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CEO Daily: Tuesday, 29th November

Good morning.

Today’s must-read is the Wall Street Journal take out on China’s plans for a “social credit” system, which underscores the potential dark side of big data. More than three dozen local governments across China are beginning to compile digital records of social and financial behavior that could include everything from jaywalking infractions and subway fare cheating to violations of family planning rules. Eventually, it also could include data on a person’s internet activity. Algorithms would use this data to calculate a person’s “social credit” score, which could be used for all sorts of purposes, including determining access to loans or government services. The system purportedly would “allow the trustworthy to roam everywhere under heaven while making it hard for the discredited to take a single step.”

The program is part of President Xi Jinping’s determined effort to ensure social stability, and seems likely to involve a wide array of Chinese businesses as well. Fortune’s Scott Cendrowski reports that Alibaba’s Alipay is one of eight companies involved in early experiments, and it’s likely companies like Tencent and Baidu will eventually be pulled in.

The development is a reminder of Kranzberg’s first law of technology: “Technology is neither good or bad. Nor is it neutral.”

More news below.

Alan Murray

Top News

AT&T Shies Away From Price War

AT&T formally launched its hotly-anticipated Internet TV venture, DirecTV Now, but it appeared to back off from launching the all-out price war with cable operators that some had expected. The rumored ‘$35 a month for 100 channels’ line turns out to be only an introductory offer, rising to $60/month at some still unspecified date in the future. The range of channels offered is a work in progress, with channels such as CBS and its sisters missing. Live NFL football via mobile, something of a Holy Grail, is also a no-go due to Verizon’s exclusive contract. Fortune

Capital Controls by Another Name

The global dollar shortage is real: China is preparing to impose more restrictions on acquisitions abroad in an effort to prop up its currency and shore up its foreign reserves, according to the Financial Times. The move comes at the end of a year when more investment capital has left China than entered it for the first time since 1998–a trend which, however it’s sliced, speaks volumes about the increasing difficulty of finding profitable investments in a slowing economy. Those capital flows have driven the renminbi down 5.9% against the dollar this year, a drop that would have been sharper without central bank intervention. FT, metered access

Samsung Plays For Time

To nobody’s great surprise, the board of Samsung Electronics punted a decision on the kind of radical restructuring advocated by activist investor Elliott Management. Instead, it announced a review that it said would take at least six months. Elliott is pressing Samsung’s owners to split the group into a holding company and an operating company, a move which it says will allow billions of dollars to be returned to shareholders. The Lee family that controls Samsung is more concerned with managing a generational transfer of power down from patriarch Lee Kun-hee, who has been hospitalized since a heart attack two years ago. It’s doing so at a time of serious distractions, from the Galaxy Note 7 fiasco to the political corruption scandal currently roiling the country. Fortune

Rupert Murdoch, Champion of Independent Reporting

It’s almost enough to restore your faith in the much-maligned mainstream media (whatever they may be). The Wall Street Journal’s reporting, which exposed the problems at Theranos, hit few people harder than the paper’s owner, Rupert Murdoch, who was one of several large investors in the company during its ill-fated expansion phase. Theranos is now under criminal and civil investigations by U.S. attorneys and the Securities and Exchanges Commission, and has  suspended its core blood-testing operations. It may not be Murdoch’s last $100 million, but his willingness to let the paper do its job in the public interest is a striking counterpoint to the prevailing doom and gloom narrative among media types. WSJ, subscription required

Around the Water Cooler

WTO Hits Boeing Just as Hard as Airbus

The efforts of Boeing and Airbus to assure their mutual destruction by striking down the subsidies enjoyed by the other proceed admirably. The World Trade Organization ruled Monday that a Washington state tax break to help develop the 777X airliner was a “prohibited subsidy” that will have to be withdrawn. The WTO also backed EU claims that another six measures provided subsidies to Boeing, but rejected European arguments that these fell into the most toxic category being reviewed by its panel. The ruling may, and most certainly will, be appealed, but could ultimately have a serious impact on Boeing’s accounts, according to Reuters sources. The U.S. had only recently secured a parallel ruling against the EU limiting its subsidies to Airbus. The hot question, as the row lurches towards its 13th year (sic), is whether the subsidies to be repaid will cover the respective sides’ legal bills. Fortune

BMW Comes to the Valley 

As Silicon Valley gets deeper into automotive technology, so the auto sector gets deeper into Silicon Valley. BMW is injecting another 400 million euros ($424 million) into its venture capital fund, iVentures, and relocating it to Palo Alto from its current base in New York City. The German company, like its rivals, is dwarfed in market value by the likes of Alphabet and Apple, who are both working on disruptive next-generation technologies. BMW’s move to buy in more expertise through iVentures contrasts with VW’s decision two weeks ago to invest overwhelmingly in a new R&D center for connected and autonomous driving technologies in its traditional home in Wolfsburg (although VW, in fairness, does also have a smaller VC arm)  Fortune

What Do You Get the CEO Who Has Everything?

With Thanksgiving out of the way, it’s time to turn one’s thoughts to what an average CEO might like for Christmas. Fortune’s John Kell has compiled a handy little list to suit all tastes, ranging from Cuban cigars to a $700,000 Michelin-star-catered weekend at Alnwick Castle (the ancestral seat of the Dukes of Northumberland that you may remember from a couple of Downton Abbey episodes). Plus, of course, the essential reading for anyone wanting to understand the incoming administration: Donald Trump’s “The Art of the Deal”, available on Amazon for just a little over $9 (and maybe for less from some Trump University graduates). Fortune

• Darling, It’s Just Mortifying (But Hey, What a Bargain!)

Of course, we were careful to style John Kell’s list ‘discerning’ rather than ‘exclusive’. The evidence suggests that true exclusivity is increasingly hard to defend as the Internet democratizes commerce. Cartier, the luxury jeweler owned by Swiss-based Richemont, is in high dudgeon after finding its $18,000 watches listed on (shudder), courtesy of an unauthorized third-party vendor, New York-based Jewelry Unlimited. The case is another illustration of the multi-faceted problem of authenticity in the digital world. Amazon and its Chinese analogue Alibaba are both struggling with the problem of actual fakes on their site. Tarring a vendor that undermines makers’ margins without defrauding customers (if such is the case) is another kettle of fish entirely.  Fortune