Friday, 30th June
One of the ironies of today’s economy is that while unemployment is near historic lows, anxiety about technology eliminating jobs seems to be near record highs. That’s because for years we were told the future belongs to “knowledge workers”—and now AI is threatening to displace knowledge work, too.
But the fears are overstated.
In the July issue of Fortune magazine we asked some of the smartest people we know to weigh in on this issue. To start your July 4th weekend off on an optimistic note, I’m sharing a few of their responses here.
“There’s this assumption that it’s going to be people or robots, all or nothing. My experience is that it doesn’t operate that way. It’s automating part of the job, but not the full job. Repetitive, manual work—no one who’s doing it is really enjoying it. Technology replaces and creates. It replaces manual work and creates new opportunities—new tasks, if you will. And productivity creates growth, which creates new kinds of work. It is a virtuous cycle. It’s so easy to talk about it in binary terms. I just don’t think that’s the reality.” —John Donahoe, CEO, ServiceNow
“There’s a huge need to increase productivity around the world, the U.S. included, simply because of aging. Half of our economic growth has come from more people working: women in the workforce, growing population. That source is about to disappear. So we badly need to increase the economic output. One way to do that is to have the robots, the AI, do the work. It has the potential to increase our productivity.” —Michael Chui, partner, McKinsey Global Institute
“Most of us don’t have the reflective time that allows us to be innovative and creative. So we’ve actually destroyed our capacity to go beyond computers. But computers are always going to be more efficient than us. For us to be better than technology, we have to find our inner human.”—Lynda Gratton, professor, London Business School
News below. Spend some quality time with your inner human this weekend. I’ll be back Wednesday morning, after the July 4th holiday.
• Walgreens Right-Sizes Rite Aid Deal
Stefano Passina scaled back his bid for dominance of the the retail pharmacy market. His Walgreens Boots Alliance abandoned its plan to buy Rite Aid for $9.4 billion, and said it would instead buy some 2,186 stores from it. While he had offered $9.4 billion for the whole company, he’s now paying $5.18 billion for 45% of its chain. WBA shares rose 5% in relief, Rite Aid’s fell 21%, having gained a $325 million termination fee but lost a strategy. Southern drug store chain Fred’s, which had stood to gain national scale by buying the stores that Walgreens was hiving off to satisfy possible antitrust concerns, also fell 22%. The FTC, which hadn’t officially challenged the deal, went out of its way to say that it wasn’t to blame for its collapse. Fortune
• Make America Dominant (in Energy)
President Donald Trump delivered a keynote speech on energy policy that aimed at achieving “Energy Dominance”—a step change from the ‘energy independence’ that presidents have sought since the 1970s oil shocks. In concrete terms, Trump’s plans include a complete review of the nuclear energy sector, revived sponsorship of coal-fired power plants overseas (to grow demand for U.S. coal) and more generous licensing terms for offshore drilling and for oil and gas export infrastructure. They promised much less to renewable energy technologies. Trump’s speech came on a day when Facebook successfully tested a solar-powered drone through which it intends to deliver Internet access to millions. NYT
• Cyber Attack Was Sabotage, Not Extortion
Sabotage, rather than extortion, was the motive behind the virus attack that hit companies and governments across much of the world earlier this week, according to investigators in Ukraine, where three quarters of the infections are estimated to have taken place. The malware’s demands for money appear to have been for show, because even victims who pay the demanded ransom find their files have been wiped. Some evidence indicates that the initial target was a Ukrainian software supplier (MeDoc), which in turn suggests a degree of targeting common, but not exclusive, to state-sponsored hackers. Ukraine’s authorities have naturally blamed Russia, having suffered repeated cyber attacks from that source in recent years. Grid operator Ukrenergo said it was hit by another such attack yesterday. Russia denies the “blanket” accusations. Both countries have indulged in unrestrained misinformation since Russia’s invasion in 2014. Fortune
• Markets Steady After Taste of a World Without Free Money
Stock and bond markets look set to end a troubled week on a calmer note, bouncing back overnight after another sharp sell-off Thursday. Fears about central bank policy tightening may now have gotten ahead of reality a little: the ECB dialed back some of Mario Draghi’s comments yesterday, and lower-than-expected oil prices seem set to take the edge off inflation data later in the year. The dollar index has fallen to a 16-month low this week on news that the European recovery is accelerating. That all bodes well for large U.S. companies with a disproportionate share of their earnings in foreign currencies. Eurozone consumer sentiment, in particular, hit a post-crisis high earlier this week. Reuters
Around the Water Cooler
• Amazon Tie-Up, China Surge Propel Nike
Shares in Nike soared nearly 7% in after-hours trading after a strong quarterly report in which earnings rose over 20% on a 5.3% rise in revenue. The highlight was an 11% rise in sales in Greater China, a market where Nike has been faster to move its distribution online. That brings into sharper focus the potential gains of its new openness to online distribution in the U.S.. On an analyst call, CEO Mark Parker confirmed a badly-kept secret that it is indeed planning to start selling directly on Amazon. Fortune
• Murdoch ‘Fit and Proper’ But Still Too Dominant
The British government threw a wrench into 21st Century Fox’s plans for Europe, indicating it will order a review its proposed $15 billion takeover of pay-TV and internet provider Sky, in defense of ‘media plurality’. News Corp’s decades-long dominance of the U.K. newspaper business, together with still-fresh memories of a phone-hacking scandal by News Corp, means that the government is unwilling to let Fox have complete control over Sky in the U.K.. The regulator Ofcom did at least confirm Fox would be a ‘fit and proper’ owner of Sky if the takeover succeeds—an issue that had been in some doubt during Fox’s recent sexism-related travails. FT, metered access
• Blue Apron Delivers a Down Exit
Blue Apron’s shares fizzled on their stock market debut, a victim of the chill cast over the grocery sector by Amazon’s move on Whole Foods. The shares were priced at $10, the low end of the range, and closed there after selling picked up during the day. The IPO valued the company at just shy of $1.9 billion, down nearly 30% from its last private funding round, according to CBInsights. Parallels with Snap, which has lost 28% since listing due to similar concerns about having to take on better-funded incumbents (Facebook), were plentiful. Fortune
• A Chinese Echo
Jack Ma’s Alibaba is jumping into the market for voice-controlled digital assistants and speakers. According to The Information, the company will launch its new product next week, focusing (for now, at least) exclusively on the domestic Chinese market. The FT points out that Baidu and JD.Com both already have digital assistants on the market, while Huawei is working on a product to rival Apple’s Siri. Back in the U.S., Samsung had announced a partnership with Microsoft Monday to market a product powered by Microsoft’s Cortana. The Information, subscription required
Summaries by Geoffrey Smith Geoffrey.email@example.com;