Drone makers gather to defend their much-maligned machines

At a recent conference on drones, manufacturers argue that drones don't kill; the people ordering them around do

“I have some d-word difficulty,” said Michael Toscano, president and CEO of the Association for Unmanned Vehicle Systems International, a trade group for makers and enthusiasts of robots of air, land and sea.

The d-word, of course, is drones.

“Just when I say that word, ‘drrrrone,’” he intoned, waving his hands, “it has a negative connotation. Drone bees: they’re not smart, they just follow orders, they do things autonomously, and they die. When you think of a drone it’s just that, it does one thing and it blasts things out of the air.”

Toscano and I spoke over lunch at the Drones and Aerial Robotics Conference at New York University last weekend. Why was “drones” in the name? For one, it’s an attention grabber. For another, DARC is a cool acronym,” said an organizer, even if it doesn’t help dispel the spooky associations that give Toscano a headache.

The conference was one part industry showcase, one part academic gathering, and one part workshop, reflecting the various camps of drone defenders and disparagers. Machines whirred around a stage in a demonstration, and their makers showed off a stream of videos of mountaintops, biking stunts, and cityscapes set to thumping music.

Far beyond their military uses, drones could pollinate crops, help firefighters – even accompany “a family on vacation in Hawaii,” said Colin Guinn, CEO of a company that makes drones for photography.

“There’s a reason we make the Phantom white, and not black. It’s not creepy. Look how cute it is!” said Guinn, referring to the small drone hovering at his side, flashing lights to charm its audience. (A researcher from Harvard arguably failed the creepy test, explaining to the audience what to consider “if you want to build a swarm of robotic bees.”)

The tech geeks, though, were almost outnumbered by those of another stripe: philosophers, lawyers, and critics who propose that drones are “a different ontological category,” of “social machines,” as Ryan Calo, a law professor at the University of Washington, put it.

I asked Patrick Egan, President of the Silicon Valley chapter of Toscano’s group and editor at an industry blog, if drone manufacturers lay awake at night contemplating the ethics of technology, the brave new world that their products represent?

“The hyperbole is out of control,” he said. “It is transformative technology, but not in the way people think.”

The conference brought out some “different perspectives,” said Egan, who also does consulting for the military. “I’m on this panel with a women’s studies professor. She wants to say I’m a Randian. I don’t even get that. Hey, I’ve read a little Ayn Rand; right now I’m reading Naked Lunch! It wasn’t the industry that inspired me to do that.”

The U.S. has virtually no commercial civilian drone market, as the Federal Aviation Administration has been slow to approve the widespread use of drones. In the past year, the public has increasingly pushed back against the drone war overseas and surveillance at home. ProPublica has covered the secrecy that surrounds the administration’s drone war, from signature strikes to civilian casualties. The lack of transparency (the government still won’t release documents related to its targeted killing program) has helped contribute to wariness about the pilotless craft.

But industry line at the conference was that drones are merely a technological platform, with a range of possibilities. They don’t spy, or kill; the people ordering them around do.

A panel on “life under drones” in Pakistan and Afghanistan turned tense when the presenters said they couldn't show images of drone victims. (The organizers said it was a technical issue.)

“I don’t understand the hostility,” one young engineer said in reaction.

Toscano hates that critiques of U.S. airstrikes zero in on drones. “It’s not a drone strike unless they physically fly the aircraft into whatever the target is. It is an airstrike because it launches a Hellfire missile or a weapon.”

Journalists in Yemen have made the same point about media using “drone” as a shorthand for U.S. military action in that country. But Toscano – who spent years involved in research and development at the Pentagon – also defends the use of military drones: “If they fly manned systems, some of them could be shot down. Would you want those pilots to be shot down?”

Domestic, unarmed drones were also scapegoats for the public’s concerns about privacy, he said. Other, more common technologies have already eroded privacy. The public lost privacy via “cellphones, they lost it on GPS, they lost it on the Internet. They can’t get that genie back in the bottle.” The difference with drones is that “we don’t have these systems flying.”

John Kaag, a philosopher at University of Massachusetts Lowell, had asked the audience at his lecture to stare into the eyes of the person next to them while he counted out five awkward seconds, to feel “the human” concern with surveillance. He advised the drone industry, “Make people know that you feel that.” Humans “are responsible, drones are not responsible.”

Toscano said he was fine with staring at the man beside him. “I’m an extrovert! The only thing I said to the guy is, ‘I don’t mind this at all but if you were a woman I’d probably enjoy it more.’”

And what about the concerns – both ethical and practical -- that autonomous machines take humans out of the equation in novel and dangerous ways?

Cars already do a lot of things autonomously, Toscano offered. Car crashes kill thousands every year, but we consider the technology indispensable to modern life.

“If Martians came down to earth and said we will cure all of cancer on the globe, and for doing it, you have to give me 100,000 of your people for me to cannibalize, to eat, would we do the deal? Most people would say no. Our society does not believe that cannibalism is acceptable.”

“Right now, in human nature, it’s unacceptable for a machine to kill a human being,” he said.

That’s why people are uncomfortable with driverless cars or drones, Toscano said. He’s confident the “risk acceptance” will change, and that fears about the technology will become as quaint as 19th-century concerns about elevators.




Economy & Nation Exclusive
Raghuram Rajan's tough battle against bubbles

RBI governor Raghuram Rajan tried to tell his colleagues about the dangers from flood of money from developed countries, but no one wants to listen. Eventually interest rates will rise higher than the present levels either because of uncertainty, inflation fears or tapering

You have to feel sorry for India's new central bank governor, Raghuram Rajan. He recently pointed out that the flood of money from developed countries could have a major impact on the policies of developing countries and sows the seeds of another crisis. He complained, "Are we in a world where we continue to blow up bubbles elsewhere?" The response was less than satisfying. Instead of concern or sympathy all he got was a shrug. Central bankers feel that the problems of emerging markets do not concern them. It is up to emerging markets to fend for themselves. Or, in the words of former US Treasury Secretary John Connolly: the US dollar “is our currency, but your problem.”


So far, the flood of cheap money has not had a bad effect in developing or emerging markets. Default rates on corporate bonds in developed markets have been very low. The rate is similar to the levels seen during 2005 to 2007 at 2.4%. But with low cost easy money, more middle market firms have had access to funds. But access to money does not necessarily mean profit growth. In fact, profit growth has been declining in the past few quarters to the low single digits for Standard & Poor’s 500 Index companies. This level of earnings growth is more consistent with a default rate of 6% rather than 2.4%. This implies that there are quite a few “zombie” companies out there: a company that can’t grow, but can survive only because they have access to money at very low interest rates. If interest rates rise, as they have since May, then the number of defaults may increase sharply.


This problem is not limited to developed countries. Emerging market (EM) companies have had access to bond markets as never before. Emerging market corporate bond sales have doubled since 2005. In 2012, they reached a record $200 billion. EM corporations surpassed that record by the end of May of this year. The companies account for 80% of all hard currency debt sold in 2013. Many of these corporations are accessing the market for the first time. A fifth of Asian local currency bonds are in debut deals. The proportion in the US and Europe is usually about 3%. The market is now about $1 trillion in size and surpasses US junk bonds as an asset class.


As the size of the market has grown, so have the defaults. EM corporate bond defaults rose to $22 billion in 2012, a huge leap from 2011 when there was only $182 million worth of defaults. Of the 25 defaults, just under half were in Latin America, mostly Brazil. There were nine defaults in emerging Europe and five in Asia. The market is much safer than in 1997. The main difference is that much of the debt is now denominated in local currency. Still there is substantial exposure to currency fluctuations and any rises in interest rates could be traumatic.


In India defaults reached a 10-year high of 4.5% up from 3.5% a year ago with 32 issuers defaulting. Much of the credit risk is concentrated in ten of the largest companies. According to a report by Credit Suisse, the gross debt of these companies topped $100 billion. The companies are by order of their debt levels: Reliance ADA Group, Vedanta Resources, Essar Group, Adani Group, Jaypee Group, JSW Group, GMR Group, Lanco Group, Videocon Group and GVK Group. The stress of this mountain of credit is showing up also in the banking system where impaired assets have risen from 4% in 2009 to 9% this year and is forecast to rise to at least 12% by 2015. This information is undoubtedly on the low side and much of the bad debt is located in state banks. Worse, much of this debt is not denominates in rupees. India has $225 billion in dollar-denominated debt and more than half is not hedged.


The problem of foreign currency lending is far less of a problem than it was during the Asian crises. With often very strong reserves many countries have been able to borrow in their own currencies. But, local currencies bonds protect only against currency depreciation not capital flight. Much of the debt was sold to foreigners. In Indonesia, foreigners now hold about a third of the local currency bonds. The number is about the same in Malaysia. These bonds were purchased for the yield but when the local currency falls as it has by 18% in Indonesia, they become much less attractive.


Bankruptcies are not so far a problem in Southeast Asia, but they are in South Korea. Investors picture corporate South Korea through the lens of Samsung with its ever growing smart phone profits. There is another South Korea. Second tier chaebols exposed to cyclically weak sectors such as construction, shipbuilding and shipping. One of these, Tongyang with interests from financial services to construction and tourism, is on the verge of bankruptcy and may default on $1.4 billion worth of bonds and commercial paper sold to retail investors this year. The problems of the corporate sector are on top of already severe issues associated with consumer debt.


China came out with better growth last week, but the cause of the growth was the same as it has been for the past five years: infrastructure spending fuelled by more debt. Earlier this year, China’s debt growth rose at a blistering 52% for the first five months of 2013. It has since slowed and is now closer to 20% year-on-year. In the last five years China’s total debt went from 130% of gross domestic product (GDP) in 2008 to about 200% today. Corporate debt made a large part of this. Chinese corporate debt has grown from 71% of equity in 2007 to 104% today. This compares unfavourably with other BRICs. Corporate debt in Brazil rose from 76% to 92% of equity. In contrast, India’s rise from 67% to 77% of equity looks conservative. Chinese companies owe a total of 64 trillion yuan ($10.45 trillion), and amount that has grown 260% in the past five years from 24 trillion ($3.92 trillion).


Brazil’s corporations are in better shape than China’s, but they are still in trouble. Moody’s, Standard & Poor’s or Fitch has negative outlooks on 26 Brazilian corporate borrowers. In total Brazilian corporate debt in doubt is $104 billion triple the amount of negative outlooks for Mexico, which recently had defaults by three large real estate developers in the amount of $2.75 billion. The bonds are now trading at 20 cents on the dollar.


But the large amount of corporate debt in emerging markets is not the real problem. The real problem is the illiquidity. Last year, thanks to low yields in the US, these markets were hot. Now they are in the deep freeze. The liquidity of EM corporate debt markets is poor in most cases and abysmal in a few. In some markets, no one is selling these bonds and no one is buying. A don’t ask, don’t tell situation, so it is difficult to value these bonds. Many of these bonds are held by ETFs, who have to maintain the link to an index. This could mean forced sales.


Raghuram Rajan tried to tell his colleagues about the dangers, but apparently they don’t want to listen. Eventually interest rates will rise higher than the present levels either because of uncertainty, inflation fears or tapering. Then everyone will definitely feel the effects of Mr Rajan’s bubbles. At that point they will start to pay attention but it is probably already too late.


(William Gamble is president of Emerging Market Strategies. An international lawyer and economist, he developed his theories beginning with his first-hand experience and business dealings in the Russia starting in 1993. Mr Gamble holds two graduate law degrees. He was educated at Institute D'Etudes Politique, Trinity College, University of Miami School of Law, and University of Virginia Darden Graduate School of Business Administration. He was a member of the bar in three states, over four different federal courts and has spoken four languages.)



BL Sebastian

3 years ago

Mr. Gamble has provided a good oversight on the dangers of such bubbles but at a more micro level the problem is more acute. The bonds issued by the corporates are being eventually passed on to the banks by way of restructuring, etc. Now imagine if a bond market is shallow and the issues are subscribed almost entirely by the institutions like banks and HNIs, the bubbles may get obscured but if such issuance is subscribed by retail investors and he burns his fingers in the process; daggers will be immediately drawn with target being the regulators / supervisors / government, et al. There seems to be a direct positive correlation between the banks rising impaired assets and such issues in the market getting bad.

Gautam Haldipur

3 years ago

Excellent article by William Gamble. He has said the ultimate truth. There is a lot more to this Conundrum than meets the eye. The Monetary policy, managed by the RBI has done the right job (much to the short term discomfort of so many)steering us with resolve through very tough times.The Fiscal policy, managed by the Government is the sore point though feeble, lackadaisical attempts are made to address the objectives from time to time.The genesis of this is so called political compulsions.In the greed of short term expediency, we are, in fact sacrificing long term benefits. Second, the list of 10 Companies mentioned are without doubt highly leveraged companies with truncated abilities to withstand severe economic downturns.The only likely thing they would do is lobbying to save their necks. The China Growth story--a disaster in the making! Many will disagree with me on this. But, keep in mind that reckless growth, fuels very high inflation & leads to a vicious Black Hole. Therefore it is better that we choose a path that brings about sustained, consistent & solid growth, which, in the long run will pay good dividends in all respects & take us to a more resilient & vibrant future.Ben Bernanke's system does not have a strong foundation. The day he goes for Q.E. tapering, you will see the fall out yourselves. However, the silver lining is: Raghuram Rajan is a no non-sense man & focussed. Leave him to do his job with full freedom & see how he can kick-start the entire economy.May the Almighty give the requisite strength & perseverance to him to get things going.


Dayananda Kamath k

In Reply to Gautam Haldipur 3 years ago

the ecent statment of our great finance minister that he is happy with the credit growth. i should wan the rbi governor that today bankers are doing banking for statistical data so that they can show better performances. by increasing the advnces you are reducing the percentage of npa to total advnce. i still remember a chairman of a nationalised bank pressurising to give tractor and tiller loans in late 1980's and one zone recklesly sanctioned loans without any meaning ful appraisal. and the justification is even if there is non repayment we will achive our lending target for agriculture as by then interest recivable on advances head has been abandoned and interet i being debited to the loan account and shown as profit and prudential norms were not being in vogue then. suden increase in npa as soon as cmd is changed is also one of the effects of banking for satistical performance. and raghuram rajan has already given and evidence that he can be fooled by statistics in gujrat development report.

Gautam Haldipur

In Reply to Dayananda Kamath k 3 years ago

This type of a regime came into being the moment Banks in the country were nationalised about 4 decades ago. The day the order was passed, we cud see a veritable change, the very next day in the Banks. In a short you have clearly pointed out at "Window Dressing" Balance sheets & performance parameters.The Real Test comes when you are able to face severe long drawn downturns in the
economy.Given the right freedom & more Fiscal prudence from the Government of the day, RR I think can do it.

nagesh kini

3 years ago

The US Treasury Secretary, Connally's statement that the $ is "our currency and your problem" ought to be an eye opener and RBI Governor's warnings ought to be taken extremely seriously.
Mr. Gamble's well written article needs to be read by all concerned who are all ga-ga on FDI and FIIs.Little do they know that all that comes in here is nothing but "hot money" that is looking for higher returns with an element of safety that India along among the emerging economies offers. They don't simply come out of love for India. They've a hidden agenda - greater returns!
Listen to Raghuram Rajan!

Anil Agashe

3 years ago

I believe Raghuram Rajan is absolutely correct. Others seem to have a very narrow view of things and will suffer in the long run.
The companies mentioned in the article are financially weak and can easily default and put good corporate plans to borrow abroad in jeopardy and may affect India's credit rating as well.
it is quite possible that China will collapse under the weight of its debt one day in future.
We should be watchful now and suffer in short run and be safe in the long run.


Dayananda Kamath k

In Reply to Anil Agashe 3 years ago

problem is the way the economy is being managed by the chandal cowkadi the short term suferring can continue to long term sufferring also. we adopted the policy of america when we never had the problem of america. the present uptrend is only because of postponing the problem.

Dayananda Kamath k

3 years ago

when entire govts policy is seling everything to fiis and debar local investors from the markets through unimaginative rules, what raghuram raan can do.every institution is currupted by these currupt politicians. bubbles are created so that somebody can benefit. the credit policy of banks itself is proof. if can controll that lot can be you can lend at base rate for housing and vehicle loans and at exorbitant rates to manufacturing industry. it has only helped land sharks. during prime rate regim how banks could grant 70% of advances at less than primerate.that has led to the reckless borrowing and now they are facing the problem.

Jose Koshy

3 years ago

The Gov. is trying to get the structural model right in India by controlling NPA's and going behind Defaulters & also exposing them to all Banks and getting a Score like CIBIL. These moves in the Long term will auger well for the Banking system & the economy..Some Short term pains will have to be digested. He would go on to increase Repo by 25 Bps on 29th Oct Vs Market expectation of 50 Bps cut..Inflation & gush of foreign Liquidity will keep his hands tight.

Hindi-Chini buy-bhai meeting? Herculean task ahead for Indian PM!

Prime Minister Manmohan Singh will presumably brief Russian President Putin about the ensuing meeting with Chinese Premier Li Kiqiang and possibly impress upon the latter to use his influence on the Chinese Premier to deal with India in a more friendly and realistic basis

En route to Beijing, Prime Minister Manmohan Singh and his entourage will spend a couple of days in Moscow when he will be closeted with Russian president, Vladmir Putin, on 21st October to discuss various issues. Ostensibly, it is expected to cover finalisation of arrangements for the Kudankulam units no 3 and no 4 in Tamil Nadu. But, at the back of his mind, the prime minister (PM) will presumably brief Mr Putin about the ensuing meeting with Chinese Premier, Li Kiqiang and possibly impress upon the latter to use his influence on the Premier to deal with India in a more friendly and realistic basis.


It may be noted that the annual bilateral meetings between India and Russia have been going on methodically for years now. It is the 10th such meeting for both the PM and the Russian president!


When they met in 2010, an Indo-Russian roadmap was approved, which envisages the construction of 14 to 16 nuclear reactors in India. This means several decades of close association, considering it takes a minimum of five years for a project of this magnitude to fructify.


In pursuing the matter of supplying hydrocarbons, the issue of surface transportation from Russia via Afghanistan and Pakistan will come up prominently. This is a big question mark with Taliban at loggerheads with the Afghan government, American troops still being there and the uncertainty of Pakistani attitude in such pipe line matters.


The PM then wings his way to meet the Chinese Premier for the second time in less than six months and continue his discussions. In reality, nothing happened, as border intrusions continued, unabated.


It is almost impossible to achieve anything in two days with anyone, particularly an intransigent state like China who has been bullying around the entire Far East. Except for North Korea, no other state in the region feels comfortable in dealing with China because of her action and attitude. Might is right, and money speaks!


In the past, Nehru-Chou En Lai's Pancha Sheela ended in disaster and now we have the PLA (People's Liberation Army) acts with impunity in violating the Line of Actual Control often. While lip service is given to such unfortunate incidents, with India playing it down most of the time, China continues to eye Arunachal Pradesh as its legitimate territory—35,000 sq miles—including a swath of territory near Bhutan and Bangladesh. Violation of airspace by Chinese helicopters also goes unchallenged.


According to Lt General Prakash Katoch, Indian Army I Corps, intrusion by Chinese

PLA, who have built infrastructures on Indian territory, was brought to the attention of General Chang Wanquan by our defence minister AK Antony, but nothing happened after that. It is a sad state of affairs.


So, Manmohan Singh has a long wish list that needs to be accepted by his Chinese counterpart. We may take this opportunity to summarise these as under:


(a) To reiterate that Arunachal Pradesh is an integral part of India; we neither accept or appreciate the Chinese insults in issuing stapled visa to anyone visiting China from this state and China needs to accept status quo and respect the actual Line of Control of all Indian territories


(b) To establish a rupee-linked Yuan trade agreement, with an initial value of, say, $25 billion worth in rupees, fixing the exchange rate of say Rs10 equal to one Yuan. List of permissible items of import from both countries need to be identified and any transaction over this limit will involve settlement in a designated third currency like the dollar, pound or whatever


(c) To accord mutually acceptable areas of direct investments by either side without restrictions of the product or services to be rendered


(d) To seek China not to provide technical know-how and supplies of nuclear reactor technology to Pakistan and also in and around the Indian sub-continent


(e) To obtain commitment from China that they shall not any more build dams or do anything to divert the rivers like Brahmaputra which originates from China which may harm the riparian states, India and Bangladesh included


(f) To sign a friendship treaty based on equality and mutual support involving a No-War pact and first use of nuclear weapons under any circumstances


(g) To garner support from China for inclusion of India as the 6th permanent member of the Security Council in the United Nations exercising the veto power


Only when these are done, can India and China can look forward to peace, tranquillity and progress in the area. Such actions should be on a quid pro quo basis.


Not an easy task to accomplish, but a serious and sincere effort can be made by Manmohan Singh.


(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)



J Thomas

3 years ago

The most important requirement is to demarcate the border

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