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The Morning Download: Global Elites at Davos Square Off Over Tech Regulation, Digital Taxes
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Good morning, CIOs. With concerns rising world-wide over data privacy, the use of AI and Silicon Valley's vast market power, technology will be among the main topics of discussion this week at the World Economic Forum, the annual gathering of business and political leaders in Davos, Switzerland.
Top of mind will be how tech leaders address what The Wall Street Journal's Parmy Olson calls a new regulatory offensive, mostly originating in Europe, that threatens some of Silicon Valley’s most successful business models. As the WSJ reports, Alphabet CEO Sundar Pichai and Brad Smith, Microsoft's president were in Brussels Monday, meeting with EU officials before heading to Davos.
More than just VIPs in the latest winter wear? The event has a certain reputation as a safe space for self-involved elites, but it looks like this year could be different. U.S. Treasury Secretary Steven Mnuchin at Davos said European countries will face tariffs if they implement their digital taxes. For more, read the Journal's updates from Davos 2020.
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The artificial intelligence radio test-bed for the spectrum collaboration challenge from the U.S. Defense Advanced Research Projects Agency is displayed during the Mobile World Congress Americas event in Los Angeles, Oct. 22, 2019. PHOTO: PATRICK T. FALLON/BLOOMBERG NEWS
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Innovation and national security in the 21st century. Chalk up the U.S. as another incumbent in danger of being disrupted, partly due to decreased federal research-and-development funding and China’s technology advances, CIO Journal Columnist Irving Wladawsky-Berger writes. A new report from a Council on Foreign Relations-sponsored task force, a group of people with backgrounds in Silicon Valley and venture capital, addresses the challenge, leaning on lessons from the private sphere.
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A Walmart fulfillment center for online orders in Bethlehem, Pa. PHOTO: MICHAEL NAGLE/BLOOMBERG NEWS
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Walmart's executive moves put IT in the spotlight. Walmart last Friday made some executive-level staffing changes in merchandising and operations. The moves could have an impact on the retailer's information technology organization headed by Suresh Kumar, the company's global chief technology officer and chief development officer.
Chief merchant Steve Bratspies is leaving the company and being replaced by Scott McCall, another company veteran, who recently has overseen the company’s U.S. entertainment and toys business. The retailer also named Dacona Smith as chief operating officer for the Walmart U.S. unit, filling a role that had been vacant since the former COO Judith McKenna became head of Walmart’s international division in 2018.
Robert Hetu, a research director with Gartner's Retail Industry Services team, said whoever holds the role of chief merchant "has a critical impact on the IT organization." While he didn't comment specifically on Walmart, he said merchandising is the heart of retailing, and technology is becoming embedded in every aspect of retailing, including the customer experience. "Whoever is heading merchandising must drive major change in business processes to allow for greater use of algorithms, AI, and automation in headquarters processes," he said.
Last year, Walmart reshuffled its technology organization and merged its consumer-facing and internal technology teams under a new role held by Suresh Kumar, a former executive at Amazon and Google. Clay Johnson, Walmart's former chief information officer, left a few months after that to join Yum Brands as the company's chief digital and technology officer.
—Sara Castellanos
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U.S.-China tech tension centered initially on Huawei and the telecom sector, but has since spread through most of the tech industry. PHOTO: WANG ZHAO/AGENCE FRANCE-PRESSE/GETTY IMAGES
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The great U.S.-China tech divide. Even if the U.S. and China mend fences and end their long-running trade dispute, analysts tell the WSJ's Stu Woo and Asa Fitch that mutual suspicion all but guarantees the march toward a two-system tech world.
Spurring Chinese innovation. “The Trump administration has employed an expansive and novel definition of national security to set back Chinese firms working in everything from memory chips to social media,” says Dan Wang, a Beijing-based technology analyst for research firm Gavekal Dragonomics. “Over the longer term, the strategic solution for Chinese firms is straightforward: develop technology capabilities so that they’re not so dependent on U.S. supply.”
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Not helping: The recent trade deal. "The trade deal does nothing to curtail China’s use of subsidies, industrial plans and state-owned companies, which have helped it build formidable industries in steel, wind turbines and solar panels," the New York Times notes. "Those state-directed efforts, which put many American manufacturers out of business, are now being harnessed for high-tech industries."
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Google CEO Sundar Pichai’s says “Sensible regulation must also take a proportionate approach” to artificial intelligence, “balancing potential harms with opportunities.” PHOTO: GEERT VANDEN WIJNGAERT/BLOOMBERG NEWS
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As EU considers AI regulation, Google pushes ‘sensible’ ideas. Alphabet CEO Sundar Pichai Monday had a message on AI regulation for policy makers in Brussels: “Sensible regulation must also take a proportionate approach” to artificial intelligence, “balancing potential harms with social opportunities.”
His visit comes as the European Commission continues to evaluate a host of proposals near and dear to Google's heart, including digital-competition, the flow of data inside the EU and AI, The Wall Street Journal's Sam Schechner and Valentina Pop report. An early draft of a white paper from the European Commission, leaked last week, suggests multiple options for regulating AI, including a temporary ban on using facial recognition technology in public spaces.
Earlier this month, the U.S. government proposed a set of principles to guide how federal agencies regulate the development of artificial intelligence in the private sector, characterizing it as an effort to govern AI without stifling innovation.
EU considers facial recognition ban. The proposal, included in a white paper presented by the EU executive, calls for a ban on the technology in public areas for up to five years, enough time to understand potential impacts and propose “risk management measures.” (Reuters)
Mnuchin warns Italy and Britain about digital tax. The U.S. Treasury Secretary, speaking at the World Economic Forum in Davos, Switzerland, warned that both both countries could face U.S. tariffs if they proceed with a tax on digital companies. The remarks came after France agreed to delay the imposition of its own digital tax in the face of U.S. threats. (WSJ)
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The Mayo Clinic is one of the major hospital systems signing agreements with tech giants that give them access to details from patients’ digitized medical records. PHOTO: JIM MONE/ASSOCIATED PRESS
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Hospitals give tech giants access to detailed medical records. Hospitals have granted Microsoft, IBM and Amazon the ability to access identifiable patient information under deals to crunch millions of health records. The Wall Street Journal's Melanie Evans reports that scope of data sharing reveals a powerful new role that hospitals play—as brokers to technology companies racing into the $3 trillion health-care sector.
Facial recognition app to end anonymity? A relatively unknown company Clearview AI has created a facial recognition app that matches photos of individuals with a database of some three billion images scraped from websites including Facebook and YouTube. Representatives of those companies tell the New York Times that their policies prohibit such scraping. Current federal and state law enforcement agencies that are customers say the app has helped them solve cases. (New York Times)
Can't ban a dystopian future. Says David Scalzo, founder of early investor Kirenaga Partners: “I’ve come to the conclusion that because information constantly increases, there’s never going to be privacy ... Laws have to determine what’s legal, but you can’t ban technology. Sure, that might lead to a dystopian future or something, but you can’t ban it.”
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Regulators will examine the complaints to determine whether to open a defect investigation. PHOTO: MIKE BLAKE/REUTERS
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Tesla unintended-acceleration claims to be reviewed by regulators. The National Highway Traffic Safety Administration is evaluating 127 complaints received by the agency, which resulted in a reported 110 crashes and 52 injuries, according to documents posted online Friday morning. (WSJ)
Facebook backs off plan to sell ads in WhatsApp. The shift marks a detour in the social-media giant’s quest to monetize WhatsApp, which it bought in a $22 billion acquisition in 2014. The possibility of advertising was a big factor in the decisions by Jan Koum and Brian Acton, who created the messaging service, to resign from the company, leaving on the table a combined $1.3 billion in deferred compensation. (WSJ)
Chinese students’ data exposed on internet. The publicly searchable cache was connected to a surveillance system labeled “Safe School Shield” and contained facial-identification and location data for individuals attending some 23 schools and companies in southwestern Sichuan province and neighboring Gansu province. (WSJ)
U.K. psychiatrists want to tax tech giants. And use the money to fund research into the harm caused by their social media, they say. (CNBC)
Uber lets drivers set fares. Uber is letting drivers at some California airports charge up to five times the fare Uber sets, an effort to give drivers more autonomy in response to the state's new gig-economy law. (WSJ)
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Everything Else You Need to Know
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The Senate will open the impeachment trial of President Trump in earnest Tuesday by taking up a measure laying out rules for the proceeding, setting up clashes over the process at the very start. (WSJ)
Stocks in Asia and Europe fell amid concerns about the rapid spread of a potentially deadly pneumonialike virus originating in central China. (WSJ)
Thousands of pro-gun demonstrators, some with military-style rifles, gathered around the state Capitol to protest proposed firearm restrictions, with officials relieved the event failed to inspire violence. (WSJ)
The IMF expects global gross domestic product will expand by 3.3% in 2020, up from 2.9% in 2019. (WSJ)
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