fortune--2020-02-24--Italy, Iran, South Korea: Coronavirus pandemic fears grow as cases spike outside China

Are we undergoing an industrial revolution or a phase change ?

The emergence of new centers of coronavirus infection outside of China is fueling concern the outbreak could become a global pandemic, rattling financial markets and stoking anxiety over the potential hit to economies.
While the outbreak in China appears to be becoming more predictable, the virus is taking hold in other parts of the world, with increasing infection and death tolls in South Korea, Italy and parts of the Middle East sparking the most alarm.
These bursts of infections could drive a second peak in an epidemic that’s already killed more than 2,400 in China and severely disrupted global business and travel activity.
In Italy and Iran, the mortality rate from the pneumonia-causing virus appears to be much higher than that in China, hinting at hundreds or thousands of still-undiscovered cases of infection. In South Korea, which has the most in-country cases outside of China, the government raised its public health alert to the highest level, allowing it to quarantine cities, delay the start of school and restrict people’s movements.
“At the moment, the death rate is running at about 3%,” Paul Hunter, a professor at the University of East Anglia’s Norwich Medical School, said in a televised interview. “That is almost certainly going to rise.”
Stocks and higher-yielding assets retreated across Asia Monday, as investors grappled with the implications of the widening outbreak.
Not Just China
“There is now very justifiably concern that this is a global pandemic and not just a China issue,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore. “The markets were taking consolation earlier on from the maturing spread cycle in China, which may no longer be the pertinent metric to follow now if it is the spread outside of China that’s causing concern.”
In China, still home to the vast majority of the almost 80,000 cases of infection that have emerged globally, there are some signs the outbreak has stabilized, and the economy is starting to move past the state of stasis that’s gripped it since the Lunar New Year holiday.
Tourists wearing protective facemasks and a Carnival mask visit the Piazza San Marco, in Venice, on Feb. 24, 2020. ANDREA PATTARO/AFP via Getty Images
While mistrust lingers over shifting data from Hubei province, new cases of infection released daily appear to have stabilized at several hundred, while the same metric at the China-wide level has been declining for three days.
Crises Elsewhere
There has also been an uptick in the number of recoveries from the virus in China and other Asian cities like Singapore. In the rest of China outside of Hubei, more than half of all cases are now declared recovered and discharged from hospital: 7,996 patients have officially recovered out of 12,863 total cases of infection in the country excluding Hubei. In Singapore, fully-recovered patients now number 47 out of a total of 86.
Underscoring the shifting mood in China, six provinces — including manufacturing center Guangdong — downgraded their emergency threat levels on Monday, paving the way for restaurants and shops to re-open. Local factories, where month-long shutdowns have disrupted global supply chains for everything from watches to lobsters, are coming back to life.
Still, China appears to be at a dilemma over how to re-start its ailing economy without prematurely lifting the draconian measures that’s managed to slow the virus’ spread. In an unusual public flip-flop, Wuhan announced that there would be some easing of quarantine over the city that’s been in place since Jan. 23. Hours later, the statement was deleted and another saying that the announcement was “unauthorized” was issued. The quarantine remains in effect.
And the cautious optimism over the situation in China is overshadowed by the growing crises in other regions. South Korea now has more than 750 confirmed cases of the virus, and will send 1,000 hospital beds to Daegu, ground zero for the virus’s spread there. Screening will be expanded to all residents who show symptoms of infection in the city, with Vice Health Minister Kim Ganglip telling reporters Monday there was a high risk of “nationwide spread” if they aren’t able to contain the disease.
South Korea warned the epidemic poses a risk to its fragile economic recovery as airlines halted flights and travel agencies canceled group tours to the country. Samsung Electronics Co. and LG Electronics Inc. are among major companies taking precautions as the outbreak rapidly gathers pace.
”I don’t think it can be contained and there is a long way to go before reaching the turning point,” said Ben Cowling, a professor of epidemiology at Hong Kong University. “The roles will soon be reversed — countries that had banned travel from China may soon see China ban travel from them.”
Restaurants Closed
Italy is becoming a virus hotspot, raising alarm levels given the European Union’s policy of free movement of people and goods within the 27-nation bloc. The Italian government canceled the remaining days of the Venice Carnival at the weekend and universities and restaurants have been closed with three deaths and at least 140 infections recorded.
Austria halted train traffic from Italy on Sunday as an area of 50,000 people near Milan was locked down amid the surge in cases.
“I suspect we’re going to see quite a few more cases reported from Italy,” Norwich Medical School’s Hunter said. “Whether the Italians will manage to contain the outbreak or whether it has already spread more widely throughout Europe, only the coming days will tell.”
In Iran, reports there of eight deaths out of 43 infections — which equates to a mortality rate of 18.6% — sparked widespread concern that the extent of the virus’ spread within the closed-off country is being covered up. The mortality rate in China, where there is more than 76,000 cases, is 3.2%.
Kuwait and Bahrain reported their first cases of the virus on Monday, linked to people who traveled back from Iran.
At a weekend meeting of Group of 20 finance chiefs in Saudi Arabia, concerns over the virus’s spread dominated discussions. Kristalina Georgieva, the International Monetary Fund’s managing director, said the outbreak would trim 0.1 percentage points from the IMF’s global growth forecast, but that it’s also looking at more “dire” scenarios.
“We do not know what will be the next steps, indeed if the epidemic will turn to pandemic or not,” French Finance Minister Bruno Le Maire told Bloomberg TV, referring to the official definition of a pandemic as an outbreak spreading across multiple continents. “But we have to be prepared.”
More must-read stories from Fortune:
—20 maps charting the rise of the modern megacity around the globe
—Coronavirus misinformation is fueled by government mistrust in China
—In China, oil won’t be the only energy sector battered by the coronavirus
—Europe wants business to share its data and open up A.I. systems for scrutiny
—Fortune Explains: Tariffs and trade wars
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-02-24--Are we undergoing an industrial revolution or a phase change?

‘ Namaste Trump : ’ India ’ s Modi welcomes U.S. president with pomp and pageantry as trade tensions simmer

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning.
Bill Davidow, one of Silicon Valley’s pioneers, stopped by the Fortune offices in New York last week. He spent a career at HP and Intel and then founded Mohr Davidow venture capital. At 84, he deserves some down time. But instead, he’s got a new book out—The Autonomous Revolution—coauthored with long-time tech journalist Michael Malone. I read it this weekend; it’s worth your attention.
Davidow’s main argument is that the “Fourth Industrial Revolution” rubric, popularized by the World Economic Forum’s Klaus Schwab, understates what is really going on today. He sees something much bigger. Borrowing a term from the physical sciences, he calls it “phase change”—similar to water changing to ice or to steam. The agricultural revolution was the first great historical phase change; the industrial revolution was the second; and the autonomous revolution will be the third, but hit much faster. “If we believe that we are experiencing the next phase of the Industrial Revolution,” Davidow argues, “we will fail to address new challenges at their roots and we will miss out on great opportunities. Worse still, we will apply obsolete solutions to our most pressing problems.”
What happens in a “phase change”? It is not just economic but also profound social change. “Our institutions will assume new forms and operate using different tools and according to new rules; our sense of time, space, and self will be irrevocably altered. Our memories of what came before the new epoch will be skewed and the few revenants from the past that do survive it will have limited applicability in the future.”
The book is a short read: 200 pages. Davidow and Malone don’t try to make detailed predictions about the future; they simply say why they think the change will be more fundamental than most acknowledge. They raise the prospect of considerable social upheaval ahead. But they end optimistically, saying America’s “sacred values, such as democracy, equality, and liberty and freedom for all, will enable our leaders to bring us together in pursuit of common goals.”
Unfortunately, there was little evidence of that in the weekend’s political news, with one party embracing the tactics of authoritarianism while the other lurched toward (democratic) socialism.
More news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
Stocks slide
The unrelenting spread of the Covid-19 coronavirus is hammering markets today. In Asia, the Hang Seng was down 1.8%, the Nikkei 225 0.4% and the Kospi 3.9% (South Korea is experiencing a worsening outbreak). The sea of red is deepening in Europe, where the Stoxx 600 is down 3.7%. A significant outbreak is happening in northern Italy, where some municipalities are on lockdown, but to what avail? European contagion now looks increasingly likely. The tourism sector is getting particularly beaten up today. Guardian
Intuit and Credit Karma
TurboTax-maker Intuit is reportedly nearing a deal to buy Credit Karma for around $7 billion. The purchase of the personal-finance portal would be Intuit's largest yet, and the first sizeable transaction under the stewardship of newish CEO Sasan Goodarzi. Wall Street Journal
HSBC CEO
Whoever HSBC's new CEO will be, it won't be UniCredit's Jean Pierre Mustier, who just pulled out of the race to stick with the bank he already fronts. So HSBC's seven-month search continues, leaving open the question of who will actually implement its huge restructuring plan, which involve the shedding of 35,000 jobs. Bloomberg
Barclays CEO
Meanwhile, Barclays is also looking for a new CEO, with current chief Jes Staley (the one being investigated over links to Jeffrey Epstein) being on his way out. The process is expected to take up to a year: six months for the hunt and six for potential gardening-leave requirements. Financial Times
AROUND THE WATER COOLER
Supply chains
A whopping 94% of the Fortune 1000 is seeing supply-chain disruptions as a result of the coronavirus outbreak. And while most will be aware of the statuses of their Tier 1 suppliers, many have little interaction with their suppliers' suppliers. Fortune
Boeing suppliers
Boeing is to give more support to its 737 MAX suppliers, both as preparation for a resumption in production and as a disincentive to looking for more Airbus business. Around 600 Boeing suppliers have been in limbo since the U.S. planemaker suspended MAX production last month. WSJ
Crown Resorts
James Packer's Crown Resorts, an Australian gambling giant, is being investigated over suspected links to organized crime, including alleged money-laundering. The public inquiry, being conducted by the New South Wales gaming authority, follows allegations in the media last week. BBC
Post-Buffett
Warren Buffett, soon to be 90, is staying on as Berkshire Hathaway CEO and chairman. But, as laid out in his latest annual missive to shareholders, he does have a succession plan for his fortune—namely, that the executors of his will and trustees to his estate may not sell any Berkshire shares. Fortune
This edition of CEO Daily was edited by David Meyer.


fortune--2020-02-24--‘Namaste Trump:’ India’s Modi welcomes U.S. president with pomp and pageantry as trade tensions simm

‘Namaste Trump:’ India’s Modi welcomes U.S. president with pomp and pageantry as trade tensions simmer

Donald Trump got a red-carpet welcome after Air Force One touched down Monday in Ahmedabad, India, kicking off a two-day visit to the country that’s as much about spectacle as substance.
Hundreds of performing artists crowded the Ahmedabad airport as Trump’s plane landed. He was greeted by Prime Minister Narendra Modi as drummers and dancers carrying colorful cloth umbrellas performed on the tarmac.
The scene opened a day that will be packed with pageantry for the American president, who’s made no secret of his predilection for large crowds and impressive displays.
Modi is hoping the welcome in his home state of Gujarat will further solidify his friendship with Trump and strengthen bonds with the U.S. that have frayed over trade disputes.
From the airport, Trump’s motorcade is expected to wind through 22 kilometers (13.7 miles) of roads to a new, 110,000-seat cricket stadium where both leaders will speak at an event billed as “Namaste Trump.” Modi and Trump appeared at a similar event — dubbed “Howdy, Modi!” — last year in Houston.
Numbers Game
Trump has repeatedly boasted about the crowds he anticipates for the India roadshow. “I hear they’re going to have 10 million people. They say anywhere from six to 10 million people are going to be showing up along the route to one of the largest stadiums in the world, the largest cricket stadium in the world,” Trump told a campaign rally audience in Colorado Springs, Colorado, last week.
On Sunday, as he departed the White House, he told reporters that “millions and millions of people” would attend the event.
“Some people say the biggest event they’ve ever had in India,” Trump said. “That’s what the prime minister told me; this will be the biggest event they’ve ever had.”
Indian officials estimated the crowd size would be closer to 100,000 — the entire population of Ahmedabad was 5.6 million as of a 2011 census — but still anticipated an impressive showing for the U.S. leader.
U.S. President Donald Trump and First Lady Melania Trump leave after attending a ‘Namaste Trump’ rally at Sardar Patel Stadium in Motera, on the outskirts of Ahmedabad, on Feb. 24, 2020. MANDEL NGAN—AFP via Getty Images
Workers in the city have been furiously resurfacing streets and repainting overpasses in anticipation of Trump’s visit, and a 200-yard wall was erected to block the views of a slum near the airport. Billboards along the route feature images of the two leaders emblazoned with slogans promoting the visit.
Investment Hopes
Nimesh Barot, associate vice-president at Tata Consultancy Services, said excitement was building across the city.
“There are lots of Gujaratis in the U.S,” Barot, 47, said in Gujarat’s largest city. “They don’t mind the disturbance that this program will cause on a Monday — route diversions, schools and colleges have been closed — because President Trump’s visit will bring the world’s focus on Ahmedabad.”
Baro is part of the BAPS Swaminarayan religious sect that is popular among most Gujarati-speaking Hindu Indian Americans. The sect, which runs 140 temples across the U.S., is building a huge temple spread over 200 acres in Robinsville, New Jersey.
Between the airport and stadium, Trump is expected to visit the Gandhi Ashram at Sabarmati, a residence of Mahatma Gandhi during the Indian independence movement.
Gandhi lived for years in a modest cottage at the site, famously departing in 1930 to lead the 24-day Dandi March in protest of the British monopoly on salt. The demonstration focused attention worldwide on the Indian resistance and Gandhi’s nonviolent protest tactics, and was seen as a catalyst for attaining the country’s independence from the British Raj.
The flag-waving and cheering crowds on the streets were equaled by the scene at Sardar Patel Stadium, which will be the world’s largest cricket facility once a $100 million renovation is completed.
“We know that this is a political visit for Trump,” said Hakim Patel, 52, who sells electrical products. “He is trying to impress the rich Gujaratis and Indians in the U.S. by coming to Ahmedabad. Ordinary people like us can only hope that Trump will help India by investing here.”
Foreign Tours
The Indian prime minister has sought to leverage foreign leader tours into increased international visibility for Ahmedabad. He hosted Japanese Prime Minister Shinzo Abe and Israeli Prime Minister Benjamin Netanyahu there before Trump. Modi’s hope is to offer an alternative vision to the city’s association with deadly anti-Muslim riots in 2002 which occurred while he was the state’s chief minister.
Following the rally at the cricket stadium, Trump will return to the airport and fly to Agra, where he’s planning to visit the iconic Taj Mahal. The U.S. president once owned a casino in Atlantic City whose design referenced the UNESCO World Heritage site.
Officials in Agra have also been busy ahead of Trump’s visit, with workers cleaning walls and fountains at the monument. Last week, the government released millions of liters of additional water from the canal network that feeds the Yamuna River in an effort to mask pollution that plagues water in the city.
A tougher problem might be the pervasive monkey population that roams the grounds of the nearly four-century-old mausoleum, which along with other stray animals have occasionally attacked tourists at the complex. Security officials have been armed with hand-held slingshots to ward off monkeys, India Today reported.
Trump will then depart for Delhi, where he’ll spend the night before a series of meetings with government officials and business leaders on Tuesday. He’s expected to conclude his trip that evening with a dinner at the presidential palace.
More must-read stories from Fortune:
—20 maps charting the rise of the modern megacity around the globe
—Coronavirus misinformation is fueled by government mistrust in China
—In China, oil won’t be the only energy sector battered by the coronavirus
—Europe wants business to share its data and open up A.I. systems for scrutiny
—Fortune Explains: Tariffs and trade wars
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-02-24--Global markets plunge as coronavirus crisis rocks Italy

This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.
Good morning, and greetings from Italy, the new front line in this global health crisis. All indicators are pointing to one of the worst—if not the worst—trading sessions since the coronavirus outbreak first emerged in mid-January, with the Dow and S&P 500 pegged to open down about 2%. I’m seeing a “- 722” handle on Dow futures flash across my screen right now.
What’s moving markets? It’s all coronavirus.
Markets update
The Asian and European markets are deep in the red this morning, as are U.S. futures. The South Korean and Italian markets plunged on Monday as both countries deal with a spike in new infections. Samsung shut down key business operations in the country as the number of cases hit 763.
Here in Italy, the cases are confined to the country’s industrious north, which is triggering all kinds of concerns the stalled economy could plunge into recession in coming quarters. Local authorities, meanwhile, have locked down towns, companies have closed offices in Milan and beyond, and Venice called off carnival festivities. Italy’s main bourse is down 4.4% as I type.
European airlines, travel and leisure and automotive sectors are among the worst performers. Budget airline EasyJet sunk 11.5% in early trading. The benchmark Stoxx Europe 600 Index fell as much as 3.6%, the most since June 2016.
Looking out more broadly, the dollar is soaring, crude is falling and the 30-year U.S. Treasury hit an all-time low as investors flock to safe havens.
We’ll be following the coronavirus fallout all week. But I want to switch gears now to another big piece of news from over the weekend: Warren Buffett‘s annual letter to shareholders.
Buffett’s big bets
At the end of last week, speculation was rife that Warren Buffett would reveal a succession plan as the Berkshire Hathaway CEO nears his 90th birthday. News flash: the greatest stock-picker of his time isn’t going anywhere.
But there was still plenty of news in his annual letter, and in the accompanying 2019 full-year report. I’m going to touch on one: the big changes in Berkshire’s stock portfolio, subject of today’s chart.
***
When the buy-and-hold Buffett piles into a company, it’s an enormous vote of confidence for that stock and for its management team. Conversely, when he reduces his holding it’s a warning that the company is on the wrong track.
So, who’s Buffett bullish on?
Let’s start at the top. Berkshire acquired 10.2 million shares of Visa, a stake worth a bit under $2 billion at year-end. Buffett is also long JP Morgan Chase and Bank of America, as the chart above shows. Berkshire increased its JP Morgan Chase holdings by 20% in the past year.
Buffett’s not sold on all his Big Finance bets, however. Berkshire cut back on Goldman Sachs and Wells Fargo, by one-third and nearly one-quarter, respectively. It also sold off some Apple shares.
On most normal days, that kind of news would weigh heavily on those particular stocks. But the coronavirus contagion is the giant gravitational pull on the markets these days. It’s taking everything down with it—even Buffett’s more beloved holdings.
That’s it for me. I’ll see you here tomorrow, everyone. Buona giornata.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
Today's reads
November surprise? President Trump’s re-election is by no means a foregone conclusion, and investors shouldn’t underestimate the potential for turbulence in some market sectors. So say UBS, which thinks investors are still too confident that a Trump re-election is a given, reports Fortune’s Anne Sraders. Recent national polls "portend a close general election contest between any Democratic nominee and President Trump", says UBS Global Wealth Management's chief investment officer Mark Haefele, cautioning that "investors might be underestimating the risk of higher volatility in certain sectors that are sensitive to potential policy changes."
Tax deal. With the U.S. tax season in full swing, tax and accounting software giant Intuit is set to pounce on personal-finance portal Credit Karma Inc. Intuit, well known for its TurboTax software, is nearing a deal to buy the San Francisco-based startup for about $7 billion in cash and stock, propelling the company further into the realm of consumer finance, The Wall Street Journal reports.
HSBC setback. The six-month-long search for a new chief executive at Europe’s biggest bank, HSBC, looks set to drag on even longer. Jean Pierre Mustier, the chief executive of Italy’s UniCredit, had been identified as the preferred external candidate by HSBC’s board of directors, setting up a potential two-horse contest with internal contender Noel Quinn, named interim chief executive in August. However, Mustier phoned Mark Tucker, HSBC’s chairman, Sunday to tell him he was no longer interested in the job and had decided to stay at UniCredit, the Financial Times reported.
Market candy
Quote of the day. “Charlie and I long ago entered the urgent zone.”
Legendary investor Warren Buffett, reassuring Berkshire Hathaway shareholders in his annual letter that the company is 100% prepared for the departure of Buffett, 89, and partner Charlie Munger, 96. The Oracle of Omaha told how, long ago, a friend in his 80s, Joe Rosenfield, received a letter from his local newspaper asking for biographical details it could use in Rosenfield’s obituary. When he didn’t reply, the newspaper sent a second letter, marked “URGENT.”


fortune--2020-02-24--The world’s longest bull run lasted 12 years. Why it ended today

The longest bull run in the world ended Monday.
Malaysia’s benchmark FTSE Bursa Malaysia KLCI index had dropped 2.69% at market close, as political upheaval wreaked uncertainty and confusion in the stock market. The dip extended the market’s drop from its April 2018 peak to 21%, concluding a 12-year streak in which the country’s stock market went longer than any others without a 20% correction.
The run started in 2008, as the nation’s economy emerged from the global financial crisis. It came close to ending last year, when the index dropped 18%, but it recovered and the stretch persisted until Monday.
The day saw Malaysia’s 94-year-old prime minister Mahathir Mohamad resign amid rumors that he was attempting to prevent his named successor and erstwhile rival, Anwar Ibrahim, from succeeding him as prime minister.
The decision capped a chaotic few days in Malaysia. The drama erupted in earnest over the weekend, when a flurry of inter-party meetings that included a breakaway faction of Anwar’s own party raised speculation that Mahathir was attempting to form a new coalition “backdoor government” to prevent Anwar, his on-again, off-again political rival from becoming prime minister.
Mahathir met with Malaysia’s King on Sunday about the matter; Anwar met with the King on Monday. Malaysia’s system of government is a parliamentary democracy with a federal constitutional monarch, and the King has the power to call a snap election.
Mahathir’s political party quit the ruling government coalition on Monday and several cabinet members also announced they were defecting from Anwar’s political party. Almost immediately after that, Mahathir offered his resignation as prime minister with no explanation, throwing the government into further turmoil.
It is unclear who will succeed Mahathir as prime minister, whether elections will take place, or which parties in the country’s multi-party system may ally to form a ruling coalition. And Mahathir’s tendered resignation may not mean he is actually stepping down—there is speculation that it is “a tactical move to buy time to cobble together a new majority to form a government,” according to the Associated Press.
Nevertheless, the market has delivered its verdict on the upheaval thus far. “Stock markets don’t like uncertainty,” said Lim Mah Hui, a Kuala Lumpur-based economist and former banker.
Monday’s drop of 2.69% represented a 21% decline from the index’s April 2018 peak, which occurred one month before the general election that ousted Najib Razak, the prime minister linked to the 1MDB fund scandal, and brought back former prime minister Mahathir, who—at the time—formed an election alliance with Anwar and ran on a promise to eventually hand power over to Anwar after two years.
The KLCI index represents the 30 largest companies in Malaysia by market capitalization. An increase in foreign investment and stronger domestic investment helped fuel its 12-year bull run, which began in January 2008.
Malaysia also has a defensive stock market, meaning its listed companies have relatively stable shares that can weather economic fluctuations. The bull run outlasted uncertainties like Malaysia’s 1MDB scandal, believed to be one of the largest financial frauds in history, and global economic hits like the U.S.-China trade war.
Beyond the immediate jitters caused by the political uncertainty, other factors were threatening to bring Malaysia’s bull run to an end, Lim said. The political brouhaha added stress to a financial market already beset by uncertainty around the growing global economic toll of the coronavirus outbreak that originated in China.
“Nobody knows and can yet quantify how much impact [the coronavirus] will have on the global economy, and on Malaysia of course,” Lim said.
Chinese visitors to Malaysia also make up a significant chunk of tourism revenue. Growth forecasts for the country have already been cut in response to the coronavirus.
“Malaysia’s biggest trading partner is China,” Lim said. “If China sneezes, Malaysia catches cold.”
More must-read stories from Fortune:
—20 maps charting the rise of the modern megacity around the globe
—Coronavirus misinformation is fueled by government mistrust in China
—In China, oil won’t be the only energy sector battered by the coronavirus
—Europe wants business to share its data and open up A.I. systems for scrutiny
—Fortune Explains: Tariffs and trade wars
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-02-24--Coronavirus infection at Samsung factory prompts South Korean firms to prepare for the worst

Samsung Electronics Co., LG Electronics Inc. and other companies in South Korea are taking precautions against the coronavirus after a rising number of cases in the country, including the infection of a Samsung employee at a local production facility.
The country’s largest technology company shut down operations at a plant in Gumi City over the weekend after the employee tested positive for the virus, and said it planned to restart operations at Monday afternoon local time. Samsung Electronics shares slid as much as 3% in Seoul.
While the novel coronavirus originated in China, it is now spreading to other countries, including Korea with more than 750 confirmed cases. Companies from Japan to Singapore are taking steps to limit the spread among employees and within their facilities.
South Korea’s Centers for Disease Control said Monday there are are 161 more virus cases, bringing the total to 763. The death toll rose by 2 to 7 people. The city of Daegu has seen a spike in case in recent days.
The won dropped to a six-month low and stocks plunged after South Korea raised its infectious-disease alert to the highest level as the coronavirus outbreak worsened.
The Samsung case is troubling because Gumi has a collection of facilities operated by Samsung, LG Electronics, LG Display, Toray Group and other companies. Samsung has two production lines in Gumi, about 200 kilometers (124 miles) southeast of Seoul, for some of its smartphones.
LG Electronics, which has TV plants in the Gumi industrial complex, told workers who commute from Daegu to work from home. LG Display has instructed workers who have visited the Daegu area to not come into the office for two weeks, while headquarters staff are restricted from visting the region without approval from management.
Samsung has shifted more than half of its smartphone production to Vietnam but still produces some of its premium models at the Gumi complex. The stoppage at the plant may affect production of Samsung’s high-end models including the foldable Galaxy Z Flip and the Galaxy Fold.
More must-read stories from Fortune:
—Billionaires are donating to fight China’s coronavirus. Where is the money going?
—China’s high smoking rate may be exacerbating the coronavirus outbreak
—In China, oil won’t be the only energy sector battered by the coronavirus
—Coronavirus misinformation is fueled by government mistrust in China
—Coronavirus may be the straw that breaks the back of oil fracking
Subscribe to Fortune’s Brainstorm Health for daily updates on biopharma and health care.


fortune--2020-02-24--Intuit to acquire Credit Karma for $7.1 billion

As coronavirus ravages the stock market , here are the biggest losers ( and a few surprising winners )

Intuit, the software giant behind TurboTax, is buying personal finance website Credit Karma for about $7.1 billion in cash and stock.
San Francisco-based Credit Karma has garnered more than 100 million users by offering free credit scores since it was founded in 2007. The financial technology startup offers other services too, including the ability to apply for a credit card, find an auto loan, or start a savings account. The combination will help consumers manage debt, maximize savings, and have better access to credit cards and loans, Intuit said in a statement Monday.
Fintech companies are at a crossroads where a number of them are established enough to go public, but a spate of poor-performing IPOs are making acquisitions more attractive. At the same time, incumbent companies aren’t afraid to snap up startups as a way to fuel their own growth. “The fertile M&A market, shift to growth stage investments, and rich valuations open the door for a lot of discussions, as well as distractions,” said Lindsay Davis, an analyst at CB Insights. “Fintech startups will have a choice to take a deal or buckle down and focus on filling product gaps.”
Perhaps most similar to Intuit, Credit Karma also launched a free tax-filing platform a few years ago and has been trying to poach customers of Intuit’s TurboTax offering.
More than 30 million users log into Credit Karma every week, the company has said. These users don’t pay the company for any of its services, and Credit Karma makes money through an affiliate fee it receives when someone successfully applies for a loan or credit card on its platform. Credit Karma generated almost $1 billion in unaudited revenue last year, up 20% from 2018, Intuit said.
Intuit also reported fiscal second-quarter results, with revenue up 13% in the period to $1.7 billion, topping the average analyst estimate of $1.68 billion. Net income rose 27% to $240 million, or 91 cents a share, in the three months ended Jan. 31. The company reiterated its fiscal 2020 outlook for revenue of $7.44 billion to $7.54 billion. The transaction is expected to be neutral or add to Intuit’s adjusted earnings per share in the first full fiscal year after the transaction closes, the company said.
The deal is only the latest in a slew of acquisitions in the industry. Morgan Stanley recently announced plans to buy E*Trade Financial for $13 billion, while Visa agreed to acquire Plaid for $5.3 billion in January.
Late last year, PayPal Holdings snapped up online coupon company Honey Science for $4 billion and Charles Schwab is acquiring TD Ameritrade Holding for $26 billion.
QED Investors, Ribbit Capital, and Founders Fund were early backers of Credit Karma.
More must-read stories from Fortune:
—Apple corrects for coronavirus to keep next iPhones on track
—Did the ‘techlash’ kill Alphabet’s city of the future?
—How technology is changing how we volunteer
—Oracle and Google will face off in tech’s trial of the century
—A.I. is transforming the job interview—and everything after
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-02-24--Coronavirus fears batter the stock market, wiping out all of this year’s gains

For weeks, investors put on a brave smile—and a fiscal face mask—hoping not to catch the COVID-19 coronavirus. But optimism finally turned to panic Monday as investors started to realize that there’s no such thing as an economic quarantine when it comes to the spread of this disease.
By the market close on Monday, the S&P 500 was down 111.85 (3.4%), Dow Jones Industrials was off 1,031.40 (3.6%), the Nasdaq was down 355.31 (3.7%), and the Russell 2000 had dropped 48.81 (2.9%).
Though a 3% drop is certainly unnerving for investors, a retreat of that magnitude is actually more common than many might assume, as the table below shows.
The biggest loss, of course, came on Oct. 19, 1987, known as Black Monday, which saw the Dow fall 22.6% and the S&P 500 lose 20.4%. While today doesn’t compare, Monday’s trading still wiped out all the year’s gains for the S&P 500, Dow, and Russell 2000. Only the tech-heavy Nasdaq kept any growth, and that was cut to 2.8% for the year.
“I do believe [the drop is] the concern of just how much this is going to clip global growth,” said Jamie Cox, managing partner at Harris Financial Group. “The bond market has been pricing this in for a couple of weeks now.” Not all sectors were hit equally: while the energy sector of the S&P 500 fell 4.7%, real estate was only off 1.3%.
For weeks equities had seemed to shrug off the economic germaphobia for a few reasons. One, according to Cox, was because of the strength in tech stocks. “When the majority of your stock indexes have tech stocks, it’s easy for them to mask the effect,” he said. But without strength across a broad enough collection of stocks, the indexes eventually feel the pain.
Then there have been central banks, which have used monetary policy in a bid to maintain growth and accommodate the markets. “There’s a lot of easy money out there,” said Carter Henderson, portfolio specialist and director of institutional development at Fort Pitt Capital Group. “It kind of kept markets in a delicate balance. But [disease] developments over the weekend opened the eyes of investors.”
Specifically, the increase of outbreaks in South Korea and Italy. Those spots are likely to be a far better predictor of what could happen in the U.S. than China is, according to some public health experts.
The big question at the moment is how much worse could things get in the short term. The answer, experts say, is “plenty.”
“You’ve got the Coronavirus and surge of Bernie Sanders and they’re feeding off each other,” observes William Zox, chief investment officer for fixed income at Diamond Hill Capital Management. “Regardless of what you think about the risks of the coronavirus, it looks like it could have enough of an effect on the economy, both in terms of significance and duration, that it could impact the election.” That, in turn, could cause further worry and downward pressure on stocks.
Victor Carlström, chairman of investment firm Vinacossa Enterprises, thinks U.S. investors are vastly underestimating the severity of the disease and its impacts. His company has offices in the U.S., Singapore, Cyprus, and Sweden and he travels heavily.
“I just got off the phone with a major fund manager in Singapore, and they are in a panic mode,” Carlström said. “All stores and malls are empty, and a lot of people are staying home, presumably because of the virus threat.” He’s also worried about signs that economic activity in Europe has slowed significantly.
“The only place where people act normal is in the U.S.,” Carlström said. First quarter earnings will be a “big shock because there’s no consuming in the rest of the world.”
More must-read stories from Fortune:
—Warren Buffett lays out a succession plan—for his Berkshire shares
—Europe’s first big Covid-19 outbreak roils global markets
—Investors shouldn’t underestimate election volatility, warns UBS
—You can now buy a fractional share of Amazon stock
—Big ideas for fixing global cities’ most daunting challenges


fortune--2020-02-24--Coronavirus interruption of drug supply chain pushes Sanofi to open a firm in France

Coronavirus should not make investors panic .
But it should make them do this

This is the web version of Brainstorm Health Daily, Fortune’s daily newsletter on the top health care news. To get it delivered daily to your in-box, sign up here.
Happy Monday, readers.
I spoke with Sanofi CEO Paul Hudson today about the company’s latest ambition—creating a massive new drug manufacturing company based in Europe. That may sound like a natural business decision for a French pharmaceutical giant, but it has a very specific implication as the coronavirus outbreak rages on in Asia and beyond.
China is one of the world’s largest manufacturers of active pharmaceutical ingredients (APIs)—the main chemicals at the heart of medicines used by millions across the world. The way the coronavirus outbreak has affected the country’s medical supply chains underscores why Sanofi wants to create an API manufacturing firm in France, according to Hudson.
“This recent challenge of coronavirus has brought it acutely into focus that Europe can’t wait longer to create this European powerhouse for manufacturing drugs,” he told Fortune.
This (as-of-yet-unnamed) new organization will aim to create active drug ingredients for hundreds of third party partners across a myriad of disease spaces, with a goal of going public by 2022.
“Some essential medicines are hard to get in the pharmacy in Europe,” said Hudson. “Why? Because over time, we pressured the price to be so low, it could only be made in China or India. And then if you come to a situation where China or India can’t make that supply, it’s patients in Europe who can’t get access.”
Hudson, a decades-long biopharma veteran, has only been in the top perch at Sanofi since September 2019. But he’s already made his mark with executive shakeups and a transformation of the company’s underlying business strategy. For more on our conversation and Sanofi’s goals with this new company, head over here.
Read on for the day’s news.
Sy Mukherjee
sayak.mukherjee@fortune.com
@the_sy_guy
DIGITAL HEALTH
HHS proposes strategy for reducing government red tape for health tech. It may not be the most tantalizing of developments, but it's an important one: The Department of Health and Human Services (HHS) has released a new strategy memo for cutting down on the federal government's administrative bureaucracy that might make it harder to use health tech such as electronic health records (EHRs)—a medical technology with a plethora of problems, as readers know. The Centers for Medicare & Medicaid Services (CMS), which oversees massive government programs such as Medicare, Medicaid, and the Affordable Care Act, collaborated with the Office of the National Coordinator for Health Information Technology (ONC) to create the report, which was mandated by the 21 Century Cures Act signed into law by President Barack Obama in 2016. The main goals of the strategic document are to make the EHR data collection process faster for medical professionals, including by addressing regulatory reporting requirements that may slow down the process.
Juul to suspend sales in Indonesia indefinitely. Reuters reports that vaping giant Juul plans to shut down sales in Indonesia, one of the world's largest (and most unregulated) groups of users of tobacco and nicotine products. The beleaguered firm says that uncertainty about whether or not local Indonesian shops will enforce procedures to prevent sales to minors drove the decision. At the same time, New Zealand (another country the company has targeted for expansion amidst criticism in the U.S.) has decided to ban vaping ads and sales to minors; the combined effect is a big freeze in Juul's growth plans mere weeks after the firm raised $700 million in convertible debt to fuel its operations. (Reuters)
INDICATIONS
FDA approves Esperion's new cholesterol drug. The Food and Drug Administration (FDA) approved Esperion Therapeutics' cholesterol treatment Nexletol, sending the biotech's shares up 3% in Monday trading. The drug is part of a new class of cholesterol-busting medicines (not to mention Esperion's first approval in the U.S.), meant to be used on top of statins in patients who have especially high levels of "bad" LDL cholesterol. What's striking is Esperion's somewhat middle-of-the-road pricing strategy for the treatment; companies like Amgen and Sanofi/Regeneron's own newfangled cholesterol medications haven't rung in impressive sales given how expensive they are compared with statins, and Esperion is pricing its once-a-day treatment at $10 per pill.
Report: Coronavirus could lead to shortages of 150 drugs. Axios reports that FDA officials believe that the coronavirus outbreak could lead to a shortage of some 150 drugs. Much of this has to do with China's outsize role in manufacturing medications (particularly generic drugs) and the havoc the virus has wreaked on supply chains in the country.
THE BIG PICTURE
Fears grow as coronavirus spreads abroad while China cases fall. Here's the good news: Coronavirus cases inside of China finally appear to be falling. Now for the more concerning part: Outbreaks in Italy, Iran, South Korea, Japan, and several other nations have public health officials on high alert (and global markets in utter turmoil). The World Health Organization (WHO) has approached the growing number of cases with a mix of a call to vigilance, especially in countries with weak health systems, and a caution against panic.
White House set to ask for $1 billion in coronavirus funds. The Trump administration will ask Congress for $1 billion in funding to fight the coronavirus outbreak, according to Politico. But, if that figure is accurate, it would be a far cry from what some public health experts have said is the appropriate funding level for the testing, treatment, and R&D efforts to tackle coronavirus. (Politico)
REQUIRED READING
Warren Buffett lays out a succession plan for his Berkshire shares, by Bernhard Warner
The world's longest bull run lasted 12 years. Why it ended today, by Naomi Xu Elegant
Apple course corrects for the coronavirus to keep its next iPhones on track, by Don Reisinger
You don't have to become a manager to grow your career, by Sarah Fielding
Sign up for other Fortune newsletters.


fortune--2020-02-24--‘I’d follow her to hell.’ Meet President Trump’s Giuliani-approved power broker—and Melania’s new se

‘I’d follow her to hell.’ Meet President Trump’s Giuliani-approved power broker—and Melania’s new senior adviser

The run-up to a political convention unfolds a bit like the plot of a teen movie, but instead of a high school crush on the line, it’s the presidency.
In that movie, Marcia Lee Kelly, CEO of the 2020 Republican National Convention, would be the President’s pal, loyal to a fault and willing to make the impossible at least somewhat possible to ensure that he gets what he wants.
Kelly tells Fortune she hasn’t lived with her husband for nearly six years and regularly sleeps on her office couch in order to serve at the will of President Donald Trump.
Her job for the past 14 months has been to create a fete so grandiose that it propels Trump straight into the White House for another four years. She has another 180 or so days to get the job done.
To accomplish her mission, says Kelly, she has had to take an event mired in the long-standing politics of career Republicans and drain the swamp, so to speak. Kelly sees herself as a businessperson first, political entity second.
Her office, however, tells a different story.
This is Trump country
Located a few stories above the NASCAR Hall of Fame in Charlotte, the liminal space leading to Kelly’s desk is covered with a rug replicating Trump’s official seal. Even before crossing that threshold, one must pass a giant portrait of Trump and Vice President Mike Pence, along with three gold-framed photos of Trump, Pence, and Republican National Committee (RNC) Chair Ronna Romney McDaniel.
The rest of the office space is chock-full of Trump swag. In one room, a gold-framed presidential tweet sits proudly on a shelf. “I have never seen a thin person drinking Diet Coke,” it reads.
Kelly has made it clear: This is Trump country.
While Democrats fret over what very well may be a brokered convention this July, Republicans already have their nominee ready to go for their convention in August. It’s not politics they need to think about, it’s pageantry.
The task of pleasing a President who prioritizes showmanship is not an easy one, and Trump is relying on Kelly, his 4-foot-11 first-generation Korean-American power broker, to make sure that this year’s Republican National Convention is to his liking.
This August, Trump will swoop into the banking city to accept his nomination amid a swarm of media, lots of pomp, some circumstance, and a fair share of partying. He’ll expect the four-day event to be big and loud. This is, after all, his one shot at designing and defining a convention that will set the tone for the next four years of the Republican Party. Ultimately, it will define his legacy and impact on the dynamics of the RNC.
Trump receives regular updates on logistics like lighting, logos, and podium design, but he mostly leans on Kelly to act as his surrogate and negotiate the blowback that comes from the more traditional end of the Republican Party.
“All day I’m at odds with people who want to pull things back,” says Kelly. The President’s vision for the convention “reflects the changing look of the Republican Party,” she adds, and that can be hard for long-entrenched Republican operatives to accept.
Kelly has a history of acting as the President’s aesthetic and logistical ombudsman. At the White House, she was in charge of decorating the Oval Office (she’s the woman behind the gold curtains) as well as Trump’s private residence.
She previously stood proxy for him while working as what she calls the “gatekeeper for perceived power” in his administration. Anyone who wanted his or her office in the West Wing or near the Oval Office had to go through her first. At one point, there was a line so long to see her that she was gifted a deli counter “take a number” machine.
It was there that Kelly developed one of her greatest skills: saying no to rich and powerful people in a way that’s perceived as a mutual win.
“I held all the assets,” she says. “I held the budget, the real estate, who got what badge, and who ended up getting West Wing parking. It was about closeness and power.”
Kelly remains close to the Trump family, regularly consulting with Eric, Donald Jr., and Lara, whom she refers to as the “New York City Trumpers.”
She’s also finalizing the paperwork to take on a role as an unpaid senior adviser to Melania Trump.
Loyalty above all else
Like the President, Kelly grew up in New York City, has ties to Rudy Giuliani (she planned large-scale events for him while he was mayor), and is used to dealing with the big personalities who work in commercial real estate: She spent years working at the whim of families like the Speyers of Tishman Speyer.
In short, she speaks fluent Trumpese.
And she uses that language to lead a staff of loyal employees who readily sing her praises as she shows Fortune around her offices in a high-energy—Kelly is very high-energy—meet and greet. She says that, much like Trump, she values loyalty above all else. If you’re loyal to her, she’s yours for life.
As we walk into the office of Johnny Oringdulph, a retired Navy commander and current chief of logistics, he says that he’s prepared to follow Kelly “to hell.” Oringdulph left his post as senior consultant at the White House Military Office, where he had worked for 15 years, when Kelly asked him to join her.
Kelly says her career has prepared her to understand the dynamics of men like Trump and Giuliani.
“They know exactly what they want—they will tell you to your face,” she says. “They sound aggressive, but to me, I find it refreshing.” Later, she clarifies: “I know [the President’s] style: Give me [bullet points], and let me know what you need decisions made on,” she says. “And then be able to have thick skin.”
Kelly claims that her ability to charm Trump comes from knowing how to utilize his time and attention in the correct way. “I’m no-nonsense when I go into meetings with the President,” she says. “I get more meetings with him by keeping things at an executive level. I go in, and I’m like, ‘Oh, you’re giving me half an hour with the President? Mazel tov, let’s do 10 minutes.”
During a walk-through at the Spectrum Center, where the nomination will take place, her staff tell Fortune they aren’t sure if she shares a design sensibility with the President or if she was just able to perfectly mimic his own. Either way, they say she pays attention to detail. She’s been known to stop meetings to ask if someone is wearing cashmere, and sometimes sardonically asks coworkers if they bought their clothing at Kohl’s.
She cares about visuals.
“It’s news, but it’s also entertainment, and the President expects it to look a certain way. He understands lighting and showmanship,” says Max Everett, the convention’s vice president and chief information officer. Kelly “is a producer with a focus on live events. Prior CEOs knew politics and not production, which isn’t what this President needs.”
Producing a convention
Political conventions, held every four years regardless of incumbency, are essentially the equivalent of mounting the Olympic Games with only public funding and a mostly volunteer staff. Charlotte’s Republican National Convention, which takes place over four days in late August (just after Tokyo’s Summer Olympics wrap), will play host to about 50,000 visitors, 15,000 members of the media, 2,500 delegates, and 3,200 events. The RNC hopes to raise about $70 million to fund it and attract 8,000 volunteers to ensure it all runs smoothly.
The goals are lofty; the last Republican National Convention, in Cleveland—which took place in a politically dangerous climate for Republicans (Hillary Clinton was polling as the clear winner) after a long, hotly contested primary—aimed to raise just $64 million. The committee was eventually able to bring in enough money with the help of a few big donors, but struggled to meet deadlines.
Eight years ago, when the Democratic National Committee (DNC) held its convention in Charlotte, it fell about $10 million short of its fundraising goals, but Republicans abide by different rules. While Democrats banned corporate money and limited personal donations to $100,000, the RNC has no such regulations. Working out of a city with the second-most banking assets in the country doesn’t hurt either.
“We have an advantage in our structure,” said John Lassiter, CEO of Charlotte’s host committee to the press. “We’re not making the decision the DNC did initially to only take individual gifts. We will be taking both individual and corporate funding. Our initial sense is there’s a lot of support for what we’re going to do.”
Kelly says the convention is expected to drive about $188 million in economic development into the city, but that she’s setting expectations low for how much influence that has on Charlotte in 2020. The convention is being run as a business in the city, not as a campaign operation, she tells Fortune. Besides, she says, large urban centers tend to swing Democratic anyway. Mecklenburg County, which holds the city of Charlotte, voted overwhelmingly in Hillary Clinton’s favor in 2016.
Last July, the Charlotte City Council voted, nine to two, to condemn Trump’s “racist and xenophobic social media posts and comments” and “all hate speech, bigotry, racism, and discrimination wherever it may occur, especially in the highest levels of government.” The move came after a crowd shouted chants of “Send her back” about Rep. Ilhan Omar (D-Minn.) at a campaign rally in nearby Greenville, N.C.
There was discussion at the time of ending the RNC contract and stopping the convention in its tracks, but city attorney Patrick Baker said that would be impossible. “I don’t believe you will be able to walk away from this contract even if you were willing to pay the financial penalties,” he told the council. “I don’t believe you would be allowed to walk away.”
Kelly insists again that this is all business, not political, and that she works closely with Democratic Mayor Vi Lyles.
Swinging a swing state
North Carolina, a swing state, is an important one for Republicans. Trump won in 2016 there by 173,315 votes, or 3.67 points, an atypically wide margin. This time around, Trump is polling tightly with at least five of his potential Democratic contenders in the state, which his congressional ally Mark Meadows (R-N.C.) has called a “must-win” to ensure 2020 success.
Kelly is doing her best to make that happen for the President. Going into her fourth convention, she says she knows what to do and how to make it work. Even if she wanted to take it easy, she notes, she can’t.
“If I did stop, I wouldn’t know what to do,” she says with a resigned sigh. She catches herself and reverts back to her typical smile.
More must-read stories from Fortune:
—What happens to leftover campaign funds when a candidate drops out of the race?
—Europe wants business to share its data and open up A.I. systems for scrutiny
—America’s heading for a tax on the middle class
—Angela Merkel is on her way out. Meet her potential replacements
—How the 2020 election could influence your personal finances
Get up to speed on your morning commute with Fortune’s CEO Daily newsletter.


fortune--2020-02-24--Coronavirus should not make investors panic. But it should make them do this

Coronavirus fears batter the stock market , wiping out all of this year ’ s gains

Stock markets around the globe were rocked on Monday as fears of the coronavirus spread. The outbreak has now spread to Europe while officials in South Korea raised its coronavirus level to the highest level following an increase in confirmed cases in the country.
The economic and market backdrop is always full of uncertainty because no one knows what will happen in the future. There’s never been a time in human history where certainty prevailed. But a virus like this one adds in an element of certain uncertainty. We know it’s out there, we just don’t know how it will play out.
The Center for Disease Control estimates there were roughly 140,000-810,000 hospitalizations and 12,000-61,000 deaths annually caused by the flu in the United States alone since 2010. And this is just the run-of-the-mill flu, which typically inflicts the most pain on the elderly and infants.
The worst influenza pandemic on record is the case of Spanish Flu in 1918. While it’s called the Spanish Flu because there was a severe outbreak in Spain, experts now believe the disease was actually started in a small town in Kansas. It spread worldwide because so many U.S. soldiers were on the move during World War I.
The global economy was already experiencing a shock from the onset of the Great War, but the influenza pandemic basically ground things to a halt in many areas. Schools, businesses and churches were closed to slow the spread of the deadly disease.
It didn’t matter. Today experts estimate the outbreak caused somewhere in the range of 50 to 100 million deaths worldwide. And this occurred during a relatively short period, from January 1918 through February 1919.
Surprisingly, a combination of a world war and the worst pandemic to ever strike the modern world somehow failed to knock down the stock market very much. This is a look at the Dow Jones Industrial Average in 1918 and 1919:
The worst peak-to-trough drawdown during this time was a correction that came close to 11%. While the pandemic wreaked havoc on the entire globe, it was over by February, roughly a year after it began. In 1919, the Dow was up more than 30%. These numbers do deserve some context. The Dow was down 40% at one point in 1917 so that was a completely different situation from today where stocks are still within a stone’s throw of all-time highs.
The problem with using history as a guide in these instances is there are too many different types of pandemics to make comparisons to present-day useful. Influenza pandemics are surprisingly more common that people would think. In his book The Great Influenza, John Barry describes how common it is for new flu epidemics to break out:
“One study found nineteen discrete, identifiable epidemics in the United States in a thirty-three-year period—more than one every other year. Each one caused between ten thousand and forty thousand “excess deaths” in the United States alone—an excess over and above the death toll usually caused by the disease. As a result influenza kills more people in the United States than any other infectious disease, including AIDS.“
So influenza is already a huge problem. The problem simply becomes more heightened when a new form of the disease spreads wide and fast.
Financial implications
The financial ramifications from the coronavirus are impossible to pinpoint because no one knows how long this will last or how far it will spread. The virus is too unpredictable to make accurate assertions about the markets or global economy. And even if we did know the full extent of the potential damage, you never know how the market will react to the news. Any prognostications as to the economic or market impact at this point would be complete guesses.
It’s easy to tell people not to panic when something like this flares up but the truth is panicking is never the right move to make when it comes to managing your money. Trying to predict the unpredictable has one predictable outcome—it increases the odds of making a mistake with your portfolio.
The S&P 500 is just 4% from all-time highs. So instead of panicking, the best move to make right now would be a reassessment of your pain threshold in the markets. If you can’t handle the gyrations involved from the uncertainty surrounding something like this when markets are near all-time highs, there’s no way you’ll be able to stay the course when markets get hit for real.
Making changes to your investment stance based on news headlines is rarely the right move. But sometimes the news headlines can provide a dose of reality for those investors who miscalibrated their tolerance for volatility and potential losses in the markets.
Ben Carlson, CFA is the Director of Institutional Asset Management at Ritholtz Wealth Management. He may own securities or assets discussed in this piece.
More must-read stories from Fortune:
—Warren Buffett lays out a succession plan—for his Berkshire shares
—Europe’s first big Covid-19 outbreak roils global markets
—Investors shouldn’t underestimate election volatility, warns UBS
—You can now buy a fractional share of Amazon stock
—Big ideas for fixing global cities’ most daunting challenges


fortune--2020-02-24--Sanofi is set to launch a new European drug manufacturing firm

France’s Sanofi will launch a new Europe-based company in order to cut down reliance on Asian drug manufacturing as coronavirus wreaks havoc in China, the pharmaceutical giant said on Monday.
China is one of the world’s largest suppliers of medicines. Alongside India, the two Asian nations manufacture approximately 60% of the active pharmaceutical ingredients (API) in the world by volume. These are the cornerstone compounds that make up chemical drugs of all types, including a bulk of the generic medicines used to fill 90% of prescriptions in the U.S.
Medical crises like the China coronavirus outbreak and sociopolitical bedlam such as Brexit can have profound effects on the medical supply chain. For instance, British drug maker AstraZeneca cited coronavirus uncertainty as a key reason for moderating its 2020 financial outlook, and European nations have been bracing for drug shortages.
In the lead up to Brexit, U.K. drug makers began to stockpile certain medications out of fear of supply chain disruptions, and the European Medicines Agency (EMA)—Europe’s equivalent of the Food and Drug Administration (FDA)—moved its home base from London to Amsterdam.
Sanofi’s plans to create a new company to manufacture these active pharmaceutical ingredients weren’t specifically driven by the coronavirus outbreak or Brexit. But both of these events reinforce why the company has had this plan in the works for a while now, Sanofi CEO Paul Hudson said.
“This recent challenge of coronavirus has brought it acutely into focus that Europe can’t wait longer to create this European powerhouse for manufacturing drugs,” he said.
The new drug manufacturing entity will be a standalone firm that’s focused on selling APIs to third party companies. It will encompass six production sites across Europe and be headquartered in France. Sanofi says it expects the new standalone firm to ring in one billion euros in sales by 2022 and include 3,100 employees. The firm also plans to take the unnamed new entity public by then.
Hudson said that Sanofi has some 600 partners in API manufacturing and helps manufacture treatments for a range of conditions for its third party partners. The company doesn’t disclose the details of all those relationships but may reveal more information as the new medicines manufacturing arm approaches an IPO.
The reliance on China and India to create the world’s drug supply can be a double edged sword, according to Hudson.
“Some essential medicines are hard to get in the pharmacy in Europe,” he said. “Why? Because over time, we pressured the price to be so low, it could only be made in China or India. And then if you come to a situation where China or India can’t make that supply, it’s patients in Europe who can’t get access.”
More must-read stories from Fortune:
—In China, oil won’t be the only sector battered by the coronavirus
—Billionaires are donating to fight China’s coronavirus
—94% of Fortune 1000 are seeing coronavirus supply chain disruptions
—Coronavirus misinformation is fueled by government mistrust
—Coronavirus may be the straw that breaks the back of oil fracking
Subscribe to Fortune’s Brainstorm Health for daily updates on biopharma and health care.


fortune--2020-02-24--Pentagon adopts new ethical principles for using AI in war

The Pentagon is adopting new ethical principles as it prepares to accelerate its use of artificial intelligence technology on the battlefield.
The new principles call for people to “exercise appropriate levels of judgment and care” when deploying and using AI systems, such as those that scan aerial imagery to look for targets. They also say decisions made by automated systems should be “traceable” and subject to testing.
Defense Department officials outlined the new approach Monday. The Pentagon said in a statement that “the use of AI raises new ethical ambiguities and risks,” but its principles fall short of stronger restrictions favored by arms control advocates.
“I worry that the principles are a bit of an ethics-washing project,” said Lucy Suchman, an anthropologist who studies the role of AI in warfare. “The word ‘appropriate’ is open to a lot of interpretations.”
The principles follow recommendations made last year by the Defense Innovation Board, a group led by former Google CEO Eric Schmidt.
An existing 2012 military directive requires humans to be in control of automated weapons but doesn’t address broader uses of AI.
More must-read stories from Fortune:
—Are we undergoing an industrial revolution or a phase change?
—Understanding the 2020 election as brand marketing
—Investors shouldn’t underestimate election volatility, warns UBS
—Angela Merkel is on her way out. Meet her potential replacements
—How the 2020 election could influence your personal finances
Get up to speed on your morning commute with Fortune’s CEO Daily newsletter.


fortune--2020-02-24--U.S. appeals court upholds Trump rules involving abortions

A U.S. appeals court on Monday upheld Trump administration changes that include additional hurdles for those seeking abortions through a federal program that helps low-income women.
The 7-4 ruling by the 9th U.S. Circuit Court of Appeals overturned decisions issued by judges in Washington, Oregon and California. The court had already allowed the administration’s changes to begin taking effect while the government appealed those rulings.
The rules ban taxpayer-funded clinics in the Title X program from making abortion referrals and prohibit clinics that receive federal money from sharing office space with abortion providers — a rule critics said would force many to find new locations, undergo expensive remodels or shut down.
More than 20 states and several civil rights and health organizations challenged the rules in cases filed in Oregon, Washington and California. Judges in all three states blocked the rules from taking effect, with Oregon and Washington courts issuing nationwide injunctions. One called the new policy “madness” and said it was motivated by “an arrogant assumption that the government is better suited to direct women’s health care than their providers.”
Planned Parenthood has already left the Title X program over the new rules, giving up about $60 million a year in federal funding.
The 9th Circuit’s majority opinion, by Judge Sandra Ikuta, found that the U.S. Supreme Court had already approved nearly identical regulations in a 1991 decision.
The dissent, by Judge Richard Paez, found that since the high court’s decision, Congress had barred the Department of Health and Human Services from imposing rules “that frustrate patients’ ability to access health care.”
The American Medical Association criticized the ruling.
“This government overreach and interference demands that physicians violate their ethical obligations – prohibiting open, frank conversations with patients about all their health care options – if they want to continue treating patients under the Title X program,” it said in a written statement. “It is unconscionable that the government is telling physicians that they can treat this underserved population only if they promise not to discuss or make referrals for all treatment options.”
Abortion is a legal medical procedure, but federal laws prohibit the use of Title X or other taxpayer funds to pay for abortions except in cases of rape, incest, or to save the life of the woman. Abortion opponents and religious conservatives say Title X has long been used to indirectly subsidize abortion providers.
More must-read stories from Fortune:
—Are we undergoing an industrial revolution or a phase change?
—Understanding the 2020 election as brand marketing
—Investors shouldn’t underestimate election volatility, warns UBS
—Angela Merkel is on her way out. Meet her potential replacements
—How the 2020 election could influence your personal finances
Get up to speed on your morning commute with Fortune’s CEO Daily newsletter.


fortune--2020-02-24--GOP fundraising mailings are deceptive, experts say

The envelopes bear tracking codes, and the letters inside tell recipients they “have been selected to represent voters” in their congressional district, while referring to “[official] documents registered in your name” and a “2020 congressional district census.”
But as official as it appears, the letter is a direct response request for donations to the Republican National Committee (RNC), and has recently arrived at the homes of residents in states including Wisconsin, Ohio, and New York.
The letter specifically says it is “commissioned by the Republican Party,” but some experts who reviewed the materials for Fortune say at best, the package is misleading and, at worst, psychologically deceptive and likely targeting older voters.
But those associated with the GOP disagree and point to some past Democratic fundraising efforts, which they say were more misleading.
Skirting the law?
The congressional census mailings began to appear last year, around the time information about the constitutionally mandated national 2020 census began circulating.
A similar campaign ran 10 years back during the last census, as ProPublica reported at the time. Congress passed a law to prevent anyone from using the approach again.
“I thought we had resolved this issue in 2010 with the passage of my Prevent Deceptive Census Look Alike Mailings Act,” Rep. Carolyn Maloney (D-N.Y.), a former ranking member of the Subcommittee on Federalism and the Census, tells Fortune. “[C]learly, the RNC has found a way to skirt the law deliberately.”
The law prevented use of the word “census” on an envelope, outside cover, or wrapper. In the latest mailings, the term did not appear on the outside.
The U.S. Postal Inspection Service tells Fortune that a “team of fraud experts reviewed statutes and violations of the Deceptive Mail Act” and that, on review, “the mailings do not reach the threshold required to apply one of the statues under our jurisdiction.”
The outside of a GOP fundraising mailing sent to a Wisconsin resident obtained by Fortune.
The psychology of direct response marketing
Direct response marketing rests on the recognition that only a tiny percentage of people who receive an appeal might respond. Frequently, a 1% or 2% response rate is considered successful. Marketers test and adjust all aspects of a campaign to improve the response rate.
Part of envelope design is the inclusion of elements that make the package seem more important, so the recipient will pay attention. Examples are calling the contents “official” or having the phrase “pay to the order to” just visible inside an envelope window, making it appear that a check might be included.
“The old direct mail saying is, ‘You can’t get a response if you don’t get the piece open,” says Kent Syler, a professor of political science and public policy at Middle Tennessee State University, who formerly worked for the Tennessee Democratic Party, in part developing direct response fundraising campaigns. “I think trying to include it as a government census and making people think it’s an official communication, that is crossing the line.”
An RNC official responded to questions from Fortune by stating that the letter, included survey, response card, and envelope were clearly marked as coming from the organization. In one sense, the text “Commissioned by the Republican Party” might seem to undermine any question about the fundraising program. However, it is still possible for recipients to find themselves misled, experts say.
The mailer creates an impression of an official census document through a number of tactics, such as the outer envelope, the use of the terms “2020 Congressional District Census” and “Census Document,” the capitalization in “Census,” and the design of the response card looking for money, according to Vamsi Kanuri, assistant professor of marketing at the University of Notre Dame’s Mendoza College of Business.
“The moment they see ‘RNC’ and ‘Census,’ since we have a President who belongs to the RNC, people might assume that somehow this is actually an official document,” Vamsi says.
And while red flags may seem obvious to some, Purushottam Papatla, a professor of marketing at the University of Wisconsin Milwaukee, says many people won’t read the mailing critically.
“Everything that’s written on that is meant to convey what the intent is and what is being done,” says Papatla.
“This is probably going to an older person that is unaware they don’t have to turn it in or send a check,” says Lindsay Cormack, an assistant professor of political science at Stevens Institute of Technology.
“Psychologically, it’s basically a priming exercise,” says Josh Klapow, a clinical psychologist in the School of Public Health at the University of Alabama at Birmingham, who thought it might target older people with some cognitive decline. “They’re throwing out words that will prime certain expectations and assumptions.”
Direct response marketing frequently uses such techniques. What crossed the line for Klapow was the response card looking for payment for “processing” even if they didn’t wish to donate, which he calls “clearly deceptive because it doesn’t give you an option.”
A GOP fundraising mailing to a Wisconsin resident obtained by Fortune.
Democrats and ‘frugging’
A focus strictly on such fundraising tactics by Republicans “doesn’t display the true state of the world,” because Democrats also use questionable tactics, according to Cormack.
One of these methods is called fundraising under the guise of research, nicknamed “frugging.” A recipient of such a campaign, whether via mail or online, gets a “survey” with a series of leading questions intended to create an emotional state, followed by a request for money. The RNC mailing includes a similar type of survey.
What seems clearly wrong when done by an opposing group, however, sometimes may be forgiven for members of one’s own tribe, resulting in partisan finger-pointing.
Craig Murphy, president of conservative political consulting firm Murphy Nasica, examined the RNC mailer and says it “does not hold a candle” to an email campaign the Democratic Legislative Campaign Committee (DLCC) ran for a special election that happened in Texas during January 2020.
That fundraising email stated, “In Texas’ 28th House District, Democrat Eliz Markowitz is currently TIED with her Republican opponent – 42-42 – with only a few days left before Election Day!” After other language, the email included a link for people to donate $10. Markowitz’s opponent, Republican Gary Gates, won the election by 16%.
Murphy says that “polls showed Markowitz down 12-24 points” at the time the email campaign went out. The tight race the DLCC sought money to help win might not have been neck and neck, after all.
“The poll it referenced was the most recent publicly available survey and showed that the race was tied at 42—42,” says Pieter Brower, a DLCC official, in response to questions from Fortune. But that poll came out a full month before. In the fluid situation of an election, the numbers could easily have changed significantly, and there could have been later poll information.
Fortune reached out to Markowitz, but did not receive an immediate response.
On the other hand, Jeff Crosby, who does direct mail consulting for Democrats in Texas and whom Fortune asked about both the RNC mailer and the DLCC campaign, says of the latter, “Good grief, both parties are guilty of lying about polls, and both do so on a regular basis.”
Crosby explains that the way the poll had been done might have skewed the results and says, “Disguising a letter as a legitimate government document is an outdated, discredited trick.”
When it comes to political fundraising, apparently all is fair in love and war—unless the other side does it.
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—Can Amazon convince a federal court to depose Trump over a $10 billion Pentagon contract?
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fortune--2020-02-24--Dow loses all gains for the year in 1,000-point drop

U.S. stocks fell sharply Monday, following a sell-off in overseas markets, as a surge in virus cases and a worrisome spread of the disease outside China sent investors running for safety.
The Dow Jones Industrial Average slumped 1,025 points to 27,998, giving up all of its gains for the year. The S&P 500 index skidded 3.1%. The Nasdaq fell 3.6% as of 11:53 a.m.
More than 79,000 people worldwide have been infected by the new coronavirus. China, where the virus originated, still has the majority of cases and deaths. But, the rapid spread to other countries is raising anxiety about the threat the outbreak poses to the global economy.
South Korea is now on its highest alert for infectious diseases after cases there spiked. Italy reported a sharp rise in cases and a dozen towns in the northern, more industrial part of that country are under quarantine. The nation now has the biggest outbreak in Europe, prompting officials to cancel Venice’s famed Carnival, along with soccer matches and other public gatherings.
There are also more cases of the virus being reported in the Middle East as it spreads to Iran, Iraq, and Kuwait, among others.
Germany’s DAX slid 4% and Italy’s benchmark index dropped 5.9%. South Korea’s Kospi shed 3.8% and markets in Asia fell broadly.
Investors looking for safe harbors bid up prices for U.S. government bonds and gold. The yield on the 10-year Treasury note fell sharply, to 1.37% from 1.47% late Friday. Gold prices jumped 1.8%.
“Stock markets around the world are beginning to price in what bond markets have been telling us for weeks – that global growth is likely to be impacted in a meaningful way due to fears of the coronavirus,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
The viral outbreak threatens to crimp global economic growth and hurt profits and revenue for a wide range of businesses. Companies from technology giant Apple to athletic gear maker Nike have already warned about a hit to their bottom lines. Airlines and other companies that depend on travelers are facing pain from cancelled plans and shuttered locations.
Crude oil prices plunged 5%. Aside from air travel, the virus poses an economic threat to global shipping.
Technology companies were among the worst hit by the sell-off. Apple, which depends on China for a lot of business, slid 4.6%. Microsoft slumped 4%.
Banks were also big losers. JPMorgan Chase fell 2.7% and Bank of America fell 4.6%.
Utilities and real estate companies held up better than most sectors. Investors tend to favor those industries, which carry high dividends and hold up relatively well during period of turmoil, when they’re feeling fearful.
Gilead Sciences rose 4.3% and was among the few bright spots. The biotechnology company is testing a potential drug to treat the new coronavirus. Bleach-maker Clorox was also a standout, rising 2%.
The sell-off is hitting the market as companies near the finish of what has been a surprisingly good round of earnings. About 87% of companies in the S&P 500 have reported financial results and profits are expected to grow by more than a half-percentage point when all the reports are in, according to FactSet.
In the eyes of some analysts, Monday’s tank job for stocks means they’re just catching up to the bond market, where fear has been dominant for months.
U.S. government bonds are seen as some of the safest possible investments, and investors have been piling into them throughout 2020, even as stocks overcame stumbles to set more record highs. A bond’s yield falls when its price rises, and the 10-year Treasury has been in such demand that its yield has plunged to 1.36% from roughly 1.90% at the start of the year.
The 10-year yield on Monday touched its lowest point in three years, falling from 1.47% late Friday, and it’s close to its intraday record low of 1.325% set in July 2016, according to Tradeweb. The 30-year Treasury yield fell further after setting its own record low, down to 1.82% from 1.92% late Friday.
Traders are increasingly certain that the Federal Reserve will cut interest rates at least once in 2020 to help prop up the economy. They’re pricing in a nearly 95% probability of a cut this year, according to CME Group. A month ago, they saw only a 68% probability.
Of course, some analysts say stocks have been rising in recent weeks precisely because of the drop in yields. Bonds are offering less in interest after the Federal Reserve lowered rates three times last year — the first such cuts in more than a decade — and amid low inflation. When bonds are paying such meager amounts, many investors say there’s little real competition other than stocks for their money.
The view has become so hardened that “There Is No Alternative,” or TINA, has become a popular acronym on Wall Street. Even with Monday’s sharp drops, the S&P 500 is still within 4.2% of its record set earlier this month.
AP Business Writer Stan Choe contributed.
More must-read stories from Fortune:
—In China, oil won’t be the only sector battered by the coronavirus
—Billionaires are donating to fight China’s coronavirus
—94% of Fortune 1000 are seeing coronavirus supply chain disruptions
—Coronavirus misinformation is fueled by government mistrust
—Coronavirus may be the straw that breaks the back of oil fracking
Subscribe to Fortune’s Brainstorm Health for daily updates on biopharma and health care.


fortune--2020-02-24--5 reasons coronavirus statistics seem inconsistent

Covering the coronavirus outbreak at times seems like a course in morbid accounting: a litany of economic impacts, case and death counts, and tallies of how the virus has spread into other countries.
The latest counts from the World Health Organization (WHO) are 77,042 confirmed cases and 2,445 deaths in China, as well as 1,729 cases and 17 deaths across 28 other countries. Then there’s the veritable spreadsheet of economic implications, such as 94% of the Fortune 1000 facing supply chain disruptions and plunging Dow futures.
The world is so awash in statistics on virtually everythingؙ—grain production, incomes, tourism traffic, and, yes, diseases—that there should be little wonder people expect numerical precision on every aspect of existence.
But when life and death are on the scales, unpredictability quickly becomes an unwelcome companion. Such is the case in tracking COVID-19, the disease this coronavirus causes: a sudden jump in cases and deaths one week, a drop the next. Nervously following the news—and asking whether to place that online order for a face mask—can leave people bewildered. Even professionals find themselves scratching their heads over the emerging statistics.
“They’re confusing not just to the general public but even to people working in the field,” said Andrew Noymer, an associate professor of public health at the University of California at Irvine.
Surely something isn’t right. Somewhere, someone must have the “real” data—or maybe they don’t. Experts in epidemiology and public health tell Fortune that there are five underlying reasons why the information can seem contradictory: assumptions about China’s forthrightness; the challenges of treating a new virus in rapidly changing conditions; the limitation of predictive models; time differences in overlapping reports; and the uncertainly of implications.
Trusting China?
When information from China is in question, suspicion comes too quickly because the country has a reputation for releasing unreliable data.
Currently, there is no independent case count inside China because of the way the global infectious disease response system works. A World Health Organization spokesperson said that under international health regulations, “WHO is notified by member states on confirmed cases of COVID-19.” In other words, China’s numbers come from the government there, not a third-party organization.
However, wholesale falsification seems unlikely to some experts.
“I am not ruling out that China is not telling us everything,” said Catherine Troisi, an epidemiologist at the University of Texas Health Science Center at Houston. “That’s probably true, but it’s hard to differentiate between a new disease and what a government may be trying to hide. These are huge numbers coming out of China, so if they’re covering something up, they’re not doing a good job of it.”
Chances are other factors have had a bigger impact on the unpredictability of information.
The eruption of an epidemic across China’s massive 1.4 billion population means that medical personnel are focused on trying to respond to patients’ needs. Accurate record keeping may have taken a back seat. Or, as Troisi put it, “These hospitals are overwhelmed, and the doctors are concerned with saving lives.”
The doctors—and nurses, orderlies, pharmacists, administrative staff, and others—are also trying to understand how the disease works and what distinguishes it from other illnesses with similar symptoms.
Then there is the question of adequate testing resources.
Last Friday, WHO director-general Tedros Adhanom Ghebreyesus noted in a press briefing that China had shifted reporting from clinical (by symptoms) to laboratory-confirmed (tested) counts.
It might sound like an attempt to make data sound better, but it is more likely an issue of testing resources. “This may indicate … the health system in Wuhan has regained the ability to test all suspected cases,” Tedros said. In other words, perhaps there weren’t enough testing materials to go around before. Overwhelmed, indeed.
Reporting challenged
Part of the reporting also involves mathematical models that predict how fast the virus will spread in other countries. Those highly complex computerized models, tailored for whatever illness is on the move, have their own snags.
“When we don’t know something, we make certain assumptions,” Noymer said. Mistakes in the assumptions can mean wrong or at least misleading results, and the models also depend on the quality of available data. “It makes it hard to say for sure that we really know what’s going on,” he said.
Then there are overlapping reports. Unlike global supply chains, which constantly run goods through multiple time zones, information gets instant dissemination. But reports with an earlier set of numbers don’t disappear because more recent information comes out later. Casual readers may not realize the difference in timing.
Finally, and perhaps the biggest problem, is the uncertainty of the implications they present. The vast majority of cases and deaths have occurred in China, which has its own complicating conditions for a respiratory illness like COVID-19. Heavy smoking, an aging population, and widespread air pollution all affect the combined outcomes.
Noymer is looking for fuller data from countries like South Korea that have “more of a tradition of transparency” and the experience of an imported disease. Those countries will show what the potential effects might be for the United States, which has time to anticipate and plan for imported cases.
In the meantime, the Centers for Disease Control has reported only 14 cases in the U.S., out of 414 people tested.
More must-read stories from Fortune:
—Billionaires are donating to fight China’s coronavirus. Where is the money going?
—China’s high smoking rate may be exacerbating the coronavirus outbreak
—In China, oil won’t be the only energy sector battered by the coronavirus
—Coronavirus misinformation is fueled by government mistrust in China
—Coronavirus may be the straw that breaks the back of oil fracking
Subscribe to Fortune’s Brainstorm Health for daily updates on biopharma and health care.


fortune--2020-02-24--Steps companies can take to make the workplace better for black employees

Most business leaders recognize that they need to improve their diversity performance—and that one way to do that is to build a more inclusive environment. Thus, each February, many corporations hold Black History Month celebrations that focus on black achievements and culture. There are black history trivia contests, African American food events, and screenings of movies by black filmmakers.
It is essential that we shine a light on the immense contributions of black Americans in politics, business, art, science, and civic life. But if we just celebrate, we’re ignoring the harder truth that racism continues to hold black professionals back from leadership roles in corporate America.
Workplace racism can end only when employees who are not black see, hear, and accept the truth about what their black colleagues have experienced and continue to experience. Black History Month is a great opportunity to begin this process.
Changing the atmosphere will be a steep climb. According to a new survey conducted by our research group at the Center for Talent Innovation, 58% of black professionals have experienced racial prejudice at work—a higher percentage than any other racial or ethnic group surveyed. Black adults represent 12% of the population and 10% of degree holders. They hold only 8% of professional jobs and 3.2% of executive or senior-level management positions. And less than 1% of Fortune 500 CEOs are black, according to the Executive Leadership Council.
The most painful aspect of the situation is that white employees don’t see the problem. While 65% of black professionals say that black employees must work harder to advance in their careers, only 16% of white professionals agree with that statement.
To create an equitable workplace culture, companies can use Black History Month as an ideal moment to begin facilitating discussions about race. These conversations are often considered a third rail—so painful that we’re afraid to touch them. Employees are not necessarily prepared to bring that pain to the surface at work.
But leaders can push through this resistance by creating a safe environment for difficult conversations. Start with the facts. Gather representation data from your company regarding the percentages of jobs at every level held by black professionals. Compare this data to national findings. If you have engagement surveys and retention rates, look at those, too, broken out by race and ethnicity.
Bring the data to a meeting of top company leaders and talent specialists—ideally a diverse group—with a neutral facilitator to walk through the internal and external findings. Discuss why the numbers are where they are and encourage leaders to express their thoughts about racial equity.
Don’t be surprised if you unearth some surprising stories. In one such meeting, an executive told us about a black female product engineer who walked through the company cafe and was asked by a white employee to take his tray to the trash. When she informed him that she didn’t work at the cafe, the white male looked down with embarrassment but didn’t apologize.
When these stories arise, avoid the tendency to minimize them. Instead, demonstrate your own curiosity and empathy. For example, ask the group how it would feel to be in each role. (You may hear, for example, that the white male saw it as a rare misunderstanding; while to the female product engineer, it was the latest in a lifetime of similar slights, and as such, cut deep.) Ask why such an encounter would happen. You don’t have to have all the answers. You simply have to have the courage to create an environment that can promote a meaningful conversation, learning, and understanding.
Don’t let the conversation stop as a one-off experience. Encourage leaders to share their newfound focus on race in discussions with their teams. Share resources on systemic racism—whether they are books, podcasts, films, or the key findings of our own research. Consider holding a screening of a film such as When They See Us, followed by a discussion.
Once more leaders and colleagues are comfortable addressing race, bring a diverse group back to the table (or consider hosting a retreat) to design interventions that will create the environment of trust, respect, and belonging that black professionals are seeking in their careers. The outcomes will vary company to company. For some it might be appropriate to hold leaders accountable for representation goals in their divisions. For others it might be better to hold new leadership training for managers, so that they are more aware of microaggressions and able to support black members of their teams.
Over time, as you and your team build new habits, you will begin to think of the “third rail” not as shocking, but energizing everyone and moving your organization forward. After all, the third rail powers the train. As people become more comfortable understanding each others’ experiences, they’ll be more likely to produce the innovative ideas that help businesses succeed.
Trudy Bourgeois is founder of the Center for Workforce Excellence and served as an adviser on the aforementioned Center for Talent Innovation study, “Being Black in Corporate America: An Intersectional Exploration.”
Julia Taylor Kennedy is executive vice president at the Center for Talent Innovation and co-lead researcher on the aforementioned study.
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