Good morning.
Microsoft demonstrated yesterday it is focused on the far future by investing $1 billion in OpenAI, the organization co-founded by Elon Musk in 2015, to help develop Artificial General Intelligence. Most A.I. work today is focused on specific tasks, like identifying images or translating language. But “A.G.I” refers to the kind of non-task-specific thinking and problem solving that humans do. That’s the stuff science fiction is made of, and most computer experts say it is likely to be decades before the capability is well developed.
The Microsoft investment ensures OpenAI development happens on Microsoft’s Azure Cloud services, so there’s an immediate commercial lift there. It gives Microsoft the inside track on developing business applications based on breakthroughs OpenAI makes along the path to developing AGI. It also gives the company a say in developing rules of the road for scary-sounding AGI itself. Microsoft CEO Satya Nadella said the goal is to “democratize A.I.—while always keeping A.I. safety front and center—so everyone can benefit.”
Microsoft, by the way, moved up to number 60 on the Fortune Global 500 list, from 71 a year earlier, with its impressive 23% revenue gain in 2018.
Some other fun facts from the Fortune Global 500, out yesterday:
-One third of the Fortune Global 500 companies are based in just five cities: Beijing, Tokyo, Paris, New York and Seoul.
-Air Liquide, the French industrial company, was last on the list this year, making its revenue total of $24.8 billion the new threshold. That’s up 5% from last year’s threshold.
-Meanwhile, one-time Fortune 500 star GE earned a dubious honor: it lost more money than any other company on the list, with a $22 billion loss in 2018.
More news below.
Alan Murray
alan.murray@fortune.com
@alansmurray
TOP NEWS
Boris Gets the Top Job
Boris Johnson was announced as the new leader of the U.K.'s Conservative party this morning, and therefore prime minister of the U.K. It was not a shocking announcement (though technically it was down to two: him and Jeremy Hunt.) That means it's worth revisiting this profile in The Atlantic of Boris, whose leadership style while the mayor of London, the foreign minister, and as an early Brussels irritant will likely hold lessons for Brexit, amid repeated warnings that a no-deal this fall would likely plunge the U.K. into recession. BBC / The Atlantic
Apple and Intel
Apple is in advanced talks with Intel to acquire its smartphone modem chip business, WSJ reports—a crucial step in Apple differentiating its iPhone, and getting a head start on the growth of 5G. That deal could be worth $1 billion, giving Apple access to technology and engineering talent, while Intel would shed a part of the business that's been weighing on its bottom line. WSJ
The Debt Ceiling
The White House and congressional negotiators have avoided hitting the debt ceiling, after reaching an agreement last night for a two-year budget that would raise the existing cap on borrowing. The deal still needs to be passed by Congress and signed by President Trump, and if that happens, it would push the showdown over debt past the 2020 elections, with the deficit already approaching $1 trillion. New York Times
Reigning in Private Equity
Leo Hindery Jr, the former CEO of AT&T Broadband, makes the case for Elizabeth Warren's proposed bill to restrict the private equity industry. "Today, too many PE fund managers are generalists, with little or no experience in the industry they’re investing in," he writes. "And we’re seeing them use a much-discredited playbook: cut costs, take out cash for their own short-term benefit, add little genuine competitive value, and then slash jobs and worker benefits in a desperate bid for greater operating cash flow." Fortune
AROUND THE WATER COOLER
Oatly Goes to China
Dairy is an exploding business in China. The industry is now worth $61 billion, and growing—approaching the U.S.'s $65 billion industry, which is declining—despite the fact that 90% of the population is actually lactose intolerant. Enter Oatly, the Swedish oat-based milk that is gaining popularity across "third-wave" hipster cafes, writes Fortune's Eamon Barrett. Fortune
Mining's Big Short
The under-construction Oyu Tolgoi copper mine in Mongolia, funded by Rio Tinto and the Mongolian government, is set to be the world's third-largest, and a significant contributor to the country's economy. But in 2013, a "special advisor" to Rio named Henry Steel, a young Oxford grad who was doing a PhD funded by the company, concluded that the mine was a bad investment for Mongolia. He went on to work for the London hedge-fund manager Crispin Odey, and make high-profile bets against the project. FT
The Economic Roots of the Hong Kong Protests
Incredibly low wages, long hours, and very tiny apartments: these are some of the economic strains behind the Hong Kong protests, which are the most extreme since the former British colony was returned to China in 1997. That also means a gap between rich and poor that is at its widest in nearly 50 years, paired with the world's longest working hours and highest rents, which have leapfrogged wage growth. New York Times
Chinese Imports Feel the Heat
An unexpected casualty of the U.S.-China trade war? American cherries. Demand for the fresh, imported fruit soared to nearly $200 million in 2017—from nothing seven years before—and has now shrunk back to a tenth of its size at its peak. The import tariffs on U.S. cherries are 50% of the price, and Beijing has lowered regulations for tariffs, instead, from Central Asia: a key Belt and Road Initiative region. But the numbers of imported cherries are now so small that fruit-lovers can't get their fix. Reuters
