TIME - Business

As Americans Crave Stability After Capitol Attack, CEOs Step Into the Leadership Void

Sun, 17 Jan 2021 11:50:48 GMT

For decades, chief executive officers studiously avoided wading into controversial issues of the day. There was no possible upside, only risk. But the apolitical CEO is one of the many norms shattered by Donald Trump. In many respects, the 45th President has made it easy for corporate leaders to be more outspoken. It’s sort of a no-brainer to speak out, as National Association of Manufacturers president and CEO Jay Timmons put it on Jan. 6, against “armed violent protesters who support the baseless claim by outgoing President Trump that he somehow won an election that he overwhelmingly lost.”

There are a number of factors driving CEOs’ new embrace of the bully pulpit. For one, insurrection, sedition and violence in the streets is bad for business. Big organizations require stability. Tear gas and bear spray make it hard to achieve the “visibility” into future earnings much prized by Wall Street. “With our country in the midst of a pandemic, business leaders recognize that ongoing division and distrust in our political system threatens the economic recovery and job creation our country desperately needs,” says the Business Roundtable, an organization made up of the CEOs of the nation’s biggest corporations including Apple, JPMorgan Chase, GM and Walmart.

On its most basic level, Trump’s persistent assault on the rule of law and the degradation of a federal election risked undermining the foundations of the system that made the American economy the most dynamic and successful on earth. The primacy of U.S. capital markets and the nation’s standing as a safe haven for global investors were at risk with Trump’s attacks on the norms of good governance. An authoritarian government and a free market can’t co-exist. At its heart, the capitalist system requires honoring contracts, which made Trump’s flouting of rules a profound threat to financial institutions, capital markets and corporate governance. “We believe in investment in the rule of law, not the law of rulers,” says Jeffrey Sonnenfeld, senior associate dean of leadership studies at the Yale School of Management. “CEOs say that about investing abroad—now that has to apply that at home too.”

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Defending that system helps explain in the week after the Capitol attack, a who’s who of the nation’s most prominent blue-chip companies, including Marriott, AT&T, American Express and Amazon, said they would halt campaign donations to members of Congress who voted to challenge the presidential-election results. Unsentimentally, Hallmark Cards, which is based in Kansas City, Mo., took the additional step of asking Republican Senators who objected to certifying the results to refund the company’s previous donations. Other companies, including JPMorgan Chase and Citigroup, called a temporary halt to donations to both Republican and Democrats.

“We are taking a pause on federal contributions and using this as an opportunity to really evaluate the candidates that we have supported and do their actions and values align with ours,” Lynn Good, CEO of Duke Energy, said in an interview with TIME. “We felt like this was an important one for us to weigh in on as a company.” Good said the decision came after careful deliberation and was informed by the strong reaction of many of the company’s employees and customers. “Everyone was watching with some degree of dismay and shock,” says Good. “We are not a supporter of violence being used as a way to voice an opinion on an important topic.” (One could ask whether corporations should play such an outsize role in funding candidates, but that’s a separate topic for another day.)

Additional moves may be forthcoming. Sonnenfeld, who has convened three emergency summits with CEOs since the election, said the majority of CEOs at a recent meeting said they would “reconsider their investments in states of seditious Congressmen.”

Business leaders are stepping in to fill a void left by the erosion of trust in government and other institutions. Communications firm Edelman, which annually measures trust in institutions including government, NGOs, business and media, found in its new study that business is the “only trusted institution … and the only institution seen as both ethical and competent.” The report concluded, “The heightened expectations of business bring CEOs new demands to focus on societal engagement with the same rigor, thoughtfulness and energy used to deliver on profits.”

One marker of a sea change is the emergence of a new vocabulary. Deplatforming—kicking bad actors off the tech infrastructure—has become a mark of corporate activism. Twitter, Facebook and most recently YouTube have deplatformed President Trump. On Jan. 12, YouTube said in a statement, “After careful review, and in light of concerns about the ongoing potential for violence, we removed new content uploaded to the Donald J. Trump channel … We are also indefinitely disabling comments under videos on the channel.”

Other tech giants up and down the digital food chain took similar steps in the wake of the Capitol attack. Amazon’s immense cloud-services businesses (in the most recent quarter, they generated nearly $10 billion in revenue) kicked right-wing social network Parler off its web-hosting servers earlier this month. (Parler has sued for breach of contract.) Apple and Google, which removed Parler’s app from its app stores, have moved to dismantle the infrastructure of hate. And Stripe, a high-flying fin-tech startup, said it would no longer process payments for Trump’s campaign website in the wake of the Capitol riots for violating its policies against encouraging violence.

Whether this was a bold act of corporate leadership—or the equivalent of closing the digital barn door after the rabid horse had already kicked the stable manager in the head and flung its rider to the ground—is a complex question. The deplatforming largely resulted in a collective short-term sigh of relief, but was a stark demonstration of the inordinate and lightly regulated power of a handful of tech giants based in Silicon Valley. Global leaders, including the heads of state of Germany and Mexico, expressed concern over private companies’ ability to censor speech. Forging a new paradigm around the complicated questions of free speech, market concentration and tech regulation will be one of the most consequential global policy debates of our time.

A final driver forcing CEOs to come off the sideline is the expectation of today’s more politically engaged younger workers. The Edelman survey found that 86% of respondents expected CEOs to speak out on societal issues. “We govern with the consent of the governed, and the governed are restless,” one CEO of a small firm told TIME, voicing concern over the expectation that a CEO statement was now considered de rigueur after any development of note. Speaking out is fine on big issues like climate change or illegally closing the borders to people of one religion, according to the CEO. But there is a growing unease about where it will lead, particularly with issues that hit closer to home, like executive compensation and the wealth gap. In a post-Trump Joe Biden world, “no comment” is no longer an option.

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What are your thoughts on CEOs weighing in on political affairs? Have you personally become more outspoken in work settings about political and social issues? I welcome your observations at leadership@time.com.

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Toll Brothers CEO Doug Yearley on Where Americans Are Moving During the Pandemic

Sun, 10 Jan 2021 11:50:24 GMT

(Miss this week’s Leadership Brief? This interview below was delivered to the inbox of Leadership Brief subscribers on Sunday morning, Jan. 10; to receive weekly emails of conversations with the world’s top CEOs and business decisionmakers, click here.)

The housing market is one of the starkest examples of the disparate impacts of the pandemic on America’s citizens. In August, the Aspen Institute released a report that estimated 30 million to 40 million Americans were at risk of eviction in coming months “in the absence of robust and swift intervention.” Yet overall, the housing market is booming as affluent, dual-income households take advantage of historically low interest rates (2.85% for a 30-year fixed-rate loan) and newfound flexibility to work from home—and perhaps move into spacious new homes with easy access to the outdoors.

At Toll Brothers, one of the nation’s largest home builders, demand has been surging since May. For its most recent quarter, Toll Brothers reported 3,407 net signed home contracts, the highest for any quarter in the company’s 53-year history; contracts were up 68% compared to the same period a year ago. Customers are also spending heavily to customize their homes. The average in buyer upgrades in the quarter was $183,000, also the most in the company’s history, as buyers feather their new nests with home offices and gyms, complete with rubberized floors, full-length mirrored walls and built-in ballet barres.

The pandemic has accelerated trends that are likely to reshape the housing market for years to come. Toll Brothers CEO Doug Yearley says buyers are leaving California and flocking to cities like Reno, Nev., and Boise, Idaho, as well as relocating to warm-weather states like Texas and Florida. Yearley expects the pace to remain intense in 2021, with the company opening upwards of 150 new housing communities this year as it follows customers into new markets. “We are very focused on geographical expansion,” says Yearley, a lawyer turned builder. “We’re chasing the sun—the Smile States, as they call them—which is North Carolina down through Florida, across through Texas and up the West, which is where most of this country is moving.”

Yearley, who was handpicked and groomed by company co-founder Bob Toll and has been CEO since 2010, has spent three decades at Toll Brothers. He recently joined TIME for a conversation about where Americans are moving, changes in housing design and the most popular paint colors (Alabaster and Agreeable Gray by Sherwin-Williams).

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(This interview with Toll Brothers CEO Doug Yearley has been condensed and edited for clarity.)

You’ve been in the business since 1990. How does the market in 2020 stack up?

Since May, we’re in the hottest housing market that I’ve seen in those 30 years. It’s a huge shock. In late March, I wasn’t sure we’d sell another home. I read recently that a third of resale transactions are trading above asking price. That’s unheard of.

Let’s break down some of the different drivers and if they will persist: Work from home?

I think the concept of having some flexibility to work remotely will survive the pandemic. We’ve already heard of some tech companies that have said forever or very long-term, you can work from home. I think that’s not the norm, but there’s going to be enough companies that do that. I still want people in the office a couple of days a week.

How are people’s buying decisions, calculations, changing?

If you were thinking, “My retirement plan is to go to Florida, to go to Hilton Head, to go to Charleston, S.C., wherever,” and you thought, “I’m gonna work till 63, so maybe around 61 let’s start looking.” The 55-year-old is now saying, “You know what? I’ll fly back to New York one week a month. My boss is gonna let me make it work. We’re going earlier.” We’re seeing more of that.

Where are people moving with this newfound flexibility?

We have a big presence in coastal California. Orange County, L.A. County and up around San Francisco—that’s still doing well. But there are a lot of Californians that are moving to Reno, Nev.; Las Vegas; Phoenix; Austin, Texas; Boise, Idaho; Salt Lake City; Denver. Our salespeople in Florida, they’re beginning to see Californians in Florida. They love coastal living, they’re just switching coasts. The cost of living of California is absolutely driving people to those markets I mentioned.

And on the East Coast?

We’re seeing migration out of the Northeast down to the Carolinas, down to Florida. Prepandemic, there’s been a big move into Texas. So you look at markets that have great weather, a great relaxed lifestyle, good jobs and more affordability. And that’s Florida, that’s Texas, and that’s those Western markets that I mentioned.

What markets have experienced the sharpest upticks for you?

So out of California, No. 1 and No. 2 would be Reno and Boise. They’re just wonderful places to live. They’re more affordable, great lifestyle, fresh mountain air. We’re seeing tremendous migration into those markets by Californians.

What are you seeing in big cities?

We have a good operation in New York City we call Toll Brothers City Living. We’ve built 30 plus or minus high-rises between Hoboken, Jersey City, Manhattan and Brooklyn. And that market has slowed. We’re already starting to see an improvement in our sales in our New York towers. And in our Hoboken, Jersey City and Manhattan towers. It’s not back to where it should be, but we are seeing an uptick in the last four to six weeks. The vaccine coming is helping. Longer term, I think the cities will be fine, but there’s no question that there are some people that have decided, having been through this, that they want a suburban lifestyle with more space.

Longer term, I think the cities will be fine, but there’s no question that there are some people that have decided, having been through this, that they want a suburban lifestyle with more space.

What are your most popular custom features these days?

Pandemic-related, the home office is No. 1. You can buy a resale home and convert a bedroom, put something in the basement, put something in the attic. But when you buy a new home, or you’ve thought through how to integrate a home office into the way the family lives, bring technology to that home office in terms of wi-fi and whatever else. It really makes a big difference.

And home gyms?

So where we build basements, which is all market-driven—for example the Northeast, the Midwest—we dig holes, we have basements. They generally go down there. We put an extra foot of height in the basement ceiling, we’ll put a bathroom down there, and you create a true home gym with a hard rubber floor and a mirrored wall and a ballet bar for bar classes.

And families want to be closer together now?

After what we’ve been through, nobody wants to put their elderly parents in a nursing home. And the opportunity to design a home that has basically a small apartment within the home, that has an exterior entrance in, so Mom or Dad or both can have privacy, they can come in from the outside, lock a door, they don’t want to see the grandkids that day or whatever. They used to call it the in-law suite. We call it multigenerational suite because it’s not just for Mom and Dad. The 26-year-old kid who’s still living at home may be using it also, where he can have some privacy but be part of the family. You don’t want to make it too nice for the kid or he may never leave. So that’s another big option that we had pre-COVID, but it’s definitely more popular with what we’ve all been through.

What is the single biggest shift in home design you are seeing?

I think the biggest change to the home, and it was pre-COVID, is the open floor plan with the indoor-outdoor living, where the back of the house is a wall of glass that accordions, that opens up, brings the outdoors in. We started this in California because 300 days out of the year the outside temperature was within 5 degrees of the inside temperature, and there’s no bugs and you can open the back of the house up and double the size of your home. But it’s expanding—we do it in New Jersey. Obviously, the season is shorter and you have to put a screen porch maybe off the back because of bugs. But the opportunity to have an open, airy floor plan where the family lives together as opposed to the old-fashioned segregated living room, dining room, family room. Bringing the outdoors inside through dramatic walls of glass is absolutely the No. 1 wow factor that everybody wants, even if you grew up in the traditional colonial East Coast house. They’re all happy to leave that behind.

You started in land acquisition. How has that changed since 1990?

The No. 1 most important thing we do is buy land. If you buy the wrong land, it doesn’t matter how great your architecture is and how great your sales team is, you can’t overcome that land. And so we spend a lot of time on it. We have 65,000 lots in this company, building 10,000 homes a year, plus or minus. Every land deal comes through my office, every week.

Every single one?

I still like to micromanage that side of the business. I look at 20 land deals a week. It’s my Sunday night. And every Monday I get together with the regional teams and the division teams, and we talk through every deal. I have a legal background, so I probably cross-examine and get into the weeds a little more than they would like, but I do it on purpose. I do it as a lesson. Because I need to remind everybody how important it is to make sure we’re buying the right land in the right location. It is the No. 1 driver of success, the ability to opportunistically and thoughtfully buy the right land. And we’re really good at it.

And on those Sunday nights, what are you looking for?

I’ve been to every market we build in; I know every submarket of every market we build in. I have probably seen half the land deals that come to me on a Sunday because whenever I travel, I say, “Anything you think we may be interested in buying?” And that may come to me. I want to see it now, even if it’s six months out. The first thing, the obvious thing, you know, is it near power lines? Is there a neighboring use that would concern me?

What might that be? Landfills?

Oh, landfills, water-treatment plants. They may explain to me that it’s next to a beautiful park. But the first thing I see are ball fields. So the next question is are there lights on these ball fields? What time do the lights go off at night? It’s great if you live across the street from the ball fields. It’s not so great if you’ve got lights in your backyard at 10:30 every night.

Do you have any ironclad rules about buying land?

I’m not disappointed if we miss a deal because we couldn’t financially come to terms with a seller. I’m very disappointed if another builder bought a deal that we didn’t know about. So I need to know that our teams are on top of everything. So if I find out [rival] Pulte Homes bought this piece and I say, “What did we know? What happened?” And if I hear a story we did, they outbid us, no problem. If one of those “Oh, it was off market, it never came to a broker, we didn’t know about it,” that’s—you’ve got to know of all the opportunities in a market.

I’m hearing, if you are on your team, don’t miss a deal.

Correct.

How has land buying changed since you were doing it?

When I started, I spent a lot of time on front porches of farmhouses in rocking chairs, eating apple pie with the landowners. There’s some of that, but there’s not as much. We’re buying office buildings in the suburbs that are being repurposed to townhomes. We’re buying distressed shopping centers that are being repurposed for residential.

You oversaw Toll Brothers’ move from the suburbs to the cities. Was that your idea?

Yeah. So early 2000s, 2003, 2004, we took a bold step, one of the few suburban builders who had done it, to jump into high-rise. It started in Hoboken. We bought the Maxwell House coffee factory on the Hudson River. It was the largest coffee factory in the world in the early 1960s before Maxwell House moved to Jacksonville [Fla.]. When we bought it, it was a brownfield. We had to spend tens of millions of dollars to clean up the environmental issues. And we built 800 condos and four towers.

And what about the design? Did you use your same team of architects?

When I started, I spent a lot of time on front porches of farmhouses in rocking chairs, eating apple pie with the landowners.We did not use any of our typical architects. We use in some cases starchitects. The building on 28th Street [in New York City] was a Rem Koolhaas, a very famous international architect. We did the right thing: we kind of dropped our suburban mindset, we hired urban architects, we hired high-rise builders and developers.

How does climate change have an impact on your land-acquisition and home-building strategies?

There’s no question that we’re moving rapidly as an industry as we are as a society, as a culture. California’s leading the way. Solar roof panels, solar heating and cooling. Solar electricity is mandated in California starting [in 2021]. And you’re going to now see virtually everything built out there with solar panels. It’s interesting because in the old days you’d see a house with the solar panels and it really stood out. Now they have solar panels that integrate into the roof shingles or the tile on the roof, and you can hardly tell, you can hardly see it. That will expand beyond California.

So your homes currently in California: there’s some with solar?

Yes, it’s an option that we offer. Some take it. It’s a bit expensive. Part of this is driven by whether there are state tax credits for having it. Much like if you buy a Tesla you get a tax credit. We’ll see if President Biden comes up with a national position on this or he allows the states to continue what they want. Right now the states are a bit all over the place. So that’s No. 1 when you talk about climate change. I think solar is going to be the biggest change you’ll see to housing. And obviously the new home will lead because you don’t have the retrofit required of the existing home.

And what about trees?

We are very sensitive to the way the roads lay out, how they meander, how we’re saving trees and other environmentally sensitive areas. We don’t want a bunch of gridded streets where the houses all line up and you can look out your front door and pick up the newspaper and look down the street and see everybody else doing the same thing.

Do you have sidewalks?

In some communities. It depends on the local regulations. I like sidewalks.

How many toilets do you buy a year?

Well, if we build 10,000 houses a year, and we have on average four bathrooms in a house—there you have it.

Toll Brothers was founded in 1967 by Bob and Bruce Toll. What is it like for you to follow in the footsteps of people whose names were literally on the door?

Bob Toll hired me 30 years ago, almost 31 now, when I was a lawyer. I got lucky. I went to Cornell, Bob went to Cornell. I went to law school; I loved the law-school education, how it rewired my brain. Bob went to law school; he loved how it rewired his brain. And we both hated the practice. We both couldn’t wait to get out, stop billing time and start being businesspeople, getting involved in making deals. He said, “Leave that practice of law. I’m gonna send you out into a construction trailer. You’re gonna learn how to be a builder, you’re gonna buy land, you’re gonna expand this company into new markets.” Then I went out in the field for two years, and I was in blue jeans and Timberland boots learning how to be a builder, managing contractors.

Do you personally live in a Toll Brothers home?

I do not. I live in a 110-year-old home in the suburbs of Philadelphia.

I love hearing from readers. Please write me at leadership@time.com. Question: What was the favorite house you lived in? If you could live anywhere, where would it be, in what type of house? An A-frame in the Alps? A row house in Chicago? I look forward to hearing your memories about your homes and aspirations.

Additional Reading

Interesting in housing? Here are some book recommendations.

Evicted: Poverty and Profit in the American City by Matthew Desmond

A TIME review said, “This Pulitzer Prize–winning book examines the plague of eviction, following eight Milwaukee families who struggle to stay in their homes in the face of a rigged system. With compassion and an expert understanding of the many obstacles to a solution, Desmond illustrates the ways that eviction serves to exacerbate the traumatic cycle of poverty.”

The Color of Law: A Forgotten History of How Our Government Segregated America by Richard Rothstein

This “powerful and disturbing history” exposes how American governments deliberately imposed racial segregation on metropolitan areas nationwide (New York Times Book Review).

Behind the Beautiful Forevers by Katherine Boo

Another Pulitzer Prize winner, this one takes readers deep inside the lives of the residents of a makeshift slum in Mumbai.

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Boeing Will Pay $2.5 Billion After Admitting Employees Misled Regulators on 737 Max

Fri, 08 Jan 2021 02:28:49 GMT

Boeing will pay $2.5 billion to settle a Justice Department investigation and admit that employees misled regulators about the safety of its 737 Max aircraft, which suffered two deadly crashes shortly after entering airline service.

The government and the company said Thursday that the settlement includes money for the crash victims’ families, airline customers and a fine.

Prosecutors said Boeing employees gave misleading statements and half-truths about safety issues with the plane to the Federal Aviation Administration, then covered up their actions.

“Boeing’s employees chose the path of profit over candor,” said David Burns, acting assistant attorney general for the Justice Department’s criminal division.

Boeing blamed two former pilots who helped determine how much training was needed for the Max. CEO David Calhoun said their conduct doesn’t reflect Boeing employees as a whole or the character of the company.

“This is a substantial settlement of a very serious matter, and I firmly believe that entering into this resolution is the right thing for us to do — a step that appropriately acknowledges how we fell short of our values and expectations,” Calhoun said in a memo to employees.

The government will drop the criminal charge of conspiracy to defraud the U.S. after three years if Boeing follows the terms of the settlement.

The settlement removes uncertainty about criminal charges against the iconic U.S. aircraft maker, which is struggling to put the Max crisis behind it. Boeing still faces lawsuits by the families of passengers who died in the crashes, it has lost more than 1,000 orders for the Max, and its once-stellar reputation for engineering has suffered.

Boeing began working on the Max in 2011 as an answer to a new, more fuel-efficient model from European rival Airbus. Boeing admitted in court filings that two of its technical pilot experts deceived the FAA about a flight-control system called the Maneuvering Characteristics Augmentation System, or MCAS, that could point a plane’s nose down if sensors indicated the plane might be in danger of an aerodynamic stall — that it might fall from the sky.

The system was not part of previous 737 models. MCAS was added because the Max’s larger engines, which are mounted higher and farther forward on the 737’s low-swept wings, gave the plane a tendency to tilt too far nose-up in some conditions.

Boeing downplayed the significance of MCAS and didn’t mention it in airplane manuals. Most pilots didn’t know about it.

The first airlines began flying the 737 Max in mid-2017. On Oct. 29, 2018, a Max operated by Indonesia’s Lion Air plunged into the Java Sea. The FAA let the Max keep flying, and on March 10, 2019, another Max operated by Ethiopian Airlines crashed nearly straight down into a field. In all, 346 people were killed.

On both flights, MCAS was activated by a faulty reading from a single sensor. The system repeatedly pushed the planes’ noses down, and pilots were unable to regain control.

After the planes were grounded worldwide, Boeing changed MCAS so that it always uses two sensors, along with other changes to make the automated system less powerful and easier for pilots to override. The FAA ordered other changes, including the rerouting of some wiring to avoid potential dangerous short-circuiting.

In November, the FAA approved Boeing’s changes, and several carriers including American Airlines have resumed using the planes.

Under the settlement announced Thursday, Boeing will pay a $243.6 million fine, $1.77 billion in compensation to airlines that were unable to use their Max jets while they were grounded, and $500 million into a fund for the families of passengers who were killed in the crashes.

Boeing faces dozens of lawsuits by families who lost relatives in the crashes. Three lawyers pressing cases in the Ethiopian crash said the settlement would not affect their pursuit of compensation.

Zipporah Kuria, a U.K. citizen whose father died in the Ethiopian crash, said that with the settlement, Boeing leaders were seeking to “pay their way out of accountability.” The agreement “won’t bring back our loved ones, but at least there is clarity that their deaths weren’t incidental and there is clarity in liability.”

Boeing said in a regulatory filing that it will take a $743.6 million charge against earnings because of the settlement.

The crashes and grounding of the Max, Boeing’s best-selling plane, has plunged the Chicago-based company into its deepest crisis. It has led to billions in losses and resulted in the ouster of former CEO Dennis Muilenburg in December 2019.

Twitter Locks Trump’s Account Over ‘Repeated and Severe Violations’ as His Supporters Mob ...

Wed, 06 Jan 2021 22:39:38 GMT

As Trump supporters stormed and breached the U.S. Capitol on Wednesday, Twitter escalated its flagging of Trump’s tweets for disputed information by marking a video he tweeted out amid the riot as carrying a “risk of violence.” The social media platform at first restricted the tweet from being liked or shared, and later removed it entirely.

In the video, Trump speaks directly to his supporters, whom he had urged to gather in Washington D.C. as the houses of Congress took up the Electoral College certification that would finalize Joe Biden’s victory over the President. Trump used the video to once again falsely claim election fraud, before encouraging his supporters who had unlawfully entered the Capitol building to go home in peace. “You have to go home now. We have to have peace. We have to have law and order,” he says. “So go home. We love you. You’re very special…I know how you feel.”

The video was tweeted out shortly after 4 p.m. EST on Wednesday and was subsequently marked with a warning that read, “This claim of election fraud is disputed, and this tweet can’t be replied to, retweeted, or liked due to a risk of violence.”

Although numerous tweets of Trump’s have been flagged for disputed information, this appears to be the first time that Twitter has locked down engagement with one of his posts as well as marked it for “risk of violence.”

Later in the evening, Trump again tweeted false information about the election and urged those who stormed the Capitol “go home with love & in peace.” Twitter similarly restricted engagement with that tweet.

Shortly after, Twitter removed the two tweets and one other from its platform and issued a statement, saying the President’s account was locked for 12 hours.

“As a result of the unprecedented and ongoing violent situation in Washington, D.C., we have required the removal of three @realDonaldTrump tweets that were posted earlier today for repeated and severe violations of our Civic Integrity policy,” the statement sent via their @TwitterSafety account read. “This means that the account of @realDonaldTrump will be locked for 12 hours following the removal of these Tweets. If the Tweets are not removed, the account will remain locked. Future violations of the Twitter Rules, including our Civic Integrity or Violent Threats policies, will result in permanent suspension of the @realDonaldTrump account.”

As a result of the unprecedented and ongoing violent situation in Washington, D.C., we have required the removal of three @realDonaldTrump Tweets that were posted earlier today for repeated and severe violations of our Civic Integrity policy. https://t.co/k6OkjNG3bM

— Twitter Safety (@TwitterSafety) January 7, 2021

Facebook also appears to have removed the video from the President’s account after initially labeling it as potentially misleading.

China’s Crackdown on Alibaba and Ant Drive $200 Billion Tech Selloff

Mon, 28 Dec 2020 09:47:13 GMT

Alibaba Group Holding led a second day of frenetic selling among China’s largest tech firms, driven by fears that antitrust scrutiny will spread beyond Jack Ma’s internet empire and engulf the country’s most powerful corporations.

Alibaba and its three largest rivals — Tencent Holdings, food delivery giant Meituan and JD.com — have shed nearly $200 billion over two sessions since Thursday, when regulators revealed an investigation into alleged monopolistic practices at Ma’s signature company. That marked the formal start of the Communist Party’s crackdown on not just Alibaba but also, potentially, the wider and increasingly influential tech sphere.

On Sunday, the central bank ordered Ma’s other online titan — Ant Group Co. — to return to its roots as a payments service and overhaul adjacent businesses from insurance to money management, spurring talk of an eventual breakup.

Once hailed as the standard-bearers of China’s economic and technological ascendancy, Alibaba and its compatriots now face increasing pressure from regulators worried about the speed with which they’re amassing clout in sensitive arenas such as media and education and gaining influence over the daily lives of hundreds of millions. That concern crystallized in November, when regulators torpedoed Ant’s $35 billion initial public offering before unveiling draft rules enshrining sweeping powers to clamp down on anti-competitive practices in sectors from e-commerce to social media.

Alibaba fell 8% Monday in Hong Kong, shedding $270 billion of value since its October peak. Tencent and Meituan both tumbled more than 6%. Alibaba rival JD.com Inc. slid roughly 2%.

“The Chinese government is putting more pressure or wants to have more control on the tech firms,” Jackson Wong, asset management director at Amber Hill Capital Ltd., said by phone. “There is still very big selling pressure on firms like Alibaba, Tencent or Meituan. These companies have been growing at a pace deemed by Beijing as too fast and have scales that are too big.”

It’s unclear what concessions regulators may try to wring from Alibaba. Under the existing Antitrust Law — now undergoing revisions to include the internet industry for the first time — Beijing can fine violators up to 10% of their revenue. In Alibaba’s case, that could mean a levy of as much as $7.8 billion.

China’s e-commerce leader on Monday raised a proposed stock repurchase program by $4 billion to $10 billion, effective for two years through the end of 2022. But the buyback program was overwhelmed by fears that the steps taken against Ant are just the tip of the iceberg. While the central bank stopped short of calling for a breakup, the financial services giant now needs to present specific measures and a timetable for overhauling its business.

The State Administration for Market Regulation dispatched officials to Alibaba’s Hangzhou headquarters last Thursday and the on-site investigation was completed on the day, according to local news reports. The People’s Daily — the Communist Party mouthpiece — ran a commentary over the weekend warning Alibaba’s peers to take the antitrust investigation into Alibaba as a chance to lift their own awareness of fair competition.

Ma, the flamboyant co-founder of Alibaba and Ant, has all but vanished from public view since Ant’s IPO got derailed last month. As of early December, the man most closely identified with the meteoric rise of China Inc. was advised by the government to stay in the country, a person familiar with the matter has said.

Ma isn’t on the verge of a personal downfall, those familiar with the situation have said. His very public rebuke is instead a warning Beijing has lost patience with the outsize power of its technology moguls, increasingly perceived as a threat to the political and financial stability President Xi Jinping prizes most.

Investors remain divided over the extent to which Beijing will go after Alibaba and its compatriots as Beijing prepares to roll out the new anti-monopoly regulations. The country’s leaders have said little about how harshly they plan to clamp down or why they decided to act now.

Some analysts predict there’s a crackdown coming, but a targeted one. They point to language in the regulations that suggests a heavy focus on online commerce, from forced exclusive arrangements with merchants known as “Pick One of Two” to algorithm-based prices favoring new users. The regulations specifically warn against predatory pricing — selling below cost — to weed out rivals.

“As this latest investigation occurs at a time when China is ready to take action against monopolistic practices, we think SAMR might want to use BABA’s case as a precedent to send a message to the rest of the industry that the authority is determined this time to address the” pricing issue, Nomura analysts wrote in a note Monday.

–With assistance from Jeanny Yu.

China Targets Jack Ma’s Alibaba With Monopoly Investigation

Thu, 24 Dec 2020 08:28:55 GMT

China kicked off an investigation into alleged monopolistic practices at Alibaba Group Holding and summoned affiliate Ant Group Co. to a high-level meeting over financial regulations, escalating scrutiny over the twin pillars of billionaire Jack Ma’s internet empire.

The probe announced Thursday marks the formal start of the Communist Party’s crackdown on the crown jewel of Ma’s sprawling dominion, spanning everything from e-commerce to logistics and social media. The pressure on Ma is central to a broader effort to rein in an increasingly influential internet sphere: Draft anti-monopoly rules released November gave the government unusually wide latitude to rein in entrepreneurs like Ma who until recently enjoyed unusual freedom to expand their realms.

Once hailed as drivers of economic prosperity and symbols of the country’s technological prowess, Alibaba and rivals like Tencent Holdings face increasing pressure from regulators after amassing hundreds of millions of users and gaining influence over almost every aspect of daily life in China.

“It’s clearly an escalation of coordinated efforts to rein in Jack Ma’s empire, which symbolized China’s new ‘too-big-to-fail’ entities,” said Dong Ximiao, a researcher at Zhongguancun Internet Finance Institute. “Chinese authorities want to see a smaller, less dominant and more compliant firm.”

The State Administration for Market Regulation is investigating Alibaba, the top antitrust watchdog said in a statement without further details. Regulators including the central bank and banking watchdog will separately summon affiliate Ant to a meeting intended to drive home increasingly stringent financial regulations, which now pose a threat to the growth of the world’s biggest online financial services firm. Ant said in a statement on its official WeChat account it will study and comply with all requirements.

Ma, the flamboyant co-founder of Alibaba and Ant, has all but vanished from public view since Ant’s initial public offering got derailed last month. As of early December, the man most closely identified with the meteoric rise of China Inc. was advised by the government to stay in the country, a person familiar with the matter has said.

Alibaba slid as much as 8.9% in Hong Kong to a five-month intraday trough Thursday. Asia’s largest corporation after Tencent has led losses among China’s internet sector leaders since Ant’s IPO got yanked in November, taking the overall toll to more than $100 billion. Tencent slid more than 2% and internet services giant Meituan declined more than 4%, while SoftBank Group Corp., Alibaba’s largest shareholder, sank as much as 2.9% in Tokyo. Alibaba said in a statement it will cooperate with regulators in their investigation, and that its operations remain normal.

The country’s internet ecosystem — long protected from competition by the likes of Google and Facebook — is dominated by two companies, Alibaba and Tencent, through a labyrinthine network of investment that encompasses the vast majority of the country’s startups in arenas from AI to digital finance. Their patronage has also groomed a new generation of titans including food and travel giant Meituan and Didi Chuxing — China’s Uber. Those that prosper outside their aura, the largest being TikTok-owner ByteDance Ltd., are rare.

The anti-monopoly rules now threaten to upset that status quo with a range of potential outcomes, from a benign scenario of fines to a break-up of industry leaders. Beijing’s diverse agencies appear to be coordinating their efforts — a bad sign for the internet sector.

“There is nothing that Chinese Communist Party doesn’t control and anything that does appear to be gyrating out of its orbit in any way is going to get pulled back very quickly,” said Alex Capri, a Singapore-based research fellow at the Hinrich Foundation.

The campaign against Alibaba and its peers got into high gear in November, after Ma famously attacked Chinese regulators in a public address for lagging the times. Market overseers subsequently suspended Ant’s IPO — the world’s largest at $35 billion — while the anti-monopoly watchdog threw markets into a tailspin shortly after with its draft legislation.

The People’s Daily, the mouthpiece of the Communist Party, warned Thursday that fighting alleged monopolies was now a top priority. “Anti-monopoly has become an urgent issue that concerns all matters,” it said in a commentary coinciding with the probe’s announcement. “Wild growth” in markets needs to be curbed by law, it added.

The chances that Ant will be able to revive its massive stock listing next year are looking increasingly slim as China overhauls rules governing the fintech industry, which in past years has boomed as an alternative to traditional state-backed lending.

China is said to have separately set up a joint task force to oversee Ant, led by the Financial Stability and Development Committee, a financial system regulator, along with various departments of the central bank and other regulators. The group is in regular contact with Ant to collect data and other materials, studying its restructuring as well as drafting other rules for the fintech industry.

“China has streamlined a lot of the bureaucracy, so it’s easier for the different regulatory bodies to work together now,” said Mark Tanner, managing director of Shanghai-based consultancy China Skinny. “Of all the regulatory hurdles, this is the biggest by a long shot.”

–With assistance from Jun Luo, Colum Murphy, Amanda Wang and John Cheng.

Why ‘Accidental Americans’ Are Desperate to Give Up Their U.S. Citizenship

Tue, 22 Dec 2020 12:27:41 GMT

Ever since the Top Salon opened its doors in 1988, it has done solid business styling hair for the residents of Harkema, in the north-west Netherlands. Yet it might soon be giving its last haircuts. “The bank wants to close my account by January 1,” says the salon owner Annie Brouwer-Hoogsteen, 53, who launched her business when she was just 21. “If they do, we cannot buy supplies, we cannot pay three hairdressers, we cannot do anything.”

Brouwer-Hoogsteen’s business is not failing, and she is not a criminal. Instead, she is being targeted because of her ties to the United States. She received automatic citizenship by being born on U.S. soil, but has no other connection to the country, having left as a baby. Like countless others around the world she is an “Accidental American,” and is now being forced to pay a price for it.

Other than Eritrea, the U.S. is the only country in the world with citizenship tax rules, demanding that all Americans—including anyone born in the U.S.—submit yearly tax filings to the Internal Revenue Service, no matter where they live. And since 2010, when the U.S. introduced the Foreign Account Tax Compliance Act, or FATCA, all the world’s banks have been obligated to begin reporting on the activities of their American customers.

This year, the U.S. began enforcing those rules in earnest. Although the U.S. Treasury temporarily relaxed the rules last year, as the tales of woe mounted, the easing of the regulation ended in January, when the Treasury refused to extend a moratorium against banks who do not send their clients’ data to the U.S. Despite pleas from European Union officials, the U.S. refused to reconsider, and beginning on Jan. 1, 2020, threatened to impose fines potentially up to billions of dollars, on foreign banks that do not share their U.S. clients’ information.

Since then the rules have ensnared thousands like Brouwer-Hoogsteen in a sticky web of tax implications, as their banks threaten to shut down their accounts, or turn away prospective American customers, rather than deal with U.S. compliance, or risk financial sanctions. “The impact on people’s lives has been enormous,” says Marc Zell, a U.S. lawyer in Israel. “People cannot get mortgages. They cannot get bank loans for businesses,” he says. “Many do not even know they are American.”

Now, lawsuits filed on both sides of the Atlantic are seeking to redress the situation. On Tuesday organizations representing Americans in Europe filed complaints against Luxembourg and Belgium’s governments, demanding they immediately stop transferring European citizens’ personal banking information to the U.S.—something they say violates strict European and national privacy laws. The complaints are a prelude to formal lawsuits in the courts.

Zell sued the State Department in early December, on behalf of 20 accidental Americans whose lives have been upturned by FATCA. Other legal challenges say it might be in violation of the European Union’s data-protection laws, and perhaps also a violation of the U.S. constitution.

With a new U.S. administration about to take office, lawyers and pressure groups who have spent years battling FATCA’s fallout say they might finally have a chance to force some changes to the law, which they say are increasingly urgent. “Under cover of fighting tax fraud, the U.S. has created a monster,” says Fabien Lehagre, founder and president of the Paris-based Association of Accidental Americans who was born in California in 1984, and lived there until he was 18 months old. FATCA, he says, is “a monster that has made accidental Americans pariahs of the international banking system, in which fundamental rights are flouted every day.”

‘They all think that we are rich Americans’

When President Obama introduced FATCA in 2010, its intention seemed reasonable: To catch rich Americans shielding their wealth from the IRS. It came after a whistleblower in the 2000s revealed how Americans were hiding billions of dollars in tax-free Swiss banks.

However, the law has acted as a dragnet with miserable unintended consequences. In several interviews with lawyers and victims, they describe time and again how ordinary people have been embroiled in years of problems, after suddenly being made aware—often from their banks—that an accident of birth has put them under suspicion.

There is no accurate figure for the numbers of “accidental” Americans. Banking organizations estimated more than 110,000 in Europe back in 2016, but that included a tally from only a fraction of banks; the Paris-based association has 1,200 French members. Some estimate that at least 9 million Americans live abroad, including many who still have deep ties to the U.S. Yet the law does not distinguish between those people, and those simply born in the country.

Brouwer-Hoogsteen, the Dutch hair-salon owner, could hardly have more tenuous links to the U.S. She was born in 1967 in Bellflower, California, where her parents were dairy farmers, and when she was 13 months old, the family returned home to the Netherlands, where she has lived ever since. She does not speak English.

When her Dutch bank Rabobank asked for her U.S. social-security number in 2018, “I thought it was a mistake,” she says in a phone interview, with her husband translating. She finally filled out bank forms for U.S. citizens, leaving black the space for a tax-identity number, an omission that seemed to anger the bank managers. “From then on it was very threatening,” she says.

FATCA likely never intended to target foreigners like Brouwer-Hoogsteen, who have no connection to the U.S., and do not owe a dime in U.S. taxes. “There is a problem with Americans looking to use foreign tax havens to disguise their income,” says Zell, the U.S. lawyer in Israel. “But they are not expats. They are in the U.S.”

Zell’s lawsuit against the State Department, filed on Dec. 9 on behalf of the Paris-based Association of Accidental Americans, argues that the law has “brought within its draconian regime Americans who have nothing to hide.” It claims FATCA violates the U.S. Constitution, by effectively forcing people to remain citizens against their will—in part because the fees to relinquish American citizenship jumped in 2014 from $450 to $2,350, a sum many U.S.-born people could not afford to pay.

(Even so, more and more people are paying it. In the first three months of this year, 2,907 gave up their U.S. citizenship, according to U.S. Treasury statistics, the highest quarterly figure ever recorded. American expat organizations believe the real figure is probably far higher, since many names do not appear in the official registry, and say the increase is partly due to FATCA).

Beyond relinquishing citizenship, there’s very little accidental Americans can do to escape the vise. Groups pushing for changes to FATCA have found little support in the U.S. Both Republicans and Democrats have declined to take up the issue, either in Congress or the U.S. Treasury, which experts say could fix the problem, for example by creating a new category of permanent expats, and permitting people to register as “qualified nonresidents.”

“I think the group is too small in their eyes,” says Rob Gerretsen, a retired retail manager from Amsterdam, who was born in 1957 in New York City, where his father was working in a bank. They returned home before his second birthday, yet at 63, Gerretsen is now fighting to keep his bank account open in the Netherlands.

He says he is deeply angry over the indifference of U.S. politicians towards the plight of accidental Americans, and American expats. “They all think that we are rich Americans who are hiding their money,” he says. “That is not the case.”

Courtroom challenges

Change may be coming to Washington, but lawyers who have worked for years to fix FATCA doubt the Biden administration will want to repair the law. “[President-elect] Biden comes from Delaware, which is always pointed to [by Europe] as an example of the hypocrisy of the U.S.,” says Filippo Noseda, a tax lawyer in London, referring to Delaware’s tax-free regime for corporations. Noseda has fought years of battle in the E.U. and Britain on behalf of expats trapped in FATCA problems.

Noseda believes that Biden may feel especially reluctant to change FATCA, since it was introduced while he was Vice President to Barack Obama. “Why could the U.S. go back on something that works for the U.S.?” he says. “The only solution is in the courts.”

In the end, it might be courts in Europe that finally force the U.S. to change tack. As this year drew to a close, several legal challenges across Europe are on the verge of being filed in courts, arguing that FATCA violates the Continent’s data protection laws, which are far stronger than in the U.S.

Noseda has lodged a complaint against British tax authorities, on behalf of an American expat named only as “Jenny,” who moved to Britain after graduating college in 1997, and now works in an unnamed university.

The complaint claims that the bank is illegally sharing personal data with the U.S., in violation of the E.U.’s privacy rules (under which Britain still falls), including her name, date of birth, and how much money she has in her bank. “That is incredibly sensitive information, and we say that is excessive,” Noseda says. He calls FATCA’s data sharing “preposterous.”

Similar efforts are underway among the European Union’s 27 countries, which fall under the E.U.’s General Data Protection Regulation, or GDPR, with its tight restrictions on sharing of information. Two rulings against American Internet companies, one this year, has restricted transferring Europeans’ online data to the U.S.

The same principle could hold true for FATCA, lawyers say. The Association of Accidental Americans, the Paris-based organization—is planning to sue two E.U. countries, still unnamed, arguing that the agreements those governments made with the U.S. to transfer people’s financial details were illegal under E.U. privacy laws. “We are convinced that it would go in our direction,” says Lehagre, the association’s president—an accidental American who is French and speaks no English; he has spent years fighting to change FATCA.

The latest lawsuits, which he says will be filed by Dec. 31, aim to prove that FATCA violates Europe’s GDPR. If the group wins its case, the ruling could be referred to the E.U.’s Court of Justice, and made applicable to all Europeans. That would make the data-sharing agreements with the U.S. illegal, “forcing the European Union to renegotiate with the United States,” Lehagre says.

If these lawsuits don’t work then individuals would be forced to keep trying to take matters into their own hands.

Ronald Aires, 62, a retired KLM pilot in Barchem, Netherlands, left the U.S. when he was a few months old, after being born on a U.S. military base in New Jersey, where his father was a visiting Dutch Army officer. In 2018, his Dutch bank, De Volksbank, accused him of committing forgery, by stating on a bank form that he had “no other tax residence” outside the Netherlands. The bank demanded that he provide a U.S. social-security number, or face having his account shut. In late November, he sued De Volksbank to keep his bank account open, rather than accede to its demands.

Aires says he is not confident he will win. And finding another Dutch bank to accept him as a customer has proved impossible, since banks routinely decline anyone with U.S. ties. His mortgage company has warned him that if he fails to resolve the situation, they could foreclose on his house, which he bought in 2018. He is considering renouncing his U.S. citizenship, but fears that under the rules, he could be forced to pay back taxes to the IRS.

“What kind of world are we living in?” he says, angrily. “Maybe we will go back to the way my dad was paid, in a brown paper bag in cash.” He says his FATCA battles have caused deep anxiety. “I have not had a single good night’s sleep in two years now.”

Capitalism Delivered Promise, and Faced a Reckoning, in 2020

Sun, 20 Dec 2020 11:50:50 GMT

On Dec. 13, the Detroit Free Press posted a video on its Twitter feed. I didn’t expect to get emotional watching it. The shaky clip, shot by someone holding a smartphone, showed UPS and FedEx semitrailer trucks carrying the first doses of the COVID-19 vaccines, pulling out of the parking lot of Pfizer’s Kalamazoo, Mich., plant, turning on to Portage Road. There, a handful of onlookers cheered the small caravan and waved. The FedEx driver waved back.

As this YLNO (Year Like No Other) comes to a close, it is hard to recall a period when the business world played such an prominent role in the life of the nation, particularly in contrast to the failure of the federal government to mobilize a crucial coordinated national response to the pandemic. While many governors, mayors and local health officials performed admirably, and initially Congress and the Federal Reserve did provide emergency relief in a series of moves credited with blunting the worst of the economic toll, the corporate world stood out, bringing the scale, technology, logistical expertise and rapid innovation that allowed the economy to keep functioning. The pharmaceutical industry, which began the year saddled with the pejorative Big Pharma for its role in the opioid crisis and aggressive drug pricing, has given the world a chance to emerge from this dark tunnel with the stunningly fast development of COVID-19 vaccines. To be sure, both federal grants and research conducted by government scientists and others helped pave the way for the vaccines; the Trump Administration’s Operation Warp Speed provided funding and research support. But the testing and manufacturing are largely a private-sector endeavor. If the early indications of efficacy and safety hold true, the rapid development of vaccines will be one of the great triumphs of private industry.

Certainly, not every corporation rose to the occasion. The meatpacking industry had COVID outbreaks in 564 plants, resulting in more than 51,000 cases and at least 347 deaths, according to the Food and Environment Reporting Network. Facebook has become public enemy No. 1 for its role as a platform for disinformation and conspiracy theories, despite the company’s efforts to combat the harmful spread of lies. Even its ad agency has reservations about continuing to gild the social network’s image. Facebook is now facing an attempt, albeit unlikely, by the FTC and most state AGs to break it up, citing its anticompetitive moves to crush the competition.

But at the height of the pandemic, in April, when Gallup found that more than 50% of workers were working exclusively from home, it was the private sector that facilitated this remarkably seamless shift and the overall acceleration of the economy’s digitization. Cloud-computing companies like Amazon and Microsoft helped businesses quickly beef up the platforms that allowed many white collar workers to log in from home, conducting meetings via Microsoft Teams platform or on rival Zoom. Streaming services like Netflix and Disney+ kept the nation distracted, adding millions of subscribers. (That digital transformation that enabled so many to stay home also required millions of essential workers to risk facing the virus on a daily basis. When I interviewed Microsoft CEO Satya Nadella in June, he said that Doug McMillon at Walmart told him: “Look, when you say ‘work from home,’ remember, ‘We’re sending millions of people to work each day so that your people can work from home.’”) Amazon, the company that everyone loves to hate for its impact on smaller retailers and treatment of its workers, became an essential lifeline for millions of Americans. Those packages were delivered by the same brown UPS and white FedEx trucks now transporting vaccines. Waste Management, the nation’s largest garbage collector and recycler, said the amount of trash it was picking up from the nation’s homes increased by nearly 25% during the height of the pandemic.

This year has also witnessed a growing acknowledgment, even among ardent capitalists, that the system is deeply flawed. While capitalism is great at creating wealth, it’s not so good at equitably allocating it and protecting those at the bottom end of the economic ladder. The market economy creates unsustainable income inequality and a wealth gap that has widened sharply during the pandemic. According to a report by Inequality.org, on Nov. 24, the wealth of 650 U.S. billionaires approached a total of $4 trillion, with more than $1 trillion in growth since March 2020. And there’s the awkward reality that many of the biggest companies in the U.S. were profitable and laid people off at the same time. In the richest country on earth, as many as 50 million people could experience food insecurity before the end of the year—including 1 in 4 children. And 11.7% of our fellow citizens live below the poverty line. There is a growing consensus that higher corporate and individual taxes are needed to fund a government that can provide basics like good education, health care, and a social safety net for its citizens.

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There has also been another reckoning, an acknowledgment that an economic system so good at creating billionaires provides structural opportunities for white people and barriers for women and people of color. Big corporations have made many pledges and commitments this year to make access to jobs, promotions and capital more equitable. But it will take years to know if these efforts amount to more than performative public relations. (Perhaps 2021’s year-end column should track the quantifiable results of all that promised hiring and investment.)

Still, in a year so filled with loss and pain, when norms were shattered and the foundation of our democracy has been shaken, companies still delivered the food, clothing, telecommunications, medical innovations and entertainment that helped so many muddle through 2020. The reason my heart raced seeing those UPS and FedEx trucks shipping Pfizer vaccines: the clip signaled hope for a more promising 2021.

A quick programming note. The Leadership Brief is taking the next two weeks off, and I hope many of you are as well. Thank you for your readership and your emails throughout this first year. Since launching in May, we have interviewed more than two dozen executives and CEOs. They lead companies like Accenture, Microsoft, Delta, Netflix and Bank of America. My most vivid memories were when two CEOs, Dave Steward of World Wide Technology and Ed Bastian of Delta, choked up during their interviews recalling the influence of their mothers, both who had died recently. Tears in his eyes, Bastian described how difficult it had been to steer Delta through the pandemic without being able to rely on his mother’s wisdom.

Please continue to share your thoughts and suggestions with me at leadership@time.com. I love hearing from you. See you on Jan. 10.

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(Miss this week’s The Leadership Brief? This interview above was delivered to the inbox of Leadership Brief subscribers on Sunday morning, Dec. 20; to receive emails of conversations with the world’s top CEO’s and business decision makers, click here.)

Here’s How Shopping Scams On Facebook Are Ripping Off Thousands of Customers, With The Money ...

Sat, 19 Dec 2020 00:02:59 GMT

The sea glass Christmas trees appeared on Richard Edmonson’s Facebook feed in October, in between a relative’s photo and a friend’s meme. Their boughs were varying shades of translucent blue and turquoise; a starfish sat on top. Edmonson, who lives in Edinburg, Tex., didn’t click on the post, but it reappeared the next day, and then the day after that. “The more I saw it, the more it looked legit. I thought it would be a perfect Christmas gift for my sister,” he says. He ordered two for $40.

The trees crept onto Heather Hopper’s feed around the same time. Hopper, who collects sea glass in Oceanside, California, was impressed by their craftsmanship and also clicked through after seeing the post several times. Further reassured by photos that showed the trees with their creator Kristi Pimentel in her Florida home studio, Hopper ordered three.

But there was one problem: Pimentel wasn’t involved at all. Someone was swiping photos from her Etsy and putting them on websites and social media ad campaigns. People would see those pictures and order her trees, and then only receive dollar store flotsam. Edmonson says he got dinky plastic cones, while Hopper says she received a wooden gnome that was “the ugliest thing I’ve ever seen.” Pimentel, meanwhile, was deluged with dozens of confused or angry customers every day demanding their money back, despite the fact she hadn’t processed any of their orders.

Gnome: Courtesy of Heather HopperKristi Pimentel, left, had photos of her and her sea glass trees stolen and put onto scam advertisements on Facebook, left and center; Heather Hopper purchased three and says she instead was sent a gnome, right.

These stories aren’t isolated incidents. An almost-identical scene is unfolding over and over in homes across the country and world. Facebook or Instagram users see an ad on their feed for a discounted product. They purchase the item through PayPal, and then a knick-knack of no value arrives. The vendor disappears or tells them to return the package back to China—a step which often costs more than the original order—while PayPal often sits on the sidelines. In October, the Federal Trade Commission reported that the number of complaints about scams that started on social media has more than tripled in the past year, with reported losses adding up to $117 million in just the first six months of 2020.

And these scams are not the work of individual small-time crooks. Many of them appear to be part of systematic, well-oiled global operations, designed to take advantage of the lack of oversight on social media marketplaces and the influx of novice online shoppers brought by pandemic quarantines, and the shutdown of brick-and-mortar stores. And the spoils of one of the largest known shopping scam networks may be benefiting a major Chinese company: the publicly traded TIZA Information Industry Corporation INC., whose 2019 revenue was $549 million.

The global nature of these scams, combined with the relatively low value of each individual con, means that they have largely escaped the scrutiny of law enforcement. Meanwhile, the volume of shady fraudulent activity is accelerating over the holiday season, as people search for affordable gifts for their loved ones. Experts worry that if unchecked, American wallets will be bled to death by a thousand cuts—and a digital ecosystem that serves as crucial infrastructure for small businesses could crumble under a torrent of spam and a general lack of trust. “We’re all suffering from that sucking sound of hundreds of billions of dollars leaving our economy,” Kristin Judge, the CEO and president of the Cybercrime Support Network, says. “The money that would have been spent on Main Street—it’s now China or somewhere else.”

The Rise of Shopping Scams

Scamming has long been a fundamental element of the internet. According to Gallup, one in four Americans is a victim of cybercrime each year, from relationship scams to fake IT support to Ponzi schemes to phishing. Last year, the FBI’s Internet Crime Complaint Center received 467,361 complaints, with reported losses exceeding $3.5 billion.

And the problem has only festered since the start of the coronavirus, when millions of people across the world retreated under social distancing rules and turned to the internet for almost all communication. Many of these users are online novices who have become easy victims for new and old ploys alike. In March and April, fake COVID remedies, medicines and sanitizers began flooding the internet. 3M, one of the largest global makers of N95 masks, investigated 4,000 reports of fraud, counterfeiting and price gouging as consumers scrambled to protect themselves and their loved ones. In the middle of the year, a swelling wave of cryptocurrency scams invoked the coronavirus to extort or blackmail people.

While there are countless different types of rackets that each deserve their own investigations, the e-commerce scam is perhaps the fastest-rising and most worrisome. In 2015, just 13 percent of scams reported to the Better Business Bureau Scam Tracker were online purchase cons; this year, they make up 64%. Online shopping scams are also the number one fraud in every age group, according to the Federal Trade Commission.

Federal Trade CommissionReports of scams that started on social media have risen dramatically since 2016.

How do these scams work, who do they affect, and what are the involved major corporations doing to stop them? Here’s a step-by-step examination.

Scammers Create Fake Shopping Websites

Let’s revisit the story of Heather Hopper in California, who, after clicking on a Facebook link, was sent to a website called Apriloina.com. If you go there yourself, nothing looks particularly amiss. “Culture Chic” is written across the top in a stylish serif. A tidy grid shows a series of discounted products, from bracelets to vegetable slicers. There’s a terms of service and privacy policy, and the symbols of PayPal and MasterCard emblazoned at the bottom.

A screenshot of the scam website Apriloina.com

But a major clue about Apriloina’s inauthenticity can found on the “About Us” page, where a familiar sentence appears: “We love every passion and interest on Earth because it is a reference to your UNIQUENESS.” If you search the same garbled phrase as above on Google, you’ll get 65,000 results. Click on virtually any of those, and you’ll land on another store which looks eerily similar in layout and language. Upon further investigation, more shared attributes will start to emerge: the same IP addresses, customer support emails, phone numbers, and warehouse shipping addresses in Mainland China. Their photos overlap; and many will have either very bad reviews or very good reviews filled with repeat phrases and malapropisms. (“It is seen that it is sewn factory,” read two identical reviews for a men’s hoodie on ByDivStore.com.)

Scam sleuthers believe that these connections are no coincidence—and that there are thousands of sites being created by just a handful of powerful, centralized organizations. They have dubbed that particular organization the “UNIQUENESS NETWORK”; another one with at least hundreds of websites is called “Kokoerp.” Sleuthers believe these networks buy domain names en masse, all with vaguely English but largely nonsensical names—GoShoesNC, KidsManShop, BoldWon—so that when one becomes compromised, it will get shut down and replaced by another. Their interchangeability makes it extremely hard for authorities to take action. “You report maybe a dozen and the next day, three dozen more show up,” Suzie Hebert, who investigates scam networks in conjunction with the ECommerce Foundation initiative ScamAdviser.com, says. “I feel like we’re turning in circles.”

Many of the sites make use of the online shopping platform Shopify. Jorij Abraham, the general manager of the ECommerce Foundation, says that because Shopify allows you to set up a shop for 14 days with no credit card required, scammers will simply set up shops, shut them down after two weeks, and start another one. “We have an incredible amount of people complaining about Shopify shops not delivering products,” Abraham says. “They’ve done a really terrible job.”

“We take concerns around the goods and services made available by merchants on our platform very seriously,” a Shopify spokesperson wrote in a statement to TIME. “Shopify’s Acceptable Use Policy clearly outlines the activities that are not permitted on our platform, and we don’t hesitate to action stores when found in violation.”

Scammers Swipe Product Images From Real Businesses

As seen on “Apriloina,” scammers cast the widest net possible of any item that someone might be searching for on Google. There’s workout equipment, lawn mowing gear, jewelry and whiskey decanters; bolts and screws and high fashion garments. Puppy scams—in which people think they are buying actual puppies but receive nothing or stuffed animals—skyrocketed over the past year, with bored people at home searching for cute companionship. Other scams take their images from high profile stores like Patagonia and L.L.Bean—but those companies have more resources to fight fraud on a larger scale, and customers are more likely to go straight to their official site.

So it seems scammers have more success swiping images from small businesses, often found on Etsy or other e-commerce websites. These unique items stand out to scrollers in a sea of content, and their original websites may be as ramshackle as the scam pages, making it difficult to discern the actual source. As a result, small business owners across the world are turning into these scammers’ collateral.

In the United Kingdom, Ildiko Duretz has been selling handmade dolls for children for the last 16 years. Each one takes her a week to make by hand, and can fetch up to £900 on the market from collectors. This fall, however, ads began appearing on social media selling them for £15 to £60. The scam websites not only stole photos of her dolls, but also her website banner and written descriptions about her dolls and herself. It wasn’t long before Duretz started getting dozens of messages from those who had been duped. “I’m still getting 10 to 20 messages a day,” she says. “They’re leaving negative reviews on my Facebook page saying, ‘Your dolls are rubbish.’ I have to spend two hours a day responding to people, otherwise they think I’m the scammer. It’s an absolute nightmare.”

Duretz is particularly upset that mostly older people email her. “So many people write to me saying, ‘I bought it for my grandchild,’” she says. She says she reported several scam websites to the London Police’s fraud reporting center, but was told that they needed a critical mass of victims to investigate. When she went to a copyright protection firm in London to seek guidance, she was told there was little they could do since the scammers were in China. “I would like for somebody to tell me what to do,” she says. “I have no idea where to go to stop this.”

Courtesy Marissa HadlandPhotos of high-quality handcrafted are being advertised on Facebook, left. The consumer then receives a dollar store doll, bottom right.

Scammers also target seasonal or holiday-related products, hoping to catch the eye of parents frantically searching for gifts for their children and other family members. In the lead-up to Halloween, an ad for a singing pumpkin duped many across the country. More recently, Christmas-related products have flooded feeds, including Pimentel’s trees. Abraham, at the ECommerce foundation, says that scams increase by 40% during the holiday season. “Our biggest traffic peak is between Christmas and 7th of January, because that’s when people become aware that they didn’t get their product,” Abraham says. “It gives a lot of people a very bad Christmas.”

Scammers Blast Their Ads On Social Media

Scammers would make a decent amount of money just off waiting for people to find their phony shops through search engines. But that passive approach doesn’t have nearly the same reach as campaigns on social media—and particularly, on Facebook.

Once a place to talk to (or poke) your friends, Facebook has become one of the world’s largest superstores. Last year, the company generated $69.7 billion from advertising, accounting for more than 98% of its total revenue. These ads have become one of the most important tools for businesses to grow and reach customers: there are millions of small businesses on the platform trying to court Facebook’s 2.7 billion monthly active users.

This dynamic has made Facebook the primary feeding grounds for scam artists. In the aforementioned FTC study, 94% of victims said their scam originated on Facebook or Instagram (which Facebook owns). Scammers take the same maximalist approach on Facebook as they do with domain names: they create multiple Facebook pages for single items and then blast out targeted ads—often to older women—using one account at a time. One page on Facebook’s ad library, for example, shows that a now-defunct scam page called Byagadget ran 8 ads for a zip-up top over one week in June. The Byagadget page spent $200-$300 on the ads, which were seen 7,000 to 8,000 times; 39% of people who saw the ads were women over 65.

As ads like that one increasingly dominate feeds, an irate community has grown on Facebook dedicated to reporting these scam ads whenever they appear. But members of these communities, like Facebook Ad Scambusters and Scam Alert Global, say that their complaints are often ignored or overruled, with Facebook representatives deeming the pages as within community standards.

Pimentel says she’s reported fake ads of her trees dozens of times and also filed a formal report with Facebook alleging intellectual property theft. “But a reply came back saying there wasn’t enough evidence, and that they couldn’t take it down because there were other things sold on the site,” she says.

Kathy Waters and Bryan Denny, two anti-scam activists, have experienced the same frustrations since 2016. Denny, a retired U.S. colonel, has been the subject of countless romance scams, in which scammers pretend to be him in order to extract money from lonely women. Waters and Denny say they’ve met with Facebook representatives several times and shown them fake accounts over four years, but that nothing has changed. “There hasn’t been any improvement since we started,” Denny says. “Facebook has as many excuses as to why this problem isn’t fixed as the scammers have in saying why they can’t Facetime with you.”

An article by Buzzfeed News published in December reported that Facebook ad workers were told to ignore suspicious behavior unless it “would result in financial losses for Facebook.” A separate Buzzfeed article reported that Facebook earned more than $50 million in revenue from a single dishonest San Diego marketing agency.

A Facebook spokesperson denied that the company profits from scam ads: “We have every incentive—financial and otherwise—to prevent abuse and make the ads experience on Facebook a positive one,” they wrote. Facebook also says it is more active than ever in removing bad content, removing 112 million organic posts in the first nine months of 2020, up more than 35% from the same period in 2019. Last month, the company launched an awareness campaign in conjunction with the Better Business Bureau about the increase of shopping scams during the holiday season.

The Facebook spokesperson also responded directly to a question about Pimentel’s situation, writing: “We’ve deleted multiple pages associated with these ads for violating our impersonation policy. We have policies in place to help protect people and businesses from scammers looking to take advantage of them, but our enforcement isn’t perfect. We take the violations that have affected Ms. Pimentel seriously, and we are actively investigating other pages and accounts associated with these ads.”

The Money Flows From Paypal Accounts to China

Facebook is somewhat shielded from blame because the actual transactions largely don’t happen there: the buyers are routed to the aforementioned scam websites, which often use PayPal. Many consumers interviewed for the story said the presence of PayPal served as the most important reassurance that it wasn’t a scam. “When I saw PayPal, I thought, ‘This must be legit. I can trust them,’” says Richard Edmonson, the Edinburg, Texas man who thought he was purchasing sea glass Christmas trees.

Consumers, including Edmonson, say they’ve been largely unsuccessful in getting refunds from PayPal. Some have said PayPal has simply encouraged them to work it out with the vendor. Others have been promised a refund if they themselves send the package back on their own dime—but shipping to China can cost more than the original order itself.

“This is not an issue we are seeing on a large scale,” a PayPal representative wrote in an email to TIME. “At PayPal, we have a zero tolerance policy on our platform for fraudulent activity, and our teams are working tirelessly to protect customers against anyone attempting to defraud well-intentioned individuals.”

Complaints on PayPal’s own website, however, suggest otherwise. One thread regarding the PayPal account “Garland Information Technology Co., Ltd.” has dozens of messages over three months from people saying that they had ordered items, from hydraulic jacks to baseball bat decanters to Pimentel’s Christmas trees, that never arrived. “Can’t PayPal do something? A fraud is being perpetrated, perpetuated, aided and abetted,” wrote one user.

It’s difficult to follow the money trail from PayPal to actual people. Scam sleuthers have found that many of scam websites have links to companies in Britain, where lax government rules allow for dodgy shell companies to be created for dirt cheap. The scams websites’ filings on the country’s corporate registry Companies House have all sorts of minimal or misleading details, like repeating names or addresses of shared rentable office spaces. “It’s kind of like musical chairs: you see the same names popping up over and over,” Marissa Hadland, who has been investigating scam networks, says. “This one is a director for this company. They resign and then are a director-shareholder for this other company.”

But there are public links between one scam network and two legitimate Chinese companies: TIZA, which is focused on providing industrial Internet IT services; and TIZA’s subsidiary Youkeshu, a cross-border e-commerce company which sells goods through AliExpress, Walmart, Amazon, and other corporations. According to public records, Youkeshu is the biggest shareholder of both Shenzhen Guiguyun software technology co., LTD—which owns the domain Kokoerp.com, where many of the scam sites appear—and Duo Tongguang Electronic Commerce Co., Ltd, a shell company that has been the subject of hundreds of complaints on PayPal and in other reviews. Email addresses and internal portals link the Youkeshu and Kokoerp domains together. And some “Kokoerp” scam victims have reported receiving boxes with YKS—Youkeshu’s trading symbol—on the return label.

Moreover, Xiao Siqing, the chairman and CEO of TIZA, is publicly listed as the CEO of Youkeshu and the legal representative of Guiguyun. Since 2017, when Duo Tongguang was incorporated, TIZA’s revenue has increased almost fourfold, to more than half a million dollars in 2019. A representative for Youkeshu declined to comment. A representative for TIZA did not immediately respond to a request for comment.

The Fight Against Scammers Continues

Given the sprawling global nature of these scams, it’s extremely difficult for local police precincts to investigate and prosecute them. This disconnect led to ECommerce Foundation and other organizations to launch the first Global Online Scam Summit in November, with representatives from Interpol, Europol and the FBI tuning in. There, several people in positions of power pledged to invest more resources into fighting online scams: Hui Ling Goh, counsel for international consumer protection at the FTC, said that the FTC is in the process of developing a website for consumers to report international scams.

Abraham, at the ECommerce Foundation, says that the problems will only get worse unless there is concerted and swift collaboration amongst international and national law enforcement. “Europol and Interpol are just at the start of fighting scams,” he says. “My fear is that consumers will get scammed a lot more in the next few years.”

Meanwhile in the U.S., the issue has stalled in Congress. There has been much public debate about Section 230 of the Communications Decency Act, which shields social media platforms from legal responsibility for certain actions by their users. Both President Trump and President Elect Biden have excoriated the law, calling for it to be repealed or revoked. But Democrats and Republicans are divided on how to change it, meaning very little substantial progress has been made.

In April, Illinois Representative Adam Kinzinger introduced two pieces of legislation on the House floor with the goal of curbing fraudulent activity on social media. But he has also received very little support from his colleagues, and the bills have stalled. “It’s been really difficult. People are happy to complain about the issue, but when you put forward a solution, they don’t jump on,” Kinzinger tells TIME. “Writing the social media bill took us a year because we were trying to find consensus, and we just couldn’t get there. Anything with information and privacy has been really hard in Congress. There are too many layers to it.”

So until any movement happens, it’s up to the individuals who are getting scammed to fight the fight alone. Edmonson, in Texas, has filed several complaints with Paypal, and was told that the vendor could refund him $8. Pimentel is still overwhelmed complaints and queries, and her trees are still circulating the internet—not only on Facebook, but now eBay, Walmart, Pinterest and Amazon. And many of those ads can be traced back to the Kokoerp network.

A screenshot of a fake Amazon page selling Pimentel’s trees

Pimentel says that just this week, she was cold-called by a woman in Denver who pled for a refund on behalf of her 76-year-old mother who had fallen for a fake ad. “These poor women are being screwed,” Pimentel says. “I feel violated, exploited and impersonated—and these companies are allowing me to get beat up and ruined.” — with reporting by Charlie Campbell/Shanghai

Adena Friedman, CEO of Nasdaq, on the Red-Hot Market and Critics of Her Diversity Plan

Sun, 13 Dec 2020 11:50:41 GMT

(Miss this week’s The Leadership Brief? This interview below was delivered to the inbox of Leadership Brief subscribers on Sunday morning, Dec. 13; to receive weekly emails of conversations with the world’s top CEOs and business decisionmakers, click here.)

Last week was pretty typical for Nasdaq CEO Adena Friedman in 2020. Another record-high close. Another buzzy multibillion-dollar IPO (on Dec. 10, Airbnb’s stock doubled on its first day of trading, valuing the company at $100 billion, the latest sign of the market’s animal spirits). Meanwhile, the Wall Street Journal attacked Friedman’s proposal to increase board diversity on Nasdaq-listed companies. And the FTC and many state attorneys general filed a federal lawsuit seeking to break up Facebook, alleging anti-competitive behavior. Facebook is one of the five FAANG (Facebook, Amazon, Apple, Netflix, Google) stocks that all trade on Nasdaq and that have powered much of the market’s somewhat perplexing rise in 2020, in a year where pandemic shutdowns battered the real economy and more than 10 million Americans are out of work.

Nasdaq has come to symbolize 2020-style inequality. The perception: while those with means to invest grow richer, others devastated by COVID-19’s destruction are left further and further behind.

On Dec. 1, Friedman, 51, unveiled the plan to increase the representation of women and underserved minorities on the boards of Nasdaq-listed companies. The proposal, which needs SEC approval, would require these companies to disclose diversity statistics of their board of directors. Additionally, companies would need to have, or explain why they do not have, “at least two diverse directors, including one who self-identifies as a woman and one who self-identifies as either an underrepresented minority or LGBTQ.” (There is more flexibility for smaller and non-U.S.-based companies.)

Friedman, who started at Nasdaq as an intern, joined TIME on Dec. 8 for a video conversation on the exuberant stock market, the divided reaction to the diversity proposal and the benefits of tae kwon do.

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(This interview with Nasdaq CEO Adena Friedman has been condensed and edited for clarity.)

Nasdaq hit another record close today, right?

I don’t know, actually. [Laughs] I should probably know but I don’t. [Editor’s note: It did.]

The Wall Street Journal editorial page has come out strongly against your diversity proposal, and even suggested that companies would be delisted if they don’t diversify their boards. That’s not correct, is it?

That is not the case. That’s the one misperception that has come through. The only obligation is disclosure, and we do believe that our economy is really founded on the basis of disclosure. We like the fact that it’s not a hard mandate. But it does really encourage progress in diversifying the boards.

This has really stuck in their craw; they posted a video, mocking the proposal as “woke” and said, “It’s virtue-signaling at someone else’s cost” and “is very dangerous for capitalism.” What is your response?

We are true believers in capitalism. Capitalism really does give the best opportunity for people to succeed and create growth. But the execution of it though has to be geared toward making it so that there’s opportunity for all. I think in the United States, we’re still trying to find what the right balance is—we call it cooperative capitalism, making sure that there is the opportunity for everyone to succeed. Whether it’s the gender issue or underrepresented minorities, we all can recognize that there are challenges that we have in our economy today where we have to make sure that we are giving more opportunities. We think it is the right balance to strike in a capitalist society. The fact is, we are not mandating this. Those who are saying this is a mandate, they are mischaracterizing our proposal.

Why not make it mandatory if you’re serious about this?

We’re really trying to encourage progress, not to force it.

You’ve mentioned the U.S. is behind other countries in terms of diversity of boards. What countries would you highlight?

Norway has a mandate for 40% of corporate boards to be represented by women. So we are not leading the world in this area.

Do you watch Borgen, the gripping (seriously) show about Danish parliamentary politics? In Season 1, the government almost collapses after the biggest Danish company threatens to leave the country because of a proposed law requiring companies to have female board members.

I haven’t yet watched that. I actually have it on my list of shows to watch because as you know, we operate a lot of exchanges in the Nordic region—including Denmark.

Let’s stay with the category of TV shows and Nasdaq for another moment. Do you watch Ozark, the Jason Bateman show about money laundering? I ask because you recently announced a multibillion acquisition of Verafin, a firm that provides technology to fight international money laundering.

I purposely don’t watch that show. To be honest, when I leave the office and I go home, I like to watch TV or read books that allow me to exit the role, not to double-down. And I love Jason Bateman.

But money laundering on the other hand is something we care deeply about. We are already very squarely in the anti-financial-crime space. But as we’ve talked to our customers, particularly our broker-dealer customers, their challenges in the broader sense of financial crime are just enormous. And what they’ve been asking us to consider is how do we bring anti-money-laundering investigation, crime-detection investigations into our offering, and team it up with our surveillance offering? Verafin has done a great job of being a tech-first, modern technology business geared specifically toward fraud detection and money-laundering detection and investigations for banks.

The estimated amount of money laundered globally in a year is up to 5% of global GDP, or $2 trillion. What does that mind-boggling number say about the state of the world?

Whether it’s the gender issue or underrepresented minorities, we all can recognize that there are challenges that we have in our economy today where we have to make sure that we are giving more opportunities.With the digitization of the global economy, there’s been an exponential change in the way that funds have flowed across the world. You have to have the technology in place to protect those money flows and to make sure that those money flows are legitimate.

Airbnb is your latest IPO: they debuted with the ticker symbol ABNB. I’ve always been curious: At what point in the process does a ticker symbol get assigned, and how does that work? Do people get to choose that? And do you have some favorites? I like HOG for Harley-Davidson and HEINY for Heineken.

Do we really want to get into it, reserving symbols?

Yeah, let’s go crazy.

Reserving symbols has been actually an interesting part of the ecosystem within the U.S. capital markets for a while because we’re one of the few countries where we have competing capital markets. And it used to be we’d have it so that all of the companies listed on Nasdaq were four [letter] symbols, and all the companies that listed on [the] New York [Stock Exchange] were one, two and three. But when the SEC actually broke down that barrier to allow for both of us to be able to list one-, two-, three- and four-character symbols on either exchange, so frankly then that really helped enable us to switch a lot of companies from New York to Nasdaq. People get very passionate about their symbol. So when we started working on switching companies from New York to Nasdaq, one of the key barriers was “I want to keep my symbol.” So having the SEC allow for both exchanges to have all characters has been big.

It’s sort of like a football player wanting to keep their numbers after they’ve been traded?

Or someone wanting to keep their phone number when they switch [office] chairs.

So do you have English majors and word mavens on your staff that are scanning listings of unicorns and saying, “Let’s grab FIDO” for, say, a big pet-food delivery startup?

Within our IPO team, we do have people who think forward as we get to know a company and we think they might be going public in the next couple of years, we will start to think about what would be natural symbols for them to consider

There has been a stunning year for IPO activity this year to date. As of Dec. 11, there have been 427 IPOs on U.S. exchanges so far this year, raising $159.4 billion, according to Dealogic. That’s up sharply from last year. So what is driving this market today? The outgoing, defeated President who lost the election often conflates the stock market with the economy. How do you explain the dichotomy between the record-high stock market and what is still one of the worst economies since the Great Depression? Unemployment is back under 7%, but there’s still more than 10 million Americans out of work. It’s such a disconnect.

The first thing I’d say is when we think about the stock market, it’s all about the future. Right? So when investors are deciding which company to invest in, they’re looking at the future of that company. It’s always been about the future. And what I think the immediate impact of COVID was, Oh, my gosh, I don’t know what the future holds. And that obviously created a lot of selling behaviors. Because when they don’t know what the future looks like, they get nervous and they say, You know what, I’m going to grab my cash.

But then once more information was understood about COVID and there’s an expectation that this isn’t going to last forever. So if there are companies that are leaning into the future, they’re technology companies, they’re health care companies, they’re companies that also kind of facilitate people through this issue and could have a great trend on the back of it, those companies suddenly started recovering.

And the government was clearly resolved to really try to shore up the economy and help see it through this really dramatic pandemic.

So I personally think it’s all of those things combined that made investors say, It’s going to be easy for companies to borrow money. The government is going to be putting a backstop on certain parts of the economy. And there are a lot of these companies that are leaning into the future. And on the back of that, they came back.

There’s a German proverb, Bäume wachsen nicht in den Himmel, which translates to “Trees don’t grow to the sky,” suggesting markets don’t go up forever. How close to the sky do you think we’re getting?

I personally try to look at it more in the context of: Do I believe that investors are evaluating the risks and the opportunities as they’re looking at what equities to own? And frankly, what are the alternatives out there that are going to give them a return? There’s growth and opportunity in a lot of companies that sit in the Nasdaq. And against alternatives where the returns are very low. I mean if you are trying to invest in fixed income, then you are getting a much lower return for the risks you’re taking.

What percentage of Americans participate in the stock market? Using a broad measure, including pension funds.

The best estimate we’ve heard is between 55% and 60% of the adult population owns equities in some form.

What do you say to people that see markets as rigged or a casino or, my favorite, “a graph of how rich people are feeling emotionally”?

Markets have never been more accessible to everyday savers as they are right at this moment.Markets have never been more accessible to everyday savers as they are right at this moment. There is an entire ecosystem of fairness that has been very well thought through to try to create an equal environment.

As a risk factor, do you worry about income inequality and social unrest in this country and around the world?

I’m a true believer that if we execute the models that we have, the capitalist models that we have and democratic models that we have, we can be a great society that gives opportunity to all. But we have challenges. I think that we definitely have to acknowledge that we have challenges. And I think that those challenges stem from equal access to education, equal access to early childhood education but also services. In the economic realm, it has to do with making sure that everyone has access to borrow money and to get access to equity capital to start a business. If they have a good idea and they have—and you believe that they can be successful, they should get access to capital to be able to create that. We’ve actually launched the Nasdaq Entrepreneurial Center to educate thousands and thousands of young entrepreneurs on how to build a business. But as a system, we have to make sure that banks are motivated to be in smaller communities, that they have motivation to lend to more people and people from different backgrounds so that we create a more equitable opportunity. That to me is really the key to sustaining capitalism, and I do think there are changes that need to be made in order to be able to achieve that.

You started as an intern. So, without being modest, how did you stand out?

I was very eager. I consistently asked to do more. I definitely was not sitting there waiting for someone to tell me what to do next. I found that if I had some free time I’d go over to someone and say, Do you have anything I can help you with? I was always willing to take on more. That also broadened my network inside the company so that they kind of saw me as a go-to person to help them with things.

You attended girls’ schools for 10 years, and you’re a big advocate of the benefits of single-sex education for young girls.

I was there from ages 8 to 18. And when I think about the confidence that I have to be able to speak up to ask questions, to be curious— I was deemed most inquisitive in my class, which I’m not so sure was a compliment. But it was an example of how I never felt that I had to hold back in a classroom. And being smart was celebrated. So I think that all of those are great elements for young girls as they’re gaining confidence.

Speaking of CNBC where you are a frequent guest and they clearly love having you on: you should start requesting that they play walk-on music, like Mariano Rivera, leaving the bullpen to take the mound at Yankee Stadium in the bottom of the ninth, with “Enter Sandman” by Metallica blasting. What would your walk-in music to CNBC be? Any favorite power ballads?

“Confident” by Demi Lovato.

You have a black belt in tae kwon do. Are you better at delivering a punch or taking a punch?

I’m best at kicking. Kicking is my favorite. I would much rather kick than be kicked.

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New Apple AirPods Max Orders Won’t Arrive in Time for Christmas

Wed, 09 Dec 2020 04:43:51 GMT

Apple’s’s new $550 AirPods Max headphones won’t arrive in time for the holiday season for many customers placing new orders with the company online.

The Cupertino, California-based technology giant quoted wait times of 12 to 14 weeks for all five color options, based on a review of Apple’s U.S. website on Tuesday afternoon. This represents some of the longest shipping delays for a new Apple product in recent history.

For customers in several other countries, including China, Canada, Japan and Germany, Apple is quoting shipping times for many colors into January and February. Australia and France still have some models scheduled to deliver by the end of this year. For customers in the U.K., Apple is quoting up to a 14-week delay for the blue version and three weeks for other colors.

Opting for a free engraving appears to reduce the delivery wait significantly in the U.S., taking it down to 2-3 weeks for some colors, according to Apple’s website. In Japan, earliest deliveries go from Feb. 6 to Dec. 26 with the customization option selected.

By putting the accessory on sale in December, Apple was aiming to lure holiday shoppers, but the shipping delays may upset that strategy. Apple had planned to launch the headphones earlier this fall, but faced problems as some testers deemed the headband too tight, Bloomberg News reported earlier this year.

When the headphones went on sale Tuesday morning, initial orders for all colors were available for delivery as early as Dec. 15. But the shipping delays quickly ramped up in the afternoon.

That spurred resellers on eBay to demand big premiums, with several listings asking $849 or more for delivery before Christmas. One seller priced a silver AirPods Max pair at $1,199, saying it was “Guaranteed B4 Christmas.”

Many Apple retail stores remain open and it’s unclear if availability in physical locations or third-party retailers will be better when the first deliveries begin next week.

Joey Wat, CEO of China’s Largest Restaurant Company, Shares Lessons on Controlling COVID-19

Sun, 06 Dec 2020 11:50:57 GMT

(Miss this week’s The Leadership Brief? This interview below was delivered to the inbox of Leadership Brief subscribers on Sunday morning, Dec. 6; to receive weekly emails of conversations with the world’s top CEOs and business decisionmakers, click here.)

On Nov. 23, CNN reported that the U.S. had 3 million new cases of COVID-19 in November. That same day, I interviewed Joey Wat, the CEO of Yum China, the country’s largest restaurant company. She mentioned that there were just a small handful of new cases in Shanghai, the world’s biggest city, with a population of over 25 million. Nearly 100% (99.5%) of Yum’s outlets in China are currently open.

Under Wat, 49, Yum China has emerged from COVID largely unscathed and cemented its reputation as one of the world’s most nimble fast-food companies. Yum China operates over 10,000 restaurants in 1,400 cities in China, a mixture of Pizza Huts, KFCs, Taco Bells and several Chinese food chains. The company, which had $8.8 billion in revenue last year, has a track record of menu innovation as well as a developed digital business—97% of its payments are digital. In some stores, it has rolled out Alipay’s “Smile to Pay,” which allows people at digital kiosks to make purchases via facial-recognition technology.

Wat grew up poor in rural China. She was delivered at home by her great-grandmother, who despite being blind and having bound feet was her village’s midwife. When Wat was 9, her family moved to Hong Kong, where she began working in factories, assembling plastic flowers. Her first experience in the restaurant industry was working in a Hong Kong restaurant as a waitress at 15.

Wat joined TIME for a conversation on how China is keeping the lid on COVID, her focus on digital, and the lessons from her great-grandmother.

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(This interview with Yum China CEO Joey Wat has been condensed and edited for clarity.)

What is the COVID situation like in China right now?

Life is back to normal. We are very happy to see traffic jams everywhere again. There are a few cases here and there, and everyone is taking it very seriously. In Shanghai, last week we had two cases.

And people are moving freely around the country?

Traffic between the cities is somewhere in the 70% to 80% range. The high-speed railway is running very well. We are very grateful. Most people still can have a normal life right now.

Have you been working in your office the whole time?

Yes, yes. It’s the middle of winter, it’s not warm. We shut down all the heating. The windows are open to keep the ventilation. Everybody puts on a coat. But we’re used to it. We did it last February, March.

Can you sort of summarize the components of what is required to defeat COVID?

We are vigilant. As citizens, we are vigilant. As a business, we are vigilant, and I think the government has done a superb job to react very quickly whenever they need to. Even for one or two cases, without disclosing the name of the person, they will disclose the route of the person. Because with the mobile phone, you can do it. So all the stores can see, Oh, was I impacted? And in some cases, they will come to KFC. And then when we see that, we close the whole store. We would do all the disinfection. Everyone there or nearby will be on quarantine until we get the tests and until we get the results.

And what is the general level of compliance?

When we need to wear masks and do temperature checks, everybody is so cooperative. It’s phenomenal to see the collective will to do something good for the collective goodness. The key things are the mask and the handwashing. The handwashing is magical.

How has your own staff been affected?

We set up our own crisis committee back on Jan. 11. Since then, we have been meeting on a daily basis. There’s no weekend, there’s no Chinese New Year. Every single day, we have a call in the morning for the headquarters, and then it cascades down all the way back to each store. Every day, effectively, we do whatever it takes. We have over 400,000 employees. We have had 10 cases. Everyone recovered. And eight cases were in Wuhan. Outside Wuhan, there were only two cases.

What was experience in Wuhan, the epicenter, at the height of the crisis?

We closed all our stores, but then we realized some hospitals and communities—particular hospitals, when they have such an influx of doctors and nurses—some hospitals were struggling with food for their nurses. So we opened seven of our stores just to produce food for the doctors and nurses, at no charge. We insisted on only one thing. No matter whether it is free food or not, the food must arrive warm. We don’t move cold food. The food is not only for the stomach, it’s for the heart as well.

How is a Pizza Hut in China different from one in the U.S.?

Well, roughly 15% of our sales are from steak. Pizza Hut is the biggest steak house in China, actually.

And pizza. Historically, have Chinese people eaten cheese?

No, no. Cheese is still a very high-end thing, and we still import 100% cheese.

Where does your cheese come from?

Here’s a fact. We usually import 100% of our cheese from the United States until last year. The funny tariff thing happened. It forced us to import 100% of our cheese from New Zealand. It’s very sad because we have been buying cheese from the U.S. for 32 years.

If relations normalize, will you go back to American cheese?

We are very open. We certainly hope that the relationship will improve and then the Chinese customer can have choices of cheese.

It’s phenomenal to see the collective will to do something good for the collective goodness.

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You have placed a lot of emphasis on building your digital business. How is that going?

In 2016 we launched digital payments. Right now as of today, digital payments are 97% of my business.

Wow. People are paying with their phone?

With your phone and at a kiosk. The phone and kiosk is 78% of my business. And delivery and takeaway is 50% plus of my business now.

Is that because of COVID? Will that persist beyond COVID?

It has been growing like this in the last few years. But COVID definitely pushed it to another level up.

I understand that you have a lot of repeat business and a membership program that is attracting a lot of attention in the industry.

Sixty percent of my business is from my members now. Six zero.

Are they giving you an email address?

We don’t ask for their email address. It’s all on the phone. It’s all about mobile right now. So people will sign up about the members and then they order through their phone, and then for every single order they put down, we give them the points. We’ll have some special gift for them once in a while, and special promotions. It’s really at the beginning of our journey, I believe, how to serve our members well. However, the sheer number—it’s China, so the number is great. As of Q3, we have 285 million members. Many people [in the industry] are learning and trying to replicate. But we are lucky because we did it early enough, so we are standing at the forefront of the digital-technology industry.

Do they pay to be a member, like Amazon Prime?

Pizza Hut is the biggest steak house in China, actually.People don’t have to pay anything. But in a subset, we have a subset of what we call privileged members. It’s about a third. People pay something and they can get a free delivery, whatever. We have 45 million such members already.

Privileged members pay about $3 a month. What do they get in return?

We have many choices. If you are a breakfast eater, then you can buy this breakfast card, and then you come in and we give a 40% discount off the very, very good breakfast. If you are a delivery customer, if you have a delivery set up all the time, you can buy this delivery membership and then you’ve got free delivery for a certain period of time.

Based on what your customers are buying, how is the Chinese consumer feeling? Are they buying the expensive things, or are they buying the cheap things on the menu?

After the pandemic, we have been focusing on more and more value for money. There’s still a lot of people who are concerned toward the uncertainties going forward. So the value for money certainly is still important. However, in the middle of the value for money, Chinese still love new and good food. This year, at KFC, we launched the most expensive burger to date that is made of Wagyu beef.

Is it tasty?

Of course!

How is it doing?

Sold out.

I understand you worked as a waitress when you were in Hong Kong.

Yes. I have a pretty humble background, and I’m very proud of it. I worked in a factory at the age of 9, and that was below the legal age. At 15, I went to work at a restaurant because that’s the legal working age and I could make more money being a waitress than working in a factory.

What were your responsibilities at the plastic-flower factory?

They come out piece by piece, petal by petal. You have to put them together. Put the leaf on and make them nice.

What did your parents do?

Very humble. My dad worked at construction sites. He had multiple jobs. Both my parents did not finish junior high school. My mom worked in a factory.

I know job creation is an important part of your business philosophy.

That has a lot to do with my background. I learned when I was a little girl that no matter what your background, if you have a job, a proper decent job, it gives you pride.

You went to business school in the States, at Northwestern, and became a consultant at McKinsey. Was it hard to shift from being a consultant to being a manager, with profit and loss responsibility?

Some people are very good at giving advice. Some people are much better at doing it themselves. I’m actually the second. When I was a consultant, actually it’s really painful, like “Come on! Of course this is the better option!”

Growing up in a small village in rural China, I understand your great-grandmother was quite an influence on you.

She was tiny, but she had such a strength for the family, for the village. She was a very generous, kind, wise lady. So she always had a lot of people coming, visiting her, seeking advice.

What was her name?

Women from that generation did not have a proper name. People would just call her Little Sister.

Any life lessons?

She was the best judge of people. She said something very profound: how big your heart is determines how big your world is going to be.

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The Housing Market Is Booming, But Millions of Americans Face Eviction—and the Gap Is Getting ...

Fri, 04 Dec 2020 15:38:49 GMT

In late February, Jessica Bonner-Gomez, an elementary school speech-language pathologist, signed a yearlong lease for an apartment in Birmingham, Ala. She and her husband, a hospital nurse, thought it would be a temporary move. The couple had recently qualified for a real estate purchase in a housing subdivision, but could only afford the down payment if they tapped into their retirement funds. Ultimately, they decided to save more cash while paying rent.

Bonner-Gomez was making enough to cover expenses and grow her savings. She supplemented her $1,000-per-week income with teaching and tutoring jobs that paid about $400 a week. But when schools shut down in March because of the COVID-19 pandemic, those side jobs dried up. Then summer recess started, and her total income dropped to $80 a week. Her husband’s hospital also cut employee wages for several months. To cover their $1,300 monthly rent, plus car payments, health-insurance premiums, groceries and other expenses, the couple depleted their savings accounts and started relying on credit.

“During the summer it was frustrating and hard,” says Bonner-Gomez. “We were accruing debt on the credit card to the point where it was at 80% utilization. That was not a place we wanted to be.”

Bonner-Gomez’s language pathology work restarted with the new school year, and she’s now earning a higher salary. But the couple has lost so much financial standing that in November, a bank representative said they did not qualify for a mortgage, evaporating their dreams of moving into their first home when their rental lease is up.

“We don’t want to stay in an apartment forever,” she says. “We’re paying someone else all this money per month. We want a place to call our own and raise a family.”

The U.S. real estate market is booming, making it a rare oasis amid the pandemic. Thanks to record-low mortgage rates and a desire for more space to ride out the outbreak, 2020 home sales are on track to exceed last year’s, when the economy was in far better shape. But like many aspects of the pandemic economy, there are winners and losers. Millions of Americans are struggling to make their next rent payment, or have already fallen behind and are relying on temporary eviction moratoriums to avoid homelessness. Experts say this imbalance is widening the gap between the wealthy and the poor.

“Inequalities were bad and growing prior to 2020,” says Daniel McCue, a senior research associate at the Harvard Joint Center of Housing Studies and who recently co-authored an in-depth analysis of the nation’s housing trends. “Then the pandemic hits, and it hits hardest those who were already in the most vulnerable position. It’s making the affordability crisis worse.”

How it happened

Before the pandemic, the economy was riding a decade-long expansion period. Unemployment was low, making it easier for Americans to pay rent and save to buy a house. But in the spring, as the virus began to take hold of the country, policymakers went full throttle to prevent the housing market from nosediving. Congress issued eviction moratoriums for the country’s 12 million federally financed rental units through the summer. (In September, the U.S. Centers for Disease Control and Prevention enacted its own evictions protections that run through the end of the year.) For homeowners, Congress also passed mortgage forbearance for up to a year, as well as a temporary freeze on foreclosures. The Federal Reserve slashed interest rates to a range of 0% to 0.25%, which in turn pushed mortgage rates down.

Next came the whiplash: the real estate market slumped during the spring lockdown period, then rebounded in dramatic fashion in the summer. Since July, new home sales have hovered between 38% and 48% higher than last year:

The summer rebound was, in part, due to pent-up demand from the spring. But because the sales surge has continued through the fall months, other market forces are clearly having an impact.

For one, people are spending more time in their homes, fueling demand for bigger living spaces, often outside major cities. According to the Harvard study, new construction permits are growing fastest in suburban neighborhoods of small metro areas, reversing a decade-long trend of urban growth. Additionally, data from moving company United Van Lines reveal that people have left large metro areas, including San Francisco, Seattle, and New York, at higher rates in 2020 than 2019. At the same time, smaller metro areas, including Salt Lake City, Louisville, Ky. and Richmond, Va. have seen a higher rate of inbound moves this year from people seeking more budget-friendly and less densely populated areas.

Regardless of why people are choosing to move, low mortgage rates are the catalyst. In July, 30-year fixed mortgages dropped below 3%, the lowest rate on record. By November, they dropped even further, to 2.77%.

Still, homeownership wasn’t a universal opportunity even before the COVID-19 outbreak. And the pandemic has made it an even more exclusive club, reserved for Americans whose savings and incomes have not been affected and who can overcome new barriers to entry.

For instance, the rapid sales spike has diminished housing supply, pushing prices higher for the fewer homes left on the market. The S&P CoreLogic Case-Shiller national home price index, which tracks changes in the total value of single-family homes in the U.S., is up 6.8% year-to-date as of Dec. 2. The price of comparatively low-cost homes are escalating the most, according to the Harvard study. (Exacerbating the supply issue: demand for second homes, which was up 100% in October from last year versus 50% for primary homes, according to an analysis from residential real estate company Redfin). Ultimately, a higher market value means greater upfront costs for homebuyers in the form of larger down payments and closing costs, putting homes out of reach for those without sufficient capital.

Meanwhile, that capital is getting harder to come by. Lower interest rates means cheaper mortgages, but they also make it harder to save in the first place via traditional rate-based accounts. “The Federal Reserve has a blunt tool: lower interest rates,” says Daryl Fairweather, chief economist at Redfin. “That only helps people who have access to credit. You only get that loan if you can pay it back. If you lost your job, you’re not going to benefit.” Furthermore, banks have raised their lending standards to hedge against economic uncertainty, making it tougher for many to borrow. The latest data from the Federal Reserve’s Consumer Credit Panel show that recent homebuyers are among the most financially stable people in the country—72% of mortgage loans last quarter were tied to applicants with credit scores over 760, compared with 64% prior to the pandemic.

Which is all to say that while affluent Americans are on a buying spree, lower income workers are finding it more and more difficult to quite literally get a foot in the door.

The growing divide

As of 2017, the most recent year from which U.S. Census Bureau data is available, homeowners had a median net worth of $269,100, while renters had a median net worth of just $3,036. The pandemic has almost certainly exacerbated this gap.

“Renters are disproportionately hurt by the crisis,” says Jung Hyun Choi, a research associate with the Housing Finance Policy Center at the Urban Institute. “A greater share of renters lost their jobs. That meant losing savings that could have been used for a down payment, and falling behind on bills, which will hurt their credit and make it more even more difficult for them to be future homeowners.”

Indeed, it’s hard to climb the real-estate ladder if the first step is out of reach. That’s the case for many lower-income Americans who don’t have enough money to make the investment, particularly in this economic climate. Renters have been more likely to experience job losses since March, while nearly 9 million households that rent homes, or about one in six, are behind on payments, according to Census Bureau data released Dec. 2.

The housing disparities are especially pronounced along racial lines. Minority populations have always dealt with racism in the financial markets and redlining practices that keep communities segregated and unequal. But the pandemic is also exposing other racial inequities that make it even harder for minorities to become homeowners. For instance, while 30% of white workers can do their jobs remotely—and are thus more able to move to a city with a lower cost of living—only 20% of Black workers can do the same, according to a March study from the Economic Policy Institute.

As the economy begins to recover post-pandemic, some economic indicators, like employment and consumer spending, will start to normalize. But the bifurcated housing market may have long-lasting effects, in part because wealth transfers between generations. A 2018 report written by Choi based on University of Michigan data found that the homeownership rate is 32% for young adults whose parents were homeowners, versus only 14% for young adults whose parents were renters.

For many families, home equity is the largest component of household wealth, especially for those in the bottom half of the wealth distribution, where more than half of assets are tied to real estate. (In contrast, mutual funds and corporate equities make up the lion’s share of assets for those at the very top.) Home equity also creates wealth because well-kept homes typically appreciate in value over time. Additionally, homeowners can refinance when mortgage rates drop, then apply the monthly savings to other investments.

“If one generation has wealth, it becomes easier for the next generation to build their own wealth,” says Fabian Pfeffer, founding director of the Center for Inequality Dynamics at the University of Michigan. “If you are from a wealthy family, you are more likely to get a college degree and have other avenues for building wealth early in your life, such as home ownership. And when you are older, inheriting family wealth is just the cherry on top.”

It’s unclear how profound the impact of this unequal housing market will be. In the short term, much will depend on whether lawmakers pass measures to help indebted renters make back payments. In the long term, other factors, such as work-from-home trends and the revival of city centers, will influence where people choose to buy homes.

But the pandemic has made one thing very clear: the U.S. housing system is fragile at best. This short but dramatic period of disruption has put millions of people in a financially dire situation, threatening their housing security at a time when having a roof over one’s head has never been so important, argues McCue. Evictions protections will expire on Dec. 31. Barring a new stimulus bill (Congress is currently debating a relief package) or an executive action to extend those protections, more than 6 million households face potential eviction next month, according to the National Low Income Housing Coalition.

“The crisis showed how critical our homes are in terms of safety and health,” McCue says. “Working from home, quarantining in home—it assumes you have a home, that it’s secure, that it’s safe. As a country, we are not doing enough to satisfy the goal of safe and secure housing for all Americans.”

Correction, Dec. 4

The original version of this story misstated Jessica Bonner-Gomez’s last name in one instance. It is Bonner-Gomez, not Bronner-Gomez.

Pfizer Scaled Back 2020 COVID-19 Vaccine Production Targets From 100 Million to 50 Million Doses

Fri, 04 Dec 2020 03:33:19 GMT

Pfizer scaled back its Covid-19 production targets earlier this year after the drugmaker ran into difficulties securing all the materials it needs to produce the shots at a large scale.

In news releases through September, Pfizer had said that it aimed to manufacture up to 100 million vaccine doses this year. But in several releases in November, the company cut that to an estimate of up to 50 million doses. Pfizer is developing its vaccine with Germany-based BioNTech SE.

A Pfizer spokeswoman said in a statement Thursday that multiple factors slowed the company down, including the time it took to source large quantities of the raw materials needed to produce the shots. But the company said it has finished bringing its manufacturing up to scale and it is now producing vaccines at a rapid pace.

“Scaling up a vaccine at this pace is unprecedented, and we have made significant progress as we have moved forward in the unknown,” said spokeswoman Amy Rose. In particular, she said, “scale up of the raw material supply chain took longer than expected.”

Modifications to the vaccine production lines in both the U.S. and Europe are now complete, Rose said.

“Finished doses are being made at a rapid pace,” said Rose. “We are confident in our ability to supply 1.3 billion doses by the end of 2021.”

Earlier, the Wall Street Journal reported that supply-chain problems caused the New York-based drugmaker to reduce the number of vaccines it expects to ship worldwide this year. That led Pfizer shares to fall as much as 3.1% and caused the wider stock market to dip. The S&P 500 ended Thursday’s trading down 0.1%.

The two-shot vaccine, based on a technology called messenger RNA, was cleared for use by U.K. regulators this week, and has been submitted for an emergency-use authorization from the U.S. Food and Drug Administration. A 44,000-participant clinical trial showed the shot to be 95% effective in preventing symptomatic Covid-19.

While Pfizer is confident it has the materials it needs, the report Thursday was a reminder that the world is depending on mass manufacturing at an unprecedented speed and scale to end the pandemic. Any hiccup in the process could delay the onset of the global economic recovery.

Moderna Inc., which has also submitted a messenger RNA-based vaccine to the FDA for emergency clearance, said in a statement on Thursday it would have between 100 million and 125 million doses available globally in the first quarter of 2021.

Operation Warp Speed Chief Operating Officer Gus Perna has said that the U.S. will distribute 40 million vaccine doses total by the end of the year, enough for 20 million people.

The U.K. pre-ordered 40 million doses of the Pfizer vaccine. On Nov. 4, five days before Pfizer cut its manufacturing target, Kate Bingham, chair of the U.K. Vaccine Taskforce, said 10 million could be delivered by year-end.

On Thursday, Health Secretary Matt Hancock said an initial batch of 800,000 doses will be administered starting next week, and that it was “not unreasonable” to expect 5 million by year-end — suggesting the U.K. has already lowered its expectations of how much Pfizer can deliver this year.

–With assistance from Riley Griffin and Alex Morales.

Eric Schmidt Thinks This Is The Best Age To Start Measuring Excellence

Sun, 29 Nov 2020 11:50:04 GMT

(Miss this week’s The Leadership Brief? This interview below was delivered to the inbox of Leadership Brief subscribers on Sunday morning, Nov. 29. To receive weekly emails of conversations with the world’s top CEOs and business decisionmakers, click here.)

Eric Schmidt wants to see new leaders running the world, fast. “The sooner we can get the next generation in charge, given all the errors we have made, the better,” says Schmidt, the former CEO of Google. “They are generally smarter, more optimistic, they have more energy. There’s a lot of reasons to turn this thing over to them.”

But just not any kids. Schmidt is a firm believer in the power of exceptionalism. On Nov. 16 Schmidt Futures, the organization that he founded in 2017 with his wife Wendy to empower “talent who want to work on the hardest problems,” unveiled Rise, a new partnership with the Rhodes Trust to scour the globe for the world’s most outstanding teenagers and to support them “through life” as they use their talents to build a better world. Applications are now being reviewed, and the initial class of 100 will be announced in July 2021.

Schmidt is busy writing his post-Google chapter. He’s chairman of New York Governor Andrew Cuomo’s Reimagine NY commission, which is focusing on ways for the state to re-emerge from the pandemic. He recently completed a four-year stint advising the U.S. Department of Defense, and he was a big supporter of President-elect Joe Biden; his name has been floated for possible roles in the Administration.

Schmidt, 65, recently joined TIME for a video conversation on why 15 is a special age, how to start fixing social media, and why fears of killer robots are overblown.

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(This interview with Eric Schmidt, co-founder of Schmidt Futures, has been condensed and edited for clarity.)

Rise is on the hunt for the world’s most promising teenagers. Why that age cohort?

The question was, what’s the lowest age at which we can get a signal for excellence? And all of the anecdotal claims are it’s around 16. We’ll see if it’s true or not, but the claim is that you can tell through a series of tests and challenges and so forth who the really exceptional people will be. And exceptional here doesn’t mean just math, it means sort of creativity, verbal skills, sort of the kind of skills that are correlative with great impact.

So 15 or so is the magic number?

There’s lots of people who believe that the signal below 15 or 16 is unreliable. There’s lots of 12-year-olds who are super impressive, but the consensus is that it’s 16.

Maybe a side benefit of this project is that parents can calm down a bit about whether their 2-year-old is showing signs of exceptionalism.

We’re now in a situation where parents are in combat for their children. There’s lots of evidence that children grow up just fine on their own, but the reason Rise is interesting is that there’s plenty of talent programs, but there’s no global one.

You’ve partnered with groups like the African Leadership Group and the Latin American Leadership Academy to help find young people in refugee camps or who might otherwise slip through the cracks. How much value does the network of local partners add?

I am reasonably convinced that the United States is seeing the top talent within the U.S., and I’m very convinced that we’re not seeing the top talent from the rest of the world. The phrase we use is that talent is distributed universally, but opportunity is not. So the idea is especially for countries where we don’t really know very much, you find the local partners who care a lot about this, and they become your referral network.

How does the initial batch of 100 kids get chosen?

The system is designed so that an individual can nominate themselves, but you can also have someone else nominate you. And I personally prefer the latter, because it provides some signaling into the system. But part of our thesis is that there’s people sitting in Afghanistan who are the next Einsteins, who if we can get a phone to them we can communicate with them and we can identify them. And eventually get them out of Afghanistan and into sort of becoming a research scientist or a great musician or whatever it is.

My original idea was let’s do it fully digital. But a lot of people looked at this and said you cannot do a fully digital selection system because there will be gaming of the system. So you have to do it in two steps. You have a digital system which needs to be on the phone: there’s an app that we just released, which is essentially a series of challenges that you have to work through.

And we ask you to produce a video of yourself doing something that you’re interested in. So we think that’s sort of hard to game. We figure in between the test and that, that’s kind of a good funnel.

Are you worried about this making the rounds at Dalton or Hotchkiss?

No, we have not seen any need to do any filtering so far. I mean, look, if it comes back and it’s rich white kids in the upper Northeast, then we’ve got a problem. Let’s say that no one from Afghanistan submits, well, that would be evidence that we did something wrong.

A philosophical question. You’ve had an exceptional life, you surround yourself with exceptional people. And you’re investing in developing the next generation of exceptional leaders. But is there an argument for focusing on making just the average person’s life a little bit better through public schools and health care?

Yeah, and I agree with that. And the question is the mechanism. And what I concluded was that the progress in the United States is driven by these exceptional people. And the American Dream is precisely that somebody that comes out of Appalachia becomes this. I grew up in rural Virginia, so I’m an example of that. And I carry those values with me. Most of the people that I deal with today came from modest backgrounds and had exceptional talent and exceptional luck. So it would be easy to take the money that I made out of Google and just paper it through the schools. And that would be a good thing. But I don’t think it’s as highly leveraged, and I’m all about leverage.

Are you familiar with the book Winners Take All: The Elite Charade of Changing the World?

It’s been described to me, I’ve not read it. I think that there’s plenty of examples to prove the thesis of the book, and there’s plenty of examples to disprove the thesis. If you look at it mathematically, the American Dream is in trouble because mobility between cities and so forth is much lower; dynamism is much lower; patrimonialism, which is where your family does well, is increasing. The fact of the matter is that if you look over the last decade, the average person on average has not done better. And the elite, obviously including myself, have done super well. And I think, I personally think the pandemic is gonna make that much, much worse.

One of the arguments of the book is that people like yourself use philanthropy to alleviate social pressure but also shape change in a way that will continue to benefit themselves.

That is certainly not my goal. What have I done in my career? The democratization of phones and the access to information. I basically networked the world and got information in everyone’s hands. I defy you to argue against making the average person smarter. That’s presumably a nonelitist strategy, right? And I would further say that if you look at the philanthropists in the ‘60s, Rockefeller and those guys, they were generally hated. But the institutions that they left have had great value to society.

Rep. Alexandria Ocasio-Cortez has questioned the morality of an economic system that produces billionaires, and one of her early advisers popularized the slogan “Every billionaire is a policy failure.” What is your response?

We would probably all be better off spending more time understanding the contributions made by specific individuals and not making generalizations about anyone.

Do you also know the quote, attributed to Balzac, “Behind every great fortune there’s a great crime”?

That may have been true during his time. But the vast majority of my friends are not going to jail. Although I must say there’s a few who have.

Who are you thinking of?

Let me not name anyone. But my important point is, look, you can complain about the tech industry all you want, but the tech industry, as compared to other industries, it is one of the cleanest and most responsible in terms of … Look at other industries in terms of payoffs and influence peddling, and destruction of the earth. The tech industry is generally socially conscious. You may disagree with our social consciousness, but it’s endemic in the society. When Larry [Page] and Sergey [Brin] started Google, they were concerned about climate change 20 years ago.

In regard to great crimes, I was actually in this instance thinking about your partner the Rhodes Trust: Cecil Rhodes is a hall of fame colonialist, imperialist and white supremacist. Did that give you any pause in partnering with them on Rise?

No, no, and because I understand the context of history. The fact that George Washington had slaves does not mean that I revere him less. I just don’t like the fact that he had slaves.

Tell me about your notion of risk transfer and how that applies to your philanthropic thinking.

My wife Wendy and I are doing this together, and she has made the argument that I think is correct that the combination of political correctness, government caution and business conservatism make it harder to take hard risks. And that private philanthropists should be willing to take much bigger risks and suffer the failure. All real progress comes from taking risks, right? And everyone says they want to take risks, but they don’t. But there’s a small number of people who are willing to really bet the farm. And if I can find them, I’m gonna fund them.

Beyond your philanthropy, are there any venture investments that you’re particularly excited about?

I’m very interested in synthetic biology. I’d rather not go into the specifics. We’ve done a lot of stuff around food and vertical farming, the future of food, the future of transportation, the future of biology.

Do you think the current publicly traded companies—the Impossible Foods, the Beyond Meats—are pursuing the right path?

The phrase we use is that talent is distributed universally, but opportunity is not.They are, they are. They really have done a good job. And I think they show the way. And it’s really hard to break into a very mature industry without a different angle, and I think they’ve got it. Most people think with food we’ll get to the point where we can grow the meat—it’s real meat, it’s not fake meat. But we can grow it without having to kill a cow. And I think you know that cows are a large contributor to global warming.

Your four-year term as chairman of the Department of Defense’s Defense Innovation Board recently ended. What was your focus there?

We did a lot of things. The military is incredibly, incredibly impressive, and it also has incredibly terrible systems. The hardware and the software are from the 1980s. So we set out to try to modernize that with lots of things. I’ll give you an example. The F-35 joint strike fighter was designed in 2001. It’s being deployed now at scale. The computers and the systems were all designed in the early 2000s. Think about that. So I worry that there’s an opportunity gap between what we could do and what we are doing.

Computers from the 2000s?

It’s complicated, and there’s a very long set of reasons. But we should be able to do that better. And in the case of the weapon systems, the vast majority of the cost is in the lifetime of the system. And so getting that right would save a trillion dollars. It’s a very large amount of money to the nation.

What was your most significant accomplishment there?

Probably the most important thing we did is our actions led to the creation of a joint AI center, which will be the place where all the AI work is done. The work is classified, but what the military will talk in general terms about is trying to use AI vision to watch instead of having a human watch. They use the systems to improve their targeting, their understanding of information, that kind of thing.

As you survey threats, drone strikes, bioterror, small dirty bombs, cyberattacks, do you worry about all of them or one in particular?

The military generally is concerned about China, Russia, Iran, North Korea and extremist terrorism. That’s generally their list. And you can debate what the order is, but that’s generally what they’re worried about.

Do you worry about swarms of armed drones from China, or is that science fiction?

No, that’s a likely attack scenario from China. There are science fiction [scenarios], and they’re basically autonomous collections of drones. And because [Chinese drone maker] DGI is 90% of the market, there are reasons to think that they might be leading in that area. There are answers to these, which I won’t discuss. These are all threats. It’s important to understand that the nation is never completely at peace.

Shifting gears, you are chairman of Cuomo’s Reimagine NY commission. What have you been focusing on there, and how involved are you?

A lot. So we issued our first set of reports, and our primary message has turned out to be broadband. The stories that we hear about access to broadband, difficulty of online education, especially from the underserved, are really tragic. We need to accelerate access to broadband. Many of these communities, by the way, are not rural. There’s lots of people in New York City who do not have access to broadband who need it for education, for work, for health care. So we, I think the consensus of the commission will be that broadband really needs to be 100% now. Think about it. I mean, how are you gonna get through the pandemic, and are you O.K. with having a whole generation of poor kids not getting educated for a year?

Do you currently engage in any hands-on tech-related activities like hands-on programming? Do you keep your fingers in at all?

Somehow, I’m the tech support for my empire. I spent a lot of time working on network design, fiber-optics design. I’m very, very interested in 5G. I must tell you, I’m not as good a programmer as I was when I was 20.

How’s your home wi-fi working?

If you look at the philanthropists in the ‘60s, Rockefeller and those guys, they were generally hated. But the institutions that they left have had great value to society.There’s a new wi-fi called Wi-Fi-6, which I’m busy upgrading everybody to.

You’re a huge advocate of the benefits of artificial intelligence. Why do humans find it so scary?

I think AI is overwhelmingly positive. I’m writing a book with [Henry] Kissinger on the future of AI. What I would suggest is that the fears of AI come from the fact that people are watching too many robot movies, where inevitably it’s a female robot who then has a nerdy creator and then the robot kills the creator. That’s a great movie, but that’s not what we’re building.

If you don’t get killed by a beautiful robot, what’s the upside of AI?

The real AI is going to provide universal language translation, it’s going to provide universal summarization, it’s going to contribute to fantastic understanding across cultures, which is very important. AI will deliver progress in biology and chemistry. Can you imagine if you had materials that were twice as strong, half the price, no carbon emissions, that kind of stuff? All of that’s on its way. And the impact on the pandemic and viruses is without question.

Any concerns about AI?

The things I worry about—I think mostly about diffusion, because this technology’s gonna be broadly held, and evil people will figure out a way to use it. So for example they’ll make false videos and things like that.

What is your view of the government’s current antitrust case against Google and other big technology companies?

I was a CEO during much of the Google activities, and I can assure you there was no violation of antitrust law. If you don’t like what the tech companies are doing, there’s plenty of ways to regulate them. There are institutions that regulate them, whether it’s the Federal Trade Commission or the Federal Communications Commission. Or you can just pass laws. The problem I have with antitrust is it’s an awfully blunt instrument.

What would more targeted regulation look like?

So I’ll pick an example out of Amazon. So Amazon in its stores has a combination of its own brands and advertising and products it sells. It’s confusing to me, as a consumer. That’s an example where maybe we could come to some consensus on how they should be labeled. That’s not an antitrust thing, that’s a regulation.

You were recently quoted as saying the context of social networks serves as “amplifiers for idiots and crazy people.” Was that accurate?

It’s amazing, it’s truthfully what I said. And the reason I said it is when we built the social networks and social media, we did not intend them to become closed networks of crazy people who are getting their fellow crazy people riled up. That was not the design. The design was sharing experiences, opening up horizons, broadly educating people. And so what seems to have happened is that alarmist messages tend to get people on these networks worried, and then they tend to spread them. And that tends to overwhelm the more normal discourse.

How might regulation work on social media?

When you look at your Twitter feed, how many of the tweets do you see are from bots? Do you know?

I have no idea.

It should be possible to tell. It would be useful to know. And you can say, “Well, this is a bot. Maybe I want to listen to a human and not a computer.” I want you to have that choice. So what I’m concerned about now is that we’re all reacting to the fact that these systems are organized around sharing of alarmist information. As opposed to broadening the discussion of society and issues around it. And again, the solutions are in the algorithms, not in censorship.

So there are reports of you being considered for a role in the Biden Administration. What can you say about that?

Really nothing. I’m a huge Biden supporter, I was heavily involved in the election, and I know the people well. But it’s too soon to talk about that. They need to sort out who the Cabinet positions are first.

What broad area do you think you could add the most value in?

I’d rather not interview with you for them. But let me tell you that I’m very interested in funding and being involved in American competitiveness. Everything I’ve been talking about is about making America win. I use China as the opponent, but it’s really about I want America to win. America was great to me; I want the next generation to win as well. I don’t want us to lose the seed corn that was so successful on my behalf.

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Black Friday Offers Beacon of Hope to Struggling Stores

Fri, 27 Nov 2020 06:42:49 GMT

NEW YORK — After months of slumping sales and businesses toppling into bankruptcy, Black Friday is offering a small beacon of hope.

In normal times, Black Friday is the busiest shopping day of the year, drawing millions of shoppers eager to get started on their holiday spending.

But these are not normal times: The economy is tanking and crowds are expected to be dramatically diminished as coronavirus cases spike and shoppers do more of their purchases online.

Many retailers closed their doors on Thanksgiving Day but are beefing up their safety protocols to reassure wary customers that they can still come back the next day. For those who can’t be reassured, stores are moving their doorbuster deals online and ramping up curbside pickup options as a last grasp at sales before the year ends and they head into the dark days of winter with the pandemic still raging.

“Black Friday is still critical,” said Neil Saunders, managing director of GlobalData Retail. “No retailer wants it to be tarnished. It’s still vital to get their consumers spending and get consumers into the holiday mood.”

The U.S. Centers for Disease Control and Prevention has labeled shopping in crowded stores during the holidays a “higher risk” activity and says people should limit any in-person shopping, including at supermarkets.

Instead, the health agency recommends shopping online, visiting outdoor markets or using curbside pickup, where workers bring orders to you in the parking lot.

The day after Thanksgiving has been losing its luster as the unofficial start to the holiday shopping season for the past several years, with more stores were offering holiday discounts throughout the month. Still, Black Friday has remained the busiest day of the year, according to ShopperTrak, and is expected to hold that title again this year.

There is reason for hope. Retailers were successful in convincing shoppers to spend early by pushing big discounts in mid-October. And shoppers have shown their willingness to spend for other holidays like Easter and Halloween.

The National Retail Federation, the nation’s largest retail trade group, has taken an optimistic view, predicting that shoppers will be looking for reasons to celebrate. The trade group expects sales for the November and December period to increase between 3.6% and 5.2% over 2019 compared with a 4% increase the year before. Holiday sales have averaged gains of 3.5% over the past five years.

“After all they’ve been through, we think there’s going to be a psychological factor that they owe it to themselves and their families to have a better-than-normal holiday,” said NRF Chief Economist Jack Kleinhenz. “There are risks to the economy if the virus continues to spread, but as long as consumers remain confident and upbeat, they will spend for the holiday season.”

Online sales could realize even bigger gains heading into the holidays. Black Friday is projected to generate $10 billion in online sales, a 39% bump from the year ago period, according to Adobe Analytics, which measures sales at 80 of the top 100 U.S. online retailers. And Cyber Monday, the Monday after Thanksgiving, will remain the biggest online shopping day of the year with $12.7 billion in sales, a 35% jump.

The pandemic has already benefited Amazon, which continues to seal its dominance in the online space as jittery shoppers click on their devices instead of venturing into stores. Likewise, big box chains like Walmart and Target that were allowed to stay open during the spring lockdowns fared far better than department stores and other non-essential retailers that were forced to close. That disparity helped speed up bankruptcy filings of more than 40 chains, including J.C. Penney and J.Crew, and resulted in hundreds of stores closings.

Plenty of clothing chains like Abercrombie and Fitch have warned of more difficult days ahead, including the possibility of even more store closures. A&F said Tuesday it expects sales declines to deepen to 5% to 10% for the holiday quarter.

“There are a lot of unknowns as we head into what’s our traditionally highest volume weeks of the year,” Scott Lipesky, chief financial officer at Abercrombie & Fitch told analysts on its earnings call. “With COVID numbers rising, there is the potential for a change in apparel demand and customer willingness to enter physical stores. “

Department stores and other clothing stores that haven’t yet recovered from the closures during the spring will have a hard time making up for lost sales, says Ken Perkins, president of Retail Metrics LLC , a retail research firm.

For the fiscal third quarter, mall-based retailers saw their profits down 20% while big box stores and other retailers that operate outside a traditional mall posted a 19% increase, according to RetailMetrics’ tally of roughly 100 retailers. For the fiscal fourth quarter, mall-based retailers are expected to see profits down 31%, while off-mall stores should see profits up 1%.

China’s Cainiao Is Revolutionizing How Goods Get Delivered. ...

Tue, 24 Nov 2020 02:18:10 GMT

It might not be the slickest thing on four wheels, and it definitely won’t win any time trials, but Chinese logistics firm Cainiao’s new Xiao G delivery cart could be the future.

Every hour, the three-foot by five-foot automated vehicle picks up packages from Cainiao’s depot in Hangzhou—a city of 10 million people in China’s booming east—and tours a nearby neighborhood. Locals in pajamas pop down to meet the driverless cart at their nearest delivery point and type in a reference number. A door in the vehicle’s side pops open and the customer’s parcel can be retrieved. Xiao G heads onto the next stop, weaving ponderously through traffic via 360-degree sensors.

“It sends a message to customers after setting off and another when it arrives at a pick-up point so they know to come down,” says Cainiao engineer Long Fei. “Some models allow customers to drop off as well as pick up packages.”

In terms of innovations in logistics, Xiao G may not be as earth-shaking as the shipping container or the cargo jet. But it is the most visible aspect of a stealthy revolution powered by Cainiao, which was founded in 2014 and whose name means “rookie” in Chinese. The $10 billion subsidiary of e-commerce behemoth Alibaba says it is poised to transform worldwide trade.

Charlie Campbell Cainiao engineer Long Fei loads packages onto the firm’s Xiao G automated delivery vehicle in Hangzhou, China on Oct. 19, 2020.

How your purchases could be delivered in the future

The Xiao G is part of Cainiao’s plan to create a single ecosystem for all logistics firms across the world to plug into, allowing for the seamless transfer of goods between companies and jurisdictions. Just as myriad smartphone makers all operate on Google’s Android or Apple’s iOS, Cainiao envisages thousands of independent logistics firms can operate within its system, sharing everything from labeling standards to customs information.

“What they’re doing is bigger than it appears to be,” says Jeffrey Towson, a private-equity investor and a professor of investment at Peking University in Beijing. “It might be the single most important thing happening in China’s digital space.”

Cainiao is not a logistics firm itself, but its open platform allows for collaboration with 3,000 logistics partners and 3 million couriers—including the top 15 delivery firms inside China and 100 operating internationally. This enables merchants to choose the most cost- and time-efficient delivery option, based upon real-time data crunching of optimum firms and routes.

For consumers and manufacturers, this means a typical, 1 kg package can be sent anywhere in China within 24 hours for around 30 cents. The goal is to deliver it anywhere in the world within 72 hours for $3. (Currently, a DHL envelope under 0.5 kg from Shanghai to London costs around $100 and takes typically 5 days.) That stands to be a life-changing boon to coffee-growers in Peru, textile-weavers in Chad, medical instrument producers in Bangalore and everyone in between.

“We had to get all the CEOs of different delivery companies in a room to work out how to do this,” says Cainiao CEO Wan Lin, sitting in the firm’s Hangzhou headquarters, which is punctuated with gym equipment and pink bunting to celebrate the recent Singles Day shopping extravaganza. “Because the biggest barrier to globalization is logistics.”

Wei Zhiyang—Zhejiang Daily/Visual China Group/ Getty Images Wan Lin, President of Cainiao Network Technology, delivers a speech during the 2019 Global Smart Logistics Summit (GSLS) in Hangzhou, China on May 28, 2019.

How the COVID-19 pandemic pushed logistics innovation

By putting sensors in everything—along with cameras in every warehouse and GPS on every truck and package—Cainiao aims to digitize the logistics process from top to bottom.

In China, the implications are vast for the $1.94 trillion e-commerce sector, currently the world’s largest and three times the size of its U.S. counterpart. Some 64 billion parcels were sent last year domestically but current delivery networks are piecemeal, inefficient and wasteful. Wander any Chinese city or town and it’s common to see gangs of smoking delivery drivers sorting through heaps of crumpled packages on the street. Packaging is also obscenely wasteful: order a 0.1mm protective film for your smartphone screen and you could find it turning up in a shoebox-sized carton packed with air pillows and styrofoam.

So there’s enormous scope to boost profits, and safeguard the environment, though savings on fuel, packaging and unnecessary storage. E-shipping labels alone save over 400 billion pieces of paper and offset a billion kilograms of carbon emissions annually, according to Cainiao. And then there is the cost. “China will process 70 billion parcels this year,” says Wan. “What if you can shave just one cent off each one?”

Wan is used to thinking big. After earning a doctorate at the University of Texas at Austin, he spent nine years at Amazon, eventually reporting directly to Jeff Bezos as director of global logistics strategy. He says Seattle “still feels like home” and credits Bezos for instilling an ethos of “let’s raise the bar and exceed expectations.”

“Amazon taught me about customer-centric culture and capability,” says Wan. “Culture without capability is just a slogan on the wall.”

Being part of Alibaba means that every aspect of Cainiao’s process can be kept in-house. Say a merchant sells internationally on Alibaba’s e-commerce platform Taobao. Transactions can be processed by Alibaba’s payment arm Ant Financial and the goods delivered via Cainiao—all part of one corporate ecosystem. That enables computers to quickly check that every detail matches up—be it cost, vendor, or size and weight of goods dispatched—and feed this information to the necessary customs departments while flagging potential problems. When Cainiao’s charter planes leave the southern Chinese city of Shenzhen for Russia, for example, customs data is sent at take-off and by the time it has landed the cargo has already been cleared.

While consumers and retailers aren’t limited to only using Taobao for orders, or Ant Financial for payment processing, the streamlined customs procedure that results from going closed-loop is a big incentive to do so—boosting shipping times, as well as Alibaba’s bottom line and China’s logistical clout.

The efficiencies are impressive, according to Wan. “When we first started doing cross-border delivery in 2014, a shipment could take one month,” he says. “Now for custom clearance, we process more than 20 million parcels in a single day.”

Cainiao’s capability was put to the test during the early days of the pandemic, when delivery routes had to be adjusted to avoid coronavirus hotspots, while ensuring that those same areas received the supplies they needed.

Back in January, Cainiao launched the “Green Channel” initiative to transport global medical aid to Wuhan, which was plunged into a bruising 76-day lockdown after COVID-19 was first identified in the city. Cainiao directed some 69 million medical relief items from 39 countries and regions to local medical institutions within a single day.

After China got a grip on the virus, the firm’s efforts turned outward, boosting flight charters from 260 to a whopping 1,260 to replace cargo capacity lost by slashed passenger services. It helped to deliver 250 million pieces of PPE to more than 150 countries and regions. By stress-testing Cainiao’s systems, the pandemic ended up spurring many of advances.

“COVID-19 made everyone realize how important the logistics infrastructure backbone is,” says Wan. “And it gave us a peek at what Cainiao should look like in three years.”

Ji Dong—China News Service/Getty Images A staff member arranges boxes of anti-epidemic supplies of the United Nations World Food Programme (WFP) at Cainiao’s Nansha warehouse on in Guangzhou, China on April 29, 2020.

The new technology of parcel delivery

In the near-term, having a state-of-the-art logistics system gives Chinese manufacturers a competitive edge to offset rising wages in a rapidly developing society.

But it’s also a strategic advantage that chimes with Beijing’s China Standards 2035 plan to set global benchmarks for next-generation technologies like 5G, Artificial Intelligence (AI) and the Internet of Things (IoT). Although China has been making steady gains in this regard—contributing a significant number of protocol standards for 5G wireless networks, for example—Cainiao’s logistics endeavors may be the first time the world’s most populous nation writes truly global rules.

“It’s part of a strategic move to become a technology-driven country, where very good minds try to see what the future is going to look like and contribute to future industries,” says Prof. Dipak Chand Jain, the European president at the China Europe International Business School and formerly dean of Northwestern University’s Kellogg School of Management.

It remains to be seen what effect Cainiao will have on the U.S., where an estimated 95% of all e-commerce orders are delivered by Fedex, UPS or the U.S. Postal Service. German-owned DHL, meanwhile, boasts 39% of the global logistics market. Amazon, which until recently provided 10% of all UPS business, has also launched its own delivery arm including flights.

Yet while these companies operate competing services, Cainiao has the potential to outflank them because its platform can absorb any industry players that wish to be a part of it. The Chinese firm says it is already partnering with UPS and Fedex on warehousing and some business-to-business logistics. “Nowhere in Europe or the U.S. are they attempting anything remotely like this,” says Towson.

It’s not just the prestige that comes with being an innovator. China also hankers after the geo-strategic clout that comes with it. “China wants to be in that same position as the U.S., where its technology becomes indispensable and used all over the world and it can dictate terms about who does and doesn’t get to use it,” says Mark Natkin, founder of Beijing-based IT research firm Marbridge Consulting.

It’s a strategy that has taken on new significance after the Trump Administration started sanctioning Chinese tech firms and banned telecoms giant Huawei from using U.S. components as well as Google’s Android operating system.

And just as Google’s Android has millions of software engineers around the world creating products for it, so Cainiao’s system offers an incentive for builders of apps, logistics infrastructure—and the next generation Xiao G—to create products to that standard, knowing that they can be sold to any of the thousands of firms tied to it.

Ultimately, says Towson, the next stage is when smart learning gets injected into the global logistics architecture. “Will these robots move themselves? Will these trucks drive themselves?” asks Towson. “How smart is this system going to be?”

In China, it’s already common for robots to deliver food to restaurant tables, or serve as digital concierges in hotel lobbies. Now it’s the turn of the logistics industry to become a testing ground for advances previously only seen in comics and movies. “Yes, in some ways life is imitating art,” says Wan. “We are building that sci-fi future of technological marvels.”

World Wide Technology Chairman Dave Steward on Founding the Largest Black-Owned Company in America

Sun, 22 Nov 2020 11:50:50 GMT

(Miss this week’s The Leadership Brief? This interview below was delivered to the inbox of Leadership Brief subscribers on Sunday morning, Nov. 22; to receive weekly emails of conversations with the world’s top CEOs and business decisionmakers, click here.)

Dave Steward is not your typical billionaire tech-company founder. His company is based in St. Louis, not San Jose. He brings his deep faith into the workplace. Earlier this year, he wrote Leadership by the Good Book, with a foreword by Bishop T.D. Jakes, about applying biblical principles to a business setting. He’s a salesman, not a technologist—he was once FedEx’s salesperson of the year.

And Steward, 69, is the rare Black chairman in an industry that has struggled with diversity, particularly at senior levels. His privately owned $12 billion company, World Wide Technology (WWT), is thriving in the current COVID-19 environment, helping a broad range of corporations select and install complex computer systems and other digital infrastructure. With more than 5,600 employees and offices around the globe, the company is the largest Black-owned business in America. Steward recently joined TIME for a video conversation on the impact of COVID on his business, why he has chosen to keep WWT private and how his father inspired his entrepreneurial zeal.

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(This interview with World Wide Technology chairman Dave Steward has been condensed and edited for clarity.)

It’s become a truism that the pandemic has accelerated the shift to digitalization by five years. What areas are you seeing have stepped up demand?

Cyberattacks have gone up over 100%, so our security practice has skyrocketed. From federal, state and local, to utilities, to health care, every sector has been just hammered with cyberattacks.

So the bad guys are pivoting to digital too?

It’s just off the charts.

So are you adding head count to your cybersecurity team?

We’re adding employees across the full spectrum of our business, from networks to architecture to engineering. You name it, we’re adding openings. Right now, I think we have 700 openings. We can’t find the right people fast enough.

Your slogan is “Experience Silicon Valley in St. Louis.” Do you have any issues recruiting top tech talent to live in St. Louis?

No, we haven’t because we’re consistently ranked as one of the best places to work by Fortune and Glassdoor. I will challenge anyone to find a health care plan that we have and benefits plan that we have in place, where we cover the spouse and everybody in the entire family at minimal cost to the employee. And we haven’t increased that cost in 10 years, longer than that, 15 years. But also I think that culture matters, and we have a set of core values that we all believe in and we feel are vitally important and very inclusive.

Why haven’t you gone public?

The question is, Why would we? The only shareholder that we’re concerned about is me. And my whole goal and objective is not all about the money, it’s about how we serve our clients better than anybody else. How do we continue to improve, how do we invest in a way that’s long term, that 50 years from now, not a quarter from now. Investors in the New York Stock Exchange or NASDAQ or anywhere else, they’re not very patient.

So have you turned away a lot of investment bankers over the years? How do you rebuff them?

As I think about investment bankers, I think about them from the standpoint, How can we make you better as an investment bank? And when you see new technology that you think is something really good, how can we help you make it even more valuable and take the risk out of it?

I heard you were a good salesman! So when you are pitched for an IPO, you turn it around into a sales call for your company?

One day I asked, ‘What business am I in? Am I in the business of auditing freight bills on railroads? Or am I in the business of using technology in a new and innovative way?’It’s a great opportunity.

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Let’s talk about the origin story for your company. Your first business involved stitching together technology to audit freight bills. Was there a moment when you saw how the advent of computing power was going to transform American business?

One day I asked, “What business am I in? Am I in the business of auditing freight bills on railroads? Or am I in the business of using technology in a new and innovative way?” That was the lightbulb moment. I decided that I want to be a part of the technological revolution. So in 1990, I started this company called World Wide Technology with five people and 4,000 square feet.

Was that before or after Al Gore invented the Internet?

That was before he created the Internet.

Today it’s a $12 billion company, but in your book, you describe some dark days early on, when there was an embezzlement.

I don’t put it that way. Some money was reallocated.

Reallocated into a personal pocket?

Yeah, a personal pocket.

Was the company at risk? Was it a significant amount of the capital at that time?

Yes, it was. I had my car repossessed from the company parking lot. I had to go out there and get my briefcase out of the car like nothing happened.

While growing up in Clinton, Mo., I understand that you got a lot of your entrepreneurial drive from your father.

Entrepreneurial zeal from my father, and such encouragement from my mother.

You describe your father as quite an accomplished jack-of-all-trades.

Innovation doesn’t happen without a person of color or a diversity of thought being at the table in order to challenge the status quo.He was, out of necessity. He was a master mechanic, he was a bartender, he was a hunter, he was a security guard. You name it. He cleaned offices; he had a janitorial service. Because of racism, because of bigotry, because of segregation and all those things … He was the first entrepreneur I ever saw. So I wanted to be like my dad. And my mom was the epitome of optimism and encouragement, and always encouraging us that we were special.

What was your childhood like?

I was born in 1951. I graduated from high school in ’69. So you think about during that period of time, Brown v. Board of Education, I’m going into the first grade and they’re saying we’re gonna integrate the school system, and the Ku Klux Klan said no way that’s going to happen. And so my dad had to patrol the town all night to ensure that his five children had the time to go to school safely. He put himself really at risk. But I think they probably were more afraid of him because he was 6 ft. 4 in. and 240 lb., with a mean attitude.

What was your household like?

We didn’t have an indoor bathroom until I was 8 or 9. We had a dip bucket with water in it, and we had a slop bucket. It was a chore for me to take it out every day. I didn’t know that we were so poor until later on in life.

Did you face much discrimination growing up in Clinton?

There was adversity and challenges. It was a very, very difficult time. The one movie theater we couldn’t go to, the other one we had to sit in the balcony. We couldn’t go roller-skating. We couldn’t also go to the swimming pool.

Is there one event that sticks in your craw?

I was 8 years old, and they said I couldn’t join the Boy Scouts. And my mother had to tell me.

What was that conversation like?

In order to get through that, you have to have blinders on. I remember this, we cried together. [Steward teared up recalling the incident.]

I have the Silver Buffalo Award, which is the highest honor that you can get with the Boy Scouts. Now you think about the hurt and pain of that, and the power of forgiveness and all of that, and I could have easily been bitter about that my entire life. So that’s what my parents taught me, the power of forgiveness. And here we are, I think 700 people in the world have the Silver Buffalo Award.

How is the country doing today in terms of race relations?

We have our problems, but we live in the greatest country in the history of the world. It used to be where you could not get past that caste system. It used to be that we had to live on the other side of the tracks But there’s an obligation as well for us, persons of color, not to allow that to be a distraction. There are unique gifts that we bring to America and bring to the relationships and the growing and developing and understanding and a common ground. We have something in common. We all love this country, and we all have something to contribute in a unique way. Innovation doesn’t happen without a person of color or a diversity of thought being at the table in order to challenge the status quo.

STEWARD’S FAVORITES

BOOK: My Bible.

APP: I’m always looking at new Scripture and getting the deep meaning of that Scripture. There’s a number of pastors that I read their materials.

EXERCISE: I’m on this regimen of getting up every morning and doing some stretches and doing some exercise. I used to do 100 consecutive push-ups every morning. That started hurting my shoulder, so I’ve cut that down to only 30. After lunch, I’ve got this routine. I walk kind of fast; I’ve got these hills that I do for about 25 minutes.

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The Story Behind TIME’s ‘Covid Winter’ Cover

Thu, 19 Nov 2020 22:22:27 GMT

For this week’s cover on how Americans are reacting to the current surge in covid-19 cases, we turned to London-based artists Sean Freeman and Eve Steben to capture the bleak forecast ahead.

The duo, who form There Is Studio and specialize in combining typography and photo illustration, created an eerie, foreboding sense of isolation with a frosted window outside their East London home.

Courtesy of Sean FreemanArtist Eve Steben creates the cover for the Nov. 30 / Dec. 7, 2020, issue of TIME.

“Creating a cover about lockdown while in lockdown is an interesting artistic and production challenge,” says Freeman, who produced the image in less than a day. “We created this against the clock, within our own small isolation bubble —using our own windows, as well as a tremendous amount of prop snow, shot during a grey, but rather warm London day.”

Courtesy of Sean FreemanArtist Sean Freman works on the Nov. 30 / Dec. 7, 2020, issue of TIME.

This is the eighth TIME cover Freeman has designed, including the iconic “Bitter Pill” cover (Mar. 4, 2013) and the “Last Days of Osama Bin Laden” cover (May 7, 2012).

Photo-Illustrations by Sean Freeman for TIME

“We’ve felt the harsh reality of covid quite personally here with Eve getting seriously ill from it at the beginning of the pandemic, as well as some friends and family catching it here and abroad,” added Freeman. “On the other hand, the situation also brought some positivity for us.”

“Enjoying life at a different pace, also this heartwarming sense of community, cooperation and camaraderie that covid has brought in our neighborhood and beyond, have been a solace. Seeing how the local businesses and residents have been generously helping one another has been absolutely incredible and inspiring.”

Airbnb Details Years of Losses Ahead of a Planned IPO

Tue, 17 Nov 2020 05:42:47 GMT

Airbnb was losing money even before the pandemic struck and cut its revenue by almost a third, the home-sharing company revealed in documents filed Monday ahead of a planned initial public offering of its stock.

The San Francisco-based company has yet to set a date for the IPO but it is laying the groundwork by filing financial records with U.S. securities regulators.

The documents show that leading up to the coronavirus outbreak earlier this year, Airbnb was spending heavily on technology and marketing to grow its business. The company said it was expanding its operations and adding new programs, like tours and other experiences that travelers could book through its website.

Its revenue jumped 32% to $4.8 billion in 2019, but it reported a net loss of $674 million that year. The company also lost money in 2018 and 2017.

This year, Airbnb said, revenue fell 32% to $2.5 billion in the first nine months as travelers canceled their plans after the pandemic crippled travel and forced lockdowns around the world.

The pandemic forced a financial reckoning, the company said. In May, Airbnb cut 1,900 employees, or around 25% of its workforce, and slashed investments in programs, like movie production, not related to its core business.

Airbnb funded operations with $2 billion from various sources, including a $1 billion investment from private equity firms Silver Lake and Sixth Street Partners.

Now, the company said, demand is rebounding as some travelers see home rentals as safer than crowded hotels. The number of nights and experiences booked, which plummeted more than 100% in March and April, were down 28% in July, August and September.

Airbnb said that indicates its business model is resilient and can adapt to future travel needs, including an increase in business travelers who want to work from a rental home.

“We believe that the lines between travel and living are blurring, and the global pandemic has accelerated the ability to live anywhere,” the company said.

Airbnb said it currently has 7.4 million listings run by 4 million hosts worldwide. Eighty-six percent of its hosts are outside the U.S. and 55% are women, the company said.

The company said it had 54 million guests in 2019.

Airbnb was founded 12 years ago by Brian Chesky and Joe Gebbia — classmates at the Rhode Island School of Design — and Nate Blecharczyk, a software engineer. Their first listing was Chesky and Gebbia’s apartment in San Francisco.

Chesky, Airbnb’s CEO, will receive a multi-year equity grant worth an estimated $120 million in lieu of a salary, the company said. The award will vest if he meets stock-price targets over the next decade.

Airbnb’s massive growth hasn’t been without complications.

The company has angered some cities that accuse it of promoting overtourism and making neighborhoods less affordable by taking housing off the market. Cities like Los Angeles, Barcelona, Paris and even Airbnb’s home city of San Francisco have passed laws restricting its rentals.

The company has tried to clean up its couch-surfing reputation by adding luxury rentals and promising to verify each of its properties to make sure the photos on its website match the accommodations.

It has also been cracking down on parties since a 2019 shooting at an illegal Airbnb house party in California. The shooting left five people dead.

In the meantime, relationships with its hosts have sometimes frayed. Earlier this year, hosts were infuriated when Airbnb allowed guests to cancel and get full refunds amid the pandemic. Airbnb later promised $250 million to hosts to make up the shortfall.

More recently, the company said it will set aside 9.2 million shares for a host endowment, which will fund projects for hosts when its value tops $1 billion. It also named a 15-member host advisory committee to distribute those funds and meet regularly with Airbnb leadership.