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Good morning, and happy Martin Luther King Jr. Day.
Here’s an interesting statistic: Over the past six years, Boeing has spent $15.7 billion on research and development, and $43.4 billion on stock buybacks. Is that a sign of misplaced priorities? Buybacks aren’t necessarily evidence of short-sightedness. But in Boeing’s case, they are part of a bigger picture. You can read our deep dive into Boeing’s swoon this morning, here. The author, Dan Catchpole, argues the company’s problems were two decades in the making.
Also this morning, we are releasing our package on the state of artificial intelligence—a topic that will be top of mind for the folks, like me, traveling to Davos this morning, and that likely will define the next decade for business. A few things I would call your attention to: a smart review by Jennifer Alsever about the hype and the hope around using AI in healthcare — there has clearly been a good bit of both. And a piece by Maria Aspan looking at the exploding use of A.I. in human resources. This is one that has taken me by surprise, and is filled with both opportunity and risk.
Maria also provided the quote of the week in her piece:
“A.I. is like teenage sex,” says Frida Polli, cofounder and CEO of Pymetrics. “Everyone says they’re doing it, and nobody really knows what it is.”
Finally, Fortune’s Jeremy Kahn takes a look at the people who are pursuing the long-term dream of human-style “Artificial General Intelligence,” and assesses the state of the field.
Meanwhile, Deloitte is releasing its third annual Global Readiness Report, based on a survey of 2,000 executives and timed for the opening of Davos. Among other things, the report highlights the yawning gap between promise and practice of A.I. While most executives recognize that “Industry 4.0” technologies will alter entire industries, only 17% of executives said making Industry 4.0 investments is a top company priority, and only 5% said they had made progress “implementing technology in a connected, integrated way across their organizations.”
And then there is this interesting finding from the annual Edelman trust survey, also aimed at the Davos crowd. While growing numbers of people around the world are questioning the efficacy of capitalism—the Edelman survey found 56% of the broad population believe “it does more harm than good in the world”—trust in business has enjoyed something of a rebound. “Business has leapt into the void left by populist and partisan government,” said Richard Edelman, who heads the eponymous firm. “With 73% of employees saying they want the opportunity to change society, and nearly two-thirds of consumers identifying themselves as belief-driven buyers, CEOs understand that their mandate has changed.”
Apologies for the overly long note this morning. More news below.
As is now traditional, the charity Oxfam is using Davos to highlight massive wealth inequality. This year's stats show that the richest 1% have more than twice as much wealth as 6.9 billion people, and that the 22 richest men are collectively wealthier than all the women in Africa. The past decade has seen the number of billionaires double, apparently. Oxfam sees trouble looming as populations age and public services have funding cut. CNN
A third person has died in China from a newly identified virus that sprang up in the center of the country. Cases have now been reported in Beijing and Shenzhen, and the novel coronavirus has also spread to South Korea. The timing of the outbreak is not good—millions of Chinese citizens are about to travel for the Lunar New Year holiday. Wall Street Journal
The U.K.'s finance chief, Sajid Javid, said the country will not align with EU rules and regulations when the Brexit transition period runs out at the end of this year. The warning to businesses knocked sterling and caused alarm on the EU side. EU diplomats and officials said industry should prepare for "less trade, less investment, less jobs." Financial Times
BAE Systems is buying two businesses that are being offloaded as a result of the Raytheon-United Technologies merger. The purchases of the military-focused GPS unit of UTC's Collins business, and Raytheon's airborne tactical radios unit, are together costing BAE $2.2 billion. Analysts like the deal, as the businesses involved are of high quality—BAE's share price popped 2.5% on the news. Reuters
AROUND THE WATER COOLER
France is to reform its stock-options rules to enable better competition with Silicon Valley, as European business leaders have been urging. The country's stock-options scheme will be expanded to include foreign companies with France-based employees, and options will apparently be priced at a fair market value, rather than the valuation price that investors pay. CNBC
The price of palladium has jumped a quarter in the last two weeks alone, continuing a trend of soaring value. So why is the metal now, at around $2,500 an ounce, now more valuable than gold? Palladium is used in the catalytic converters that control cars' harmful emissions—demand is outstripping supply, to the extent that there's a spike in thefts of catalytic converters from cars. BBC
How confident are Apple's TV+ executives about their programming in the streaming wars? So confident that they've already renewed two series that haven't even debuted yet, namely Home Before Dark and Mythic Quest: Raven's Banquet. Fortune
China is moving to cut the use of disposable plastics with bans on non-degradable plastic bags in major cities' shopping malls, supermarkets and food-delivery services. Analysts see the development as China catching up with the policies of the EU, Africa and Southeast Asia. Fortune
This edition of CEO Daily was edited by David Meyer.
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