fortune--2020-12-03--How Chinese phonemaker Xiaomi conquered India—and outperformed Apple

Ever since Chinese smartphone maker Xiaomi entered the Indian market six years ago, it has run an ad campaign targeting India’s biggest religious festival, Diwali, that features a clever tagline: “Diwali with Mi”—Mi being shorthand for Xiaomi. The ads are so closely associated with the holiday that Indians look forward to them the way Americans anticipate Coca-Cola’s polar bear ads at Christmas.
This year’s campaign was a mashup of pop culture and the C-suite, featuring Baba Sehgal, India’s first breakout Hindi rapper, and Xiaomi’s 39-year-old global vice president and managing director of India, Manu Kumar Jain—or Manu-J, for the purposes of the videos. In between a catchy refrain of “Diwali with Mi,” the two trade zingers about who’s the better rapper.
Jain tells Fortune, with a laugh, that the videos were “embarrassing,” but they seemed to strike a chord with Indian consumers. The most popular video in the series was viewed on YouTube more than 6 million times, and Xiaomi sold 9 million smartphones during the monthlong sales period. The brand usually sells 12 million phones in a single quarter in India, so Jain deemed this Diwali, which ended Nov. 14, Xiaomi’s best yet.
The Diwali ads are one way the 10-year-old Beijing-based technology company has embedded itself in India. It has also moved manufacturing to the subcontinent, earned the right to open thousands of retail stores, and developed phones and other gadgets with the Indian consumer in mind—smart water purifier, anyone? It’s gone all in where other foreign phone brands have danced around the edges.
A Xiaomi billboard on display in Sopore, India. Nasir Kachroo—NurPhoto/Getty Images
The investment in the world’s fastest-growing mobile market, where over 300,000 people power up their first smartphone every day, has made Xiaomi India’s bestselling smartphone brand for three years running. In 2020 so far, it has sold 29 million phones, 2 million more than in China, to control a full quarter of India’s smartphone market.
After it launched a decade ago, tech journalists called Xiaomi the “Apple of China,” because of its sleek, affordable phones that catered to China’s young, growing middle class. The association fueled Xiaomi hype—the now public company was the world’s most valuable private startup in 2016—but it annoyed designers in Cupertino who derided Xiaomi’s handsets as cheap iPhone wannabes. Xiaomi is now a bona fide phone giant, with $30 billion in revenue last year and a market capitalization of $78.4 billion. And Xiaomi’s India sales—responsible for 20% of all revenue, according to Morgan Stanley—have helped pull the brand fully out of Apple’s shadow, at least by one measure: In the third quarter of 2020, Xiaomi’s worldwide phone shipments landed it in third place, ahead of Apple (No. 4) for the first time.
Navkendar Singh, a tech analyst at consultancy International Data Corporation (IDC), describes Xiaomi’s recent track record in India as “growing, growing, growing,” but it does face one strong headwind: Indian consumers’ anti-China sentiment. A border skirmish between Indian and Chinese military forces in June ignited boycotts of Chinese goods. Prime Minister Narendra Modi’s nationalist government keeps stoking the backlash, which means Xiaomi’s trajectory on the subcontinent may depend on whether the roots it planted in India qualify the brand as Indian enough.
Xiaomi landed in India in 2014 with its flagship Mi 3 phone, which featured a faster processor, better camera, and more memory than other phones at its price point of roughly $200. What’s more, Singh says, Xiaomi offered 4G services, while competitors like Samsung, Microsoft, and Indian brand Micromax were stuck on 3G.
India represented Xiaomi’s first major international expansion, and it brought to the subcontinent the same “flash sale” strategy that had catapulted it briefly to No. 1 in its home market just four years after its launch. (It later lost that title to cheaper rivals as well as Beijing’s champion telecom brand, Huawei.) Selling products only online, in limited batches, created a frenzy among buyers and avoided overproduction costs; eschewing physical stores meant saving on overhead.
Xiaomi partnered with Flipkart, an Indian e-commerce startup that is now one of the nation’s flagship tech giants, as the sole distributor of its phones. The first batch of roughly 10,000 Mi 3 smartphones sold out within half an hour of launch in July 2014. A second flash sale later that same month sold out in five seconds, and a third round in August sold out in two ticks, Flipkart said.
The mania could have come to a sudden stop in 2015, when Modi’s administration doubled tariffs on smartphone imports to 12.5% as part of its “Make in India” initiative to onshore manufacturing. Had Xiaomi kept its supply chain in place—it was almost entirely based in China at the time—the tariffs would have forced it to raise prices, forfeiting a big competitive edge. Instead, it partnered with phone assembler Foxconn to set up a manufacturing site in India in 2015, a first for both companies.
The new Indian factory earned Xiaomi the all-important Made in India label and shielded it from Modi’s tariffs. With its low price point secured, Xiaomi India’s market share leaped from 3.3% in 2015 to 13.3% the next year.
The Chinese market’s gone backward … but India’s still been growing. [Xiaomi] focused on the right market at the right time. Dan Baker, senior equity analyst at Morningstar
Xiaomi shifted its focus beyond the mainland before many of its Chinese rivals, says Dan Baker, a senior equity analyst at Morningstar. “The Chinese market’s gone backward for a while, in terms of volumes, but India’s still been growing, so they focused on the right market at the right time.”
In moving its supply chain to India, Xiaomi was a half-decade ahead of Apple, which only started manufacturing iPhones in India—also through Foxconn—last year.
Xiaomi also beat Apple to opening up physical stores on the subcontinent. Jain says Xiaomi abandoned its online-only sales strategy in India in 2017 after realizing that stealing market share demanded a physical presence. Even now, over 50% of all smartphone sales in India are made offline.
Until last year, the Modi government kept foreign retailers from setting up their own stores, unless they sourced 30% of their manufacturing from India. Unlike Apple, which lobbied Modi’s government to change the rule, Xiaomi opted to meet it. After a year of back and forth with regulators, Xiaomi in 2017 got the green light to open its own retail outlets. Xiaomi now has more than 3,000 Mi-branded stores across India. In 2019, Modi’s government relaxed the 30% rule, and Apple is due to open its first Apple Store in India next year.
The Mi stores sell phones, yes, but they also serve as showrooms for another bright spot in Xiaomi’s India business: Internet-connected gadgets. “Probably the part of Xiaomi’s business that has done better than expected … is the Internet of Things (IoT) lifestyle products,” says Baker.
Walk into a Mi store and you’ll encounter rice cookers, electric scooters, weighing scales, and robot vacuums—an entire ecosystem of interconnected smart devices that orbit the Xiaomi mobile phone. The Mi scale, for example, connects to a Mi fitness app that can track body mass index and suggests relevant exercise regimes.
In 2019, Xiaomi’s IoT device sales globally generated roughly $9.5 billion for the company, an increase of 41.7% from the year before and about 30% of the company’s total revenue. In India, Xiaomi has parlayed its pole position in smartphones to be the market leader in smart TVs and wearable tech.
Rival brands like Indian firm Realme and China’s Oppo—both top-five smartphone makers in India—are starting to target the same IoT segments, says Nomura analyst Donnie Teng, but Xiaomi has a first-mover advantage. “The life cycle for IoT products is much longer than the one for smartphones, so time is the best barrier Xiaomi can deploy to prevent competitors from entering the market,” Teng says. But since IoT devices last for so long, Xiaomi is under pressure to keep developing new products. Just this year, Xiaomi has launched new smartwatches, smart lights, and smart speakers in the Indian market.
“We believe the Internet of Things can be a big opportunity for us because there’s so much more we can do,” Jain says. Xiaomi also launched a smart beard trimmer this year. It doubles as a hair trimmer, Jain says, running a hand over his shaved head, and it’s seen “off the chart” demand, thanks to pandemic lockdowns keeping everyone away from barbershops.
Despite years of ingratiating its brand with Indian consumers, Xiaomi’s identity as a Chinese company has left it susceptible to the whims of India and China’s long-standing geopolitical rivalry.
The feud erupted on the China-India border in June when troops from both countries clashed, leaving 20 Indian soldiers dead. (The Chinese death toll is not publicly known.)
Modi’s government retaliated by banning 177 Chinese apps, a move the Ministry of Electronics and Information Technology said was “to ensure safety, security, and sovereignty of Indian cyberspace.” Meanwhile, the Confederation of All India Traders—a union that says it represents 70 million merchants across India—called for a boycott of Chinese goods with a campaign dubbed “Indian Goods—Our Pride.” According to local media, the group identified 3,000 categories of goods that “must immediately be replaced by Indian products.”
Four Xiaomi apps, including its web browser and video-calling platform, were caught in the purge and, according to Jain, a “mob mentality” on social media threatened its sales.
Jain, himself an Indian national, responded by touting Xiaomi’s adopted Indian identity, telling local media that Xiaomi was “as Indian as any other company here.” In other interviews, he said Xiaomi customers are “very intelligent” and would be able to identify the company’s Indian “spirit.” Lest they forget, a few Mi stores plastered “Made in India” signs in their windows that pointed to Xiaomi’s local supply chain.
Initially, Xiaomi weathered the anti-China movement and remained India’s top smartphone seller not because it had fooled consumers into thinking it was anything but Chinese, but because in India “there [were] no real alternatives” to Chinese phones that are still in Xiaomi’s price territory, says Neil Shah, an analyst at Counterpoint Research. (Apple, a U.S. brand, is considered higher-end; the cheapest iPhone on the Apple Store in India is $526.)
That was true, at least, until South Korea’s Samsung began flooding India with phones that could compete with Xiaomi’s features and affordability. Samsung’s phones hit the market just as anti-China attitudes were ramping up. Between the first and second quarters, Samsung’s smartphone market share in India grew 10 percentage points. By the third quarter, it had overtaken Xiaomi as No. 1, according to data from Counterpoint Research, ending Xiaomi’s streak of 12 consecutive quarters on top. (Other market analysts like Canalys and IDC show Xiaomi retaining its lead.)
“If there were no anti-China sentiments in India, and Samsung didn’t expand its portfolio, Xiaomi would have gone to 30% or more of India’s smartphone market,” says Shah.
Whether Xiaomi ever reaches that threshold will depend on it shaking the anti-China stigma for good and fending off new challengers. It’s not just Samsung; the most formidable newcomer could be the low-price smartphone that’s forthcoming from Google and its new partner, Jio Platforms.
Jio is the digital arm of Reliance Industries, a conglomerate based in Mumbai and founded by Mukesh Ambani, India’s richest man, and its homegrown credentials may foster more goodwill among Indian consumers than any amount of battle rap can muster.
A version of this article appears in the December 2020/January 2021 issue of Fortune with the headline, “The ‘Apple of China’ goes big in India.”


fortune--2020-12-04--FiscalNote raises $160 million to help companies track government legislation

Los Angeles ’ s new COVID lockdown bans most walking , driving and use of public transport

A wave of populism has led many governments around the world to rule in an increasingly erratic fashion. This phenomenon has been challenging for citizens and businesses, but it has proved a boon for a company called FiscalNote, which makes software that tracks laws, regulations, and other government decrees.
FiscalNote has been growing fast. On Friday the firm, based in Washington, D.C., announced a $160 million funding round led by Arrowroot Capital and Runway Growth Capital that will help fuel acquisitions and international expansion.
“Looking back at the last four years, the Trump administration has been good for business,” FiscalNote CEO Tim Hwang told Fortune. “When there is political uncertainty and when organizations don’t know what’s going to happen, they flock to information sources more than ever.”
Hwang launched FiscalNote as a 21-year-old whiz kid in 2013 with the backing of prominent entrepreneurs like Mark Cuban and Yahoo founder Jerry Yang. As a teenager, Hwang had used his tech chops to help President Obama win the Iowa caucuses and get elected to a county government position in Maryland.
While FiscalNote began as a niche product for companies to track legislation, it has become a mainstay of both government and business. Today, its more than 4,000 clients include 3M, Astra Zeneca, the CDC, and the U.S. House and Senate. During the pandemic, Hwang says, the company’s software has become especially popular with businesses looking to keep up with a variety of stimulus measures.
Another source of growth for FiscalNote has been the European Union, where Brussels bureaucrats have sought to make the EU a global nexus of regulation with an ever-growing list of rules and directives. Companies looking to navigate this legal maze rely on FiscalNote to send them updates.
Meanwhile, as a growing number of local governments improve their digital capacity, FiscalNote—which relies on software and A.I. to track and analyze changes to laws—has been able to expand its U.S. offerings.
In trying to do so, FiscalNote announced a plan in 2016 to provide a service that could predict the likely success or failure of given legislative proposals. That didn’t pan out, but the company has instead found success in selling software packages aimed at advocacy—letting organizations contact activists in order to direct them to write or phone their local lawmakers. Hwang says FiscalNote had a hand in many of the myriad emails and texts Americans received during the recent election season.
Hwang declined to provide details about FiscalNote’s annual revenue, other than to confirm the figure is between $10 million and $100 million. Likewise, he declined to say if the company is profitable, only saying it is not burning a lot of cash.
FiscalNote’s growth has been impressive not only because of its founder’s age—Hwang is just 28—but also because it has been able to carve out a niche in a data and intelligence business dominated by the likes of Bloomberg and Thomson Reuters. This status could make FiscalNote an attractive acquisition target, but Hwang says he is focusing for now on building out the company’s global operations. The company is expanding quickly in Asia and has opened offices in India and South Korea.
Hwang claims FiscalNote is experiencing the same tailwinds other enterprise software companies, including Zoom and Salesforce, have enjoyed in 2020.
“Shutdowns, stimulus, lockdowns—you’ve never had a time when people are so glued to their screens trying to understand what governments are doing,” he says.


fortune--2020-12-04--The EU’s biggest oil producer will end extraction by 2050—and exploration is cancelled as of now

Denmark has become the largest oil producer so far to set a finite deadline for ending oil and gas extraction, in an effort to meet some of the world’s most ambitious climate targets.
While Denmark is known for its low-carbon offshore wind networks and its bicycle lanes, it is the largest oil and gas producer in the EU, based on its domestic industry centered around the North Sea. (Keep in mind: Neighboring oil giant Norway is not part of the EU.)
The government will also cancel the current and all future licensing rounds for oil and gas extraction, the Danish Ministry of Climate, Energy, and Utilities said, following a vote for the deadline in the Danish Parliament.
“Denmark’s decision to cancel its eighth licensing round comes against the background of other canceled oil exploration tenders elsewhere and a growing number of oil and gas companies who are curtailing frontier exploration activities. But it also flags an important precedent to be made,” said Amy Myers Jaffe, managing director of the Climate Policy Lab at Tufts University, in a comment.
“With its decision to end exploration tenders permanently, Denmark stands out as the first developed nation to acknowledge not only the priority of the energy transition but also the need to step aside and let other less economically fortunate nations be the ones to benefit from any lingering budget for oil and gas development as we move off of oil over time.”
The country began extracting oil and gas in 1972, and oil and gas revenues played a key economic role in building up the country’s ample welfare state, the ministry said Friday. In 2019, the country made DKK5.9 billion (nearly $1 billion) in revenue from oil and gas and, as of 2016, the last year figures were collected, 4,000 people were employed in the sector. Denmark has a population of about 5.8 million people.
Danish climate minister Dan Jørgensen said that as a relatively small oil and gas producer, the country hoped to lead by example, in showing that such a cutoff was possible.
“We intend to show what an ambitious yet balanced phaseout of fossil fuel production might look like, taking into account both the urgency of climate change and the very real concerns of workers employed in the fossil sector,” said Jørgensen in a statement. The ministry said the cutoff would include a “just transition” for those workers and the regions affected.
Denmark has one of the world’s most ambitious government-level climate change targets: It has committed to lowering greenhouse gas emissions by 70% by 2030, compared with 1990 levels.
But it also has a leading edge in the energy transition in other ways. Ørsted, the Danish state energy company—originally formed to exploit oil and gas in the North Sea—has transitioned over the past decade into the world’s largest offshore wind producer, and aims to be carbon neutral by 2025.


fortune--2020-12-04--Designing better businesses for a post-COVID world

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning.
The collision of COVID and a business technology revolution has given new urgency to the role of design in business. Companies are reinventing themselves, out of necessity and opportunity. And the process of reinvention requires a kind of creativity that isn’t often taught in business school.
That’s why Fortune created Brainstorm Design. We are working over the next year in partnership with Salesforce and IBM to focus on how to use design principles to design better businesses in a post-COVID world. We’ll be holding the first in a series of intimate conversations next Tuesday, with PepsiCo’s chief design officer, Mauro Porcini, and chief commercial officer, Ram Krishnan. The two will lead a discussion on how design thinking can best be used to create business value. Also on hand: Deanna Van Buren, co-founder and executive director of Designing Justice + Designing Spaces, about design’s role in building healthy communities.
Brainstorm Design is by invitation only, intended for those working on major design challenges within business. We still have a few spaces open. If interested, let me know, or go here for more.
And since it is Friday, some feedback. Our annual Businessperson of the Year list attracted a lot of interest. A sampling:
“Congratulations on a HUGE week! Elon (Musk) and Lisa (Su) #1 & #2 are bold choices, provocative even. Makes Fortune what it is always, #leader.”
—BW
“I don’t understand the left and journos constant obsession with what characterizes leadership. Patton was a prick, MacArthur was an alcoholic, JFK and Bill Clinton were womanizers, Jobs was caustic, Obama was and still is…condescending …I could go on for hours.“
—KZ
“You captured the zeitgeist of Elon perfectly. I feel the same way. he is at turns inspirational and offensive, admirable and frustrating. I’ll hold out hope that someday in the third act of his career that he finds more equanimity and perspective in terms of how he treats other people and himself.“
—SF
More news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
Fauci vs U.K.
The U.S. infectious diseases czar Anthony Fauci laid into the U.K.'s medicines regulator over the speed of its Pfizer-BioNTech coronavirus vaccine approval. "They just took the data from the Pfizer company and instead of scrutinizing it really, really carefully they said, ‘OK, let’s approve it. That’s it,'" he said, before later clarifying that he "did not mean to imply any sloppiness." Meanwhile, British Education Secretary Gavin Williamson said (really) that the U.K.'s approval process was so quick because "we're a much better country than" France, Belgium and the U.S. Fortune
Huawei CFO
Huawei chief financial officer Meng Wanzhou is reportedly in talks with the U.S. Justice Department that would allow her to go home to China from Canada, where she is awaiting extradition to the U.S. The deal would apparently involve her conceding to sanctions-related wire and bank fraud charges, and getting a deferred prosecution agreement in return. Wall Street Journal
Warner releases
We all know the coronavirus pandemic has changed how studios release their films, but this is still a huge move: Warner Bros will release every one of its 2021 movies simultaneously in theaters and on HBO Max (for one month, in the U.S.) We're talking everything from Dune and Matrix 4 to Godzilla vs. Kong and, uh, Space Jam: A New Legacy. Fortune
Moon rocks
A Chinese spacecraft is bringing lunar samples back to Earth for the first time in decades. Chang'e-5 blasted off from the moon yesterday and is expected to land in China's Inner Mongolia region around the middle of the month, after meeting up with a return spacecraft. CNBC
AROUND THE WATER COOLER
Google ethics
Timnit Gebru, a prominent A.I. ethics researcher, claims she was fired from Google for criticizing the company's lack of commitment to diversity, and for drawing attention to bias in artificial intelligence in a paper she alleges Google tried to censor. "We are a team called Ethical A.I., of course we are going to be writing about problems in A.I.," she said. The argument comes shortly after Google was found to have probably violated labor law by firing two employees who helped organize companywide protests. Fortune
Airbnb vs parties
Airbnb has implemented a two-night minimum for guests who don't have positive reviews and who want to rent an entire home for New Year's Eve. The point of the rule-change is to stop people using Airbnb to organize superspreader parties on what is usually a night of intense celebrations. Fortune
Lockdown lite
How successful has Germany's "lockdown lite"—a second-wave lockdown far less draconian than those instituted in many neighboring countries—been in practice? Not very, according to authorities and experts. Yes, it's led to a plateau in new infections, but a high plateau that has led Chancellor Angela Merkel to extend the measures to January 10. As in Sweden, it seems leaving it up to people to police their own social mixing has not been enough to stop the disease's spread. The Local
Brexit talks
Good news: the EU and U.K.'s post-Brexit-trade talks will have to be finished soon, one way or another. Bad news: the likelihood of their collapse has increased, after British officials accused French President Emmanuel Macron of making new demands at the last minute, regarding the sticking point of fishing rights in British waters. Financial Times
This edition of CEO Daily was edited by David Meyer.


fortune--2020-12-04--Will you need a COVID-19 vaccine to fly? One airline says yes

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Now that a COVID-19 vaccine is finally in sight, governments, employers, schools, and service providers are debating whether or not to mandate compulsory jabs. One airline carrier is taking a stand on the matter.
On Thursday, Alan Joyce, the CEO of Australia’s Qantas Airways, said that Qantas will require passengers to prove that they’ve been vaccinated for COVID-19 in order to board international flights.
“Australia’s success at virtually eliminating COVID means we’ll need a vaccine for international travel to restart properly,” Joyce said on a call with investors on Thursday. “We have a duty of care to our people and to our passengers, and once a safe and effective vaccine becomes readily available, it will be a requirement.”
Joyce first suggested that his airline was looking into the policy in late November. Qantas appears to be alone among global airlines in mandating that passengers be vaccinated.
A Singapore Airlines spokesperson told Fortune it would “work closely with all relevant government authorities and be guided by the advice of health professionals.” The spokesperson also said that the recent vaccine announcements “provide hope” that rolling out the vaccines will spur a recovery in air travel.
AirAsia, the Malaysian low-cost airliner, told CNN in November that it would only review making vaccines mandatory once immunizations become widely available. Air New Zealand also told CNN at the time that “ultimately, it’s up to governments to determine when and how it is safe to reopen borders, and we continue to work closely with authorities on this.”
Asian airlines Cathay Pacific and Taiwan’s Eva Airways as well as U.S. carriers Delta, United Airlines, and American Airlines did not immediately return Fortune‘s request for comment on whether they will mandate passenger vaccinations.
Airlines are grappling with the question as the world awaits the start of mass vaccination campaigns. Currently, three vaccine makers have posted promising clinical data from Phase III trials. The U.K. became the first country in the world this week to authorize a science-backed vaccine for high-risk groups when it gave Pfizer’s vaccine the green light. The U.K. will start distributing the doses next week.
Qantas’s vaccine requirement largely reflects the Australian government’s stance on the matter.
In November, Australia’s Health Minister Greg Hunt said that the Australian government may require travelers to provide “proof of vaccination” in order to enter its borders. In August, Australian Prime Minister Scott Morrison suggested on a radio show that he would make a vaccine compulsory for all Australians, though he later walked back the comments.
Australia’s impulse to mandate vaccines illustrates how risk-averse it is about COVID-19, the disease it’s worked so hard to contain.
Australia has recorded just a handful of new COVID-19 infections per day after months of strict lockdowns and rigid border requirements. Amid the pandemic, Australia has largely banned its own citizens from leaving the country and imposed weekly caps on how many Australians can return home.
Industry experts argue that proving travelers are vaccinated—perhaps with an immunization passport of sorts—is unrealistic on a global scale given the looming production and distribution complexities of vaccinating the world’s population.
The International Air Transport Association (IATA), the leading trade association for global airliners, said in November that it doesn’t expect vaccines to be widely available until the middle of 2021. In the meantime, governments should work with airlines to open up borders and replace mandatory quarantine periods for international travelers with more testing, medical adviser David Powell said at an IATA meeting in November.
The travel industry’s early optimism about so-called travel bubbles has faded with the latest failure: the delay of a much-hyped Hong Kong–Singapore route because of a new COVID-19 outbreak in Hong Kong.
On Thursday, Qantas’s Joyce said the stalled bubble proved vaccines are the best hope for returning global travel back to normal.
“The potential for vaccines to be rolled out maybe faster than the bubbles happening is probably real at this stage,” he said.


fortune--2020-12-04--Chinese scientists say they’ve achieved a quantum computing breakthrough

Chinese scientists claim to have built a quantum computer that is able to perform certain computations nearly 100 trillion times faster than the world’s most advanced supercomputer, representing the first milestone in the country’s efforts to develop the technology.
The researchers have built a quantum computer prototype that is able to detect up to 76 photons through Gaussian boson sampling, a standard simulation algorithm, the state-run Xinhua news agency said, citing research published in Science magazine. That’s exponentially faster than existing supercomputers.
The breakthrough represents a quantum computational advantage, also known as quantum supremacy, in which no traditional computer can perform the same task in a reasonable amount of time and is unlikely to be overturned by algorithmic or hardware improvements, according to the research.
While still in its infancy, quantum computing is seen as the key to radically improving the processing speed and power of computers, enabling them to simulate large systems and drive advances in physics, chemistry and other fields. Chinese researchers are competing against major U.S. corporations from Alphabet Inc.’s Google to Amazon.com Inc. and Microsoft Corp. for a lead in the technology, which has become yet another front in the U.S.-China tech race.
Google said last year it has built a computer that could perform a computation in 200 seconds that would take the fastest supercomputers about 10,000 years, reaching quantum supremacy. The Chinese researchers claim their new prototype is able to process 10 billion times faster than Google’s prototype, according to the Xinhua report.
Xi Jinping’s government is building a $10 billion National Laboratory for Quantum Information Sciences as part of a big push in the field. In the U.S., the Trump administration provided $1 billion in funding to research into artificial intelligence and quantum information earlier this year and has sought to take credit for Google’s 2019 breakthrough.


fortune--2020-12-04--Anthony Fauci tones down earlier criticism of U.K.’s Pfizer vaccine approval

Anthony Fauci, the U.S. government’s top infectious-disease specialist, slammed the U.K.’s drug regulator, saying that it rushed to clear the COVID-19 vaccine from Pfizer Inc. and BioNTech SE.
The U.K. watchdog, called the Medicines and Healthcare products Regulatory Agency, said Wednesday that it had approved the Pfizer vaccine. That means the shot will likely be used in Britain before the U.S. and the European Union.
“They’re great, they’re good scientists,” Fauci said in an interview with CBS News, according to a transcript. “But they just took the data from the Pfizer company and instead of scrutinizing it really, really carefully [t]hey said, ‘OK, let’s approve it. That’s it.’”
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The U.S. Food and Drug Administration has been under fire from President Donald Trump because no COVID vaccines were approved before the election in which he was defeated by President-elect Joe Biden. FDA Commissioner Stephen Hahn and other health officials have said that a careful, transparent approval process is key to ensuring public trust in the vaccine that will be required for a successful immunization campaign.
The U.K. “kind of ran around the corner of the marathon and joined it in the last mile,” Fauci told CBS. “They really rushed through that approval.”
Fauci later attempted to clarify his comments.
“Our process is one that takes more time than it takes in the U.K.,” Fauci told the BBC, according to a report in the Washington Post. “That’s just the reality. I did not mean to imply any sloppiness even though it came out that way.”
The U.K. Department for Health and Social Care tweeted a clip late on Thursday of MHRA Chief Executive Officer June Raine defending the regulator’s methods by saying a “rolling review” process had enabled it to act quickly to approve the vaccine.
“A rolling review can be used to complete the assessment of a promising medicine or a vaccine in a situation where time is of the essence, in the shortest time possible,” she said. “But, and this is a very important point indeed, that doesn’t mean that any corners have been cut. None, at all.”


fortune--2020-12-05--Top economists say this is what’s on their stimulus wishlist—and the bipartisan bill looks pretty cl

Top economists say this is what’s on their stimulus wishlist—and the bipartisan bill looks pretty close

For the latest information on the ongoing stimulus negotiations, please check out our coverage here
It’s been clear in the data for a while: The economic recovery is slowing. At the same time, the window for more stimulus to help boost that recovery is narrower than ever.
That decelerating pace was even more evident in the unemployment data released Friday, showing only 245,000 jobs were added in the month of November—dropping the unemployment rate from 6.9% to 6.7%.
The report comes as Congress is making progress on a new $908 billion stimulus bill, this time with bipartisan support. Even House Speaker Nancy Pelosi, who has long pushed for several trillion dollars in aid, has said the the smaller bill is a good jumping off point for further negotiations.
But with the slowing pace of the economic recovery and a winter without a widely-distributed vaccine, some economists are feeling exasperated with Capitol Hill: “C’mon, already!” exclaims Moody’s Analytics chief economist Mark Zandi.
“If we don’t get that help, [Friday’s unemployment] report suggests that the economy is going to start backtracking, we’re going to start losing jobs, and unemployment will start rising again,” Zandi tells Fortune. Without more stimulus, “There’s a pretty good chance this will go down in history as a double-dip recession,” he believes.
Michelle Meyer, head of U.S. economics at Bank of America, is slightly more optimistic: “There’s a clear economic case for the stimulus, but I think it’s important to remember that the economy has continued to recover, has continued to heal,” she tells Fortune. “Another round of stimulus will simply speed up that healing process in a way that could be very powerful for the trajectory of growth once we have the vaccine.”
But what’s on economists’ wishlists for a stimulus bill to bridge the gap between an ailing economy and a vaccine-liberated one?
Top stimulus priorities
For Bank of America’s Meyer, a few things top the list: More funds for testing and a vaccine (“clearly number one,” she says), pandemic unemployment insurance (which includes expanded groups like freelancers and gig workers who are due to lose access next year), and aid for small businesses make up her top three.
In a broader sense, “the first priority is, bottom line, those households who don’t have a job, don’t have any savings,” says Moody’s Zandi.
He agrees that more money for the unemployed, testing, and small businesses is crucial, and that rental assistance, support for transportation like airlines, and state and local funding are also key: “Those are all, I think, things that are necessary to bridge the economy to the other side of the pandemic,” he states.
Liability insurance, a key Republican ask, and state and local funding, a Democrat sticking point, are both good ideas, Zandi says. And Meyer thinks “ultimately to get a bill through, they’re going to have to have a little bit of both.”
To be sure, that all adds up pretty quickly. But the latest bipartisan proposal ticks a lot of those boxes for Zandi and Meyer.
The bipartisan proposal currently includes $180 billion for enhanced unemployment benefits, $288 billion in small business funding, $16 billion for testing and the vaccine, and $25 billion in rental assistance (Plus, some $180 billion for state and local funding).
As a bridge to the other side of the pandemic, “I think they got it right,” says Zandi.
In addition to unemployment and small business support, Zandi argues rental assistance is also a critical component to another deal, especially with eviction moratoriums expiring at the end of the year. “That has a very heightened-level need because either you’re going to have people getting evicted in the middle of winter, in the middle of a raging pandemic, or you’re really sticking it to a lot of mom-and-pop landlords,” he notes. “That’s not that expensive, so, check.”
Certainly the price tag is much lower than the Democrats’ previous $2.2 trillion mark and above Republicans’ $500 billion deal, but economists like Meyer argue roughly $1 trillion of stimulus is “probably appropriate to get us through the next few months.”
‘Blanketed’ stimulus checks aren’t essential
One thing that’s not on Zandi or Meyer’s wishlist? More stimulus checks. The new bipartisan bill notably doesn’t include more $1,200 direct payments, which has already caused a stir among some in Washington, including President-elect Joe Biden and Sen. Bernie Sanders. But economists like Meyers and Zandi argue now more “targeted” support is needed.
“There are very clear differences in how people are faring,” from those who have been able to keep their jobs versus those struggling with unemployment or in hard-hit industries, “so I don’t think we need to have a blanket stimulus check at this point,” Zandi believes.
Whatever the particular line items, a smaller bill looks more likely now (versus the $2.2 trillion or $3 trillion asks from Democrats earlier this fall) because of the time crunch: Congress has until Dec. 11 to pass a spending bill and additional stimulus, and Republicans likely won’t sign a massive deal.
Adds Zandi: “At this point, sooner rather than bigger, is better.”


fortune--2020-12-05--Sagging job gains can’t keep U.S. markets from record highs

This is the web version of Bull Sheet, a no-nonsense daily newsletter on what’s happening in the markets. Sign up to get it delivered free to your inbox.
Good evening, Bull Sheeters. This is Fortune finance reporter Rey Mashayekhi, filling in one final time this week for Bernhard with a special PM edition of the newsletter.
Markets around the world ended the week on an exceptionally strong note. The U.S. indexes shook off a disappointing November jobs report to close at record levels, while Europe shrugged off dragging Brexit negotiations to post gains across the board. Meanwhile, China shot back at U.S. measures targeting Chinese companies, and Japan is preparing an economic stimulus plan.
Markets update
U.S.
The Dow is back above 30,000 points after gaining 0.8% on the day, while the S&P 500 climbed 0.9% to close just shy of 3,700 and the Nasdaq was up 0.7% to finish north of 12,400 . Those numbers represent record-high closes for all three indexes .
is back after gaining 0.8% on the day, while the climbed 0.9% to close and the was up 0.7% to finish . Those numbers represent . The market’s exceptional performance Friday came in the wake of an underwhelming November unemployment report , which depicted a U.S. economy struggling with a COVID-19 surge that has forced parts of the country to reinstitute lockdown measures. President-elect Joe Biden said the “grim” report “shows an economy that is stalling,” and urged lawmakers to act on stimulus legislation .
, which depicted a U.S. economy struggling with a COVID-19 surge that has forced parts of the country to reinstitute lockdown measures. President-elect said the “grim” report “shows an economy that is stalling,” and . It appears those on Capitol Hill are getting the memo as far as stimulus talks are concerned, with House Speaker Nancy Pelosi noting “momentum” in negotiations between leaders on both sides of the aisle.
are concerned, with House Speaker noting “momentum” in negotiations between leaders on both sides of the aisle. In regulatory news, the SEC has settled with The Cheesecake Factory on charges that the restaurant chain misled investors about the pandemic’s impact on its business.
has settled with on charges that the restaurant chain on its business. Pharma and biotech trade groups have filed a lawsuit against the Trump administration over its measures to lower drug prices.
Europe
The major European bourses all had a bullish Friday. London’s FTSE climbed 0.9%, Frankfurt’s DAX ticked up 0.4%, and both the CAC 40 in Paris and the pan-European STOXX 600 gained 0.6%.
all had a bullish Friday. London’s climbed 0.9%, Frankfurt’s ticked up 0.4%, and both the in Paris and the pan-European gained 0.6%. Brexit negotiations continue to dominate the agenda. Friday’s deliberations ended on a sour note, with the sides pausing talks and putting the onus on their leaders—namely, British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen —to find some common ground over the weekend.
continue to dominate the agenda. Friday’s deliberations ended on a sour note, with the sides and putting the onus on their leaders—namely, British Prime Minister and European Commission President —to find some common ground over the weekend. Meanwhile, London’s finance industry continues to sweat over Brexit, as a trade deal with the EU won’t cover a British financial sector that is already seeing a flight of assets and operations to the continent .
continues to sweat over Brexit, as a trade deal with the EU won’t cover a British financial sector that is already seeing . Companies hoping for a new EU-U.S. data transfer pact shouldn’t hold their breath, according to the EU’s privacy watchdog.
shouldn’t hold their breath, according to the EU’s privacy watchdog. The battle over the EU’s 1.8 trillion euro budget rages on, with Poland and Hungary digging in on their objections.
Asia
The Asian markets were mostly up to end the week. Tokyo’s Nikkei was the exception (-0.2%), but both Hong Kong’s Hang Seng (+0.4%) and South Korea’s KOSPI (+1.3%) registered gains. On mainland China, the major indexes in Shanghai (+0.1%) and Shenzhen (+0.4%) also notched up.
were mostly up to end the week. Tokyo’s was the exception (-0.2%), but both Hong Kong’s (+0.4%) and South Korea’s (+1.3%) registered gains. On mainland China, the major indexes in (+0.1%) and (+0.4%) also notched up. Huawei ’s battle with the U.S. government shows signs of abating, with the Justice Department reportedly discussing a deal with Meng Wanzhou , the Chinese firm’s CFO, that would allow her to return home, according to the Wall Street Journal.
’s battle with the U.S. government shows signs of abating, with the Justice Department reportedly discussing a deal with , the Chinese firm’s CFO, that would allow her to return home, according to the Wall Street Journal. Japanese Prime Minister Yoshihide Suga said his government will finalize a new economic stimulus package next week, with one of his aides floating a safety net for Japanese firms hit hard by the pandemic.
said his government will finalize a new next week, with one of his aides floating a safety net for Japanese firms hit hard by the pandemic. China has shot back at the U.S. over a pair of measures this week targeting Chinese companies. It slammed a new law forcing U.S.-listed Chinese firms to follow U.S. auditing standards as “clearly discriminatory,” and also criticized the Pentagon’s move to blacklist four Chinese companies for their ties to China’s military.
has over a pair of measures this week targeting Chinese companies. It slammed a new law as “clearly discriminatory,” and also criticized the Pentagon’s move to for their ties to China’s military. Taiwan’s president has called for a bilateral trade deal with the U.S. , which she said would “reinforce America’s support for Taiwan in the face of unrelenting intimidation” from China.
has called for a , which she said would “reinforce America’s support for Taiwan in the face of unrelenting intimidation” from China. Burger King India’s IPO has proven a whopper-sized hit after drawing $9.5 billion in bids—more than 150 times the amount of shares available—from investors on Mumbai’s National Stock Exchange.
Elsewhere
Gold slipped slightly but remains above $1,800/ounce .
slipped slightly but remains above . The dollar fell again.
fell again. Bitcoin sank below $19,000 .
sank below . Crude oil climbed, with Brent trading at around $49/barrel.
***
By the numbers
It’s Friday, so let’s have a look at some numbers before ringing in the weekend.
26,751.24
That was the Nikkei’s closing price at the end of trading Friday, down 58 points from the previous day. So what’s notable about that number, and the Tokyo Stock Exchange index’s 16% rally since the start of November?
It’s well known that the Nikkei has never fully recovered the losses sustained when Japan’s asset price bubble burst 30 years ago. Indeed, anyone of the opinion that stock markets only go up in the long-term needs only to examine the index’s performance in the three decades since to find otherwise.
But finally, it appears that the TSE is digging itself out of that 30-year hole. Last month, the Nikkei closed above 26,000 points for the first time since May 1991, and it has continued its climb since. On Tuesday, it finished above 26,700 points for the first time since April 18, 1991, and closed above 26,800 points twice this week before retreating slightly on Friday. Omedetō to the Nikkei—it’s been a long time coming.
$95 million
That’s how much Snowflake CEO Frank Slootman earns every month in the form of stock options in his cloud-computing company, which has been one of the hottest names on Wall Street since its September IPO. Snowflake shares shot up immediately upon the firm’s public debut and have continued to soar since, closing at nearly $388 a share on Friday.
$3.1 billion
That’s how much DoorDash hopes to raise through its upcoming IPO—an amount that could give the online food delivery startup a valuation as high as $35.7 billion. DoorDash revised its IPO estimates—which just earlier this week called for a $2.6 billion raise that would value the firm at around $32 billion—in disclosing that it expects to sell around 33 million shares priced between $90 to $95 each.
***
That’s all from me this week; you’ll be back in Bernhard’s hands on Monday. Please be sure to check out today’s reads below, and have a wonderful weekend.
Rey Mashayekhi
@reym12
rey.mashayekhi@fortune.com
As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.
Today's reads
Petco’s pandemic puppy push. Who would have guessed that the pandemic would boost Petco’s business? The pet supply retailer filed its IPO prospectus Thursday night, revealing that sales have surged since the start of the pandemic thanks in part to “an increase in pet ownership” during that time. Of course, Petco’s successes go beyond the pet adoption boom, with the company also investing big in e-commerce and store remodels in recent years.
Head in the cloud. Snowflake isn’t the only cloud-based tech firm tearing up Wall Street as of late. The likes of CrowdStrike, Okta, and Zscaler have all seen their shares soar, as the pandemic has accelerated a shift to the cloud that has proven a boon to these firms’ businesses.
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Market candy
“If you’re worried about your ego, don’t get into short-selling.”
That’s Fraser Perring, the founder of three-person activist investment firm Viceroy Research. Viceroy is among the tiny short-selling firms profiled by Bull Sheet’s own Bernhard Warner in Fortune’s December/January issue.


fortune--2020-12-05--Why would Elon Musk move to Texas? The answer could be in the billions

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Tesla CEO Elon Musk has told friends and family he’s moving from California to Texas, CNBC reported on Friday.
The news doesn’t come out of nowhere. In May, Musk announced he planned to sell all of his California properties, including his Bel Air mansion. And that same month he flirted on Twitter with the idea of moving Tesla’s California headquarters to either Nevada or Texas—a decision he said would come down to how “Tesla is treated in the future” by the state.
Musk is reportedly considering Austin. While something of a tech hub, Austin pales in comparison to his current home in California.
So why exactly would a tech CEO leave California? Good ole greenbacks.
Musk has a net worth of $139 billion, second globally to Amazon founder Jeff Bezos. That wealth is largely in Tesla shares, which have climbed over 1,000% since July 2019—a feat that helped him earn the title of Fortune’s Businessperson of the Year. And as Musk begins to tap into that paper wealth, he’ll be required to pay California’s top capital gains tax rate of 13.3%—in addition to the top federal capital gains rate of 20%.
But once Musk establishes Texas residency, he should be able to avoid state capital gains altogether. Not only does the Lone Star State not impose income taxes, it’s among the nine states without capital gains taxes.
The tax savings could be astronomical. According to Bloomberg’s calculation of SEC filings, Musk owns the equivalent of $135 billion in Tesla shares and options as of Thursday. If he executed the options and sold all ensuing shares at their current trading price of $599.04, he could owe California as much as $18 billion in capital gains taxes based on a rough calculation—assuming most of Musk’s equity stake was granted to him rather than purchased. If he lived in Texas, he’d dodge that entire potential tax bill. For perspective, the entire market cap of Domino’s Pizza is $15.1 billion.
And those Texas tax savings could entice Musk to sell some of his Tesla shares to pay down his massive debt: Over half of his equity stake in Tesla is collateral to his personal debt, according to Tesla’s most recent SEC filing.
Over the past year a number of California-based business leaders and corporations have said they’re going to flee the state for tax-friendly havens. That includes individuals like comedian Joe Rogan and venture capitalist Keith Rabois. Additionally, Fortune 500 firms like CBRE Group, Charles Schwab, and Hewlett Packard Enterprise have all announced moves from California to Texas.


fortune--2020-12-04--Black women-founded startups are increasing—but they still raise far less than average

There’s good and bad news for Black women founders, Google employees protest the dismissal of an ethical AI expert, and whose god is Charlamagne anyway?
But first, here’s your never-ending-the-war-on-drugs week in review, in Haiku.
Well, at least for one
brief shining moment we can
imagine a world
where Jamaal doesn’t
lose his future for the same
joint that doesn’t seem
to trip up all the
Chads who recreate with ease.
A world where taxes
are investments in
communities; ending a
pointless war on drugs.
Oh! There is a point?
And drug laws don’t even work?
At least we can dream.
Have a fulfilling weekend. Take some time to dream, if you can.
Ellen McGirt
@ellmcgirt
Ellen.McGirt@fortune.com
On point
Black female founders: Want the good news or the bad news first? Let’s start with the good news: 93 Black female founders report they have secured $1 million in investor backing for their businesses in 2020, triple the number who found investment in 2018. Ninety Latina founders also hit the million mark this year. And yet, Black and Latinx women combined received just 0.64% of total venture capital investment between 2018 and 2019. This is the finding from the highly anticipated biennial survey called ProjectDiane, produced by digitalundivided, a nonprofit that develops programs that spark economic growth in Black and brown communities. Good and bad news abounds in the report, which is fully interactive and clickable. Here’s one more nugget: Some 82% of Black women entrepreneurs reported revenue loss because of the pandemic.
Fortune
Google employees defend AI research scientist alleged to be fired after she complained of bias Until this week, Dr. Timnit Gebru, a scientist known for her research in bias in facial recognition technology, helped lead Google's Ethical Artificial Intelligence team. But according to an open letter signed by hundreds of Google employees, she was fired for defending research that highlighted potential problems with an AI tool used by Google, and a subsequent internal list posting that complained about the treatment of “marginalized voices” at the company. "Instead of being embraced by Google as an exceptionally talented and prolific contributor, Dr. Gebru has faced defensiveness, racism, gaslighting, research censorship, and now a retaliatory firing," the open letter said. Well worth your time.
NPR
Who died and made Charlamagne a God? It’s an important question and Rachelle Hampton raises some interesting observations about Charlamagne, the provocative host of the nationally syndicated morning radio show The Breakfast Club. The political theater on the show has been brewing for awhile: It was on this show that presidential hopeful Hillary Clinton produced a bottle of hot sauce from her purse. In the latest cycle, nearly every Democratic presidential hopeful showed up to court the Black vote. (They were also forced to listen to him wax on about their chances across political cable TV.) So how did the once-described “Howard Stern of hip-hop," shock jock become the voice of Black political America? “[T]here’s a notable disconnect between the way white media responds to The Breakfast Club and the show’s contentious status within the Black community,” says Hampton.
Slate
It is not safe inside our homes As had been anticipated, intimate partner violence has continued to be a significant problem during the pandemic, and a review of studies shows that domestic violence calls to police and shelters spiked up from 6-21%, depending on the particular research, with the largest spike occurring within the first two months of quarantine. This piece highlights the common risk factors for violence that are amplified now, like economic hardship, stress, isolation, gun ownership, and substance disorders. But the pandemic has impacted the collection of already underreported domestic violence related data. The uptick in calls largely appears to be coming from households where the police have not visited in the past, perhaps due to witnesses who are also in quarantine. But for people in more rural areas, it’s likely that there is no way to escape and no one to report to. One solution? Encourage people to report in nontraditional spaces, like pharmacies.
The Conversation
We’re poised to lose a generation of students if we don’t focus up Data shows that if you can read by third grade, you’re on a better path to high school graduation. It’s not a subtle benchmark: Black and Hispanic children are eight times as likely not to graduate if they don’t hit third grade reading proficiency. So, this story about the Achievement Prep public charter elementary school in Washington, D.C. should raise some alarm bells. In March, 90 percent of the school’s first-graders hit their reading targets. But by the time they returned to school as second graders, every single child was off track. Some were back to kindergarten levels. What does the future look like for them?
Washington Post
On Background
A cosmologist turns her eyes to the earth Chanda Prescod-Weinstein has been delighting armchair stargazers and quantum mechanics for years on Twitter, as she breaks down her research on the origins and futures of the universe. But she is also a powerful force for inclusion in science, academia and beyond, and has become a sharp-eyed observer of where institutions go wrong. “I accused the physics community of practicing not real empiricism, but practicing white empiricism, where certain pieces of data get discarded when we're having conversations about social and civic issues—and with a level of comfort that people would never have if we were talking about an official science or official physics question,” she said. A must-read profile.
Vice
What we can learn from a 1,000-year-old ice cream shop Wars, plagues, political upheaval and natural disasters are now part of the story of Ichiwa, the family-owned toasted mochi shop that has been selling some version of the same rice flour cake since it opened in Kyoto in the year 1,000. They are one of many old businesses that have found a unique resilience by side-stepping the manic need to succeed at scale. “These companies’ operating principles are completely different,” Kenji Matsuoka, a professor emeritus of business at Ryukoku University in Kyoto tells the New York Times. “Their No. 1 priority is carrying on. Each generation is like a runner in a relay race. What’s important is passing the baton.”
New York Times
How did the media do with the 1918 flu pandemic? For one thing, it didn’t originate in Spain, despite its moniker. But embroiled in the Great War, the global press was entreated to downplay the dire effects of the flu, to boost wartime morale and project an image of strength and battle readiness. In this fascinating radio interview, John Barry, author of The Great Influenza: The Story of the Deadliest Pandemic in History, breaks down the rationale for the censorship—turns out we think of it as the Spanish flu only because their media reported on it—and how this blind spot in history may have affected our ability to grasp the impact the coronavirus.
WNYC On The Media
raceAhead is edited by Aric Jenkins.
Today's mood board
Fred Hampton, the activist and revolutionary, was assassinated by Chicago police and the FBI 51 years ago today. He's pictured here, around 22 years old, in a 1968 file photo.


fortune--2020-12-04--$1,200 stimulus checks ‘may be still in play’ says Biden

For the latest information on the ongoing stimulus negotiations, please check out our coverage here
Is there still hope of finding a stimulus check in your stocking this year?
President-elect Joe Biden seems to hope so.
Biden was speaking in Wilmington, Delaware after the announcement Friday morning that the U.S. economy added just 245,000 jobs in November, pushing the unemployment rate to 6.7% from 6.9% in October. That was far lower than the 440,000 jobs economists had been predicting, and was read as a sign that the economic recovery has stalled.
On the topic of stimulus, Biden said that we need to “step up now” and if we don’t act, “the future will be very bleak,” he told reporters. Biden said he was “encouraged ” by the bipartisan effort in the Senate. Earlier, on Tuesday, House Speaker Nancy Pelosi has said the compromise bill could be a starting point for talks between Democrats and Republicans, who have been at an impasse since the summer over the size of an economic rescue bill.
As Fortune‘s Lance Lambert and Anne Sraders have been reporting, the new bipartisan bill would “set aside $180 billion to pay out weekly $300 enhanced unemployment benefits, which would be paid on top of state benefits. That would replace the weekly $600 enhanced unemployment benefits which expired in late July. In addition, the package would include $82 billion for education, $45 billion for transportation such as airlines, and $25 billion in housing assistance.”
Biden stressed that stimulus and stopping the virus are intertwined: “Emergency relief helps stem the spread of COVID because it allows people to say home when they are sick,” he said, adding that “the sooner we pass the funding the sooner we can turn the corner on COVID 19.”
When asked about reports that progressive Democrats such as Bernie Sanders and Alexandria Ocasio-Cortez wanted to see direct payments as part of the bill, Biden replied: “It would be better if they had the $1200, that may be still in play.”
Ocasio-Cortez tweeted Friday: “Canada did $2,000/monthly. The US is the richest nation on earth and a 2nd stimulus check is getting blocked bc GOP want corporate bailouts & austerity in ‘exchange’ for it. Maybe if everyone in the US incorporated as an LLC, Mitch McConnell would actually do something for them.”
In his remarks, Biden nodded to the fact that has plenty of experience negotiating behind the scenes between the two parties, and felt confident an agreement could be reached. However, many onlookers have been highly skeptical that Republicans would get on board with direct payments. As Tom Porcelli, chief U.S. economist at RBC Capital Markets, recently told Fortune: “I think [more stimulus checks are] going to be a very hard sell,” and if the two runoff Senate seats in Georgia leave control of the Senate in Republican hands in January, “I think that’s almost a nonstarter.”
Interestingly, direct payments were one of the areas Democrats and the White House initially agreed upon, but more fiscally-conservative Republicans have left stimulus checks out of a recent “skinny stimulus” bill, which failed to pass the Senate twice. With time running out to pass a bill this year, Biden also cautioned that not everyone is going to get everything they want, and that when you insist on everything you can end up with nothing.
Optimistically, Biden promised that whatever happens this round, this stimulus bill is a “down payment” with “more to come early next year.”


fortune--2020-12-04--Activision sues Netflix over hiring of former finance chief

Video game publisher Activision Blizzard sued Netflix, claiming the video-streaming service engaged in a yearslong campaign of unlawfully poaching executives, including by hiring its former chief financial officer.
Activision claims Netflix interfered with the contact of the executive, Spencer Neumann, by offering to pay him in advance to cover his legal fees.
“Netflix unapologetically recruits talent without regard to its ethical and legal obligations,” Activision said in the complaint filed Friday in state court in Los Angeles.
Activision is suing for intentional interference, unfair competition, and aiding and abetting. It seeks a court order to permanently stop Netflix from soliciting Activision employees and unspecified compensatory and punitive damages to be determined by a jury at trial.
Netflix and Activision both declined to comment on the lawsuit.
Neumann hopped from Activision to Netflix at the beginning of 2019 after he was abruptly put on leave by the video-game maker in anticipation of the move. He had joined Activision in May 2017 from Walt Disney, where he served as CFO of that company’s theme-park division.
In the suit, the game publisher said it’s concerned that — as Netflix creates video games based on its shows — it “increases its competition with Activision.” Netflix shows have already become games such as “Stranger Things 3: The Game” and “The Dark Crystal: Age of Resistance.”
The video-gaming market has exploded during the Covid-19 pandemic, as many other forms of entertainment became unaccessible. Video games should generate nearly $160 billion in revenue globally this year, up 9.3%, according to research firm Newzoo. The launch of new gaming consoles from Microsoft and Sony this fall should further add fuel to the market.


fortune--2020-12-04--5 software acquisitions Salesforce’s Slack deal could spur

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Salesforce’s nearly $28 billion Slack-quisition is shaking up the software world by pushing competitors to consider big bets of their own.
The jumbo-size deal for the workplace instant messaging service, announced Tuesday, can be viewed as a salvo directed at a common foe. Salesforce and Slack are most obviously taking on Microsoft, the Office juggernaut whose grip on virtual workplaces tightened this year as the number of people working remotely soared during the pandemic.
Slack was wounded by the surging use of Microsoft Teams, the company’s newly popular teleconferencing tool. Videoconferencing service Zoom added to Slack’s challenges.
But there’s more to the Slack-force combo than joining forces against Microsoft. Salesforce is also trying, preemptively, to keep ahead of rising rivals like Google. The search giant is keenly interested in growing its cloud computing division alongside its business collaboration tools, yet its many attempts at developing chat services—Allo, Duo, Hangouts—have floundered.
With Slack now off the table, analysts expect Salesforce’s rivals to make big bets too. As Daniel Ives, managing director at Wedbush Securities, writes in a research note, the Slack acquisition could “set off a chain reaction for more cloud software deals in 2021 despite the run-up in valuations over the past nine months.” In addition to Microsoft and Google, possible acquirers abound: Adobe, Amazon, Atlassian, Cisco, DocuSign, Dropbox, IBM, Oracle, SAP, ServiceNow, Twilio, Workday, and plenty of others.
Here are five cloud business toolmakers that may be ripe for the taking.
Airtable
Maker of a spreadsheet-cum-database, Airtable helps people stay on track with projects. The company was founded by Howie Liu in 2012, who briefly led “social CRM”—or social media–centric customer relationship management—at Salesforce after selling it his earlier company, Etacts. Liu, who raised $185 million in fresh funding for Airtable in September, tells TechCrunch he has no interest in an exit anytime soon. But then again, Salesforce CEO Marc Benioff said he had no interest in acquisitions just a few months before he made his biggest one ever.
Asana
Another online task manager for businesses, Asana was founded by former Facebookers—including Dustin Moskovitz, a Harvard dormmate of Mark Zuckerberg’s—at the end of 2008. The yoga pose–named company went public this fall on the same day as data-miner Palantir, using a direct listing (like trendsetter Slack). With a market capitalization of $4 billion, a purchase wouldn’t necessarily empty the wallet of a tech-giant suitor. And the appetite is apparently there: Adobe recently agreed to buy Asana rival Workfront for $1.5 billion.
Box
Box offers just that, a box—for electronic storage. The file-sharer helps people access documents and other digital content remotely. Bearing a market capitalization that’s one-third of its similarly named archrival, Dropbox, Box could be considered a budget buy. “This is Salesforce’s Instagram,” said Aaron Levie, Box’s chief executive, praising Benioff’s M&A of Slack with a favorable comparison to Facebook’s prescient photo-app purchase. Maybe Box could be someone’s WhatsApp?
Notarize
A purveyor of electronic signatures, Notarize specializes in—you guessed it—notarization. The startup, founded in 2015, helps deals get done digitally. E-signature star DocuSign bought adjacent startup Liveoak this summer, and Dropbox picked up a signature-themed company, HelloSign, last year. Notarize already partners with Adobe. As more contracts are consummated through computers, a Big Tech company could make the tie-up official and ink the dotted line.
Symphony
Like Slack, Symphony offers an instant messaging service, except it’s built first and foremost for bankers. Last privately valued at more than $1 billion, according to equity-tracker PitchBook, Symphony could be a handy add-on for a cloud company interested in wooing Wall Street. Perhaps Amazon-laggards like Oracle or IBM, known to talk up the so-called hybrid cloud (hosting computers part remote, part on-site), could make a match.


fortune--2020-12-04--How Ulta Beauty is using tech to spur in-store shopping during the pandemic

Beauty is one of the most hands-on categories in physical retail, a fact that has made life more difficult for stores like Ulta Beauty during the pandemic.
Ulta this week reported that comparable sales, a metric that includes sales at stores open for at least 14 months as well as e-commerce, fell 8.9% in its third fiscal quarter. Its online business almost doubled, rising 90%, meaning in-store business fell sharply, even with the bulk of Ulta’s stores open again.
Many shoppers have preferred to avoid stores and Ulta can’t offer its skin and makeup services because of safety concerns, contributing to the 30% drop in revenue in its salon services business last quarter.
So the beauty chain has had to ramp up its in-store tech more quickly. For instance, Ulta has been promoting its GLAMlab, a virtual try-on tool for items like eye shadow, foundation, eyelashes, and blush.
“The pandemic has by necessity accelerated the use of digital tools for Ulta Beauty in a way we were well poised to capitalize on,” Ulta Beauty CEO Mary Dillon tells Fortune.
Since the pandemic began, Ulta has added QR codes to shelf strips so that customers can go use GLAMlab as an alternative to testers which are no longer available for customers to touch and use. And the company has trained employees on how to nudge shoppers to download it.
“It’s a phenomenal way to try things on whether you’re in the store and can’t use a tester right now, or just sitting at home,” she adds.
GLAMlab will be a feature at the Ulta shops the company will start opening at hundreds of Target locations starting next year as part of the companies’ recently announced tie-up. (Ulta will soon have plenty more company in the strip malls it occupies, once Kohl’s is done setting up 850 Sephora shops inside its stores in 2023.)
Ulta also recently launched a skin analysis tool, which uses augmented reality technology and artificial intelligence to make product recommendations, helpful to Ulta given that the full-fledged in-person skin consultations are halted for now. The retailer updated the tool to allow customers to keep assessments at different points over time to keep track of how their skin is changing.
“Skincare is really hot right now,” says Dillon. And Ulta’s third-quarter results bear that out: skin care sales were way up, but makeup, which generates almost half of Ulta’s overall sales, were down, while skincare, haircare, bath, and fragrances fared well.
What’s more, Ulta is trying out one-on-one remote video consultations, a virtual selling approach that is catching on in retail with companies like Signet Jewelers and J.C. Penney using it.
Some of Ulta’s newer tech has been to help with more prosaic considerations such as booking appointments: Ulta has completed the rollout of a new booking tool for services, with one-third of service appointments, such as a hair styling, or brow sculpting, last quarter.
All this is not to say that Ulta is giving up on physical retail. Dillon said Ulta sees room for up to 1,700 stores in the U.S. eventually, excluding the Target locations. (Ulta has just shelved plans to launched a Canadian store fleet.)
But the pandemic has led to changes in how customers shop, even in stores, and that will persist long after the pandemic has subsided.
“The intersection of the digital and the physical is here to stay,” says Dillon.


fortune--2020-12-04--Nearly a third of workers don’t want to ever return to the office

The vaccines are on their way. So far, they appear so effective that Dr. Anthony Fauci even thinks we may have packed stadiums return in the summer of 2021.
That also means more employers will begin to reopen their offices—and we’ll get to see to what degree WFH sticks around.
To get an eye on the future of work, Future Forum by Slack conducted a three-month survey of over 9,000 knowledge workers or skilled office workers around the world—something they used to build their Remote Employee Experience Index. Future Forum by Slack gave Fortune Analytics exclusive access to that raw data.*
Here’s what we found.
The numbers to know
27%
… of knowledge workers say they’d never (13%) or rarely (14%) work from their employer’s office in an ideal world. 39% say they’d want to always (12%) or usually (27%) work from the office. And 34% are in the middle.
48%
… of workers say they expect their employer to make permanent policies changes to expand remote working post-pandemic. 31% say they don’t expect permanent changes, and 21% are unsure.
43%
… of hiring managers say they’re likely to consider a remote candidate when hiring for a position on their team. 32% said they’d be unlikely to, and 25% are neutral.
33%
… of workers are feeling burned out.
The big picture
Workers are split on returning to the office. Around 3 in 10 workers would never or rarely want to return to the office, while 4 in 10 would like to go back to the old normal. We should expect a mixed approach from employers, tailoring new work policies based on how their staff works best. Simply put: The future of work won’t look like fully packed offices nor a wasteland of empty buildings.
A few deeper takeaways
1. Older workers prefer WFH the most.
This isn’t the ’90s: Older workers are damn good at digital communication. And these employees aged 55 to 64 are the most likely to say they’d prefer to never work from the office, with 17% of them indicating so.
Only 11% of workers aged 25 to 44 say the same thing. What may be the reason? As I’ve pointed out before, younger staffers are struggling the most to be productive while working from home. Some find it challenging because they’re still learning the ropes in their industry or job. This age group includes many parents—a group that is struggling to balance WFH and childcare.
2. Burnout is hitting lowest-paid workers hardest.
In April alone, more than 20 million Americans were laid off. Smaller staffs mean those who were lucky enough to escape pink slips are being asked to do more. That, paired with disruptions in everyone’s personal lives, is a perfect recipe for burnout. In all, 33% of workers say they’re burned out.
Those at the bottom of the office chain are most likely to be struggling with burnout. Among those earning less than $50,000, 39% agree they’re feeling burned out. 29% earning more than $200,000 are feeling the same.
Workers paid less are more likely to see their jobs cut during the crisis. That means many of these modest earners are working extra hard to avoid the corporate axing—and burning out faster.
*Methodology: The Slack Work Tracking Survey was conducted between May 30 to August 11 among an audience of over 9,000 “knowledge workers” or “skilled office workers” in Australia, France, Germany, Japan, United Kingdom, and United States.


fortune--2020-12-04--Backlash against Google grows over firing of prominent Black A.I. researcher

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Google faced mounting criticism Friday over its treatment of a prominent Black A.I. ethics researcher who says she was fired after questioning the company’s commitment to diversity in an email to colleagues.
By midmorning Pacific Time on Friday, more than 1,400 people, including nearly 600 who work at Google, had signed an open letter expressing solidarity with the researcher, Timnit Gebru. The letter also called on Google to strengthen its commitment to research integrity and support ethics research in line with the company’s own A.I. principles.
Gebru, who was co-lead of Google’s A.I. ethics team, is well known among machine learning researchers for her exploration of the racial and gender bias inherent in many A.I. systems. She was also one of Google AI Research’s most prominent Black employees and is a cofounder of Black in AI, an organization that has sought to highlight the work of Black machine learning researchers and provide mentorship and support to Black scholars in the field.
She says she was fired after writing a message to members of a “women and allies” email list within Google AI Research in which she accused the company of paying lip service to diversity and inclusion.
She said her managers informed her that the message was “inconsistent with the duties of a manager” at the company and immediately terminated her employment.
Jeff Dean, the senior vice president in charge of Google’s A.I. research, said in an email to staff that Gebru had offered to resign and that the company had accepted her resignation.
Google declined to comment on the open letter.
Both Gebru and the company say that her departure followed an incident in which the company asked Gebru to withdraw a research paper she and several other Google researchers had coauthored and submitted to an A.I. conference. In it, Gebru and her fellow researchers highlighted the racial bias inherent in a kind of cutting-edge natural language processing A.I., known as large language models, that Google and several other companies have developed. Google now uses one of these large language models to power parts of its search results.
In his email to staff, Dean says that the paper “didn’t meet our bar for publication” because “it ignored too much relevant research,” including information on how some of the issues Gebru and her coauthors were raising could be mitigated.
Gebru has said that the process used to review the paper was opaque and irregular. The open letter calls on Dean and others involved in the decision to reject the paper to meet with the Google A.I. ethics team to explain the process they used. It also calls on the company to explain to the broader public what took place. And it demands that Google Research “make an unequivocal commitment to research integrity and academic freedom.”
Google has said that it is “committed to making diversity, equity, and inclusion part of everything we do,” but the company has for years struggled to make good on that stance. According to Google’s 2020 diversity report, Black employees make up just 3.4% of its U.S. staff, up from 2.4% in 2014. The company also noted that its attrition rate among Black women, who make up 1.6% of its U.S. workforce, had increased in the past year.
Gebru’s departure is almost certain to be a significant blow to the company’s effort to reverse this trend. Many, including Gebru, pointed out on Twitter that Google had in the past often held her and her work up as examples of the strides the company was making in addressing diversity and inclusion issues. Gebru said in her email to colleagues that her treatment had convinced her that “there is zero accountability” at Google for actually improving its culture.
Many machine learning researchers posted messages on Twitter saying that Gebru’s exit dealt a serious blow to Google’s reputation on A.I. ethics and diversity issues.
Joy Buolamwini, a computer scientist who founded the Algorithmic Justice League, a group dedicated to fighting algorithmic bias, and who had coauthored an influential paper with Gebru on racial bias in facial recognition systems, said Gebru’s firing “severely undermines Google’s credibility for supporting rigorous research on AI ethics and algorithmic auditing.”
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fortune--2020-12-04--Europe is missing out on the A.I. revolution—but it isn’t too late to catch up

For decades, the European economy has been characterized by and celebrated for its industry, from manufacturing to construction and energy generation. Even today, industry accounts for 80% of Europe’s exports and private sector innovations. But when looking at this year’s Future 50, a collaboration between Fortune and Boston Consulting Group, which ranks the businesses with the greatest capacity to continually reinvent their businesses and sustain long-term growth, observers can find a sobering situation: Only four European companies make it to the list. And, excluding information and communications technology, there is only one digital-native European firm on the list, and it’s not an industrial one: It’s Spotify.
This is a significant observation, but maybe not so surprising. Actually, the situation seems even more dire when you consider the gap in competitiveness in artificial intelligence between European countries and global leaders, namely the U.S. and China. In short, Europe is at a crossroads. Missing today’s opportunity to digitize its industry with A.I. will have grave consequences for the continent’s long-term competitiveness, and for local employment. Immediate action is needed.
What is happening to European industry?
Every year, BCG and the MIT Sloan Management Review survey thousands of executives to gain insights into cross-industry A.I. practices. This year’s results reveal that Chinese companies are miles ahead of their European counterparts, both in terms of A.I. adoption (80% of Chinese companies vs. 45% in Europe) and in their ability to get financial impact from A.I. (29% vs. 14%). And the gap may only increase in the future: 97% of Chinese companies have a strategy for A.I., compared with just 62% of their European counterparts. It is therefore critical to understand what Europe missed. How did it allow such a gap to grow? Based on our analysis, the answer lies in four dimensions.
“Europe” as a unified entity is a mirage. A single statistic summarizes the situation: Over the past few years, there have been 18 A.I. national strategies published independently by different EU countries. And all of them focus on the same goal—improving local A.I. innovation capabilities—even though the strength of an A.I. ecosystem may also reside in its connections beyond national borders. In addition, diverging local regulations on A.I. and the absence of pan-European initiatives to attract investments (for example, an EU equivalent of the Nasdaq) act as a brake on Europe’s A.I. competitiveness today.
Action from the EU is too fragmented and timid. A lack of central coordination, planning, and prioritization limits the actual impact of any actions taken by the EU. The European Commission (EC) Digital Innovation Hub initiative is revealing: €500 million ($607 million) was spent to set up 450 hubs where small and medium-size enterprises (SMEs) could get training on digital technologies. This is twice as many hubs as China has, meaning resource allocation could have been significantly more focused to optimize impact.
The situation in the EU contrasts with that in the Middle Kingdom, where both local and national governments play key enabling roles: setting goals, distributing funds accordingly, and ensuring coordination to avoid wasteful duplication. And China also invests boldly in the necessary supporting infrastructure to digitize at scale. In 2019, it hosted about 40% of the 500 most powerful computers in the world, over three times as many as all the countries in the EU put together. Even the latest flagship EU initiatives—such as Quantum Flagship, which plans to invest €1 billion over 10 years to develop quantum computers—are dwarfed by China’s recent investment of over €8 billion in its National Laboratory for Quantum Information Sciences.
Data-sharing gridlock has yet to be addressed in Europe. In 2018, the EC found that 60% of companies did not share data with other companies and 58% did not reuse data obtained from others. In contrast, China realized that data is critical in an A.I.-powered world and fostered the development of a data labeling industry. It plays a key role by taking unlabeled data, like street pictures, and adding descriptive tags to convert them into useable datasets. This is a win-win: It helps local rural governments by creating a new, stable source of employment, and it provides an unparalleled volume of data to feed algorithms used by local businesses.
European digital ecosystem orchestrators barely exist today. None of the global Tech Giants—like the GAFAM (Google, Amazon, Facebook, Apple, Microsoft), Alibaba, or Tencent—is European. Consequently, EU industrial players are required to digitize independently, without any pull from Tech Giants to join their ecosystem, which results in a slower path to A.I. maturity. Conversely, in China, the strongest digitization pulls on industry players have come from local digital orchestrators. For instance, e-commerce giants Alibaba and JD.com digitized more than one-third of China’s 6 million stores in less than two years, offering digital infrastructures and A.I. tools for free. In return, shop owners agreed to share data, reinforcing the Tech Giants’ digital ecosystems and serving as fulfillment and delivery centers. Similarly, in B2B, appliance-maker Haier integrated more than 4 million SMEs to foster mass customization in manufacturing through its COSMOPlat platform.
How to reverse the trend
Above all, European governments need to realize that there is strength in unity. Thanks to its cumulative industrial market size and A.I. innovation capabilities, the EU has the potential to become the third global A.I. superpower, possibly the first in B2B. This is why the EC must accelerate implementation of the necessary legislative framework to create a true “Digital Single Market,” with common regulation and policies across member states. The objective, as suggested in the EC’s A.I. white paper, Shaping Europe’s Digital Future: Strategies for Data and A.I., should be to create the underlying conditions for at least one—but not more than two or three, to maintain a critical mass—EU-wide A.I. ecosystem orchestrator to emerge in each key industrial vertical, while catalyzing tech investment inflows. The recent Data Governance Act, albeit focused only on data sharing at the moment, exemplifies what such regulatory foundations could look like.
In parallel, European industrial players urgently need to embrace their transformational journey to put A.I. at the core of their business model. Not only can it bring significant financial benefit, as highlighted in the 2020 BCG-MIT A.I. report, it can help build resilience in these turbulent times. To achieve these things, they should be ready for ecosystem cooperation beyond traditional partnerships, and they should leverage the unique digital capabilities of tech companies to complement their vertical capabilities and disrupt their own sectors. Again, we find a good example by looking East: Ping An, a traditional Chinese insurer, joined forces with Tencent and Alibaba to help it become a pure digital insurance leader.
To remain competitive, European industrial players must upgrade quickly with the best A.I. technologies. And in most cases they can only do so by collaborating with Tech Giants; Europe has rarely been able to generate the best of A.I. on its own. However, to make this association sustainable and mutually beneficial, the players must interact on a level playing field, which can only happen if Tech Giants operate in Europe and abide by European rules. European governments and the European Commission have a key role to play here, but it requires a radical mindset shift: Instead of trying to “win the A.I. innovation race,” they should seek to “win the industrial race with A.I.”—that is, support traditional companies in their work to digitize with A.I. In other words, they should adjust their policymaking to concentrate on joint efforts to attract Tech Giants under conditions for industrial players (for example, costs, privacy) that respect European values, instead of pursuing the fantasy of creating ex nihilo hypothetical local competitors to the Tech Giants.
During the 19th century, with one-third of global GDP, China was the biggest economic power. But it missed the second Industrial Revolution and lost any global economic significance until recently. Let’s not allow Europe to follow the same path in the 21st century by missing the A.I. revolution. Europe has great assets, both in industry and in A.I.; it is the leading region in terms of the size of the A.I. talent pool, and it is home to global leaders in many sectors. There is urgency to act. To address Europe’s A.I. digitization gap, policymakers and companies have a joint role to play, and success can happen only if business and government leaders embrace this transformational journey. As the Italian author Lampedusa once wrote: “If we want nothing to change, we need everything to change!”
François Candelon is a managing director and senior partner at BCG, and global director of the BCG Henderson Institute. Rodolphe Charme di Carlo is a principal at the BCG Henderson Institute.


fortune--2020-12-04--Pandemic puppies push Petco profits, prompting public prospectus

Add Petco to the short list of retail’s big COVID-19 winners just in time for its return to the public stock markets.
The pet supplies and services chain has ridden a surge of pet adoptions during the pandemic. That, combined with Petco’s big e-commerce investments and store remodels in the last few years, has led to vastly improved financial results that have allowed it to finally pull the trigger on a long awaited IPO filing.
PET Acquisition LLC, the parent company of Petco Health and Wellness Company, said in an initial public offering prospectus filed late Thursday with U.S. regulators, that comparable sales have surged since the pandemic began, including a 16.3% increase in the most recent quarter.
That was the eighth straight quarter of comparable sales growth for Petco, and the biggest increase in that streak for Petco, which is on track to pass $5 billion in sales this year.
And Petco’s operating profit nearly doubled in the first nine-months of the fiscal year, crucial for a company owned by private equity firms and saddled with $3.3 billion in debt. CVC and the CPPIB acquired Petco for $4.6 billion from fellow private equity firms TPG and Leonard Green in 2016, ten years after they took Petco private. Media reports suggest Petco could be valued at $6 billion when it returns to the stock market, where it will list under the ticker “WOOF” on the Nasdaq.
Petco’s reversal of fortune was not obvious just a few years ago, as this current streak of accelerating growth followed a two-year period of decline. Petco was seen as having inadequate e-commerce, stale stores, tired house brands and did not offer sufficient services (such as veterinarians) to draw shoppers into stores (versus visiting PetSmart, Chewy or even Amazon).
But as Fortune detailed it in a May feature story, that changed under CEO Ron Coughlin, who was previously at HP, where he ran the personal systems business selling PCs and tablets. When he took the reins in 2018, the 1,470-store chain made becoming an e-commerce player a priority. Petco went from getting only got 4% of sales from e-commerce to the double-digits, and it’s rising fast.
Petco was able to quickly set up curbside picking for online orders for nervous customers once the pandemic started. That’s been essential to competing with Chewy, which was owned by its archrival Petsmart and went public last year.
Before the pandemic, Petco had begun remodeling hundreds of its stores, adding higher-end, adding more health-oriented brands, revamping its own store brand portfolio, and adding homey touches like wood shelf panels, a Treatery stand for baked goods for dogs, and a station where pet owners can get nutritional advice including information about Petco’s premium WholeHearted food brand. Petco is also making an aggressive push deeper into veterinarian services, an area of intense competition that includes PetSmart, Walmart, and Chewy’s online pharmacy.
That will be key for a retailer to keep its place in a booming $96 billion U.S. market.


fortune--2020-12-04--Employers bringing workers back to the office may be inviting them to an unfamiliar place

Millions of office workers and the companies that employ them will discover in 2021 whether the work practices they hurriedly adopted in the pandemic are a new normal or a crisis make-do best left behind. In the process, employers will begin to learn whether the workplace bets they’re making for the future are winners or losers.
The stakes are high. Only when returning to the office becomes a safe option will we see how employees feel about it after months of working from home. Beyond WFH policies, employers will confront major decisions on commercial real estate, including how much to have, where to put it, and how to design it. The future of cities, some with areas that are almost deserted now, will begin to reveal itself. Perhaps most important for the long run, employers will learn more about the hard-to-measure value of bringing employees together and balance it against the easy-to-measure savings of letting them work remotely.
CEOs are sharply divided on these issues. High-profile tech companies—Facebook, Twitter, Zillow, others—have told employees they can work from home indefinitely. Twitter is subleasing over 100,000 square feet of its office space in San Francisco. Outdoor retailer REI went further, selling its new, unused corporate campus in Bellevue, Wash., and making remote work a “normalized model,” as CEO Eric Artz put it.
But other corporate heavyweights, including AbbVie, Alphabet, Goldman Sachs, JPMorgan Chase, and Johnson & Johnson are leaning the other way. They want their office workers back in the office as soon as safely possible. Their reasons share a theme. “We believe collaboration and innovation are fueled in large part by the connections of people,” Johnson & Johnson HR chief Peter Fasolo tells Fortune. Chase CEO Jamie Dimon explained to MSNBC that “there’s a huge value to working together in terms of collaboration and creativity and training the younger people.” IBM HR chief Diane Gherson notes the “bank of trust we all build when we work together physically.” Research shows that trust is essential to creativity, and nothing builds trust like in-person interaction.
Will the permissive WFHers find that their company’s culture and creativity wither over time? Will the back-to-the-office advocates discover that many employees now consider commuting a miserable experience they’d like to ditch? Both groups of employers face risks, which 2021 will illuminate.
Most employers will make changes to their workplaces, often major changes, if they haven’t done so already. In the strange new post-COVID world, they’ll somehow have to reconcile conflicting imperatives. Employers will reduce office space because they don’t need it or they have to cut costs; 76% of CEOs in an October survey by Fortune said they’ll be cutting office space. But they’ll also have to allocate more square feet per worker. Even if distancing mandates are eventually repealed, employers will likely continue to use more spacious floor plans—“de-densified” in real estate talk—so workers feel safe.
Another conflict: The hottest trends in office real estate in recent years have been “community” and amenities, which employees and employers still want—but how to deliver them to people who may remain wary of close quarters for a long time? Landlords provide community by organizing book and travel clubs, tastings, speakers, and other events that have had to be canceled or digitized. “Community will be central,” says Emma Buckland, global president of property management at the CBRE real estate services firm. “This crisis is highlighting the need for community.”
But meeting that need won’t be easy. It’s the same with office building amenities. “Restaurants, gyms, terraces—they’ll all need different planning,” says Buckland. Employers enthusiastically bringing workers back to the office may be inviting them to an unfamiliar place.
Most CEOs think they’ll arrive at a hybrid model with some employees in offices and others working remotely. In a Fortune survey conducted with Deloitte, they said they expect 33% of employees to be working remotely in January 2022. Those cutting space say they’re most likely to eliminate satellite offices.
But that’s the view from inside the whirlwind of the pandemic. The world may look and feel starkly different as vaccines are distributed and maskless human interaction slowly resumes. Right now it seems everyone is predicting the future of work. In 2021, it will arrive.