Wednesday, November 6, 2019

CEO Daily: Recalibrating U.S. and Chinese Tech Ecosystems

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November 6, 2019

Good morning.


I'm on my way to Guangzhou, China, where the third annual Fortune Global Technology Forum gets underway tomorrow. This has become an eye-opening event for me each year, because it provides an under-the-hood look at the private tech industry exploding across China. A highlight is the Fortune China Innovation Award competition, which showcases tech startups from around the nation.


The backdrop to this year's conference is growing concern that the U.S. and China are diverging into separate technology ecosystems. While the trade war has cooled recently—as my colleague Adam Lashinsky noted yesterday—the tech war has not. A report delivered to the U.S. Congress this week by the National Security Commission on Artificial Intelligence illustrates the trend. The bipartisan commission, chaired by former Google CEO Eric Schmidt, notes the benefits of technology collaboration between the U.S. and China, but charges that China is using A.I. to "build a dystopian surveillance state," and says U.S. "global leadership in A.I." must be "a national security priority."


"The choice need not be a binary one between cooperating and disentangling," the report concludes. But it does require "recalibration" to "be more conducive to American interests." I'm betting that recalibration will be long and bumpy.


Separately, IBM and Bank of America this morning are announcing a unique public cloud infrastructure that they are building to meet the security and compliance needs of banks. The effort comes out of a nine-month collaboration between IBM SVP Bridget van Kraligen and BofA's Chief Operations and Technology Officer Cathy Bessant. "No other cloud provider has the built-in security and regulatory controls" that banks need, van Kraligen told me in an interview yesterday. Bessant said the new cloud will be open to other banks and related institutions. "We can build a beautiful cloud for ourselves, but if it's not a universal standard" open to those whom BofA transacts with, "then we haven't mitigated risk."


More news below.


Alan Murray
@alansmurray
alan.murray@fortune.com


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TOP NEWS


SoftBank Hit


SoftBank's profits for the six months to September were half those of a year ago, largely thanks to writedowns on its investments in WeWork and Uber—mainly WeWork, though, where the writedown was nearly $4.6 billion. That will have something to do with WeWork actually being worth (by SoftBank's current figures) $7.8 billion rather than the $47 billion claimed when the ill-fated workspace firm was preparing to go public. New York Times


Copy That


Xerox is considering a cash-and-stock offer for HP, the Wall Street Journal reports. The PC and printer maker is thrice the size of its copier-making potential suitor, and just got a new CEO—on the other hand, Xerox is about to get a cash boost from the sale of its stakes in joint ventures with Fujifilm. WSJ


Uber Death


More news on the tragic death last year of Arizona pedestrian Elaine Herzberg, who was struck by an Uber self-driving car. Turns out that, per documents released by the National Transportation Safety Board, the car was not programmed to recognize jaywalkers. Incredibly, it also seems Uber's self-driving car program didn't have a safety manager. Fortune


Banking Union


Germany's finance minister, Olaf Scholz, has ended Berlin's opposition to a common Eurozone scheme for protecting savings. This change of stance brings a Eurozone banking union a step closer to reality, as the European Central Bank and European Commission have been urging. Financial Times



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AROUND THE WATER COOLER


Warren Effect


Would the markets tank if Elizabeth Warren became president, as some hedge fund billionaires claim? History suggests such warnings are common and generally don't square up with reality, says Ben Carlson, the director of institutional asset management at Ritholz Wealth Management. Fortune


Trump's SEC


The Securities and Exchange Commission has under President Trump taken over two dozen measures to make life easier for corporate America—and to make life harder for investors, for example by allowing widespread confidential IPOs and by removing a requirement for companies to get SEC approval when they redact confidential information from disclosures. Reuters


European Tech


Gen Tsuchikawa, the head of Sony's venture capital arm, says the European tech industry is showing signs that it can compete with the U.S. "There are smart people with smart ideas which can scale here, so I think I'm pretty optimistic," he said at the Web Summit tech conference. CNBC


Dalio Warning


Bridgewater's Ray Dalio has written a lengthy LinkedIn post saying the world has "gone mad" because of the widespread availability of free money…to some. Dalio: "At the same time as money is essentially free for those who have money and creditworthiness, it is essentially unavailable to those who don't have money and creditworthiness, which contributes to the rising wealth, opportunity, and political gaps… the system of making capitalism work well for most people is broken. LinkedIn


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



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