In this week’s edition, Ukraine’s startups pivot to defense, Finland joins NATO, Macron visits Beijing, and Italy bans ChatGPT. Additionally, Doug Beck is named director of the Defense Innovation Unit, VCs are predicting startup failures due to cash flow, and a judge rejects Fox News’ bid to dismiss the defamation case brought by Dominion Voting Systems.
Industrial Policy & International Security
Ukraine’s tech entrepreneurs fight war on a different front | Reuters
Before Russia invaded Ukraine, the country was one of the fastest growing tech hubs in central and eastern Europe. However, most startups collapsed when the war began and demand plummeted. But a number of companies pivoted to defense projects. For example, employees from one medical and biotech startup raised $200,000 in funding in Poland to develop a military drone designed to operate in bad weather, fly vertically, and carry large payloads. In addition to drones, new innovations range include software applications and data integration tools that give commanders better battlefield awareness. In 2021, Ukraine boasted 285,000 software developers and maintains a strong tradition of education in math and computer science. Over the past year, the government has become one of the main sources of funding for startups but that is starting to change. Ukrainian Startup Fund resumed funding in October and is offering $35,000 grants mostly focused on military technology. One NATO official commented that “one of the reasons they’re holding their own is that they have, in a very innovative way, integrated technology into warfighting.”
Finland Joins NATO in a Power Shift and Rebuke to Putin | The New York Times
On Tuesday, Finland joined NATO as its thirty-first member, marking a significant victory for the West and a blow to Russia's attempts to halt further expansion of the alliance. According to Jens Stoltenberg, NATO's Secretary General, the alliance's partnership with Finland will eliminate any "miscalculation in Moscow," making both Finland and NATO safer. Finland's 830-mile border with Russia enhances NATO's surveillance and intelligence capabilities, and with one of Europe's most robust militaries, Finland will also bolster NATO's defense capabilities. The country is now the alliance's best-equipped artillery force and will eventually provide NATO access to the country's ports, airspace, and sealanes. During a news conference held in Moscow on Tuesday, Kremlin spokesman Dmitry S. Peskov referred to Finnish membership in NATO as an "assault" on Russia's security and national interests and stated that Russia would take tactical and strategic countermeasures in response to this decision. Objections from Turkey and Hungary continue to prevent ratification of Sweden’s NATO membership.
The warm embrace and the cold shoulder: China mines Europe’s fractures during joint visit | Politico
French President Emmanuel Macron invited Ursula von der Leyen, European Commission President, to join his recent trip to Beijing to display European unity. While they planned to follow different schedules, there was a distinct difference in how each politician was received. From Chinese media to government officials, Macron received the red-carpet treatment while von der Leyen was given a colder welcome, highlighting the challenges the EU faces in its relationship with China. Macron is eager to work with Beijing but von der Leyen is seen as hawkish and pro-US. One popular Chinese commentator even suggested that “the Americans may have tasked her to keep a watchful eye on Macron.” President Xi Jinping spent approximately six to seven hours with Macron and it was clear that Beijing is more optimistic about the Sino-French relationship. Macron focused on economic matters, signing several deals, and avoided raising the issue of Taiwan. However, he did press Xi to leverage China’s ties with Russia to end the war in Ukraine; Xi agreed to a future call with Ukrainian President Volodymyr Zelenskyy.
US Regulation
Italy’s ChatGPT Ban, A Precedent For the Rest of Europe? | Forbes
Italy has become the first Western country to block ChatGPT—created by US-based startup OpenAI—due to data privacy and transparency concerns. The Italian National Authority for the Protection of Personal Data announced the decision with immediate effect and requested that OpenAI “communicate within 20 days the measures undertaken” to address their concerns or risk a $21.7 million fine. The Italian Authority argues that ChatGPT has no legal authority to collect and store user data for training purposes and fails to protect minors from unsuitable content. This move has sparked similar considerations from other European countries. The Irish data protection commission asked Italian regulators to share the basis of their ban and promised to coordinate with other EU regulators. And the UK's Information Commissioner's Office has pledged to challenge any non-compliance with data protection laws. Meanwhile, the EU is creating the Artificial Intelligence Act, which aims to label AI models with societal consequences and combat the biases of generative AI algorithms. The legislation also considers appointing a single AI regulator in each EU country.
Innovation
Apple VP Doug Beck named next DIU director, will report directly to Austin | Breaking Defense
This week, Secretary of Defense Lloyd Austin named Doug Beck, a vice president at Apple, as the new director of the Pentagon’s Defense Innovation Unit (DIU). The memo announcing DIU’s new leadership also reshuffled the organization chart; DIU will now report directly to the Secretary of Defense instead of the Under Secretary of Defense for Research and Engineering. This change positions the DIU director as a focal point for emerging commercial technology with defense applications and as a strategic advisor to the Secretary and Deputy Secretary of Defense. Beck, who is a captain in the Navy Reserve, has previously worked with DIU, where he founded and led the joint reserve component until 2019. Former DIU director, Mike Brown, has expressed frustration over the lack of support for DIU’s mission from Department of Defense leadership. After his appointment, Beck will have ninety days to assess and report DIU’s capabilities, an action plan, and milestones to Secretary Austin.
Google says its AI supercomputer is faster, greener than NVIDIA A100 chip | Reuters
Google has released new details about its supercomputers for AI model training in a scientific paper. The system leverages Google’s custom, fourth generation Tensor Processing Unit (TPU), which is used for over 90 percent of Google's AI training work. Google's supercomputers string together over four thousand TPUs using custom-developed optical switches. AI supercomputers will be essential to the improvement of large language models that have exploded in size, like OpenAI’s ChatGPT. Because they are too large to be stored on a single chip, it’s necessary to split the models across thousands of chips that work together to train them over a period of weeks. Companies with more powerful supercomputers will therefore have an advantage over their AI competitors. Google claims its system is up to 1.7 times faster and 1.9 times more power-efficient than a system using Nvidia's A100 chip. Google hinted at the development of a new TPU to compete with Nvidia's flagship H100 chip but provided no additional details.
Cyber
This new ransomware could be the fastest encryptor ever seen | Techradar
Experts at Check Point discovered a new strain of ransomware, dubbed Rorshach, after investigating a cyber incident at a US company. During an encryption speed test, Rorschach outperformed the previous record holder, LockBit 3.0, by two and a half minutes; the new ransomware variant encrypted 220,000 files on a 6-core CPU machine in just four and a half minutes. While attribution is still unclear, the Check Point researchers found similarities to Yanlowang ransomware and the hacking group DarkSide’s ransom notes. During the investigation of Rorshach’s technical specifications, the researchers discovered that the encryptor is only activated if the target machine is configured with a language outside the Commonwealth of Independent States.
State & Local Tech Ecosystems
Venture capital funding in start-ups halves as tech downturn bites | Financial Times
Venture capital (VC) funding for startups has dropped by over 50 percent in the last year due to the economic downturn. In the first quarter of 2023, VC funds globally invested $76 billion, less than half of the capital ($162 billion) invested during the same period last year, according to Crunchbase. Only Microsoft’s $10 billion investment in OpenAI kept quarterly venture investment from reaching its lowest levels in more than five years. Many tech companies are being forced to accept lower valuations or unfavorable debt terms to ward off insolvency, and VCs are predicting further failures as some run out of cash. Sam Yagan, founder of OKCupid and early-stage investor, says “now there are really good companies that can’t get capital.” Additionally, late-stage companies are cut off from the option to go public while the market for initial public offerings remains frozen. The collapse of Silicon Valley Bank will further exacerbate funding difficulties for tech startups, especially those facing debt.
Democracy Online
The DEA Bought Customer Data from Rogue Employees Instead of Getting a Warrant | Vice
Senators Ron Wyden and Cynthia Lummis are proposing a ban on the Drug Enforcement Agency (DEA) and FBI from purchasing information from employees within private companies without first obtaining a search warrant. Although the DEA updated its policy in 2016 to prohibit payments to government or quasi-government employees, a loophole exists around DEA or other Department of Justice payments to private sector employees. The Office of the Inspector General reports that the agency has been paying for data from data brokers and sources inside private companies to collect information such as smartphone location data, travel details, and parcel routes without a search warrant. For example, the DEA reportedly paid an Amtrak employee over $850,000 over nearly twenty years for confidential passenger data. The policy change proposed by Wyden and Lummis seeks to close this gap and prevent Department of Justice agencies from bypassing Fourth Amendment protections.
Judge undercuts key Fox News defense as he sends Dominion suit to trial | The Washington Post
Delaware Superior Court Judge Eric M. Davis rejected Fox News and Fox Corporation’s requests to dismiss the $1.6 billion defamation case against the network. Dominion Voting Systems argues that Fox unfairly smeared the company with allegations that it participated in fraud in the 2020 election. Fox’s defense claims they were simply reporting newsworthy information. However, Judge Davis pointed out that the network never aired statements that debunked Dominion’s alleged fraud and ruled that Fox cannot dispute that it spread false, harmful claims. It will be up to a jury to decide whether the network’s actions meet the standard of “actual malice” required in defamation cases, and Dominion must still prove it suffered damages. Judge Davis also ruled that the jury will be allowed to determine the damages, meaning the award could potentially exceed $1 billion. Fox responded to the ruling stating the case “is and has always been about the First Amendment protections of the media’s absolute right to cover the news.”
