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Huawei Ban, Boeing Review, Iraq Warning: CEO Daily for May 15, 2019

Good morning.

AI is now part of the toolkit of most big companies. But how are they using it? That’s one of the topics we probed in this year’s poll of Fortune 500 CEOs. The question:

To date, my company has used artificial intelligence or machine learning mostly to:

1) reduce business cost.
2) create new products or services for customers.
3) other.

It’s an important question. As the folks at the McKinsey Global Institute point out in a new paper this morning—Tech for Good—technology “has no overall purpose of its own; its effects are driven by human choices and actions.” In the case of business, AI can be used to automate all sorts of back office functions–saving money and cutting costs, but also eliminating jobs. Or it can be used to reinvent products and services to create new value for customers…and for society.

Both functions are important, and enable increases in productivity, profits and pay. But the more companies focus on the second use—boosting the top line rather than the bottom line—the more their actions are likely to benefit society.

So what did the survey show? Seventy percent of the CEOs who answered the question chose the first option—they are using AI mostly to cut costs. Only 22% are using it mostly to create new products and services. That’s no surprise, I suppose; cost cutting is the low-hanging fruit. But it’s unfortunate. If AI is going to create a new industrial revolution, and live up to its potential to improve society, business leaders will need to focus on the second option. That will take more imagination, more creativity and more courage—it will take a talent for design thinking—but in the end, it will lead to much greater rewards.

You can read the McKinsey paper here. Also out this morning is PwC’s annual study on CEO turnover, showing the turnover rate among the CEOs of the world’s 2,500 largest companies hit 17% last year—the highest in the study’s 19-year history. And for the first time, more CEOs were forced out for ethical lapses (39%) than for financial performance (35%). I suspect that’s a good thing—not because ethical lapses are becoming more common, but because CEOs are being held more accountable.

More news below, and more results from the Fortune 500 CEO survey tomorrow.

Alan Murray
@alansmurray
alan.murray@fortune.com

Top News

Huawei Ban

President Trump will reportedly ban U.S. companies from using telecoms equipment from vendors that pose a national security risk this week. The executive order would effectively lead to a ban on the use of Huawei equipment—which would at least mean the U.S. taking the same medicine it has been prescribing to its allies, with mixed success. Reuters

Boeing Review

The Federal Aviation Administration did not involve its senior officials in safety assessments of Boeing’s 737 MAX flight control system, instead leaving the assessments up to Boeing. That’s according to an internal FAA review in the wake of two fatal crashes that have been linked to the system. Wall Street Journal

Iraq Warning

The U.S. State Department has ordered “all non-emergency U.S. government employees” to get out of Iraq as soon as possible, using commercial transportation. It has also suspended visa services there. This follows repeated warnings of attacks on American troops from Iranian or Iran-allied forces. Reuters

Facebook Streaming

Facebook is instituting a “one strike” policy that bans users (for a period) from live-streaming video on its platform if they break Facebook’s community standards just one time. The move comes in the wake of the Christchurch massacres, which the perpetrator live-streamed over Facebook. The same restrictions will soon also apply to those who want to post ads on the service. The Verge

Around the Water Cooler

Tariff Costs

Analysts reckon the latest tariffs imposed by China on U.S. imports will lead to a 2-3% rise in the production costs for Apple’s iPhone. And if the Trump administration follows through on its threat to impose more tariffs on China, iPhones could end up costing a whopping $120 extra to produce there. Fortune

EU Ruling

Businesses in the EU must have systems for recording how many hours their employees work, according to a ruling from the bloc’s top court. The Court of Justice of the European Union ruled yesterday that this was the only way to enforce legal limits on working time. As for what the systems should look like, that’s up to each EU country. Politico

Barclays Warning

When U.K. prosecutors were considering charging Barclays over financial-crisis-era payments to Qatar, the Bank of England stepped in to warn them that such charges could destabilize the lender. In other words, this was a case of “too big to jail.” Two years ago, the prosecutors went ahead and charged Barclays over the affair anyway, and the bank is still here. Financial Times

Facial Recognition

San Francisco has gone ahead with its proposed ban on the use of facial recognition systems by the police and other municipal departments. ACLU attorney Matt Cagle, who helped draft the new law, said: “We’ve learned a lot about facial recognition and seen how it’s been used in places like China to track and control populations. The public increasingly understands the threat this technology can pose and that isn’t what they want.” Fortune

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