fortune--2020-08-04--Here’s what TikTok may look like if Microsoft buys it

Congress still ‘ a long ways away ’ from deal on bill that would include more stimulus checks

If you’re scratching your head over the prospect of technology giant Microsoft buying the trendy video-sharing app TikTok, you aren’t alone.
After all, Microsoft makes most of its money from selling Office software and Azure cloud computing to business customers. Its enterprise products are far afield from an app known for short videos of people lip syncing and dancing.
Nevertheless, Microsoft is pushing to negotiate a deal for TikTok’s U.S. operations before Sept. 15, the date when President Trump said he would ban TikTok in the U.S. He alleges that the app, owned by Chinese parent company ByteDance, is a national security threat.
So, if a sale is finalized, what would TikTok be like? The answer is mostly business as usual, according to analysts, who added that Microsoft may eventually try to tie the service into some of its business-oriented products.
For starters, Microsoft should resist immediately slapping its name on the service, explained Ari Lightman, a professor of digital media and marketing at Carnegie Mellon University. For many TikTok users, Microsoft doesn’t resonate at all as a desirable brand.
“I think if they brand it Microsoft, it will be the next Bing,” Lightman said, referring to Microsoft’s search engine that significantly lags Google’s. TikTok is all about cat videos and “people falling into pools—it’s entertainment,” he added, and not particularly corporate.
Microsoft may use TikTok to give its own product development a lift, Lightman added. Microsoft could mine the data TikTok collects, like what kind of content people are more inclined to share, to learn more about consumer behavior—an area in which it’s historically been weak.
Alex Zukin, an analyst for RBC Capital, added that Microsoft could weave parts of TikTok into its Office 365 suite of workplace software, including its Teams instant messaging service. Office workers would be able to create mini-video messages to send to colleagues, much like many of them do already do through a fast-rising workplace instant messaging service called Loom.
Whatever the case, TikTok could be a critical tool for Microsoft for making make sure that younger users are aware of its products—a challenge that Zukin described as Microsoft’s “most existential threat.”
Younger users are already familiar with Google, not only through its popular YouTube video service and search engine, but also by using Google products like Chromebook laptop computers at school. Because of this early indoctrination, many younger consumers “never get into the Microsoft ecosystem,” Zukin said.
In general, he expects Microsoft CEO Satya Nadella to leave TikTok’s U.S. service and leadership alone after an acquisition. It’s a similar strategy the company took following other big acquisitions in recent years like LinkedIn, developer service GitHub, and video game Minecraft.
The danger for Microsoft is to repeat the mistake of Skype, a once popular online calling service that floundered after Microsoft acquired it in 2011 and then imposed design changes, as Bloomberg reported in 2018. Microsoft also struck out with video-game viewing service Mixer, which it acquired in 2016, but then pulled the plug on earlier this year.
Both Zukin and Lightman said that TikTok would benefit from Microsoft’s Xbox gaming business by merging two different consumer worlds—video sharing and video gaming. People could share TikTok videos of themselves playing video games while viewers click a button to automatically open the same game to play via a cloud gaming service, which Microsoft is already developing.
Last year, Nadella hinted at Microsoft making a bigger push into consumer technology, substituting in the word “life.” In an interview with Fortune, he said: “Can we do more things around productivity across work and life? What can we do in gaming, obviously, which is entertainment? These are categories we’ve always been in.”
Perhaps TikTok is the answer.


fortune--2020-08-04--The next stimulus should be a no-regrets infrastructure bill

Here ’ s what TikTok may look like if Microsoft buys it

We are fighting some of the most challenging health and economic circumstances in our nation’s history and Congress is weighing the next stimulus. If lawmakers want to spark the economy, quickly create many jobs, and do the most good for the greatest number of Americans, there’s one clear answer: infrastructure investment.
This will have the additional benefit of making our economy more competitive globally by expanding U.S. capabilities, creating jobs, and providing opportunities for other nations to build and buy American products. If we are going to help the American people, let’s do it in a way that provides crucial jobs and lasting benefits to our society and economy. Let’s do something that we all know is needed and not kick the can down the road for another 12 months or 12 years.
Yes, it’s August in an election year, but a post-pandemic stimulus shouldn’t wait until next spring. Most political leaders agree that we need to invest in infrastructure to goose the economy and create more jobs. We simply cannot let the political season interfere when both parties agree that it would be incredibly valuable to the country now and in the future.
With tens of millions of Americans out of work and in need of jobs, let’s take an approach that actually saves us money in the long term. According to the American Society for Civil Engineers, “infrastructure deficiencies” cost each U.S. household an average of $3,400 every year, a number that will rise to $5,100 annually by 2026.
As Washington considers its next stimulus, it would do well to prioritize infrastructure investment—providing an infusion of jobs, expanded American manufacturing, more efficient transportation, and better safety. In addition, spending on infrastructure has a significant multiplier effect. A study by the Federal Reserve Bank of San Francisco estimates that every dollar of infrastructure spending produces $2 for the economy, and an Economic Policy Institute study found that each $100 billion in infrastructure spending will create about 1 million full-time jobs. Imagine what that would do for our flagging employment.
The Congressional Research Service explains the multiplier effect of infrastructure spending: “As the government hires contractors to complete new infrastructure projects, the employees and suppliers utilized by the contractors now have additional money as well, and will likely spend at least some of it on goods and services provided by other businesses. The successive flow of funds, first from the government to contractors, then to employees and suppliers, may result in a larger GDP increase than the original spending by the government.”
Strong action to build the U.S. economy is the best long-term strategy to recover from the unprecedented effects of COVID-19, prosper in the near term, and prepare for unforeseen events of the future. The coronavirus has forced us to reassess our ability to handle unexpected events and take a hard look at the efficiency of societal functions and processes. Modernizing U.S. infrastructure ranks at or near the top of the list of actions needed to ensure our economy is resilient enough to adapt to future challenges.
Much of the nation’s infrastructure was built during the New Deal and post-World War II eras and has far exceeded its planned lifecycle. The U.S. lags well behind many other global economic powers in terms of modernized infrastructure to match the increasingly interconnected and technologically advanced world. Annual infrastructure investment by federal, state, and local governments, which was 4.2% of GDP in the late 1930s, has fallen to about 1.5% of GDP.
As the world’s top economy, it’s time to leverage American strength to build infrastructure commensurate with our position.
We need to upgrade our roads, bridges, and mass transit systems, as well as modernize telecommunications and connectivity in order to stay competitive in an interdependent, worldwide economy. Of course, as a vital component of the modern world’s infrastructure—whether in transport systems, housing, manufacturing, agriculture, or energy—the steel industry may benefit from infrastructure spending.
But this is bigger than the need for infinitely recyclable steel; it’s about rebuilding and revitalizing a host of industries and opportunities in America. If we can dedicate resources and streamline government regulations while prioritizing environmental protection, the projects can serve the needs we have today and those of future generations.
In addition to a much-needed upgrade in the lives of Americans, these projects would fuel years of organic, home-grown economic growth through thousands of projects.
There is no better time to do an infrastructure bill. It’s critical that our elected leaders work together now to restore our nation’s infrastructure and help power our future economic growth.
David B. Burritt is president and CEO of United States Steel Corporation.


fortune--2020-08-04--Congress still ‘a long ways away’ from deal on bill that would include more stimulus checks

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An overwhelming majority of Americans want Congress to put political divides aside and send out a second round of stimulus checks.
A Fortune-SurveyMonkey poll* of 2,802 U.S. adults between July 17 and 21 finds 80% of U.S. adults support the federal government issuing a second round of stimulus checks. That’s up from 54% of U.S. adults who supported a second of stimulus checks back when Fortune-SurveyMonkey polled U.S. adults between May 20 and 26.
Both Democratic and Republican leaders support sending another round of $1,200 stimulus checks to Americans, however, any such proposal would be passed as part of a more expansion stimulus package. And the other items of such a bill, like state funding and expired enhanced unemployment benefits, are what the two sides are arguing about.
“We’re a long ways away from striking any kind of deal,” Mark Meadows, White House chief of staff, told reporters on Tuesday. Party leaders from both parties made it clear Tuesday little progress has been made in negotiations this week.
Issuing a second stimulus check has a majority of support in every demographic that Fortune-SurveyMonkey looked at. Among Republicans, 67% support a second round of checks, while 92% of Democrats and 86% of Independents do. White House officials have suggested the distribution of the second round of checks could be sped up, given the system is already in place. However, until the bill passes and the U.S. Department of the Treasury issues guidance, nothing is certain. But it’s safe to assume that when and if the parties can hammer out a deal, the checks for many Americans could come as early as two weeks after President Donald Trump signs it into law. *Methodology: The Fortune-SurveyMonkey poll was conducted among a national sample of 2,802 adults in the U.S. between July 17-21. This survey’s modeled error estimate is plus or minus 3 percentage points. The findings have been weighted for age, race, sex, education, and geography.


fortune--2020-08-04--Ford’s Jim Hackett had a bold vision—but couldn’t improve this all-important financial metric

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Jim Hackett tried to transform an old-line industrial icon by forging a daring template to go driverless and electric. As it turned out, what doomed Hackett was his failure to address what a bloated automaker needs most: a basic restructuring to squeeze far more dollars in profit from a shrunken, highly-efficient base of plants and design centers.
On August 4, Ford Motor announced that CEO Hackett will step down after a rocky tenure of just over three years. Unlike Hackett, who ran office furniture-manufacturer Steelcase before joining the automaker, Ford’s new CEO Jim Farley is one of its own. He’s a 13-year Ford veteran who rose in sales and marketing, and and advanced to COO in February, a move that anointed him as heir apparent.
In May of 2017, the Ford board promoted Hackett to CEO with a charge to “modernize” the 114-year-old carmaker. In pursuit of that mission, Hackett strove to curb manufacturing costs by deploying robots, and use common parts across the portfolio. His blueprint for streamlining outmoded design and development processes centered on introducing such techniques as 3D printing and virtual reality. Overall, Hackett followed a multi-front campaign. He aimed to fix, not ditch, failing overseas operations, notably in Europe. A second quest was advancing three promising new fields, electric vehicles, mobility including dynamic vans, and self-driving cars. Hackett also pledged to strengthen the profitable lines that are paying for the foreign losses and fresh investments (think trucks including Ford Ranger, and SUV and Crossover series—all the Big “E’s,” Explorer, Escape, Expedition, Edge and EcoSport).
Hackett made a number of smart moves, among them shedding almost all of its money-losing passenger car line from the budget Fiesta to the luxury Lincoln sedan, not to mention the fading Taurus, once America’s best selling brand. The all-electric Mustang Mach-E, due for launch in late 2020, is a potential hit that could prove a strong challenger to Tesla Model Y.
But overall, Hackett’s bold vision failed to deliver what’s essential to reviving an old-fashioned metal-bending enterprise: Consistently rising returns on investment from fresh and staple products. The way to get there? Through a combination of hammering down production costs, and lowering the up-front outlays for designing pioneering products and retooling plants.
A key metric shows that Ford’s numbers got worse under Hackett’s leadership. The yardstick is Cash Operating Return on Assets, or COROA, developed by leading accounting expert Jack Ciesielski. COROA measures the cash generated from all the factories, inventories and other assets invested in the business. Those total assets are the denominator. For the numerator, COROA uses cash from operations, but eliminates the effects of leverage and taxes by adding back cash payments for both to get “Operating Cash Flows.” What you see from COROA is a pure measure of management’s stewardship of all the dollars entrusted to them by shareholders.
For 2016, the year before Hackett took charge, Ford had an average of $266 billion in total assets on its balance sheet (including accumulated depreciation). It recorded $19.85 billion in cash from operations from those investments for a return of 9.2%. By Big Manfacturing standards, that number seemed middling. It trailed auto parts-maker Borg Warner by a wide margin, but almost matched conglomerate Danaher (9.2%) and edged out GM (8.6%).
But over the three years spanning 2017 to 2019, while Ford swelled its balance sheet, it produced less cash from all the extra investment. Over that period, its total average assets rose from $266 to $290 billion, or 9%, while its operating cash flow fell by $2.2 billion, to $17.64 billion. In other words, it posted a negative return of 8.5% on the $26 billion in added assets. As a result, its COROA dropped from 9.2% in 2016, to 8.2% in 2019.
Ford still managed to beat GM, whose performance deteriorated even more. But it stands well behind Danaher (9.8%) and Borg Warner (11.3%). Interestingly, Tesla was a laggard in 2016 at a negative COROA of .4%. But since then Tesla roared ahead: by 2019, Tesla’s COROA had jumped almost 9 points, pulling a bumper ahead of Ford at 8.2%.
That Ford has long been generating inadequate returns on capital, and that those returns are falling, is reflected in its stock price. At the close of 2019, its shares stood at $9.30, their level in 1987. In the pandemic crisis, Ford’s shares have sunk bo $6.84, dropping its market cap by one-fourth to just $27.2 billion.
Even at these levels, though, Ford is not a buy. The reason is fundamental: It’s stuck in a ferociously competitive, low-margin business. It also faces governments and unions that pressure automakers to keep outdated factories running to preserve jobs, and impose three levels of regulations governing emissions, safety and fuel efficiency. Plus, competitors are constantly launching hot new models, and matching or beating them requires multibillion investments that take years to pay off.
Ford’s best option for getting profitable is getting smaller. It can get there if it focuses in two areas, its highly lucrative SUV and truck brands, and electric cars that promise big growth in the years ahead. That course would force Ford to forget about building a glorious future to match its storied past—and instead settle for building a steady, reliable vehicle that can stay on the road.


fortune--2020-08-04--Disney Q3 earnings: Streaming a bright spot as parks and cruises plummet

Disney on Tuesday released its earnings numbers for the third quarter of fiscal 2020 and, as expected, its parks and cruises business took a hammering due the coronavirus pandemic.
One bright spot, however? Streaming. The company announced it now surpasses 100 million paid subscribers for its full direct-to-consumer portfolio, which includes Disney+, ESPN+, and Hulu. And with national movie theater chains still closed indefinitely, the company is making a bold gamble by releasing the anticipated live-action Mulan remake on streaming video on demand.
The tentpole will premiere on Disney+ on Sept. 4 for a price of $29.99, CEO Bob Chapek announced during an earnings call. Asked about the impact it could have on the traditional movie theater window, Chapek added: “We’re looking at Mulan as a one-off, as opposed to say, there’s some new business windowing model we’re looking at.” (Last month, Universal and AMC Theaters struck a deal to reduce the exclusive theatrical window for movies from 90 to 17 days.)
Shares of Disney initially declined following the report before rising about 2% in after-hours trading.
In the third quarter, which ended on June 27, Disney brought in $11.78 billion revenue versus analysts’ expected revenue of $12.39 billion. Disney managed to squeak by with a profit with its earnings per share at 8 cents versus an estimated loss of 64 cents.
Disney’s lone segment to increase revenue year-over-year was direct-to-consumer and international. More than half of Disney’s 100 million streaming subscribers are from Disney+, with a total of 60.5 million subscribers not even one year into service. Three million of those subscribers were added in the third quarter.
Prior to Disney+’s launch in November, the company had set an initial target of 60 million to 90 million subscribers by the end of fiscal 2024.
ESPN+ was a standout improvement during Q3 despite most live sports not yet returning during the third quarter. The service added 6.1 million subscribers for a total of 8.5 million. A year earlier, ESPN+ had just 2.4 million subscribers. Disney partially attributed the increase to the Ultimate Fighting Championship pay-per-view events during the period.
Disney’s theme parks and movie studios were not as fortunate, with segment revenues declining 85% and 55% year-over-year, respectively. The company lost $3.5 billion in operating income from its parks being closed during the quarter. Some of its parks, including Orlando’s Disney World, have since been able to reopen with limited capacity and strict social distancing measures.
“In an otherwise bleak earnings outlook, Disney’s explosive growth in its streaming business is the one saving grace, which is grabbing investor attention and causing the stock to rise,” Investing.com senior analyst Haris Anwar said.
“The company is taking full advantage of the stay-at-home environment and adding subscribers at a robust pace,” Anwar added. “Investors are looking beyond the tough quarter to continued reopening of parks, while Disney+ is expected to see further growth.”


fortune--2020-08-04--SEC reportedly investigating Kodak’s government loan and stock spike following Trump deal

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The Securities and Exchange Commission is reportedly investigating the circumstances around Kodak’s announcement last week that it had won a $765 million government loan to manufacture pharmaceutical ingredients—a deal that sent the legacy camera firm’s soaring.
While the agency’s probe is at an early stage, the Wall Street Journal reports that the SEC is looking into Kodak’s disclosure of the loan, which began to leak on Monday, July 27—one day before the official announcement that prompted a massive spike in the company’s theretofore struggling stock price.
Kodak’s trading volumes and share price were already on the rise before the announcement was made, a dynamic seemingly tied to leaks disseminated by local news outlets in the company’s hometown of Rochester, N.Y. The SEC is said to be scrutinizing Kodak’s handling of the announcement, according to the WSJ, to determine whether it fell afoul of disclosure requirements for publicly traded companies.
News of the SEC’s investigation comes one day after Sen. Elizabeth Warren (D-Mass.) sent a letter to SEC chairman Jay Clayton, urging him to “investigate potential incidents of insider trading” related to Kodak’s deal with the U.S. government.
In addition to criticizing Kodak’s handling of the disclosure, Warren raised questions over stock purchases made by the company’s board of directors—including chairman and CEO Jim Continenza—in advance of the announcement, “at a time when Kodak and the Trump administration were negotiating the deal in secret.”
A Kodak spokesperson told Fortune that the company “intends to fully cooperate with any potential inquiries.” Representatives for the SEC declined to comment.
The clouds forming over Kodak and its handling of the loan disclosure is putting a damper on its share price, which was down 3% at Tuesday’s close, to $14.40 per share. While that’s a significant decline from the $33.20 per share it closed at last Wednesday, it’s still up considerably from the $2-plus per share territory that Kodak had struggled to break out of since the start of 2019.
Update, August 4, 2020: This story has been updated to include comment from Kodak and the SEC.


fortune--2020-08-04--NBCUniversal begins layoffs in the midst of faltering ad sales

People stuck at home during the Covid-19 pandemic may be consuming more media than ever, but the ax is falling at the companies that provide much of their entertainment.
NBCUniversal has begun issuing pink slips to employees, a person with knowledge of the matter said Tuesday, the result of faltering advertising sales and a shutdown of movie and TV production. Part of Comcast Corp., NBC is eliminating jobs across its broadcast and cable-television businesses, movie studios and theme parks. The cuts may amount to 10% of its 35,000-person payroll, the Wall Street Journal reported.
AT&T Inc., whose WarnerMedia unit includes the Warner Bros. studio and cable channels such as HBO, CNN and TBS, has been making its own reductions. The phone giant is eliminating thousands of jobs companywide as part of a $6 billion belt-tightening effort, and WarnerMedia’s employees won’t be spared. That division is expected to begin layoffs next week, according to the Journal.
Entertainment companies have been slashing costs since the Covid-19 pandemic crippled their businesses, with job losses in related industries exceeding 800,000 in the second quarter, according to government employment data.
Theme parks closed for months, a huge blow to Walt Disney Co. and Comcast, and even the ones that have reopened are experiencing substantially weaker attendance. With movie theaters in the U.S. shut down as well, studios have been unable to market or release new pictures. TV production is only just beginning to creep back.
Advertising, a crucial revenue source to broadcast and cable networks, has plunged because of the pandemic and the shutdown of live sports, which are only just returning to the air. Comcast said last week ad revenue at its cable networks slumped 27% last quarter. Broadcast ad sales tumbled 28%.
ViacomCBS Inc., meanwhile, has been cutting hundreds of jobs as it combines the operations of Viacom Inc. and CBS Corp., which merged in December. The company plans to unload its Simon & Schuster publishing division as part of its consolidation. It’s also selling its Black Rock offices in New York, though that process has been delayed by the pandemic.
Disney, which operates theme parks, the ESPN sports network, and both film and TV studios, reports quarterly financial results after markets close later Tuesday.
Fox Corp., which also reports earnings Tuesday, let go fewer than 100 people in its sports division last month.
–With assistance from Scott Moritz.


fortune--2020-08-04--Ford replaces CEO Jim Hackett with COO Jim Farley, its third CEO in 8 Years

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Another three years, another CEO change at Ford Motor Co.
Jim Hackett, who took over the automaker in 2017 and led an effort to modernize its storied but financially struggling operations, will retire on October 1, Ford said Tuesday. He will be replaced as president and CEO by chief operating officer Jim Farley, who will now be responsible for driving the automaker through the rest of the COVID-19 pandemic, for boosting its competitiveness with higher-tech rivals—and for continuing to turn it around from the lingering effects of the Great Recession, more than a decade ago.
Farley, 58, has “great instincts for the future and the new technologies that are changing our industry,” executive chairman Bill Ford said in a company announcement, also thanking Hackett “for all he has done to modernize Ford and prepare us to compete and win in the future.” Hackett, 65, will remain a special advisor to the company through March 2021.
Ford has struggled with relatively flat sales and dwindling profits in the past few years, even before the COVID-19 pandemic temporarily halted its assembly lines and turned Ford into a ventilator manufacturer. Ford’s stock is down nearly 40% since the start of Hackett’s tenure, and shares rose 1.5% Tuesday after the CEO transition was announced.
Farley has been Hackett’s heir apparent since February, when Ford promoted him to chief operating officer. An industry lifer who spent the first half of his career at Toyota and joined Ford in 2007, he has since held various roles overseeing the company’s strategy, global marketing, and operations in Europe, the Middle East, and Africa. During a conference call Tuesday, he emphasized his plans to build on Hackett’s work to increase Ford’s competitiveness among fierce—and increasingly nontraditional—rivals.
“We know our competition today. It’s Amazon, Baidu, Tesla, Apple, Toyota, and others,” Farley said during a conference call with reporters. “They’re well-financed and voracious companies—and I’m inspired by the positive momentum that we’re now building.”
Farley inherits that tech-savvy focus from Hackett, a former Steelcase CEO who emphasized user experience and recently oversaw Ford’s quick pivot into making ventilators and other personal protective equipment this spring. After replacing Mark Fields, who also lasted three years, Hackett was tasked with both cutting costs and modernizing the automaker known for its founder’s invention of the assembly line.
With his emphasis on design thinking and high-tech innovations, including an electric Mustang, Hackett was a bit of an unusual choice for a Ford CEO. (At least, among white men with brief first names.) “Hackett is as close to an intellectual as the executive suite is ever likely to see, a strategist obsessed by so-called design thinking as a blueprint for doing business,” Fortune’s Adam Lashinsky wrote in a 2017 profile.
But “no matter how clever his ideas, Hackett has yet to distinguish himself financially,” Lashinky wrote 18 months later, adding that “Hackett can only last so long if the company’s stock remains a single-digit embarrassment. (It trades below $9 a share.)”
Today, Ford stock trades below $7 a share. And the clock appears to be starting on the next Ford CEO’s attempt to boost it, and the automaker’s future.


fortune--2020-08-04--Apple’s Phil Schiller moves to ‘fellow’ position, while Greg Joswiak takes on marketing role

Apple Inc. said Senior Vice President of Worldwide Marketing Phil Schiller is stepping aside and will be replaced in the most prominent marketing job in the electronics industry by Greg Joswiak.
Schiller, who has been at Apple since 1987, will move to an “Apple Fellow” role, according to a statement on Tuesday. Joswiak, a veteran leader in the product marketing organization, is promoted to Schiller’s SVP president position, Apple said. Schiller is 60.
In Schiller’s new role, he will continue to oversee the App Store and Apple events, and will report to CEO Tim Cook. Joswiak will be responsible for Apple’s product management and product marketing, developer relations, market research, business management, as well as education, enterprise and international marketing, the company said.


fortune--2020-08-04--Teen accused of Twitter hack pleads not guilty

A Florida teen identified as the mastermind of a scheme that gained control of Twitter accounts of prominent politicians, celebrities and technology moguls pleaded not guilty on Tuesday to multiple counts of fraud.
Graham Ivan Clark, 17, is accused of using the hijacked Twitter accounts to scam people around the world out of more than $100,000 in Bitcoin.
He is charged with 17 counts of communications fraud, 11 counts of fraudulent use of personal information, and one count each of organized fraud of more than $5,000 and accessing computers or electronic devices without authority. The brief hearing in Tampa took place via the video conferencing service Zoom.
Clark is scheduled for a bond hearing on Wednesday. He remains in the Hillsborough County Jail with bail set at $725,000, according to court records.
Clark was arrested on Friday in Tampa, and the Hillsborough State Attorney’s Office is prosecuting him as an adult, a news release said.
Two other men were also charged in the case. Mason Sheppard, 19, of Bognor Regis, U.K., and Nima Fazeli, 22, of Orlando were charged separately last week in California federal court.
As part of the high-profile security breach, bogus tweets were sent out on July 15 from the accounts of Barack Obama, Joe Biden, Mike Bloomberg and a number of tech billionaires including Amazon CEO Jeff Bezos, Microsoft co-founder Bill Gates and Tesla CEO Elon Musk. Celebrities Kanye West and his wife, Kim Kardashian West, were also hacked.
The tweets offered to send $2,000 for every $1,000 sent to an anonymous Bitcoin address.
Court papers in the California cases say Fazeli and Sheppard brokered the sale of Twitter accounts stolen by a hacker who identified himself as “Kirk,” and said he could “reset, swap and control any Twitter account at will” in exchange for cybercurrency payments, claiming to be a Twitter employee.
The documents do not specify Kirk’s real identity but say he is a teen being prosecuted in the Tampa area.
Twitter has said the hacker gained access to a company dashboard that manages accounts by using social engineering and spear-phishing smartphones to obtain credentials from “a small number” of Twitter employees “to gain access to our internal systems.” Spear-phishing uses email or other messaging to deceive people into sharing access credentials.
Although the case was investigated by the FBI and the U.S. Department of Justice, Hillsborough State Attorney Andrew Warren said his office is prosecuting Clark in state court because Florida law allows minors to be charged as adults in financial fraud cases when appropriate. He called Clark the leader of the hacking scam.
“This defendant lives here in Tampa, he committed the crime here, and he’ll be prosecuted here,” Warren said Friday.
Clark is represented by Tampa attorney David Weisbrod. He has not yet responded to a phone call seeking comment about his client’s case.
Fazeli’s father told The AP on Friday that he’s 100% sure his son is innocent.
“He’s a very good person, very honest, very smart and loyal,” Mohamad Fazeli said. “We are as shocked as everybody else. “I’m sure this is a mix up.”
Federal court records didn’t list attorneys for Sheppard or Fazeli.


fortune--2020-08-04--Why COVID-19 testing in the U.S. is still plagued with delays and inconsistencies

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It didn’t have to be this way.
A pandemic that emerged globally more than six months ago has now engulfed every part of our lives. The first reported case of COVID-19 in the U.S. occurred on Jan. 20. And yet, well into the summer of 2020, the United States can’t seem to get its act together on one of the most basic processes that can help control an outbreak: letting Americans know, in a timely manner, whether or not they actually have the coronavirus. Some have had to wait days, or even weeks, to receive a coronavirus test result.
There’s no single party at fault for our current diagnostic dilemma and the devastating toll this virus has wrought on American life. The Centers for Disease Control (CDC) botched the job at the earliest stages with a COVID test that just didn’t work. Many individuals in the U.S. have fumbled their responsibility to wear masks and socially distance, exacerbating the problem. Political leaders have given the nation wildly divergent advice on the best way to approach the kind of pandemic we have not seen in more than 100 years.
These various failures are inextricably linked and feed a vicious cycle. If you’re looking for someone to blame, it’s not so much a straight line as it is a constellation of culprits.
“We’ve had six months, and we haven’t built the infrastructure necessary, and I think a large part of the reason is because there hasn’t been a true interest in running a national infrastructure, and a belief that the pandemic was over in May,” says Ashish Jha, director of the Harvard Global Health Institute.
Experts from companies, laboratories, and hospitals, along with top government officials, tell Fortune they are trying their best to cut down how long it takes to get a COVID test result back, including prioritizing tests for certain people and promoting technologies that can deliver results within 15 minutes.
But it’s still a difficult circumstance for many workers, high-risk patients, and others who absolutely need tests with a quick turnaround time, yet may not have access to them.
The good news is that public health officials say testing capacity is growing. The bad news is that it’s still very inconsistent.
Health care workers use a nasal swab to test a person for COVID-19 at a pop-up testing site on July 22, 2020, in Pembroke Park, Fla. Joe Raedle—Getty Images
Stories from the pandemic
Danny Houk moved to New York City at the worst possible time. A Chicago transplant, he’s been in Brooklyn for nearly a year. The 33-year-old was laid off from a tech company during the pandemic. Houk is also a working actor—and that presents its own challenges. He got a gig from a production company slated to resume filming at the end of July.
But the results of the first coronavirus test he took on July 9, a requirement for being on set, hadn’t come back by late July. He took a second test from a different site on July 20 and received results within two days.
Antoinette, a 58-year-old schoolteacher in the Bronx who lives in New York’s Westchester County, had a similarly frustrating experience before a medically necessary colonoscopy. She had a polyp removed in early 2019 and was required to get a checkup a year later. That necessitated a COVID test, as is typical with procedures right now, and she received one on the morning of July 10. On July 15, two days before her procedure, Antoinette’s doctor called to say the test results still hadn’t come through. She took a rapid response test at 6 p.m. on July 16, the night before her colonoscopy, and received results within 15 minutes at White Plains Hospital. “I heard that for some other patients it was a 10-day turnaround time,” says Antoinette, who asked to use only her first name for privacy.
These aren’t unique tales. Delays and bizarre discrepancies in coronavirus testing times are hitting workers across industries such as Houk, everyday people who have mild symptoms or may have been exposed to the pathogen, and even patients who are most at risk for COVID-19 or waiting for medical procedures like Antoinette.
Testing companies and the federal government say they are doing their best to grapple with an impossible circumstance. And while experts who spoke with Fortune largely agree, they lament the failures that have built to this moment.
Trump administration officials at the Department of Health and Human Services (HHS) tell Fortune that testing capacity, as well as turnaround time, will improve significantly in the coming weeks.
“We have increased testing since March 12, when I took over in my position, by 32,000% in ACLA [American Clinical Laboratory Association] labs,” says Adm. Brett Giroir, assistant HHS secretary and one of the department’s previous coronavirus diagnostics czars.
Among commercial laboratories such as LabCorp and Quest Diagnostics, Giroir says that technologies such as “pooled testing” will decrease turnaround times significantly. “This will improve their efficiency by 20% or 30%,” adding that nursing homes, some of the highest-risk facilities, will also benefit from these investments.
But that may prove cold comfort to Americans facing a labyrinth of confusion and disparate results in getting a lab result returned. A COVID diagnostic taken at one facility may return results in mere days; another may take two weeks. But the interval between those days could spell the difference between protection and widespread infection, since people with the coronavirus may not have active symptoms.
How can you gird yourself and others against a pathogen if it takes that long to even realize you’re carrying it? While experts emphasize the importance of personal responsibility, not everyone, including essential employees in health care and multiple other fields, have the luxury of working from home during these times. Others in more niche industries face their own set of barriers.
Houk’s and Antoinette’s experiences encapsulate what Americans across the nation, especially those who can’t work or receive health care services without taking precautions, have had to tackle. Where he’s working, “they’re being super safe about all the requirements to make sure everyone’s tested,” Houk says. “And so they want to do a test two weeks out to see if you were positive for COVID.” Antoinette has a whole different set of problems as a teacher.
Two weeks is a generous time frame when it comes to testing. For travel purposes, you may have to prove you don’t have COVID-19 within just three days of flying to certain states.
Testing giants LabCorp and Quest Diagnostics, alongside public health experts, hospital laboratory directors, government officials, and industry groups, tell Fortune that a surge in recent cases and a lack of access to the machines and basic materials required to conduct these tests have brought us to a moment when coronavirus testing turnaround times can take five or more days on average.
A common theme among government officials, corporate leaders, and medical professionals is the efforts are moot if people don’t take personal responsibility and wear a mask, socially distance, and limit travel while more treatments and effective vaccines can be developed.
This gets at the heart of the problem: demand. As many cities and states have reopened, and only 67% of people report wearing a mask, coronavirus cases are surging across the country. It certainly doesn’t help that public officials have been playing a tug-of-war among one other, and sometimes with themselves, on advice to the public. States such as Florida and Arizona, which downplayed the risks of the pandemic in favor of reopening economies, have since retrenched, leaving their residents in a bind. And there’s only so much that companies and public facilities can do to meet the urgency of the moment.
“It really doesn’t matter if they wait five days, seven days, or 10 days” to get a test result, Giroir says, referring to those who are at low risk of COVID. He says the priority should be to test those who are most at risk—to triage, as multiple experts told Fortune.
“There is infinite demand and limited supply” for testing, Giroir says.
Giroir also points to another critical issue: The country needs to ramp up “point-of-care testing,” where swabs can be tested on site—whether that’s at a drive-thru location, hospital, or retail outlet like Walgreens—and results are delivered much faster. The American system is too reliant on tests that must be shipped off to a commercial laboratory that requires more complex machinery. And certain molecular diagnostic tests, including some which rely on “polymerase chain reaction,” or PCR technology, just take longer. Some types of PCR tests must cycle through multiple temperatures, heating up and then cooling down the sample. So the timeline for results depends on a lot of factors, most of which the patient doesn’t know at the time of the test.
“Commercial labs do about half of the overall testing, and the other half is done at a point-of-care site that can return results within 15 minutes or a local hospital with about a 24-hour turnaround time,” Giroir says. HHS has expanded partnerships with companies such as Hologic that produce machines that can do automated testing, which requires less manpower and less turnaround time.
Giroir says such efforts will contribute to lower turnaround times for test results. “Point-of-care will be an increasing share of the market,” he says. “In August, it should be a dominant share of the market. By September, we expect at least 15 million point-of-care tests.”
Why you haven’t received your test results
There are currently 36 molecular coronavirus diagnostic tests that have Food and Drug Administration (FDA) emergency authorization. These are the kinds of tests that can sniff out someone with an active case of COVID-19, as opposed to a blood test that senses whether or not you’ve developed COVID antibodies from a previous infection that may offer some immunity.
Taking these tests isn’t fun. A professional has to shove a swab up your nose, and perhaps also down your throat, depending on which test you’re given. Then those biological samples have to travel down links in the testing supply chain.
It’s a complicated system that requires the use of chemical reagents (essential components that induce a reaction telling you what’s happening on a biological level and what’s going on with a sample collected from a swab); testing kits that may include swabs, vials, and other clinical materials; and, critically, the availability of the machines that can conduct all of these tests, whether a point-of-care test or a more complex one.
And when the companies making all of those materials have to serve the entire world, that can be a big problem. Representatives from LabCorp, Quest Diagnostics, and the ACLA admit that the battle between supply and demand has brought them to their knees despite their best efforts.
“The most significant gating factor we currently face is limits to the testing platforms, the complex machines that perform the technical analysis, as well as reagents, or chemicals, required to perform testing,” says a spokesperson for Quest Diagnostics.
A spokesperson from the ACLA agrees: “We have seen a huge surge of demand over the last several weeks among our member groups. And while our labs are doing everything we can to continue to build capacity, I think the problem is that there are days where a lab is receiving more specimens than they can process in a day.”
LabCorp CEO Adam Schechter says the company is buying everything it can get its hands on. “We have bought every piece of equipment we can buy. I’ve even bought used equipment that I could find in the marketplace,” he says. “And we’re buying every reagent and test that we can find. We’re focused on testing in the U.S. because, you know, we’re a U.S. diagnostics testing company.”
How we can fix the situation
Schechter says one way LabCorp has dealt with this backlog is by incorporating as many platforms as possible. A COVID test created by, say, Roche, may be different from one created by LabCorp itself, or Abbott, or any of the dozens of other companies requiring various ingredients for their diagnostic potions. Roche’s test may require one kind of reagent or machine; Abbott’s may require another. But even having multiple machines at hand can’t make up for constantly surging demand.
Giroir from HHS says the federal government has done everything it can to buy up supplies in order to deliver them to local sites. The CDC declined to comment on its efforts to deploy reagents through an agency called the International Reagent Resource.
On July 21, Schechter said that LabCorp’s testing capacity had risen from about 2,000 to 3,000 tests per week to 165,000 tests per day across 14 laboratories in America working constant seven-day shifts including weekends and holidays.
Just five days later, LabCorp updated its numbers based on what the company said was a higher capacity, which had cut down on test delivery times: “With this additional capacity, we have reduced the average time to deliver results to two to three days from specimen pickup. For hospitalized patients, the average time for results is faster.”
In late July, Quest’s turnaround times were more than two days for priority 1 patients and seven or more days for nonpriority patients. Priority 1 patients are people who are actively sick in the hospital, health care workers showing COVID symptoms, or patients who are about to have certain procedures.
“Demand for our molecular diagnostic testing remains high as the virus has spread across much of the United States, particularly the South, Southwest, and West,” the company says in an emailed statement to Fortune in late July. “Persistent high demand has strained our testing capacity and extended delays for test results.”
But on August 3, the company noted a shift saying the situation has improved thanks to technologies such as pooled testing. The company said that average turnaround times had gone down to five or more days for nonpriority patients. It’s still at two days on average for priority 1 patients, but Quest expects that to go down to one day within the next week, along with three days for nonpriority patients.
“We expect this week to be the third consecutive week in which our capacity will exceed test orders, a pattern we have not seen since early June,” the company wrote in a press release. “The combination of growing capacity coupled with plateauing demand is translating into faster turnaround times for our COVID-19 molecular diagnostic testing.”
That’s still a pretty significant lag time.
Gary Procop, the head of clinical virology at the Cleveland Clinic who has direct oversight over the renowned institution’s COVID-19 testing, paints a bleak picture of what has led to this crisis. “It’s kind of everything,” he says. “Platforms that run the tests have been unavailable or on long waiting lists. Fortunately we’re a large laboratory; we’ve repurposed some machines. I don’t think we’ve stolen any yet.”
This is a problem that will only get worse, according to Procop, as flu season rears its head. Many of the same materials will be needed to conduct those tests.
He adds that the latest problem is “plastics”—the literal plastic plates and pipettes that you need to administer COVID tests. And that’s a problem he feels could be solved by the government through the Defense Production Act (DPA). “You could use that to get a General Motors or a Ford Motor Company to manufacture those parts,” he says.
Jha, Giroir, and other experts Fortune spoke with say that a production process is essential, but Giroir warns that the DPA isn’t a “magic wand.”
“We constantly do that,” says Giroir, referring to the DPA. “And yes, we’re working a lot with the supply chain, including on everything from test tubes to pipette tips, on everything. And not everything is known, because there are confidentiality issues, but you will see these things rolling out.”
Supply-chain issues are practical dilemmas. Policy issues and personal behavior are a different nightmare that have already dictated the course of this pandemic and will continue to do so.
“There’s a whole different set of national strategies or individual state strategies around the coronavirus,” says Jha. “The trouble is, if you build up local strategies in Arizona or Texas, that can hurt turnaround times for testing in Rhode Island or Massachusetts.”
“I think it’s just going to get worse in the coming weeks or months.”


fortune--2020-08-04--How antitrust investigations impact U.S. A.I. supremacy

Antitrust inquiries into U.S. tech giants could upend the development of artificial intelligence.
Last week, lawmakers interrogated the CEOs of Apple, Alphabet, Amazon, and Facebook about whether their companies have become too powerful. House members drilled in on Big Tech’s acquisitions (they allegedly stifle innovation) and their collection of huge amounts of data (it gives the companies a huge advantage over rivals in developing A.I. and improving their products).
But even if lawmakers agree Big Tech is too big, they are in a quandary about what to do about it. Should they break the companies up? Fine them? Do nothing?
As antitrust expert Dakota Foster recently explained in a paper for Georgetown University’s Center for Security and Emerging Technology, what Congress decides could be critical to the federal government. Research and technology from major tech companies both directly and indirectly benefits the Pentagon. Tech giants often open source their A.I. research, which means that the federal government can use the findings for free. The companies also sell cloud computing and A.I. services to government agencies.
By taking action, lawmakers risk hurting the ability of tech companies to develop A.I., Foster warned Fortune. They may end up cutting spending into A.I. research, and thereby achieve fewer technological breakthroughs.
In the past, the government would have been easily able to dump Big Tech in favor of contractors like Lockheed Martin and Raytheon, Foster explained. But in recent years, the tech giants have leapfrogged the defense industry’s A.I. skills, she said.
Members from both political parties are concerned that slowing progress by Big Tech in A.I. may benefit China. That country is investing heavily in A.I., with the goal of becoming the world’s leader 2030.
Whatever the case, the federal government shifting to using smaller U.S. tech companies as an alternative to Big Tech isn’t particularly realistic. The data used by the upstarts for A.I. projects isn’t as complete as what the tech giants have. Furthermore, the small fry lack the money to pay for the tremendous amount of computing power required for A.I. projects. At the same time, they face a tougher time attracting the necessary talent, she explained.
Still, smaller businesses could get some lift if Big Tech had its wings clipped. As Foster said, “there’s definitely an argument to be made” that the mere presence of Big Tech is curtailing innovation by smaller companies.
“If Facebook was founded today would it become the Facebook we now know?” Foster asked. “Some people say it’s just not possible given the [tech giants’] presence.”
Jonathan Vanian
@JonathanVanian
jonathan.vanian@fortune.com
A.I. IN THE NEWS
Siri’s legal problems. Apple is being sued by Chinese tech company Shanghai Zhizhen Network Technology, also known as Xiao-I, over allegations that the Siri voice-activated digital assistant “violated a patent the Chinese artificial-intelligence company owns for a virtual assistant whose technical architecture is similar to Siri’s,” The Wall Street Journal reported. Shanghai Zhizhen is seeking $1.43 billion in damages and wants Apple to "stop sales, production and the use of products flouting the patent—a category that includes virtually all the U.S. company’s devices,” the report said. Apple told the Journal that it disputes the allegations and it looks forward to "presenting the facts to the court."
Rite Aid waves goodbye to facial recognition. Rite Aid has ended the use of facial recognition technology at hundreds of its stores throughout the U.S. after a Reuters investigation revealed the extent of the drugstore’s use of the controversial technology. The Reuters article said that Rite Aid “deployed the technology in largely lower-income, non-white neighborhoods” in New York and Los Angeles and that some of the facial recognition tools the company used for over a year were created “from a company with links to China and its authoritarian government.” From the article: Among the systems used by Rite Aid was one from DeepCam LLC, which worked with a firm in China whose largest outside investor is a Chinese government fund. Some security experts said any program with connections to China was troubling because it could open the door to aggressive surveillance in the United States more typical of an autocratic state.
This agriculture startup just raised millions. Farmers Business Network, a startup specializing in data aggregation and analytical tools for farmers, has raised $250 million from investors like BlackRock, Kleiner Perkins, and GV (formerly Google Ventures), Bloomberg News reported. Farmers using the startup’s service share information like the size of their field or how much they paid for chemicals in order to get a better picture of pricing trends in agriculture. “The new capital will be used to expand its seed and crop protection business, which aims to help farmers reduce their cost of production,” the report said.
A.I.’s call of the wild. Researchers from Cornell University are using deep learning to analyze elephant calls that were recorded in the wild, NPR reported. The team of scientists have accumulated about “a million hours of tape,” which, as you can imagine, is a “very, very slow, very tedious” task to analyze, said Peter Wrege, a Cornell University behavioral ecologist. From NPR: We feed these models hundreds of examples of both audio clips with and without elephant calls, and then these deep learning models are, basically, over time able to learn specific features that the people training these models don't fully know ourselves.
EYE ON A.I. TALENT
ByteDance, which owns the video app TikTok, said that Ma Wei-Ying would no longer be the head of the company’s A.I. lab, Reuters reported. Ma, who previously joined ByteDance from Microsoft, will join an unspecified A.I. research institute at Tsinghua University and become a “technological consultant for ByteDance,” Asia-Pacific news outlet KrASIA reported. Microsoft is currently pursuing an acquisition of TikTok from ByteDance, which has come under fire from President Donald Trump over national security reasons.
VIDA Diagnostics, Inc. hired Todd Johnson to be the health tech startup’s chief technology officer. Johnson was previously the CTO of Evident, a company specializing in dental technology.
EYE ON A.I. RESEARCH
Night night, neural network. Researchers from institutions like Los Alamos National Laboratory and Drexel University published a paper about techniques they developed around so-called spiking neural networks, a kind of deep learning system. They describe their techniques as akin to the way sleep restores brain functions in humans. Researchers from companies like Intel have been experimenting with spiking neural networks for the development of neuromorphic computer chips, which, theoretically, would be powerful A.I. chips that conserve power by only activating when they receive the appropriate signal.
As Popular Mechanics describes in a story about the new paper, the researchers developed their “resting” techniques to help stabilize the spiking neural network during unsupervised learning:
In their paper, they describe incorporating "epochs of sinusoidally-modulated noise that we hypothesize are analogous to slow-wave sleep."
That means to achieve some semblance of artificial sleep, the researchers had to inject noise into the neural network. They experimented with a few different types of static, but ultimately settled on Gaussian noise waves, which include an array of different frequencies and amplitudes.
Watkins and her colleagues believe their new algorithm, which induces the noise, can mimic the slow wave sleep that rejuvenates the biological neurons in our own brains. "It was as though we were giving the neural networks the equivalent of a good night’s rest," she said.
The researchers presented their paper during the Conference on Computer Vision and Pattern Recognition in June.
FORTUNE ON A.I.
Congress wants to curb Big Tech. It could end up crushing startups instead—By Patricia Nakache
The U.S. and EU’s key data-protection deal is dead. How one of the world’s biggest data brokers is adapting—By David Meyer
Facebook and Amazon grilled over history of aggressive competitive practices at antitrust congressional hearing—By Danielle Abril
Google’s upcoming Grace Hopper subsea cable will span the Atlantic Ocean—By Jonathan Vanian
BRAIN FOOD
Drug discovery is very difficult and not even GPT-3 can help. Drug and pharmaceutical expert Derek Lowe wrote in his “In the pipeline” commentary about the limits of machine learning to aid the task of drug discovery. As he explains, machine learning doesn’t work well when it's applied to big problems that lack appropriate data, and he cites the classic “garbage in, garbage out” adage to highlight his point.
Unfortunately, when it comes to drug discovery, there’s “just a lot of things that we don’t know, and sometimes we are destined to find out about them very painfully and expensively,” he writes.
He explains that while research group OpenAI’s GPT-3 language technology has been receiving much hype as of late, the technology, while genuinely novel, is likely not going to uncover clues in DNA, for instance, if someone actually gave it DNA data to analyze. The text that OpenAI was trained on was ultimately created by humans, thus imbuing the information with some form of “human purpose and some level of intelligence,” he explains, inferring that this helps the language tech pick up on patterns within text data. But biological systems like the human brain or even the tiny fruit fly are “fundamentally different” and more complicated than anything people have ever created.
He writes:
But what happens if you feed a pile of (say) DNA sequence information into GPT3? Will it spit out plausible gene sequences for interesting new kinase enzymes or microtubule-associated proteins? I doubt it. In fact, I doubt it a lot, but I would be very happy to hear about anyone who’s tried it. Human writing, images that humans find useful or interesting, and human music already have our fingerprints all over them, but genomic sequences, well. . .they have a funkiness that is all their own. There are things that I’m sure the program could pick out, but I’d like to know how far that extends.
And even if it really gets into sequences, it’ll hit a wall pretty fast. There’s a lot more to a single living cell than its gene sequence; that’s one lesson that have had – should have had – beaten into our heads over and over. Now consider how much more there is to an entire living organism. I’m all for shoveling in DNA sequences, RNA sequences, protein sequences, three-dimensional protein structures, everything else that we can push in through the textual formatting slot, to see what the technology can make of it. But again, that’s only going to take you so far.


fortune--2020-08-04--Ralph Lauren’s dismal quarter shows it remains too reliant on department stores

Ralph Lauren reported poor first-quarter results on Tuesday that showed it will need to take more of its destiny into its own hands to weather major retail storms like the current COVID-19 crisis.
The fashion company reported weaker than expected sales, with North America revenue seeing the biggest decline, falling 77% to $165 million. In Europe, revenue decreased 67% and in Asia, the furthest market along in terms of recovering from COVID, it was down fell 34%.
Shares plunged 8% in mid-morning trading as Ralph Lauren reported revenue collapsed 65.9% year over year to $487.5 million, well below Wall Street forecasts.
In North America, business at its own stores fell 77%, and dropped 93% in its wholesale business, which includes sales to department stores like Macy’s and Nordstrom, clients that slammed the brakes on placing orders as their own sales collapsed. Yet unlike other fashion brands, Ralph Lauren didn’t get much relief from its online business, which rose a scant 3% during the quarter. (It fared better overseas.)
“A lot (of that) is simply down to Ralph Lauren being out of tune with patterns of demand during the pandemic and therefore not being a digital destination,” Neil Saunders, managing director of GlobalData Retail, wrote in a research note.
This adds urgency to Ralph Lauren’s ongoing efforts to sell more of its merchandise via its own stores and its own web site, which was not operating early on in the pandemic, and less through wholesalers.
The company did get dinged by the broader environment for fashion, with a bit of relief from its home goods business. The pandemic has led to fewer occasions like big weddings, more working from home and more caution about discretionary purchases, hurting not just Ralph Lauren, but many higher-end fashion brands.
This year alone, retailers from Lord & Taylor to Tailored Brands to Neiman Marcus have filed for bankruptcy protection. Ralph Lauren has a strong balance sheet which precludes that possibility as of now, but the company acknowledged it needs to reinvent its business, even as it has spent the last few years on a turnaround.
Ralph Lauren said that in the coming months, it will evaluate its “long-term operating structure to align with our evolving strategic priorities.” That means rethinking areas such as how it organizes its teams, its corporate office real estate and where it sells its products and its overall portfolio of brands, meaning Ralph Lauren could significantly curb its presence in some markets and increase in others.
“There’s an opportunity to reset in this environment, as we look at new consumer behaviors and the retail landscape,” Ralph Lauren CEO Patrice Louvet told Bloomberg News in an interview.
The company also pledged to expand the diversity of its staff, making moves such as interviewing two candidates from underrepresented groups for every leadership position, Louvet said on the company’s conference call. Ralph Lauren wants to have people of color make up 20% of the company’s global leadership or more by 2023.


fortune--2020-08-04--Google faces EU antitrust probe over the data implications of its Fitbit buy

There’s now no doubt about it: Europe’s regulators see data as a serious potential antitrust issue.
On Tuesday, the European Commission opened an in-depth investigation into Google’s proposed $2 billion takeover of Fitbit, the wearable-tech firm. The move follows warnings by consumer-rights and privacy advocates in the EU, the U.S. and Brazil, over the possible implications of the deal.
The gist of the probe is that Google—already the leader in online advertising in Europe, where it also has a 94% share of the search market—could further fortify that position by getting access to the health data that Fitbit holds.
Here’s Margrethe Vestager, the EU competition commissioner and digital champion, who has spent the last year warning about the effects of data’s misuse:
“The use of wearable devices by European consumers is expected to grow significantly in the coming years. This will go hand in hand with an exponential growth of data generated through these devices. This data provides key insights about the life and the health situation of the users of these devices. Our investigation aims to ensure that control by Google over data collected through wearable devices as a result of the transaction does not distort competition.”
Around a month ago, Vestager’s department was reported to be asking Google and Fitbit’s rivals about their views on the takeover. That exercise seems to have yielded enough concerns to merit a deeper investigation.
Google said in a Tuesday blog post that the deal was “about devices, not data.”
“We’ve been clear from the beginning that we will not use Fitbit health and wellness data for Google ads,” wrote Google devices and services chief Rick Osterloh. “We recently offered to make a legally binding commitment to the European Commission regarding our use of Fitbit data.”
The Commission noted Tuesday that Google had addressed its initial concerns by promising it would keep “certain data collected through wearable devices” separate from its other datasets, so it can’t be used to tailor ads for Fitbit and Google users.
But no dice. The Commission said Google’s proposal did not cover all the data it would get through the Fitbit buy.
Interestingly, Vestager’s antitrust squad won’t just be looking into the takeover’s potential effects on the European search and display advertising markets, and the advertising technology market—they will also delve into the questions of how the combination of the two companies’ databased might affect the nascent digital healthcare sector.
The team will even examine whether Google would have the “ability and incentive to degrade the interoperability of rivals’ wearables with Google’s Android operating system for smartphones once it owns Fitbit.”
Vestager has thus far whacked Google with three enormous fines, totaling over $9 billion, over its questionable behavior in the advertising, search and smartphone markets.
However, this is a different sort of probe. It’s not about past behavior, but rather about stopping Google from behaving badly in future. It should also take much less time—instead of years, the Commission has until December 9 to make up its mind about whether the takeover can go ahead, and with what strings attached.
The European Consumer Organisation (BEUC) praised the opening of the investigation.
“We have serious concerns that Google’s takeover of Fitbit could significantly harm consumers,” said BEUC director general Monique Goyens in a statement.
“This takeover is likely to be a worrying game-changer not only for how consumers interact with the online world but also for how their health data is used. It is hugely important that the EU carries-out this in-depth examination because wearable devices like Fitbit’s could in future give companies details of essentially everything consumers do 24/7 and feed digital services back to consumers.”


fortune--2020-08-04--Why Facebook is conspicuously silent about TikTok

Good morning, Data Sheet readers. Tech writer Danielle Abril here, filling in for Adam.
Facebook, once a big buyer of social media companies, is apparently steering clear of today’s hot acquisition target: TikTok.
Instead, Microsoft is an unlikely suitor for the U.S. operations of the fast-growing video-sharing platform, owned by Chinese tech firm ByteDance.
Concerned about TikTok’s ties to China, President Trump threatened to shut down the app in the U.S. if it’s not bought by Sept. 15. You could say that the clock is…tick-tocking for TikTok.
Facebook’s absence from any negotiations—at least as far as we know—is a departure from its previous strategy of scooping up companies that could eventually challenge its dominance. Remember Instagram, WhatsApp, and Oculus?
Facebook is unlikely to pursue TikTok for a few key reasons. First, legislators are currently scrutinizing Facebook over its past acquisitions, including Instagram. During last week’s antitrust hearing, members of Congress brought up some damning evidence, such as internal emails, that showed Facebook’s plan to neutralize competitors by buying them out.
Meanwhile, Facebook is also in the middle of an antitrust investigation by the Federal Trade Commission. Obviously, Facebook wants to avoid anything that could fuel further skepticism—like buying a big rival.
What’s more, Facebook typically acquires smaller companies, but TikTok is already sizable, said Jason Helfstein, analyst at investment bank Oppenheimer. Facebook paid $1 billion for Instagram in 2012 and $19 billion for WhatsApp in 2014. But the price of TikTok’s operations in the U.S., Canada, Australia, and New Zealand is expected to be higher than both of those acquisitions combined—close to $50 billion, according to some investors.
For a lot less money, Facebook could copy TikTok. That’s exactly what Facebook did when Snapchat became a threat. In fact, Facebook already plans to introduce a TikTok clone in the U.S., called Instagram Reels, in August. Better late than never, I guess.
So what does it mean for Facebook if Microsoft wins the TikTok sweepstakes? Not much, according Helfstein. TikTok “would have to get 10 times bigger before it would start to become a threat to Facebook from a revenue standpoint,” he said.
But Dan Ives, analyst at investment firm Wedbush Securities, had a starkly different take, suggesting Microsoft’s “war chest” and marketing budget could pose a “major threat” to Facebook. “To me, this would be a nightmare situation, competitively speaking.”
As Helfstein says, “Anything is possible until the ink is dry.”
This edition of Data Sheet was curated by Aric Jenkins.
NEWSWORTHY
TikTok’s on the clock. President Trump on Monday officially gave his blessing to Microsoft’s pursuit of Chinese-owned social media sensation TikTok. It was a sharp reversal from last week, when Trump said he was considering outright banning the app in the U.S. Microsoft now has until Sept. 15 to close the deal—which would see the tech giant take control of TikTok operations in the U.S., Canada, Australia, and New Zealand—or else Trump will make do with his threat. The president added that “a very substantial portion of that [sale] price is going to have to come into the Treasury of the United States, because we’re making it possible for this deal to happen,” though it’s unclear how exactly this would work, or if it is legal. Such an arrangement also assumes China is happy to allow this deal to proceed, which—as you probably can guess—it is not.
The O.G. cool kids app—Snapchat—is rolling out a TikTok-esque feature. That’s ironic, given how Snapchat’s successful “Stories” feature was ripped off by Instagram and pretty much every social media network afterwards. Nevertheless, it’s an opportunity for Snapchat to make a play on the music-played-over-funny-video trend that TikTok has popularized, especially with the future of the latter unclear in the U.S. The new feature will allow users to embed popular songs into clips, though Snapchat maintains it’s designed more intimately for sharing music with “close friends” rather than a public audience. Snapchat isn’t the only social media platform trying to level the playing field with TikTok—Facebook is rolling out “Instagram Reels” in a matter of weeks.
Facebook is gambling on the future of NYC—and offices. The social media behemoth on Monday signed a lease to rent all of the office space in the storied James A. Farley Building, the former main post-office hub just outside of Penn Station. The deal is significant: 1) Despite all the talk of permanent remote work in a post-coronavirus world—including plans from Facebook itself—the company is still betting on physical office space. And 2) that office space is situated in the same area as Google, Apple, and Amazon, further cementing New York as Silicon Valley East. The city could use Facebook’s presence in Midtown Manhattan, as the area and city as a whole struggles to rebuild an economy shattered by the pandemic.
Did someone mention Google? New Pixel phones are on the way. The company unveiled three new entries of its flagship smartphone model, including a $349 budget offering that will compete with the iPhone SE. That device will go by the name Pixel 4A, which is now available for pre-order before shipping on Aug. 20. There’s also the Pixel 5, which comes with the 5G, and the Pixel 4A 5G. Those two will ship sometime this fall.
FOOD FOR THOUGHT
Some choice quotes from President Trump’s latest interview with Axios:
On whether he found John Lewis’ life impressive:
I can’t say one way or another. I find a lot of people impressive, I find many people not impressive. But he didn’t come to my inauguration. He didn’t come to my State of the Union speeches. And that's OK. That's his right. And, again, nobody has done more for Black Americans than I have. He should have come. I think he made a big mistake.
On the coronavirus pandemic in the United States:
They are dying, that's true. And you have—it is what it is. But that doesn't mean we aren't doing everything we can. It's under control as much as you can control it. This is a horrible plague.
IN CASE YOU MISSED IT
Congress wants to curb Big Tech. It could end up crushing startups instead By Patricia Nakache
TikTok tit-for-tat? Beijing has no obvious answer to Trump’s app ban By Grady McGregor
Warning: This malware is tied to the Chinese government, U.S. says By Alyza Sebenius
Workday CEO Aneel Bhusri on wanting workers back in person, and needing to hire more than 3% Black employees By Maria Aspan
(Some of these stories require a subscription to access. Thank you for supporting our journalism.)
BEFORE YOU GO
The MLB restart has been, well, a bit of a disaster. And with the NFL’s intention to have teams travel for away games, a similar fate could be on the cards for football—Odell Beckham Jr. certainly thinks so. But the NBA’s “bubble” restart appears to have gone pretty swimmingly so far. So instead of the risk of infection, we can focus on these fun pieces like how coaches are enjoying—or detesting—the new casual dress code at the Disney World campus. Could this lead to a new era of polo-donning head coaches?
Aric Jenkins
@aricjenkins
aric.jenkins@fortune.com


fortune--2020-08-04--ADT and BBVA are now part of the Alphabet as Google grows its influence

Good morning, Term Sheeters. This is Fortune finance reporter Rey Mashayekhi, filling in today for Lucinda.
Google is not letting a recent wave of antitrust sentiment—epitomized by last week’s much-hyped Big Tech congressional hearing—get in the way of its designs.
A pair of announcements on Monday morning indicate just how wide-ranging the Silicon Valley giant’s ambitions remain. Most notably, Google unveiled a $450 million investment in home security provider ADT that picks up a 6.6% stake in one of the most recognizable names in electronic property security.
More important than the financials, the ADT deal gives Google an established vehicle through which it can deploy its Nest line of smart-home electronics and services to as many homes and businesses as possible. Google paid $3.2 billion to acquire Nest in 2014, and since then the brand has competed with Amazon’s Ring and other players in the battle to shape the smart home of the future (the sort of thing you would see in made-for-TV movies 20-plus years ago).
And ADT, which is owned by private equity giant Apollo Global Management, now has the power of Google’s brand and cutting-edge tech behind its own services. Investors certainly took kindly to the deal; ADT’s stock set a new 52-week high on Monday, and closed the day up nearly 57%.
But that wasn’t all going on with the Big G on Monday. There was also the announcement of a collaboration with BBVA USA—the Spanish bank’s American subsidiary team is teaming up with Google Pay to offer new digital banking services, like bank accounts that will couple BBVA’s infrastructure with Google’s front-end user experience.
BBVA is a winner here: A relatively small, regional banking player gets to deploy the Google Pay platform as it seeks to enhance its digital capabilities and keep up with the rapid tech transformation sweeping the banking sector (one undoubtedly accelerated by the pandemic). In a statement, BBVA USA president and CEO Javier Rodriguez Soler said the deal is “fully aligned” with the bank’s goals to “reach more customers with our digital offerings.”
But Google has plenty going for it as well. Tech firms have taken the lead on driving the financial sector’s digital evolution, with everyone from Apple to Facebook to PayPal to Square seeking to beat the banks at their own game when it comes to facilitating how people transact. The BBVA partnership is part and parcel of Google’s strategy; in fact, it’s reportedly only one of eight different partnerships with various banks and credit unions that will soon offer digital services through Google Pay.
It’s all a testament to the grand ambitions of the erstwhile Search Engine That Could—now a trillion-dollar, multinational behemoth that seeks to penetrate endless facets of how we live our lives, antitrust inquiries be damned.
Rey Mashayekhi
@reym12
rey.mashayekhi@fortune.com
Anne Sraders curated today’s Term Sheet.
VENTURE DEALS
-Indigo Agriculture, a Boston-based company and marketplace that helps farmers grow crops more sustainably and profitably, raised $360 million in extended Series F funding from investors including Alaska Permanent Fund and Flagship Pioneering.
-Farmer’s Business Network, a San Carlos, Calif.-based company that helps farmers share data and information with each other, raised $250 million in Series F funding. BlackRock led the round, and was joined by investors including Baron Capital Group, Balyasny Asset Management LP, Mandi Ventures, Lupa Systems and Ron Shaich.
-Grab, a Singapore-based ride-hailing and food delivery service, is raising $200 million from Stic Investments Inc., a private equity firm based in South Korea, Bloomberg reports citing sources. Read more.
-Yotpo, a New York City-based ecommerce marketing platform for retail brands, raised $75 million in Series E funding. Bessemer Venture Partners (BVP) led the round, and was joined by investors including Access Industries, Vertex Ventures, and Hanaco.
-PMV Pharmaceuticals, a Cranbury, N.J.-based developer of small molecule therapies to treat cancer, raised $70 million in Series D funding from investors including Avoro Capital, RA Capital Management, Wellington Management Company, OrbiMed Advisors, Nextech Invest, Viking Global Investors, and Boxer Capital of Tavistock Group.
-Buckle, a Jersey City, N.J.-based provider of ridesharing insurance for drivers, raised $31 million in Series A funding from HSCM Bermuda and Eos Venture Partners.
-Silverfort, a Tel Aviv-based secure multi-factor authentication solutions provider to keep networks safe without the need for proxies, raised $30 million in Series B funding. Aspect Ventures led the round, and was joined by investors including Citi Ventures, Maor Investments, TLV Partners, StageOne Ventures and Singtel Innov8.
-MikMak, a New York City-based ecommerce marketing platform, raised $10 million in Series A funding. Wavecrest Growth Partners led the round, and was joined by investors including Luminari Capital, Brave Ventures, Lunch Partners, Madrona Venture Group, and others. Read more.
-IgGenix, a South San Francisco-based biotech focused on therapies for food allergies, raised $10 million in Series A financing. Khosla Ventures led the round and was joined by Parker Ventures.
-Breezeway, a Boston-based property management platform, raised $8 million in Series A funding. Schooner Capital led the round, and was joined by investors including Tamarisc Ventures, Krillion Ventures, and Launch Capital.
-TaxScouts, a London-based tax preparation platform, raised £5 million ($6.5 million) in Series A funding. Octopus Ventures led the round, and was joined by investors including SpeedInvest, Seedcamp, Finch Capital, and Clocktower Technology Ventures.
-Truera, a Redwood City, Calif-based AI model intelligence platform developer, raised $5.1 million in funding. Greylock led the round, and was joined by investors including Wing VC, Conversion Capital, and Aaref Hilaly.
-hey, a Japan-based cashless payments and e-commerce platform for businesses, raised an undisclosed amount in Series E funding. Bain Capital Tech Opportunities led the round, and was joined by investors including PayPal Ventures, Goldman Sachs, YJ Capital, Anatole, Mitsubishi Corporation and World Innovation Group.
PRIVATE EQUITY
-Franklin Resources, operating as Franklin Templeton, completed its acquisition of Legg Mason, a Baltimore-based asset manager, for $4.5 billion. Read more.
-ReMed, owned by Baird Capital, acquired Learning Services Corp., a brain injury care services provider across the U.S. Financial terms were not disclosed.
-Globant (NYSE: GLOB), backed by Riverwood Capital, acquired gA, a Miami-based cloud and technology transformation services consulting platform. Financial terms were not disclosed.
-Thoma Bravo and Madison Dearborn Partners invested in Syntellis Performance Solutions, a Chicago-based enterprise software and data analytics provider for healthcare, financial services, and education businesses. Financial terms were not disclosed.
-GEM Global Yield invested in NuView Life Sciences, a Park City, Utah-based biotech specializing in cancer detection, to buy shares on a commitment basis valued at $90 million. Read more.
-EverWatch, backed by Enlightenment Capital, acquired BrainTrust, an Annapolis Junction, Md.-based systems engineering and software developer for U.S. military and intelligence customers. Financial terms were not disclosed.
-PolyVision, backed by Industrial Opportunity Partners, acquired Marsh Industries, a New Philadelphia, Ohio-based manufacturer of visual boards, space separators, and markerboards. Financial terms were not disclosed.
-ACON Investments acquired a majority stake in Alsur, a Spain-based canned vegetables producer. Financial terms were not disclosed.
-Clean Streak Ventures, owned by MKH Capital Partners, acquired 7 Bay Breeze Car Wash and Lube, a Tampa Bay, Fla.-based car wash operator. Financial terms were not disclosed.
-Turnspire Capital Partners agreed to acquire Goodyear’s Air Springs business, a Fairlawn, Ohio-based air springs provider for large vehicles and trucks, from EnPro Industries (NYSE: NPO). Financial terms were not disclosed.
OTHERS
-Lordstown Motors Corp, a Lordstown, Ohio-based electric work vehicles maker, will merge with DiamondPeak Holdings Corp, a blank check company, and go public on the Nasdaq as “RIDE”. The deal is valued at $1.6 billion. Read more.
-Intuit has agreed to acquire TradeGecko, a Singapore-based inventory management software provider, for over $80 million, Bloomberg reports citing sources. Read more.
-Dwayne “The Rock” Johnson, Dany Garcia, and RedBird Capital Partners will buy the assets of XFL, a professional football league whose parent company recently went bankrupt, for $15 million. Read more.
-Sotera Health acquired Iotron Industries, a Canada-based electron beam operator used to modify the molecular, chemical, and biological properties of materials. Financial terms were not disclosed.
BREAKUPS, HANGUPS, AND BANKRUPTCIES
-Benevis, a Marietta, Ga.-based support services provider for dentists, filed for bankruptcy protection.
IPOS
-Foley Trasimene Acquisition II, a Las Vegas-based blank check company led by investor Bill Foley, plans to raise up to $1.2 billion in an IPO. It is targeting investments in the financial technology space. It plans to list on the NYSE as“BFT.U”. Read more.
-Horizon Acquisition, a Greenwich, Conn.-based blank check company led by Eldridge Industries, plans to raise up to $500 million in an IPO. It is targeting investments in the financial services industry. It plans to list on the NYSE as “HZAC.U”. Read more.
-Freeline Therapeutics, a U.K.-based clinical stage gene therapy company focused on liver diseases, plans to raise $125 million in an IPO by offering 7.4 million American Depositary Shares (ADS) priced between $16 and $18. Syncona Portfolio Limited (64.7% pre-offering) and Novo Holdings A/S (6.6%) are among the company’s backers. It plans to list on the Nasdaq as “FRLN”. Read more.
-HighCape Capital Acquisition, a New York City-based blank check company formed by HighCape Capital, plans to raise up to $100 million in an IPO. It is targeting investments in the life sciences industry. It plans to list on the Nasdaq as “CAPAU”. Read more.
-GoodRx, the Santa Monica, Calif.-based prescription medication coupon company backed by investors including Silver Lake and Francisco Partners, confidentially filed for a potential IPO, Reuters reports citing sources. Read more.
EXITS
-GCM Grosvenor, a Chicago-based alternative asset management firm owned by investors including Hellman & Friedman, will merge with CF Finance Acquisition Corp, a blank check company formed by Cantor Fitzgerald, and will go public. The deal is valued at $2 billion. Read more.
-Motorola Solutions (NYSE: MSI) acquired Pelco, a Fresno, Calif.-based video security systems developer, from Transom Capital Group for $110 million in cash.
-Court Square Capital acquired interest in RailPros, an Irving, Texas-based railroad engineering and field services provider, from Bow River Capital. Financial terms were not disclosed.
F+FS
-Blackstone Group has raised $3.5 billion for its second Strategic Capital Fund. Read more.
-Blackbird Ventures, an Australian-based venture capital firm, has raised A$500 million ($357 million) for its fourth fund. Read more.
PEOPLE
-Blackstone added Christine Feng as a senior managing director. Feng was previously an executive at Amazon.
-Neotribe added Alex Salazar as a venture partner. Salazar was previously at Okta.


fortune--2020-08-04--Pandemic price gouging is a huge issue—but state laws to stop it are creating more problems than the

Pandemic price gouging is a huge issue—but state laws to stop it are creating more problems than they solve

Media coverage of price gouging during the COVID-19 pandemic has focused predominantly on individuals hoarding much-needed supplies and reselling them for high prices online. State price gouging laws are designed to prevent such actions—they exist to prevent sellers from taking advantage of consumers during a temporary state of emergency. Typically triggered by natural disasters, they often have a short life span.
Such laws were not designed to deal with the length and national scope of the current pandemic. As states of emergency continue, law-abiding businesses and consumers are suffering unintended consequences.
Businesses face a patchwork of these laws. At least 36 states have price gouging statutes, and they vary greatly. Some states prohibit all price increases during a state of emergency, while others prohibit increases over a set amount, and still others prohibit “unconscionable” price increases that provide little guidance to businesses.
The laws are ambiguous in other ways. Some expressly state that they apply to supply chain businesses; others do not. Some cover only materials necessary for emergency response; others also apply to more commonplace goods and services. Many are silent on whether businesses can continue with regularly scheduled price increases. Some are unclear as to whether they even remain in effect. This mishmash of laws has caused increasing difficulties throughout the economy.
For one, these laws have discouraged innovation and competition. COVID-19 has forced businesses to alter operations. From the end of March through mid-April, transactions at full-service restaurants plunged 79%. Grocery store food demand is up, with some nonperishables seeing over a 200% increase in demand. Suppliers have shifted production to meet demand, often having to retool plants, packaging, and logistics to get products to consumers. Many suppliers face increased costs throughout the supply chain. Businesses normally respond to price signals to make planning decisions, but now, prices are frozen or capped.
In response, some suppliers are likely sitting out the emergency instead of sending their products into new channels to respond to increased demand, for fear of being hit with a price gouging investigation or class action lawsuit. Likewise, businesses considering the launch of new products and charging more for them may be waiting until after the pandemic to enter the market.
Second, this patchwork of laws disrupts companies’ standard operations. Most businesses raise prices annually to account for inflation and to provide cost-of-living salary increases to employees. This year, such an increase could trigger investigations and lawsuits from state attorneys general and the private plaintiffs’ bar as possible price gouging. This creates a perverse incentive to hold down wages and reduce sales volume, while margins vanish.
The third issue with these laws is that their vagueness attracts class action lawsuits. Already, in one class action lawsuit for alleged price gouging during the pandemic, the plaintiffs did not know who to sue, so they sued almost everyone in the industry even though they “[could] not assert that every defendant engaged in price gouging.” This threat of being forced to defend against expensive litigation is a further hit to businesses. To avoid it, many of them are pulling back from entering new markets, upgrading their products, or developing new products—because they all could require price changes that might draw fire from overzealous class action lawyers.
Where should we go from here? The cleanest solution would be enacting a single nationwide price gouging law. This would enable businesses to adopt a clear and consistent compliance policy. Such action by Congress, however, seems unlikely. As an alternative, states could provide “reciprocity” to each other, so that a business complying with one state’s price gouging law would be deemed to be in compliance in the other states in which the business operates.
Even if every state continues on its own, states should improve their price gouging laws as follows. First, the extension of a state of emergency should not automatically extend the activation of price gouging laws. States should separately consider the impact of keeping their price gouging laws activated given the unintended consequences.
Second, price gouging law violations should not be subject to private lawsuits. State attorneys general should oversee these government-imposed price controls, not class action lawyers.
Third, price gouging statutes should be substantially clearer as to when and where they apply. To avoid chilling innovation and competition in areas unrelated to the emergency, these laws should only apply to the types of goods and services implicated by the emergency, and not to other goods and services for which it is counterproductive to control prices for months on end.
While well intended, existing price gouging laws are not tailored to meet the challenges of the COVID-19 pandemic. As states of emergency continue to be extended, it is becoming clear that such laws are unintentionally harming businesses and the economy, and ultimately harming consumers along the way.
Christopher E. Ondeck is co-chair of Proskauer’s antitrust group and leads the firm’s price gouging team. He represents clients in civil and criminal antitrust litigation, defending mergers and acquisitions before the U.S. antitrust agencies, defending companies involved in government investigations, and providing antitrust counseling.
Jennifer E. Tarr is an associate in Proskauer’s litigation department and a member of the firm’s antitrust group and price gouging team.


fortune--2020-08-04--Why Val Demings is the perfect running mate for Joe Biden

In his 1982 book Out of the Crisis, W. Edwards Deming, the Yale-trained industrial engineering visionary, transformed global management with the advice that emphasis should not be on speed of the activity but on why it should be done at all. Former Vice President Joe Biden has heeded that advice and slowed up the naming of a running mate.
Congresswoman Val Demings offers Biden a Deming-like reminder on why someone should assume the job of Vice President. It is to serve as he did, to be simpatico with the president—not just to be a tag team combatant in a three-month campaign, or a careerist seeking a credential for a next run themselves, but a four-year governing partner.
Thus, with 90 days to go before election day, Biden deferred by a week the announcement of his own vice presidential choice. This delay should be of no concern, as an announcement next week would still be a week ahead of the online Democratic convention on Aug. 17. Generally, the vice presidential nomination is only announced two to three days in advance of the convention. This gives everyone time to digest emerging information about the excellent array of prospects. In particular, many were surprised by Val Demings’s strong showing in recent major surveys.
Does it really matter who is selected? A Morning Consult survey of 2,000 registered voters last week found that Biden, when paired with each of 12 prominently named prospective women vice presidential candidates, handily beat the Trump-Pence ticket by equal margins. This could be interpreted many ways: the referendum on Trump is overwhelmingly the focus; the list of alternative candidates is very strong; or respondents were equally unfamiliar with the prospective nominees.
Interestingly, while Kamala Harris, Elizabeth Warren, Susan Rice, and Stacey Abrams had the highest name recognition in that new survey, they also had the highest favorable impressions matched by offsetting and equally high unfavorable ratings. More than half of these voters had never heard of Demings or other contenders such as Congresswoman Karen Bass or senators Tammy Duckworth and Tammy Baldwin.
Demings was not well known to much of the nation until, as a House Judiciary Committee member, she was made an impeachment manager by House Speaker Nancy Pelosi to guide the impeachment prosecution against President Trump. Demings showed a calm, prepared, eloquent, and unflappable demeanor. She was as renowned for her extensive knowledge of the allegations of presidential misconduct as she was for her understanding of the relevant constitutional issues.
At the same time, Demings’s foreign affairs and national security expertise has been deepened through her service on the homeland security and intelligence committees. These national priorities have not diverted her from tending to the issues key to her constituents in Florida’s 10th Congressional District, which range from protecting the Affordable Care Act to controlling gun violence. While only serving a few terms in Congress, Demings has served twice as long in Congress as did Abraham Lincoln.
Demings’s facility in balancing priorities as leader is anchored in her 29 years in public safety, where she ultimately rose to become police chief for Orlando. There were disappointing examples of excessive force under her watch, but still a remarkably low rate of officer misconduct and a dramatic drop in violent crime that had threatened the safety and economic vitality of this tourist-driven town’s economy. Demings was celebrated as a trailblazer: the first woman and second African American to lead this police department in the South.
While a tough crime fighter, she was also an effective community problem solver, drawing on skills she gained starting her career as a social worker. She gave out her personal phone number to community members with complaints. When a woman was being evicted because she refused to pay rent until her refrigerator was repaired, Demings went out and bought her a new one, defusing the standoff. Throughout this time, she worked effectively with businesses such as Disney and Comcast.
Demings has recently shown a capability to take on national discussions over police brutality against Black Americans. In the aftermath of George Floyd’s death in Minneapolis, Demings authored a Washington Post piece entitled “My fellow brothers and sisters in blue, what the hell are you doing?” In that piece she addressed the importance of matching the power and authority of law enforcement with a local community’s need for safety, trust, and fairness.
These are qualities we would want to see in any leader, but Demings also has noteworthy experience in national and municipal politics. She also has foundational values that most Americans share. She was raised in a two-room home as the daughter of a maid and a janitor, neither of whom lived long enough to see her enter the U.S. Congress. But they did see her lead her class at her police academy and eventually become chief of police. A mother of three and a churchgoing, gun-owning Harley-Davidson rider, Demings understands the core of this nation, which needs someone to unite them.
Former governor and fellow member of Congress Charlie Crist said of Demings recently: “I don’t know if you could find a better qualification for someone for this moment in time.”
With a Wall Street Journal/NBC survey last month showing that only 19% of Americans feel the nation is headed in the right direction, Biden’s “soul of America” and “build back better” campaign themes have great resonance. Demings can help bring those themes to life. She is an inspiring incarnation of the American dream.
Jeffrey Sonnenfeld is senior associate dean for leadership studies and Lester Crown professor of leadership studies at the Yale School of Management.