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CEO Daily: Wednesday, 13th July

Good morning.


The discussions at Fortune Brainstorm Tech this year highlighted how new technologies, from artificial intelligence to virtual reality, are fundamentally transforming nearly every sector of the economy. But there is one notable exception: the K-12 education system, which remains largely impervious to technology’s benefits.


Why? That’s the question I asked a group of 28 education and technology experts who secluded themselves for a couple of hours yesterday morning to try and come up with some answers. The session was co-hosted by Walter Isaacson of the Aspen Institute and Susanna Schrobsdorff of Time, and included a mix of school system superintendents, entrepreneurs and non-profit leaders.


At the top of their list for change was a concerted effort to ensure all students, and all schools, have access to high-speed broadband – still something that roughly a quarter of all students go without. But the second priority – and the one that consumed much of the morning’s discussion – was the need for better systems to drive adoption of best educational practices.


The problem, all attending seemed to agree, is not that there aren’t lots of teachers and schools and organizations who have developed good methods for using technology to provide individualized instruction to students. The problem is that most of those successes remain one-offs. “We are tired of little pilots,” said one attendee. What’s needed is a system to spotlight “pockets of excellence,” and bring those methods to scale. You can read Rob Hackett’s detailed summary of the panel here.


In the private sector, as conversations on the Brainstorm Tech main stage highlighted, those who don’t adopt best practices risk going out of business. In education, however, there’s usually no such threat. As a result, creating a system for bringing best-practices to all classrooms remains a challenge.


More news below, including other highlights from Brainstorm Tech.


Alan Murray

Top News

The Dragon’s Wounded Pride

President Xi Jinping said China won’t accept any proposition or action based on the arbitration ruling by a UN panel Tuesday that dismissed most of its territorial claims in the South China Sea. Xi called for fresh bilateral talks with “states that are directly involved” –a pointed dig at the U.S., which China maintains has no natural rights in its backyard. China is already talking about establishing an “Air Defense Identification Zone” over the disputed area, which would give it effective control of overflights. In almost-related news, South Korea chose yesterday to announce where it would site an advanced U.S. anti-missile system designed to protect it against attacks by North Korea. China and Russia are upset because the deployment of such weaponry changes the strategic balance of power beyond the Korean peninsula by giving a U.S. ally capability to interdict their missiles too. SCMP, CNN

Airbus Cuts Its Losses on the A380

Airbus said it will cut production of its A380 ‘superjumbo’, which has failed to attract the kind of order volumes expected since its launch to huge fanfare over a decade ago. The A380 is popular with flyers, but less so with airlines, who prefer smaller aircraft that can be deployed more flexibly to maximize yields. It isn’t clear whether the project, which cost $25 billion to develop, will ever break even. So far, 319 have been ordered. The company also warned earlier Wednesday that it will face fresh charges on its A400 military cargo aircraft program. Demand for smaller models such as the A321 continues to be firm, though: Airbus confirmed a $12.6 billion order from AirAsia for 100 single-aisle A321 yesterday.  FT, metered access

AB InBev Bets on Weaker Beer

Anheuser-Busch InBev, which will soon make almost 30% of the world’s beer, wants to serve more low and alcohol-free brews to drinkers trying to live a healthier lifestyle. The brewer of Budweiser et al. has forecast lower and zero strength beer will grow from a small base to make up 20% of its sales by the end of 2025. That compares to a global market share of around 2.5% in 2014, according to some estimates. The logic is that craft brewers are already securing the segment for higher-alcohol beers, leaving more opportunity elsewhere (including in the marketing of lower-calorie brews). The initiative will depend more than ever on appetites in North and South America, which will account for 70% of the group’s sales after its merger with SAB Miller. Fortune

• Theresa’s To-Do List

Theresa May will be confirmed in office today as the U.K.’s second woman Prime Minister. The urgent issue confronting her is whether or not to trigger the official process of negotiation separations with the EU (by invoking Article 50 of the EU’s Treaty). May has appeared to stall for time and hold off from that while she works out her negotiating strategy, which boils down to a choice between keeping full access to the Single Market and controlling immigration. She’s also said she won’t call a new election to give her a stronger mandate. EU officials are still trying to pre-empt any possible British request to water down EU rules on the free movement of labor and are refusing—at least publicly—to hold any kind of talks until May triggers Article 50. The pound, meanwhile, is at its highest in a week against the dollar, but still nearly 10% below its pre-referendum level. BBC


Around the Water Cooler

End of Days, pt. 94: The Pokemon Craze

Three data points stand out from the roaring success of Pokemon Go, the first Nintendo game to be successfully migrated to the world’s smartphones. First, it appears to render its users oblivious to norms of civilized behavior: as NPR reports, people think it’s quite appropriate to play it in Arlington National Cemetery or the Holocaust Museum. Second, it appears to blind them to their own personal safety, as they seem perfectly willing to go to unsafe locations in pursuit of their targets. Third, it creates a more powerful urge than sex – more people have downloaded Pokemon than Tinder on Android, according to tracking service Similarweb. All that suggests that the 50% rise in Nintendo’s share price (an increase of some $10 billion in market capitalization) since last week is perfectly justified. You might want to mark down your estimate of the human race by a corresponding amount, though. WSJ, subscription required, Fortune

A Pay Raise at JP Morgan

Jamie Dimon said JP Morgan will give its lowest-paid employees a chunky pay raise, in what he styled as “the right thing to do.” Dimon said the bank will raise its minimum wage for 18,000 U.S. employees from $10.15/hour (plus benefits) to between $12 and $16.50/hour over the next three years (depending on geographic and market factors). It is, undoubtedly, an encouraging sign that a tight labor market is forcing employers to pay more to keep staff on board, and on investing more in training them. JP Morgan didn’t say how much the raise would cost the bank, but Fortune estimates it will be around $50 million a year, or less than 2% of its overall wage bill. Whatever the overall number, plenty of those getting the raise will still find themselves struggling to keep up with the boss: Dimon’s own pay rose 35% to $27 million last year. Fortune

Sage Beats the Baby Blues

Shares in Sage Therapeutics leaped 40% Tuesday after the company announced positive mid-stage (Phase 2) trial results for SAGE-547, a drug to treat postpartum depression. The commercial value of a successful drug would likely be significant: PPD affects up to one in seven mothers, according to Sage’s own research, and there is no approved drug currently on the market. Sage said its tests showed a near-immediate effect on patients, with results visible within 60 hours. Secondary ‘endpoints’ also showed significant patterns of difference at 24 hours and through 30 days, at the end of which 70% of patients were in remission. SAGE-547 was initially conceived as a treatment for epilepsy, but early hopes for the drug had faded, causing the company’s shares to fall by over half from their 2015 peak before yesterday’s announcement. WSJ, subscription required

Amazon’s Suspect Prime Day

Amazon’s second annual summer sales blitz, called Prime Day, seems to have been a bit of a mixed bag, as soft U.S. sales contrasted with a 12% rise in the U.K. (so much for the Brexit effect). According to e-commerce software company ChannelAdvisor estimated that its U.S. sales were flat as of 5pm ET, but Amazon added more deals to its offer later in the evening. The day had started badly with many customers reporting technical problems and venting on social media. Amazon’s other goal for the Prime Day is to encourage more consumers to adopt its Prime service, which for $99 a year, among many benefits, offers customers free two-day delivery and access to Amazon’s TV and movie streaming service. Prime enrollments peaked on July 14 last year, one day before Prime Day. It’s unclear what effect, if any, Wal-Mart’s rival sales blitz may have had on Amazon’s takings this year. The target to beat is the $415 million it notched last year. Fortune