AI Knows You’re Cheating

Plus: Foreign banks stand on the sidelines of China’s IPO boomlet. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

June 12, 2023

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TOGETHER WITH

Good morning and happy Monday.

Gone may be the days of socialized streaming. Netflix — which estimates that over 100 million of its subscribers share their passwords with friends and co-workers and nephews’ entire frat houses — began its password-sharing crackdown campaign late last month in the US. And, so far, the gamble appears to be paying off.

The new rules place heavy restrictions on logins outside the home, and new data from research firm Antenna shows new sign-ups spiked to nearly 100,000 a day following their implementation. Leave it to Big Tech to teach your late-twenty-something kids a thing or two about financial independence (unless, of course, they can convince mom and dad to pay the extra $8 a month to keep them on the Netflix plan).

Morning Brief

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You’re not invited to China’s hot IPO market.

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Congestion pricing could be coming to a city near you.

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Identifying ChatGPT just got a little easier.

International

China Ices International Banks from its IPO Market

The commercial cold war with China isn’t limited to technology.

China’s stock market has seen 109 initial public offerings so far this year. The number of listings US banks have been involved in? Zero. Zilch. Zippo. In fact, foreign banks’ overall involvement in Chinese IPOs has fallen to the lowest rate on record, according to Dealogic data dating back to 2009, as reported by the Financial Times this weekend.

Forget it Jake, it’s China’s Market

The siloing is the result of a now-yearslong trend. According to Dealogic, foreign banks have been involved in just under $300 million worth of new listings, roughly 1.2% of the $26 billion raised so far. That’s down from last year’s 3.1% rate, the third-lowest on record since 2009, and way down from the nearly one-fifth participation rate in 2019. And even that mark is a significant decrease from the roughly 50% proportion of total listing involvement that foreign banks saw in 2009. “This is the environment that Xi Jinping has created,” Fraser Howie, an independent analyst with expertise in Chinese finance, told the FT.

But the specter of broader geopolitical tensions is only partly to blame. “[It] might just be easier for an issuer not to have a foreign bank and only deal with Chinese bookrunners.” That’s because foreign banks are required to hold multiple licenses to conduct business across multiple sectors, and the steep decline in the past three years can also be attributed to strict zero-covid restrictions that kept foreign entities at a more literal arm’s length away. And compliance is one of a handful of reasons China’s IPO market is starting to feel so exclusive, if not exclusionary:

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For starters, Chinese listings lean way more on retail investors than institutional investors — the pathway that most US and global banks are familiar with. “The business model that the Western banks run, where you sell [shares] to the same 100 or so investors every time, doesn’t work,” one anonymous top executive working in a global bank’s Asian investment division told the FT.

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Bankers say another factor is due diligence, or rather lack thereof. Whereas Western banks are accustomed to, say, contacting a firm’s top 50 clients before an IPO, such a standard doesn’t exist as starkly in China.

Unsocial Networks: While simmering geopolitical tensions aren’t exactly keeping foreign banks out of China, they are placing firewalls around Big Tech. Google, Microsoft, and OpenAI’s AI chatbots are not accessible in Hong Kong for fear that their loquacious large language models might accidentally start spouting talking points that run afoul of the island city’s new pro-CCP national security laws. Meanwhile, a legal fight over censoring a popular pro-democracy song on YouTube could fundamentally alter how Western tech and media companies present content to Hong Kong and Taiwan. Move fast and break things — except authoritarian laws restricting free speech.

– Brian Boyle

Policy

NYC Wants You To Pay to Go Downtown

(Photo Credit: Nabeel Syed/Unsplash)

The Big Apple will always have car honks, engine revs, and slighted pedestrians screaming “I’M WALKIN’ HERE,” but you might hear less of it starting next spring.

With President Joe Biden’s administration likely to give New York City the go-ahead soon, congestion pricing — intra-city tolls in this case — is one step closer to becoming the first-of-its-kind program in the US.

Gotta Pay the Toll

Though paying tolls is a normal part of riding highways and bridges, congestion pricing in NYC would charge drivers going south of 60th Street in Manhattan, and the fees would vary from anywhere between $9 and $23 depending on the time of day and amount of traffic. The first example of this model goes back to Singapore in 1975, which resulted in less traffic, fewer crashes, better air quality, and today, more than $100 million in revenue each year. Other cities such as London, Milan, and Stockholm adopted the scheme to great benefit.

For decades, New York legislators have been pushing for congestion pricing, but proposals caught the ire of commuters and outer borough drivers. Taxi and rideshare operators — largely low-income and immigrant workers — say it would greatly reduce their customer base. Some legislators believed it would cause parking jams just before the toll zone. But the pros may simply outweigh the cons:

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The number of jobs in the entertainment and retail industries is down, and hotels are still struggling to fill rooms (thanks, covid). Proponents say the program will also help make midtown/downtown Manhattan more pedestrian and cyclist-friendly, bolstering outdoor dining and exposure for businesses, while the MTA expects to generate $1 billion in new annual revenue, much of which will go toward fixing subways and getting ridership back to pre-pandemic levels.

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Congestion pricing is also expected to reduce carbon emissions. Less traffic means less pollution for those neighborhoods. A study in Stockholm found the rate of children’s acute asthma visits to the doctor fell by about 50% compared to rates before a congestion charge program launched in 2007, CNN reported.

(Not) Only in New York: A few American cities have variations of congestion pricing, but nothing within proper city limits like what New York has planned. In San Diego, single-occupant cars pay a fee to drive in what they call HOT lanes on I-15, and in Lee County, Florida, drivers using the Midpoint and Cape Coral bridges pay different tolls depending on when they use the bridge. In 2019, LA started a congestion pricing study for the California county, and now its metro authority is seriously considering implementing its own version — as if drivers on the 405 aren’t grumpy enough already.

– Griffin Kelly

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Tech

University of Kansas Researchers Develop Near-Perfect AI Detector

If you think all you need to do to fly through college is master ChatGPT, think again.

Last week, scientists from the University of Kansas released a study on an algorithm that reportedly detects ChatGPT with a 99% success rate. So, students, no cheating. Everyone else, you’re in the clear — for now.

Now You’re Speaking My Large Language

A lot of AI content — like this wacky film script about a Tibetan monk who tries to stop Dave Chappelle from stealing the Pulitzer Prize — is easy enough to look at with the naked eye and say, “OK, clearly, a computer made this.” But something as ridiculous as Puffer Pope stumped plenty of viewers and even some programs specifically designed to identify fake images.

While AI has everyone from writers to coders to investment bankers fearing for their livelihoods, students happily embrace large language models. AI can be an extra tool in the learning process, but when a survey from Study.com revealed that roughly 90% of college students have used ChatGPT to help with a homework assignment, a high potential for cheating is suspected. LLMs are the new copy-and-paste, which itself was the new “I’ll just watch the movie,” and AI-detecting programs are slowly getting better at parsing out what’s real and what’s fake:

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In the University of Kansas study, 64 legitimate scientific articles were fed to ChatGPT, which was asked to create 128 news articles, and then each paragraph was used as the base for the AI detection algorithm. Then they tested that algorithm on 30 more real articles and 60 ChatGPT pieces.

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When combed in their entirety, all of the 60 fake articles were flagged as AI content, researchers said. On the paragraph level, accuracy dropped to 92%. That might be more impressive than Shadowbane.

Higher Education: Those are some pretty impressive stats, but the algorithm is so geared toward scientific academic writing, that it won’t work in other settings. So any high school American lit teacher still needs to stay on their toes when reading essays on The Great Gatsby. Did the student really know the green light symbolized his hopes and dreams, or was it just ChatGPT?

– Griffin Kelly

Extra Upside

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Iconic: Carl Icahn successfully unseats Illumina CEO Francis deSouza.

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Tech Rift: Twitter is refusing to pay its Google Cloud bills — imperiling critical pieces of its content moderation infrastructure.

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