Tesla shareholders who sell if Musk takes electric-car maker private will be big losers for one reason: AI - Canadanewsmedia
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Tesla shareholders who sell if Musk takes electric-car maker private will be big losers for one reason: AI

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Tesla stock has been on the move this week and is hovering around $352 per share. Elon Musk wants to take the electric-car maker private in a $71 billion deal valuing shares at $420 each. One thing was clear even before the surprise Musk tweet: Tesla is significantly undervalued. But one of the reasons for the valuation gap is often overlooked as investors have been hyperfocused on Model 3 production.

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Musk said in a letter to Tesla employees released on Tuesday that he hopes all current shareholders will remain in a new private fund, but they also have the right to sell. If Musk can pull the deal off, which is by no means clear, Tesla shareholders who decide to sell — roughly 12 percent of shares are owned by individuals — should know what they are giving up: a huge advantage that Tesla maintains over competitors in artificial intelligence.

Tesla is the only company truly advancing AI in its vehicles. Musk made the decision to invest in real-world data analytics early. This leap in technological advancement has left competitors like Alphabet‘s Waymo, Uber, BMW and GM scrambling in vein to keep pace, and there is a long lineup of companies wanting to partner, including Toyota and Mercedes-Benz.

According to electric-vehicle analyst Jonathan Shieber, “a slew of well-funded new entrants backed by massive amounts of capital are chasing Tesla’s lead.”

Tesla’s early investment and resulting tech have put the company firmly ahead of the pack. To understand how Tesla is unique with AI, you need to understand that Tesla has been collecting billions of miles worth of real-world driving data since 2012, through Model S, X and 3 drivers. Both Tesla and Waymo have been attempting to collect and process enough data to create a car that can drive itself. Waymo and Uber by comparison use inferior simulations, not real-world driving data.

Nidhi Kalra, senior information scientist for the nonprofit research organization RAND Corporation, has said that any simulation used by Waymo or another Tesla competitor is a simplification of the real world: “Real-world miles still really, really matter. That’s where, literally, the rubber meets the road, and there’s no substitute for it.”

Billions of new sensors translate into yottabytes of real-world road data, all of which is sent directly to the cloud. Crowdsourcing, or “the wisdom of the crowd,” provides Tesla with minute details ranging from their driver’s hand placement to how instruments are operated.

Musk believes it will take about 6 billion real-world miles to gain “worldwide regulatory approval” of true self-driving technology. Tesla is the only company to already have surpassed that mark. Tesla also has greater ability to detect useful trends from the massive quantities of real-world data it has already collected.

Tesla uses radar (not lidar), which hits a commercial price point that is more practical. Radar can see farther, the sensors are less expensive, the cameras are solid-state and reliable to a million miles. These are not the bulky, expensive and unreliable roof-spinning lidar systems like Waymo and other Tesla competitors use.

Musk knows his cars will be fully autonomous, fully thinking by 2019, while his competitors are still struggling with low-competency software and expensive, unreliable lidar systems. All Tesla vehicles since 2012 (S, X, 3) were built with the potential to one day become self-driving. The brand-new Tesla-designed and -built AI chips are simple drop-in upgrades. According to ARK Invest analyst Tasha Keeney, “If Tesla solves self-driving cars without lidar, everyone else is going to be kicking themselves.”

Tesla also diagnoses vehicle components that could require remote repair through a software patch. All of this big data is currently available to help Tesla refine its systems, and nearly all of this data-reliant tech is still far out of reach of its competitors. Tesla is the only autonomous vehicle company to have designed its own proprietary AI chip, bottoms-up, designed from scratch and custom-built for autonomous driving. Musk said on the recent Tesla earnings conference call that the chip is almost ready.

Musk brought director Pete Bannon onto the call. He came to Tesla in 2016 to lead the development of the Autopilot hardware after nearly eight years at Apple. “The chips are up and working, and we have drop-in replacements for S, X and 3; all have been driven in the field,” Bannon said.

Cloud-based genetic algorithms can educate the entire Tesla fleet and determine optimal solutions so that individual cars can take immediate action. An even higher level of execution exists when all 700,000 Tesla cars, a fleet size it is expected to reach by the end of this year, are able to form networks to share local information and evaluate millions of options and insights.

Near-term headwinds are just uninformed analyst noise. While Model 3 production was low, Tesla acted quickly to add a third production line this summer. Many industry analysts point to increasing gross margin as the best indicator of financial health, and Tesla has consistently produced gross margins above 20 percent. The company and some analysts project that Tesla will be profitable by the end of 2018, with gross margins of at least 20 percent on the Model 3.

Musk recently confirmed that Tesla will produce 50,000 Model 3’s in the third quarter, an increase of 75 percent over Q1, and reach 10,000 per week in 2019. The dramatically increasing Model 3 production rate will take Tesla vehicles on the road to 700,000 by late 2018. In 2016, Tesla sold $1 billion worth of cars in China and reached agreement with the Chinese government to build a factory in Shanghai. Musk said Tesla will use sales income to fund its upcoming $2 billion investment in new factories in China and Europe.

This is not a cult stock. Tesla stock is dramatically undervalued based on its leadership role in self-driving cars, including a superior amount of real-world driving data, the only proprietary AI autonomous driving chip and the fact that it is now self-funding on a go-forward basis.

By Keith Wright, Villanova University instructor of accounting and information systems

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Musk Defends Relentless Work Hours as Tesla Enters Fateful Week

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Several anti-pipeline protesters released from BC jail days before week-long sentences end

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Several pipeline protesters were released from a British Columbia jail on Sunday, a few days before their week-long sentences were set to end.

Seven protesters in all were sentenced to a week-long jail term on Aug. 15, after pleading guilty to contempt charges in B.C. Supreme Court.

Five who were released on Sunday issued a joint statement, saying they were imprisoned because of their opposition to the Trans Mountain pipeline expansion.

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In the statement, the five women – who include anti-poverty activist and Order of Canada recipient Jean Swanson – said they are not criminals, but “political prisoners.”

Swanson said in a phone interview that her four days spent at the Alouette Correctional Centre for Women in Maple Ridge, B.C., had not deterred her in what she said is a fight against climate change.

“I don’t know how anyone can look at the sky in Vancouver today and say global warming is not an issue,” said Swanson, in reference to the smoke and particulate matter from wildfires hazing the skies in southwestern B.C.

“We need to do something, we need to stop the insanity.”

From her perspective as an anti-poverty advocate, Swanson said the Trans Mountain pipeline ties the issues of homelessness, poverty and climate change together.

“For all those billions and billions of dollars, governments could actually create jobs building renewable energy…. Governments could end homelessness, they could put clean and safe water on Indigenous reserves.”

In May, the federal government announced its intent to acquire Trans Mountain from Kinder Morgan Canada.

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According to recent documents filed with the U.S. Security and Exchange Commission, the sale could cost as much as $1.9-billion more than the initial quote of $4.5-billion.

The documents also suggest the project could take another 12 months to finish.

More than 200 activists have been arrested for demonstrations against the Trans Mountain project since March.

Those released on Sunday also included former B.C. Teachers’ Federation president Susan Lambert.

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Online pot sales will leave a lot of information at risk, say experts

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TORONTO — Buyers who have to provide personal information to purchase recreational pot online after legalization this fall should be able to rely on existing laws to protect their privacy but the issue needs to be watched closely to ensure regulations are obeyed and mistakes are avoided, experts say.

The matter is important given the stigma many people still attach to marijuana use, and the potential for Canadians to be barred from the United States if their otherwise legal indulgence becomes known to American border agents.

“We need to keep eyes on it, meaning we have to make sure this information is not abused or used for secondary purposes that were never intended,” Ann Cavoukian, Ontario’s former privacy commissioner and now an expert at Ryerson University, said in an interview. “Theoretically, it should not be used for any other purpose.”

A spokesperson for federal Privacy Commissioner Daniel Therrien said the office had not looked specifically at online marijuana sales. At the same time, the commission said it recognized privacy concerns around buying or using marijuana given its longtime status as a controlled substance.

“The legal sale and use of both medicinal and recreational marijuana raises privacy issues, particularly since laws and regulations differ from country to country and even within countries,” Tobi Cohen said. “We have repeatedly raised concerns about the effectiveness of (Canada’s two privacy laws) in the digital age and have called for both laws to be strengthened.”

Last week, Ontario’s new Progressive Conservative government announced that consumers 19 years or older will have to go online to buy weed after legalization federally on Oct. 17 because private retail stores won’t be up and running until April. A government agency called the Ontario Cannabis Store will run the online sales, although private e-commerce provider Shopify will be involved.

Online buyers will, at minimum, have to provide a name along with email and delivery address, and payment information. In Ontario, as is currently the case with online alcohol sales, buyers will be able to order as a “guest” without creating an online account.

However, Scott Blodgett, a spokesperson for the Ministry of Finance, said buyers will have to provide proof of age via government-issued ID, which a delivery person will verify but not copy. The cannabis store website will have data security and privacy controls “aligned with global e-commerce best practice,” he said.

Personal data will remain in Canada and not be shared with third parties, Blodgett said.

Ontario’s Privacy Commissioner Brian Beamish was unavailable to discuss the issue but his office said in a statement that public institutions are accountable for the information they collect.

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