CEO Daily: Monday, 9th January

January 9, 2017, 11:35 AM UTC

Good morning.

I’m in Los Angeles this morning, having spent last night at the Golden Globes awards – an evening of celebrity and high fashion to counter a three-day inundation in CES’s high-tech geekery.

The link between the two was the movie Passengers, which I saw here Saturday night. It didn’t make much of a showing at the Golden Globes. Hollywood was more impressed with the navel-gazing of La La Land, which ran away with last night’s major awards.

But I thought Passengers was a perfect sequel to CES. Rapid advances in AI were the major theme of this year’s conference, and the movie was an entertaining exploration of where those advances might take us in the future.

One big question overhanging AI is what happens as its capabilities become increasingly human-like. Will machines ultimately challenge human dominance? Baidu’s Andrew Ng told Fortune he wasn’t too worried about this threat.

But Intel CEO Brian Krzanich, who participated in the panel I moderated Friday, seemed more confident about the rapidly-advancing abilities of computers to think like humans.

My favorite scene in Passengers was when Jim (Chris Pratt) is talking to the android bartender Arthur (Michael Sheen) about whether to wake up Aurora (Jennifer Lawrence) from hibernation – a profound moral question, since it would give him a companion, but doom her to a life inside the spaceship. Arthur’s response: “Jim, these are not robot questions.” That’s an android who knows his limits.

The second big question overhanging AI is whether it will eliminate jobs more rapidly than new ones are created. My three panelists Friday – Krzanich, Ford CEO Mark Fields, and Flex CEO Mike McNamara – all expressed confidence that new jobs would emerge. “I have this belief that technology drives transformation — it actually creates jobs,” Krzanich said “It rarely ever eliminates jobs.” But all stressed the need for more emphasis on training and education programs to re-skill displaced workers. “There are going to be displaced people,” Fields said, “and they are going to be vocal about it, and we as a society are going to have to deal with that, because the last thing we want is to have society turn against technological innovation. That would be disastrous.”

More news below.

Top News

  Trump ‘Accepts’ Russia Election Hacking, Says Priebus

President-elect Donald Trump accepts the U.S. intelligence community's conclusion that Russia engaged in cyber attacks affecting the U.S. presidential election and may take actions in response, according to his incoming chief of staff Reince Priebus. Priebus' comments marked a significant shift away from Trump’s previous stance, although there was still no acceptance that the hacking had an influence on the election’s outcome.  There’s no confirmation yet from the horse’s mouth (or Twitter account), but it would be striking if the President-elect were to contradict his chief of staff (and the Republican establishment that Priebus represents) as well as the combined intelligence agencies of the U.S. Fortune

  China Warns Trump Over Taiwan

State-run Chinese tabloid Global Times warned that China would "take revenge" if President-elect Donald Trump reneged on the U.S.’s one-China policy, hours after Taiwan's president made a controversial stopover in Houston. Taiwan President Tsai Ing-wen met senior U.S. Republican lawmakers including Texas Governor Ted Cruz during her stopover in Houston on Sunday en route to Central America. Tsai will also stop in San Francisco on Jan. 13, her way back to Taiwan. China had asked the U.S.  not to allow Tsai to enter or have formal government meetings under the one China policy, which is based on the view that Taiwan is essentially a Chinese province. Beijing suspects Tsai of pushing for independence and full international recognition for Taiwan as a sovereign state. Time

McDonald’s Sells Majority Stake in China Business

McDonald’s agreed to sell an 80% stake in its mainland China and Hong Kong business to Carlyle Group and state-owned Chinese brokerage and asset manager Citic. The deal values the business at up to $2.08 billion, depending on a final valuation. It accelerates McDonald’s move to an asset-light structure (it wants franchises to account for 95% of restaurants worldwide). It also marks a milestone in the evolution of its second-biggest market. As long as China was growing like a weed, the company reinvested almost all its profits there. Now China is slowing and the business is being run more for cash, McDonald’s needs to pay more attention to how to get its money out, especially now that Beijing is tightening capital controls. Fortune

 FBI Arrests VW Executive As Criminal Case Nears Resolution

The FBI arrested Oliver Schmidt, the man who led Volkswagen’s U.S. compliance operations between 2014 and March 2015. He’s likely to be arraigned Monday on charges of conspiracy to defraud the U.S., according to the New York Times. Schmidt is the second VW employee and the first executive to be charged in connection with the diesel emissions scandal. The NYT also reported that VW is likely to plead guilty and pay $2 billion to settle the Department of Justice’s criminal case into the affair, on top of the $16 billion it paid to settle the government’s civil claims. None of VW’s senior management are at the Detroit show this week. Fortune

Around the Water Cooler

  Theresa May Sinks the Pound With Brexit Comments

Sterling fell to a two-month low against the dollar after Prime Minister Theresa May dropped her broadest hint yet that the U.K. would have to leave the EU’s Single Market in the process of leaving the EU itself. Business leaders are anxious to stay in the Single Market, akin to non-EU member Norway, afraid that leaving would bring border tariffs and other market-access problems, especially for the highly-regulated financial services sector. However, leaving the Single Market is the only way to satisfy popular demands for immigration curbs by escaping the EU’s rules on freedom of movement. Business likes free movement because it needs skilled workers from Europe to fill vacancies in an economy that is still performing as strongly as any in the G7. Fortune

  Uber Will Share More Data With Town Planners

Uber said it would share more data with municipalities on the volume and time of rides ordered through its app. The partnership illustrates how the ride-hailing service is mutating slowly from being an outsider challenging the system to being part of the system itself, and contrasts with its often hostile relationships to regulators who have often sought to restrict its operations. The deal will keep Uber users’ data anonymous. The news comes amidst Uber's battle with New York City over rules that would require it and other ride-hailing services to share specific times and locations for each drop off, to allow better monitoring of driver hours. Fortune

  Another One Bites the Dust in the Mall

Women's apparel chain The Limited began closing all 250 of its stores across the U.S. Sunday and said it will cut 4,000 jobs, the latest casualty of shopping's move online and the growth of fast fashion chains. The Limited was spun off from Victoria’s Secret in 2007 in a leveraged buyout by Sun Capital, which said Sunday it was writing its investment down to zero. It all adds to the pressure on operators of shopping malls, which are seeing other stalwarts like Macy’s and Sears step up the pace of closures. A report by Reis Inc. on Friday showed that mall vacancy rates rose in 30 of 77 metro areas last year, up from 24 in 2015. Fortune

Fiat Chrysler Tries to Get Ahead of the Trump Blame Game

Fiat Chrysler said it would invest $1 billion to modernize two plants in Michigan and Ohio, in a move apparently aimed at pre-empting censure from the President-elect. FCA said a plant in Warren, Michigan, near Detroit, would make the Jeep Wagoneer and Jeep Grand Wagoneer SUVs, while a Toledo, Ohio, factory would produce the Jeep pickup. The announcement is good publicity for FCA as the North American International Auto show prepares to open in Detroit. Like the moves by its big two U.S. rivals, it appears to make domestic production increasingly concentrates on production of SUVs and pickups. Demand for these has been strong due to low gas prices over the last couple of years.  Detroit will be hoping that the shale industry can guarantee they stay low by replacing the oil that OPEC and Russia are taking off the market right now. Fortune

Summaries by Geoffrey Smith;



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