Business

Your raise is shrinking

Pay and benefits for Americas workers grew at a healthy but more gradual pace in the final three months of 2022, a third straight slowdown, which could help reassure the Federal Reserve that wage gains wont fuel higher inflation.

Wages and benefits, such as health insurance, grew 1% in the October-December quarter compared with the previous three months. That marked a solid gain, though it was slower than the 1.2% increase in the July-September quarter.

Fed Chair Jerome Powell and economists consider the data released Tuesday, known as the employment cost index, to be the most comprehensive gauge of labor costs. Powell last year cited a sharp increase in the index as a key reason why the Fed accelerated its interest rate hikes.

On Wednesday, Powell and his Fed colleagues are set to raise their benchmark interest rate by a quarter-point to a range of 4.5% to 4.75%, their eighth straight rate hike. But as inflation has cooled, the central bank has been boosting rates by smaller increments. Last year, the Fed raised its key rate by three-quarters of a point four times.

Powell has said that he sees rapid wage gains, particularly in the labor-intensive service sector, as the biggest impediment to bringing inflation down to the Feds 2% target. When restaurants, hotels, veterinary clinics and other services companies raise pay, they often pass along those higher costs by charging their customers higher prices.

Overall inflation is steadily cooling, having eased to 6.5% in December compared with a year ago. That is down from a 40-year high of 9.1% in June. Powells concern, though, is that fast-growing wages will cause inflation to plateau at around 4% still twice as high as the Feds target.

Workers pay has grown at a solid pace for roughly the past two years. With labor shortages afflicting a variety of industries, many employers have steadily boosted wages and salaries, while offering more lavish benefits, to try to attract and keep employees. For most people, inflation has still outpaced those pay gains. Yet wage increases have helped many consumers maintain their spending despite higher prices.

In last years first quarter, total worker compensation jumped 1.4% the most on records dating to 2001. Before then, quarterly compensation growth had rarely topped 1%.

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So long Silicon Valley. Cerebral Valley is the new hot tech zone in San Francisco

San Franciscos Hayes Valley sits just north of the Mission District and a bit east of Haight-Ashbury. Its far removed from Mountain View and Cupertino, the heart of Silicon Valley, but its quickly becoming one of the hottest areas in the country for tech startups.

As artificial intelligence grows into the next big thing in tech, this small neighborhood is acquiring the nickname Cerebral Valley as a growing number of AI workers are spending their days and nights there.

They gather in what are called hacker houses, co-living/coworking environments that demand in-person participation and, in a way, take tech startups back to their garage roots. The biggest of the hacker houses is reportedly Genesis House, a 21-bedroom building that was founded in March of 2021 to give workers a place to work and to bond.

The trend was spotlighted earlier this month by Amber Yang, an early-stage investor in Bloomberg Beta, who later implied it was done somewhat in jest. But the Cerebral Valley name appears to be sticking.

ppl in sf are now nicknaming Hayes Valley "Cerebral Valley" because all the AI communities and hacker houses are there
AI seems to be the one thing in startup world that demands in-person rn so much so that if you're not in sf, you're at a disadvantage
Amber Yang (@theamberyang) January 9, 2023

The surge in AI comes as the same time that there is a glut of skilled tech workers suddenly on the market. Layoffs by Google parent Alphabet, Meta and more could help AI companies thrive, as they re-embrace the startup world.

The growing popularity of AI powerhouses like image generator DALL-E and language tool Chat GPT have only fueled that enthusiasm. And venture capitalists are happily footing the bills. The San Francisco Standard reports more than $6.75 billion has been give to AI companies so far.

The competitive nature of the business, though, is bringing back the grind culture of the early dotcom days. Workers put in long hours, which makes the hacker houses a popular gathering spot, as they are able to largely co-exist with other members of the team.

Hayes Valley might be red-hot with AI startups, but it hasnt seen the ridiculous inflation in real estate prices Silicon Valley did in its early days (at least not yet). The median sale price in the area is down 10% from a year ago and more than half the price of its peak in September 2020, according to Redfin.

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Environmental concerns are on the rise across the worldbut Americans support for climate action has been stagnant for years. Heres why

Back in 2006, Al Gores documentary An Inconvenient Truth became a cultural phenomenon. It also sparked a change in peoples minds and attitudes about the environment. The film had a much greater impact on public opinion and public awareness of global climate change than any scientific paper or report, climatologist Steven M. Quiring of Texas A&M wrote.

An analysis found that the film produced a significant positive jump in the general publics perceptions of the issue. As one study put it, research and data show that unlike any work or event before it, the film was a turning point for shifting America to think and act more consciously about the warming climate.

But it was not enough to sustain momentum. Now, Pew Research reports that while climate concerns are on the rise across the world, that is not the case for the United States. Here, concern remains stagnant, with only 54% of Americans calling it a major threat. The overall figure has stayed the same for years as people on both sides of the divide have become more hardened in their beliefs, largely along political and ideological lines.

Some climate activists have been working hard to reach people across that divide. But the tactics often employed dont work. The problem lies in a failure to understand what sways people. To move things in the right direction, its important to understand why An Inconvenient Truth had an impactand how to do even better going forward.

Mind-changing narratives

When people hear about climate change in the news, its often about rising temperatures, U.N. studies, and predictions of how many years it will be until certain calamities hit. Such things very rarely win over skeptics. For many who are dismissive of climate change, facts and data have little or no effect because people tend to seek out and assess information that reinforces what they want to believe, a report from the Columbia Climate School explained.

An Inconvenient Truth largely sidestepped this problem. Instead, it wove imagery of melting ice caps and industrial smoke stacks into a cinematic documentary that included Gores close personal mentors teaching him about climate change. The result was a powerful, mind-changing narrative. The data in the film was not the reason for its success. It worked because it expanded the salience of climate change in peoples minds.

Networks of memories and associations

In their unconscious minds, people have memories and associations with brandswhich can be products, but also political parties, campaigns, movements, and more. These are crucial in what behavioral scientists refer to as memory structure. Theyre the reason that an estimated 95% of decisions people make are instinctive, not rational.

Nobel Prize-winning behavioral economist Daniel Kahneman explored the cognitive shortcuts that overtake the rational decision-making process. Along with Whartons top neuroscientist, I studied the networks of memories and associations consumers build around any given brand, both positive and negative. I call each of these networks a brand connectome.

When a brand connectome has more positives than negatives, it grows. The key is to use sticky, supercharged images and ideas that build a brands connectome in the targets unconscious mind.

Ive been applying this to the field of marketing for years, turning brands around for Fortune 500 companies. The same can be done for environmental activism.

Reaching people where it matters

To reach people who are unconvinced or unconcerned about climate change, step one is to avoid confrontation. When we argue, get angry, or focus on telling people that theyre wrong, their existing views become more entrenched. An argument about the science can make things worse and harden attitudes if it is taken as criticism or a personal attack, the Columbia report explained.

Next, leverage the things they already care aboutthe things that have strong brand connectomes in their unconscious minds. Summon iconic, inspirational themes about the American heartland, America the beautiful, and farm country. Highlight the growing support for climate solutions from hunters and anglers. Show faith leaders who are part of the effort.

Most importantly, maintain a consistent stream of image-heavy communications. Take the lesson from An Inconvenient Truthbut keep it up over time with bursts of universally relevant imagery. These create cognitive shortcuts that strengthen climate activism by connecting it with aspirational memories that already exist in the subconscious mind. Yale Climate Connections suggests certain images that can be especially powerful in swaying certain audiences.

The more this happens, the more people will come aroundand the more theyll work together, on the same side, to tackle one of the greatest challenges of our time.

Leslie Zane is the CEO and founder of Triggers, a brand consulting firm that has been helping transform Fortune 500 brands for three decades.

The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.

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An AI algorithm designed for child welfare could have the potential for discrimination and now the Justice Department is looking into it

The Justice Department has been scrutinizing a controversial artificial intelligence tool used by a Pittsburgh-area child protective services agency following concerns that it could result in discrimination against families with disabilities, The Associated Press has learned.

The interest from federal civil rights attorneys comes after an AP investigation revealed potential bias and transparency issues about the opaque algorithm that is designed to assess a familys risk level when they are reported for child welfare concerns in Allegheny County.

Several civil rights complaints were filed in the fall about the Allegheny Family Screening Tool, which is used to help social workers decide which families to investigate, AP has learned.

Two sources said that attorneys in the Justice Departments Civil Rights Division cited the AP investigation when urging them to submit formal complaints detailing their concerns about how the algorithm could harden bias against people with disabilities, including families with mental health issues.

A third person told AP that the same group of federal civil rights attorneys also spoke with them in November as part of a broad conversation about how algorithmic tools could potentially exacerbate disparities, including for people with disabilities. That conversation explored the design and construction of Alleghenys influential algorithm, though the full scope of the Justice Departments interest is unknown.

All three sources spoke to AP on the condition of anonymity, saying the Justice Department asked them not to discuss the confidential conversations, and two said they also feared professional retaliation.

Wyn Hornbuckle, a Justice Department spokesman, declined to comment.

Algorithms use pools of information to turn data points into predictions, whether thats for online shopping, identifying crime hot spots or hiring workers. Many child welfare agencies in the U.S. are considering adopting such tools as part of their work with children and families.

Though theres been widespread debate over the moral consequences of using artificial intelligence in child protective services, the Justice Departments interest in the pioneering Allegheny algorithm marks a significant turn toward possible legal implications.

Supporters see algorithms as a promising way to make a strained child protective services system both more thorough and efficient, saying child welfare officials should use all tools at their disposal to make sure children arent maltreated. But critics worry that including data points collected largely from people who are poor can automate discrimination against families based on race, income, disabilities or other external characteristics.

Robin Frank, a veteran family law attorney in Pittsburgh and vocal critic of the Allegheny algorithm, said she also filed a complaint with the Justice Department in October on behalf of a client with an intellectual disability who is fighting to get his daughter back from foster care. The AP obtained a copy of the complaint, which raised concerns about how the Allegheny Family Screening Tool assesses a familys risk.

I think its important for people to be aware of what their rights are and to the extent that we dont have a lot of information when there seemingly are valid questions about the algorithm, its important to have some oversight, Frank said.

Mark Bertolet, spokesman for the Allegheny County Department of Human Services, said by email that the agency had not heard from the Justice Department and declined interview requests.

We are not aware of any concerns about the inclusion of these variables from research groups past evaluation or community feedback on the (Allegheny Family Screening Tool), the county said, describing previous studies and outreach regarding the tool.

Allegheny County said its algorithm has used data points tied to disabilities in children, parents and other members of local households because they can help predict the risk that a child will be removed from their home after a maltreatment report. The county added that it has updated its algorithm several times and has sometimes removed disabilities-related data points.

The Allegheny Family Screening Tool was specifically designed to predict the risk that a child will be placed in foster care in the two years after the family is investigated. It has used a trove of detailed personal data collected from child welfare history, as well as birth, Medicaid, substance abuse, mental health, jail and probation records, among other government data sets. When the algorithm calculates a risk score of 1 to 20, the higher the number, the greater the risk. The risk score alone doesnt determine what happens in the case.

The AP first revealed racial bias and transparency concerns in a story last April that focused on the Allegheny tool and how its statistical calculations help social workers decide which families should be investigated for neglect a nuanced term that can include everything from inadequate housing to poor hygiene, but is a different category from physical or sexual abuse, which is investigated separately in Pennsylvania and is not subject to the algorithm.

A child welfare investigation can result in vulnerable families receiving more support and services, but it can also lead to the removal of children for foster care and ultimately, the termination of parental rights.

The county has said that hotline workers determine what happens with a familys case and can always override the tools recommendations. It has also underscored that the tool is only applied to the beginning of a familys potential involvement with the child welfare process. A different social worker who later conducts the investigations, as well as families and their attorneys, arent allowed to know the scores.

Alleghenys algorithm, in use since 2016, has at times drawn from data related to Supplemental Security Income, a Social Security Administration program that provides monthly payments to adults and children with a disability; as well as diagnoses for mental, behavioral and neurodevelopmental disorders, including schizophrenia or mood disorders, AP found.

The county said that when the disabilities data is included, it is predictive of the outcomes and it should come as no surprise that parents with disabilities may also have a need for additional supports and services. The county added that there are other risk assessment programs that use data about mental health and other conditions that may affect a parents ability to care for a child.

The AP obtained records showing hundreds of specific variables that are used to calculate the risk scores for families who are reported to child protective services, including the public data that powers the Allegheny algorithm and similar tools deployed in child welfare systems elsewhere in the U.S.

The APs analysis of Alleghenys algorithm and those inspired by it in Los Angeles County, California, Douglas County, Colorado, and in Oregon reveals a range of controversial data points that have measured people with low incomes and other disadvantaged demographics, at times measuring families on race, zip code, disabilities and their use of public welfare benefits.

Since the APs investigation published, Oregon dropped its algorithm due to racial equity concerns and the White House Office of Science and Technology Policy emphasized that parents and social workers needed more transparency about how government agencies were deploying algorithms as part of the nations first AI Bill of Rights.

The Justice Department has shown a broad interest in investigating algorithms in recent years, said Christy Lopez, a Georgetown University law professor who previously led some of the Justice Departments civil rights division litigation and investigations.

In a keynote about a year ago, Assistant Attorney General Kristen Clarke warned that AI technologies had serious implications for the rights of people with disabilities, and her division more recently issued guidance to employers saying using AI tools in hiring could violate the Americans with Disabilities Act.

They are doing their jobs as civil rights investigators to get to the bottom of whats going on, Lopez said of the Justice Department scrutiny of Alleghenys tool. It appears to me that this is a priority for the division, investigating the extent to which algorithms are perpetuating discriminatory practices.

Traci LaLiberte, a University of Minnesota expert on child welfare and disabilities, said the Justice Departments inquiry stood out to her, as federal authorities have largely deferred to local child welfare agencies.

The Department of Justice is pretty far afield from child welfare, LaLiberte said. It really has to rise to the level of pretty significant concern to dedicate time and get involved.

Emily Putnam-Hornstein and Rhema Vaithianathan, the two developers of Alleghenys algorithm and other tools like it, deferred to Allegheny Countys answers about the algorithms inner workings. They said in an email that they were unaware of any Justice Department scrutiny relating to the algorithm.

Researchers and community members have long raised concerns that some of the data powering child welfare algorithms may heighten historical biases against marginalized people within children protective services. That includes parents with disabilities, a community that is a protected class under federal civil rights law.

The Americans with Disabilities Act prohibits discrimination on the basis of disability, which can include a wide spectrum of conditions, from diabetes, cancer and hearing loss to intellectual disabilities and mental and behavioral health diagnosis like ADHD, depression and schizophrenia.

LaLiberte has published research detailing how parents with disabilities are disproportionately affected by the child welfare system. She challenged the idea of using data points related to disabilities in any algorithm because, she said, that assesses characteristics people cant change, rather than their behavior.

If it isnt part of the behavior, then having it in the (algorithm) biases it, LaLiberte said.

Strike expands cross-border payments feature to the Philippines

Cross-border payments have long been floated as one of the best potential use cases for cryptocurrency, but clunky interfaces and costly fees have hindered the expansion of a true blockchain-powered remittance platform.

Jack Mallers, the founder and CEO of the crypto platform Strike, is trying to change that. Through a new feature called Send Globally, Strike users can send money between currencies, utilizing Bitcoin as an intermediary. After launching in Nigeria, Kenya, and Ghana in December, Strike is announcing the expansion of the feature to the Philippines today.

The ambition for us is to continue to serve monetary functions to the world digitally for the first time ever, Mallers told Fortune. We think the lowest hanging fruit is cross-border payments.

Strike employs the Lightning Network, a Layer-2 protocol built on top of Bitcoin that allows users to send the cryptocurrency faster and with lower fees. Strike has an API functionality that allows other companies to employ its Lightning functionalityTwitter is a clientalong with a wallet that allows consumers to transact with each other.

The company announced an $80 million Series B in November.

Send Globally marks Strikes foray into remittance payments, an industry notorious for predatory companies like MoneyGram and Western Union that charge exorbitant fees for people to send money between currencies.

As Mallers explained, Strikes Send Globally feature allows a user in the United States to load their wallet with U.S. dollars from their bank account and send it to someone in another country in their local currency, with the exchange rate and estimated transfer time displayed at the time of the transaction. Behind the scenes, Strike converts the U.S. dollar to Bitcoin before converting it to the local currency, which the recipient can deposit in their own bank account.

Because Strike is using trading partnersgenerally a proprietary trading firmto bid on the exchange between fiat and Bitcoin, Mallers said that Strike can often get a more competitive rate than having to rely on traditional banking partners.

Courtesy of Ford

When Send Globally launched in Nigeria, Kenya, and Ghana, Strike partnering with the African crypto company Bitnob to help serve as an off-ramp from Bitcoin into local fiat currency. Mallers declined to share engagement numbers from the first month of activity but said the company is seeing surprising use cases, like businesses sending money to each other.

The Philippines was a natural location for expansion: At $35 billion, the country has one of the worlds largest remittance markets, with about a third coming from the U.S. alone. Strike is partnering with the crypto company Pouch.ph to enable transfers between U.S. dollars and Philippine pesos.

Mallers said that Strike hopes to continue expanding the feature, which is dependent on finding local payments partners who agree to a six-step implementation document with the Chicago-based company, a necessary step for creating an off-ramp from Bitcoin into fiat currency.

Cross-border payments have been a goal for Mallers for several years. He previously touted Bitcoin as a potential tool for remittances when he introduced Salvadoran President Nayib Bukele at a Bitcoin conference in Miami in 2021the country would become the first to accept Bitcoin as legal tender. Strike did not end up helping the Salvadoran government with the implementation, which has been fraught with delays and mismanagement.

Through his new Send Globally initiative, Mallers hopes that the Philippines and the three African countries will just be the first of many to go online with the feature.

Were pretty confident were going to add a ton of markets really, really fast, he said.

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Why might Amazon be interested in NFTs?

Jeff Bezoss tech giant is omnivorous. Originally an online retailer, Amazon has expanded into web hosting, groceries, andmost surprisinglyhealth care. And as of last Thursday, the trillion-dollar behemoth was rumored to be making a play for the NFT market.

The details are fuzzy, but Amazon plans to launch an NFT initiative in the spring, per four anonymous sources who spoke to Blockworks. A spokesperson for Amazon declined to comment, and Fortune was unable to independently confirm the report.

Given the prolonged crypto winter, FTXs collapse, and even the White Houses recent hostility toward crypto, why is one of the tech industrys biggest players reportedly now interested in non-fungible tokens?

Whats the plan?

Two sources from the Blockworks report said Amazon is purportedly focusing on blockchain gaming and related NFT implementations, with one saying that the company will focus on encouraging users to play Web3 games that award free NFTs.

The tech giant has already planted its flag firmly in media, creating its own streaming service and television and film studio. I can easily see them saying, Yeah, we should get into gaming, too, Brian Fitizgerald, an Amazon analyst at Wells Fargo, told Fortune.

Amazon does already have its own small gaming studio, and there were rumors in 2022 that it would buy Electronic Arts, one of the largest companies in the space. Its potential entrance into the NFT market may be one more step in expanding its influence in gaming.

But why NFTs?

In 2022, there was no shortage of proclamations about the death of NFTsand for good reason. By September, trading volume had collapsed by 97% from its peak roughly eight months earlier.

The bottom of the NFT market undoubtedly fell out, but that doesnt mean it still isnt worth hundreds of millions of dollars. Sales have creeped upward since October, reaching $900 million in January, according to data from CryptoSlam.

If the reports are true, its not a surprise that a major Cloud provider like Amazonwho currently hosts the metadata for many popular NFT collections on their serverswould be interested in getting a slice of that pie, Andrew Tate, the content lead at blockchain analytics firm Nansen, told Fortune.

Linked with retail?

Tates mention of Amazon hosting NFT metadata speaks to the companys already prominent role in the world of Web3.

Amazon Web Services, the catchall name for the companys various cloud computing services, is a blockchain computing workhorse, with 25% of all Ethereum workloads running on its servers, according to its website.

And in early January, Amazon announced a partnership with Ava Labs, which created and maintains the blockchain Avalanche, to increase the adoption of Avalanche among businesses, institutions, and even the government.

In addition to Amazons rumored entrance into the NFT game market, Fitzgerald, the Wells Fargo analyst, thought it was plausible that the company could link NFTs with its retail business. He imagined a scenario in which consumers would receive a digital token as a certificate of ownership after they bought a physical good.

He cant see Amazons splash into the world of Bored Apes to be dramatic enough to open a crypto or NFT exchange to rival Binance or OpenSea, given all of the regulatory uncertainty and inherent risk surrounding the crypto market. However, the NFT market still brings in hundreds of millions of dollars per month, and Amazon hasn't shied away from experimenting with blockchain technology.

If NFTs and the blockchain technology underneath them provide utility in terms of physical good authentication and in accuracy, said Fitzgerald, then why wouldn't Amazon and eBay want to be involved in enabling that technology?

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Gen Z and millennials are rejecting consumer culture on TikTok and 'de-influencing' to protect their money

Whether they have 100 followers or 100,000, it seems like everyone on TikTok is trying to sell you something.

Get Ready With Me videos are a staple on the platform, in which the creator provides the affiliate details of every cream and tube of mascara they use and every item of clothing they wear that day in an impressive form of brand recall. Sunday Reset videos are filled with mentions of vacuums, surface cleaners, and the trendiest sponge to buy to make a home sparkleand by extension, your life better.

Viewers are fluent in the names of specific, trending itemsand if theyre not familiar with the brand, theyre not afraid to ask. Open the comment section of a Day In the Life video, and youll find inquiries for where the creator purchased their duvet cover, graphic T-shirt, or bookshelf. If a creator doesnt respond, or doesnt respond fast enough, he or she is labeled a gatekeeper (for those not fluent in TikTok phraseology, this is not a compliment).

To make the buying process as seamless as possible, creators with even a hint of a following boast Linktrees in their bios, allowing viewers to purchase everything they just saw in the video in just a few clicks. And if you cant afford a $46 Charlotte Tilbury Flawless Filter, dont worry, theres a dupe for that (translation: a less expensive product that is similar to what you really want to buy), which a different influencer is all too happy to share.

Its all become a bit much. But of course, for every trend, theres a backlash. Enter: The de-influencer.

De-influencers denounce a consumerist mindset

Over the past few weeks, scores of videos featuring creators de-influencing their followers have flooded TikToks For You Page. These videos denounce the consumerist culture inherent to the app. In some, creators clue viewers in on which products they absolutely do not need to waste their money on; in others, they muse on materialism more generally.

Do not get the Ugg Minis, do not get the Dyson Airwrap, do not get the Charlotte Tilbury wand, do not get the Stanley cup, do not get Colleen Hoover books, do not get the Airpods Pro Max, jokes one creator, listing off some of the apps current trendiest buys. If you do any of those things, a bomb is going to explode.

The trend has taken off in the beauty and fashion realms in particular, highlighting the degree to which audiences are losing trust in influencers seemingly peddling a different moisturizer or eyeshadow palette each week. On an app where inauthenticity is death, being seen as a shill for a product you dont actually use or like is the ultimate faux pas.

De-influencing is being positioned as a form of offering frank digital advice, often as a way to break down hype or share the truth about a product, experience, or anything that just isnt worth it,' Larry Milstein, co-founder of creative communications agency PRZM, tells Fortune.

It also dovetails with younger generations growing interest in conscious consumerism and sustainability, and comes amidst the ongoing pains of rampant inflation and growing economic uncertainty. With less money to spend on non-essentials each month, TikTok users are growing tired of being sold over-hyped products in every video they watch. And while experts are still on the fence about whether a recession is imminent, nearly everyone on TikTok is convinced were already in one.

De-influencing as a concept is still evolving, says Emma Austin, a 24-year-old social media manager and content creator who has posted videos about the trend. But shes excited to see more and more people talking about changing their relationship to consumerism generally.

De-influencing is a movement to be more cautious with consumer habits and to be cautious about buying a product when it is over-promoted, over-talked about, or is being promoted in a way that is too good to be true, says Austin. Were in a recession, and people are much more inclined to gatekeep their money and be more careful.

Still, Austin notes that as of now, the conversation is fairly limited: Most of the videos are still centered around a product, whether its to encourage people to buy it or to share a dupe for it.

But at the very least, it highlights the need for companies to rethink their relationship with influencers and the types of sponsorship deals they offer, she says. For example, Austin says shes much more likely to follow people and try the products influencers talk about if she knows theyve used them in their daily life for several months.

People are realizing they dont need 20 different blushes and bronzers, says Austin. Its a really good opportunity for businesses to find influencers who have a really solid audience and build a long-term relationship with them.

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