How The Corporate Cafeteria Is Changing

 

Even as the sprawling dining halls of old struggle with emptier workplaces, food is still important to employees, particularly the young. Many companies are reinventing the company meal. The corporate cafeteria can be an especially lonely place these days.

“You used to walk in at 12 o’clock on a Tuesday and stand in line to get something,” said Casey Allen, 46, who works for a division of the agricultural chemical company BASF in Raleigh, N.C. “Now, you walk in and you’re usually first in line.” A paternalistic fixture of white-collar life born of the Industrial Revolution, the office dining room survived the midcentury move to sprawling suburban office parks.

It weathered the rise and fall of cubicle culture and power lunches, and more recently, the lavish excess of the Silicon Valley office lunch. But as the American office emerges from its pandemic slumber, can the cafeteria survive layoffs, a workweek that sometimes requires only a few days in the mother ship and a new, more demanding generation of employees?

Even at companies like Meta, which this month announced that it would lay off 126 cafeteria employees at its headquarters in Menlo Park, Calif., workers are skipping free meals in a quest to leave the office as soon as possible.

“The world of the traditional big cafeteria is dead,” said Fedele Bauccio, who in 1987 co-founded Bon Appétit Management Company, which runs food service at hundreds of museums, universities and companies like LinkedIn. “They are just too expensive to maintain, and not flexible enough.”

Still, office workers need to eat. So companies are blowing up the cafeteria. Long regarded as a way to encourage productivity, cafeterias are being reframed as respite and recreation, designed to attract younger workers in a job market badly in need of them.

Some companies are installing cocktail bars, or hosting sunset oyster-shucking parties to help employees relax and socialize after work. The large dining halls at tech giants are being divided into smaller, more homey spaces flexible enough to feed a work force whose size changes drastically day to day. Developers are building restaurants that function like subsidized corporate cafeterias but are open to the public.

“Free pizza isn’t enough anymore,” said Andrew Montesano, the North America food programming and operations manager at LinkedIn. Employees, especially younger ones, are demanding more culturally authentic meals and climate-friendly kitchen protocols, like reducing waste, according to Mr. Bauccio and others in the corporate food service business. They are eating less meat and questioning labor practices. Health and wellness have become a menu mantra.

Companies that aren’t paying attention are likely to suffer, said Jennifer A. Chatman, associate dean for academic affairs at the Haas School of Business at the University of California, Berkeley. Smart leaders know that informal interaction can keep corporate culture from eroding as remote work persists, and may be the main purpose for coming to the office in the future, she said.

“A cafeteria is not the only way to get there,” Dr. Chatman said, “but people need to eat, and we know eating together fosters interaction.” Food has become such an important recruitment and retention tool that some applicants for remote jobs are even offered credits with food delivery companies, or generous weekly lunch stipends — benefits that may be especially prized as inflation drives up food costs.

Free meals can also offer psychological rewards, Dr. Chatman said. “There’s an advantage to being able to say, ‘My company buys me lunch every day.’ There is a symbolic value in feeling like you are being taken care of by the company.” On the shores of South San Francisco, an airy two-story restaurant called the Anecdote opened in March on a biotech campus. It functions like a corporate cafe, but has the look and feel of a restaurant.

 

Bon Appétit Management Company pioneered the idea with real estate developers. Companies in the building can use the restaurant as a way to offer employee meals, sometimes free or at a discount. But anyone can stop in for dishes like crispy tofu sliders and $16 Dungeness crab cakes.

Company downsizing and hybrid work hours prompted the idea, but cities — particularly on the West Coast — that are pushing companies to stop providing abundant free food helped it along, said Alison Harper, a Bon Appétit district manager. Huge corporate cafeterias, the reasoning goes, keep workers from patronizing local food businesses, and offer nothing for the neighborhood.

“The pandemic speeded up what I consider a paradigm shift that was already happening in the Bay Area and beyond,” she said. “Cities were saying we don’t want big, closed cafeterias that don’t benefit the community anymore.” Hans-Peter Goertz, 48, eats at the Anecdote during the three days each week he goes to the Cytokinetics office. He misses the variety and speed of food service at his former employer, Genentech, where a dosa or an order of fresh, local fish was delivered fast and free.

A meal at the Anecdote, he said, is more akin to a longer, European-style lunch. “I can get a really nice meal for $4 or $5 in a beautiful setting with an innovative menu,” Mr. Goertz said. “It’s a very nice perk that translates beyond the economics.” There may be no better example of the changing fortunes of corporate dining than the former Condé Nast cafeteria in Midtown Manhattan, once an exclusive palace of power where the editor Anna Wintour ordered blood-rare burgers, and one might spot Cameron Diaz at the salad bar or John Updike having lunch with a New Yorker editor.

The cafeteria line became so legendary that it had a role in the film “The Devil Wears Prada.” (“You do know that cellulite is one of the main ingredients in corn chowder,” Stanley Tucci tells a young new hire ladling some into a bowl.) The Durst Organization opened the revamped cafeteria at 151 West 42nd Street in 2018, after Condé Nast moved out.

Part of its $150 million renovation was spent giving the cafeteria, originally designed by the famed architect Frank Gehry, a face lift. Anyone whose company rents space in the building is welcome. Durst put beehives on the roof of a neighboring building and uses its honey in the cafeteria. It began offering master classes in cooking lobster and fresh pasta. Food scraps are shipped to the company’s 1,800-acre McEnroe Organic Farm near Millerton, N.Y., and the compost is used to grow vegetables for the cafeteria line.

Quality food, served in refined gathering spots, has been such a winning formula that Durst is replicating it in its building at 825 Third Avenue, which is also undergoing a $150 million renovation. By this summer, employees at companies like Gotham Asset Management and National Bank of Egypt will be able enjoy a cafeteria lunch, and after work head to a 6,000-square-foot terrace for happy hour or an oyster-shucking party.

At One World Trade Center, which Durst co-owns with the Port Authority of New York and New Jersey, a large, casual communal space on one floor offers a quick-service cafe with high-end coffee and beverages. The building is home to young, midsize tech companies like Wunderkind and Undertone, which have pumped up their own pantries, sometimes making them the centerpiece of the office.

“What we’re seeing is a merger of the renaissance in food and corporate dining,” said Spencer Cohn, who manages food and beverage for Durst. “The shift is not temporary.” David Neil, a Durst principal, said a number of companies have made their leasing decisions based on a building’s food and beverage offerings.

In less flashy corners of corporate America, companies are struggling to find efficient ways to manage unpredictable lunch crowds and reduce labor costs while still offering dining options. Streamlined menus with QR codes are posted on office walls, and orders are made on apps or at kiosks.

Some businesses have abandoned cafeterias altogether in favor of subsidizing food delivery. An app called Relish by ezCater aggregates a variety of restaurant orders from employees and delivers them all at the same time, in uniform packaging, so everyone can eat together. It uses a network of more than 104,000 restaurants in every state, selected based on their ability to reliably feed large groups.

Stefania Mallett, the chief executive of ezCater, said that companies she never thought would subsidize food for employees have signed up because it’s cheaper than running a cafeteria and satisfies younger workers, for whom food is becoming a requirement rather than a perk.

The New York ticket company SeatGeek uses the service regularly, she said. On days it offers subsidized lunch through the Relish app, five times as many employees come to the office. “It’s much cheaper to give you a sandwich than replace a worker,” she said. Still, there are some parts of the country where the old-school corporate dining room endures. The cafeteria at Hallmark headquarters in Kansas City, Mo., is one of them.

In 1956, Mr. Hall opened the Crown Room, with an army of cooks, a terrific view and 36 chandeliers shaped like the company logo. “Greeting cards represent thoughtfulness, and it’s fitting that those who create them should be working in the best conditions we could provide,” he said at the time.

The Crown Room was always the heart of the company, with cakes for employee birthdays, World Series parties and gift-wrapping demonstrations. People heading home for the day could pick up a potpie or some meatloaf for the family on their way out the door.

During the height of the pandemic, when headquarters was closed, the kitchen still turned out packaged sandwiches and salads to feed people in the manufacturing plants. The dining room reopened in April. “Hallmarkers were thrilled to have the Crown Room back open,” said Paul Herdtner, a company spokesman who is particularly fond of the cafeteria’s Texas sheet cake.

It’s a piece of Hallmark corporate culture no one wants to change, but reality is reality. These days, the cafeteria line is open only three days a week.

Kim Severson

Source: How the Corporate Cafeteria Is Changing – The New York Times

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Thinking About Taking Year End Tax Losses? Don’t Make These Mistakes

Given the stock market’s performance this year, you may be thinking about taking some losses—otherwise known as tax loss harvesting. It’s a good strategy when investments in a taxable account decline, but you want to avoid some traps.

Tax loss harvesting is simply selling investments in taxable accounts that have paper losses so the loss becomes tax deductible.On your tax return, capital losses first offset any capital gains you have for the year. Each dollar of taxable loss you recognize allows you to recognize a dollar of capital gains tax free.

If capital losses for the year exceed capital gains, up to $3,000 of excess losses can be deducted against the other income on your tax return. When capital losses for the year exceed capital gains plus the $3,000 deduction, the excess losses can be carried forward to future years to be used in the same way.

Selling a losing investment can shelter other gains or types of income from income taxes and frees up the capital to be invested in something else.

Of course, you probably purchased the investment because you expected it to appreciate. If you still like the investment’s longer term prospects, you can buy it back after selling it. But you have to avoid the wash sale rule.

The wash sale rule says you have to wait more than 30 days (not 30 days—more than 30 days) to repurchase the investment or a substantially identical one. If you don’t wait long enough, the loss isn’t deductible. It’s added to the basis of the new investment and effectively the deduction is delayed until that investment is sold.

The wash sale rule also applies if you bought the substantially identical investment 30 days or less before you sold the losing investment.

So, the first rule is to avoid buying a substantially identical investment within 30 days of selling the investment.

You can buy an investment that isn’t substantially identical within 30 days of the sale. For example, you can sell one tech stock and purchase a different tech stock, even one in the same sector. Or sell a biotech stock and buy shares in a biotech ETF.

Another action you can’t take is to buy a substantially identical investment in an IRA or 401(k). The IRS ruled some years ago that the wash sale rule is violated when an individual investor sells an investment in a taxable account and within 30 days buys the same investment in an IRA or 401(k). It’s one case when the IRA isn’t treated as a separate taxpayer.

Here’s a related point. When you have a losing investment in an IRA, you won’t be able to deduct the loss on your individual tax return. A loss in an IRA is deductible only in the rare case when you fully distribute all your IRAs of the same type (traditional or Roth), and the proceeds are less than your aggregate cost basis in the IRAs.

Source: Thinking About Taking Year End Tax Losses? Don’t Make These Mistakes

Critics by Hayden Adams

Tax-loss harvesting—offsetting capital gains with capital losses—can lower your tax bill and better position your portfolio going forward. Even in the best of times, not every investment will be a winner. Fortunately, a losing investment does have a silver lining: You may be able to use your loss to lower your tax liability and better position your portfolio going forward. This strategy is called tax-loss harvesting, and it’s one of the many tax-smart strategies that investors should consider.

Tax-loss harvesting generally works like this:

  1. You sell an investment that’s underperforming and losing money.
  2. Then, you use that loss to reduce your taxable capital gains and potentially offset up to $3,000 of your ordinary income.
  3. Finally, you reinvest the money from the sale into a different security that meets your investment needs and asset-allocation strategy.

The general principle behind tax-loss harvesting is fairly straightforward, but it’s best to plan your strategy to avoid some common pitfalls.

The basics of tax-loss harvesting

Imagine you’re reviewing your portfolio, and you see that your tech holdings have risen sharply while some of your industrial stocks have dropped in value. As a result, you now have too much of your portfolio’s value exposed to the tech sector. To realign your investments with your preferred allocation, you sell some tech stocks and use those funds to rebalance. In the process, you end up recognizing a significant taxable gain.

This is where tax-loss harvesting comes in. If you also sell the industrial stocks that have declined in value, you could use those losses to offset the capital gains from selling the tech stocks, thereby reducing your tax liability.

In addition, if your losses are larger than the gains, you can use the remaining losses to offset up to $3,000 of your ordinary taxable income (for married couples filing separately, the limit is $1,500). Any amount over $3,000 can be carried forward to future tax years to offset income down the road.

For example, let’s say you recognize a gain of $20,000 on a stock you bought less than a year ago (Investment A). Because you held the stock for less than a year, the gain is treated as a short-term capital gain and will be taxed at the higher ordinary-income rates rather than the lower long-term capital-gain rates, which apply to investments held for more than a year.

At the same time, you also sell shares of another stock for a short-term capital loss of $25,000 (Investment B). Your $25,000 loss would offset the full $20,000 gain from Investment A, meaning you’d owe no taxes on the gain, and you could use the remaining $5,000 loss to offset $3,000 of your ordinary income. The leftover $2,000 loss could then be carried forward to offset income in future tax years. Assuming you’re subject to a 35% marginal tax rate, the overall tax benefit of harvesting those losses could be as much as $8,050. Let’s take a look at how this works.

Using an investment loss to lower your capital-gains tax

By offsetting the capital gains of Investment A with your capital loss of Investment B, you could potentially save $7,000 on taxes ($20,000 × 35%). Because you lost $5,000 more than you gained ($25,000 – $20,000), you can reduce your ordinary income by $3,000, potentially lowering your tax liability an additional $1,050 ($3,000 × 35%) for a total savings of $8,050 ($7,000 + $1,050). You could then apply the remaining $2,000 of your capital loss from Investment B ($5,000 – $3,000) to gains or income the following tax year.

Issues to consider before utilizing tax-loss harvesting

As with any tax-related topic, there are rules and limitations:

  • Tax-loss harvesting isn’t useful in retirement accounts, such as a 401(k) or an IRA, because you can’t deduct the losses generated in a tax-deferred account.
  • There are restrictions on using specific types of losses to offset certain gains. A long-term loss would first be applied to a long-term gain, and a short-term loss would be applied to a short-term gain. If there are excess losses in one category, these can then be applied to gains of either type.
  • When conducting these types of transactions, you should also be aware of the wash-sale rule, which states that if you sell a security at a loss and buy the same or a “substantially identical” security within 30 days before or after the sale, the loss is typically disallowed for current income tax purposes.

Even if you don’t have capital gains to offset, tax-loss harvesting could still help you reduce your income tax liability.

Let’s say Sofia, a single income-tax filer, holds XYZ stock. She originally purchased it for $10,000, but it’s now worth only $7,000. She could sell those holdings and take a $3,000 loss. Then, she could use the proceeds to buy shares of ZYY stock (a similar but not substantially identical stock) after determining that it’s as good as or better than XYZ, given her overall investment goals and objectives.

Sofia could use the $3,000 capital loss from XYZ to reduce her taxable income for the current year. If her combined marginal tax rate is 30%, she could receive a current income tax benefit of up to $900 ($3,000 × 30%). She could then turn around and invest her tax savings back in the market. If she assumes an average annual return of 6%, reinvesting $900 each year could potentially amount to approximately $35,000 after 20 years.

Harvesting losses regularly and proactively—when you rebalance your portfolio, for instance— can save you money over the long run, effectively boosting your after-tax return.

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7 Best Biotech ETFs to Buy

1-17-768x534-5Biotech stocks face volatility but boast long-term potential. In 2020, it was the year for growth-oriented health care names as the world came to grips with coronavirus and hungered for potential treatments. But in 2021, as the pandemic matured and as some of the COVID-related successes were priced in, we saw many areas take a step back – including the once-popular sector of biotechnology.

In fact, over the last 12 months many leading biotech stocks are significantly in the red even though the broader S&P 500 has moved 22% higher. But as the old saying goes, investors make the most when they buy low and sell high. And some traders are starting to eye this pullback in biotech as a buying opportunity considering its long-term potential. If you’re bullish on the sector despite recent challenges in late 2021 and early 2022, here are some of the best biotech ETFs to buy.

iShares Biotechnology ETF (ticker: IBB)

The leading biotech ETF by assets, IBB has nearly $10 billion under management and is one of the most established ways to get exposure to the high-growth corner of health care. It also averages more than 2 million shares traded on any given day, making it a popular and liquid vehicle in what can sometimes be a volatile sector.

Top holdings among its roughly 370 positions at present include Amgen Inc. (AMGN) and Gilead Sciences Inc. (GILD). But buyer beware: These aren’t exactly small upstarts, as the pair is collectively worth nearly $200 billion in market value – and makes up more than 18% of the entire IBB portfolio between them. But for investors looking to play the bigger names in biotech, that may not be too much of a knock against this top iShares fund.

SPDR S&P Biotech ETF (XBI)

The second-place biotech fund at present, with about $6 billion in assets, is this SPDR fund. While it is similarly focused on gene-editing companies, development-stage drugmakers and high-tech diagnostic firms, it differs significantly from IBB in its structure. Specifically, it has a smaller list of stocks at a lineup of only about 200 components.

What’s more, XBI aims to be “equal weight” with regular rebalancing to ensure no single stock has too big or too small a stake. That means you’ll find lesser-known biotech stocks like $5 billion gastroenterology specialist Arena Pharmaceuticals Inc. (ARNA) and $3 billion oncology firm PTC Therapeutics Inc. (PTCT) side by side with the big boys to provide true exposure to the entire sector.

ARK Genomic Revolution ETF (ARKG)

Differing from the prior two funds is ARKG, a roughly $5 billion actively managed ETF that’s designed to hold 50 or fewer holdings based on a unique set of internal metrics. In theory, this puts the cash behind the biggest opportunities – at least, based on the screening methodology designed by this biotech ETF’s managers, led by the famed investor Cathie Wood.

Right now the top single position is DNA screening test specialist Exact Sciences Corp. (EXAS), with a 7% weighting, followed by remote health care play Teladoc Health Inc. (TDOC). Of course, it’s also worth noting that these picks haven’t done all that well lately, and as a result ARKG is sitting on a 12-month loss of more than 50%. However, if you’re bullish long-term and want to trust management at this popular fund, this could be a bargain opportunity to stake out a position in this biotech ETF.

First Trust NYSE Arca Biotechnology ETF (FBT)

Another fund focused on a short list of high-octane biotechs is this nearly $2 billion First Trust offering that only holds a mere 30 total positions. No single holding tops 5%, however, so the cash is spread around this list pretty equally. Top holdings at present include $3 billion neurological treatment specialist Acadia Pharmaceuticals Inc.

(ACAD) and $1 billion biotech FibroGen Inc. (FGEN), which focuses on various rare organ disorders. FBT has been very volatile lately, however its 17% loss over the last 12 months is actually much better than some of its peer biotech ETFs on this list. That shows this First Trust offering can find profits even in a troubled market through a focused list of high-quality components.

iShares Genomics Immunology and Healthcare ETF (IDNA)

We’re now out of the billion-dollar biotech ETFs and into the smaller and more boutique offerings. This IDNA ETF from iShares is a good example of this, as the biotech ETF offers a focused fund with only 50 total components and a specific focus on “innovation in genomics, immunology and bioengineering.”

Right now that includes stocks like European megacap drugmaker Sanofi (SNY) as well as $5 billion oncology biotech Exelixis Inc. (EXEL). Though the strategy is narrow, the list of holdings is pretty diverse within this corner of the market. And though smaller, IDNA does enjoy $300 million in assets so it does have a decent amount of support across Wall Street.

Invesco Dynamic BioTech & Genome ETF (PBE)

A roughly $200 million biotech ETF, this Invesco fund is another tactical play on a subset of stocks in the sector – this time, involving gene-editing and DNA-related capabilities. That includes big biotech names like the $60 billion Regeneron Pharmaceuticals Inc.

(REGN) as well as smaller up-and-comers like Ireland-based “orphan drug” researcher Alkermes PLC (ALKS). Though shares have been volatile, a decline of 20% over the last 12 months puts this smaller biotech ETF ahead of many of its larger peers, and that may make it worth a look in 2022 as a result of this resilience.

Direxion Daily S&P Biotech Bull 3X Shares ETF (LABU)

No discussion of fast-moving biotech ETFs would be complete without the fastest-moving fund of them all – this “leveraged” offering from Direxion aims to deliver 300% of the daily returns of the S&P Biotechnology Select Industry Index. That’s great news when times are good, like when this ETF nearly tripled from its late 2020 lows to a high that briefly crested $185 in early 2021.

However, it’s worth noting this biotech ETF sits in the low $20 range at present for a gut-wrenching decline of almost 90% from its 52-week high. If you’re not afraid of the big risks and want to bet on biotech, LABU may have a limited role in your portfolio. But considering the current momentum is to the downside, investors may want to tread very carefully here.

Here are the seven best biotech ETFs to buy:

  • iShares Biotechnology ETF (IBB)
  • SPDR S&P Biotech ETF (XBI)
  • ARK Genomic Revolution ETF (ARKG)
  • First Trust NYSE Arca Biotechnology ETF (FBT)
  • iShares Genomics Immunology and Healthcare ETF (IDNA)
  • Invesco Dynamic BioTech & Genome ETF (PBE)
  • Direxion Daily S&P Biotech Bull 3X Shares ETF (LABU)
Jeff Reeves is a veteran capital markets journalist and an active individual investor. Since 2017, he has written about dividend stocks and exchange-traded funds for US News & World Report. His work has also appeared on CNBC, the Fox Business Network, the Wall Street Journal digital network, USA Today and CNN Money.

Source: 7 Best Biotech ETFs to Buy | Investing | US News

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Moderna Stock Crash Has Wiped Nearly $100 Billion As Flu Vaccine Results Trigger Latest Plunge

Moderna shares plummeted Friday morning after the Cambridge, Massachusetts-based biotech firm reported early data for its seasonal flu vaccine that failed to impress investors, intensifying a crash that’s wiped out nearly 50% of the value in one of the year’s best-performing stocks.

Key Facts

Shares of Moderna fell 8% Friday by 11:30 a.m. ET after the company reported early data for its seasonal flu vaccine that showed robust increases in antibody concentration among patients in the study.

Though Moderna touted the results as positive, Morgan Stanley analyst Matthew Harison said the initial data looked “undifferentiated” with biotech firm Sanofi’s flu vaccine, which is already on the market—a disappointment for investors seeking data that “supported clearly better efficacy.”

Shares plunged as much as 13% after the early morning report, pulling prices to near one-month lows until they pared losses after Moderna announced a new agreement to supply 20 million more Covid-19 vaccine doses to the World Health Organization’s Covax initiative, which is now on track to receive about 54 million Moderna vaccine doses in 2021.

At current prices of about $250, shares of Moderna have plunged 48% from an all-time closing high of $484 on August 9, wiping out about $97 billion from the firm’s market capitalization, which now stands at roughly $101 billion.

Despite its recent weakness, Moderna is still the S&P’s third-best-performing component this year, with shares skyrocketing about 127% thanks to the company’s Covid-19 vaccine becoming widely available across the world.

Big Number

$8 billion. That’s how much Moderna CEO Stéphane Bancel, who joined the firm in 2011, is worth as of 11:30 a.m. Friday, according to Forbes. The French native owns a roughly 8% stake in Moderna.

Key Background

Covid-19 vaccines, which are Moderna’s only commercialized product, have proven to be a massive boon for businesses heading up their development, but Moderna shares have struggled in recent months as critics increasingly question whether or not sales of Covid-19 vaccines alone will prove a viable revenue stream in years to come.

Last month, the company reported third-quarter sales and earnings that failed to meet analysts’ expectations, with revenue falling short of $5 billion despite average analyst projections calling for $6.2 billion. In addition to lower sales projections, supply chain constraints and the development of antiviral Covid-19 treatments have also triggered Moderna stock sell-offs.

Tangent

Diverse product offerings have helped Moderna’s biggest Covid-19 vaccine competitors earn high marks on Wall Street. Wells Fargo recently initiated Pfizer coverage with a “buy” rating and $60 price target, implying an upside of around 16% from current levels. The vaccine-maker’s new oral antiviral pill, Paxlovid, “provides another avenue for Covid-related growth” and will be a “game changer” for the company’s profits, the analysts said, forecasting nearly $18 billion in sales from the product next year.

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I’m a senior reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business journalism and

Source: Moderna Stock Crash Has Wiped Nearly $100 Billion As Flu Vaccine Results Trigger Latest Plunge

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AI Can Write Code Like Humans Bugs and All

Some software developers are now letting artificial intelligence help write their code. They’re finding that AI is just as flawed as humans.

Last June, GitHub, a subsidiary of Microsoft that provides tools for hosting and collaborating on code, released a beta version of a program that uses AI to assist programmers. Start typing a command, a database query, or a request to an API, and the program, called Copilot, will guess your intent and write the rest.

Alex Naka, a data scientist at a biotech firm who signed up to test Copilot, says the program can be very helpful, and it has changed the way he works. “It lets me spend less time jumping to the browser to look up API docs or examples on Stack Overflow,” he says. “It does feel a little like my work has shifted from being a generator of code to being a discriminator of it.”

But Naka has found that errors can creep into his code in different ways. “There have been times where I’ve missed some kind of subtle error when I accept one of its proposals,” he says. “And it can be really hard to track this down, perhaps because it seems like it makes errors that have a different flavor than the kind I would make.”

The risks of AI generating faulty code may be surprisingly high. Researchers at NYU recently analyzed code generated by Copilot and found that, for certain tasks where security is crucial, the code contains security flaws around 40 percent of the time.

The figure “is a little bit higher than I would have expected,” says Brendan Dolan-Gavitt, a professor at NYU involved with the analysis. “But the way Copilot was trained wasn’t actually to write good code—it was just to produce the kind of text that would follow a given prompt.”

Despite such flaws, Copilot and similar AI-powered tools may herald a sea change in the way software developers write code. There’s growing interest in using AI to help automate more mundane work. But Copilot also highlights some of the pitfalls of today’s AI techniques.

While analyzing the code made available for a Copilot plugin, Dolan-Gavitt found that it included a list of restricted phrases. These were apparently introduced to prevent the system from blurting out offensive messages or copying well-known code written by someone else.

Oege de Moor, vice president of research at GitHub and one of the developers of Copilot, says security has been a concern from the start. He says the percentage of flawed code cited by the NYU researchers is only relevant for a subset of code where security flaws are more likely.

De Moor invented CodeQL, a tool used by the NYU researchers that automatically identifies bugs in code. He says GitHub recommends that developers use Copilot together with CodeQL to ensure their work is safe.

The GitHub program is built on top of an AI model developed by OpenAI, a prominent AI company doing cutting-edge work in machine learning. That model, called Codex, consists of a large artificial neural network trained to predict the next characters in both text and computer code. The algorithm ingested billions of lines of code stored on GitHub—not all of it perfect—in order to learn how to write code.

OpenAI has built its own AI coding tool on top of Codex that can perform some stunning coding tricks. It can turn a typed instruction, such as “Create an array of random variables between 1 and 100 and then return the largest of them,” into working code in several programming languages.

Another version of the same OpenAI program, called GPT-3, can generate coherent text on a given subject, but it can also regurgitate offensive or biased language learned from the darker corners of the web.

Copilot and Codex have led some developers to wonder if AI might automate them out of work. In fact, as Naka’s experience shows, developers need considerable skill to use the program, as they often must vet or tweak its suggestions.

Hammond Pearce, a postdoctoral researcher at NYU involved with the analysis of Copilot code, says the program sometimes produces problematic code because it doesn’t fully understand what a piece of code is trying to do. “Vulnerabilities are often caused by a lack of context that a developer needs to know,” he says.

Some developers worry that AI is already picking up bad habits. “We have worked hard as an industry to get away from copy-pasting solutions, and now Copilot has created a supercharged version of that,” says Maxim Khailo, a software developer who has experimented with using AI to generate code but has not tried Copilot.

Khailo says it might be possible for hackers to mess with a program like Copilot. “If I was a bad actor, what I would do would be to create vulnerable code projects on GitHub, artificially boost their popularity by buying GitHub stars on the black market, and hope that it will become part of the corpus for the next training round.”

Both GitHub and OpenAI say that, on the contrary, their AI coding tools are only likely to become less error prone. OpenAI says it vets projects and code both manually and using automated tools.

De Moor at GitHub says recent updates to Copilot should have reduced the frequency of security vulnerabilities. But he adds that his team is exploring other ways of improving the output of Copilot. One is to remove bad examples that the underlying AI model learns from. Another may be to use reinforcement learning, an AI technique that has produced some impressive results in games and other areas, to automatically spot bad output, including previously unseen examples. “Enormous improvements are happening,” he says. “It’s almost unimaginable what it will look like in a year.”

Source: AI Can Write Code Like Humans—Bugs and All | WIRED

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