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Google Duplex, Apple and Goldman, Drug Prices: CEO Daily for May 11, 2018

David Meyer

Good morning. David Meyer (Fortune‘s writer in Berlin) here, filling in for Alan.

When Google unveiled its Duplex “AI” earlier this week, it sparked massive ethical concerns. Belatedly, the company seems to have recognized the problem.

The point of the new virtual assistant is to conduct phone calls on behalf of the user, making appointments and so on. Duplex is the culmination of a lot of Google’s work on machine-learning and natural-language technology—in other words, it sounds and comes across like a real person.

When Google CEO Sundar Pichai demonstrated the service at its I/O developer conference, playing recordings of interactions between Duplex and actual people at a hair salon and a restaurant, the demo rightly wowed a lot of people, but it also outraged many. The problem was that those on the other end of the line apparently had no idea they were talking to a robot—good tech; bad ethics.

As prominent sociologist Zeynep Tufekci put it: “Google Assistant making calls pretending to be human not only without disclosing that it’s a bot, but adding ‘ummm’ and ‘aaah’ to deceive the human on the other end with the room cheering it… horrifying. Silicon Valley is ethically lost, rudderless and has not learned a thing.”

Yesterday, Google finally responded by saying it was “designing this feature with disclosure built-in, and [will] make sure the system is appropriately identified. What we showed at I/O was an early technology demo.”

It’s good that Google is listening, but deeply concerning that it didn’t think to demonstrate these human-friendly tweaks along with its technical advances. As I’ve written before, in the context of Facebook and the Cambridge Analytica scandal, big tech can’t take people’s trust for granted.

Many people are already freaked out by the implications of AI—from its impact on employment to its lack of human discretion—and suspicious of Google because of the amount of their data it holds. So what does the company do? Run a demonstration that implies they won’t even be able to trust that they’re talking to a real person on the phone, thanks to Google tech.

Human ethics—not just human simulation—need to be baked into these systems from the start, not as a reactive afterthought. And Google, as a company that so many budding technologists look up to, really should try harder on this front.

News below.

Top News

Apple and Goldman

Apple and Goldman Sachs are reportedly going to launch a joint credit card bearing the Apple Pay brand. The move could help Apple boost uptake of the payment service, which the Wall Street Journal says has been slower than hoped-for. It’s also Goldman’s first card, coming at a time when the company is trying to push harder into consumer banking. WSJ

Drug Prices

President Donald Trump will today give a speech addressing the issue of high prescription drug prices, according to White House officials. According to reports, the administration will try to promote cheaper generic drugs, easing their way into the market and making them available for free to low-income seniors. It will not, however, allow Medicare to directly negotiate prices with manufacturers. CNBC

Asda-Sainsbury’s Merger

The sale of Walmart’s British supermarket chain, Asda, to rival Sainsbury’s would need to involve the offloading of at least 73 branches, according to research by store-location analysts at Maximise UK. That’s 6% of the combined operation’s total branches. The deal will require a green light from the U.K.’s Competition and Markets Authority, and the new group—set to be the country’s largest—would have a particular concentration of locations in England’s north-west and south-east. BBC

Boring Story

Elon Musk has promised that his Boring Company’s first under-L.A. tunnel will be available for public use within a few months—for free. That just applies to early tests, of course; once it’s fully operational, using the tunnel will cost money. The 2.7-mile tunnel was built very quickly, partly due to an environmental review exemption. Musk’s plans for more elaborate tunnels will likely incur much closer, and lengthier, scrutiny. Fortune

Around the Water Cooler

Eyes On Italy

With the anti-euro, populist Five Star and League parties on the verge of forming a coalition government in Italy, why are investors not more scared? According to experts quoted in this Financial Times piece, the European Central Bank’s ongoing bond-buying creates market conditions that are “supportive for Italian debt,” and Italy’s decision to refinance itself at longer maturities makes it more “resilient to shocks.” FT

Apple’s Aluminum

Apple uses a lot of aluminum in its devices, but it’s also big on environment-friendliness—for example, by making all its data centers use renewable energy. So now it’s setting up a new joint venture with Alcoa and Rio Tinto to establish a greener way of smelting aluminum. Usually that involves burning carbon, but the new project—set for fruition in 2024—would use another “advanced conductive material.” CNBC

Electronics Searches

A federal judge has rejected the government’s argument that warrantless searches of personal electronics at the U.S. border are acceptable. The Department of Homeland Security has the authority to search luggage and containers without warrants, but the government thinks this applies to smartphones as well. However, refusing to dismiss a lawsuit over the issue, Boston judge Denise Caspar noted that “the ability to review travelers’ cellphones allows officers to view ‘nearly every aspect of their lives—from the mundane to the intimate.'” NBC

AI Sexism

LivePerson CEO Robert LoCascio is concerned about virtual assistants, which come with female voices by default, being mainly developed by white male engineers who may be baking chauvinism into their systems. Think Alexa being subservient and accepting rudeness on the part of the user. “To avert a disaster in conversational AI, one important antidote to techie male bias that we are pursuing aggressively in our company is to engage contact center staff alongside coders in building the bots,” he suggests. Fortune

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