“Are we there yet?”

For generations, kids have longed for car rides to be shorter. Now, Germany’s Holoride wants to break the curse of juvenile impatience with the help of VR headsets that turn car trips into immersive gaming sessions and theme park rides.

Holoride unveiled its first consumer product in Germany on Wednesday. The company’s Pioneer’s Pack includes a HTC Vive Flow VR headset, a game controller, and an additional safety strap, as well as one year of access to Holoride’s software catalog, for a total of €699 ($690). Each month thereafter will cost €19.99.

Support for Holoride’s immersive motion entertainment platform is at launch limited to select 2023 Audi models, and the Pioneer Pack buyers will only have access to a handful of games as well as a few other apps. However, in the long run, the company plans to not only expand to cars made by other companies, but also beyond VR to support other media formats.

Ultimately, Holoride wants to become an immersive motion entertainment platform for the future of transportation.

From an Audi project to a consumer product

Holoride CEO Nils Wollny met his co-founders in 2015 at Audi, where he was in charge of the car maker’s digital business. Together, they explored ways to combine car data with VR. The first prototypes involved “a lot of chewing gum and duct tape,” as Wollny recently told Protocol. “We had gaming PCs in the trunk, hard-wired to the car,” he recalled. “We had the DK2 from Oculus, which was like a massive TV in your face, wired to the gaming PCs in the trunk.”

Those early prototypes may have been clunky, but they were good enough to show off to entertainment industry executives, who, according to Wollny, were instantly enamored with the idea of turning cars into moving theme parks. Hollywood also had some valuable feedback, with executives asking: How can this possibly scale if it is limited to Audi?

Wollny and his team took the feedback to heart, and Holoride spun out of Audi in late 2018. The German car maker remains a minority investor, but the company’s technology works with most modern cars. “We can very easily collaborate with car manufacturers and their data sets,” Wollny said. Holoride also has plans to expand to other VR headsets over time, but picked the HTC Vive Flow as a launch device because it feels more like a pair of glasses than a heavy headset.

Holoride – Turning vehicles into moving theme parks www.youtube.com

During a demo given to Protocol last week, the company showed off Cloudbreakers: Leaving Haven, a game developed by Schell Games in which players steer a flying robot through enemy skies. When the car turned, the motion was repeated in the game, and any acceleration and deceleration of the vehicle was also reflected in the gameplay. A second demo showed off smartphone mirroring, which made it possible to watch Netflix and YouTube videos on the Vive Flow.

Unlike VR gaming on the Quest, the apps shown didn’t support 6DOF tracking. The gameplay experience nonetheless felt surprisingly immersive, and the glasses-like form factor of the Vive Flow made wearing a headset in the backseat of a car a lot less awkward than your standard headset. Cloudbreakers was fun to play, and provided enough of a distraction to make one forget about the world outside of the vehicle, safe for the occasional pothole.

Wireless screen mirroring of a mobile phone didn’t add a whole lot of utility beyond media viewing, but may help people who struggle with motion sickness as it blocks out all the external visual cues that can make screen usage in a car a stomach-churning experience. (Wollny suggested that up to a third of car passengers struggle with some level of motion sickness.)

Bored teenagers and self-driving cars

With this mixture of games and video viewing, Holoride is squarely aiming for bored teens and their desperate parents as their primary launch audience. “This is made for Gen Z, teenagers on backseats,” Wollny said. Over time, the company wants to expand to other kinds of passengers, and also offer meditation and wellness apps and perhaps even productivity and work tools.

Holoride’s vision of the future of in-car entertainment seems to run counter to the way many car manufacturers approach the subject, which is all about turning the car into a second living room. One example: Earlier this year, BMW announced that it is adding a 31-inch 8K screen that runs Amazon’s Fire TV operating system to some of its cars.

Wollny countered that VR glasses can offer a more immersive experience with virtual screens that look much bigger, quipping that Holoride offered “180 inches for a fraction of the cost.”

Ultimately, Holoride’s approach is also about envisioning a different future of mobility. Instead of turning cars into personal screens, the company wants to give people the option to bring their personal big-screen experience to any vehicle, including those you may only use for a single ride, be it through ride-hailing, car sharing, or self-driving robotaxis.

“In the future, people will switch cars more often, but the personal device always stays with you,” Wollny said. “That’s why we are extending the car to the personal device, and not the personal device to the car.”

Car makers and tech companies alike have struggled to make autonomous driving a reality, with recent headlines suggesting a windy road ahead. This also means that drivers will have to keep their eyes on the road, making something like Holoride a passenger-only solution for the foreseeable future. Wollny didn’t seem too concerned by this, suggesting that 1.3 billion people ride as passengers in cars every day.

Wollny also said that Holoride was looking to eventually expand beyond VR, and offer audio and other media experiences that may work for drivers as well.

“We are not a VR company,” he said. “We built a motion- and location-aware platform for content in moving vehicles.” This could even involve using the car’s cabin lights or massage seats for feedback. “It could bring a new level of immersion to the interiors of cars.”

The Commerce Department is in the midst of developing new trade restrictions intended to blunt the progress of China’s quantum computing ambitions, Protocol has learned, a move that comes on the heels of new export controls on advanced semiconductor tech.

It’s unclear how quickly any such measure could be enacted. Discussions with the private sector — including Google, IBM, Quantinuum, and IonQ — have been ongoing for years, and span both the Biden and Trump administrations. However, there’s mounting pressure to move faster, particularly from the National Security Agency and other intelligence agencies, which see China’s progress on quantum as a significant concern, according to industry sources familiar with the deliberations; they requested anonymity to speak freely about private conversations regarding sensitive government policy ideas.

Asked for comment on the progress of these efforts, the Commerce Department and the White House directed Protocol to recent remarks from Undersecretary for Industry and Security Alan Estevez. “So will we end up doing something in those areas?” he said when asked last week about additional controls on quantum computing equipment. “If I was a betting person, I would put down money on that.”

The agency declined to comment further.

However, in September, national security adviser Jake Sullivan listed quantum computing as a part of one of the three broad families of technology — biotech, clean energy, and computing — critical to the U.S. in the coming decade that the administration is looking to protect.

Despite notable advancements, quantum computing still remains a nascent technology, especially when compared to other emerging tech areas like AI. That makes regulating the sector tricky for the Biden administration: Export controls could harm, or even torpedo, the overall progress of the field and pave the way for other countries to take a more commanding lead in the development of the tech that, while still very experimental, may obliterate the capabilities of classical computing.

Globally, however, there is acknowledgement that some guardrails are necessary. Discussions of a broader set of export controls have been ongoing within the Wassenaar nations. But the U.S. wants to act more aggressively and go beyond the parameters being developed by the group of 41 states — a cohort that includes Russia — established in 1995 to oversee tech used both by the military and civilians.

The U.S. is aiming to reach an agreement with other countries that have invested heavily in quantum and serve as critical partners for domestic quantum producers — namely Japan, which signed a quantum cooperation agreement with the U.S. in 2019 — along with intelligence allies Australia and the U.K., two industry sources told Protocol. That broad desire was reiterated by Estevez last week, though it’s unclear what such an agreement would look like and whether it would be done under the guise of the Wassenaar nations or another international body, like NATO.

While the Commerce Department wants to move quickly and could issue new regulations before the end of the year, it is likely to be pushed into 2023, those sources said.

Too many cooks

In 2018, Congress passed export control legislation that directed the White House to establish a process to determine what emerging technologies might be of national security concerns if they are exported out of the U.S.

The legislation installed the Commerce Department as the leader of that process, but included three other federal agencies — the Defense, Energy, and State departments — in the consultation process, and any others that are necessary. Other agencies, such as the NSA, participate too. And the White House, through the National Security Council, typically plays a coordinating role in setting broad policy.

Now, startups like Quantinnum and IonQ, as well as larger manufacturers including IBM and Google, are all meeting with the Commerce Department’s Bureau of Industry and Security, which oversees the writing of export controls, according to industry sources.

While the discussions now are viewed as a precursor to new controls, talks have been ongoing for years, including during the Trump administration. In late 2021, for example, the Commerce Department held discussions with companies over how it would seek to enact export restrictions on the quantum industry, per government and industry sources, including how the administration planned to evaluate the performance of quantum computers and the limits around qubit processing that would trigger controls.

After opposition to those early ideas, BIS and other departments, like the National Institute of Standards and Technology, are trying to take a more measured approach that wouldn’t throttle the U.S. and also reflects the nascent nature of the tech, the sources said.

However, the agency is facing pressure from the NSA, which is strongly advocating for new export controls, government and industry sources said. The NSA has a keen interest in quantum, both to understand how the tech could be used to decrypt sensitive U.S. information and how it could be used to access encrypted data from adversaries, the sources added. The NSA did not respond to a request for comment.

It’s still unclear exactly how the Commerce Department would craft any new export controls given quantum computers are still very much still in the development stage. It’s notable, however, that the administration appears to be narrowing in on specific areas, like error-correction software, as well as end applications that will eventually run on top of the quantum computers, the sources said.

Many in the industry have framed hardware advancements based on the number of qubits — the core unit of measurement in quantum computing — their respective machines can process. But the metric can be misleading.

Many of those qubits may not be stable enough to produce accurate results, greatly reducing the power of the hardware. That’s why Commerce staffers have acknowledged the importance of error-correction software, which helps improve the quality of the qubits and, ultimately, the capabilities of the quantum computers.

There’s also a challenge of how to oversee networked quantum computers. A customer, for example, might be able to purchase multiple computers from different providers all under some predetermined performance threshold — like 200 qubits, for example — to avoid export controls. They could then use them in conjunction with one another to build a more powerful machine, one that theoretically would exceed a 200-qubit processing limit that would be subject to controls.

Ditch the bath water, keep the baby

The most pressing problem when it comes to regulating quantum computing is that no one knows exactly what successful quantum computers will look like. Unlike more mature areas of tech such as semiconductors, there aren’t easily identifiable chokepoints that the BIS could cut off.

There isn’t a standard approach to building quantum computers, or a set of standard tools that are necessary, which the U.S. has historically targeted to hobble access to a specific tech. There’s also the question of software, which could be tricky to place under export controls. A large portion of quantum software is open-sourced. However, key parts of the stack — like the software that ultimately connects to the hardware as well as the user-facing applications — remain proprietary.

And any additional actions on quantum hardware or software run the risk of hindering domestic advancement. Many of the components used by U.S.-based quantum hardware manufacturers, for example, are sourced internationally. Germany is a major exporter of laser technology used in quantum, while Finland exports refrigerators needed for the computers to work.

New export controls could make it harder for them to operate globally and, potentially, hinder their ability to get the pieces necessary to advance the machines, industry sources said. For example, an export control placed on a certain part could add considerable time to the procurement process and may even convince a foreign supplier to halt sales completely to avoid the compliance nightmare. It would also impact the ability of manufacturers to sell cloud access to their computers, even to domestic customers, and publish scientific research based on the systems.

The challenge is also that the U.S. is taking a very different approach to quantum. Japan, Denmark, Italy, Germany, and other nations witnessed the tech revolution of the past few decades from the sidelines. Now, eager to get an early lead in what could be a multibillion-dollar industry that redefines the tech sector as we know it, those countries do not appear as willing to take actions under the guise of national security that could threaten the development of their domestic quantum economies, sources told Protocol.

Quantum technology is years if not decades away from broad commercial or military use. But it has advanced quickly with companies like IBM, Quantinuum, and IonQ publishing more aggressive product road maps.

China is also investing heavily in quantum. And unlike the U.S., China has striven to unify its efforts across all the country’s economic sectors, a move intended to prepare China to capitalize on both the monetary and security advantages that quantum may one day provide.

Barring any major course change, the U.S. is clearly bent on maintaining a national-security-first approach to quantum. In fact, there are some in the intelligence community who would rather risk imploding the entire U.S. industry just to blockade China, according to industry sources.

That doesn’t seem to be a widespread belief. The Biden administration is said to be keenly aware of the challenge of navigating both security and economic concerns. Still, it’s a tough line to straddle. Any action will almost certainly have some impact on domestic manufacturers. And the outcome could reverberate not just through quantum, but any developing tech that poses a risk if it reaches bad actors.

Jason Gardner announced in August that he would step down as CEO of Marqeta, the fintech powerhouse he founded 12 years ago.

Gardner launched and led Marqeta at a critical time. The rise of fintech sparked growing demand for infrastructure for issuing debit and prepaid cards and processing payments.

Marqeta, which went public in June 2021, subsequently expanded its reach by offering more financial services tools to businesses. Last month, Marqeta announced a new suite of products that would allow clients to offer direct deposit, bill pay, ACH features, and other capabilities.

Marqeta is currently looking for Gardner’s replacement. Gardner, who’s still running the company in the interim, will take on the role of executive chairman once his successor is named.

Gardner’s story, as told to Protocol, has been edited for clarity and brevity.

Building companies is about brute force. You’ve got to get people to work well beyond their capacity. I've been doing this for 27 years through three different companies.

I founded this company by myself. I felt that, heading into my 13th year, I needed to find that late-stage co-founder. I can move from chairman and CEO, largest shareholder and founder, to an executive chairman role where I can continue to do the things that I love doing, which is [dealing with] our customers and talking with them all the time, our culture and our people and our products.

A private company CEO is very different from a public company CEO. As a private company CEO, you can change all kinds of things that you want to change at a whim. You really can't do that as a public company CEO. In some ways, entrepreneurs just aren't built for that. So I decided that, ultimately, for the next three decades of growth, [I need to] find someone who was born and bred and trained for this stage. And I can partner with them to really drive the business.

I won't be dealing with the day-to-day running of the business. I actually love talking to analysts. That's one that I'm going to miss, talking to analysts and our investors. They've told me they enjoy talking with me. It's like a good debate. I believe that the company and our investors will be better served by focusing on people, products, and our customers, because that's what I'm great at.

The folks I'm interviewing for the CEO job, they want that. I've seen how that works, whether it's like Reid Hoffman and Jeff Weiner [at LinkedIn], Scott Cook and Brad Smith [at Intuit]. Look at what they've been able to create, the value they've been able to create together. It's extraordinary.

When I made the decision [to step down], the economy was in a different place. But as I've said to the company, don't focus on what's across the street — focus on the horizon line. I've been through this before. We will come out of it. It's definitely a cyclical trend we see now. We've been in 13 years of a bull market. But we built a formidable business. We're so much better off than so many other tech companies out there, even in fintech.

The secret to building businesses is you fail a lot more than you're successful. Find out what you don't want to do. That’ll lead you to the direction that you should be on. I've definitely deployed that strategy here. Once we found product-market fit, we knew exactly where we needed to be headed. Everything else, I just turned off, cut out, and we just became hyper-focused on delivering what we had to deliver. As we began to find a tighter and tighter market fit, we began investing a lot more in that, even when there was pressure to focus on this and focus on that and focus on the other thing.

Companies don't die from starvation. They die from overeating. So I became hyper-focused on modern card issuing. And that strategy was the right strategy for us because it really just completely tightened the product-market fit that we had.

I'm not going anywhere. Certainly being the largest shareholder in the company, I'm definitely not going anywhere. The future of my kids and the generational wealth that's been created by leading this company, not only mine but many Marqetans and our investors and Marqetans to come — I want to make sure that that is intact.

Through decades of support, Microsoft was an instrumental force helping China become the AI powerhouse it is today.

Now, as the very thought of a U.S. company partnering in tech projects in China draws scrutiny from lawmakers, national security hawks, and human rights advocates, Microsoft could be forced to grapple with tough decisions surrounding the thriving AI ecosystem it fostered there.

Microsoft established its research lab in Beijing in 1998, when it was a pioneer paving the way for AI research and business collaborations between the U.S. and China. It was three years before China joined the World Trade Organization, a time when President Bill Clinton actively pushed for closer trade ties with the country, and when AI was mostly the stuff of sci-fi pipe dreams.

Since then, Microsoft Research Asia, or MSRA, has been known as one of the most influential hubs of AI research in the world, advancing speech recognition, natural language and image processing, and other deep-learning work, spreading its discoveries far and wide.

Elements of research conducted at MSR China have been used to build Microsoft’s advertising, chatbots, Bing search, Windows, Xbox, Azure Cloud, and other products used everywhere. People who honed their skills at MSRA have moved on to help create and grow some of China’s best-known tech firms driving AI in the country and across the globe, including Alibaba, Baidu, and Tencent, as well as more controversial AI providers, including facial-recognition company Megvii.

“Basically you can argue that Microsoft Research Asia was the sort of seed capital from which a lot of Chinese AI companies and researchers and the sector really developed,” said Paul Triolo, senior vice president focused on China at global strategic consultancy Albright Stonebridge Group. “It’s proven to be a catalyst for the industry."

Microsoft’s storied lab in Beijing has helped the company cultivate AI talent and better understand China’s massive market. In 2018, Microsoft said it had invested more than $1 billion in research and development in China over the previous decade.

Basically you can argue that Microsoft Research Asia was the sort of seed capital from which a lot of Chinese AI companies and researchers and the sector really developed.

There are more than 300 scientists and engineers working at its MSRA labs in Beijing and Shanghai, but Microsoft has a much larger research and development group consisting of 6,000 scientists and engineers in Beijing, Shanghai, Shenzhen, and Suzhou as well as in Taiwan and Japan. That group, which includes a team focused on Cloud and AI technologies, helps transform research from MSRA into Microsoft products and services.

To help it get there, Microsoft has nurtured close ties with universities as well as state and local governments in the country.

Before the Trump administration launched its China initiative in 2018, “MSRA’s China government links would have been viewed as a major positive,” Triolo said.

But now the “D-word” is on many lips: decoupling. “Fast forward to the current situation, and being favored by the Chinese government is clearly viewed in Washington as a major negative,” Triolo said. “But the links are pretty deep and complex, and cannot be unraveled that easily, nor is there a strong desire on either side to break these ties.”

Still, Microsoft has made some changes. When the U.S. Treasury Department included China’s drone tech giant DJI on a list of sanctioned companies in December 2021, Microsoft ended a partnership with the company, which has been previously unreported. It has also been rumored that Microsoft has stopped recruiting from some Chinese universities.

Diversity of thought

When Microsoft opened an AI Innovation Center in Shanghai in conjunction with the Xuhui District government and a state-owned enterprise group there in 2018, the mayor of the district, Fang Shizhong, praised other “successful” collaborations with Microsoft, such as a startup accelerator program called Microsoft ScaleUp Shanghai.

The center would “further expand the depth and breadth of cooperation between Microsoft and Xuhui District, and will play an active role in bringing together talents, accelerating development, and leading innovation,” he said.

MSRA researchers have also assisted local Chinese companies on projects. In 2017, Xianyuan Zhan, a former MSRA associate researcher who got his Ph.D. from Indiana’s Purdue University, helped energy company China Energy Group use AI to make production at its coal-fired power plants more efficient.

“There was a senior leader from the China Energy Group who reached [out] to my manager at MSRA,” Zhan, now a research assistant professor at Tsinghua University’s Institute for AI Industry Research in China, told Protocol via video call from Beijing.

“The person from the China Energy Group said, ‘We have a complex problem. Maybe AI can help,’” Zhan said.

Alibaba Shanghai R&D Center, ZJ Science City, IBM and Microsoft at AIsland in Shanghai. Photo: Shen Chunchen/VCG via Getty Images

When Zhan’s manager left MSRA to work for China’s fintech, AI, and cloud services company JD Technology later that year, Zhan joined him and carried on the project there. Since then, they’ve published some of that research. A Microsoft spokesperson confirmed that Zhan started the energy project while at MSRA and said the company did not continue the work after Zhan left.

More recently in 2021, Microsoft launched an international research community dedicated to AI for use in 5G networks, joining existing university partners in China including Tsinghua University, Nanjing University, and Peking University.

“The interaction between the top universities in the U.S., the top universities in China, now it’s almost on a day-to-day basis, and we also feel very honored to actually play a big role to make this the norm today,” said Hsiao-Wuen Hon, managing director, corporate vice president, and chairman of Microsoft’s Asia-Pacific R&D Group, during a 2018 episode of the Microsoft Research Podcast.

The contributions of Microsoft’s researchers in China “have and continue to benefit the international academic research community, which is why I believe it is important to invest in AI research in China,” said Peter Lee, corporate vice president of Microsoft research and incubations, in an email sent to Protocol.

He pointed to their 2014 discovery of a seminal deep-learning technique commonly known as ResNet, which the company helped share with the rest of the world.

Lee chalked up the success of ResNet to diversity of thought. MSRA’s China researchers came upon the breakthrough because they were prone to using an approach to AI problem-solving called backpropagation, one typically not considered by AI researchers in the U.S., he said.

“If this engagement had not happened, ResNet might have been left undiscovered outside of China. Instead, researchers in the U.S. and Europe have been able to learn from and build on this research,” Lee said.

Since ResNet was introduced, researchers at companies including Apple, DeepMind, and Facebook have conducted work involving the technique.

Work out of MSRA continues to be incorporated into other projects that are bound to be spread far and wide. For instance, in September when Meta announced its new Make-A-Video AI system that automatically creates video clips using text prompts, the company shared details of the components that went into it, some of which originated at MSRA in Beijing, including training and testing data sets.

'They’re scaring people'

But Microsoft’s AI-related ties in China go well beyond research. The company actively recruits people in China with AI-related expertise to work on its products for that market. It also partners on AI collaborations with China-based companies. For instance, a Microsoft principal software engineer demonstrated a machine-learning project in August conducted in conjunction with a ByteDance software engineer based in Seattle.

Despite the lab’s historic role bridging AI research discoveries between China and the rest of the world, these days Microsoft is not eager to broadcast it. Following several months of requests for interviews, the company would only agree to provide written email responses to Protocol.

Part of the reason for its reticence might be that the company’s expanding business in China has become increasingly sensitive in the U.S. Even when Microsoft announced plans in September to grow operations in China to coincide with its 30th anniversary in the country, the company did not publicize the news in English-language media.

“In celebration of Microsoft’s 30-year presence in China, the local team shared the company is on track to reach 10,000 employees in China — a 10% growth target disclosed more than four years ago,” a Microsoft spokesperson told Protocol, noting that the company is “very close” to hitting that 10,000 employee goal.

“All of a sudden, AI has been dragged into the U.S.-China geopolitical competition in ways that companies like Microsoft and others in the sector were not really expecting,” Triolo said.

“If they have researchers, for example, that are collaborating with a particular Chinese individual who happens to be at an institute or a company that all of a sudden is now sensitive, then this becomes a big issue for the company in terms of reputational risk,” he said.

Microsoft is hardly alone in its reluctance to talk about its AI tech work in China. Heightened geopolitical tensions amid a U.S. government crackdown on research and tech partnerships with China — driven by national security, economic, and human rights concerns — have influenced many U.S. companies to keep mum about their AI business in China. The political rhetoric has formed a cloud of anti-China sentiment that has some Chinese AI businesspeople feeling fearful.

All of a sudden, AI has been dragged into the U.S.-China geopolitical competition in ways that companies like Microsoft and others in the sector were not really expecting.

“[U.S. government officials are] scaring people,” said a U.S. citizen of Chinese descent who works as the chief scientist of a U.S. business that sells AI software to companies in mainland China. The source asked not to be named in this story for fear of political retribution.

“It’s why we are taking very regular steps to make sure we’re compliant,” said the scientist.

Most of the top U.S. tech companies building AI today have operations in China. Amazon has AI development labs in Shenzhen and Shanghai and says it has a “long-term commitment in China.” Although Google closed an AI center it opened in Shanghai in 2017, the company has recruited people with AI expertise recently to join teams in China. Apple also does AI work in China and recently looked for people with machine-learning skills to work at its China Vision Lab in Beijing. Meanwhile, several China-based tech companies engaged in AI-related work have offices or labs in the U.S., including Alibaba, Baidu, ByteDance, and Tencent.

But the increased pressures around competition between the U.S. and China are taking a toll on businesses. The number of U.S. companies doing business in China that reported negative business impacts such as lost sales and supply sourcing disruptions in June reached 87%, up from 73% in 2018, according to the U.S.-China Business Council, a group that counts Amazon, Apple, eBay, Meta, Intel, IBM, and Microsoft among its members.

Next stop: Tianjin

Microsoft’s AI research team in China has been instrumental in the company’s AI advancements.

Ten years ago, a team of AI researchers crowded around Rick Rashid’s desk in his cramped office at Microsoft’s Redmond campus. It was time to test an automated speech recognition system Rashid had challenged the company’s researchers in China and Redmond three years prior to build.

“The teams in China picked up on this, working with our guys in Redmond, and really tried to integrate a system that made heavy use of this new neural network technology, deep neural networks,” said Rashid, a founder of Microsoft Research who would later lead the division.

Now the moment of truth had arrived. “We set it all up. We had the computer there, nice microphone. And we were talking about it. And I noticed that [while] we had the system running, that it was actually transcribing our conversation really, really well, and doing a great job of it. And that gave me a lot of confidence that when the time came to do a speech in China, that that would probably work,” Rashid told Protocol.

The excitement was palpable. Rashid finally knew that the groundbreaking system — designed to recognize speech, transcribe it to text, then translate it from English to Chinese in real time — worked well enough to show the world.

Rashid’s next stop was Tianjin, where the MSRA research team would hold an annual lavish event demonstrating its latest achievements.

“I got up onstage in Tianjin. And I gave my little section of the speech that was actually translated in real time in Chinese. It was just an amazing experience, because the audience was just stunned,” he said. “There were literally students in the audience that I could see crying, because I assumed they never expected they would see something like that happen."

Cool research projects are one thing. Even in the early days, Microsoft’s China lab produced a variety of research that ended up in products such as its DirectX multimedia game installer, said Nathan Myhrvold, another co-founder of Microsoft Research and today the founder of tech startup investment firm Intellectual Ventures.

Almost all major Microsoft products over the years until today all have the MSRA contribution.

“China did a lot of image processing work that wound up being in some of our games; they wound up being in the DirectX platform stuff, which was the graphics code. They contributed along with others to the vision system that we used in the game thing for a while,” Myhrvold told Protocol.

“Almost all major Microsoft products over the years until today all have the MSRA contribution,” Hon said on the 2018 Microsoft Research Podcast. “We also have several technologies inside Microsoft [that were] totally started [by] MSRA."

China’s Big Tech alma mater

But it wasn’t just applicable research MSRA was producing. It was AI talent.

“Instead of waiting for folks to come to the U.S., get their Ph.D. or whatever, and then hire them into MSR, we could just go directly there,” said Kevin Goldsmith, chief technology officer at open-source AI software company Anaconda, who joined Microsoft Research’s graphics group in 1994.

“And obviously China is a massive market. It was good to have folks who were there who could actually understand the market, work with the market better, help the company produce things for that market in a more locally aware way.”

MSRA has also become an alma mater for some of China’s top corporate AI engineers and executives. Baidu’s chief scientist, Jingdong Wang, who specializes in computer vision-related work, joined the company after 14 years at MSRA. Wei-Ying Ma, now a chair professor at Tsinghua University, became vice president at ByteDance’s AI Lab after serving as assistant managing director at MSRA, overseeing research groups focused on machine learning and natural-language computing.

Earlier this year, computer vision researchers mourned the untimely death of Jian Sun, a former research manager at MSRA who contributed to the important ResNet work there. Sun joined Megvii as its chief scientist and managing director of research in 2016. Three years later, the company was added to the U.S. entity list of sanctioned companies for enabling human rights violations against Muslim minority groups in China.

Perhaps MSRA’s biggest star is Kai-Fu Lee, founder of MSR’s China lab who went on to start Google’s operation in China in 2005. Today Lee is a prominent investor in AI companies in China and an evangelist of the country’s AI advancements.

Recovering lost revenue was also a key factor pushing Microsoft into China. The company hoped being there might help it curb rampant software piracy, said Usama Fayyad, executive director at the Institute for Experiential AI at Northeastern University, who worked as senior researcher and manager at Microsoft Research from 1996 to 2000.

“China had very little regard for intellectual property, and there was a lot of unlicensed Microsoft software being used in China and being distributed by entities in China,” he said.

“So, [Microsoft wanted] collaboration with the government and institutions there to help them realize there is value to this IP. We can cooperate and help you advance in research and computer science; at the same time, you need to also appreciate the value to us and help us figure out what is the right answer to get the right laws in place to stop a lot of the abuses in software piracy,” Fayyad said.

And, while national security and intelligence authorities in the U.S. often cite risk of intellectual property theft among key concerns driving the U.S. scrutiny on AI from China, security was top of mind for Microsoft from the start, Goldsmith said.

“If you went to China, you couldn’t bring company equipment. You’d get a separate piece of equipment to bring that you would immediately dispose of when you left the country. And that was all around concerns around intellectual property,” he said.

Fraying ties

As the U.S. widened its sanctions net to include more Chinese technology companies, Microsoft felt the effects.

The company was able to maintain a deal with Huawei after the U.S. restricted partnerships with the telco in 2019. However, the outcome was different when drone maker DJI was sanctioned by the U.S. in 2021. As a result, the companies ended a partnership allowing developers to build Windows applications to remotely pilot DJI drones, a Microsoft spokesperson told Protocol.

The Treasury Department sanctioned DJI and other tech companies for “actively [supporting] the biometric surveillance and tracking of ethnic and religious minorities in China, particularly the predominantly Muslim Uyghur minority in Xinjiang.”

Rumors have emerged that MSRA has severed ties with universities in China listed on the U.S. government’s entities list that are believed to conduct research with military applications. In August, the U.S. Commerce Department added some technology-focused schools with military ties to the list.

Microsoft declined to confirm or deny the reports, but a spokesperson said, “Microsoft fully complies with U.S. laws — including U.S. export controls and sanctions laws and regulations.”

What the future holds for Microsoft’s entrenched AI partnerships in China remains to be seen. “It is possible that the U.S. government could put pressure on Microsoft to not pursue certain types of AI research at MSRA, but this would be a major issue for Microsoft in the AI domain,” Triolo said.

He suggested Microsoft could move AI researchers in China to Redmond, “forming a kind of ‘away team’ in the U.S.” However, he said, “That would come with costs, and likely undermine morale and some of the relationships the firm has built in China via MSRA over the years.”

Welcome back to our Workplace newsletter. Today: Execs are leaving Twitter as Elon Musk shakes up the company’s leadership and strategy (and reportedly plans to lay off 25% of the workforce). Plus, IT and engineering leaders tell Protocol how to create a great developer experience that also ties in to company goals. And: As we get ready for comp review season, Mercer reveals surprising data around how much of a budget increase tech companies are planning.

— Allison Levitsky, reporter (email | twitter)

Twitter purge

Days into Elon Musk’s tenure as “Chief Twit,” Twitter is in full purge mode. While Musk himself still somehow manages to find time to celebrate Halloween and tweet memes. The Washington Post reported Monday that Musk planned to lay off 25% of the company’s workforce “to start,” following internal conversations led by Musk’s longtime lawyer Alex Spiro.

• Much about the layoffs, including when they might take place and how many employees might be affected, “remains fluid,” The New York Times reported, as the company identifies low performers.

Meanwhile, company leaders are dropping like flies. Musk has now dissolved Twitter’s board of directors and named himself CEO, the company disclosed to the SEC on Monday.

• On Tuesday morning, Twitter’s chief customer officer and chief people and diversity officer both tweeted that they had resigned from their jobs on Friday. Musk also fired Twitter’s CEO; CFO; general counsel; and head of legal policy, trust, and safety, last week.
• Given Musk’s need to appease advertisers, the resignation of chief customer officer Sarah Personette is particularly significant given her role as the company’s top ad executive. (And it came the day after Personette tweeted that she had “had a great discussion” with Musk, that Twitter’s “commitment to brand safety for advertisers remains unchanged,” and that she was “Looking forward to the future!”)
• By Monday night, two other Twitter leaders had updated their bios on the site, Platformer writer Casey Newton tweeted, with head of product Jay Sullivan deleting his Twitter bio and GM of the Redbird core technologies group Nick Caldwell adding “former Twitter exec” to his. Bloomberg reported that Musk was expected to name new product leaders.

Neither Sullivan nor Twitter PR immediately returned requests for comment about the departures. Caldwell said he had “nothing really to add” about his departure.

For more updates, check our developing story on the Twitter transition.

Developer experience

Developer experience is not just about free lunches and ping-pong tables. Do your developers feel connected to your company goals?

For Protocol’s latest Braintrust, research editor Kevin McAllister asked IT and engineering leaders from Goldman Sachs, Atlassian, and Intuit about their tactics for tying developer experience to company goals. Among the suggestions: Treat developer experience like a KPI, focus on transparency, and make DX a “top company priority.”

Read the full story.

A MESSAGE FROM BAMBOOHR

In conversations around pay equity and pay transparency, the stakes are high and the responsibility is stressful for HR. Learn how to confidently and capably discuss these topics with everyone from executives and managers to entry-level employees with three important steps.

Learn more

Raises are shrinking

Ready for comp review season? Tech companies are planning for lower-than-average merit increases this year, according to a recent report from the asset management firm Mercer.

• Tech employers reported an average of 4.2% for their total increase budget for 2023, which is right on par with the national average across industries.
• But for merit raises, tech companies are slightly behind the national average — coming in at 3.7%, compared to a 3.8% average budget across industries.
• Although tech raises won’t be huge this year, average salaries in the tech industry are up more than the national average.

Some personnel news

Anyone else having a bad case of Great Resignation whiplash? It’s hard to keep up with which tech companies are growing, shrinking, floating, or sinking. We’re here to help.

⬇️ The lending company Upstart laid off 140 employees, 7% of its workforce, TechCrunch reported.

⬇️ The Apple execs leading the company’s online store and information systems divisions are leaving, according to Bloomberg.

⬇️ Foxconn workers fled the world’s largest iPhone factory, in Zhengzhou, amid COVID lockdowns, Axios reported.

For more news on hiring, firing and rewiring, see our tech company tracker.

Around the internet

A roundup of workplace news from the farthest corners of the internet.

If your boss doesn’t accept your social media friend request, maybe don’t keep asking? (Slate)

Welcome to the House of Web3. (Axios)

How to stay on top of Slack messages without losing your mind. (The Wall Street Journal)

These people were part of the Great Resignation. Now they have a lot of house cats.

A MESSAGE FROM BAMBOOHR

No two recessions are alike. In fact, eight in ten workers reported looking for a new job before the upcoming market shift. Learn what HR can be doing to ensure meaningful retention today and in the near future.

Learn more

Thoughts, questions, tips? Send them to workplace@protocol.com.