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CEO Daily: Tuesday, 8th August

August 8, 2017, 12:13 PM UTC

Good morning,

Google has fired James Damore, the software engineer whose internal memo about diversity and gender equality (or lack of it) created such a storm over the weekend.

CEO Sundar Pichai said in an e-mail to staff that Damore’s views “violate our Code of Conduct and cross the line by advancing harmful gender stereotypes in our workplace.” (You can read the full letter here.)

It’s a mistake that the company could live to regret.

I don’t say this in defense of Mr. Damore’s opinions. You can read the memo here and draw your own conclusions about that. But using executive power to shut down debate – especially at a company that prides itself on its openness – is both counterproductive and misguided.

For one thing, it supports Damore’s thesis about Google not being able to stomach open debate. Arguments need to be won, not stifled. Firing someone for merely expressing an opinion is the embodiment of intolerance. It undermines any claim to ‘diversity’ and ‘inclusiveness’.

Secondly, on a tactical level, it may well mean that Google has lost control of the process. Instead of allowing the matter to run its course through internal forums, it has created a martyr who will now be free to parade his victimhood on a much bigger stage. Damore told the New York Times he will “likely be pursuing legal action.” He’ll have the court of public opinion, at the very least. It’s a moot point whether he’ll make it to any other court, since non-union or “at will” employees can be fired for a wide array of reasons that have nothing to do with performance. But it seems a fair bet that he’ll be heartily backed to sue by conservative groups.

None of this is to deny the existence of gender pay gaps or glass ceilings, which are demonstrably real issues, both at Google and in the wider economy. And it’s hard to escape an impression that this is an over-reaction born out of weakness. If Google had done a better job of promoting women in the past, it would not now be in a position where its female staff feel like this is the last straw and where it has to resort to extreme measures to calm their outrage and defend its reputation.

But when Zeus reaches for his thunderbolt instead of replying, it’s because he’s wrong.

News below.

Geoffrey Smith


Top News

The Only Valuable Brand is a Tech Brand

Amazon is now one of the world’s five most valuable brands, according to this year’s Brandz100 list (put together by WPP’s Kantar Millward Brown). The key to its rise? Winning consumer trust through convenience and efficiency, according to the compilers. The Brandz top 5 is an exclusive club for tech stocks. Google comes top, followed by Apple, Microsoft, Amazon and Facebook. China’s Tencent Holdings, owner of the world’s most popular video game and a big social network, is at number eight, while the fastest riser was Germany’s Adidas.  Brandz

North Korea Vents While China Makes Nice

North Korea threatened to use its nuclear weapons against the U.S. if “provoked” and promised “physical action” in response to the latest round of UN sanctions against it. Foreign Minister Ri Yong Ho stressed that it would only target the U.S., and may have been surprised at the lack of reassurance felt by the rest of the world at his words. China, blamed by President Trump for failing to restrain its client, has pledged to enforce the sanctions that will cut North Korea’s export revenue by around one-third. Fortune

Cheap Debt > Cheap Equity at Tesla

Tesla said it will borrow $1.5 billion to fund its rollout of the Model 3, in what will be its first plain-vanilla issue of tradable debt. It should get the company through the next quarter's cash commitments with a bit left over to spare. Elon Musk had flagged his intentions during last week’s earnings call, but analysts questioned whether it wouldn’t have been more sensible to take advantage of its sky-high share price to issue more equity. Credit spreads have tightened as economic data have weakened the case for rapid interest rate increases, making the cost of raising debt even at a modest B- rating acceptable. Fortune

Kalanick, the No-Comeback Kid

There’ll be no comeback for Travis Kalanick as CEO of Uber, according to an e-mail to staff from co-founder and chairman Garrett Camp dug up by Recode. Camp’s re-emergence as a power in his own right at Uber is one of the interesting subplots in this year’s melodrama, and the The Wall Street Journal reported that the memo had not been coordinated with either the board. Nor is he a member of the five-strong executive search committee. According to the WSJ, Uber’s shortlist of three for the vacant CEO post includes Jeff Immelt, the former head of General Electric. Fortune

Around the Water Cooler

CBS Steps up its Streaming Game

CBS said it will launch a new digital sports network across the U.S. later in the year, and launch its ‘All Access’ streaming service abroad, starting in Canada next year. In addition, the company said its programming will now also be available through AT&T’s DirecTV service. The moves represent a big step up in streaming for a traditional TV player. The company’s quarterly earnings showed a 16% rise in revenue from affiliates and subscriptions, and a 12% rise in revenue from content licensing and distribution. Ad revenues rose 4.3%. Fortune

Mazda Flies the Flag for Combustion Engines

Only days after announcing it will team up with Toyota to make electric vehicles, Mazda announced a breakthrough in combustion technology that will make its engines 20%-30% more fuel-efficient. Many other automakers, including Daimler and GM, have tried to commercialize ‘compressed ignition’ technology in the past, without success. The achievement will give Mazda a head start in meeting tighter emissions regulations that are scheduled to come into force in both the U.S. and EU in the next few years. Mazda will start installing the new SKYACTIV-X engines in 2019. Fortune

Netflix Bets on Comic Books

Netflix made its first-ever acquisition, buying comic-book publisher Millarworld for a price estimated at between $50 million and $100 million – loose change for a $78 billion company that has nearly $2 billion in cash. Millarworld is best known for properties such as “Kingsman” and “Kick-Ass”, but neither of those is part of the deal. The move is a bet on repeating the success of Marvel (where Millarworld founder Mark Millar spent eight years) in spinning movies and serials off its comics. Fortune

McDonald’s China Partners Raise Their Aim

McDonald's Corp said it would almost double the number of stores in mainland China by 2022, slightly more than was expected, as part of its strategic partnership with state-backed conglomerate CITIC Ltd and Carlyle Group. Mcdonald’s had agreed to sell most of its China and Hong Kong business to CITIC and Carlyle for up to $2.1 billion. The new partnership had initially planned to add 1,500 restaurants in the two areas over the next five years. Fortune