CEO Daily: Wednesday, January 13

January 13, 2016, 11:36 AM UTC

This year’s Detroit auto show is proving that autonomous driving is no longer a techie’s pipe dream. Even holdout Akio Toyoda has finally joined the parade. The self-driving car is coming.


But behind that development is an even more profound change: artificial intelligence (also known as “deep learning”) has gone mainstream. The autonomous driving craze is just the most visible manifestation of the fact that computers now have the capacity to look, learn and react to complex situations as well or better than humans. It’s leading to a profoundly different way of thinking about computing. Instead of writing millions of lines of code to anticipate every situation, these new applications ingest vast amounts of data, recognize patterns, and “learn” from them, much as the human brain does.


“2015 was the big year,” says NVIDIA CEO Jen-Hsun Huang, who was in New York to attend an AI conference and stopped by FORTUNE’s offices to talk. “AI has been plodding along for 30, 40, 50 years in research. All of a sudden last year, something happened.”


Huang’s company makes GPUs, or Graphics Processing Units, which power many deep-learning applications. He said two years ago, NVIDIA was talking to only 100 companies or so that were interested in deep learning. “This year, we are working with more than 3,500.” The explosion cuts across industries: financing, medical imaging, media, and more.


Huang, of course, is not alone in seeing this inflection point. Google, Facebook and Microsoft all made big investments in this area last year. IBM is betting the company on what it calls “cognitive computing” (and is leading the industry in new patents – see story here.) Google’s Eric Schmidt, also in New York for the AI event, said the technologies will not only transform business, but have the potential to solve some of the world’s hardest problems, including population growth, climate change, and education.


So there’s a reason to be optimistic today. More news below.



Top News

Obama touts progress in economy

President Barack Obama gave his final State of the Union address on Tuesday, arguing the nation has made significant process on economic and national-security issues. Ahead of the speech, Fortune took a look at some key economic indicators, including a lower unemployment rate and the sharply higher value of the S&P 500 index. Other metrics don't look as good, including the steep drop in the labor participation rate, stagnant wages, and a drop in U.S. homeownership. Obama's speech also hit on key Democratic themes as the party gears up to maintain control of the presidency later this year. He backed labor unions and said Wall Street precipitated the economic crisis. Wall Street Journal (subscription required)

MetLife weighs U.S. retail IPO

The largest U.S. life insurer disclosed plans to possible sell, spin off or launch an initial public offering of its domestic retail business, a move that would shrink the company and cut the risk of tighter government oversight. The same logic had played a big part in General Electric's decision to simplify operations after being designated a "non-bank systemically important financial institution." The new company would account for about 20% of MetLife's operating earnings. MetLife's move would leave it with a regulated business, albeit less heavily regulated than retail insurers, a debt analyst said. The news sent shares rallying in after-hours trading on Tuesday. Bloomberg

California rejects VW plan

The California Air Resources Board rejected Volkswagen's proposed fix for bringing its 2-liter diesel engines into line with emission limits, a move that increases the likelihood that the German auto company will have to buy back hundreds of thousands of vehicles that breach U.S. limits on emissions. That would substantially boost the cost of rescuing the company's reputation in the U.S. It also comes at a bad time on a PR front for VW, as the company's CEO Matthias Müller is scheduled to meet with Environmental Protection Agency head Gina McCarthy in Washington, D.C., today. Fortune

EU to probe Halliburton deal

The European Commission has launched a probe into oilfield services provider Halliburton's planned purchase of smaller rival Baker Hughes, a cash-and-stock deal worth about $35 billion. While the commission said it would look "closely" at the proposed takeover to ensure that it would not reduce choice or push up prices for oil and gas exploration and production services, Halliburton claims the move is a normal step in the review process. The deal between Halliburton and Baker Hughes was first announced in November 2014. Reuters

Clinton unveils new plan to tax the rich

Democratic presidential contender Hillary Clinton on Tuesday called for closing a pair of loopholes that some have used to shield billions in personal wealth – a proposal that is a new way to raise taxes on the super-wealthy. One involves cycling income through reinsurance outfits that have been set up in low-tax nations to reduce what is owed to the U.S., a scheme that's popular among New York financiers including Dan Loeb and David Einhorn. The reforms Clinton proposes comes after she earlier this week pitched a 4% tax on individual income exceeding $5 million a year. Fortune

Around the Water Cooler

PC shipments struggled during the holidays

Worldwide shipments of personal computers declined in the fourth quarter, according to two industry reports, indicating the holiday didn't lift sales for PCs sold to consumers during a critical time of the year. The firms projected a fairly steep drop from a year ago – down 8% or 10.6% the firms estimated – with some of the weak sales attributed to China's turbulent economy. Some analysts were optimistic the PC market could eventually rebound in the second half of 2016, with hope that Windows 10's improved design and better security will lure more people to buy computers. Fortune

Disney sets opening for Shanghai park

Walt Disney is planning to open a theme park in China's commercial hub Shanghai this upcoming June, a $5.5 billion facility that was originally supposed to open last year. Disney's new park in China features established themes – like the castle and a "Toy Story"-themed hotel, though Disney said the park would also reflect China's culture. That was a necessary move for the company to win permission to enter the country. Disney already operates in the region, in 2005 opening a theme park in Hong Kong, a special administrative region of China. Yahoo News

'Sesame Street' gets makeover for HBO

“Sesame Street” is in desperate need for a turnaround this year – the well-regarded, long-running children's program lost $7.4 million in fiscal 2015 and saw total operating revenue down nearly 10% from the prior year. Under a new deal with HBO, the cable operator will have exclusive rights to the program for nine months. To prepare for the change, "Sesame Street" is planning some notable style changes: Big Bird's nest moved to a tree, Elmo now lives in a brownstone instead of an apartment, and Oscar the Grouch now pops up through an underground tunnel connecting recycling and compost bins. The new 46th season starts Saturday morning. New York Times (subscription required)

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