By Geoff Colvin and Ryan Derousseau
February 22, 2017

Three important developments that deserve more attention than they got in the news of the past 24 hours:

Bill Gates proposes robot tax. Microsoft’s co-founder suggested that robots should be taxed like human workers, based on the value of their work. As a matter of tax policy, the notion seems obviously loony. Gates used the example of a human worker making $50,000 who is replaced by a robot; “you’d think we’d tax the robot at the same level,” he said. But of course the robot is brought in only because it can do that same work for less than $50,000. To tax the robot’s owner as a human earning $50,000 would in effect make efficiency illegal. In addition, the principle Gates proposes would seem to require taxing any technology that eliminates human labor, presumably starting with the wheel.

Yet as an insight into societal issues, Gates’s idea illuminates a larger truth. For the first time in history, technology may be – not for sure, but may be – eliminating jobs faster than it creates new ones. If it’s really doing so, then our whole economic and social order will be remade in a disruptive and destabilizing way. Gates is suggesting a way to slow down the process and generate tax revenue to fund job retraining. Regardless of his idea’s merits, the issue won’t go away. Last summer the European Parliament advanced a proposal that robots be deemed “electronic persons” for whom their owners must pay social security tax. That idea sounds similarly loony. But business and government leaders who think so must form their own proposals for addressing an issue that’s sure to intensify.

-Amazon strikes back at Walmart. Amazon offers free two-day shipping, among many other benefits, to Amazon Prime members (who pay $99 a year). Walmart tried a similar $49 membership program but recently dropped it and offered free two-day shipping on orders of at least $35. Now Amazon has dropped its free-shipping minimum for non-Prime members from $49 to $35. Why should you care? Because Amazon vs. Walmart is shaping up as one of the great business battles of all time, with neither side willing to give up an inch of ground. Every move is strategically important. We’re watching a classic case study playing out in real time.

-The aircraft carrier USS Carl Vinson enters the South China Sea. The Navy said the deployment is part of “routine operations,” and no doubt it is, but the Carl Vinson, a so-called supercarrier with 90 aircraft and a crew of 6,000, sends a message wherever it goes. In response, China’s foreign ministry told the U.S. to “refrain from challenging China’s sovereignty and security” in the area. China’s claims around the Spratly Islands and elsewhere in the South China Sea, which an international tribunal at The Hague condemned last year, would give China control over 30% of the world’s shipping, worth $5.3 trillion a year. It seems inevitable that push will come to shove, and the stakes are enormously high.

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What We're Reading Today

CSX to cut 1,000 management positions and its CEO retires
Under pressure from activist investor Mantle Ridge, CSX announced that CEO Michael Ward will step down in May. The hedge fund wants to install former Canadian Pacific Railway CEO Hunter Harrison in the top spot. CSX says the moves were long planned and not a response to Mantle Ridge’s urging.
Fortune

Peugeot goes on the offensive
CEO Carlos Tavares‘s three years atop Peugeot have so far focused on rescuing a company near bankruptcy. Now Tavares is ready to build the company, with his bid for GM’s European business, Opel, as well as a stake in a Malaysian automaker. 
WSJ

Automakers ask EPA to reverse Obama emission rules 
A trade group representing Mary Barra‘s GM, Akio Toyoda‘s Toyota, Matthias Müller‘s Volkswagen, and others, has asked the EPA to end Obama administration vehicle emissions standards that are set through 2025. The automakers claim the rules are too stringent and would cost jobs.
Reuters


Building Better Leaders

Companies struggle to identify high potential employees
Over 40% of employees in high potential programs don’t belong there, says new research.
Harvard Business Review

The jobs most at risk of being replaced by robotics…
…are in customer service, shipping, and healthcare (but not doctors, yet).  
Fortune

The impact of older workers
The U.S. population got older last year, but labor force participation stabilized. Encouraging workers to stay beyond retirement age could strengthen the U.S. economy. 
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Trump's Latest

Trump’s immigration order to clear way for deportations
In an effort to stem illegal immigration, the Trump administration has issued guidelines instructing authorities to target and deport immigrants faster. Homeland Security Secretary John Kelly has ordered officers to increase raids in areas with high numbers of illegal immigrants, detain even those who don’t have convictions, and deport people for small infractions.
Los Angeles Times

Trump would reconsider Bannon’s role on the National Security Council…
…if new National Security Adviser Lt. Gen. H.R. McMaster wants to replace him. Trump named chief strategist Steve Bannon to the council even though his background is as a media executive and political campaign strategist. 
WSJ

Trump’s Mar-a-Lago trips have cost taxpayers…
…$10 million in the first month of his presidency. At this pace, total costs for travel to the Florida home and related security could run in the hundreds of millions of dollars over four years. President Obama‘s costs were estimated at about $97 million over eight years.
Fortune


Fortune Reads and Videos

Uber CEO Travis Kalanick apologizes…
…for the company’s culture to employees at an all-hands meeting. Kalanick‘s apology comes after a former software developer claimed she dealt with sexual harassment and discrimination while working at the company.
Fortune

A potential problem for Snap investors…
…is dilution of shares. Snap plans to grant 270 million shares to CEO Evan Spiegel, a foundation, and others over the next three to four years. 
Fortune
 

The legalization of same-sex marriage…
…correlates with a drop in youth suicides.
Fortune


Quote of the Day

“Many of life’s failures are experienced by people who did not realize how close they were to success when they gave up.” — Thomas Edison  Inc.

 

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@ryanderous
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