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The pandemic exposed flaws in Canada’s economic system. Fixing them won’t be easy

After a year of living with COVID-19, Postmedia is taking an in-depth look at the significant social, institutional and economic issues the pandemic has brought to light in Canada — and more importantly, how we can finally begin to solve them. You can…

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2 years ago

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The COVID-19 pandemic has hit jobs and sectors that historically have fared better during hard economic times.

After a year of living with COVID-19, Postmedia is taking an in-depth look at the significant social, institutional and economic issues the pandemic has brought to light in Canada — and more importantly, how we can finally begin to solve them. You can find our complete coverage here.

Statistics Canada recently released its final tally of the economic output of the sports and entertainment industry in 2019. Did we ever have fun, in those pre-pandemic days!

The first championship by Toronto’s National Basketball Association franchise helped push the contribution of “spectator sports, event promoters, artists and related industries” to Canada’s overall gross domestic product (GDP) to $10.5 billion, the most ever.

The fun didn’t last, of course. Kawhi Leonard, the hero of the Raptors’ playoff run, left to play in Los Angeles. Then, in March of 2020, the virus that causes COVID-19 swept into North America, bringing death, economic destruction and an abrupt end to frivolity.

“You had to really shake your head and decide how serious is this,” Chris Fowler, chief executive of Edmonton-based Canadian Western Bank, said while reflecting on the early days of the pandemic. “When they started to cancel the NHL and the NBA, you were like, ‘Whoa!’ It punctuated the worry of it.”

It says something about us that the COVID-19 crisis only got real when we were denied access to non-essential pursuits.

Navdeep Bains, the former industry minister who oversaw the gargantuan effort that was required to jumpstart domestic production of masks, ventilators and other essential equipment, said in an interview that the big lesson for him from the past year is “resiliency.”

That’s a polite way of saying that we had grown too comfortable, making us blind to how fragile the economy had become. Our chronically underfunded health-care system was no match for a mysterious and deadly virus. To protect hospitals, we shut down the economy, wiping out a decade’s worth of job growth in a single month. To protect the economy, governments borrowed as if they were fighting a war, which in many ways they were.

The effort, so far, has gone better than many expected. An epic economic collapse has been partially offset by an almost-as-epic recovery. In January, the Bank of Canada assumed that the second wave of COVID-19 infections would cause GDP to contract again the first three months of 2021. Instead, it looks like the economy grew at an annual rate of around six per cent, according to the Bank of Nova Scotia’s real-time forecast.

It’s too soon to draw conclusions from what we’ve been living through for the past year, but it’s clear that some of the most important assumptions we had about the economy need to be reconsidered. The surprising strength of the rebound is the result of adaptation, not necessarily resiliency. If the latter is the goal then changes will be needed.

At first, we struggled to find masks, medical gowns and other personal protective equipment, and then we found ourselves near the back of the line for vaccines, because we had allowed our manufacturing capacity to erode. “There’s not a lot of manufacturing left in Canada,” Greg Hicks, chief executive of Canadian Tire Corporation Ltd., told Bloomberg News in March, a comment on the extent to which we have sacrificed self-sufficiency for cheap goods from Asia, Mexico and the United States.

Canada’s full embrace of the free-trade era, starting with the Canada-U.S. Free Trade Agreement in 1989, contributed to the shrinking of our manufacturing base. The other policy priority from that time — balanced budgets — resulted in a strained health system and a safety net so tattered that the federal government felt compelled to send the suddenly unemployed $2,000 cheques and subsidize the payrolls of tens of thousands of companies to keep them from firing people.

It was the right response, but a sign of weakness, not strength. “Our basic needs have to be thought through,” Mark Barrenechea, chief executive of Waterloo, Ont.-based Open Text Inc., one of the country’s biggest digital technology companies, said in an interview.

Ali Reyhany, founder and chief executive of Care Pharmacies, a Toronto-based group of independent drug stores, offered a more blunt assessment. “Everyone in the world is looking to solve the same problems,” he said. “If you take this type of beating, government, and you don’t fix it? I don’t know what to tell you.”

***

Canada’s GDP shrank 5.4 per cent in 2020, more than in 2009 (the Great Recession) and 1982 (stagflation).

But aggregate numbers like that don’t really tell the story.

Recessions typically punish goods producers. A downturn might prompt automobile makers to idle production, which in turn makes life difficult for their suppliers. But other sectors will muddle through until the economy recovers. Consumers continue to visit hair salons, restaurants and shops, although maybe not as often.

The COVID recession was different. The pandemic flattened restaurants, entertainment and tourism — corners of the economy that typically avoid the worst when the economic cycle turns. The production side of the economy actually did ok. Agriculture and mining made the list of essential services. Factories and construction sites were permitted to reopen relatively quickly. Meanwhile, accountants, coders, writers and other white-collar service workers simply plugged in from home rather than the office.

That dynamic caused some perverse outcomes. Consider employment in a category of companies that Statistics Canada calls “computer assisted design and related services.” The payrolls of those firms surpassed their pre-pandemic level in September and had increased by more than 13,000 positions as of January.

Yet there still were about 373,000 fewer people working at bars and restaurants. The contrast is a miniature portrait of systemic unfairness and inequality that was exposed by the crisis. The hardest hit were also the most vulnerable. Coders and the like earn an average of about $1,700 per week, four times as much as the typical server or bartender makes. Technology industries are dominated by men, while women and younger people make up the majority of workers in frontline services.

“We exposed all the weaknesses in the economy for women,” said Jennifer Reynolds, president of Toronto Finance International, an agency that promotes Canada’s biggest city as a top banking centre. “COVID put a spotlight on the problem.”

Those fissures informed Ottawa’s response to the crisis. The rescue effort that followed the 2008-09 financial crisis favoured bankers and industrial companies via the bailout of automobile makers and subsidies for construction. This time, households and smaller companies were first in line for help.

The Bank of Canada quickly dropped the interest rate on which commercial banks base their lending to 0.25 per cent, about as close to zero as policy-makers think they can safely go, and used its unique power to create money to become a major buyer of corporate and government bonds, allowing it to put even more downward pressure on the cost of borrowing. Tiff Macklem, the governor, also has indicated that he intends to leave the benchmark interest rate near zero until at least 2023.

Ultra-low interest rates and a flood of cash risk stoking inflation. It’s a risk Macklem is willing to take for now. He hinted in a speech earlier this year that he thought it might be possible to push the jobless rate lower than its pre-pandemic level of around 5.5 per cent without causing prices to spike. (The jobless rate was 8.2 per cent in February, down from its COVID crisis peak of 13.7 per cent in May.) The experience of other central banks shows prices are more anchored than experts previously thought. That means the central bank can let the economy run hot in order to speed up the recovery and pull those marginalized workers back in the economy.

“We’re going through an incredibly unique economic cycle, like nothing we’ve ever experienced,” Macklem said in an interview. “We need to both understand how inequality and unevenness is affecting economic outcomes and we have to understand how our policies affect unevenness and inequality.”

Prime Minister Justin Trudeau’s response was even more extraordinary.

His predecessor, Stephen Harper, showed a certain amount of restraint when he confronted the Great Recession. He did enough, but there was never any doubt that he intended to balance the budget as quickly as possible. He did so, just before losing the 2015 election to Trudeau’s Liberals.

The intellectual consensus about the risk posed by government debt had changed by the time the pandemic forced the closure of the world’s biggest economies. The bias towards prudence shown by countries such as Canada, Germany and the United States a decade ago had come to be seen as the reason the recovery was so frustratingly slow. Some prominent economists had become convinced that governments needn’t worry too much about debt, as long as the economy grows at a rate faster than the cost of borrowing.

Trudeau took that information and went all-in. The Finance Department reported a deficit of $268.2 billion between April and January, compared with a shortfall of $10.6 billion over the same period a year earlier. Revenue was about 15 per cent lower, while expenditures surged 84 per cent to cover CERB, the wage subsidy and various other patches in the existing safety net.

Net debt was about $993 billion at the end of January, compared with about $721 billion at the end of March 2020, the close of the federal government’s previous fiscal year.

The prospect of a $1-trillion debt makes many people uncomfortable. Fowler of Canadian Western Bank said governments’ current level of borrowing is unsustainable and could require higher taxes to get it under control. His comments show that there are pockets of resistance to the theory that debt can be eroded simply by ensuring that growth is faster than the government’s cost of borrowing.

Still, the Alberta banker stopped short of saying Trudeau was reckless. In fact, the business community, which typically insists on fiscal prudence, is all but universal in its praise of the aggressiveness of the government’s response. Executives have issues with choices and execution, but they aren’t worried about the debt. The history of economic crises, including the Great Depression, shows they were worsened by governments doing too little. For once, authorities opted to err on the side of doing too much.

“It was very important for governments to proceed quickly,” Monique Leroux, vice chair at Fiera Capital, a Montreal-based investment firm, said during a virtual conference hosted by the Canadian Chamber of Commerce in February. “If we go back to 2008, it took a while for governments to move forward and it was very difficult. So, I think that part was well done in Canada and in other countries.”

***

There almost certainly will be unintended consequences, but it’s unlikely that any of them will be worse than the disaster we were facing at this time a year ago. The Toronto Stock Exchange went into Easter weekend at a level that was 60 per cent higher than its pandemic-induced trough. Stock prices reflect a multitude of variables, but an important one is confidence in the future. The markets are telling us that things are better than they feel.

“In hindsight, we reduced our staff too much,” said Greg Engel, chief executive of Organigram Inc., a Moncton, New Brunswick-based producer of cannabis products. “The demand continued to grow.”

Cannabis plants at Organigram’s facility in Moncton, N.B.

Engel started 2020 with a staff of about 800 people. The lockdowns forced Organigram to kill plants because it was effectively impossible to process the harvest. Half the staff accepted voluntary layoffs. In August, the company made half of those departures permanent. The forced stop in the spring had a lasting effect. Demand is worthless without supply.

“You just can’t flip a switch and start scaling and growing cannabis again,” Engel said. “We didn’t have enough product to package.”

By December, a new crop of cannabis was ready, although still not enough to keep up with surging orders. Engel started bringing people back, and he’s now restored about 130 of the positions he axed last year, putting Organigram’s headcount at about 600.

However, staffing at Organigram probably won’t grow much higher for now, even though demand remains strong and Engel anticipates it will get even stronger. That’s because the lockdowns forced him and his lieutenants to come up with ways to keep up with orders with fewer people. They added automation and devised more efficient production methods. Those innovations promise to make Organigram more profitable. They’re here to stay.

“If there is a positive from COVID, and I don’t want to say there has been a positive because it has had a detrimental impact on the world and on a lot of people, but it did force us to look at efficiency,” Engel said in an interview. “With fewer people, we are able to get more output within the facility.”

You want companies to be in good shape once the recovery arrives. The growth that followed the Great Recession disappointed because there were too few companies left standing in the immediate aftermath to take full advantage of the surge in global demand. That might not be as big an issue this time. Insolvencies spiked in 2008 and 2009. In contrast, the bankruptcy rate plunged in 2020, and even though it has picked up this year, it remains well below pre-pandemic levels.

But as the example of Organigram shows, a foundation of healthy companies doesn’t necessarily mean that employment will be quickly restored. The crisis has accelerated a shift to a digitally oriented economy that will present employers with opportunities to replace humans with software power by artificial intelligence and various state-of-the-art machines. That means the unemployment rate could remain elevated, which will make it harder for governments to work off their debts.

The fear of being replaced by technology also could add to the anxiety being felt by a labour force that already is coping with high levels of stress and burnout.

Three million Canadians were working from home in January, according to Statistics Canada. Their bosses might be pleasantly surprised with the results: a third of those workers feel they are more productive, while about 60 per cent say they accomplish just as much at home as they do at the office, the agency said in a study published on April 1.

However, there’s reason to think that full-time telework is bad for our health. Thirty-five per cent of the new teleworkers have replaced their commutes with longer hours, Statistics Canada said. The extra effort is exacerbating stress levels that were high before the pandemic, and have been pushed even higher by the isolation and strangeness of the past year, Jennifer Moss, author of The Burnout Epidemic, said at a virtual conference hosted by the Conference Board of Canada on April 2.

It’s an unfamiliar variable that will affect the recovery. Delvinia, a fast-growing research and data firm in Toronto, was working at 150 per cent capacity at one point last year as companies grasped the importance of digital information. Founder and CEO Adam Froman’s staff struggled to keep up. Some burned out. Some quit. It wasn’t as simple as beefing up mental-health benefits because it was nearly impossible to get an appointment with a psychologist or therapist.

“Last year is going to be considered one of the greatest learning years for companies about how to manage, not through a pandemic, but just how to manage,” said Adam Froman, founder and chief executive of Delvinia, a Toronto-based research and data firm. “It’s not about foosball tables anymore, or paid lunches. You need a culture that can survive a pandemic.”

***

Life-altering moments tend to be followed by significant change. The Second World War showed that government could get things done when it wanted, and politicians used that momentum to put in place many of the programs that we now take for granted. Overreach in the 1970s led to high inflation, high interest rates and high unemployment, setting in motion a partial dismantling of what was built after the war. The Great Recession triggered a new resolve to constrain the biggest banks, which ensured the financial industry had big reserves of cash with which to confront the latest economic crisis.

COVID-19 will bring similar structural change. Governments won’t have to do all the work. Reyhany, the pharmacist, raised about $40 million by listing his company’s online pharmacy business, Mednow Inc., on the TSX Venture Exchange in early March. The pandemic has made investors keen to get behind both health and technology companies, and Mednow offered exposure to both. Open Text’s Barrenechea said he’s in the process of hiring about 300 people in Canada, and for the first time, location isn’t an issue because the pandemic has shown that companies like his can function without an office. “Modern work works,” he said. “We’re embracing it.”

The other force that will push Canada out of the recession is the response to climate change. Global pledges to neutralize carbon emissions within a few decades have reached a critical mass, and they are increasingly backed by policy, such as a carbon tax in Canada and U.S. President Joe Biden’s decision to block the Keystone XL pipeline from Alberta. The policies remain controversial, but after a decade of promise, green energy’s moment appears to have arrived. “For all of these years, we’ve been working so hard, and it’s all coming together now,” said Kirsten Marcia, chief executive of Saskatoon-based Deep Earth Energy Production Corp, which last month completed a successful test of what could be Canada’s first geothermal power project. “This is our year.”

So, the recovery has a tailwind. That means the worst probably is behind us, although a third wave could complicate matters.

But as the economy starts to feel better, it will be important to resist confusing relief with victory. The recession was devastating because we were vulnerable and those vulnerabilities haven’t been fixed. All we’ve done to date is apply very expensive Band-Aids.

“What the pandemic did was show all the warts in the system,” said Delvinia’s Froman. “There was no hiding.”

Financial Post

• Email: kcarmichael@postmedia.com | Twitter:

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Asking the right dumb questions

You’ll have to forgive the truncated newsletter this week. Turns out I brought more back from Chicago than a couple of robot stress balls (the one piece…

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17 hours ago

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March 31, 2023

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You’ll have to forgive the truncated newsletter this week. Turns out I brought more back from Chicago than a couple of robot stress balls (the one piece of swag I will gladly accept). I was telling someone ahead of the ProMat trip that I’ve returned to 2019 travel levels this year. One bit I’d forgotten was the frequency and severity of convention colds — “con crud,” as my comics friends used to call it.

I’ve been mostly housebound for the last few days, dealing with this special brand of Chicago-style deep-dish viral infection. The past three years have no doubt hobbled my immune system, but after catching COVID-19 three times, it’s frankly refreshing to have a classic, good old-fashioned head cold. Sometimes you want the band you see live to play the hits, you know? I’m rediscovering the transformative properties of honey in a cup of tea.

The good news for me is that (and, hopefully, you) is I’ve got a trio of interviews from ProMat that I’ve been wanting to share in Actuator. As I said last week, the trip was really insightful. At one of the after-show events, someone asked me how one gets into tech journalism. It’s something I’ve been asked from time to time, and I always have the same answer. There are two paths in. One is as a technologist; the other is as a journalist.

It’s obvious on the face of it. But the point is that people tend to enter the field in one of two distinct ways. Either they love writing or they’re really into tech. I was the former. I moved to New York City to write about music. It’s something I still do, but it’s never fully paid the bills. The good news for me is I sincerely believe it’s easier to learn about technology than it is to learn how to be a good writer.

I suspect the world of robotics startups is similarly bifurcated. You enter as either a robotics expert or someone with a deep knowledge of the field that’s being automated. I often think about the time iRobot CEO Colin Angle told me that, in order to become a successful roboticist, he first had to become a vacuum salesman. He and his fellow co-founders got into the world through the robotics side. And then there’s Locus robotics, which began as a logistics company that started building robots out of necessity.

Both approaches are valid, and I’m not entirely sure one is better than the other, assuming you’re willing to surround yourself with assertive people who possess deep knowledge in areas where you fall short. I don’t know if I entirely buy the old adage that there’s no such thing as a dumb question, but I do believe that dumb questions are necessary, and you need to get comfortable asking them. You also need to find a group of people you’re comfortable asking. Smart people know the right dumb questions to ask.

Covering robotics has been a similar journey for me. I learned as much about supply chain/logistics as the robots that serve them at last week’s event. That’s been an extremely edifying aspect of writing about the space. In robotics, no one really gets to be a pure roboticist anymore.

Q&A with Rick Faulk

Image Credits: Locus Robotics

I’m gonna kick things off this week with highlights from a trio of ProMat interviews. First up is Locus Robotics CEO, Rick Faulk. The full interview is here.

TC: You potentially have the foundation to automate the entire process.

RF: We absolutely do that today. It’s not a dream.

Lights out?

It’s not lights out. Lights out might happen 10 years from now, but the ROI is not there to do it today. It may be there down the road. We’ve got advanced product groups working on some things that are looking at how to get more labor out of the equation. Our strategy is to minimize labor over time. We’re doing integrations with Berkshire Grey and others to minimize labor. To get to a dark building is going to be years away.

Have you explored front-of-house — retail or restaurants?

We have a lot of calls about restaurants. Our strategy is to focus. There are 135,000 warehouses out there that have to be automated. Less than 5% are automated today. I was in Japan recently, and my meal was filled by a robot. I look around and say, “Hey, we could do that.” But it’s a different market.

What is the safety protocol? If a robot and I are walking toward each other on the floor, will it stop first?

It will stop or they’ll navigate around. It’s unbelievably smart. If you saw what happened on the back end — it’s dynamically planning paths in real time. Each robot is talking to other robots. This robot will tell this robot over here, “You can’t get through here, so go around.” If there’s an accident, we’ll go around it.

They’re all creating a large, cloud-based map together in real time.

That’s exactly what it is.

When was the company founded?

[In] 2014. We actually spun out of a company called Quiet Logistics. It was a 3PL. We were fully automated with Kiva. Amazon bought Kiva in 2012, and said, “We’re going to take the product off the market.” We looked for another robot and couldn’t find one, so we decided to build one.

The form factors are similar.

Their form factor is basically the bottom. It goes under a shelf and brings the shelf back to the station to do a pick. The great thing about our solution is we can go into a brownfield building. They’re great and they work, but it will also take four times the number of robots to do the same work our robots do.

Amazon keeps coming up in my conversations in the space as a motivator for warehouses to adopt technologies to remain competitive. But there’s an even deeper connection here.

Amazon is actually our best marketing organization. They’re setting the bar for SLAs (service-level agreements). Every single one of these 3PLs walking around here [has] to do same- or next-day delivery, because that’s what’s being demanded by their clients.

Do the systems’ style require in-person deployment?

The interesting thing during COVID is we actually deployed a site over FaceTime.

Someone walked around the warehouse with a phone?

Yeah. It’s not our preferred method. They probably actually did a better job than we did. It was terrific.

As far as efficiency, that could make a lot of sense, moving forward.

Yeah. It does still require humans to go in, do the installation and training — that sort of thing. I think it will be a while before we get away from that. But it’s not hard to do. We take folks off the street, train them and in a month they know how to deploy.

Where are they manufactured?

We manufacture them in Boston, believe it or not. We have contract manufacturers manufacturing some components, like the base and the mast. And then we integrate them together in Boston. We do the final assembly and then do all the shipments.

As you expand sales globally, are there plans to open additional manufacturing sites?

We will eventually. Right now we’re doing some assemblies in Amsterdam. We’re doing all refurbishments for Europe in Amsterdam. […] There’s a big sustainability story, too. Sustainability is really important to big clients like DHL. Ours is an inherently green model. We have over 12,000 robots in the field. You can count the number of robots we’ve scrapped on two hands. Everything gets recycled to the field. A robot will come back after three or four years and we’ll rewrap it. We may have to swap out a camera, a light or something. And then it goes back into service under a RaaS model.

What happened in the cases where they had to be scrapped?

They got hit by forklifts and they were unrepairable. I mean crushed.

Any additional fundraising on the horizon?

We’ve raised about $430 million, went through our Series F. Next leg in our financing will be an IPO. Probably. We have the numbers to do it now. The market conditions are not right to do it, for all the reasons you know.

Do you have a rough timeline?

It will be next year, but the markets have got to recover. We don’t control that.

Q&A with Jerome Dubois

Image Credits: 6 River Systems

Next up, fittingly, is Jerome Dubois, the co-founder of Locus’ chief competitor, 6 River Systems (now a part of Shopify). Full interview here.

TC: Why was [the Shopify acquisition] the right move? Had you considered IPO’ing or moving in a different direction?

JD: In 2019, when we were raising money, we were doing well. But Shopify presents itself and says, “Hey, we’re interested in investing in the space. We want to build out a logistics network. We need technology like yours to make it happen. We’ve got the right team; you know about the space. Let’s see if this works out.”

What we’ve been able to do is leverage a tremendous amount of investment from Shopify to grow the company. We were about 120 employees at 30 sites. We’re at 420 employees now and over 110 sites globally.

Amazon buys Kiva and cuts off third-party access to their robots. That must have been a discussion you had with Shopify.

Up front. “If that’s what the plan is, we’re not interested.” We had a strong positive trajectory; we had strong investors. Everyone was really bullish on it. That’s not what it’s been. It’s been the opposite. We’ve been run independently from Shopify. We continue to invest and grow the business.

From a business perspective, I understand Amazon’s decision to cut off access and give itself a leg up. What’s in it for Shopify if anyone can still deploy your robots?

Shopify’s mantra is very different from Amazon. I’m responsible for Shopify’s logistics. Shopify is the brand behind the brand, so they have a relationship with merchants and the customers. They want to own a relationship with the merchant. It’s about building the right tools and making it easier for the merchant to succeed. Supply chain is a huge issue for lots of merchants. To sell the first thing, they have to fulfill the first thing, so Shopify is making it easier for them to print off a shipping label.

Now, if you’ve got to do 100 shipping letters a day, you’re not going to do that by yourself. You want us to fulfill it for you, and Shopify built out a fulfillment network using a lot of third parties, and our technology is the backbone of the warehouse.

Watching you — Locus or Fetch — you’re more or less maintaining a form factor. Obviously, Amazon is diversifying. For many of these customers, I imagine the ideal robot is something that’s not only mobile and autonomous, but also actually does the picking itself. Is this something you’re exploring?

Most of the AMR (autonomous mobile robot) scene has gotten to a point where the hardware is commoditized. The robots are generally pretty reliable. Some are maybe higher quality than others, but what matters the most is the workflows that are being enacted by these robots. The big thing that’s differentiating Locus and us is, we actually come in with predefined workflows that do a specific kind of work. It’s not just a generic robot that comes in and does stuff. So you can integrate it into your workflow very quickly, because it knows you want to do a batch pick and sortation. It knows that you want to do discreet order picking. Those are all workflows that have been predefined and prefilled in the solution.

With respect to the solving of the grabbing and picking, I’ve been on the record for a long time saying it’s a really hard problem. I’m not sure picking in e-comm or out of the bin is the right place for that solution. If you think about the infrastructure that’s required to solve going into an aisle and grabbing a pink shirt versus a blue shirt in a dark aisle using robots, it doesn’t work very well, currently. That’s why goods-to-person makes more sense in that environment. If you try to use arms, a Kiva-like solution or a shuttle-type solution, where the inventory is being brought to a station and the lighting is there, then I think arms are going to be effective there.

Are these the kinds of problems you invest R&D in?

Not the picking side. In the world of total addressable market — the industry as a whole, between Locus, us, Fetch and others — is at maybe 5% penetration. I think there’s plenty of opportunity for us to go and implement a lot of our technology in other places. I also think the logical expansion is around the case and pallet operations.

Interoperability is an interesting conversation. No one makes robots for every use case. If you want to get near full autonomous, you’re going to have a lot of different robots.

We are not going to be a fit for 100% of the picks in the building. For the 20% that we’re not doing, you still leverage all the goodness of our management consoles, our training and that kind of stuff, and you can extend out with [the mobile fulfillment application]. And it’s not just picking. It’s receiving, it’s put away and whatever else. It’s the first step for us, in terms of proving wall-to-wall capabilities.

What does interoperability look like beyond that?

We do system interoperability today. We interface with automation systems all the time out in the field. That’s an important part of interoperability. We’re passing important messages on how big a box we need to build and in what sequence it needs to be built.

When you’re independent, you’re focused on getting to portability. Does that pressure change when you’re acquired by a Shopify?

I think the difference with Shopify is, it allows us to think more long-term in terms of doing the right thing without having the pressure of investors. That was one of the benefits. We are delivering lots of longer-term software bets.

Q&A with Peter Chen

Covariant

Image Credits: Covariant

Lastly, since I’ve chatted with co-founder Pieter Abbeel a number of times over the years, it felt right to have a formal conversation with Covariant CEO Peter Chen. Full interview here.

TC: A lot of researchers are taking a lot of different approaches to learning. What’s different about yours?

PC: A lot of the founding team was from OpenAI — like three of the four co-founders. If you look at what OpenAI has done in the last three to four years to the language space, it’s basically taking a foundation model approach to language. Before the recent ChatGPT, there were a lot of natural language processing AIs out there. Search, translate, sentiment detection, spam detection — there were loads of natural language AIs out there. The approach before GPT is, for each use case, you train a specific AI to it, using a smaller subset of data. Look at the results now, and GPT basically abolishes the field of translation, and it’s not even trained to translation. The foundation model approach is basically, instead of using small amounts of data that’s specific to one situation or train a model that’s specific to one circumstance, let’s train a large foundation-generalized model on a lot more data, so the AI is more generalized.

You’re focused on picking and placing, but are you also laying the foundation for future applications?

Definitely. The grasping capability or pick and place capability is definitely the first general capability that we’re giving the robots. But if you look behind the scenes, there’s a lot of 3D understanding or object understanding. There are a lot of cognitive primitives that are generalizable to future robotic applications. That being said, grasping or picking is such a vast space we can work on this for a while.

You go after picking and placing first because there’s a clear need for it.

There’s clear need, and there’s also a clear lack of technology for it. The interesting thing is, if you came by this show 10 years ago, you would have been able to find picking robots. They just wouldn’t work. The industry has struggled with this for a very long time. People said this couldn’t work without AI, so people tried niche AI and off-the-shelf AI, and they didn’t work.

Your systems are feeding into a central database and every pick is informing machines how to pick in the future.

Yeah. The funny thing is that almost every item we touch passes through a warehouse at some point. It’s almost a central clearing place of everything in the physical world. When you start by building AI for warehouses, it’s a great foundation for AI that goes out of warehouses. Say you take an apple out of the field and bring it to an agricultural plant — it’s seen an apple before. It’s seen strawberries before.

That’s a one-to-one. I pick an apple in a fulfillment center, so I can pick an apple in a field. More abstractly, how can these learnings be applied to other facets of life?

If we want to take a step back from Covariant specifically, and think about where the technology trend is going, we’re seeing an interesting convergence of AI, software and mechatronics. Traditionally, these three fields are somewhat separate from each other. Mechatronics is what you’ll find when you come to this show. It’s about repeatable movement. If you talk to the salespeople, they tell you about reliability, how this machine can do the same thing over and over again.

The really amazing evolution we have seen from Silicon Valley in the last 15 to 20 years is in software. People have cracked the code on how to build really complex and highly intelligent looking software. All of these apps we’re using [are] really people harnessing the capabilities of software. Now we are at the front seat of AI, with all of the amazing advances. When you ask me what’s beyond warehouses, where I see this really going is the convergence of these three trends to build highly autonomous physical machines in the world. You need the convergence of all of the technologies.

You mentioned ChatGPT coming in and blindsiding people making translation software. That’s something that happens in technology. Are you afraid of a GPT coming in and effectively blindsiding the work that Covariant is doing?

That’s a good question for a lot of people, but I think we had an unfair advantage in that we started with pretty much the same belief that OpenAI had with building foundational models. General AI is a better approach than building niche AI. That’s what we have been doing for the last five years. I would say that we are in a very good position, and we are very glad OpenAI demonstrated that this philosophy works really well. We’re very excited to do that in the world of robotics.

News of the week

Image Credits: Berkshire Grey

The big news of the week quietly slipped out the day after ProMat drew to a close. Berkshire Grey, which had a strong presence at the event, announced on Friday a merger agreement that finds SoftBank Group acquiring all outstanding capital stock it didn’t already own. The all-cash deal is valued at around $375 million.

The post-SPAC life hasn’t been easy for the company, in spite of a generally booming market for logistics automation. Locus CEO Rick Faulk told me above that the company plans to IPO next year, after the market settles down. The category is still a young one, and there remains an open question around how many big players will be able to support themselves. For example, 6 River Systems and Fetch have both been acquired, by Shopify and Zebra, respectively.

“After a thoughtful review of value creation opportunities available to Berkshire Grey, we are pleased to have reached this agreement with SoftBank, which we believe offers significant value to our stockholders,” CEO Tom Wagner said in a release. “SoftBank is a great partner and this merger will strengthen our ability to serve customers with our disruptive AI robotics technology as they seek to become more efficient in their operations and maintain a competitive edge.”

Unlike the Kiva deal that set much of this category in motion a decade ago, SoftBank maintains that it’s bullish about offering BG’s product to existing and new customers. Says managing partner, Vikas J. Parekh:

As a long-time partner and investor in Berkshire Grey, we have a shared vision for robotics and automation. Berkshire Grey is a pioneer in transformative, AI-enabled robotic technologies that address use cases in retail, eCommerce, grocery, 3PL, and package handling companies. We look forward to partnering with Berkshire Grey to accelerate their growth and deliver ongoing excellence for customers.

Container ships at dock

Image Credits: John Lamb / Getty Images

A healthy Series A this week from Venti Technologies. The Singapore/U.S. firm, whose name translates to “large Starbucks cup,” raised $28.8 million, led by LG Technology Ventures. The startup is building autonomous systems for warehouses, ports and the like.

“If you have a big logistics facility where you run vehicles, the largest cost is human capital: drivers,” co-founder and CEO Heidi Wyle tells TechCrunch. “Our customers are telling us that they expect to save over 50% of their operations costs with self-driving vehicles. Think they will have huge savings.”

Neubility

Image Credits: Neubility / Neubility

This week in fun pivots, Neubility is making the shift from adorable last-mile delivery robots to security bots. This isn’t the company’s first pivot, either. Kate notes that it’s now done so five times since its founding. Fifth time’s the charm, right?

Neubility currently has 50 robots out in the world, a number it plans to raise significantly, with as many as 400 by year’s end. That will be helped along by the $2.6 million recently tacked onto its existing $26 million Series A.

Model-Prime emerged out of stealth this week with a $2.3 million seed round, bringing its total raise to $3.3 million. The funding was led by Eniac Ventures and featured Endeavors and Quiet Capital. The small Pittsburgh-based firm was founded by veterans of the self-driving world, Arun Venkatadri and Jeanine Gritzer, who were seeking a way to create reusable data logs for robotics companies.

The startup says its tech, “handles important tasks like pulling the metadata, automated tagging, and making logs searchable. The vision is to make the robotics industry more like web apps, or mobile apps, where it now seems silly to build your own data solution when you could just use Datadog or Snowflake instead.”

Image Credits: Saildrone

Saildrone, meanwhile, is showcasing Voyager, a 33-foot uncrewed water vehicle. The system sports cameras, radar and an acoustic system designed to map a body of water down to 900 feet. The company has been testing the boat out in the world since last February and is set to begin full-scale production at a rate of a boat a week.

Image Credits: MIT

Finally, some research out of MIT. Robust MADER is a new version of MADER, which the team introduced in 2020 to help drones avoid in-air collisions.

“MADER worked great in simulations, but it hadn’t been tested in hardware. So, we built a bunch of drones and started flying them,” says grad student Kota Kondo. “The drones need to talk to each other to share trajectories, but once you start flying, you realize pretty quickly that there are always communication delays that introduce some failures.”

The new version adds in a delay before setting out on a new trajectory. That added time will allow it to receive and process information from fellow drones and adjust as needed. Kondo adds, “If you want to fly safer, you have to be careful, so it is reasonable that if you don’t want to collide with an obstacle, it will take you more time to get to your destination. If you collide with something, no matter how fast you go, it doesn’t really matter because you won’t reach your destination.”

Fair enough.

Image Credits: Bryce Durbin/TechCrunch

 

Here you go, way too fast. Don’t slow down, you’re gonna crash. Na-na-na-na-na-na-na-na-na. (Subscribe to Actuator!)

 

 

Asking the right dumb questions by Brian Heater originally published on TechCrunch

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Cuban election: high turnout despite opposition call for boycott

Cubans turned out in higher numbers than expected at the recent elections.

Published

17 hours ago

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March 31, 2023

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Results of the five-yearly Cuban national assembly elections on March 26 will have disappointed opposition figures, who had called for a boycott to signal unhappiness with the government’s performance.

Two-thirds of the electorate submitted valid votes (that were not spoiled nor blank) despite opposition calls for people to stay away. Given all the difficulties and tensions of the past few years, the high numbers of voters seems to suggest that, although it is under strain, the Cuban political system is more resilient than expected. Turnout had been dropping since the days of former leader Fidel Castro, and poor voter numbers could have signalled significant dissatisfaction with the current president, Miguel Díaz-Canel Bermúdez.

One of the reasons for the high turnout may be a sense of communal rejection of US threats to national sovereignty, the importance of which should not be ignored, according to historians such as Louis Pérez. Tightening of US sanctions has certainly contributed to everyday suffering and economic hardship. Another reason for a high turnout may be President Díaz-Canel Bermúdez’s efforts to push ahead with reforms, increasing accountability and creating more opportunities for private enterprise and participation in decision-making at local level.

The election results and turnout of 76% might also be interpreted as an indication that among the majority who still support the government even in the middle of the recession, there is an increased willingness to actively express preferences rather than offer unconditional loyalty. This shift is expressed in the growing proportion (up from 20% of valid votes in 2018 to 28% in 2023) who selected specific candidates from the list for their constituency, rather than fully complying with official encouragement to simply indicate acceptance of the complete slate.

The backdrop

The elections mark the end of the first term of Díaz-Canel Bermúdez, during which the population has suffered from a severe recession.

Since the last election in 2018, the country has witnessed a series of major disasters, including a plane crash, three hurricanes, three tropical storms, a tornado, a gas explosion that destroyed a hotel and a huge fire at the country’s main oil depot. But the economic impact of those disasters were dwarfed by two further blows: the COVID pandemic and, above all, US foreign policy towards Cuba.

Despite the development and successful roll-out of effective vaccines, the possibility of an economic bounce-back from the COVID-induced recession (an 11% fall in GDP) has been effectively blocked by unprecedented restrictions on Cuba’s access to international trade and finance resulting from US sanctions imposed by the Trump administration and maintained under Joe Biden’s presidency.

March 2023 election: type of vote

Cuban voting by type of vote. Author based on Cuban electoral commission figures., Author provided

The effects of COVID and tightened US sanctions have combined with the sorry state of the country’s infrastructure. Another factor was caused by the price of food and energy imports soaring between 2020 and 2022, which resulted in power outages and food shortages. A 2021 currency reform exacerbated disruption and hardships by sparking an inflationary surge.

Read more: Cuba: why record numbers of people are leaving as the most severe economic crisis since the 1990s hits -- a photo essay

Long queues and a growing sense of frustration also contributed to unprecedented protests in mid-2021 and a record-breaking wave of emigration. In 2022, almost 250,000 people – over 2% of the population – are reported to have left for the US, including many of Cuba’s youngest and brightest.

How do elections work?

The Cuban electoral system was originally created as a “participatory” rather than “representative” system of democracy in an attempt to avoid the political conflict, violence, corruption and foreign interference experienced before the 1959 revolution, as described by political scientist William LeoGrande.

As the Cuban Communist party is the only legal political party, Cuban elections are not contests between parties. The 470 candidates for the national assembly do not represent the party. Instead, around half of them are representatives of municipal governments (themselves elected in municipal elections) and the rest are nominated by bigger organisations. These include neighbourhood committees, official trade unions, the women’s federation, students’ organisations and the small farmers’ association. Local electoral commissions then select one candidate for each seat from the list of nominated candidates. It is not a requirement for candidates, members of mass organisations or the electoral commission to be members of the party; however, many are, effectively making it impossible for self-proclaimed dissidents to be selected.

The local electoral commissions, whose members are selected from the mass organisations, are responsible for the organisation of the ballots and counting of the vote. Once selected, candidates must receive over 50% of valid votes to become a member of the national assembly. Voters can either accept all the candidates on the list for their constituency (a “united vote”) or select some and not others. Voting is secret and voluntary.

Over the years, and particularly over the past decade, efforts have been made to ensure that candidates are representative of the population. They include ministers, workers, farmers, educators, managers and health workers. The average age of candidates in 2023, at 46 years, is lower than previous elections, while the proportion who are non-white has increased (45% compared with 41% in 2018), and 53% are women.

The national turnout for these elections, confirmed by the national electoral commission, was 76%. Although this is above the turnout in legislative elections in the UK (67.3% in 2019) and US (at 62.8% of the voting age population in 2020 and 47.5% in 2022, according to the Pew Research Center), it is significantly less than the 86% recorded in the last national election in 2018. The abstention rate increased, from 14% registered electors in 2018 to 24% in 2023, and in blank or spoiled ballots, from 5.6% to 9.7%, a possible indication that the hardship of the past few years have taken their toll on public confidence in the government.

Díaz-Canel Bermúdez, who lacks the status and charisma of his predecessors Fidel Castro and his brother, Raúl Castro (who were both leaders of the 1959 revolution), will need to be alert to concerns of the electorate as he begins his second term. He will need to find ways to improve living standards quickly. He has pushed ahead with reforms to allow Cubans to create private companies, foster innovation through university-enterprise links, and devolve budgets and decision-making to enable municipal authorities to directly respond to local demands.

However, with inflation persisting and fiscal resources overstretched, his scope for macroeconomic stimulation is restricted. A major obstacle is the US government’s seeming commitment to retain the most important economic sanctions, but Díaz-Canel Bermúdez must prevent further erosion in confidence in Cuba’s government and its political system.

Emily Morris has received funding from University College London, the Ford Foundation and the British Embassy, Havana.

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Aspen looks to rebound in production and revenue after Covid-19

Last year, South African-based vaccine manufacturer Aspen Pharmacare was facing reports that it had not received a single order for its manufactured Covid-19…

Published

18 hours ago

on

March 31, 2023

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Last year, South African-based vaccine manufacturer Aspen Pharmacare was facing reports that it had not received a single order for its manufactured Covid-19 shots and that manufacturing lines were sitting idle. But now the vaccine producer is looking to turn things around.

Aspen’s disclosure of its financial results in March unveiled that manufacturing revenue had decreased by 12% to R 603 million ($33.8 million), which Lorraine Hill, Aspen Group’s COO, said is attributable to lower Covid vaccine sales.

However, things were not all negative as Aspen said it was in negotiations with customers seeking to “secure a portion of Aspen’s sterile manufacturing capabilities.”

Stephen Saad

Aspen CEO Steven Saad said in a release:

The Group’s performance under challenging trading conditions was anticipated and is aligned to guidance previously shared for the first half of the financial year. Consistent with our previous communications, we are optimistic that the results for the second half of this financial year will not only exceed those reported for the first half but will also exceed those of the second half of the prior year.

Aspen had initially invested in three sterile manufacturing lines at its production site in Gqeberha, South Africa, and had plans to invest in two more production lines. The intention was to transition the manufacturing of its own anesthetic products from third-party producers to enhance the supply, Hill told Endpoints News in an email.

“The COVID pandemic, however, fast-tracked our plans to manufacture vaccines as we pivoted and re-prioritized in-housing our anesthetic products to manufacture the COVID vaccine,” Hill said.

Man­u­fac­tur­ing roundup: As­pen teams up with the Serum In­sti­tute; Por­ton se­cures sev­er­al strate­gic part­ner­ships

Hill stated that in August of last year, Aspen entered a long-term agreement with India’s Serum Institute for Aspen to manufacture, market and eventually distribute four vaccines in Africa. The Serum Institute deal will also help Aspen gain further entry into the routine vaccine market, which has “sustainable” demand and can diversify the manufacturer’s portfolio, Hill told Endpoints.

“This is an important milestone as Aspen seeks to optimize our sterile manufacturing capacity in Gqeberha. The four products are Pneumococcal vaccine, Rotavirus vaccine, Polyvalent Meningococcal Vaccine and the Hexavalent Vaccine with transfer activities currently underway,” Hill said.

The company also secured agreements with the Bill & Melinda Gates Foundation and the Coalition for Epidemic Preparedness Innovations in the meantime. Hill added that the grant funding from these deals has helped to offset the production costs related to starting production of the Serum Institute vaccines.

Saad added in the release that Aspen expects the new manufacturing business to bring in around R 2 billion ($112 million) in 2024.

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