moves as CEO was to move him into the 

CEO role at Tinder. An engineer, “intellectual,” 

and serial entrepreneur, Seidman, Ginsberg 

says, is “the last person in the world you think 

of as a bro,” she says. “I mean, the last.” 


BUT THE TINDER SAGA would have lasting 

impact. A few months after the settlement, 

Wolfe Herd launched Bumble, a 

new dating app with features strikingly 

similar to Tinder’s—swiping methodol- 

WOLFE HERD: JEFF VESPA— GETTY IMAGES; ANDREEV: COURTESY OF BADOO 

88 


FEEDBACK LETTERS@FORTUNE.COM

ogy, card-stacking design and all—but with 

a transformative twist that almost seemed 

to presage the current #MeToo movement: 

After a match is made, contact must be initiated 

by the woman. It was a genius stroke 

of female empowerment wrapped in yellow, 

bee-themed branding, and it struck a chord: 

In 3½ years, Bumble has amassed 34 million 

registered users, roughly 10% of them paid; 

last year the company is said to have pulled 

in $100 million in subscription revenue. 

Bumble may be the David to Match 

Group’s Goliath, but it has a Goliath-size 

backer of its own: Wolfe Herd has proved to 

be a gifted entrepreneur in her own right, but 

she created Bumble with the help of Andrey 

Andreev, a London-based Russian billionaire 

entrepreneur and the founder of Badoo. 

The two cooked up the idea together, and 

Andreev owns 79%, Wolfe Herd 20% (the 

remaining 1% is split between two additional 

employees). Bumble operates out of Austin, 

but engineering, development, and other 

infrastructure is handled by Badoo’s teams 

in London. 

For a few years, Tinder and Bumble 

coexisted—and were even reported to be in 

on-and-of acquisition talks last year—but 

things recently turned testy. In March, 

Match, which was recently granted patents 

related to the swipe and the design of the 

Tinder app, filed its suit against Bumble, 

accusing it of patent infringement and 

stealing trade secrets. With patents in hand, 

it claimed Bumble’s technology “copied 

Tinder’s world-changing, card-swipe-based, 

mutual opt-in premise” and that the app is 

“virtually identical” to Tinder. 

Four days after the Match filing, Bumble 

fired back with an angry letter it published 

on its blog and in the New York Times. “Dear 

Match Group, we swipe left on you,” the 

letter began. “We swipe left on your multiple 

attempts to buy us, copy us, and now, 

to intimidate us.” Accusing Match of suing 

to scare away other potential bidders, the 

letter said any deal was of the table: “We’ll 

never be yours. No matter the price tag, we’ll 

never compromise our values.” A few days 

after that, it filed its own suit against Match, 

claiming Match had fraudulently obtained 

sensitive information during acquisition 

talks and that it had “poisoned” Bumble 

to the investment market. It asked for 

$400 million in damages. 

Among other things, the suit stated that 

Match had made a $450 million ofer for 

ONLINE 

DATING’S 

FAMILYTREE 

No matter what 

your dating 

preferences, 

there’s an app 

for that—and 

it’s likely owned 

by one of the 

Big Eight. 

ELITESINGLES 

CHRISTIAN MINGLE 

BADOO 

BUMBLE 

OURTIME 

SPARK 

NETWORKS 

TINDER 

the company last year that Bumble rebufed, 

sparking a protracted back-and-forth over 

Bumble’s valuation. Sources close to Bumble 

say those discussions were still ongoing 

when Match filed its lawsuit, and that’s what 

provoked Bumble’s outraged response. They 

also suggest that the Match lawsuit may have 

been a tactic to ramp up pressure on Bumble 

to do a deal. 

Ginsberg declined to comment on acquisition 

talks or their timing, citing a nondisclosure 

agreement. She says the lawsuit was 

simply about intellectual property. “Thousands 

of companies protect their IP and patent 

infringement and trade secrets,” she says, 

noting that a few days after Match filed suit 

against Bumble, it also brought a separate 

suit against Tantan, known as the “Chinese 

Tinder.” (Tantan settled in May.) 

“If we didn’t think there was merit and 

justification [in filing the Bumble lawsuit], 

we wouldn’t have done it,” Ginsberg says. “I 

thought a lot about, ‘Do I regret making that 

decision?’ I don’t.” 

JDATE 

MEETIC 

GRINDR 

TAGGED 

ONLINE 

DATING 

SERVICES 

HI5 

THE MEET 

GROUP 

MATCH.COM 

MATCH 


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SKOUT 

EHARMONY 

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GRAPHIC BY NICOLAS RAPP 

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89 



B 

OTH COMPANIES WOULD soon be hit with 

a much bigger tsunami of news on 

May 8, when Zuckerberg made his 

announcement. “All of a sudden, he 

starts saying, ‘Did you know that one in three 

marriages in the U.S. start online?’ ” recalls 

Jeferies Internet analyst Brent Thill, who 

was in the F8 audience that day. “And I’m 

like, ‘Oh, no, here comes the dating app.’ ” In 

his presentation, Zuckerberg said that the 

Facebook feature would be “for building real, 

long-term relationships, not just hookups,” a 

dig at Tinder. 

Facebook has been light on actual details 

but says the opt-in feature will match users 

with people they aren’t already friends with, 

and that users will be able to create a separate 

dating profile that friends won’t be able to see. 

Ginsberg addressed the issue on Match’s 

earnings call the following week. Research 

suggests the majority of singles—especially 

women—would not want to use Facebook for 

dating, she told investors. Users have concerns 

over both privacy and engaging in dating 

activities in the same place where they share 

updates with family and friends, she said. 

She also points out that the dating business 

is not as easy as it might seem. While 

Match has reams of cards and thank-you 

notes hung around its headquarters for every 

wedding and child it helped create, it also 

hears from plenty of users who have had bad 

dates and blame the company. “Part of dating 

is the up and down,” she says. “We live with 

all that psychology, and they’ll have to, too. 

How does that psychology play in with the relationship 

they have with their core product?” 

All these things are true, but so is the fact 

that a half-trillion-dollar company with 2 billion 

users just announced it’s getting into a 

field that Match has had pretty much to itself 

for more than two decades. 

One thing everyone seems to agree on is 

that Facebook’s efectively endorsing online 

dating will be a huge legitimization event 

for the industry. “This may actually be a 

pump that primes the overall market,” says 

Thill. Match has found that when it has gone 

into new overseas markets where people 

are already comfortable with Facebook, it 

reduces the barrier to entry for online dating. 

And the truth is, for all the drama between 

MATCH GROUP 

GLOBAL REVENUES 

$1.5 

1.0 

0.5 

0 

FY 2012 

MATCH GROUP 

PROFITS 

$400 M 

300 

200 

100 

0 

FY 2012 

FOREIGN 

U.S. 

$1.3 B 

2017 

$451.6 M 

2017 

STOCK PRICE 

GROWTH SINCE IPO 

(NOV. 18, 2015) 

258% 

SOURCE: BLOOMBERG 

Bumble and Match, and all the angst about 

Facebook’s entry, there’s a lot of room in this 

category: On average, people use three dating 

products at any given time. 

A 

FTER A FEW WEEKS test-driving both 

Tinder and Bumble, I conclude that I 

am no fan of the swipe. I find myself 

missing the thoughtful, epistolary 

correspondence of email-based dating, which, 

compared with this, feels almost Victorian. 

I also developed an aversion to the apps’ 

location-driven approach, which draws no 

distinction between someone who lives in the 

New York City area and someone just passing 

through. I signed up for Bumble, for instance, 

while visiting friends in Boston and immediately 

matched with Bostonians—and then, on 

the Amtrak ride home, with eligible singles 

all up and down the New England coast. 

And it’s true what people say: Compared 

with the Match.com of yore, there is much 

more short-term-ism. Many profiles don’t 

have anything written, just photos. On Tinder, 

I saw a few couples looking for a threesome 

and a handful of married men looking for 

something on the side. 

But I found that if I was patient enough 

and kept swiping, there did seem to be a 

supply of eligible matches in my general 

demographic. Ultimately, that’s what really 

matters to daters: I may not love these apps, 

but if everyone in my demo is using Tinder 

and Bumble, then I’m going to use Tinder and 

Bumble. (Levin of IAC refers to this as “liquidity 

in the marketplace.”) Sometimes, the pack 

moves. Case in point: During my research for 

this story, someone suggested that I try the 

dating site Hinge, noting that it has seen a 

spike in use among New Yorkers. 

G 

INSBERG HERSELF NEVER did much online 

dating, save for a few Jdates while she 

was in business school. To get into the 

online dater’s mindset, she constantly 

polls singles about their experiences—including 

texting her 19-year-old daughter and her 

daughter’s friends to ask what they think 

of Tinder. But she knows firsthand how the 

excitement of a serendipitous meet-cute can 

change a life—and also how relationships 

aren’t always easy. 

In the early-1990s, after graduating from 

UC–Berkeley, Ginsberg decided to spend the 

summer as a counselor on a teen tour to Israel, 

with the intent of returning to her native Dallas 

afterward. But while on the trip, she fell 


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in love with the Israeli tour guide, stayed, and 

ended up marrying him, starting her career at 

software companies in Tel Aviv. (Her parents’ 

reaction to the seemingly impulsive move? 

“They were not very happy,” she says.) The 

couple returned to the U.S. when her husband 

was admitted to Berkeley’s clinical psychology 

Ph.D. program, and while he pursued 

his studies, Ginsberg worked for Edelman in 

public relations. When she got into the prestigious 

Wharton School, she and her husband, 

now with a 1-year-old daughter, relocated to 

Philadelphia. 

But one week into her first semester, her 

husband told her that he felt the relationship 

wasn’t working—and that he was moving back 

to Israel. “I found myself with this fat little 

1-year-old, and I was at the hardest business 

school in the country,” Ginsberg recalls. “And I 

just had this sort of ‘Oh, shit’ moment where I 

was like, ‘What am I going to do?’ Then I was 

like, ‘Wait. I have to figure this out.’ ” 

Through day care, babysitters, and persuading 

her study groups to use her house as 

their gathering spot, she figured it out. (She 

and her ex-husband have remained on good 

terms.) But after she graduated came an even 

bigger setback: Her mother was diagnosed 

with ovarian cancer. Ginsberg moved back 

to Dallas to care for her, adjusting her career 

plans and taking a job at a small software 

company. Her mother died a few years later— 

and soon after, Ginsberg tested positive for 

the BRCA gene, making her much more likely 

to sufer the same fate. 

Over the following several years, she had 

a mastectomy, an oophorectomy (removal of 

the ovaries), and a hysterectomy, all while she 

was climbing the ranks at Match.com. (A major 

bright spot: She met her second husband 

at her previous job at the software company 

and was able to have her second daughter before 

undergoing the surgeries.) As diicult as 

they were, Ginsberg says she took a lot from 

the experiences. “Your perspective changes 

when you have all of these life challenges,” she 

says. “You realize that you can do a lot.” 

In 2006, she joined Chemistry.com, a new 

brand started by Match, as general manager. 

Ginsberg had little experience 

running a business, but 

the company was looking for 

someone who understood PR, 

marketing, and, in particular, 

psychology around women. For 

Ginsberg’s part, she wanted 

to get into consumer technology, 

and she happened to have 

something of a gift for matchmaking, 

having introduced four 

couples who’d gotten married. 

She took the brand from zero to 

$25 million before being named 

general manager of Match.com 

two years later and CEO of 

the Match business in 2012. 

In 2013, she headed East to 

become CEO of IAC’s nascent 

Tutor.com business, which subsequently 

acquired the Princeton 

Review test-prep company. 

Then, in 2015, she was brought 

back as CEO of Match Group 

North America. It took just 2½ 

more years for her to claim the 

top job, replacing Blatt, who 

stepped down as CEO at the 

end of last year. 

Those around Ginsberg 



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describe her as confident and low-ego, with 

an encyclopedic knowledge of the industry 

and a gift for spotting and nurturing talent— 

a relevant strength in a company with so 

many autonomously managed brands. Her 

senior management team consists almost 

entirely of people Ginsberg brought in over 

the years. She hired her longtime lieutenant, 

Sharmistha “Shar” Dubey, currently president 

of Match Group, in 2006, shortly after leaving 

the Dallas software company, which sued her 

for doing it. 

Ginsberg also says she feels the significance 

of being a woman CEO at a dating and 

technology company. The online dating world 

has been rife with abuse, and much like 

Wolfe Herd at Bumble, she feels an obligation 

to think about the female perspective when 

it comes to the user experience. She’s also 

aware of her imprint on company culture and, 

particularly, female employees. Shortly after 

she was named CEO, a young female developer 

came into Ginsberg’s oice and confided in 

her that she didn’t think she would ever get 

to work for a tech company run by a woman, 

but now seeing Ginsberg in that role, she 

could see herself there someday too. “That 

had a big impact on me,” Ginsberg says. 

FOR NOW, GINSBERG HAS her hands full. As 

the competition looms, the company is 

focused on growth, both international— 

the untapped among those 600 million 

potential customers are largely overseas—and 

through better monetization; the majority of 

its customers still use its sites for free. 

Match Group is also working on new 

female-friendly features, like a Gentleman’s 

Badge, a designation recently added into 

its European Meetic brand that men earn 

through certain behaviors, such as filling out 

an entire profile or engaging in lengthy email 

correspondence; men with the badge get 33% 

more attention from women. On Tinder, the 

company is developing a tool that will enable 

women to choose to set their profile such that 

they have to initiate contact. So … just like 

Bumble? “This is very diferent,” Ginsberg 

says, noting that users can choose. “You’re not 

forced down a path.” 

Photos can show you only so much; just ask 

anyone who’s been disappointed by an online 

date (i.e., pretty much everyone who’s ever 

gone on one). A goal of Ginsberg’s is to get 

closer to the heart of creating a connection, so 

that by the time two people meet face to face 

there’s a higher chance of success. Videos can 

“When 

Bumble 

says, ‘We’RE 

NOT GONNA 

PLAY YOUR 

GAME’— 

Believe me, 

THAT DOESN’T 

MEAN THEY 


go a long way toward that end, and Tinder 

and Match.com recently started testing 

features using the technology. Tinder recently 

launched Super Likeable, which uses machine 

learning to predict which profiles a user is 

most likely to swipe right on. 

Match also has to keep chipping away at 

the stigma that hurts the category—and, 

with Tinder, it has to work harder to shake 

its reputation as a hookup app. Even though 

plenty of people now meet long-term partners 

or spouses on Tinder—just peruse the New 

York Times wedding pages for proof—the 

brand’s tawdry image has stuck. “We’ve got 

some work to do there,” Ginsberg says. 

And then there’s the challenge from Bumble. 

It’s anyone’s guess what will happen with 

this heated and colorful saga, or who among 

these players is going to couple up with whom. 

Some put strong odds on Facebook’s acquiring 

Bumble. Others say despite the war of words, 

there’s still a chance of a Match-Bumble union. 

“When you take an ad out and when Bumble 

says, ‘We’re not gonna play your game’—believe 

me, that doesn’t mean they wouldn’t take 

an ofer from Match,” says David Evans of 

Digicraft, an industry consultancy. 

Match Group says the company has not yet 

been physically served with Bumble’s lawsuit. 

It could be that opposites attract after all. 

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LAST BYTE 

TOTAL VALUE OF U.S. AGRICULTURAL EXPORTS IN 2017: $143.3 BILLION 

CALIFORNIA 

$24.6 

LOUISIANA 

$19.9 

WASHINGTON 

$13.8 

TEXAS 

$11.1 

ILLINOIS 

$7.9 

IOWA 

$5.0 

KANSAS 

$3.9 

NEBRASKA 

$3.8 

FLORIDA 

$3.7 

OTHER STATES 

$49.7 

EXPORTS 

BY STATE 

($ BILLIONS) 

SOYBEANS 

$21.6 

CORN 

$9.2 

TREE NUTS 

$8.6 

BEEF 

$7.2 

PORK 

$6.2 

WHEAT 

$6.1 

COTTON 

$5.8 

DAIRY 

$5.2 

OTHER PRODUCTS 

$73.3 

TYPE OF 

GOODS SOLD 

CANADA 

CHINA 

MEXICO 

$23.7 $19.7 $19.2 

MUCH TO LOSE 

FOR U.S. FARMERS 

EUROPEAN UNION 

$11.9 

THE REST OF THE WORLD 

$68.8 


MARKETS 

PURCHASING GOODS 

, 

NOTE: EXPORTS INCLUDE PUERTO RICO AND THE VIRGIN ISLANDS. MEATS INCLUDE DERIVED PRODUCTS 

96 


SOURCE: U.S. DEPARTMENT OF AGRICULTURE 



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