Good morning.
Clear some space in the C-suite; your company now needs a Chief AI Officer.
So says Andrew Ng, who spoke last night at Fortune’s annual Brainstorm Tech dinner at the CES show in Las Vegas. In an interview with Adam Lashinsky, Ng predicted that five years from now, big company CEOs will “wish they had started earlier thinking about their AI (artificial intelligence) strategies.” In his view, AI is the “new electricity” that will change the fundamental operations of every business.
Ng is chief scientist at Baidu, an adjunct professor at Stanford University, the co-founder of the education company Coursera, author of dozens of published papers on machine learning and artificial intelligence, and a seriously smart guy. He said he and his friends sometimes “play a game – we try and think of an industry that will not be transformed by AI.” The closest they’ve come is hairdressing; but even that, he believes, will ultimately be disrupted.
Ng doesn’t worry much about Elon Musk-like doomsday scenarios, in which AI matches or exceeds human intelligence. Today’s AI is mostly “supervised learning,” he says, in which computers consume vast amounts of data and learn to map inputs to a desired response. It works best in a controlled context, with defined – if massive – data sets.
“Human intelligence does so much more,” he says. “We have pretty much no idea how the human brain works,” and “there is no clear path” to matching it. Worrying about evil AI robots taking over is, in his view, “like worrying about overpopulating Mars.”
But he is concerned about the jobs that will be displaced by AI projects now underway – from truck driving to the factory floor to banking. Job displacement will be “a big challenge.”
I’ll be wandering the sprawling CES show here for the next two days, exploring the latest technological wizardry. Tomorrow, I’ll moderate a conversation with Ford Motor CEO Mark Fields, Intel CEO Brian Krzanich, and Flex CEO Mike McNamara at a CES “supersession” on global innovation. Fortunately, AI hasn’t yet mastered the job of conducting interviews.
More news below.
| Alan Murray | |
| @alansmurray | |
| alan.murray@fortune.com |
Top News
• Fed Spooked by Trump
The Federal Reserve’s top brass is concerned it may have to raise interest rates faster than it currently expects if the new administration is true to the President-elect’s word on tax cuts, spending and regulatory reform. Minutes from the Fed’s meeting in December indicate that it will wait until it knows more about the “size, timing and composition of any fiscal and economic policy initiatives” before acting, but there is no getting away from the fact that, after a decade of fretting about downside risks to the economy, the central bank now sees the balance of risks firmly in the other direction. Fortune
• It’s Manipulation, Jim, But Not as We Know It
The renminbi has made its biggest ever two-day gain against the dollar, in a move that looks engineered to inflict pain on speculators trying to push the currency lower (and thus deprive President-elect Trump of ammunition for his complaints about unfair currency competition). The renminbi had neared the psychologically important level of 7 to the dollar in recent days, against a background of rising U.S. rates and fears of a trade war between the world’s two biggest economies. In the offshore market in Hong Kong, where the renminbi is supposed to trade freely, overnight interest rates spiked to over 38%, driving it over 2.5% higher against the dollar. It creates an interesting backdrop for the next set of foreign reserve data, which may see China’s FX stash fall below $3 trillion for the first time since 2011. FT, metered access
• No Miracle on 34th Street
Macy’s said it will close 63 stores this spring and eliminate 10,000 jobs, after reporting a miserable set of figures for the holiday season. Over 6,200 of those are new cuts, while nearly 4,000 were announced already last year. Comparable sales, which include its booming e-commerce business and sales at stores open at least a year, fell 2.1% in November and December. The company cut its full-year profit forecast by nearly 10% and its shares fell by a similar amount in after-hours trading. At least it wasn’t alone in its misery: Kohl’s sales over the two-month holiday period also fell by 2.1%. Fortune
• A Last Hurrah for Auto Sales?
U.S. sales of new cars and trucks hit a record high in 2016. According to Autodata, sales of 17.55 million were up 0.4% from 2015’s record. The news sent the stocks of GM and Ford up 5.5% and 4.6%, respectively. Executives from GM, Ford and Toyota reckon that this year will come close to matching 2016, pointing to a 15-year high in consumer confidence. Low interest rates and gas prices also help, but both will likely rise in the course of the year. It’s also worth noting that companies are resorting more to discounts to prop up sales – average discounts rose by some $500 from a year earlier to $4,000 in December, according to JD Power data. Reuters
Around the Water Cooler
• Apple Confirms Softbank Fund Investment
Apple confirmed it would invest $1 billion in a tech fund being set up by Japan’s SoftBank. An Apple spokesman said it would “speed the development of technologies which may be strategically important to Apple.” Apple’s investment is dwarfed by the $70 billion that Softbank and Saudi Arabia’s sovereign wealth fund are investing, but the move is another notable step in the direction of trusting others to create value with its money in the absence of any new in-house transformational projects. Qualcomm, a key partner in Apple’s smartphone business, has also already signed up to the fund, and supplier Foxconn is expected to follow soon, as is the family office of Oracle chairman Larry Ellison, according to The Wall Street Journal. In other Apple news yesterday, the company removed the New York Times app from the Apple Store in China under pressure from Beijing. Fortune
• Snapchat Skullduggery
The IPO of Snapchat parent Snap Inc. hit a speedbump. Anthony Pompliano, who was fired only three weeks after joining from Facebook to head the company’s user growth and engagement team, filed suit in an LA County Superior Court, alleging that the company was trying to inflate its value by misrepresenting its growth rates. He now claims Snap is smearing him to stop him finding a new job, according to the Hollywood Reporter. Snap has hired Goldman Sachs and Morgan Stanley to run what could be one of 2017’s biggest IPOs, reportedly eyeing a valuation of $25 billion for the messaging service. It says the case is without merit. Fortune
• A Wall Street Lawyer for the SEC
President-elect Donald Trump nominated deal-making attorney Walter ‘Jay’ Clayton to head the Securities and Exchanges Commission, in what looks like another significant change of emphasis at the top of federal agencies under the new administration. Clayton, who has worked on numerous mergers and capital-raisings by both private and public companies (notably Alibaba’s IPO in New York in 2014), is expected by many to dial back the SEC’s emphasis on enforcement and ease a regulatory burden that has contributed to a serious thinning-out of U.S. public equity markets. His challenge will be to do that without creating the ground for a new wave of corporate governance scandals like Worldcom, Enron and, of course, the subprime mortgage fiasco. Fortune
• Cuomo Pushes $10 Billion Facelift for JFK
New York Governor Andrew Cuomo proposed a $10 billion renovation of John F. Kennedy International Airport and surrounding roadways, his latest salvo in a roughly $100 billion push statewide to bring decaying old infrastructure into the modern era. Cuomo’s proposal would transform the New York City airport by unifying its currently disconnected terminals. It would also redesign internal roadways to centralize parking lots and revamp amenities. That could cost around $8 billion, with the remaining $2 billion being accounted for by an expansion of the Van Wyck Expressway. Fortune
Summaries by Geoffrey Smith Geoffrey.smith@fortune.com;
@geoffreytsmith
