By Aaron Pressman and Adam Lashinsky
December 14, 2017

Artificial intelligence is so hot it’s on the verge of becoming a cliché. Yet the topic has so thoroughly permeated the strategic landscape that every CEO needs an AI plan, much as every leader needs to understand digital disruption, regulation, and cybersecurity.

I recently interviewed Walt Bettinger, CEO of financial-services goliath Charles Schwab, and over the course of discussing interest rates, asset allocation, and cash management, I asked him, almost in an obligatory manner, what Schwab was doing with AI.

His answer surprised me. The one-time discount brokerage had no interest in using AI to beat the market, knowing first that algorithms already were quite good at designing asset-allocation strategies and second that a computer couldn’t consistently beat the market. Instead, Schwab was using home-built AI to “listen” to customer-service conversations and offer help to human representatives in real time. A client might have too large a position in one stock, for instance, and an AI could pick this up and alert the rep to alert the client. Only a computer, said Bettinger, could monitor tens of thousands of calls that way and offer constructive suggestions in real time.

The key to this example is that Schwab understands the limitations of AI and also the role humans play in making it work. Read my whole interview with Bettinger, in the current issue of Fortune, here.

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Like a lot of others, apparently, I scratched my head Wednesday morning as to what Apple meant by the $390 million “award” it had given to facial-recognition concern Finisar. The money comes from something Apple calls its $1 billion Advanced Manufacturing Fund, which would suggest that the “award” is either a grant or an investment. It is neither. Instead, it is a commercial agreement.

“Questions have arisen regarding news reports of Apple Inc.’s announcement this morning regarding a $390 million award to Finisar,” the Sunnyvale, Calif., said in a securities filing Wednesday. “Apple has not made a debt or equity investment in Finisar. The amount referred to by Apple represent anticipated future business between the companies over a period of time.”

In other words, Apple is buying a type of laser from Finisar, which will use the commitment to build factories, which will create jobs, which will earn political Brownie points for Apple, which might explain why it is characterizing a purchase order as a “reward” from a “fund.”

Adam Lashinsky
@adamlashinsky
adam_lashinsky@fortune.com

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