Will artificial intelligence eliminate jobs? That’s a popular topic for high-minded fora like the Aspen Ideas Festival, and it was the first question Aspen CEO Walter Isaacson asked Microsoft CEO Satya Nadella in their conversation yesterday.
“The real thing we need are guidelines for the creators of AI,” Nadella countered. “How do we create AI to augment human capabilities and enhance the human experience? What are the things we need to do so that human welfare is front and center? And that means building in trust, transparency, the ability to take back control, and infusing technology with human values and empathy.”
Nadella acknowledged the coming wave of artificial intelligence will create “massive displacement– that was true in the industrial revolution, and it will be true in this new AI age.” Moreover, he said, the AI revolution is likely to happen faster than previous industrial revolutions, meaning society will need to provide “reskilling on a constant basis.”
The Microsoft CEO then turned the conversation to what he called his “obsession” – focusing Microsoft on creating the tools for a “makers’ economy” that will enhance the ability of people “to make, express, create, build.…to empower every person, every organization on the planet. That’s what I want the next ten years of our company to represent.”
Nadella, who was trained as a computer scientist, got applause from the Aspen audience when he said the rise of AI means we need to educate the next generation to do things machines can’t – “empathy, creativity, curiosity, the ability of humans to be able to explore things which are non linear.” The implication for education is that “a more diverse set of subjects, beyond STEM, could become even more important.”
Before you get too comfortable with Nadella’s benign view of the technological future, take some time today to read Roger Parloff’s story about the algorithms that may be screening your office communications to determine if you are a “threat.” It’s in the July issue of our magazine, but being released online this morning.
More news below.
British politics is now so confusing that people are getting stabbed in the front by mistake. Boris Johnson, who led the Leave campaign, said minutes before the noon deadline that he wouldn’t run, after his referendum ally Michael Gove decided to run himself (Gove’s wife had trashed Johnson’s ability to lead in a leaked e-mail Wednesday). The party’s 330 MPs have to whittle the list down to two and present a binary choice to the nationwide party membership. All the candidates are solemnly swearing today to deliver the Leave verdict of the referendum, and all appear to prioritize capping migration over staying in the Single Market through the so-called EEA arrangement shared by Norway and Switzerland. Theresa May, the current favorite, said she wouldn’t formally activate the process of leaving until at least the end of this year—not what the EU wants to hear. BBC
• China is Ready to Let the Yuan Weaken
Correlation is not causation, but the market volatility that followed the Brexit vote appears to have a new dimension. China’s central bank is willing to let the yuan slide as far as 6.80 to the dollar this year, which would mean a second straight yearly loss of 4.5%. The story, from Reuters, suggests Beijing has no appetite to chain its currency to a dollar that is heading higher due to safe-haven flows out of sterling (which has virtually no AAA-rated assets after this week’s downgrades) and out of the euro (which is vulnerable to the ripple effects of Brexit). Capital is still flowing out of China due to the economic slowdown, but at a much slower rate than earlier in the year. Further yuan devaluation will spread the pain of Chinese deflation more evenly across the globe, reducing the scope for interest rate hikes by the Federal Reserve. Meanwhile, global stocks are broadly stable after yesterday’s extended rebound. But with the political processes described above locking in a high degree of uncertainty for a good six months, it’s worth remembering that markets don’t move down in straight lines. Reuters
• Fed Fails Morgan Stanley
Morgan Stanley failed the Federal Reserve’s annual stress tests as the Fed told it to resubmit its homework. In order to pass the test, banks have to show they have enough capital to cover a downturn, but they also have to show that they have the processes in place to assess what losses they might have if things get bad. The Fed said Morgan Stanley has “material weakness” in its “capital planning process.” The regulator also said that Morgan Stanley internal stress tests did not adequately reflect the “risks and vulnerabilities specific to the firm.” The Fed was kinder to GE Capital, formally ending its Too-Big-To-Fail status. The heavy capital requirements on TBTF banks had been behind GE’s decision last year to get out of finance and concentrate on its industrial businesses. Separately, the Fed also failed Deutsche Bank and Spain’s Santander, in a further blow to the image of European banks. Fortune
• Privacy Shield Deal Near
Europe and the U.S. are on the verge of a new deal that will allow the transfer of data across the Atlantic, removing a serious threat to the European businesses of Silicon Valley giants and other U.S. companies, according to The New York Times. Many of Europe’s national privacy regulators had raised concerns that the new agreement, known as the E.U.-U.S. Privacy Shield, did not go far enough to protect Europeans’ fundamental rights. They said the bulk collection of Europeans’ data by United States and European intelligence agencies failed to comply with the region’s data protection rules. The U.S. appears not to have made any fresh concessions, allowing the suspicion that the EU would rather have one less issue to worry about right now. NYT
Around the Water Cooler
• The Movie Merger Games
Lions Gate, the movie people behind the Hunger Games franchise, is set to go ahead after all with its bid for premium television network Starz, in a deal that would unite two media companies with ties to cable mogul John Malone, according to Bloomberg and Reuters sources. A deal could be announced as soon as Thursday. That contradicts a New York Post story which said volatility in the wake of the Brexit vote had scuppered talks. Lions Gate is planning to pay more than $30 per share in cash and stock for Starz, Reuters’ source said. That doesn’t sound like much of a premium to Starz’ current share price at just below $30. The two companies had held on and off talks for more than a year. Starz was spun off from Malone's Liberty Media Corp in 2013. Fortune
• Senate Passes Puerto Rico Relief Bill
The U.S. Senate gave solid approval on Wednesday to a relief plan to help Puerto Rico address its $70 billion debt, sending the measure to President Obama for his signing into law just ahead of a possible default by the territory on Friday. The House of Representatives has already approved the bill. The legislation would create a federal oversight board, appointed by Washington, with power to restructure Puerto Rico's unmanageable debt load. The bill provides for a stay, or halt, to any litigation brought against the Puerto Rican government and its debt issuing agencies backdated to last December. This provides breathing room for the board to start the process of restructuring and oversee a fresh budgetary start on a more sustainable basis. How that happens, with the key tourist industry suffering from fears about the Zika virus, isn’t yet clear. Fortune
• Walmart's Double-Whammy
Allegations of false advertizing continue to plague Walmart. The campaign group Truth in Advertizing accused it Wednesday of still misleading customers by branding products with high foreign content as “Made in the U.S.A.”. A year after the Federal Trade Commission launched a probe into the labeling practices of the country’s biggest retailer, Truth in Advertizing said Wal-Mart’s website was still “replete with false and deceptive U.S.-origin claims.” Walmart was also under attack from Visa yesterday, which accused it of acting in bad faith in their dispute over letting customers authorize transactions with signatures. Visa set Walmart had deliberately sabotaged its initiative by setting up PIN-only terminals in its stores. Fortune
• Honeywell Taps Adamczyk
Honeywell said its chief operating officer Darius Adamczyk will take over as CEO from outgoing veteran Dave Cote from April next year. Cote will move into the chairman’s seat. Cote’s stewardship has been one of U.S. industry’s big success stories in recent years, rewarded handsomely by the stock market—the company’s value has more than doubled from their pre-crisis peak, after a string of well-judged and, just importantly, well-implemented acquisitions to keep it at the cutting edge of its core business of supplying parts and materials to the aerospace industry. Its latest, most ambitious, move for United Technologies was rejected, but Cote said earlier this month he’s still looking for acquisitions. Fortune