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The Challenge of Our Times — CEO Daily, Wednesday 29th November

Good morning,

Here’s a big number to chew on: between 400 million and 800 million workers around the world could be displaced by automation by 2030. That is the finding of a multi-year research project by the McKinsey Global Institute, which has done the best work of anyone I know on this topic. Its report is being released this morning, here.

In the U.S., the displacement could involve up to one-third of the work force. Jobs most likely to disappear are those that involve collecting and processing data—like accounting, mortgage origination, paralegal work—or jobs that involve manual labor in predictable environments—like operating machinery or making fast food. Less likely to be affected are jobs that involve managing people, applying expertise, or social interactions, as well as those involving physical work in unpredictable environments—like gardening or plumbing.

The research shows the size of this displacement is not out of line with past transitions, from agriculture to manufacturing, or manufacturing to services. And the authors of the study express confidence that, as in the past, new jobs will arise to “more than offset” those that are eliminated.

But there’s a catch: Given the speed of the change and the skill levels required for many of the new jobs, the need to retrain mid-career workers will be far bigger than ever before. If that doesn’t happen, unemployment will rise, wage growth will slow, and disaffection will soar. “There are few precedents in which societies have successfully retrained such large numbers of people,” the authors conclude.

That’s a challenge that will require massive effort on the part of governments, academia, nonprofits, and business. And given the dysfunction of U.S. government and the institutional inertia of much of academia, business may well need to take the lead—a conclusion that permeated discussions at the Fortune CEO Initiative last September, and will be a focus for the initiative in the coming year. Stay tuned.

More news below.

Alan Murray
@alansmurray
alan.murray@fortune.com

Top News

Just Sing Out a Te Deum, When You See That ICBM…

…and the party will be ‘Come as you are.’ Tom Lehrer’s riff on the apocalypse has a new topicality after North Korea said it had successfully tested a new intercontinental ballistic missile capable of reaching any point on the American mainland. President Donald Trump said he will “take care of it” (although the briefing he gave after the news revolved more around upcoming negotiations over the debt ceiling with Democratic Party leaders). In practical terms, the likeliest attempt to exert pressure on Pyongyang will go through its ally China. That is the context in which to see yesterday’s announcement of an in-depth probe into alleged dumping of primary aluminium by China. Fortune

•  Uber ‘Trained a Team to Steal Trade Secrets’

Uber had a whole team of employees dedicated to stealing trade secrets and trained them extensively in how to evade legal discovery through tactics such as storing information on servers outside Uber’s corporate network. That’s according to a former employee whose allegations were read aloud in court yesterday as part of Waymo’s lawsuit against it. It’s unclear if Softbank, which is planning to invest $10 billion in Uber, will need to adjust its valuation to take account of the new liabilities. It also emerged yesterday that Uber’s net loss widened to $1.46 billion in the third quarter, from $1.06 billion three months earlier. Fortune

Paying for the Cake, and Going Hungry

The U.K. government caved to the EU’s insistence that it honor past commitments to the EU budget as a condition for starting talks on their trading relations after Brexit. The deal smoothes the way for a transitional arrangement that avoids ‘cliff edge’ effects on the economy, which may persuade the likes of Lloyd Blankfein et al.  not to pull the trigger on the mass relocation of staff and operations out of the U.K. At a cost of over 45 billion euros ($54 billion), the deal debunks the central claim of the Brexit campaign—that leaving the EU would free up budget money for domestic public services (£350 million a week for the NHS!). Far from having its cake and eating it, the U.K. will continue to pay a price for Single Market access, while having minimal influence over its rules. Fortune

•  Bitcoin $10k

Bitcoin hit $10,000. At the point of writing, it’s at $10,750. It will probably be at $11k by the time you go home today. Federal Reserve governor Neel Kashkari tweeted last week about a conversation he had with a customs agent in Los Angeles airport, who told him a friend had taken out a $35,000 home equity loan to ‘invest’ in the cryptocurrency. One of the drivers of this leg of the rally continues to be the clampdown on shadow banking in China, which has triggered a surge in demand for other assets outside the traditional Chinese financial system. That’s clearly a non-negligible source of demand. Whether it’s a sign of a new world order for the economy is not such a clear-cut question.   Fortune

 

Around the Water Cooler

Trump Wins in Court on CFPB

A federal judge on Tuesday ruled in favor of President Donald Trump in the battle for control of the Consumer Financial Protection Bureau. An attorney for Leandra English, the Obama-era official trying to defend a position bequeathed to her by her outgoing boss, said English would appeal. Fortune

 LSEG Power Struggle Takes Both Players Out

London Stock Exchange Group’s CEO Xavier Rolet will leave the company with immediate effect, instead of hanging around till the end of next year, as he originally planned. His power struggle with chairman Donald Brydon has been a depressing distraction from the task of preparing the exchange group for a life after Brexit, in the wake of its failed attempt to merge with Germany’s Deutsche Boerse. Brydon will also leave the company, LSEG said Wednesday, and CFO David Warren will take over on an interim basis.   FT, metered access

Cineworld and Regal Set to Merge

U.K.-based movie theater chain Cineworld said it’s in advanced talks to buy Regal Entertainment Group for $3.1 billion, a bid that will give it more scale to compete with AMC. The news caused Cineworld’s stock to drop 14% in London, while Regal’s had risen 8% yesterday in response to an initial statement from the U.S.’s second-largest movie theater group. The combined group’s position vis-à-vis AMC could improve still further if China gets any tougher on what it sees as non-strategic investment by major conglomerates. AMC is owned by Wang Jianlin’s Wanda Group, but Wanda was pressured into dropping its bid for Dick Clark earlier this year. Bloomberg

•  Emerson Throws in the Towel

Emerson abandoned its $29 billion bid for Rockwell Automation after failing to win support from investors. Emerson had been forced to pursue a hostile approach after Rockwell’s board had refused to talk to it. It said it would instead pursue opportunities for smaller, ‘bolt-on’ acquisitions and threw its own investors a bone in the form of a $1 billion share buyback. Reuters

Summaries by Geoffrey Smith; geoffrey.smith@fortune.com

@geoffreytsmith