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Bull March, Micron Slump, Wells Cuts: CEO Daily for September 21, 2018

Good morning. David Meyer here in Berlin, filling in for Alan.

Something smells funny in the pathology labs at Memorial Sloan Kettering. As detailed in an investigation by the New York Times and ProPublica, there’s uproar at the prestigious cancer center over a new “artificial intelligence” venture that uses MSK’s troves of 25 million tissue samples.

The startup is called Paige.AI, and its mission is to train algorithms on decades of slides from the MSK path labs, so they can learn to detect malignant tumors from benign tumors. A noble mission, for sure, but the ownership has raised eyebrows: stakeholders include not only MSK itself, but the chairman of the pathology department, the head of an MSK research lab, and four board members.

A major part of the story here is the ethics of this structure: as a non-profit, MSK is not supposed to give insiders preferential treatment, including assets provided below market values. While it’s not clear that the rules were broken, it seems there was no independent valuation of the tissue archive that’s central to the deal here, and no competitive bidding. Pathologists are also irked that the company’s founders could get rich off the work they spent 60 years putting together. Once reporters started asking questions, the chairman of the pathology department said he would divest his stake.

But the other part of the story is one that echoes beyond MSK’s facilities. The center’s patients have apparently been expressing concern about the commercialization of their data. Those that have not consented to their tissue samples being used will see that information anonymized in the dataset, but even then, some of the pathologists are squeamish that it’s in there at all.

We’ve seen something similar play out before, over in the U.K. A couple years back, a National Health Service trust in London handed over the healthcare data of up to 1.6 million patients to DeepMind, a Google-owned AI company. In that case, the aim was to develop an app that could help detect kidney injuries. But, following an outcry, the British privacy watchdog ruled that the hospital had broken the law, largely because patients had no idea their data was being used in this way.

“The price of innovation does not need to be the erosion of fundamental privacy rights,” said the Information Commissioner, Elizabeth Denham, at the time.

It’s true that machine-learning systems thrive on being fed as much data as possible, but there are careful balances to be struck—particularly since once the data is in there, it’s next to impossible to get out again. If people are to offer up their data, they need to be crystal clear on the implications and give proper consent.

Without wishing to sound like a broken record, the gains on offer here are ultimately contingent on people’s trust, and that’s a fragile thing.

News below.

David Meyer
@superglaze
david@dmeyer.eu

Top News

Bull March

The Dow Jones and S&P 500 both hit record highs yesterday, as investors appeared to dismiss the impact of the U.S. trade war with China—Wall Street was bracing for a 25% level in the latest tranche, not the 10% it got (for now.) Also yesterday, the U.S.government touted falling numbers of Americans filing for jobless benefits. USA Today

Micron Slump

The U.S.’s latest round of tariffs on Chinese imports will soon hit the gross margins of semiconductor firm Micron, CFO David Zinsner said yesterday. Micron had just released Q4 earnings that beat expectations, sending the company’s stock up 4%—but when Zinsner talked tariffs, the stock fell 6% in after-hours trading. CNBC

Wells Cuts

Wells Fargo is to cut its headcount by 5-10% over the next three years, in a slimming-down exercise that could hit more than 26,000 employees. The scandal-prone bank, which saw profits decimated in the first half of the year, is trying to become more efficient. CEO Tim Sloan: “We are addressing past issues, enhancing our focus on customers, strengthening risk management and controls, simplifying our organization, and improving the team member experience.” BBC

Tesla Exodus

Another top executive has left Tesla. This time it’s Liam O’Connor, the vice president of global supply management. O’Connor joined Tesla three years ago from Apple, and is the fifth senior executive to flee in the last few weeks. The news of his departure knocked Tesla’s share price slightly, but that’s no rare event these days. Bloomberg

Around the Water Cooler

Gmail Privacy

Google has admitted to lawmakers that, even though Google itself no longer scans through Gmail users’ emails in order to find advertising keywords, it does give access to third-party app developers who do the same. It even lets those third-party developers share the data they find, as long as Google thinks their privacy policies are transparent enough. Wall Street Journal

Cohen and Mueller

Former Trump lawyer/fixer Michael Cohen has reportedly engaged in multiple interview sessions with investigators from Special Counsel Robert Mueller’s team. The interviews apparently focused on Trump’s various dealings with Russia. ABC’s sources said Cohen participated voluntarily, with no guarantee of leniency for his own crimes. ABC News

China Sanctions

The U.S. hit the Chinese military with sanctions yesterday for buying Russian military equipment. The State Department: “Today’s actions are not intended to undermine the military capabilities or combat readiness of any country, but rather to impose costs on Russia in response to its interference in the United States election process, its unacceptable behavior in eastern Ukraine, and other malign activities.” CNN

Suge Sentence

Former rap mogul Suge Knight, who founded Death Row Records, will be sentenced to a prison term of 28 years after pleading no contest to a voluntary manslaughter charge. Knight ran over two men with his pickup truck in 2015, killing one. The plea gets him off a murder charge that would have come with a life sentence, while also helping him avoid charges over robbery and making criminal threats. BBC

This edition of CEO Daily was edited by David Meyer. Find previous editions here, and sign up for other Fortune newsletters here.