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FortuneNBA Launches Streaming Service, Making Games More AffordableThe 10 Best U.S. Cities for Women in TechPeloton Is Pedaling Furiously, But It’s Not Enough To Impress InvestorsLooking for Growth, Spain’s Santander Acquires Stake in High-Rising Fintech StartupWould the Stock Market Crash if Elizabeth Warren Becomes President? Here’s What History SaysWhat Companies Can Learn From the U.S. Government’s Use of Artificial IntelligenceGoldman Sachs Jumps On the ‘Profit Matters’ BandwagonHere’s What’s Good and Bad About Apple’s New Beats Solo Pro HeadphonesFrom an Income Tax Ban to Democracy Dollars, These Are the Ballot Measures to Watch This Election DayConsumers Say They Want More Sustainable Products. Now They Have The Receipts To Prove ItHas the Trade War Actually Hurt Tech?Airbnb Agrees to Provide Host Records to Hawaii’s Department of TaxationFemale Founders and Employees Are Facing a Gender Equity GapGoldman Sachs Lost Millions on WeWork and Uber. Now, the CEO Is Talking Up the ‘Path to Profitability’Climate Change In the Corner OfficeIs Your Company an Innovator? These 5 Traits Make the DifferenceWhy a Rush of Chinese Companies Are Planning U.S. IPOs This FallInnovative Tech Offers a Better Solution to Aircraft Pollution Than Boycotting FlightsCorporate Earnings Are Up. Markets Are Up. And Yet Analysts Keep Saying the R-WordFrom Luxury Watches to Broiler Hens, Companies Around the Globe Say Hong Kong Protests Are Hurting ThemCollaborate or Isolate? The U.S. Tech World Is Watching China’s Advances in A.I.—WarilyUber Eats’ Hungry New Strategy: Dominate or ExitBill Gates Commits $10 Million More for Alzheimer’s Research to ‘Part the Cloud’For the Diamond Industry, Things Are RoughA Digital Dollar for a Strong United States Financial SystemSearching for a Buying Opportunity in the Stock Market? Don’t Wait For a RecessionHouse Impeachment Inquiry Transcripts Read Like a Political ThrillerTrump Formally Begins U.S. Withdrawal From Paris Climate Agreement in Latest Effort to Roll Back RegulationsBeanie Feldstein, Jharrel Jerome, and Other Young Stars on Landing Their First Big RolesEmmett Till’s Memorial Is Targeted Again

https://fortune.com Fortune 500 Daily & Breaking Business News Tue, 05 Nov 2019 16:27:27 +0000 en-US hourly 1 https://wordpress.org/?v=5.2.4 164653900 https://fortune.com/2019/11/05/nba-tv-streaming-service-live-price-features-games/ Tue, 05 Nov 2019 16:14:41 +0000

https://fortune.com/?p=2727678&showAdminBar=true

Two weeks after tip-off on the 2019-2020 season, the NBA is stepping into a whole new game.

The National Basketball Association has launched a new streaming service for live and archived games (as well as original shows revolving around the league). At $6.99 per month (or $59.99 annually), it’s a much more affordable option for fans vs. the League Pass streaming service (which runs $17.99 per month).

Dubbed NBA TV, the service lets fans stream games through their smartphone, tablet or gaming console through a dedicated app or from NBA.com. It won’t show every game in the league, but it will show more than 100 live out of market games, along with the WNBA and NBA Summer League.

The move by the NBA could put the NFL and Major League Baseball on notice. Both of those leagues have dedicated networks for their sports, but like NBA Pass, they’re pricey. (NFL Sunday Ticket costs $294 per season and MLB TV runs $25 per month.) By offering a cheaper service, even one that pares down the offerings, the NBA could keep fans engaged, instead of seeing them migrate over to the myriad of streaming services launching this month and in the months to come, including Disney+, Apple TV+ and NBCUniversal’s Peacock.

More must-read stories from Fortune:

Wall Street’s scorn for Elizabeth Warren boils over
Spotify saved the music industry. Now what?
—Bill Gates went back to his high school and talked about the secrets to success
—Women from Twitter, Facebook, and Uber are teaming up to fund Silicon Valley’s future
Voters over 65 remember Nixon—and want to impeach Donald Trump
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2727678 https://fortune.com/2019/11/05/best-cities-for-women-in-tech/ Tue, 05 Nov 2019 16:00:16 +0000

https://fortune.com/?p=2721834&showAdminBar=true

If you’re female and looking for a job as, say, a software developer or systems analyst, here’s a tip: Forget about Silicon Valley and consider Washington, D.C., Baltimore, or Philadelphia instead. Those are three U.S. metro areas where women in tech are thriving—and where the wage gap between male and female techies is slimmest.

In its fifth annual study on this subject, personal finance site SmartAsset analyzed Census data for 58 cities with populations of at least 200,000 and ranked them according to four criteria: women as a percentage of the current tech workforce; the gender pay gap in each place; the affordability of housing (the median earnings of women minus the median cost of renting or buying a home); and growth in overall tech employment.

Northern California “didn’t even rank in the top half” of this list, notes AJ Smith, SmartAsset’s vice president of financial education. Small wonder: In top-ranked Washington, D.C., women make up 39% of the tech workforce and earn 95% of what their male peers make. The numbers for the Bay Area: 22% and 82% respectively.

Even a seemingly small gap in current wages matters over time, partly because settling for less pay now “can have a tremendous effect on people’s ability to save for retirement,” Smith notes, “or, ultimately, on whether they can retire at all.” Gulp.

Here are the 10 best cities for women in tech now, the percentage of the current tech workforce that is female, and the average woman’s pay as a percentage of the average man’s pay in the tech sector in each city.

City % women Pay gap
1. Washington, D.C. 39% 95%
2. Baltimore, Md. 31% 93%
3. Philadelphia, Pa. 30% 97%
4. Houston, Texas 26% 99%
5. Arlington, Va. 33% 87%
6. Albuquerque, N.M. 30% 95%
7. Kansas City, Mo. 29% 89%
8. Durham, N.C. 29% 88%
9. Long Beach, Calif. 22% 115%
10. St. Paul, Minn. 28% 90%

Tied for 11th place: Detroit, with a tech workforce that’s 40% female, where women earn 93% of men’s pay; and Louisville, Ky., where those figures come in at 27% and 92%.

Because SmartAsset’s ranking weighs four different measures of how women are faring in each place, it shows some intriguing results. Long Beach, for instance, has the lowest proportion of female tech employees of any city in the 10 best, and it’s the only place in the country where women earn more than their male counterparts (115%). Seen strictly through the lens of income minus housing costs, however, six cities on the whole list of 58 outrank Long Beach—including Jersey City, N.J., Seattle, and Plano, Texas.

Note to employers, tech and otherwise, in these retention-conscious times: If you want your employees to be happier about working for you—hence more likely to turn down other job offers—hiring and promoting more women seems to help. Compensation consultants Willis Towers Watson recently polled 1.7 million staffers at 32 big U.S. companies and found that the ones that develop and promote women “generate more favorable employee views, especially of senior leadership” across a whole range of topics than those that don’t, the survey shows—especially when women make up at least one-third of a firm’s highest-paid leaders.

“Companies that are making a push toward gender diversity are seeing a meaningful, positive impact on employee attitudes,” notes Laura Sejen, a Willis Towers Watson managing director. It pays to walk the talk.

More must-read stories from Fortune:

—New grad? Career changer? Think about temp work
—What the best workplaces in the world have in common
—How to create benchmarks when you work for yourself
—5 proven ways to decrease stress at work
—Ready to jump at that great job offer? Read this first
Get the RaceAhead newsletter for insights on corporate culture and diversity.

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2721834 https://fortune.com/2019/11/05/peloton-earnings-report-investors-ipo/ Tue, 05 Nov 2019 15:59:31 +0000

https://fortune.com/?p=2727330&showAdminBar=true

Less than two months after the bicycle-slash-happiness-selling company’s IPO, Peloton Interactive released its first earnings as a public company—and more than doubled its revenue from the year-ago quarter.

Investors were unimpressed, sending shares sharply lower in early trade on Tuesday.

Peloton beat consensus earnings estimates, reporting revenues of $228 million, up from $112.1 million in the year-ago period (versus estimates of $199.1 million in revenue, according to FactSet). That was the good news.

The bad news: the fitness company posted a net loss of $1.29 per share, versus estimates of a loss of 36 cents per share—which is still narrower than the $2.18 per share a year ago.

Connected fitness subscribers (defined as members with paid subscriptions) more than doubled to over 560,000 from a year ago. And while the fitness company’s first fiscal quarter earnings largely beat analyst expectations, its losses were heavier than expected.

For one, Raymond James’ Justin Patterson expected the company’s full-year year 2020 results to “be Peloton’s peak EBITDA loss year. This is because FY20E contains unique investments related to studio and HQ expansion, incremental investment in international markets, and increased focus on Tread,” Patterson wrote in a research note, referring to Peloton’s new treadmill line.

And it looks as though he’s right—Peloton estimates a full-year adjusted EBITDA loss guidance of $150 million to $170 million. Yet Patterson notes the loss is actually more favorable than Raymond James’ and the Street’s estimates, noting that Peloton’s “momentumis expected to continueinto theholiday season, asevidencedbyrevenue and EBITD guidance for F2Q20and FY20 that wereaboveour/Street expectations.”

‘Gorgeous economics’

Still, Peloton executives tried to work out some rationale as to their current unprofitable state, and cash burn. “For us, profitability is a managed outcome,” CEO John Foley said on a call with analysts. “We’ve said this before—our bike business is profitable, and because of our gorgeous unit economics … it will continue to be profitable.” And, what’s more, Foley declared, “If we pull back on growth we could be profitable tomorrow.”

After all, Peloton’s Foley even told Fortune in September that the company’s plan was to “prioritize growth over profitability”—something that, in the year of massive and arguably unsuccessful IPOs, unnerves investors. The company is currently in investment mode, expanding its international footprint in Germany, focusing on Tread, and even announcing the acquisition of Tonic Fitness Technology, a Taiwan-based bike manufacturing partner to control their supply chain.

Notwithstanding the pricey capital investments, some analysts can still see Peloton pedaling toward profitability in the future. “Hardware sales and existing subscribers are helping subsidize growth investments,” Raymond James’ Patterson writes.

The exercise-equipment maker has had a rocky start as a public company. Peloton traded down a whopping 11% on its first trading day in September, as investors have increasingly grown skeptical of high valuation, unprofitable companies (think Uber, Lyft, and once upon a time, WeWork). And as yet another cash-burning, tech-ish company to come to market this year, investors have increasingly zeroed in on Peloton’s path to profitability—or lack thereof.

Nick Einhorn, vice president of research at Renaissance Capital, told Fortune in September that “in general, investors have become a little less risk-tolerant in recent months.” Einhorn said there were “some questions about the long-term prospects [of Peloton].” The company’s stock is still trading down around 15% from its first day trading in September as of Monday’s close. And shares were down an additional 6% in early trading on Tuesday.

Yet since Peloton’s debut, the stock has been met with overwhelming bullishness from the Street. In fact, according to Bloomberg data, Peloton holds a 95% consensus “buy” rating, with only a 5% “hold” recommendation at a roughly $30 price target.

More must-read stories from Fortune:

“Secret” recession signs may provide clues to when the next downturn is coming
—The HENRYs—high earners, not rich yet—may finally be having their moment
—A recession may not be likely, but a ‘semi-recession’ is. Here’s what that means.
Bill Gates talked to high schoolers about the secrets to success. Here’s what he said
A.I. vs. the wolves of Wall Street
Don’t miss the daily Term Sheet, Fortune’s newsletter on deals and dealmakers.

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2727330 https://fortune.com/2019/11/05/spain-santander-acquires-stake-fintech-startup/ Tue, 05 Nov 2019 15:56:57 +0000

https://fortune.com/?p=2727606&showAdminBar=true

Banco Santander SA is the latest European banking giant to jump into the fintech market, buying a majority stake in London-based Ebury, it announced this week.

The move comes as Europe’s negative interest rates are squeezing banks on both the top and bottom lines, forcing them to cast about for new revenue streams and higher margin opportunities. Increasingly, Big Finance has been pouring money into small, but fast-growing digital startups. The lure of Ebury: it operates a payments and trading platform with a global customer base of small- and medium-sized enterprises.

Earlier this year, Deutsche Bank and HSBC, both struggling with hefty losses, made investments in fintech startups to branch into new markets or expand further into existing ones. Deutsche Bank bought a stake in Deposit Solutions of Germany, while HSBC co-led an investment in Britain’s Bud.

The Ebury deal is the biggest of the bunch. Santander is paying £350 million (approximately $450 million) for the 50.1 percent stake in Ebury, a specialist in SME trade and foreign exchange. Ebury operates in 19 countries and 140 currencies.

The move is part of the Santander’s digital strategy of “accelerating growth through new ventures,” and will give the bank the technology it needs to expand its customer base and services portfolio, the company said. Ebury’s technology is expected to accelerate and expand Santander’s own trading platform, Global Trade Services, time-to-market offer by 24 months, a spokesman said.

Promise of growth

“SMEs are becoming increasingly global, and Santander is the best positioned bank to play a leading role to help them access global trade finance,” said Ana Botín, Santander’s group executive chairman in a statement. “By partnering with Ebury, Santander will deliver faster and more efficient products and services for SMEs, previously only accessible to larger corporates.”

That’s all well and good, but the sweet spot of the partnership may be hinged on the nearer-term promise of growth, a rarity for Europe’s banks. Ebury has generated consistent average annual revenue growth of 40 percent in the last three years, the companies said in a joint statement.

The deal, expected to close in the first half of 2020, could contribute €100 million in revenue to Santander by next year, said a market source close to the deal. A Santander spokesman confirmed that Ebury anticipates reaching break-even status in 2021. The companies also note that Santander, for the deal, is eyeing return on invested capital (RoIC) higher than 25% by 2024.

Ebury’s value proposition may be a bright spot for Santander. It claims to serve more than four million SME clients worldwide, with more than 200,000 of them doing business internationally. Santander last week reported that while third quarter income rose 6 percent year-over-year to €12.47 billion, its net profit took a big hit from a €1.49 billion charge to its U.K. business, which struggled with Brexit issues and other regulatory charges. The bank posted quarterly net profit of €501 million, a 75 percent decline from the year-ago period.

Radical moves

This latest bank-fintech matchup may open the door for still more tie-up opportunities around Europe and beyond.

“As growth slows, banks across the globe need to urgently consider a suite of radical organic or inorganic moves before we hit a downturn,” read a key takeaway from McKinsey & Company’s global banking annual review, published last month. “For challenged banks, the sense of urgency is particularly acute given their weak earnings and capital position; banks in this group need to radically rethink their business models. If they are to survive, they will need to gain scale quickly within the markets they currently serve.”

The McKinsey report goes on to say that “potentially high-value mergers” could shorten the distance to achieve that goal. Possibilities may include the merger of organizations with overlapping franchises where more than 20 to 30 percent of combined costs can be taken out, and deals where parties combine complementary assets, such as a marrying of customer and brand experience with strong technology platforms.

The latter scenario seems to be what drew Santander in Ebury’s direction.

“Combining a big bank with nimble Fintech means we can offer our clients the best of both worlds: They can benefit from our technology and high-quality service safe in the knowledge that they are counterparty to one of the world’s most important financial institutions,” said Juan Lobato and Salvador García, co-founders of Ebury.

Under the terms of the transaction, £70 million of the £350 million investment (roughly €80 million) will be new primary equity to support Ebury’s plans to enter new markets in Latin America and Asia, the companies said. Besides the accelerated leap into new markets and the growth that is predicted to come with it, Santander’s execution risk is reduced by buying existing technology, a spokesman said.

Ebury, which has 900 employees working in 22 offices globally, raised more than $134 million since inception in 2009. The company processed £16.7 billion in payments for its 43,000 clients in 2018.

More must-read stories from Fortune:

“Secret” recession signs may provide clues to when the next downturn is coming
—The HENRYs—high earners, not rich yet—may finally be having their moment
—Markets are betting that good things come in threes—especially rate cuts
—Why Virgin Galactic sidestepped a traditional IPO, according to its CEO
A.I. vs. the wolves of Wall Street
Don’t miss the daily Term Sheet, Fortune’s newsletter on deals and dealmakers.

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2727606 https://fortune.com/2019/11/05/stock-market-elizabeth-warren-2020-presidency-us-economy/ Tue, 05 Nov 2019 15:39:40 +0000

https://fortune.com/?p=2726977&showAdminBar=true

Some prominent investors are worried about a potential Elizabeth Warren presidency and the impact her policies would have on the stock market. Hedge fund billionaire Paul Tudor Jones recently predicted a 25% market crash if Warren were to be elected.

Fellow hedge fund billionaire Leon Cooperman made a similar forecast, joking to CNBC, “They won’t open the stock market if Elizabeth Warren is the next president.”

Warren’s plan would break-up big tech firms, separate commercial and investment banking, ban fracking, and re-make the healthcare system. According to The Economist, nearly half of all publicly-traded corporations and private equity-owned firms would be broken up. Then there’s the fact that she wants to add a tax on those whose wealth exceeds $1 billion.

So should we heed the warnings of the Warren doomsayer? Not so fast. Market crash predictions surrounding new presidents is nothing new. But even the wealthiest investors can succumb to political bias in their investment forecasts.

When it became apparent Donald Trump would beat Hilary Clinton on election night, the futures market sold off hard. The Dow was down 750 points or around 4% overnight.

The next day Paul Krugman from the New York Times made the following prediction:

Still, I guess people want an answer: If the question is when markets will recover, a first-pass answer is never.

The disaster for America and the world has so many aspects that the economic ramifications are way down my list of things to fear.

Dallas Mavericks owner Mark Cuban made a similar statement before Trump was elected:

“In the event Donald wins, I have no doubt in my mind the market tanks. If the polls look like there’s a decent chance that Donald could win, I’ll put a huge hedge on that’s over 100% of my equity positions… that protects me just in case he wins.”

Stocks didn’t stay down for long, recouping the majority of those overnight losses the very next day. Since Trump was elected president on November 9, 2016, the S&P 500 is up more than 50%.

Barack Obama faced similar scrutiny about how his policies would impact the stock market. Michael Boskin of Stanford’s Hoover Institution wrote an op-ed in the Wall Street Journal on March 6, 2009 with the following headline: “Obama’s Radicalism Is Killing the Dow.”

Boskin further elaborated:

It’s hard not to see the continued sell-off on Wall Street and the growing fear on Main Street as a product, at least in part, of the realization that our new president’s policies are designed to radically re-engineer the market-based U.S. economy, not just mitigate the recession and financial crisis.

That same day, Bloomberg would declare Obama responsible for a bear market in stocks since he took over the presidency:

President Barack Obama now has the distinction of presiding over his own bear market. The Dow Jones Industrial Average has fallen 20 percent since Inauguration Day, the fastest drop under a newly elected president in at least 90 years, according to data compiled by Bloomberg.

The publication date of these pieces was prescient in that it was one trading day before the market hit a generational bottom. Stocks would go onto quadruple from those levels.

Obama didn’t deserve all the blame for stocks being down during the first few months of his presidency nor did he deserve all the credit for the rise in stocks ever since. Trump equally didn’t single-handedly cause the stock market to rise by coming into office. And if stocks had cratered after Trump was elected, that wouldn’t have been all his fault either.

Investors love bringing politics into the mix when discussing the markets because it provides good fodder for creating narratives. Stock market returns are often so random that it makes us feel better to have an explanation for what might happen next. But politics and markets go together about as well as WeWork and a successful IPO at the moment.

Markets already invite a range of emotions into the equation when making forecasts and investment decisions. Bringing politics into the fray only further exacerbates those emotions because we often confuse cause and effect when it comes to politicians and economic outcomes. Elected officials always get too much credit when things go well and too much blame when things go poorly.

It’s also important to remember that it’s a long road from campaign trail promises to enacted policies. This may come as a shock to some of you, but politicians don’t always deliver on the promises they make to get your votes. Predicting a crash in the stock market is never an easy proposition but doing so using politics as your main catalyst is nearly impossible.

Politics and investing make for a terrible combination.

Ben Carlson, CFA is the Director of Institutional Asset Management at Ritholtz Wealth Management.

More must-read stories from Fortune:

“Secret” signs may provide clues to when the next downturn is coming
—The HENRYs—high earners, not rich yet—may be having their moment
—A recession isn’t likely, but a ‘semi-recession’ is. Here’s what that means.
Bill Gates talked to high schoolers about the secrets to success
A.I. vs. the wolves of Wall Street
Don’t miss the daily Term Sheet, Fortune’s newsletter on deals and dealmakers.

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2726977 https://fortune.com/2019/11/05/what-companies-can-learn-from-the-u-s-governments-use-of-artificial-intelligence/ Tue, 05 Nov 2019 15:16:32 +0000

https://fortune.com/?p=2726519&showAdminBar=true

This is the web version of Eye on A.I., Fortune’s weekly newsletter covering artificial intelligence and business. To get it delivered weekly to your in-box, sign up here.

The federal government, like the private sector, is turning to artificial intelligence to improve operations and reduce busywork plaguing its sometimes overworked staff.

And like most businesses, federal agencies face obstacles along the way, including a lack of software tools and data infrastructure required for cutting-edge data crunching.

At an A.I. conference last week at Stanford University, Stanford law professor David Engstrom discussed the challenges facing the federal government’s foray into machine learning. In many ways, the challenges mirror those facing corporations, like having employees how know how to operate sophisticated machine-learning software. 

Engstrom shared some preliminary findings from the Stanford Policy Lab, which has analyzed technology use by the federal government. The team will eventually present the analysis to the Administrative Conference of the United States, a federal agency intended to improve government processes, to create guidelines for agencies using machine learning. 

For the project, Engstrom said members of the policy lab analyzed about 150 Federal departments and agencies to find how they are using machine learning. Ultimately, the researchers identified 171 different uses.

Two of the leading agencies were the Securities and Exchange Commission and the Social Security Administration, he said. 

The SEC, for instance, currently uses machine learning to help identify scammers who may engage in insider trading. The SSA, meanwhile, uses machine learning to catch possible errors in draft decisions that spell out who receives payouts on claims.  

The SEC became savvy in machine learning because it had to keep up with the rapidly changing financial sector. Engstrom described the commission as having a “strong innovation culture” that is “way ahead of most other agencies in terms of the development of these tools.” 

The SSA developed its machine-learning chops due to the “entrepreneurial efforts of a few employees” and a recently retired judge, Gerald Ray, who helped spearhead data-crunching projects, Engstrom said. The judge hired lawyers who had computer-programming skills and then let them work on data-crunching projects.

Businesses can learn from these two agencies and their machine-learning successes. For instance, the SEC’s tech-focused culture requires its technical and administrative staff to routinely “gather and compare notes,” ensuring that everyone agrees on which machine learning projects to pursue, Engstrom said.

Companies starting out with machine learning should identify a strong entrepreneurial tech advocate who can help the company build the necessary team to focus on data projects, like the judge who helped the SSA. Engstrom referred to the judge as a “one-man show” who helped the agency move forward despite some staff who were less enthusiastic about technology. 

In general, the findings contradict conventional wisdom that the government is slower to adopt technology than businesses. In fact, some agencies are doing just fine.

Jonathan Vanian 
@JonathanVanian
jonathan.vanian@fortune.com

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2726519 https://fortune.com/2019/11/05/goldman-sachs-profit-matters/ Tue, 05 Nov 2019 15:05:27 +0000

https://fortune.com/?p=2727621&showAdminBar=true

This article originally ran in Term Sheet, Fortune’s newsletter about deals and dealmakers. Sign up here.

The latest financier to get on the “pivoting to profit” bandwagon? Goldman Sachs’s CEO David Solomon. After years and years of companies pursuing revenue growth at all costs and putting profit on the backburner, Solomon is the latest to have the epiphany that profit matters

Stung by Uber and WeWork, Solomon
told Bloomberg
that “it’s important for people to grow, but there’s
got to be a clear and articulated path to profitability.” He added that he
thinks there’s a little more market discipline coming into play. 

Goldman Sachs lost $267 million on public equity investments
such as Uber, Avantor, and Tradeweb Markets. Its stake in WeWork fell by $80
million after the company’s failed IPO plan. Last quarter was Goldman’s worst
performance in more than three years.

Solomon said: “The monetary policy that has been ramping
around the world has basically forced people out on the risk curve, has forced
people to look for other ways to drive returns, and one of the things they’ve
been chasing is growth and to some degree growth at all costs. The market here
is speaking and telling people here, let’s rein that in a little bit.”

Solomon used WeWork as a signifier that capital markets were
functioning properly. I’ve been writing about this way before the WeWork
implosion. In an April
column
, I pointed out that investors are willing to overlook profitability
so long as there’s a promise for long-term growth. In response, one Term Sheet
reader wrote: 

“There has to be an inflection point when a company
swings to profitability, typically by wielding pricing power in a
winner-take-all market, or at least continues inching closer to it. If you
don’t have that, you don’t have a business. Plain and simple.” 

Oh, and we’ve swung. Trinity Ventures’ Patricia Nakache said
last month that the private markets have swung way out toward growth at all
costs. Now, public markets have weighed in and resoundingly said that this has
gone too far. “It’s a mistake in private markets to go from extreme to
extreme,” she
said
at Fortune’s Most Powerful Women Summit.

This morning, a colleague asked me how Term Sheet was going.
And normally, dealmaking has slowed down by November. But not this year. My
inbox is overflowing with new funding rounds, and you’ll find two mega-rounds
and one newly-minted billion-dollar company in the deal section below. 

People are predicting that cheap capital, skyrocketing valuations, and overall excess will come to an end in 2020. But let’s not forget, that’s what we said about 2019💀

MEANWHILE, SoftBank, which is largely blamed for all
this abundant capital, is
expected to outline
tougher governance standards and restrictions on
dual-class share structures on Wednesday. (Watch Lucinda and I attempt to explain what a
dual-class share structure is
with … pizza.) 

Polina Marinova
Twitter: @polina_marinova
Email: polina.marinova@fortune.com 

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2727621 https://fortune.com/2019/11/05/news-beats-solo-pro-review/ Tue, 05 Nov 2019 15:00:46 +0000

https://fortune.com/?p=2725757&showAdminBar=true

Apple’s Beats by Dre headphone-maker has been churning out quality audio products for years now. And its latest product, new Beats Solo Pro, has a lot going for it.

Beats by Dre introduced its new Solo Pro wireless headphones last week for $300. It’s pricier than other wireless headphones, but it comes with active noise-canceling that entry-level ones do not, long battery life, and a sleek metal and leather design.

In the week I spent using the new Beats, I found myself reaching for my usual AirPods less, and not just because I was trying the Solo Pro for this article.

The over-the-ear headphones have a phenomenal 40 hours of battery life, or a still-impressive 22 hours when the active noise-canceling is on. So I never worried if they were running low on power.

The noise canceling—controlled by a button on the bottom of the left speaker—is what sold the headphones for me. Initially, I tried the noise canceling out of curiosity to see how much of a difference it made—and it made a big difference.

Suddenly, my morning commute on a packed subway car was almost peaceful. I didn’t feel the need to raise the volume to make sure I could understand people speaking on podcasts.

Even using the headphones without any audio on helped provide a quieter experience in my office. I didn’t hear my colleagues speaking next to me or the space heater whirring at the desk nearby.

The headphones are comfortable because of their plush ear cushions. However, for long-term use, the cushioning only provides comfort up to a point. The cushions press up against your ear, which is normal for any over-the-ear headphone with cups that don’t surround the ear. But they still make you want to take a break after a few hours.

This is a bigger problem for people who wear glasses, and I found myself taking the headphones off sooner when I had my glasses on.

Traveling with the Solo Pro also means you’ll need more space to store them. AirPods have spoiled consumers because they can easily put them in their pockets. With Solo Pro, or any other over-the-ear headphones, that’s impossible. Customers, in the end, will have to decide how essential portability is to them.

Additionally, the new headphones come with a flimsy fabric case that offers little in the way of protection. Before putting the Solo Pro in my backpack, I was careful to store them in the case—and even then, I was mindful that they could still be damaged.

My other issues with the headphones came when I went to the gym. To be clear, you can work out while wearing Solo Pros. But why would you?

They’re sweat-resistant and, truthfully, felt fairly secure for most activities. During for the most rigorous workouts like a HIIT class or even yoga that requires a good deal of movement, they may start to slip. Another Beats product, the Powerbeats Pro, is much better for the gym considering their smaller size and wraparound-the-ear design that better secures the headphones. AirPods would also be an improvement.

The newly announced AirPods Pro also just went on sale for $250. The new earbuds offer similar active noise-cancelation in a smaller package, even smaller than the original AirPods.

At $300, the Solo Pro is likely too expensive to be a big seller like some other Bluetooth headphones, including AirPods. If you’re in the market for noise-canceling over-the-ear headphones rather than a pair of everyday use earbuds or something to use at the gym, the Solo Pro is worth the money.

And while the noise-canceling is great, it still might not be enough for some customers to shell out the money for the Solo Pro. Those who do likely won’t be disappointed though.

The audio quality is good but not great, which may rule them out for audiophiles. And the new headphones don’t provide much of an improvement over the now-pervasive AirPods.

However, the Solo Pro is still a well-rounded pair of headphones.

More must-read stories from Fortune:

Uber’s business service ramps up in quest to attract more ‘sticky’ customers
The mobile price wars are on. Here’s how much you can save
—L.A. threatens to ban Uber-owned scooter service
China’s 5G network is ahead of schedule, on a spectrum the U.S. can’t match
—Europe is starting to declare its cloud independence
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.

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2725757 https://fortune.com/2019/11/05/2019-voting-day-what-to-watch-ballot-measures-texas-state-income-tax/ Tue, 05 Nov 2019 14:54:28 +0000

https://fortune.com/?p=2727107&showAdminBar=true

November 5th is Election Day, and while there won’t be any presidential candidates on Tuesday’s ballots, numerous state and local constituencies will have the opportunity to vote on issues ranging from municipal leadership to land use.

Few voters actually bother to cast a ballot in an off-cycle year, when there is neither a presidential nor midterm election. According to a 2016 study by Portland State University, turnout for local elections is less than 15% in 10 of America’s 30 largest cities. This is despite the fact that these elections can have huge impacts not only locally, but on the national level.

Here are four local elections and ballot measures that could make waves this Election Day. If you live in one of these cities—or any others holding elections—don’t forget to check your voter registration and get to the polls.

Texas Might Constitutionally Ban Individual Income Tax

Texas is one of seven states, including Alaska, Florida, Nevada, South Dakota, Washington, and Wyoming, that do not levy an income tax on its residents. Texas never has imposed an income tax, and if Proposition 4 passes, it likely never will.

Proposition 4 aims to edit the Texas State Constitution so that the legislation is banned from taxing the “net incomes of individuals.” The constitution already makes it difficult to enact such a tax: currently any attempt to implement an income tax must be put to vote before the citizens, and if approved, revenue from the tax must go toward education.

Under Proposition 4, this language would be replaced with an outright ban, meaning any future legislation wishing to enact an income tax would have to do so with a constitutional amendment requiring a two-thirds majority in both chambers. Proposition 4 narrowly achieved the two-thirds it needed to reach the ballot earlier this year.

Proponents of the Proposition 4, led in part by Rep. Jeff Leach (R-Texas), argue the amendment would solidify the state’s commitment to welcoming business. Opponents say the measure unnecessarily ties the hands of future legislations. They’re also wary the amendment’s language—which uses the term “individual” instead of “natural persons” without clarification—could be used to exempt corporations from taxes, as well.

Teachers’ associations in Texas oppose the measure because it eliminates the guarantee that if an income tax were to be implemented in the future, the funds would go to education. On the other hand, a University of Texas/Texas Tribune poll found in March that 71% of Texas voters say the state should not consider creation of an income tax if money is needed to raise money for schools—60% said they’d rather legalize marijuana and tax that instead.

San Francisco Could Reverse City Law Banning Vaping Products

If Proposition C on the San Francisco ballot passes, the sale of electronic cigarettes and other nicotine vapor products in the city would be permitted under certain regulations. Juul, the most well-known vaping product company, is based in San Francisco and was the main sponsor of the proposition.

The measure would reverse a city law that suspended the sale or shipment of such products within city limits until they are authorized by the FDA, starting in January 2020. Since an outbreak of vaping-related illness and deaths, several states have enacted similar bans targeting flavored e-cigarettes.

Under the regulations outlined by Proposition C, the advertisement of vaping products to minors would be prohibited in San Francisco. Retailers of vaping products would have to scan photo IDs to ensure the customer is at least 21 years old, limit the number of products sold per transaction, and train their employees twice a year. Larger online retailers would have to obtain a permit from the city, with the fees going toward youth education programs warning of the effects of nicotine and vaping.

Proponents of the measure say the new regulations will keep vaping products out of kids’ hands while allowing responsible adults to use the devices as an alternative to combustible cigarettes. Opponents—including San Francisco’s mayor—argue Proposition C is Juul’s attempt to protect its bottom line.

According to Ballotpedia, Juul loaned $15.5 million to the Coalition for Reasonable Vaping Regulation, the organization behind Proposition C. After a review of company policy, however, CEO K.C. Crosthwait announced in late September that Juul would cease active support for Proposition C. The Coalition for Reasonable Vaping Regulation suspended its Yes on C campaign shortly thereafter, but the measure remains on the November 5 ballot.

Albuquerque Might Use ‘Democracy Dollars’ to Strengthen Publicly Financed Candidates

Albuquerque, New Mexico may become the second city after Seattle to implement “Democracy Dollars.” The system allows voters to donate $25 government vouchers to a qualified candidate of their choosing, lessening the strength of wealthy private donors.

Albuquerque Democracy Dollars, the group leading Proposition 2, says giving each resident a $25 voucher for political donation will help make the political donor pool as diverse as the city. A 2017 study found that while 41% of Albuquerque residents are white and 48% are Hispanic, the donor pool in Albuquerque is 70% white and 23% Hispanic.

Moreover, 70% of Albuquerque voted for the Open and Ethical Election public financing code in 2005, meaning the majority of voters want to get big money out of politics.

According to Albuquerque Democracy Dollars, no new taxes would be needed for the voucher program because much of the Open and Ethical Election funds have gone unused—particularly since the Supreme Court shut down the program’s attempt to match privately funded candidates’ donations in 2011.

The amount of Democracy Dollars a candidate can receive would be capped at the same level as their initial amounts under Proposition 2. Proposition 1 on the ballot aims to raise the limits on how much seed money a candidate can collect, allowing each candidate to receive another $150 per person and another $2,000 from themselves, as long as they follow certain rules.

The Albuquerque Journal editorial board argued the Open and Ethical Elections Fund will be exhausted in one or two election cycles, meaning more taxes will be necessary. They also said the system does little to help small-name candidates qualify for public financing in the first place, negating the goal of having “average folks” run for office.

A Seattle Councilwoman Aiming to Boost Amazon’s Taxes Could Be Reelected

Kshama Sawant has been representing her district in Seattle City Hall for two terms as a member of the Socialist Alternative Party, and Amazon wants her out. The tech giant has donated $1.45 million to the Seattle Metropolitan Chamber of Commerce, a group that’s endorsed Sawant’s opponent: businessman and Pridefest leader Egan Orion.

Two members of the Seattle city council expressed outrage at this and endorsed Sawant after initially distancing themselves in the primary. Amazon’s spending has been criticized by 2020 candidates Bernie Sanders and Elizabeth Warren, as well.

Sawant was one of two council members who retained their support of a per-employee “head tax” targeting big businesses last year after Amazon pushed back. The rest of the council voted to repeal the tax, which was intended to raise millions for programs to address homelessness.

Local leaders of Seattle and its county declared a state of emergency over homelessness in 2015. Sawant has made rent control one of her leading issues, arguing this and “a massive expansion of social housing (publicly-owned affordable housing) funded by taxing Amazon and other big businesses” could abate the crisis.

Amazon, which employs more than 50,000 at its Seattle headquarters, has attempted to replace taxation with action: it’s made space for family homeless shelter Mary’s Place within one of its new buildings, creating a temporary home for up to 275 individuals.

Seattle voters will decide Tuesday whether they want to give Sawant another change to take on big tech.

More must-read stories from Fortune:

Paul Ryan’s new foundation makes poverty experts and Medicare advocates nervous
—Wall Street’s scorn for Elizabeth Warren boils over
Trump’s national parks changes could, ironically, help Jeff Bezos
—Sherrod Brown has some advice for 2020 candidates hoping to win in Ohio
Prisoners are fighting wildfires on the front lines, but getting little in return
Get up to speed on your morning commute with Fortune’s CEO Daily newsletter.

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2727107 https://fortune.com/2019/11/05/sustainability-marketing-consumer-spending/ Tue, 05 Nov 2019 14:30:58 +0000

https://fortune.com/?p=2724751&showAdminBar=true

In survey after survey consumers have said they’re willing to pay more for sustainably-produced products, but when it comes to being sustainable, actions speak louder than words.

Luckily for the planet, research from the New York University Center for Sustainable Business (CSB) shows shoppers aren’t all talk but are actually following through with buying more sustainable goods.

“Across virtually every category of consumer packaged goods (CPG), sustainability is where the growth is, which I think tells you something about where consumers are,” CSB Director Tensie Whelan tells Fortune. While there might still be a gap between intentions and actual purchasing, Whelan says, “the bottom line is if you look at our data there is a massive shift in the last five years.”

CSB analyzed purchasing data on the sales of over 71,000 products in 36 different categories of consumer package goods. Items were considered sustainably-marketed if they were advertised with certain criteria, like being non-GMO, plant-based, or certified by a third party like the Rainforest Alliance or Fair Trade.

After combing through the data, CSB found 50% of sales growth among consumer packaged goods (CPG) between 2013 and 2018 came from these sustainability-marketed products, despite the fact such goods account for just under 17% of the market.

“The area of consumer packaged goods—food, personal care products—is an area where there’s been significant growth in demand for sustainability-marketed products,” Whelan says.

The growth of the sustainable marketplace isn’t an entirely new phenomena. According to market research firm Nielsen, just 22% of the world’s consumers were willing to pay more for an eco-friendly product in 2011, despite the fact 83% thought it was important for companies to have environmental programs.

In 2015, according to Nielsen, the number of willing consumers crossed the 50% threshold and dollar-sales of sustainability-committed brands grew four times more than those that didn’t advertise as sustainable. However, the data isn’t conclusive: research released by analytics firm Accenture last June found consumers still consider quality and price above environmental impact when making a purchase.

In its analysis of U.S. sales, CSB found a slightly higher growth rate in sales of sustainable products across its five years of study than Nielsen did. According to CSB’s data, reported earlier this year, sales of sustainability-marketed products grew 5.6 times faster than conventionally-marketed products, when measured by gross merchandise value. In over 90% of the individual product categories, the sustainability-marketed products outperformed their conventional counterparts.

However, there’s still room for even more sales growth in sustainable categories, particularly among consumer products valued for their efficacy—such as laundry detergent. Consumers may be hesitant to trust the effectiveness of a sustainable version right now, creating lower sustainability purchasing, said Whelan, but growth is spiking as more effective options enter the marketplace.

Indeed, environmental risk management firm CDP found six out of the seven of the largest publicly listed household consumer goods companies are actively innovating to replace petrochemicals in their products with natural, biodegradable ingredients.

Most major consumer good companies, however, are putting off such development by acquiring smaller, more environmentally conscious brands, CDP reported in February. This allows the major corporations to remain competitive without changing their core brands.

“Marketing firms and brand managers operate using an outmoded paradigm,” said Whelan. “Sustainability is the new disrupter from an environmental and social perspective.”

“Business leaders need to understand that consumer tastes are indeed changing,” Whelan continued, “and that if they don’t begin to change to address that shift, their company will lose market share.”

More must-read stories from Fortune:

—Climate change is hitting the insurance industry hard: How Swiss Re is adapting
—Norway is a green leader. It’s also drilling more oil wells than ever
The World Bank and its peers get poor marks for funding renewable energy projects
—The Future 50 sustainability all stars
—How 3 PG&E execs decide when California businesses go dark to stop wildfires
Subscribe to The Loop, a weekly look at the revolutions in energy, tech, and sustainability.

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2724751 https://fortune.com/2019/11/05/trump-trade-war-china-economy-damage/ Tue, 05 Nov 2019 14:26:22 +0000

https://fortune.com/?p=2727545&showAdminBar=true

This is the web version of Data Sheet, Fortune’s daily newsletter on the top tech news. To get it delivered daily to your in-box, sign up here.

If you had asked me several months ago how I felt about the prospects for the Fortune Global Tech Forum, which begins Thursday morning (China time) in the megalopolis of Guangzhou, up the Pearl River Delta from Hong Kong, I would have told you I was quite concerned.

The talk then was of de-coupling: a separation of the U.S. and Chinese economies to match the already decoupled Western and Chinese versions of the Internet. Tensions were real. The chief financial officer of Huawei had been arrested on charges that sounded like an uncomfortable mix of trade, commercial, and national-security issues. Tariffs were escalating. Corporate sales in both directions were hurting. Hong Kong was boiling. Neither the government headed by China’s Xi Jinping nor the U.S.’s Donald Trump showed any sign of backing down.

Investors and businesspeople generally turned their noses up at all this. Tariffs are bad for international commerce. And while American gripes against China on issues like intellectual property theft, state subsidies of industry, and access to the Chinese market are legitimate, what businesspeople really like about the U.S.-China relationship is that it makes money.

And now it all looks far closer to business as usual than I could have expected. Yes, the Huawei situation is unresolved. (Its Australian-born chief technology officer for its carrier group, Paul Scanlan, will speak in Guangzhou.) And the situation in Hong Kong is even worse. (We’ll host a panel on what the Chinese call the Greater Bay Area, of which Hong Kong most certainly is a part.) At the same time, trade tensions seem to be rapidly de-escalating, albeit with little to show for it that likely couldn’t have been achieved with quieter diplomacy.

The question I’ll have on my mind in Guangzhou is if the events of 2019 have bred lasting mistrust between Western and Chinese businesspeople, or if the spirit of cooperation, collaboration, and eagerness to learn from each will prevail. The conference will explore all the meaty topics: the future of 5G technology, how cloud computing is evolving, the next stage of digital retail, and what big data means in an age of surveillance. The conference promises a lighter approach too: We’ll host a panel exploring East-West relations through the prism of the HBO show Silicon Valley.

Watch Fortune.com for complete coverage of the Fortune Global Tech Forum. And, if the time zone suits you, the entire event will be livestreamed.

Adam Lashinsky

Twitter: @adamlashinsky

Email: adam_lashinsky@fortune.com

This edition of Data Sheet was curated by Aaron Pressman.

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2727545 https://fortune.com/2019/11/05/airbnb-host-records-hawaii-taxation/ Tue, 05 Nov 2019 13:35:36 +0000

https://fortune.com/?p=2727549&showAdminBar=true

Airbnb Inc. has agreed to provide Hawaii with records of many of its island hosts as the state tries to track down vacation rental operators who haven’t been paying their taxes.

Airbnb and the state Department of Taxation reached the agreement last week after negotiating the scope of a subpoena sought by the state. First Circuit Court Judge Bert Ayabe approved the agreement.

Ayabe still must rule on whether the state has met the requirements for serving the subpoena. A hearing before the judge has been scheduled for Wednesday.

The state needs the court’s permission to serve the subpoena because its investigation targets a group of taxpayers and not specific individuals.

“We are pleased to have reached a compromise with the Hawaii Department of Taxation that provides adequate data to help them enforce against individuals who they suspect may have skirted tax laws, while including safeguards to further hosts’ privacy,” Airbnb said in a statement.

The company said it remains committed to working with state leaders to collect and remit taxes on behalf of hosts, which it says would generate $64 million a year for Hawaii.

The state’s court filing said it has struggled to collect taxes from vacation rental and bed-and-breakfast operators in part because many hosts don’t generate enough revenue for Airbnb to send the IRS relevant tax forms for them. It also blames the relative anonymity hosts are given on the Airbnb website, where rental operators are often identified by a first name.

In addition, many Hawaii hosts have been illegally running their businesses without permits. Hawaii’s counties issue permits for short-term rentals, and each of them has different regulations.

Honolulu, the most populous county, cracked down on illegal operators with a strict new law enacted earlier this year. Before this law took effect, Honolulu was estimated to have about 800 legal vacation rental and bed-and-breakfast units and about 10 times as many illegal ones.

Details of the agreement filed in state Circuit Court last week said Airbnb will provide the Department of Taxation with the records of the 1,000 hosts who made the most revenue from 2016 through 2018. The company will give these hosts two weeks’ notice before it hands over the information.

Airbnb will provide the state with anonymized data for hosts who had more than $2,000 in annual revenue during those years. The state may then request individualized records for these hosts, though it will be able to obtain information on only 500 hosts every two weeks.

If a host files a legal motion challenging the transfer of records, Airbnb won’t provide the state with the data until the legal case is resolved.

The department cited statistics to justify the need for its subpoena. It said its investigation of 600 Airbnb hosts found many didn’t have a license to charge the general excise tax, a state levy similar to a sales tax, or an account to charge the transient accommodations tax, the state’s hotel tax.

Of about 500 hosts who received income from Airbnb, 76 percent had at least one delinquent general excise tax or transient accommodations tax return, it said.

Nicholas Mirkay, a University of Hawaii law school professor, said the agreement appears to be a breakthrough for the state so long as the judge finds Hawaii has a reasonable basis to serve the subpoena. Getting the taxpayer information will be huge, he said.

“Now they know who to go to. Up until this point, it appears that there’s been a lot of taxpayers that would be subject to the tax but they had no idea who they are,” Mirkay said.

Hawaii first sought to subpoena tax records from Airbnb last year. This initial request aimed to compel Airbnb to hand over a decade of vacation rental receipts.

But First Circuit Court Judge James Ashford denied that move in February, saying the state didn’t sufficiently show that Airbnb users may have failed to comply with tax laws. Ashford said the state also didn’t establish that the information wasn’t available from other sources.

The state filed a new petition in June seeking approval for a revised subpoena. The department and Airbnb began negotiations after the second petition was filed.

The deal also calls on Airbnb to send a written notice to hosts who generated $2,000 or less in annual revenue.

This notice will inform the hosts that they must obtain a license to collect general excise tax and a certificate of registration to collect the transient accommodations tax. The notice will remind hosts that they must file tax returns and pay taxes to the state.

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2727549 https://fortune.com/2019/11/05/female-founders-and-employees-are-facing-a-gender-equity-gap/ https://fortune.com/2019/11/05/female-founders-and-employees-are-facing-a-gender-equity-gap/#respond Tue, 05 Nov 2019 13:31:26 +0000

https://fortune.com/?p=2727192&showAdminBar=true

This is the web version of the Broadsheet, Fortune’s daily newsletter for and about the world’s most powerful women. To get it delivered daily to your in-box, sign up here

Good morning, Broadsheet readers! Goldman Sachs ups the parental leave standard on Wall Street, Jennifer Riley Collins could be the first black woman elected statewide in Mississippi, and we examine the gender equity gap. Have a terrific Tuesday. 

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https://fortune.com/2019/11/05/female-founders-and-employees-are-facing-a-gender-equity-gap/feed/ 0 2727192 https://fortune.com/2019/11/05/goldman-sachs-solomon-profits-wework-uber/ Tue, 05 Nov 2019 12:10:47 +0000

https://fortune.com/?p=2727529&showAdminBar=true

Goldman Sachs Group Inc., stung by losses in Uber Technologies Inc. and WeWork, has a message for investors in growth stocks: profit matters.

After years of pursuing revenue growth at all costs, driven by cheap money, markets are increasingly focusing on whether companies can translate top line expansion into profitability, Chief Executive Officer David Solomon said Tuesday in a wide-ranging interview that also touched on Europe’s negative interest rates and his plans for the bank’s investor day in January.

“It’s important for people to grow, but there’s got to be a clear and articulated path to profitability,” Solomon said in a Bloomberg TV interview with Matt Miller in Berlin. “I think there’s a little more market discipline coming into play.”

Goldman Sachs, which relies on investments with its own money as a key profit driver, last quarter suffered the worst performance in more than three years from equity wagers in public and private companies. The slump in prized holdings added to a perception that the investments are subject to unpredictable swings even as the company works to provide more disclosure.

The bank took a $267 million hit on public equity investments such as ride-hailing company Uber Technologies Inc., Avantor Inc. and Tradeweb Markets Inc. Its stake in WeWork declined by $80 million after plans for an initial public offering collapsed.

Solomon stopped short of comparing the recent troubles in the market for IPOs to the dot-com crisis, though they underscore how, after years of ultra-loose monetary policy, markets are demanding proof that companies can make money.

“The monetary policy that has been ramping around the world has basically forced people out on the risk curve, has forced people to look for other ways to drive returns, and one of the things they’ve been chasing is growth and to some degree growth at all costs,” Solomon said in the interview. “The market here is speaking and telling people here, let’s rein that in a little a bit.”

Solomon sought to put a positive spin on the failed WeWork IPO, saying it showed capital markets function properly. While there was a lot of hype around the company, investors were able to discuss the relevant financial information and “there was a pretty clear view as to whether the company could go public,” he said.

Solomon also touched on the U.S.-China trade dispute, the Trump impeachment efforts and the U.S. economy:

  • On the U.S.-China trade dispute: “It feels like both are incentivized to have some sort of a phase one deal. I think the issues are complicated and there’ll be a lot more to talk about but I’m relatively optimistic.”
  • On impeachment: “That process of impeachment and how that plays out, to the degree that there was an impeachment hearing and the President of the U.S. was removed from office, that would obviously be a very, very significant event. I don’t see that as something that’s likely.”
  • On the U.S. economy: “There’s no question the industrial, the manufacturing part of the economy is slower, but when you look at the whole package, I think the chance of a recession in the near-term is not significant.”
  • On the Fed: “The market at this point I think has the Fed slowing down, but when you look at the economic data, I’d be surprised if rates push lower from here.”

He declined to discuss the IPO of Saudi Aramco, the world’s largest oil producer, because it is an active transaction. Saudi Arabia is aiming for a valuation of between $1.6 trillion and $1.8 trillion, according to people familiar with the matter. But analysts at banks working on the deal offered wildly diverging estimates.

“Different people will have different valuations and parameters,” Solomon said. Still, “when you run an IPO process and you get an IPO process to the point where a valuation range is set and then you are actually selling securities to investors, I don’t think it’s that hard to get to a pretty narrow range for what the market expects and where buyers and sellers can meet.”

The CEO also waded into the debate about negative interest rates, suggesting history will take a dim view of that monetary policy experiment. The European Central Bank has imposed negative rates on banks for half a decade now. Some of Europe’s most senior bankers have blasted the policy, with Deutsche Bank AG CEO Christian Sewing saying it ruins the financial system in the long run.

Europe’s Experiment

While central bankers argue they support the economy, the burden on commercial banks is mounting and the industry is warning about detrimental long-term side effects. Solomon, who took over at the helm of Goldman Sachs a little more than a year ago, also questioned their economic benefit.

“When we look back on negative rates, I think when the book’s written, it’s not going to look like a great experiment,” he said. “Growth in this part of the world has been lagging and negative rates have not allowed an acceleration of that growth in my opinion.”

The losses on the equity investments last quarter add to headwinds for Solomon, 57. Shares of Goldman Sachs, which celebrates its 150th anniversary this year, have trailed peers as investors await the fallout from a global corruption scandal involving Malaysia’s investment fund 1MDB. The CEO has also struggled to revive the trading unit, and pleaded for patience with a fledgling consumer business started by his predecessor.

Solomon is tightening the bank’s partnership ranks and installing new leaders across divisions. He has promised to lay out a vision for the firm’s future at the firm’s inaugural investor day in January that could serve as a catalyst for its stock, though he cautioned on Tuesday that shareholders shouldn’t expect a shift in strategy.

“We’ve got very, very good businesses that we’re very proud of and we’d like to evolve those businesses a little bit,” Solomon said. “I wouldn’t expect any big reveal.”

More must-read stories from Fortune:

“Secret” recession signs may provide clues to when the next downturn is coming
—The HENRYs—high earners, not rich yet—may finally be having their moment
—A recession may not be likely, but a ‘semi-recession’ is. Here’s what that means.
Bill Gates talked to high schoolers about the secrets to success. Here’s what he said
A.I. vs. the wolves of Wall Street
Don’t miss the daily Term Sheet, Fortune’s newsletter on deals and dealmakers.

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2727529 https://fortune.com/2019/11/05/climate-change-in-the-corner-office/ Tue, 05 Nov 2019 12:08:31 +0000

https://fortune.com/?p=2727480&showAdminBar=true

Good morning.

No issue better illustrates how far the business community has moved on the American political spectrum than climate change. At the turn of the millenium, big business was in the vanguard of climate denial. But in the last decade, that has changed. While President Trump yesterday formally notified the UN that the U.S. was withdrawing from the Paris Accord, nearly every big company now has a serious carbon control effort in place.

“Everybody that I’ve talked to, with very few exceptions, accepts the fact that climate change is occurring,” Carlyle co-founder David Rubenstein said in a piece published yesterday, when asked how his business and finance colleagues view the issue. “Some subset of that group, maybe 15%, are not yet convinced that it’s man-made as opposed to naturally occurring. That means, therefore, at least from the people I’ve talked to, 85% of them believe that man-made factors are contributing to climate change and that something needs to be done about human behavior.”

That change has happened partly because business leaders are increasingly witnessing the impact of climate change on their businesses. And it has happened because some see an opportunity in producing products to help move toward a lower carbon economy. But the biggest reason for the change, I believe, has been pressure from employees. A new generation of workers is demanding the businesses they work for step up to the plate.

That employee activism is a good thing…until it’s not. Google employees demonstrated the downside yesterday with their petition demanding their company stop doing business with fossil fuel companies. Really? No realistic analysis I’ve seen shows humanity surviving the next fifty years without large helpings of oil and gas. What purpose is served by denying fuel producers technology that can make them more efficient?

By the way, in the interview cited above, Rubenstein said we are “probably in inning two of a nine inning game” with regard to business efforts to address environmental, social and governance (ESG) issues. That suggests business has a long way to go. But it also suggests it will continue to move in the same direction.

More news below.

Alan Murray
alan.murray@fortune.com
@alansmurray

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2727480 https://fortune.com/2019/11/05/business-innovation-leaders-study/ Tue, 05 Nov 2019 12:00:27 +0000

https://fortune.com/?p=2727291&showAdminBar=true

What
do you want to become when you grow up? Someone asked me this question recently
and it was harder to answer than I expected. It’s easy to think of a response
when you’re seven years old—when the world is your neighborhood and the
sidewalk is your only highway. But as an adult? A different story.

When
I was a kid growing up in Germany, I wanted to become a pilot and explore life
beyond the Alps. But as we grow up and the horizon seems closer, our options
seem less clear. Our answers become, for lack of a better word, blurry.

So
many companies face these same struggles. How do you define what you want to
become in a world that’s changing so rapidly, with competition ever fiercer?
And then: How do you actually become it? The simple answer is innovation. But
what does that even mean, and does it mean the same thing inside the C-suite as
it does to the customers their businesses serve?

My company, Mastercard, wanted answers. So we partnered with the Harvard Business Review to ask leading executives what they thought and compiled them in a report published today called “Become 2020.” In it, you’ll also find our new Business Innovators Index, which explores key differentiators that separate leading innovators from their peers.

What did we find? First, that most organizations understand the importance of innovation for financial success. What’s more, nearly half of consumers consider it a high priority in their purchasing decisions.

Yet
only 17% of organizations qualify as innovation leaders, according to our
research.

We
found that there are five common traits that distinguish innovation leaders
from everyone else: speed to action, data-driven decision making, a commitment
to innovation by leadership, an entrepreneurial culture, and a relentless focus
on the customer.

The
key word here is common—not just because the traits were the most prominent
among innovation leaders, but also because these attributes are common
knowledge. Ask your favorite business executive or wide-eyed intern what’s most
important for a successful business and they’ll likely respond the same way.

Why 17% then? Because that knowledge doesn’t always translate to action. Innovation leaders are rare because execution is difficult. Customers increasingly expect it. As Gabrielle Cournoyer, vice president of cards and payment solutions for National Bank of Canada, told us in the study: “We don’t set the pace anymore. Our consumers set the pace.”

Two-thirds
of the business executives we surveyed see increased customer expectations for
new technologies as the top trend impacting their customer experience
strategies.

Innovation
leaders focus less on releasing products they think consumers want and more on meeting unmet consumer needs.
Most of the executives in our survey—72%—strongly agree that consumer insight
is a vehicle for innovation. That means companies need better methods, tools,
and data to understand consumers in quantitative and qualitative
ways.  

Our
report reveals a problematic disconnect: There are twice as many consumers who
say innovation is a top indicator for products and services they purchase as
there are companies that qualify as innovation leaders.

Sure,
innovation is complicated, costly, risky, and laden with stakeholders. But we
found that leaders blow past these challenges in many ways. They don’t rely on
hunches or piecemeal improvements. They think big and they take risks—more than
40% of innovation leaders prioritize the ambitious, exploratory, groundbreaking
projects known as “moonshots,” we found. But they are thoughtful and methodical
about both.

They
also support a culture that embraces failure in practice by testing a broad
pipeline of ideas: scaling what works, killing what doesn’t, and rewarding
those who take risks.

So what do I want to become when I grow up? As an adult, I realize that question isn’t what intrigues me most. The thrill is in the journey and the choices you make along the way. How fast will you go? In which direction? How will you respond when life throws you a curveball? In business innovation as in life, the destination isn’t nearly as exciting as the trip to get there.

Michael Miebach is the chief product and innovation officer of Mastercard.

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2727291 https://fortune.com/2019/11/05/chinese-companies-ipos-in-america/ Tue, 05 Nov 2019 12:00:24 +0000

https://fortune.com/?p=2726748&showAdminBar=true

The IPO market has been relatively muted since office-sharing firm WeWork withdrew its filing at the start of October. But one source of IPOs has been unexpectedly strong: Chinese companies looking to list on U.S. exchanges.

At least nine Chinese companies filed for an IPO in the U.S. in the month of October including the world’s second-largest maker of bitcoin mining materials, Canaan Creative, according to Renaissance Capital, a firm focused on IPO research. Other companies that have filed include, on the Nasdaq: drone-maker EHang Holdings; real estate rental platform Q&K International; Diagnostics provider AnPac Bio-Medical Science; crypto mining firm Canaan on the Nasdaq; and real estate marketplace FangDD. On the NYSE there is consumer debt collector YX Asset Recovery; online market place for residential rentals Phoenix Tree Holdings; Used car loan platform Meili Auto; and Audio platform LiZhi.

Canaan, the largest deal of that group, said it plans to raise some $400 million through an offering, though that figure is likely to change. Of the nine companies, only one, FangDD, is currently trading.

A calendar clash may explain why so many firms are trying to get deals done now. December is typically a quiet month for Western markets due to the string of holidays that come with it. On the other side of the Pacific though, Chinese New Year takes precedence. That holiday is coming somewhat early this year on Jan. 25. “Chinese New Year is earlier this year, so if [a deal] doesn’t happen now, then it might not happen until March—and that comes with a lot of uncertainty on the markets,” said Ron Cao, founding partner in Sky9 Capital, an investor in online real estate marketplace FangDD.

The rush is a bit of a surprise however, as overall fewer Chinese companies have sought to IPO in the U.S. this year, with about 18 having listed compared to 26 in the same period last year. And while 2018 was a blockbuster year in terms of the $8.9 billion in capital raised thanks to megadeals including Pinduoduo and IQIYI, so far in 2019, such deals have raised $2.9 billion so far, per Renaissance.

Some Chinese companies even seem satisfied with fetching less than top dollar. “In a ‘normal’ market, could this have priced higher? Maybe,” said Cao. The company raised $78 million in an IPO on the New York Stock Exchange on Friday, with the deal pricing below the anticipated range and share count. “But we have got to move forward and perhaps take a lower valuation to let us get to the next stage of development. Most tech IPOs have not done well because it is a price discovery between the private and public markets.”

It’s not been the best year for Chinese companies seeking to list in the U.S. Since the start of the year, the 18 Chinese companies that have gone public in the U.S. have shed about 19% in value on average of their value compared to the 1.4% loss experienced by tech IPOs, according to Renaissance. Many Chinese companies seeking to go public in the U.S. are unprofitable tech firms that may have high growth potential—a combination that hasn’t proved popular with investors of late given the fates of WeWork, Peloton and Uber. Now, investors are growing more wary of the “fail fast” directive that has driven companies to barrel through cash in the hopes of building scale as quickly as possible.

With many market watchers worrying that the U.S. economy may tip into recession in 2020, some companies may be looking to stockpile capital now in the hopes of lasting through a downturn. Indeed, while U.S. consumer spending still appears healthy, Chinese consumers are closing their wallets and helped slow economic growth in that country to a near three-decade low of 6% in the quarter ending in September.

“There is concern about a recession globally while China is in an economic slowdown—a U.S. IPO allows companies to raise U.S. dollars now and in the future,” said Matthew Kennedy, Senior IPO Market Strategist at Renaissance Capital.

For Chinese companies, U.S. bourses are still considered highly liquid and highly attractive to potential listees because it can help boost a company’s reputation and help attract management talent to trade on a U.S. exchange.

“The environment doesn’t change the need for money,” says Drew Bernstein, who helps advise Chinese companies in the IPO process in his position as co-regional managing partner at Marcum Bernstein & Pinchuk.

The flurry of filings comes despite trade tensions as well as the Nasdaq’s attempt to crack down on the smaller IPOs could impact Chinese companies, according to Reuters. The Nasdaq has sought to tighten listing restrictions by raising the trading volume requirements, and said in June that it may delay listings of companies that lack key personnel, such as shareholders or executives, with connection to the U.S. While those changes and statements did not explicitly call out Chinese companies, most foreign companies listing in the U.S. do tend to be from China. In June, the bourse also said it may delay the listing of companies that don’t have key personnel, such as shareholders or board members, with U.S. ties.

At least one more Chinese company that everyone will be keeping an eye on? SoftBank-backed CloudMinds has filed for an IPO in the U.S. to raise $500 million.

More must-read stories from Fortune:

“Secret” recession signs may provide clues to when the next downturn is coming
—The HENRYs—high earners, not rich yet—may finally be having their moment
—A recession may not be likely, but a ‘semi-recession’ is. Here’s what that means.
Bill Gates talked to high schoolers about the secrets to success. Here’s what he said
A.I. vs. the wolves of Wall Street
Don’t miss the daily Term Sheet, Fortune’s newsletter on deals and dealmakers.

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2726748 https://fortune.com/2019/11/05/greta-thunberg-spain-chile-by-plane-cop25/ Tue, 05 Nov 2019 11:20:34 +0000

https://fortune.com/?p=2727502&showAdminBar=true

This is the web version of The Loop, Fortune’s weekly newsletter on the revolutions in sustainability. To get it delivered daily to your inbox, sign up here.

Good morning.

Last week Chilean President Sebastián Piñera announced that Chile’s capital Santiago would no longer host the COP25 summit on climate change in December due to ongoing protests against inequality. Spain—not devoid of protest itself, recently— has stepped up and decided to host the meeting in Madrid on the same dates.

The sudden change in venue no doubt complicated logistics for the 25,000 delegates scheduled to attend but perhaps none were left more adrift than the 16-year-old Swedish activist, Greta Thunberg, who has vowed never to use commercial flights and braved a two-week voyage across the Atlantic to attend the summit in Chile.

The activist’s decision to shun commercial flights has apparently kickstarted a culture of “flight shaming”—or “flygskam” in Swedish—which, according to UBS, could half air travel growth in Europe by 2035. However, rather than advocate a ban on flying, I’d prefer to see the tech community step up and provide solutions. Thankfully, it already is.

In China last week, a team from the Liaoning General Aviation Academy successfully completed a test-flight of a four-seater electric airplane. The tiny RX4E plane has a fight radius of 300km, although there’s no mention of how far the test-flight travelled. The craft’s relatively meagre engine capacity makes the tiny plane perfect for short-haul flights, aerial photography, crop dusting, or pilot training.

Uber anticipates launching electric-powered “flying taxis” by 2023 in Melbourne and Chinese passenger drone maker Ehang, which has already trialed its short-distance heli-taxis in China and Dubai, this week filed for a $100 million IPO on Nasdaq.

Less flashy, interim innovations include running jet engine planes on biofuel blends or offering customers the option to offset carbon emissions—as numerous airlines do.

But the are many other start-ups vying to flood airspace with electric-motor flying machines and, while breakthroughs won’t come in time for Thunberg to attend the conference in Madrid this December, the groundwork is promising.

What does it mean for the future of travel? I’ll be attending the Fortune Global Tech Forum in Guangzhou, China, this week where I’ll be moderating a panel on urban transport on Thursday and Booking.com Chairwoman Gillian Tans will be sharing her thoughts on the future of travel on Friday.

I can’t say whether Tans’ vision of the future includes electric planes or reduced trips due to growing flight shame, but tune in to Fortune for live coverage of the event and find out.

For all those concerned, I’ll be travelling to Guangzhou by train.

More below.

Eamon Barrett
– eamon.barrett@fortune.com

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2727502 https://fortune.com/2019/11/05/corporate-earnings-markets-up-recession/ Tue, 05 Nov 2019 10:48:14 +0000

https://fortune.com/?p=2727419&showAdminBar=true

U.S. corporate earnings are proving to be a lot more resilient than many Wall Street analysts were expecting only a few short weeks ago.

Nearly three-fourths of companies in the S&P 500 have reported their third-quarter results so far. In the run-up to earnings season, headlines in the financial press warned of an earnings recession, a bleak outlook for companies, and the peril of a derailed stock market.

So far, however, the state of financial health of major U.S. companies has looked a little better than expected—though nothing’s simple when it comes to earnings reports. Some notable names still have to report this week. They include Disney, Qualcomm, CVS, Square, and Bidu. But the trend so far suggests a quarterly results season performing above predictions.

The art of lowballing

John Butters, senior earnings analyst at Factset, combed through the 355 companies in the S&P 500 that reported through last week. He found that 76% of them had reported a positive EPS surprise while 61% had reported a positive revenue surprise.

That’s a strong showing of better-than-forecast financials, but maybe not quite as stellar as it seems at first blush. “Over the past 5 years, 72% of S&P 500 companies have beaten EPS estimates while 59% have beaten revenue estimates,” Butters says.

It’s not clear why well more than half of companies prove so adept, quarter after quarter, at posting results above Wall Street’s forecasts. Many companies have been buying back shares at a record pace, which can lift the EPS figure by lowering the number of shares outstanding. But Butters says that Factset’s EPS figures are weighted to factor out the impact of buybacks.

It’s more likely to do with the well-worn customs of Wall Street. Companies have learned that if they lowball their earnings guidance, they might enjoy a brief rise in their share price when they handily jump over the bar of expectations. Research analysts rely on this guidance in setting their own estimates.

Companies also have more flexibility in controlling the bottom line, which makes it easier to deliver an earnings surprise than a revenue surprise. Revenue is typically subject to strict reporting requirements, and, for multinationals at least, can fluctuate on something they have little control of—big swings in the dollar. But companies can improve profits by reducing their operating costs or excluding one-time charges from their GAAP earnings.

Still, it’s welcome news that there have been a higher-than-average percentage of companies delivering earnings surprises this quarter. That speaks to the continued health of many companies during a quarter when trade tensions were rising, overseas economies were struggling, and corporate executives were growing pessimistic about the U.S. economy.

Earnings recession?

Not all the news is good. Companies may be beating Wall Street estimates, but overall earnings in the S&P 500 may have been down in the third quarter. Based on earnings reported so far, and on estimates for those yet to report, Factset says third-quarter earnings could fall 2.7% from a year ago. That would mark the first time earnings have shrunk for three straight quarters since late 2015 and early 2016.

What’s more, expectations for earnings in the current quarter—a big one for many companies since it includes the busy holiday season—are now expected to decline 0.4%. A little more than a month ago, the forecast was for 2.4% earnings growth. In that sense, the predictions of an “earnings recession” may actually prove to be true.

Given that economic data has been showing U.S. manufacturing activity contracting in recent months, investors are finding it encouraging that so many companies are reporting better earnings than expected. Stocks of companies that have impressed investors with their earnings reports are up. Apple has risen 6% since its strong earnings, while JPMorgan and Tesla are up 11% and 25%, respectively. And, on Monday, the Dow, S&P 500 and Nasdaq Composite all hit record highs, though it seemed to be driven more by U.S.-China trade deal talks than company earnings.

The flip side is that companies that disappoint investors, whether through lower-than-expected earnings or other bad news, are getting sold off. On Monday alone, Uber fell as much as 9% in after-hours trading following its earnings report, while Under Armour plunged 19% and Shake Shack tumbled 16%.

“For the companies that have beaten expectations, the market response has been very positive, and yet the ones that have disappointed have really been beaten up,” Seema Shah, chief strategist at Principal Global Advisors said on Bloomberg Radio. “There’s still a lot of caution out there. I don’t think this is the end. I think that in Q4 you could see further weakness in earnings.”

All in all, most U.S. companies are weathering the current earning season pretty well. But three months from now, they’ll have to report earnings all over again, while jumping over whatever estimates Wall Street sets for them in the interim.

More must-read stories from Fortune:

“Secret” recession signs may provide clues to when the next downturn is coming
—The HENRYs—high earners, not rich yet—may finally be having their moment
—Markets are betting that good things come in threes—especially rate cuts
—Why Virgin Galactic sidestepped a traditional IPO, according to its CEO
A.I. vs. the wolves of Wall Street
Don’t miss the daily Term Sheet, Fortune’s newsletter on deals and dealmakers.

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2727419 https://fortune.com/2019/11/05/hong-kong-protests-quarterly-earnings-reports/ Tue, 05 Nov 2019 09:58:29 +0000

https://fortune.com/?p=2727489&showAdminBar=true

Whether they sell luxury watches from Switzerland or farm hens from Mississippi, a surprising concern is occupying a number of corporate executives this earnings season: Hong Kong’s protests.

An A.I. model trained by Bloomberg News to scour thousands of quarterly analyst calls and investor updates revealed that the city’s pro-democracy demonstrations, which show few signs of resolution after five months, are pressuring companies that sell all kinds of consumer goods.

Of some 2,500 transcripts of calls held during the month of October, the A.I. model identified dozens of instances of protest-related discussion among businesses ranging from skincare products to talent recruitment.

The far-reaching impact of the protests speaks to the outsized role that Hong Kong has hitherto played as a thoroughfare for Chinese shoppers. Buyers have flocked to the city for its zero consumption tax and variety of global imports, whether luxury handbags or infant formula.

Now, the protests are accelerating a shift away from Hong Kong by global businesses as Chinese travelers — the city’s biggest tourist segment — stay away.

“Hong Kong has been extremely challenging [and] tourism has fallen off a cliff,” said Andre Hoffman, vice chairman of luxury skincare company L’Occitane, in a call on Oct. 22. “But we see very strong growth from China, Korea and Macau, so I think some of that business is being transferred to other countries in the region.”

Whatever the outcome of the protests, the blow to Hong Kong’s role as a consumption hub for the region is likely to be lasting, some executives said. The city’s economy has already been plunged into a technical recession and full-year growth is very likely to be negative.

Hong Kong’s business outlook continued to drop in October, with the purchasing manager’s index for the whole economy falling to 39.3, according to IHS Markit. The reading was the lowest since the depths of the financial crisis in November 2008.

“Business didn’t just arrive back at the doors as soon as the protest finished,” Paul Edgecliffe-Johnson, chief financial officer at InterContinental Hotels Group plc. said in a call on Oct. 18, referring to the Occupy Central protests of 2014. Those protests are widely seen as the precursor to this year’s movement.

“Hong Kong will probably pay a price for the current situation, not only in terms of volume of business, but also in terms of profitability,” said Jean-Jacques Guiony, chief financial officer of LVMH, the luxury conglomerate which sells everything from leather handbags to fur coats, in a conference call on Oct. 9.

Retailers and hotel operators have been hardest-hit as clashes between protesters and police bring the city to a near-halt every weekend. Retail sales by value fell 18.3% in September, compared with a decline of 22.9% in August. Hotel occupancy rates were 63% in September, 23 percentage points below the same period the year before, according to data from the Hong Kong Tourism Board.

The protests in Hong Kong “impacted traffic and caused some of our stores to close temporarily,” Harmit J Singh, chief financial officer of denim company Levi Strauss & Co, told analysts in a call on Oct. 8. Crocs Inc, a maker of rubber-like shoes, said its stores in the city were “significantly impacted by everything that’s going on there,” Andrew Rees, the company’s president and chief executive officer, told analysts in a call on Oct. 30.

Sales of products like medicine, baby food and other daily necessities have been hit by a drop in Chinese tourists who come to Hong Kong to buy goods for resale in the mainland — one of the many causes which demonstrators have taken up. Mainland arrivals to Hong Kong were down 35% in September compared with the same month a year earlier.

Industries away from the consumer front lines have also felt the heat. Recruitment consultancy PageGroup PLC said on Oct. 8 that social unrest in the city was having an impact on its clients’ confidence.

U.S. exports of broiler chickens have also been affected. “We have seen a little decline [in overall exports] to Hong Kong and I think some of the unrest there has been a big part of that,” Eric Scholer, vice president of Express Markets Analytics, told delegates at an investor day on Oct. 18 hosted by Sanderson Farms Inc, a Laurel, Mississippi-headquartered food producer.

Hong Kong’s property tycoons, whose grip on economic life and political power in the city of 7 million has been cited as a factor aggravating the protests, have been of little help to suffering retailers, the corporate call transcripts revealed.

“We’ve been very, very aggressive as much as we can be as a tenant in Hong Kong to try to get some rent reductions,” said L’Occitane’s Hoffmann. “Landlords have not been very forthcoming with a few exceptions. We will continue to engage with them to try and see what support they can give us, but it’s not been particularly effective at this point.”

Rents for high street locations in Hong Kong fell 10.5% in the third quarter, compared with three months earlier, the biggest contraction in more than two decades, according to real estate advisory CBRE Group Inc. But shopping mall rents were flat during the same period.

For analysts and investors who use the quarterly calls to prise information from executives, certainty on this particular topic was elusive.

“Really, we do not know how this is going to pan out for the rest of the year,” said Cindy Chow, chief executive of Mapletree North Asia Commercial Trust, in a call on Oct 29. The Singapore-based real estate investment trust generates almost 70% of its revenue from Hong Kong and owns a mall in the city which closed for three days during the ongoing unrest.

“It still doesn’t have any end in sight,” she said.

More must-read stories from Fortune:

—Energy companies say the oil glut—and shrinking profits—aren’t over
—Give or take a trillion, banks haggle over IPO valuation of Saudi Aramco
China launching its 5G ahead of schedule on a spectrum the U.S. can’t match
—Why China’s digital currency is a ‘wake-up call’ for the U.S.
—Europe is starting to declare its cloud independence
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.

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2727489 https://fortune.com/2019/11/05/us-china-artificial-intelligence-nscai/ Tue, 05 Nov 2019 09:56:19 +0000

https://fortune.com/?p=2726909&showAdminBar=true

China’s technology strides are clearly on the U.S. tech world’s mind.

A U.S. government commission on artificial intelligence said in a new report released Monday that the government needs to fund more artificial intelligence research and train an A.I.-ready workforce in the interests of national security.

And the report—an interim version before the final account comes out in a year—mentioned China more than 50 times.

The National Security Commission on Artificial Intelligence (NSCAI), which is chaired by former Google chief executive Eric Schmidt and includes the CEOs of Amazon Web Services and Oracle, raised concerns about A.I. development in China, where the government invests more in A.I. than the U.S. and aims to make the country a world leader in the field by 2030.

The NSCAI report arrives in the midst of a larger U.S.-China “tech rivalry” in next-generation technologies like A.I., robotics, 5G networks, digital currencies, and quantum computing.

Last month, the Department of Commerce added China’s leading A.I. firms to its export-barring Entity List over alleged human rights violations, a move some see as an effort to slow tech development in China. The U.S. has also accused China of intellectual property theft, and China has called U.S. proposals to block Chinese tech companies “economic bullying.”

The NSCAI report said the U.S. and China should work together to set standards for responsible A.I. use. It also expressed concerns about Chinese access to American military and technological information, but acknowledged that American academics and industry professionals say visa and export controls targeting China and Chinese academics would harm the U.S. economy.

Open and global

Scientists and entrepreneurs in the A.I. sector have expressed a desire for collaboration over competition.

“As a scientist, I always find that it’s unfortunate when there are technology embargoes or these kind of obstacles to technical exchange,” says Pascale Fung, director of the Centre for A.I. Research at the Hong Kong University of Science and Technology.

“In terms of A.I. research, it’s all open and global. Everybody publishes their paper, a lot of source codes are public, a lot of research is publicly available,” Fung says, adding that U.S. visa restrictions on Chinese students and scientists have a much larger effect on research than trade embargoes.

“Science has no borders, that’s what we really believe in.” Fung says.

Jennifer Zhu Scott, a Hong Kong-based investor in A.I. and blockchain, says China and the U.S. bring different strengths to the table. China has “an enormous amount of data and a huge market”—a big leg up in A.I. since machine learning algorithms depend on data to hone implementation—while the U.S. attracts talent from across the world.

An Oct. 29 report from the Stanford-New America DigiChina Project called the U.S. a “massive net importer” of A.I. talent which the report said gives the U.S. an advantage in basic A.I. research, an area China struggles with because of “brain drain”—nearly three-quarters of Chinese A.I. researchers go overseas after training in China, according to one estimate.

Zhu worries that the current political climate, including increasing U.S. suspicion of Chinese and Chinese American scientists, may lead to “a huge talent loss for the U.S.”

“When it comes to data there should be a very clear boundary in terms of […] national security [for both sides], but beyond that, once we figure out where the boundary is, the two countries have to collaborate,” Zhu says.

Zhu says an escalating “tech balkanization” could also have negative environmental effects—disruptions in the global supply chain, like export controls that ban U.S. chips from being sold to Chinese firms, not only do financial damage but may also lead to less efficiency and more waste.

“For me it’s [about] collaboration rather than competition,” says Ray Yang of Marathon Venture Partners, a China-based venture capital firm that focuses on healthcare-sector applications of A.I., robotics, and big data.

He gives the example of GE Healthcare, which launched its Edison A.I. platform in China in September and partnered with five Chinese digital healthcare companies to do so. “[GE] would never have the capability to get enough data […] without the collaboration with local partners.” Yang says.

But, Yang adds, he has noticed a trend among tech-focused venture capital firms in China—they are starting to look to Europe instead of the U.S. for new investment opportunities, “surely because of the situation right now.”

More must-read stories from Fortune:

—Energy companies say the oil glut—and shrinking profits—aren’t over
—Give or take a trillion, banks haggle over IPO valuation of Saudi Aramco
China launching its 5G ahead of schedule on a spectrum the U.S. can’t match
—Why China’s digital currency is a ‘wake-up call’ for the U.S.
—Europe is starting to declare its cloud independence
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.

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2726909 https://fortune.com/2019/11/04/uber-eats-new-growth-strategy-q3-earnings/ Tue, 05 Nov 2019 02:22:10 +0000

https://fortune.com/?p=2727398&showAdminBar=true

Uber unveiled an aggressive strategy for its food delivery business: Become one of the top two players in cities where it operates or retreat from those areas within the next year and a half.

During the third quarter, Uber Eats missed Wall Street’s expectations for its gross bookings, or the money collected on the service before paying drivers or accounting for discounts.

Uber reported $3.66 billion in quarterly gross bookings for Eats versus the $3.96 billion that analysts had expected. Meanwhile, the loss for the unit, excluding certain expenses, grew 67% to $316 million from the third quarter of last year.

Overall, Uber lost $1.16 billion for the quarter on $3.8 billion in revenue, exceeding Wall Street’s already low expectations for the company. However, the miss on gross bookings for Eats and rides coupled with smaller-than-expected growth in overall monthly active users spooked investors, sending Uber’s stock down more than 5% to $29.49 in after-hours trading.

But on Monday’s earnings call, Uber executives assured investors that they have a plan for Uber Eats. That plan, couched in financial speak, is to selectively retreat if the company can’t be among the top two in food delivery.

“Our commitment is to lean in if we think we can win … and if we think we can’t, be good stewards of capital,” said Nelson Chai, Uber’s chief financial officer.

Uber Eats has been one of the company’s fastest growing business units, bringing in $645 million in third quarter revenue, an 64% increase from the same quarter last year. For comparison, revenue from the company’s core ride-hailing business grew 21% over the same period to $2.9 billion. 

But the Eats business has faced increasing headwinds as competition from rivals like DoorDash and Grubhub intensifies and food delivery services ramp up customer discounts and driver incentives. And now the entire on-demand food delivery industry is being challenged by economic realities.

Last week, after reporting a quarter that fell short of analysts’ expectations, Grubhub’s stock dropped more than 40% in after-hours trading. By Monday, the company’s share price had recovered slightly to $35.01, but was still down considerably.

“There is a clear change going on the market as seen by the Grubhub debacle last week,” said Dan Ives, analyst at Wedbush Securities. “Uber is being more strategic about this business going forward.”

Meanwhile, privately-owned DoorDash has yet to publicly disclose its financial results. The company is one of the best-funded players in the business, having raised more than $1.97 billion since its inception in 2013, according to PitchBook. The funding has allowed it to branch out into renting shared kitchen space for restaurant delivery and to scoop up smaller food delivery services like Caviar.

On Monday’s earnings call, Uber CEO Dara Khosrowshahi advised investors against being distracted by heavily funded startups in food delivery and to focus more on players that can operate more efficiently.

“Many of the startups in the food category have been trying to use cheap capital to buy their way to growth,” he said. “But we’re seeing capital is getting expensive and can run dry.”

Uber executives bragged about Uber’s ability to cross promote its rides and Eats services to users across a big part of the globe—something that competitors can’t do because many of them have no ride-hailing business. It also thinks it can operate more efficiently because its drivers can shift between shuttling passengers and food with the click of a button.

This could translate into faster delivery times, said Tom White, analyst at D.A. Davidson. And Uber’s renewed focus on retreating from offering Eats in cities where it can’t win is a similar strategy to what the company has done before, White added.

“We’ve seen them do this in ridesharing,” White said. “They exited China, Russia … those were acknowledgements that they had doubts about their abilities to succeed there long term. They’re probably coming to those same realization in Eats.”

Uber also gave a loose goal of achieving a profit excluding certain expenses by 2021—following a similar statement from Lyft two weeks ago. But that doesn’t necessarily mean Uber Eats’ business will be profitable on an adjusted basis or even break even by then, executives said. 

More must-read stories from Fortune:

Uber’s business service ramps up in quest to attract more ‘sticky’ customers
The mobile price wars are on. Here’s how much you can save
—L.A. threatens to ban Uber-owned scooter service
China’s 5G network is ahead of schedule, on a spectrum the U.S. can’t match
—Europe is starting to declare its cloud independence
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.

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2727398 https://fortune.com/2019/11/04/bill-gates-alzheimers-association-part-the-cloud/ Tue, 05 Nov 2019 00:05:41 +0000

https://fortune.com/?p=2727151&showAdminBar=true

This is the web version of Brainstorm Health Daily, Fortune’s daily newsletter on the top healthcare news. To get it delivered daily to your in-box, sign up here.

Hello and happy Monday, readers! I hope you enjoyed your weekend.

Bill Gates is continuing to pour money into Alzheimer’s research efforts. The billionaire philanthropist is funding a new $10 million award for an Alzheimer’s Association program called “Part the Cloud”—a global research program that’s meant to spur what the agency calls “high-risk, high-reward” Alzheimer’s and dementia research, including new drugs, diagnostics, and ways of tracking brain activity.

Gates’ award to Part the Cloud (which is led by fellow philanthropist Mikey Hoag) will add on to $20 million that the Alzheimer’s Association is raising as part of the joint effort. That would, in the span of just one year, double the total research investment in the program over seven years to $60 million.

As the groups explained, Part the Cloud’s focus here is less on late-stage Alzheimer’s drugs that have had a rather abysmal track record for decades; rather, the money will be used to fuel early-stage clinical studies that examine new avenues of tackling dementia.

“The Alzheimer’s Association Part the Cloud program is impressive and accelerating early clinical phases of drug development to slow, stop, and ultimately cure the disease,” said Gates in a statement.

Read on for the day’s news.

Sy Mukherjee

sayak.mukherjee@fortune.com

@the_sy_guy

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2727151 https://fortune.com/2019/11/04/diamond-industry-sales-slump-de-beers/ Mon, 04 Nov 2019 22:22:23 +0000

https://fortune.com/?p=2727290&showAdminBar=true

De Beers is taking more drastic steps to stem the crisis in the diamond industry by cutting prices across the board for the first time in years.

The company, the world’s biggest diamond producer, lowered prices by about 5% at its November sale, according to people familiar with the matter, who asked not to be identified as the information is private.

The move is aimed at helping improve profits for the middlemen of the diamond industry, a group of traders and polishers that buy rough gems from De Beers. Many of these customers, which includes family-run traders in Belgium, Israel, and India, as well as the subsidiaries of Tiffany & Co. and Graff Diamonds, are running on wafer-thin profit margins because of low prices and an oversupply of polished gems.

“De Beers is a price setter and has not made any price cuts thus far, despite the open market price for rough diamonds falling by about 9% year-to-date,” said Edward Sterck, an analyst at BMO Capital Markets. “The most important market participant finally taking action after holding out for so long feels like a fairly typical indication that things may be about to improve.”

The price cut is unlikely to trickle down to the retail market and consumers shouldn’t expect to see diamond prices getting cheaper anytime soon.

Part of the problem in the diamond industry is that prices have stagnated as other luxury offerings, like shoes, handbags and resort vacations, crowd the field. It’s also harder for diamond trading companies to find financing because banks are abandoning the sector after being hit by frauds and bad loans.

Still, De Beers has insisted that the current weakness doesn’t mean demand has softened. Last week, the company released data that showed demand for diamond jewelry rose 2.4% last year. In the U.S. market, where almost half of all diamonds are sold, the increase was 4.5%.

De Beers sells its gems through 10 sales each year in Botswana’s capital of Gaborone, and the buyers—known as “sightholders”—have to accept the price and the quantities they’re offered. It’s a system that originated in the 1890s and is designed to benefit both miner and customer, who receives the diamonds at a discounted rate. But the discount has been shrinking. Some sightholders now struggle to make money from a business that was once highly lucrative.

De Beers has offered its buyers more flexibility about their purchases, but it hasn’t been enough. The company made less than $300 million in each of the past three sales, which is the lowest in data going back to 2016.

The November sales data, due next week, could indicate whether the price cuts are helping drive demand.

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J.C. Penney’s new retail lab at the center of CEO Jill Soltau’s turnaround plans
—Hard coffee is the next big drink trend
—Gift guide: Must-have luxury items for everyone in your life
—Gift guide: The best wines to give this year
Follow Fortune on Flipboard to stay up-to-date on the latest news and analysis.

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2727290 https://fortune.com/2019/11/04/digital-dollar-coinbase/ Mon, 04 Nov 2019 22:13:00 +0000

https://fortune.com/?p=2727283&showAdminBar=true

The time has come for a tokenized version of the dollar—and it’s not just those of us in the cryptocurrency world who think so. In recent months, senior U.S. officials have been exploring the idea of minting greenbacks on the distributed ledger software known as blockchain. The idea appears inevitable. The only question is who should create the digital dollar: the government or the private sector?

First, some background context. Last month, a top Fed official said the Central Bank is debating the idea of a digital dollar, while Democratic and Republican members of Congress wrote to Fed Chairman Jay Powell to ask about the implications of such a move. Meanwhile, the former chairman of the Commodity Futures Trading Commission has advocated for the U.S. to create and run a dollar-based digital token and ledger. The timing of these considerations is not coincidental—and reflects new challenges to America’s role as the lynchpin of the global financial system. 

Right now, the U.S. dollar is under increasing pressure as the globe’s dominant reserve currency, threatening a monetary order that has existed since the 1944 Bretton Woods Agreement. Other countries, including China, Russia, and the UK, have published papers exploring the viability of digital fiat currency. Sovereign money will become digital. The only conversation left to have is “when” and “how” it happens, not “if.”  Or maybe not even “when” and “how” — the Premier of Bermuda announced that his country is already accepting a particular cryptocurrency “stablecoin” as legal tender for all government obligations including taxes.

The true question facing our policymakers is whether our
government needs to create the digital dollar, or whether the private sector
can do so effectively. The best path forward is one that harnesses our
country’s remarkable capacity for innovation and also reflects government’s
historical practice of setting broad guide rails for private innovation within
the financial system. That means letting innovators invent, and letting
government regulate. In short: the private sector should build the technology,
and the public sector should set monetary policy.

Right now, there’s rightfully a debate over how innovations such as digital currency, including Facebook’s Project Libra, can impact the US economy. But it’s worth noting that there are paths to compromise and an example is a cryptocurrency that’s fully backed by U.S. dollars. A “stablecoin” like the one Coinbase created in collaboration with another crypto exchange, Circle, offers the stability of the dollar and the flexibility of crypto. The coin, known as USDC, is collateralized by US dollars – not risky assets, not corporate debt, not offshore accounts, but US Treasuries and bank deposits – which are held in reserve. It’s worth noting, in the debate over Facebook’s Libra currency, that some lawmakers urged CEO Mark Zuckerberg to remake the proposed currency so that it’s backed 100% by dollars.

The amount of stablecoins like USDC in circulation is constrained
by the availability of dollars as determined by the Federal Reserve—meaning they
pose no threat to the government’s control of the money supply.  All
transactions exist on an immutable public ledger, and all participating
institutions have firm compliance and customer identity controls in place.
Every token can be redeemed for one dollar — effectively providing a
price-stable cryptocurrency that fits within the existing financial regulatory
structure. 

This doesn’t mean the U.S. government has no role to play in regulating assets like stablecoins. Indeed, it already plays a role in supervising stablecoin issuers to ensure they are holding the underlying dollar assets as advertised. And because the asset is tied to the dollar, the government’s monetary policy continues to dictate the amount of dollars (and thus the number of these digital assets) in circulation. But there is no more need for the government to control the blockchain policy of stablecoin issuers than there is for the government to dictate the technology used by privately-owned commercial and investment banks.

The U.S. is the world’s leader in technology innovation, but that leadership is provided by the private sector, not by the government. We think USDC and other fully backed stablecoins like it are great examples of how the U.S. can take the lead without the exerting unnecessary control over technology decisions that are providing increased access to our financial system. This can all be done while still empowering central banking authorities and building trust between individuals and institutions.

The world is moving in the direction of digital currency, and
technology innovators are here to help.

Brian Brooks is chief legal officer of Coinbase, a cryptocurrency exchange and institutional custodian.

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2727283 https://fortune.com/2019/11/04/buying-opportunities-stock-market-recession-best-time-to-invest/ Mon, 04 Nov 2019 22:00:41 +0000

https://fortune.com/?p=2721379&showAdminBar=true

Morgan Stanley strategist Mike Wilson told CNBC recently that he’s rooting for a recession to get a reset in the stock market. Wilson told The Halftime Report, “I’m rooting for a recession in some ways because that’s what would get the flush in terms of expectations that still has to happen. And then we can have a cyclical recovery.”

Although there have been a number of corrections along the way, the stock market has been in a relentless rise since the bottom of the Great Financial Crisis crash in early-March of 2009. By my count there have been six double-digit corrections in the S&P 500 since 2009, with the largest losses coming in the 4th quarter of 2018 at 19% and change. But the V-shaped recoveries have been swift and we haven’t gotten another crash. That’s left many investors waiting to redeploy capital they’ve been sitting on as the market continues to push ever higher.

Many investors share Wilson’s belief that a recession is the only way to get that buying opportunity so many have been waiting for. Recessions are a natural outcome of our economic system so they’re never going away but you don’t have to root for an economic downturn to find better entry points in the stock market. Investors have always found other ways of overreacting outside of a recession to make stocks cheaper.

If we look at the S&P 500 going back to 1928, there have been 53 double-digit corrections. That’s roughly one every year-and-a-half or so over the past 91 years. Of those 53 double-digit losses, 20 times stocks have fallen by the standard bear market definition of losses in excess of 20%. So bear markets have happened once every four-and-a-half years, on average.

But 33 of those 53 double-digit drawdowns occurred outside of a recession. And 6 out of the 20 bear markets took place outside of an economic downturn. So more than 60% of all double-digit corrections and 30% of all bear markets took place without the onset of a recession.

The 1987 Black Monday crash is the most extreme example. After the stock market fell more than 20% on a single day and more than 30% over the course of a week in October 1987, many economists were worried we were on the brink of a depression. It turned out to be nothing but a blip on the long-term upward trajectory of the stock market throughout the 1980s and 1990s.

There was no recession and the S&P 500 would go on to gain more than 120% over the ensuing 5 years for an annual return of an astounding 17%. Most people fail to remember that although that crash was unprecedented, the S&P 500 still finished the year up around 5%.

It’s also instructive to look at the differences in the drawdowns which take place in the context of a recession and outside of those periods.

It’s obvious things get more out of control in the stock market when a recession is involved. The stock market losses are larger in both magnitude and length. Breaking things down even further by only bear markets shows a similar relationship. The average bear market outside of a recession has been a loss of 30%, lasting 273 days from peak-to-trough. The average bear market that occurred in concert with a recession was a loss of more than 40%, lasting nearly 400 days.

The problem for investors in either scenario is we don’t know in advance which one it’s going to be during the onset of a correction. Those larger recessionary crashes always look like wonderful buying opportunities with the benefit of hindsight but they rarely feel like it at the time when it feels like the entire economic system is crumbling around you.

The other problem with banking on a recession for your buying opportunity is many people lose their jobs or see business slow when the economy takes a dive. You need not only intestinal fortitude but also capital available to invest when things are the worst.

No one knows what will cause the next market downturn or when it will occur. But you can be sure, recession or not, stocks will fall at some point.

Ben Carlson, CFA is the Director of Institutional Asset Management at Ritholtz Wealth Management.

More must-read stories from Fortune:

“Secret” recession signs may provide clues to when the next downturn is coming
—The HENRYs—high earners, not rich yet—may finally be having their moment
—Markets are betting that good things come in threes—especially rate cuts
—Why Virgin Galactic sidestepped a traditional IPO, according to its CEO
A.I. vs. the wolves of Wall Street
Don’t miss the daily Term Sheet, Fortune’s newsletter on deals and dealmakers.

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2721379 https://fortune.com/2019/11/04/house-impeachment-transcript-marie-yovanovitch-michael-mckinley-testimony-released/ Mon, 04 Nov 2019 21:52:23 +0000

https://fortune.com/?p=2727246&showAdminBar=true

Laying out the anatomy of a chilling smear campaign, former U.S. Ambassador to Ukraine Marie Yovanovitch told House investigators in a transcript released Monday that Ukrainian officials had warned her in advance that Rudy Giuliani and other allies of President Donald Trump were planning to “do things, including to me” and were “looking to hurt” her.

The former envoy, who was pushed out of her job in May on Trump’s orders, testified a senior Ukrainian official told her: “I really needed to watch my back.”

While the major thrust of Yovanovitch’s testimony had come out on the day she testified behind closed doors last month in the impeachment inquiry, Monday’s 317-page transcript provided new details about the bewildering sequence of events that led to the career diplomat’s ouster. Her account started with the warnings from Ukrainian officials and then led legislators through various attempts to badmouth her both in Ukraine and the U.S.

The emotion behind her nine hours of testimony was evident. At one point, when Yovanovitch returned from a short break, one of her questioners told her, “We understand this is a difficult and emotional topic.” (Read a copy of Yovanovitch’s House impeachment testimony here.)

New insights surface into duration of Ukraine scandal

Yovanovitch also offered significant new threads of information—including the potential that Trump was directly involved in a phone call with Giuliani, the president’s personal lawyer, and the Ukrainians dating back to January 2018—while pushing back on Republican questions suggesting she harbored opposition to Trump.

She had been recalled from Kyiv before the July 25 phone call between Trump and Ukrainian President Volodymyr Zelensky, at the center of the impeachment inquiry but was “surprised and dismayed” by what she understood from the transcript of the call.

Yovanovitch told investigators she was shocked to learn Trump had called her “bad news” in the phone call, adding she felt threatened and perplexed by his remark she was “going to go through some things.” The diplomat added she worried her job and pension could be at risk, but “so far” she wasn’t concerned about her personal safety, although “a number of my friends are very concerned.”

Yovanovitch was recalled from Kyiv as Giuliani pressed Ukrainian officials to investigate baseless corruption allegations against Democrat Joe Biden and his son Hunter, who was involved with Burisma, a gas company there.

Giuliani’s role in Ukraine was central to Yovanovitch’s testimony. She said she was aware of an interest by Giuliani and his associates in investigating Biden and Burisma “with a view to finding things that could be possibly damaging to a Presidential run,” as well as investigating the 2016 election and theories of Ukraine interference instead of Russian interference.

Asked directly if Giuliani was promoting investigations on Burisma and Biden, Yovanovitch said, “It wasn’t entirely clear to me what was going on.”

More directly, she drew a link between Giuliani and two businessmen—Lev Parnas and Igor Fruman—who have been indicted in the U.S. on charges stemming from campaign donations they made to U.S. politicians with foreign money—as part of the campaign to oust her. She understood they were looking to expand their business interests in Ukraine “and that they needed a better ambassador to sort of facilitate their business’ efforts here.”

Former Ukraine prosecutor “was looking to hurt me in the U.S.”

Yovanovitch said she was told by Ukrainian officials last November or December that Giuliani, the president’s personal lawyer, was in touch with Ukraine’s former top prosecutor, Yuri Lutsenko, “and that they had plans, and that they were going to, you know, do things, including to me.”

She said she was told Lutsenko “was looking to hurt me in the U.S.”

At one point in April, Yovanovitch said she received a call from Carol Perez, a top foreign service official, at around 1 a.m. Ukraine time, abruptly telling her she needed to immediately fly back to Washington. Yovanovitch said when she asked why, Perez told her, “I don’t know, but this is about your security. You need to come home immediately. You need to come home on the next plane.”

Yovanovitch said she didn’t think Perez meant it was to protect her physical security. Instead, Yovanovitch said, Perez told her it was for “my well-being, people were concerned.”

The diplomat said she sought advice from Gordon Sondland, Trump’s ambassador to the European Union, after an article appeared in The Hill newspaper about Giuliani’s complaints against her and Sondland told her, “‘You need to go big or go home,” advising her to “tweet out there that you support the president.”

Yovanovitch said she felt she could not follow that advice.

Yovanovitch defends her professionalism

The former envoy stressed to investigators she was not disloyal to the president.

“I have heard the allegation in the media that I supposedly told our embassy team to ignore the President’s orders since he was going to be impeached,” she said. “That allegation is false.”

She answered “no” when asked point blank if she’d ever “badmouthed” Trump in Ukraine, and said she felt U.S. policy in Ukraine “actually got stronger” because of Trump’s decision to provide lethal assistance to the country, military aid that later was held up by the White House as it pushed for investigations into Trump’s political foes.

Under friendly questioning from Democratic Rep. Sean Patrick Maloney of New York, Yovanovitch said she considered herself good at her job and had been there more than three years and her bosses at the State Department wanted to extend her tour.

“It seems to me they threw you to the wolves. Is that what happened?” Maloney asked.

Yovanovitch replied: “Well, clearly, they didn’t want me in Ukraine anymore.”

Long hours into her testimony, Yovanovitch was asked why she was such “a thorn in their side” that Giuliani and others wanted her fired.

“Honestly,” she said, “it’s a mystery to me.”

Yovanovitch, still employed by the State Department, is doing a fellowship at Georgetown University.

Yovanovitch told the investigators the campaign against her, which included an article retweeted by Donald Trump Jr., undermined her ability to serve as a “credible” ambassador and she wanted Secretary of State Mike Pompeo to issue a statement defending her. But no statement was issued.

McKinley’s concerns about State Department politicization

The impeachment panels also released testimony Monday from Michael McKinley, a former senior adviser to Pompeo.

McKinley, a 37-year veteran career diplomat, testified he decided to resign from his post as a senior adviser to Pompeo after his repeated efforts to get the State Department to issue a statement of support for Yovanovitch after the transcript of the Trump-Zelensky phone call was released. “To see the impugning of somebody I know to be a serious, committed colleague in the manner that it was done raised alarm bells for me,” he said.

McKinley said he was already concerned about politicization at the State Department and the refusal to publicly back Yovanovitch convinced him it was time to leave. (Read a copy of McKinley’s House impeachment inquiry testimony here.)

“To see the emerging information on the engagement of our missions to procure negative political information for domestic purposes, combined with the failure I saw in the building to provide support for our professional cadre in a particularly trying time, I think the combination was a pretty good reason to decide enough, that I had no longer a useful role to play,” he said.

House Intelligence Committee Chairman Adam Schiff says the panels are releasing the transcripts so “the American public will begin to see for themselves.”

Republicans have called for the release of the transcripts as Democrats have held the initial interviews in private, though Republican lawmakers have been present for those closed-door meetings.

More must-read stories from Fortune:

Paul Ryan’s new foundation makes poverty experts and Medicare advocates nervous
—Wall Street’s scorn for Elizabeth Warren boils over
—Trump’s national parks changes could, ironically, help Jeff Bezos
—Sherrod Brown has some advice for 2020 candidates hoping to win in Ohio
Kids brought guns to school at least 392 times last year. What experts say we should do
Get up to speed on your morning commute with Fortune’s CEO Daily newsletter.

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2727246 https://fortune.com/2019/11/04/us-withdraw-paris-climate-agreement/ Mon, 04 Nov 2019 20:56:56 +0000

https://fortune.com/?p=2727249&showAdminBar=true

President Donald Trump formally began the process of withdrawing the U.S. from the Paris climate accord on Monday, a move announced in 2017 that will take another year to complete.

The State Department formally submitted a request to withdraw from the pact signed by roughly 200 countries on Monday, the earliest date Trump can make the official notification.

“President Trump made the decision to withdraw from the Paris agreement because of the unfair economic burden imposed on American workers, businesses, and taxpayers by U.S. pledges made under the agreement,” Secretary of State Michael Pompeo said in an email.

It will take a year for the move to take effect — setting the stage for the U.S. departure on Nov. 4 next year, coincidentally a day after the 2020 presidential election.

But, critics say, he’s already retreated from the fight against global warming by systemically undoing emissions-cutting policies — an issue Democrats aim to use against him on the campaign trail.

“With or without the paperwork the administration is doing to withdraw from Paris, they have effectively withdrawn from any kind of commitment already,” said Joe Goffman, executive director of the Environmental and Energy Law Program at Harvard Law School.

Trump, who has repeatedly questioned the science behind climate change, vowed to leave the Paris climate accord while campaigning for president. He formally declared his intentions during a Rose Garden speech in 2017.

Trump reiterated his plan last week, calling the pact “a total disaster for our country” that would hurt American competitiveness by enabling “a giant transfer of American wealth to foreign nations that are responsible for most of the word’s pollution.”

The president has celebrated other environmental priorities, regularly touting the U.S. as having the cleanest air and water. The 2015 climate accord is really a collection of individual, country-specific pledges to cut greenhouse gas emissions, designed with an ambition to strengthen them over time. Under former President Barack Obama, the U.S. committed to reduce emissions by 26% to 28% below 2005 levels by 2025.

The one-year withdrawal timeline could draw more attention to climate change as a campaign issue.

The 2020 Democratic hopefuls have vied to outdo each other with plans to rapidly slash greenhouse gas emissions, drive renewable power and quash fossil fuel development. Their environmental ambitions took center stage in a seven-hour climate-focused town hall with 10 Democratic presidential candidates in September.

If Trump were to lose re-election, his successor could reverse his course right after the January inauguration. There is a 30-day waiting period for re-entry to take effect.

“It takes four years to leave. It takes 30 days to go back in,” said David Doniger, with the NRDC Action Fund. But, he said, “a three-month timeout where the U.S. is formally out is not going to be any different than the level of disrespect the president has given the previous three years” to climate change.

The U.S. carbon-cutting pledge hinged on an assortment of domestic environmental policies governing everything from automobiles and power plants to oil wells and light bulbs.

Here’s a look at Trump’s efforts to roll back major climate regulations:

Power Plants:

The Environmental Protection Agency in June repealed sweeping Obama-era curbs on greenhouse gas emissions from power plants and replaced them with requirements for modest upgrades at individual sites.

The Trump administration said its replacement rule is projected to reduce carbon dioxide emissions in 2030 by about 11 million short tons over what would happen without Obama’s so-called Clean Power Plan in place. In part, that’s because utilities and electric companies have moved more rapidly than expected to use natural gas and renewables, displacing heavier-emitting coal-fired power.

Public health groups, at least six cities and more than 20 states are battling the rule change in federal court.

The Interior Department also resumed selling leases to extract coal from federal land, canceling an Obama-era moratorium on the sales and an underlying review of possible changes to factor climate change consequences into coal leasing decisions.

Automobiles:

The Transportation Department and Environmental Protection Agency are working to dial back requirements governing automobile fuel economy and greenhouse gas emissions charted under Obama in concert with carmakers and California.

In August 2018, the agencies proposed capping those requirements at a 37-mile-per-gallon fleetwide average after 2020, rather than allowing current regulation increases to roughly 50 miles per gallon by 2025. Now, after lobbying by automakers, agency officials have tentatively decided to soften the proposal by requiring 1.5% annual increases in auto efficiency fleetwide.

The possible changes alarm environmentalists because automobiles are among the biggest sources of greenhouse gas emissions.

The EPA, meanwhile, has challenged California’s authority to set more stringent requirements limiting greenhouse gas emissions from auto tailpipes than what the federal government requires — mandates that are followed by other states.

Light bulbs:

The Energy Department is easing efficiency standards for some household appliances that help lower power consumption — and the greenhouse gas emissions tied to producing that electricity.

In September, the agency finalized a regulation rolling back energy-use requirements for billions of the most commonly used light bulbs. The standards, which had been scheduled to take effect in January 2020, applied to light bulbs commonly used in recessed lighting, track lighting, bathroom vanities and decorative fixtures.

Oil wells:

The Trump administration is moving on multiple fronts to ease requirements for stemming oil and gas well emissions of a powerful greenhouse gas known as methane.

The Interior Department already eliminated key requirements governing oil and gas wells on public land, including requirements for capturing more methane at the sites instead of venting or burning it off. It also stripped away a requirement that energy companies working on public land regularly search for leaks.

And now the EPA is seeking to abandon regulations designed to stop methane leaks from wells on private land too.

Broader changes:

The Trump administration is unraveling a web of policies that forced federal agencies to consider climate change, while stripping states of power to keep their own carbon dioxide emissions in check.

Trump regulators, for example, have directed agencies to stop using an Obama-era estimate of the “social cost of carbon” to assess the potential economic damage from climate change, which had been used to justify a slew of environmental policies.

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2727249 https://fortune.com/2019/11/04/beanie-feldstein-jharrel-jerome-mena-massoud-camila-morrone-first-roles-scad/ Mon, 04 Nov 2019 20:52:42 +0000

https://fortune.com/?p=2726702&showAdminBar=true

They’re not quite household names—yet—but you’ve undoubtedly seen them in some of the most acclaimed film and TV projects of the past few years.

At the 22nd annual SCAD Savannah Film Festival, which ran from Oct. 26 to Nov. 2, Breakout Award recipients Beanie Feldstein (Booksmart), Jharrel Jerome (When They See Us), Mena Massoud  (Aladdin), and Camila Morrone (Mickey and the Bear) opened up about the opportunities and setbacks they’ve experienced in their burgeoning careers.

On the parts they didn’t get

Feldstein recalled the disappointment she felt when she found out she didn’t get a part in the school musical during her senior year of college. She was on the way to audition for a guest role on Netflix’s Orange is the New Black and she funneled her frustration into the audition.

“I remember my line was ‘I just put a roofie in my own drink,’” the actress told the audience of mostly SCAD students. She got the job. There were other roles she wanted, but didn’t land, including on a pilot that Amy Poehler was producing. “She’s one of my heroes,” said Feldstein. “This business is not only about getting jobs. It’s about getting to be around or near your heroes.”

Feldstein’s big breakthrough came when she starred in the Golden Globe-winning and Oscar-nominated Lady Bird, written and directed by Greta Gerwig. She followed that up with Booksmart directed by Olivia Wilde (recipient of the Rising Star Director Award at the SCAD Savannah Film Festival).

“To get to work with two of the most ridiculously bright, clever, brilliant, warm directors—Greta Gerwig and Olivia Wilde—who I think will define a new generation of cinema, has been one of the greatest honors,” said Feldstein.

Before beating out 2,000 actors for the title role of Aladdin in Disney’s 2019 live-action remake of the beloved animated musical, Massoud said he lost out on a TV role he wanted.

“But if I had booked that job, I wouldn’t have been able to do Aladdin, so it’s a blessing in disguise. You never know how things will work out,” said Massoud, who stars in the upcoming Hulu original series Reprisal, set to premiere on Dec. 6.

“I think my booking ratio is 100 auditions for one job,” said Camila Morrone, who was at the festival with the father-daughter drama Mickey and the Bear, which premiered at SXSW and will be released on Nov. 13. Written and directed by Annabelle Attanasio, Mickey and the Bear has an 100% rating on Rotten Tomatoes (at press time).

Morrone said that just as she was about to start rehearsals for the indie film, she got called to audition for “probably the biggest movie of the year—I’m not going to say which one.” She didn’t get that role, which she said, “would have changed my life,” but she has no regrets.

“The best choice in my life was doing this movie,” said Morrone, who previously starred in Augustine Frizell’s comedy Never Goin’ Back, which premiered at Sundance in 2018.

Jerome said he was dejected when he didn’t land a TV part he wanted, but it worked out for the best when he was cast in his feature film debut in Barry Jenkins’ Moonlight. The independent film famously went on to beat out La La Land for the 2017 Academy Award for Best Picture.

“I was super-blessed to book Moonlight,” said Jerome, who recently won a 2019 Emmy Award for Lead Actor in a Limited Series for his portrayal of Korey Wise, one of the “exonerated five” in Ava DuVernay’s Netflix series When They See Us.

Approaching auditions and taking chances on small films

Rare is the actor who actually enjoys auditioning. Regularly offering yourself up for criticism can be hard on the ego, for one thing. Sometimes it takes a matter of shifting perspective to stay sane during the process.

“I always view auditions as the first and last time I’ll
ever do a character, so that’s how I like to see the joy in it,” said Massoud. “Assuming
I don’t ever book this, I get to play this character this one time and give it
my all because I’ll never play it again.”

Morrone has found unexpected opportunities working with first-time female filmmakers and taking chances on smaller, independent films such as Never Goin’ Back and Mickey and the Bear.

“We made Mickey and the Bear with barely any money with a first-time director, a first-time director of photography, and a crew who had just graduated from NYU film school. We were all very much in this together for the first time,” said Morrone. “There’s no famous actor or big explosions. It’s not a Marvel movie. I thought nobody was going to see this film. And yet here I am.”

The challenges of getting into character

Stepping into the shoes of a beloved character like Aladdin was daunting for Massoud, but he turned to co-star Will Smith (Genie) for perspective. “It’s something Will and I talked about a lot because he had big shoes to fill too with the Genie. We just wanted to make it our own,” said Massoud.

For Jerome, depicting a real person such as Korey Wise, who was one of five young black men wrongfully convicted and imprisoned for the rape of a jogger in Central Park, presented a challenge.

“This man’s story is so powerful and so strong and painful that I knew that if I was going to be the one person blessed on this planet to tell this story that I had a job to do,” said Jerome. There were moments during the production of When They See Us, when he couldn’t sleep or eat or speak to anyone. “I would bring the pain that I allowed myself to dive into on set home with me,” he said. Though there were tormented moments, he was inspired by Korey. “I had to do justice to this injustice,” he said.

A Monica Lewinsky miniseries

In August, FX announced that Feldstein would play Monica Lewinsky opposite Sarah Paulson as Linda Tripp in the third installment of American Crime Story, about the impeachment of former President Bill Clinton.

Though she hasn’t yet met Lewinsky, Feldstein said they’re in touch over messaging. “Monica is really a symbol of resilience and strength. The activism work that she does for the anti-bullying movement is kind of remarkable and awe-inspiring. I feel deeply privileged to bring her story to life,” said Feldstein.

The young actors seemed to agree that sometimes getting the part is a matter of timing—and luck. “You’ve got to have confidence that the universe is working out for you,” said Massoud.

More must-read stories from Fortune:

—#PayUpHollywood: Former Walking Dead showrunner calls for doing better by assistants
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—Director Kasi Lemmons on bringing Harriet Tubman’s life to the screen
—Will social media buzz help decide the Oscars?
Theme parks turn to tech to attract future guests
Follow Fortune on Flipboard to stay up-to-date on the latest news and analysis.

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2726702 https://fortune.com/2019/11/04/emmett-till-memorial-targeted/ Mon, 04 Nov 2019 20:49:26 +0000

https://fortune.com/?p=2727156&showAdminBar=true

This is the web version of raceAhead, Fortune’s daily newsletter on race, culture, and inclusive leadership. To get it delivered daily to your inbox, sign up here.

On Saturday, a small group of white supremacists gathered at the newly reinstalled and bulletproofed Emmett Till memorial in Tallahatchie County, Miss. They carried with them two flags, one for the state of Mississippi, and another representing the League of the South—an Alabama-based group that the Southern Poverty Law Center says is seeking to “establish a Christian theocratic state and politically dominate black people and other minorities.”

Under the clear sky, a man begins to speak while two women film him. 

“We are here at the Emmett Till monument that represents the Civil Rights movement for blacks. What we want to know is, where are all of the white—,” they are cut off when an alarm that has been installed to keep the memorial safe from vandalism begins to sound. They’ve been seen by a surveillance camera, their actions now captured on video.

“We got to go now, come on,” says a man holding the Mississippi flag. “We got to get the f-ck on,” another man says.

Bulletproof. Hidden video. Alarms. 

This is what it takes to protect the memory of 14-year-old Emmett Till, a Chicago boy who was brutally tortured and murdered in Mississippi in August 1955, for the crime of perhaps whistling at a white woman. His death was one of the most chilling incidents of racial terrorism in the Jim Crow South. His grieving mother, Mamie Till Mobley, is credited for having galvanized a movement by insisting her son’s brutalized body rest in an open casket for the world to see.

But back in Mississippi, it’s still complicated.

Civil rights tour guide Jessie Jaynes-Diming, part of the Emmett Till Memorial Commission, tells NPR that Till’s story may be a watershed moment for everyone else, in the Mississippi Delta, it’s personal. The first memorial, which was posted at the spot on the Tallahatchie River where Till’s body was recovered, was installed in 2008. It had been shot at so often that its current replacement, installed nearly two weeks ago, had to be bulletproof.

“There was a lot of pushback [about the memorial] not only from the white community but from the black community also,” she says. “Whites and blacks came to our meetings and [said] ‘Why are you all bringing this up? Why don’t y’all let that die?’”

The League’s attempt to use the current memorial as a scene in a propaganda video was just another reminder of how complicated this history is. (All respect to Ashton Pittman of the Jackson Free Press for his in-depth reporting of the incident.)

League of the South was founded in 1994 by the man in the video, Michael Hill. The group later managed to post a hasty version of their film on YouTube and finish that gripping opening salvo. “What we want to know is, where are all the white people over the last 50 years that have been murdered, assaulted, and raped by blacks going to be memorialized like this? We are League of the South,” Hill says. 

Pittman correctly points out that Hill’s diatribe is just another in a long series of false, racist claims that African Americans are more violent than white people. It’s a persistent idea that continues to bedevil the Jackson, Miss., community in many ways, including fueling the shocking re-segregation of their schools

Oh, and by the way, Mississippi has the highest percentage of black voters in the country and hasn’t had a black Senator since Blanche Bruce left office in 1881. 

In a gut-wrenching and Netflixian twist, Pittman reveals that before Hill founded the League of the South, he was a professor of British history at Stillman College—a historically black college in Tuscaloosa, Ala.

See? Complicated.

So, it should come as no surprise that more than 60 years after his murder, Emmett Till’s personal story has not ended.

His accuser, Carolyn Bryant Dunham, has largely recanted her story. Last year, the Department of Justice quietly re-opened an investigation into his death.

That Till’s memory triggers such vitriol and pain is a difficult part of life for people in Tallahatchie County. I imagine relationships between families are quietly fraught. I imagine the peace, at times, must feel fragile. I imagine that, as a community, it would be nice to be known for something other than this.

But until we can come to a broader reckoning on race in both our public systems and our private lives, Emmett Till will continue to be a complicated part of our own collective story.

That story is still to be continued.

Ellen McGirt

@ellmcgirt

Ellen.McGirt@fortune.com

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