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February 19, 2020

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Good morning.


A prominent scientist once told me that the reason the public rejected GMO food was because its first use case was to make tomatoes that were attractive and long-lasting—but were tasteless. In other words, they helped the grocery business manage its supply chain…but they created no value for the end user.


I worry the new wave of business data technologies may follow a similar path. A new report out this morning from PwC—an early copy of which was shared with CEO Daily—highlights the problem. PwC gave more than 2,000 global executives a long list of new technologies—A.I., IOT, Blockchain, Drones, VR, AR, 3D Printing, etc.—and asked two questions:


Which of the following technologies is the most important to your strategy today?
Which of the following technologies will be the most important to your strategy in three years?


The consensus answer to the second question was clear—43% said they believed A.I. would be most important to their business in three years. That was more than double the number who picked the second-place choice (Internet of Things).


But when asked about their strategies today, the top choice was “RPA”—Robotic Process Automation—chosen by 36% of executives, compared to the 19% who chose A.I.


Now that may seem natural—RPA is the low hanging fruit, with a potential for quick savings. But think about it: by definition, RPA doesn’t change anything. It certainly doesn’t reinvent the business, and it doesn’t create new value for customers or society. It just means doing exactly the same thing you are currently doing more efficiently—and with fewer workers.


With that as the common starting point, is anyone surprised workers are scared? In the long term, companies will be better off—and society will be better off—if they made the bold moves now to figure out how this technology can create new value.


“RPA is alluring for its immediacy and simplicity,” says Scott Likens, who heads the emerging technologies practice at PwC. “But it is a short-lived value,” and in many cases “businesses are automating processes that aren’t that good.” He urges companies to invest in A.I. now, ”in very precise spots that make sense.”


You can read the PwC study here. Or, if you are interested in a mind-bending story, try Jeffrey O’Brien’s piece on how psychedelic drugs may revolutionize mental health care, available this morning here.


More news below.


Alan Murray
@alansmurray
alan.murray@fortune.com


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TOP NEWS


Huawei defeat


Huawei tried to get the U.S. courts to rule against the 2018 law that banned it from business with federal agencies, but a federal judge threw the case out yesterday. "Contracting with the federal government is a privilege, not a constitutionally guaranteed right—at least not as far as this court is aware," said Judge Amos Mazzant of the U.S. District Court in East Texas. Wall Street Journal


Moonshot cull


Alphabet has made its first closure of a "moonshot" project since founders Sergey Brin and Larry Page took a back seat at the end of last year. The victim: Makani, the Google parent's power-generating-kite venture. Losses in Alphabet's "Other Bets" segment are mounting, so CEO Sundar Pichai is under pressure to get rid of the relative duds. Financial Times


U.K. workforce


British industry is up in arms after the Conservative government said it would close the U.K.'s borders to unskilled labor. Under the proposed new rules, anyone moving to the country will have to be skilled and speak English, and have a job offer that clears a minimum salary threshold. It's a straight "no" to the self-employed. The hospitality and care industries are particularly worried. Guardian


Coronavirus effect


Asian American businesses are suffering due to fears about the spread of Covid-19 in the U.S. Customers are staying away; events organizers are fielding xenophobic calls. With business down 40% or more, some firms are temporarily shuttering properties. Fortune



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AROUND THE WATER COOLER


Merkel successors


The race is on to seize the leadership of Angela Merkel's Christian Democratic Union party—a role that almost certainly means candidacy for the post of German chancellor after Merkel's planned departure. Meet the likely candidates (the first declared yesterday), who represent very different takes on conservatism: Armin Laschet, Friedrich Merz, Jens Spahn and Norbert Röttgen. Fortune


Trump pardon


President Trump has pardoned "junk bond king" Michael Milken and commuted the sentence of the corrupt former Illinois governor Rod Blagojevich—the latter having been a contestant on Trump's Celebrity Apprentice while awaiting trial. According to Trump, Blagojevich's 14-year sentence, which he began serving in 2012, was "tremendously powerful [and] ridiculous." Reuters


Post-Bloomberg Bloomberg


If Michael Bloomberg wins the presidency, he will sell his eponymous company, campaign adviser Tim O'Brien has said. O'Brien: "There will be no confusion about any of his financial holdings blurring the line between public service and personal profiteering…We will be 180 degrees away from where Donald Trump is on these issues because Donald Trump is a walking financial conflict of interest." CNN


Virus bonds


Beijing is pushing companies, ranging from airlines to drug distributors, to issue cheap "virus bonds" in order to shore up the economy and fight the Covid-19 epidemic. The firms have to spent at least 10% of the proceeds on fighting the coronavirus outbreak; regulators are fast-tracking the sales. Financial Times


This edition of CEO Daily was edited by David Meyer.


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