AI helps Google dodge a bullet

0:02Good morning from the Financial Times. Today is Thursday, September 4th. And this is your FT News Briefing. Businesses are trying to find ways to cut the fat. And Indonesians are distressed over widening inequality. Plus, the FT's John Foley explains why Google just dodged an enormous bullet. Google's shares were up by the equivalent of$220-something billion on Wednesday. So that's showing that there is an enormous sense of relief. I'm Mark Filippino, and here's the news you need to start your day.

0:44Company executives are cracking down on underperformers. UK-based Lloyds Banking Group is overhauling how it measures the productivity of its 63 ,000-strong workforce. That's according to people familiar with the matter. The plans would put about 3 ,000 people at risk of dismissal. The move comes as the company enters the final phase of a cost-cutting drive. Meanwhile, the boss of consumer goods giant Unilever unveiled a similar roadmap for his company at a conference yesterday. He plans to replace dozens of managers in what he describes as a drive to weed out, quote, pockets of mediocrity.

1:29shares of google's parent company alphabet surged yesterday that's in large part because of a court decision on tuesday that said google doesn't have to sell off its chrome browser at play in the case was whether google has become too dominant as a search tool but the judge ruled that the answer is no thanks to recent advancements in artificial intelligence john foley is the head of the ft's Lex Colum. He joins me now to break this all down. Hi, John. Hi, thanks for having me. Good to have you. So, John, catch us up on this big court decision. How big of a win is it for the company? So I think the market tells you that this is a pretty big win.

2:05Google's shares, or Alphabet, the parent company of Google's shares, were up by the equivalent of$220-something billion on Wednesday. So that's showing that there is an enormous sense of relief. This shows you that there was an overhang on the shares because of concerns that this case would end with the judge saying that Google basically had to break itself up into pieces. That hasn't happened, and that's a big win. Now, it's worth saying that this case is not over yet because Google may appeal, but at the moment, Google has definitely escaped the worst. Got it. So it might just be temporary relief for investors.

2:36But the thing I want to focus on, my understanding is that artificial intelligence plays a pretty big role in this decision. How does AI fit into this story exactly? One of the things that the judge, Amit Mehta, said in this decision is that AI was not a factor at the beginning of this trial, which started, this process started back in 2023. By the end of it, everyone was talking about generative AI. Witnesses were saying this market is changing dramatically because of the arrival of competitors like ChatGPT. The judge himself is saying that potentially AI will reshape the competitive landscape without Google having to break itself up into pieces.

3:13And that's one of the reasons why he stopped short of, for example, asking for the Chrome browser to be detached or explicitly banning Google from making payments that put its apps in default settings on smartphones. John, tell me more about all this. What does AI have to do with it? So the big thing that has changed is really ChudgyPT is amassing users extremely quickly. It now has something like 700 million weekly users. And it's not the same as a search engine, but it is increasingly the place where people go to retrieve information the way they would have done from a search engine. Google is obviously like trying to fight back.

3:46Google is introducing AI, generative AI into its own searches. Sometimes when you ask a question that kind of narrates the answer to you rather than just showing you links. But ChatGPT is changing the way that people use the Internet. And Google is certainly acting as if there is a risk that ChatGPT could also change search. Getting back to the outcome of the case, what exactly is Google allowed to do now? And what are they not allowed to do? I mean, what are the next steps for the company? So the big thing that isn't happening is that they don't have to sell Chrome, their browser. This is really important because Chrome, which defaults to Google search, makes up about 20 % of all U.S.

4:23internet search. They also don't have to stop making deals with smartphone makers like Apple to get their apps put on its phones in a default setting. There are limits to what it can now do, and there are specifically limits being put in place to try and ensure that Google can't extend its current monopoly in search into new AI-based products like assistance and so on. So where does this all leave Google? And I guess the big question is, does this decision tell us anything about trends and antitrust lawsuits when it comes to artificial intelligence? So I kind of think that this whole process may chip away at Google's monopoly, but is it going to do away with the monopoly problem in internet and search?

5:03Probably not. We may find, though, that in 10 years from now, we have a different monopoly. ChatGPT is growing extremely quickly. OpenAI, its owner, is extremely ambitious. So the trend is going to be seen in future years when we're looking at how the cards fall basically in the artificial intelligence and search and assistant market. because are we just going to end up with another situation where someone creeps up, becomes a monopoly, and then judges and governments are forced with trying to work out what to do retroactively, which is really difficult. John Foley is the head of the FT's Lex column.

5:35Thanks so much, John. Thank you.

5:43The EU-US trade deal is looking pretty fragile right now. Quick refresher, Washington and Brussels struck this agreement in July, and it puts 15 % tariffs on most EU exports to the US. The Blocks Assembly still needs to approve the reduction in tariffs on American goods entering the EU. But MEPs from most of the parties in the European Parliament called for changes to the agreement yesterday. Opponents included voices from the Greens, the far right, the left group, the Socialists and Democrats, and the Renew Group. Those five parties alone make up more than half of the parliament. For what it's worth, the head of the parliament's trade committee said the deal will probably be amended during the legislative approval process.

6:34Indonesia has seen some of the worst political unrest for decades this past week. Less than a year since President Prabowo Subianto took office, growing unemployment and anger over politicians' lavish lifestyles has boiled over. I'm joined now by Diana Mariska, who's been reporting on the protests. Hi, Diana. Hi. So, Diana, what is it that sparked the protests in the first place? The people were so angry because they were facing financial hardships in their daily life. And it doesn't seem to be in accordance with what the parliament members are showing because they somehow still got very generous allowances to their monthly salary.

7:14It was also revealed that a motorcycle taxi driver was run over by a police vehicle, and it escalated very badly from there with thousands of people taking on the streets in several cities in Indonesia. And what has been the extent of the unrest? So on Tuesday, the National Commission on Human Rights reported that 10 people died across the cities and some 1 ,600 people arrested in Jakarta alone. And in Jakarta, police stations, toll gates were set on fire. Companies also ordered their workers to work from home. In Makassar, also regional parliament building were burned. And in cities like Bandung and Surabaya, some locations were also burned.

7:56Wow, it sounds like things are getting really serious there. What's the economic backdrop to all this? In the last few years alone, the middle class is shrinking from$60 million in 2018 to about$47.9 million last year. Also, purchasing power is weakening, and lack of job opportunities is also concerning. And labor unions estimate about 70 ,000 layoffs in this year alone. It is evident in job fairs being packed with thousands of job seekers, while only dozens of job opportunities available. So the struggle has been very real. I think it's important to mention, Diana, that President Prabowo won last year's election on the back of promises to boost growth and reduce inequality.

8:44Can you tell me what he's done so far? Yeah, his flagship promises have struggled in the initial months of his presidency. Also, the goal to boost economic growth by 8 % looks even more impossible right now, given the current state of the economy. Also, economists have warned that he needs to take more concrete steps to attract investment and to create jobs as well as boost consumption to be able to boost this aspired growth. And early this year, the government has also introduced a inefficiency plan to further cut ministry's spending. And this has forced some regions and provinces to raise tax.

9:25And this has also caused some anger in some part of Indonesia. How serious is all of this for the government? And how has it responded? The recent protests posed serious challenge to Prabowo and threatened to undermine the political stability as well as investor confidence. So the president met with political party leaders a few days after the initial unrest and announced that the parliament will review the allowances for parliament members. But some people are still gathering in some spots, including the parliament building. And economists have also warned that behind all this is the economic issues faced by common Indonesians.

10:05So the government will need to address this issue and to create jobs. Otherwise, protests like this will continue to happen in the future. Diana Mariska reports from Jakarta for the FT. Thanks, Diana. Thank you.

10:23You could read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

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