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Little Room for Complacency: CEO Daily

Good morning.

Red Hat CEO Jim Whitehurst was in the Fortune office yesterday, and talked about how his company is working with its new owner, IBM. He dismissed the notion of a culture clash. “It’s not two cultures coming together,” he explained, reminding me that IBM had promised to keep Red Hat distinct. “It’s two cultures working together to do things we never could have done separately…That’s what creates the magic.”

He also said the challenge of the current wave of technology is that it is about creating new sources of value. “For a long time, technology was about automating what you are already doing. But this recent wave of technology touches how you interact with your customer.” That requires a different approach on the part of technology service companies. “You are not automating what they were already doing, you are co-creating new things.”

Later in the day, the CEO of another enterprise tech company, Splunk’s Doug Merritt, came by and talked about the challenge of being a data company in the land of giants–Amazon, Google, Microsoft. The only way to survive in that battle, he said, is to constantly innovate. When I asked what keeps him up at night, he responded: “I think about what we can do to crank up the innovation and the velocity.”

Both conversations reminded me where I ended last week—responding to The Economist’s concern that the move away from shareholder primacy could lead to “complacency” among companies. In today’s rapidly changing business world, there’s little room for complacency. As Merritt put it, “if you aren’t growing, you are dying.”

More news below.

Alan Murray
alan.murray@fortune.com
@alansmurray

TOP NEWS

Red Light

Recession-watchers yesterday had their eyes trained on the 5.3-basis-points gap between the yields on two-year Treasury notes and 10-year notes. This is the heaviest inversion of that curve since March 2007 and, in the words of Seaport Global Holdings MD Tom di Galoma, it’s “the ultimate flashing red light.” Financial Times

Levandowski Charges

Anthony Levandowski, a former Uber engineer, has been charged with stealing driverless car technology from Alphabet’s Waymo unit. The companies settled a civil case over the matter last year, but the criminal case could see Levandowski put behind bars for up to a decade. Fortune

Philip Morris and Altria

Wall Street isn’t too keen on the idea of Philip Morris reuniting with Altria Group, sending down the former’s stock price by as much as 11% on the news of talks. Philip Morris currently doesn’t operate in the U.S. (Altria’s Philip Morris USA subsidiary owns the brands there) so investors are worried about fresh exposure to an uncertain regulatory environment. Bloomberg

Trump Tax Returns

Deutsche Bank has some Trump returns, it said yesterday in a court filing. It’s not clear which Trump, though—the bank has financial records relating to the president and three of his children, and redactions in the court filing make it difficult to know whose tax returns are in that collection. Congressional Democrats have subpoenaed the financial records and, if the White House fails in its bid to block the release, the tax returns may be exposed. Reuters

AROUND THE WATER COOLER

Tencent Music

Tencent Music’s share price in New York slid by almost 7% on the news that Chinese antitrust authorities are probing the operation. Tencent Music scored exclusive Chinese licensing deals with the three biggest labels (Universal, Sony and Warner) and then sublicenses content to smaller rivals. This, the rivals complain, makes song-licensing twice as expensive in China as it is elsewhere. Yahoo Finance

Social Credit

China’s corporate “social credit” system, which censures firms that violate regulations or have local suppliers that break rules, is to be applied to foreign companies, according to the EU chamber of commerce. The chamber warns that the move would give Beijing the blacklisting tools it needs to punish companies that violate its stance on politically sensitive issues. FT

Purdue Deal

OxyContin maker Purdue Pharma is reportedly considering an at-least-$10 billion settlement that would resolve over 2,000 opioid cases and put the company into bankruptcy—then re-emerge as a public benefit trust corporation. The Sackler family would lose ownership. Wall Street Journal

Trade War

The reduction in visitors to the U.S. from China is already hitting the hotel industry, according to Dan Levin, the CEO of architectural millworking firm Cain Millwork. He writes: “Hotel construction usually booms this time of year…That’s not the case this year. Although our pipeline of work remains strong, we’re already seeing a slowdown in our hotel business…These types of delays mean it will take longer for developers to profit from their investments in renovations and new construction.” Fortune

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