fortune--2020-07-20--Guarding Britain’s crown jewels was a secure job for over 500 years. Not anymore

The Tower of London’s iconic ceremonial guards, popularly known as beefeaters, are facing job losses for the first time since their formation in the late 15th century, thanks to COVID-19.
The charity that looks after Britain’s historic royal palaces, including the Tower of London, is facing a $124 million budget shortfall as tourist numbers have plunged during the pandemic and aren’t projected to recover for years.
That means redundancies for the tower’s garrison of 37 yeomen warders—as the beefeaters are officially known. Ostensibly there to safeguard the crown jewels, which the tower houses, as well as to keep any prisoners (which the tower currently does not house), the yeomen warders greet visitors to the tower and conduct guided tours of the fortress. One of the yeomen warders, known as the ravenmaster, is also responsible for looking after the tower’s resident flock of ravens.
The Tower of London is currently seeing only about 800 visitors a day, compared with the 15,000 that might be expected at the height of Britain’s summer tourism season. With social distancing measures in place, the tower can accommodate about 1,000 people daily.
The staff of Historic Royal Palaces, the charity that pays the yeomen warders’ salaries as well as those of employees at five other historic sites, including Henry VIII’s former palace at Hampton Court, have already agreed to a 20% pay cut from July to October and taken unpaid leave to try to alleviate budget pressures. Two beefeaters have also agreed to take voluntary redundancy, but further mandatory cuts are expected, the Guardian newspaper reported.
The charity has received no government aid since the pandemic began. The Guardian reported that the charity plans to apply for a $33 million loan from its bank.
The finances for the Tower of London are particularly strained because of the high cost of protecting the crown jewels. Even though they are used by Queen Elizabeth II in royal ceremonies, neither the British government nor the royal family contribute to their security costs.
The yeomen warders were constituted by King Henry VII in 1485. Their signature scarlet-and-gold dress uniforms and Tudor-style hats—immortalized on countless postcards, not to mention a well-known brand of gin—date back to the mid–16th century.
All current yeomen warders are retired members of the British armed forces, with at least 22 years of regular service. They and their families live inside the Tower of London, although most also maintain a home elsewhere.
No one knows for certain how the yeomen warders came to be known as beefeaters: Contrary to common misperception, they did not sample the monarch’s beef to ascertain if it had been poisoned. One theory is that the name may derive from Cosimo III de’ Medici, the duke of Tuscany, who visited the English court in 1669 and remarked that a different, but similarly named and attired, group of guards—the yeomen of the guard—ate such a large ration of meat that they might be called beefeaters.


fortune--2020-07-20--Why Republicans need a convention and Democrats can lay low

Malls are dying , but Nordstrom has no intention of being dragged down with them

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The Democratic National Convention is one month out and a few days later Republicans will follow with their own controversial version. But in the face of a highly contagious and deadly virus, both parties have struggled to reimagine and quickly execute their landmark events which typically involve arenas full of people, hundreds of crowded soirees, and political celebrities galore.
Coronavirus-induced reckonings have put everything from office life to fashion week under a microscope, and now it’s the political convention’s turn. The extreme pivots and sudden reduction in quadrennial glamour raise the obvious questions: Do we really need these political summits? Or at the very least, do we need them to be multiday lavish media events?
Conventions are planned years in advance, cost millions of dollars, and employ full staffs to pull off a series of events that envelop and involve an entire city, culminating in a highly publicized presidential nomination. This time around, Republicans were planning to take over Charlotte, where they expected about 50,000 visitors, 15,000 members of the media, 2,500 delegates, and 3,200 events. The RNC had hoped to raise about $70 million in funding and to attract 8,000 volunteers to ensure that everything ran smoothly.
Democrats had planned attractions of a similar size in Milwaukee.
But that’s not happening anymore.
This time around, the fat will be trimmed. Superfluous expo halls and open bars will likely be shuttered. The conventions will return to their original purpose: Setting the party platform for the years to come and nominating the next presidential candidate (at least for Democrats, they will).
Democrats plan to make their event mostly virtual and are telling delegates to stay home and cancel any planned travel to the Rust Belt swing state.
Republicans, meanwhile, have hastily moved their convention to Jacksonville because of restrictions on large events put in place by North Carolina’s Democratic Gov. Roy Cooper. They still intend to have some big events, but not nearly as large as originally planned. They’ll also hold some parts of the convention in North Carolina because they signed a contract saying that they would. The multistate hodgepodge won’t be the well-oiled jamboree that was two-plus years in the making.
Many Republicans, worried about the potential spread of COVID-19, say they’ll sit this one out. Iowa Sen. Charles E. Grassley, 86, and Tennessee Sen. Lamar Alexander, 80, are skipping the event. “I’m not going to go. And I’m not going to go because of the virus situation,” Grassley said in a call with reporters last week. This will be the first time in 40 years that Grassley has skipped a convention.
Judi Bosworth, a 72-year-old Democratic delegate from North Hempstead, N.Y., said that party officials conducted a video call with all potential attendees outlining how they would be able to vote online earlier this month. The call, she said, was “very organized,” and the “tech was flawless,” which ended any unease about potential problems at the convention itself.
Bosworth, who serves as her town supervisor and has been a delegate at the past two conventions, told Fortune that she didn’t feel like she would be missing out on in-person festivities and instead felt a sense of “pride” and “community” in knowing that her assumed presidential nominee Joe Biden valued her health.
“Ultimately, this is showing Biden to be the leader that he is. The compassionate, kind, caring person who understands the most important thing is that our country and its residents are safe,” she said.
But Biden currently leads in polling by an average of nearly nine points, and he’s retained that lead while keeping his head relatively low through the election season. A smaller convention without as much press won’t hurt him; it’s in line with the status quo of his campaign thus far.
The Democratic convention, with the increased volume of progressive voices like Bernie Sanders and Alexandria Ocasio-Cortez, may actually work to highlight divisions in the party, and so less stage time and smaller events work in favor of the image of a cohesive party, said Ford O’Connell, a Republican operative and media analyst.
“Biden is walking a tightrope in his party between the Bernie Sanders wing and more moderate Democrats,” he said. “The virtual convention appeases both sides and decreases potential drama.”
There’s no serious need for a message to be amplified when the party is already leading so significantly, said O’Connell. Republicans, however, view the convention as an essential piece of their strategy to get reelected in November.
News about the spread of COVID-19 is clearly not working in President Donald Trump’s favor: Nearly 60% of the country disapproves of his response to the crisis. And while hosting what could easily become a superspreader event in a state that has seen its virus rate repeatedly hit record highs would seemingly be a bad decision, O’Connell says that Trump sees it as his only chance to break through the news cycle.
“If Florida is going to open its schools in the fall, Republicans can have a convention there,” he said. “Republicans are having trouble getting their political message across and breaking through the COVID-19 news cycle. They want to reenergize and present what they stand for to the country before Labor Day.”
The President thrives in large arenas where he can relay his message to his fans and collect heaps of earned media: It was the secret sauce to his 2016 win, and it’s no longer possible, said O’Connell. He needs the convention to “find his mojo” and the Republican party needs it to try to sell their platform to the American people.
This upcoming election already shows signs of a lack of voter enthusiasm, said O’Connell. It’s an election where “you don’t have to get someone to vote for you, you have to get them to not vote for the other person.”
People know who President Trump is and what he stands for. He’s well defined in the American mind. And despite his years in the public eye, Joe Biden has recently become less of a known persona. Republicans, said O’Connell, need this convention to convince voters that Biden isn’t someone they should vote for, to make his persona known as they see it.


fortune--2020-07-20--Gunman kills son of judge overseeing Deutsche Bank–Epstein trial

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A gunman posing as a FedEx driver shot and killed the 20-year-old son of a federal judge in North Brunswick, N.J., on Sunday, and badly wounded her husband.
The judge in question is Esther Salas. Earlier in the week, she was assigned to oversee a lawsuit brought by investors against Deutsche Bank over its involvement in the handling of financial matters related to sexual predator Jeffrey Epstein.
The motive for the shooting is unclear. On Sunday evening, federal law enforcement asked for the public’s help in solving the crime.
The FBI is investigating a shooting that occurred at the home of Judge Ester Salas in North Brunswick Township, New Jersey earlier this evening, July 19. We're looking for one subject & ask that anyone who thinks they may have relevant information call us at 1-973-792-3001. — FBI Newark (@FBINewark) July 20, 2020
On Monday afternoon, multiple news reports cited police sources suggesting a deceased lawyer is a prime suspect in the case. The lawyer—who allegedly was a men’s rights activist with a case before the judge—was reportedly found dead hours after the shooting, and was in the possession of a package addressed to the judge.
In the lawsuit against Deutsche Bank, investors claim they lost money as a result of the financial giant having to pay regulators $150 million for compliance failures related to Epstein. The disgraced financier was arrested for the sex trafficking of minors in 2019. He died in a Manhattan jail cell last August in an apparent suicide.
According to ABC News, the attack on Salas’s family occurred when her son, Daniel Anderl, or husband, Mark Anderl, opened the door to what appeared to be a FedEx deliveryman. Her son, a student at Catholic University, was shot through the heart; Salas’s husband is in the hospital.
Some have speculated on Twitter that the attack may not be related to Judge Salas’s involvement in the Epstein case, but rather to her husband’s work as a criminal defense attorney.
This story was updated at 1:40 p.m. ET to note reports of the deceased lawyer suspect.


fortune--2020-07-20--How COVID-19 has changed the workplace for better—and for worse

This is the web version of Data Sheet, Fortune’s daily newsletter on the top tech news. To get it delivered daily to your in-box, sign up here.
The late, great novelist Douglas Adams used to say that time is an illusion, lunch time doubly so. If so, our illusory midday break is slipping away.
A group of researchers at Microsoft has been crunching data about how work habits have shifted over the past few months, using all sorts of anonymized data from the company’s own workforce. It turns out, as you may have already experienced, there is a lot more work activity through the lunch hour than there used to be. And it’s not just meal time getting squeezed. Work activity, as measured by emails, instant messages, and meetings, has increased after 6 p.m. and on weekends. Overall, people are working four more hours per week on average.
The researchers have a theory to explain the shift: People have had to become more flexible during traditional working hours, blurring work-life boundaries and leaving a larger pile of undone work looming over the off hours.
“Employees said they were carving out pockets of personal time to care for children, grab some fresh air or exercise, and walk the dog,” they wrote. “To accommodate these breaks, people were likely signing into work earlier and signing off later.”
It’s a shift that hopefully will not stick. We’ve known for a long time now that excessive flexibility about work hours becomes a cover for just way more work, and how bad it is for people’s mental health and particularly tough on working mothers.
Some changes in the current economy, however, may be more welcome. At least in the group studied, meetings of an hour or longer dropped 11% compared to the months before lockdown, while meetings of 30 minutes or less jumped 22%. That’s another one that we’ve known for a long time—shorter meetings are more productive.
The Microsoft study didn’t delve into the different ways that work has changed for different groups of people during COVID-19, however.
Some statistics suggest that women have been disproportionately hurt by the sudden rise in unemployment, accounting for 55% of job cuts in March and April and only 45% of new hires in May. And women are still taking on the majority of the burden for at-home tasks like child care during lockdown. The bottom line, as my colleague Kristen Bellstrom noted in Fortune‘s Broadsheet newsletter last week, is that working from home can hurt women’s careers. The economic crisis sparked by COVID-19 has also disproportionately hit Black and Latino workers.
It’s becoming increasingly clear that, after this most dangerous phase of the pandemic, we will need to seriously think about the changes it has wrought in how we work, and which should be embraced and which need to be reversed.
Aaron Pressman
@ampressman
aaron.pressman@fortune.com
NEWSWORTHY
Offline but not by choice. Speaking of flexible work hours, you may have been able to take advantage of Friday afternoon's Internet outage to relax a little bit. Turns out that critical Internet plumbing provider Cloudflare suffered a glitch that put many web sites offline for a few hours. And in news of other Internet screwups, Twitter reported that the hacker attack last week breached a total of 45 accounts and downloaded personal data from eight. Twitter has not identified the culprits, but New York Times reporters Nathaniel Popper and Kate Conger appear to have convinced the gang to talk to them, and they're not exactly the most sophisticated bunch: "It was done by a group of young people—one of whom says he lives at home with his mother—who got to know one another because of their obsession with owning early or unusual screen names, particularly one letter or number, like @y or @6."
Rocketman. Have we mentioned that IPOs in China are doing really well lately? Success attracts success. Billionaire Jack Ma’s financial payments arm, Ant Group, is aiming to go public in Hong Kong and on the Shanghai stock exchange’s STAR board. Last valued at $150 billion privately, Ant wants a public valuation of at least $200 billion. In other news of big finance in tech, eBay is close to selling its classified ad unit to Norway’s Adevinta for $8 billion, the Wall Street Journal reports.
Dear men, what is preventing you from looking like this? And a lack of success attracts...a need for more cash. Uber is reportedly seeking to raise $500 million from outside investors for its Uber Freight division. At the same time, Uber CEO Dara Khosrowshahi on Friday pledged to double the company's Black leadership by 2025.
Touch of evil. The mystery of the gruesome murder of Gokada founder Fahim Saleh ended quickly. Police arrested Saleh's 21-year-old personal assistant, Tyrese Haspil, on Friday in New York after they identified him as the alleged murderer caught on surveillance videos.
Relax, don't do it, when you want to go to it. Finally, poor billionaire Facebook founder Mark Zuckerberg, who just wanted to hit the waves and not get sunburned. Now people are mocking his perhaps excessive use of sunscreen.
FOOD FOR THOUGHT
Reliance Jio, India's top wireless carrier, has been making headlines for weeks now as it amassed a treasure chest of outside investment totaling $20 billion from the likes of Google, Facebook, and Silver Lake. Counterpoint analyst Neil Shah has been tracking the money flow and has an analysis of what's going on with the company and its billionaire chairman Mukesh Ambani.
We believe Reliance Jio or Jio Platforms is transforming into a Super Operator which is no longer a dumb pipe. With a platform approach, it is laying a strong foundation to play a key role across the users’ digital lives and businesses’ digital transformation journeys. None of the operators we can think of globally promises to build, offer and control what Jio is capable of.
Jio’s strategic partnerships with key companies such as Facebook, Google and Microsoft, the three biggest tech giants, will help it drive Commerce, Communication and Cloud areas, respectively, where it had been weak in terms of capabilities, reach and adoption...With 5G around the corner, Jio can lay out a fully-controlled greenfield network to build the software stack via Radisys in fixed as well as wireless networks. It remains to be seen if there are any other big moves on the Radio Access Network (RAN) hardware side or it will depend on the long-term partner Samsung.
IN CASE YOU MISSED IT
Veterinarians are turning to virtual visits to care for Fido By Danielle Abril
How Fitbit and other wearables can help detect the spread of COVID-19 By Aaron Pressman
Meet the new dating app for parents and people who want kids By Michal Lev-Ram
How one toy store owner used his PPP loan to pivot online—and saw sales soar By Anne Sraders
1 in 3 Amazon Prime members are likely to subscribe to Walmart+ By Lance Lambert
Why brands should use TikTok—even if it’s at risk of being banned By Justin Kline
Why this health care startup felt launching early during a pandemic was the best business strategy By Rachel King
(Some of these stories require a subscription to access. Thank you for supporting our journalism.)
BEFORE YOU GO
If you check out Google today, you may notice the Google doodle of a woman looking up at a starry sky. It's nothing to do with comet NEOWISE. Rather, it's meant to commemorate the life of Dilhan Eryurt, a Turkish astrophysicist who died in 2012. Eryurt was a NASA scientist in the 1960s who studied the evolution of stars and proved that the sun is getting cooler and will eventually die out. That will really put a damper on lunch time! Have a great start to your week.


fortune--2020-07-20--Bernice King, Ava DuVernay reflect on the legacy of John Lewis

This is the web version of The Broadsheet, a daily newsletter for and about the world’s most powerful women. Sign up to get it delivered free to your inbox.
Good morning, Broadsheet readers! RBG is working through cancer (again), today is the Strike for Black Lives, and women who knew John Lewis reflect on his legacy. Have a meaningful Monday.
– The conscience of Congress. On Friday, the world lost Rep. John Lewis, the civil rights activist and Congressman whom his colleagues in government called the “conscience of Congress” for his moral leadership and clarity.
Lewis, who was a hero to so many, received an outpouring of grief and love from those who looked up to him and knew him. Many Black women were in agreement about what Lewis meant to them: he paved the way for their activism, fights for justice, and success. (President Barack Obama has said the same.)
A notable reflection came from Oprah Winfrey, who said she and Gayle King had spoken to Lewis last week in his final days fighting pancreatic cancer after false reports of his death at the time. “I had a final chance to tell him what I’ve said every time I’ve been in his presence: ‘Thank you for your courage leading the fight for Freedom. My life as it is would not have been possible without you,'” Winfrey said.
Ava DuVernay, who directed the 2014 film Selma in which actor Stephan James portrayed Lewis during the 1965 marches for voting rights, said she would “never forget what you taught me and what you challenged me to be.” DuVernay also shared some insight into Lewis not just as a larger-than-life figure, but as a humble man who was just as willing to share his senses of humor and fun as he was to fight for what’s right. DuVernay shared a video capturing Lewis’s humble appreciation of the March on Washington program Obama displayed in the Oval Office; it’s a wonderful behind-the-scenes moment, similar to the time he cosplayed as his 25-year-old self marching across Edmund Pettus Bridge with a train of children at Comic-Con.
Lewis was such a towering figure that he was a touchstone for many even before his death prompted these tributes. Last week, I interviewed Rep. Pramila Jayapal about her new book, Use the Power You Have: A Brown Woman’s Guide to Politics and Political Change. In that book, Jayapal writes that she is “an unusual elected official, in that I have been arrested three times for leading and participating in civil disobedience.”
When I asked her about that line, she responded: “I’ve had the honor to serve with John Lewis so I don’t feel like getting arrested—’good trouble’ as he calls it—is out of bounds for us as elected officials. I know some people don’t feel comfortable with it, but I feel it’s very appropriate. … If politics is the art of the possible, then it’s our job as activists and organizers, regardless of where we sit, to push the boundaries of what is seen as possible. Because the possible is not static.”
(You can read the rest of that interview here, where Jayapal also discusses the role of the South Asian community in fighting anti-Black racism, the lessons she learned from the matrilineal society her family came from in Kerala, India, and from parenting a non-binary child.)
I’ll leave you with the words of Bernice King, daughter of Dr. Martin Luther King Jr., on the passing of her father’s friend: “When I visited Uncle John last week, I looked in his eyes and said, ‘Well done.’ I told him that I loved him and that we are going to continue to fight. So I must mourn and move at the same time.”
Emma Hinchliffe
emma.hinchliffe@fortune.com
@_emmahinchliffe
ALSO IN THE HEADLINES
- Get well soon (again), RBG! As you may have heard by now, Supreme Court Justice Ruth Bader Ginsburg is again being treated for cancer; according to a Supreme Court statement the disease is a recurrence of pancreatic cancer that spread to her liver. The 87-year-old justice is "fully able" to continue on the bench, and will continue working while undergoing chemotherapy. CNN
- Strike forward. Today is the Strike for Black Lives, a union-led day of action. Teresa Romero, president of the United Farm Workers of America (and the first Latina immigrant to lead a national U.S. union), writes about the longstanding connection between farm workers and the civil rights movement, going back to the relationship between Dr. Martin Luther King Jr. and Cesar Chavez. Fortune
- Made in America. In an op-ed for Fortune, former U.S. ambassador to the UN Nikki Haley and former Walmart U.S. CEO Bill Simon argue that coronavirus makes the case for bringing manufacturing back stateside. "Not only will this help our country come through this difficult time," they write, "it will protect the American people in future crises." Fortune
MOVERS AND SHAKERS: Pamela Talkin is retiring as the marshal of the Supreme Court and Christine Luchok Fallon is retiring as the court's reporter of decisions; both were the first women to hold their roles. Serta Simmons Bedding hired former Hayneedle CEO Shelley Huff as CEO of Tuft & Needle and EVP of direct to consumer.
IN CASE YOU MISSED IT
- Justice for Breonna. A new lawsuit filed on behalf of Breonna Taylor's family claims that Taylor survived for at least five minutes after police officers shot her five times—but for 20 minutes, she received no medical attention. Officers rushed to assist Sgt. Jonathan Mattingly, one of the officers who fired his weapon; Taylor's boyfriend Kenneth Walker shot Mattingly in the leg after law enforcement entered their home without warning. During those crucial minutes as officers put a tourniquet on Mattingly's leg, no one tried to help Taylor, records show. A spokeswoman for the Louisville police department declined to comment. Louisville Courier-Journal
- In the market. In this piece for Fortune, economist Liliana Gomez Fernandez explains why a boycott of Goya Foods because of the endorsement of President Trump by the company's chief executive is not an example of "cancel culture," as some have claimed," but is instead an example of the free market at work. Gomez Fernandez calls this kind of boycott "alignment culture." Fortune
- One of a kind. Ellen DeGeneres' mantra on her daytime talk show is "be kind." But employees who worked for Ellen say the environment on the set is toxic, from racist microaggressions to the denial of bereavement leave. Employees place most of the blame on executive producers rather than DeGeneres herself. The show's EPs said in a joint statement that they "take all of this very seriously and we realize, as many in the world are learning, that we need to do better." BuzzFeed
ON MY RADAR
Star critic of big tech has side gig working for Amazon, Apple Bloomberg
Susan Orlean takes us behind her drunken Twitter whirlwind—and the wild responses LA Times
The white man’s path is a rut for the rest of us Washington Post
Desiree Tims wants to be the candidate for this moment BuzzFeed
PARTING WORDS
"I won't just turn the car around. I'm gonna shut it off, kick you out and I'm gonna make you walk home."
-Chicago Mayor Lori Lightfoot on being called the "mom who will turn the car around when you're acting up" as she considers reinstating lockdown restrictions to stop the spread of the coronavirus


fortune--2020-07-20--Why unions are crucial to empowering Black workers

Amid a global pandemic devastating Black communities across the U.S., and following the horrific murders of George Floyd, Breonna Taylor, Ahmaud Arbery, and too many other Black people, our nation is in a moment of reckoning.* We’re grappling with a national legacy of violence and can no longer ignore the deadly impacts of structural racism.
That’s why we’re joining thousands of working people and allies today in the Strike for Black Lives. We’re coming together to declare that until Black communities thrive, none of our communities can truly thrive.
We know that change is possible because we’ve seen it happen when people organize to demand better.
One of us, Mary Kay Henry, is the president of one of North America’s largest unions, the Service Employees International Union (SEIU). And Rasheen Aldridge is a former fast food worker from St. Louis who a few years ago became the youngest Black committeeman in St. Louis history. Now, at 25, he’s the youngest Democratic member of the Missouri House of Representatives.
We were first brought together in the fight for justice for Black fast food workers in St. Louis. Rasheen had been working at Jimmy John’s, making a few pennies above minimum wage. After his area manager forced him to hold a sign that said, “I made three wrong sandwiches,” and snapped a photo, he’d had enough. Rasheen and his coworkers became the first workers to go on strike in St. Louis as part of the Fight for $15 and a union movement, which SEIU has proudly supported from the start.
After Michael Brown was killed by police in 2014, it became more clear than ever that the fights for economic justice and against systemic racism were inextricably linked. Fast food workers took to the streets and helped deliver interconnected demands for an end to police violence against Black people and a just economy. Even though we were pepper-sprayed and teargassed, and tanks lined the streets, the energy and resilience of young people sparked something.
Ferguson created not just change for St. Louis, but for our whole country. We saw Ferguson was everywhere. It was a system that had existed for so long that said certain people’s lives don’t matter.
But we still have so far to go, as the recent police violence shows. Creating a just economy and society that values Black lives requires structural change that we haven’t yet achieved. It means more workers have a voice on the job and in our democracy, because by joining together, workers can hold government and corporations accountable to ensure Black lives matter.
Coming together in a union allows workers to demand greater protections and higher wages to build a better future. Black workers are the most likely to be represented by unions, and get a larger boost than white workers do from being in a union. And Black union workers are paid almost 17% more than nonunion Black workers. They’re also 15% more likely to have a retirement plan and health insurance.
Unions are the best counterweight to corporate power, which is part of why corporations have fought workers for decades, pouring millions into anti-union campaigns and buying off politicians through political contributions. And today amid a global pandemic, corporations like McDonald’s, Uber, and Amazon have failed to protect workers. They are quick to claim Black lives matter, but they’ve failed to change policies that would protect the health and economic security of Black workers.
The essential workers putting their lives on the line without proper PPE or paid sick days are more likely to be Black. Right now, more than half of Black workers make less than $15 an hour. Millions of workers have lost their jobs and health care. And the virus itself is devastating Black communities with high rates of infection and mortality.
All of these factors have added up to an overlapping crisis of public health, a broken economy, and deadly systemic racism. That’s why today, from California to Connecticut, from Michigan to Florida, working people are demanding corporate executives and elected officials use their authority to reimagine our economy and democracy to ensure communities of every race can thrive. They need to disrupt the multigenerational cycle of poverty and allow workers to form unions to bargain for better lives. We’re demanding everyone has a voice in our democracy. And we’re demanding an end to violence against Black people at the hands of police.
We know that change is possible because we’ve seen it happen. It’s the spirit of fighting for a better future that propelled one of us from a sandwich counter to the State House. And it’s in the spirit of fighting for a better future that today we strike for Black lives.
Rasheen Aldridge represents the 78th District in the Missouri House of Representatives.
Mary Kay Henry is the international president of the 1.9 million–member Service Employees International Union.
*Editor’s note: Derek Chauvin, the officer who placed his knee on Floyd’s neck, has been charged with second-degree murder, but has yet to face trial. One of the officers involved in the killing of Taylor has been fired; none currently face criminal charges. The three men accused of killing Arbery have been indicted on murder charges, but have not yet gone to trial.


fortune--2020-07-20--8 workers on why they’re walking out in today’s Strike for Black Lives protest

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On Monday, workers across the U.S. are expected to walk off the job in a series of protests organizers are calling the Strike for Black Lives.
The action was coordinated by a coalition of labor groups and activists that includes the Service Employees International Union, the American Federation of Teachers, and United Farm Workers. The walkouts are scheduled to last eight minutes and 46 seconds, the length of time originally reported that police officer Derek Chauvin knelt on George Floyd’s neck, leading to his death. Floyd’s killing has led to a resurgence of the Black Lives Matter movement, alongside nationwide anti-racism protests and calls to defund the police.
In at least 29 nationwide events, protesters today will be raising their voices for a wide-ranging list of demands: higher wages, better jobs, and the ability for more workers to form unions. They’re also calling on elected officials to reimagine the economy in a way that better serves Black communities, and on corporations to dismantle systematic racism, expand health care, and better provide workers with personal protective equipment.
While Black people make up about 13% of the U.S. population, they disproportionately work in roles impacted by the coronavirus pandemic: Black adults make up 23% of respiratory therapists, 27% of licensed nurses, nearly 27% of health care support positions, 20% of protective services jobs like correctional officers, and nearly 20% of food preparation and serving workers, such as fast food associates. The coronavirus pandemic has continued the long-standing health care disparity for Black Americans: Black people account for about one in four of COVID-19 deaths where the patient’s race is known. Meanwhile, coronavirus cases continue to surge across the country with no end in sight.
Protesters from around the country spoke to Fortune about why they are walking off the job today. Their responses have been edited for length and clarity:
Courtesy of Wellington Thomas
“I’m going on strike for Black lives because our hospital isn’t taking our demands seriously when it’s literally a matter of life or death. We know COVID-19 has disproportionately affected Black lives here in Chicago and across the country. Our hospitals and elected leaders need to recognize that. That means investing in those of us serving Black communities with higher wages, better benefits, and safer staffing so we can continue to provide the quality of care our patients deserve.”
—Wellington Thomas, 38
Emergency room technician at Loretto Hospital
Chicago
“I work at three different jobs, and I make $9 an hour. I should be making $11 per hour. I watch others come in and make more money than me even though I’ve been there for six years. As Black women, we fight so hard to take care of our families. I have a family of four. I know there are other families out there trying to make ends meet. If we come together, our voices will be heard. It’s very important to me because I want to be heard, and I want others’ voices to be heard.”
—Deatric Edie, 40
Associate at McDonald’s, Papa John’s, and Wendy’s
Fort Lauderdale
Courtesy of Carmen Laguer-Diaz
“I am a part-time faculty member at Valencia College. There is a big gap between the amount of people of color in full-time positions versus part-time positions. There is an even wider gap if we consider administration and leadership positions. Administration is currently pushing to move to more equitable hiring practices, which I do commend. These practices will help Valencia in the long run. But we also need to consider what is happening in the short term, especially in times like these, with COVID-19 and issues of racial inequity at the forefront of our everyday lives.
Part-time faculty need a voice and further recognition. There are little to no channels for part-time faculty to engage and know their voices are being heard. I was a temporary full-time professor, helped create a new club, and then had to have the difficult conversation with my students that I would not be able to provide them the same support, as I was going back to part-time work. I went back to part-time, and I could not let them flounder. So I took it upon myself to work extra for no pay. I have had to meet students at coffee shops, or crammed in adjunct resource rooms, interrupting other adjunct-student meetings. I have had to get to the classroom early or leave late because I have nowhere to meet with them if they need to meet in private. When they ask me about trying to find my office, I have to hold back my tears thinking of my car as my only office space. I have had to rely on the kindness of some of my colleagues in letting me store things in their office, so I don’t lug them across campus. We are a student-centered institution, but part-time faculty do not get paid or acknowledged for student engagement hours. We are a student-centered institution that serves a large BIPOC student population, with an underrepresentation of BIPOC full-time faculty and administration, and an overrepresentation of BIPOC part-time faculty and staff. The inequity is palpable, and it needs to change.”
—Carmen Laguer-Díaz, 34
Part-time faculty member at Valencia College
Orlando
Courtesy of Dominique Thomas
“I am a Black climate organizer, and every day my existence is a form of radical resistance. I understand how climate is a race issue, and being siloed in a white-dominated movement means always making sure the work is centering Black leadership. During this current uprising, we have to be more radical, nimble, and unwavering in defense of Black lives. At 350.org, we understand that the work to dismantle racist systems, and systems of anti-Blackness and white supremacy is our work when tackling the climate crisis. As a climate movement, we must support the demand to divest from the police and fossil fuels, and reinvest in Black communities and a just recovery.”
—Dominique Thomas, 29
Organizer at 350.org
Harlem, New York
“Thirty-three of my coworkers went on strike in late May in the face of a COVID-19 outbreak at our store. McDonald’s failed to keep us safe. Instead of proper PPE, we were treated like animals and given doggy diapers to wear as masks. In total, 11 of us and eight of our family members tested positive for the virus.
Our strike came as the country saw a wave of uprisings in response to the murders of George Floyd, Breonna Taylor, Ahmaud Arbery, and others. [Editor’s note: Chauvin, the officer who placed his knee on Floyd’s neck, has been charged with second-degree murder, but has yet to face trial. One of the officers involved in the killing of Taylor has been fired; none currently face criminal charges. The three men accused of killing Arbery have been indicted on murder charges, but have not yet gone to trial.] Our fights for justice are inextricably linked. I grew up believing in the promises of the United States, but I have seen how badly those promises have been broken, especially for my Black brothers and sisters. Until Black people can thrive, none of our communities can thrive. That’s why I am striking for Black Lives. I will be standing with working people from all backgrounds—Black and white, Latino and Asian, First Nations and immigrants—to demand justice and respect from our workplaces to the communities where we live. Systemic racism and greed have led to the loss of Black and brown lives through police violence and corporate negligence. We can stop this, but it will take working people fighting together to dismantle this unfair system.”
—Angely Rodriguez, 26
Associate at McDonald’s
Oakland
Courtesy of Demetrus Dugar
“I’ve been a security officer in Seattle for over 14 years. Security plays a crucial role securing hospitals, grocery stores, businesses—there to protect but also to help enforce social distancing practices and provide a familiar face. Before I became a security officer, I was in the police explorer program, and my interactions with police have mostly been positive. However, I know, as a Black man in America today, I’m only one wrong encounter away from dying because of the color of my skin. On top of that, when I come home from work, I worry I will spread COVID-19 to my family—my partner, my four daughters, including my 6-month-old. It took three long months during the pandemic before my company provided us with masks. That’s why I’m standing up. Essential workers—who are mostly Black and brown folks—deserve respect, a workplace free of racism and discrimination, PPE, hazard pay, and job protections. I’m joining with tens of thousands of workers across the country. I’ll be taking a knee for eight minutes and 46 seconds, the time it took for George Floyd to be murdered in broad daylight, by police.” [Editor’s note: The officer who knelt on Floyd’s neck has been charged with murder but has not yet gone to trial.]
—Demetrus Dugar, 35
Security officer
Seattle
Courtesy of Cassie Geremaia
“I am kneeling for eight minutes and 46 seconds in memory of George Floyd in support of the Strike for Black Lives. This day is important to me because I believe the oppressive systems that prevent Black people from living a safe life in our country are wrong. It is time for us to continue the fight to make our country a better place, and I am proud to stand in solidarity with my fellow workers across the country until we make this right. As a state worker, I know that when we come together in our union we make sure we stand behind every single member, no matter the color of their skin.”
—Cassie Geremaia, 32
Hospital cost analyst at the Colorado Department of Health Care Policy & Financing
Denver
“My life as a Black individual matters. I am a Black domestic worker in America. We have not been appreciated. I want everyone to know what a day without Black domestic workers feels like when we’re not in your homes, not in your offices. If you don’t support Black lives, it can impact the country. Just knowing that Black lives matter is the first step in getting justice.”
—Crystal Crawford, 34
Nanny for multiple families
Atlanta


fortune--2020-07-21--No-one tried to protect the U.K.’s Brexit referendum from Russian interference, long-awaited report

No-one tried to protect the U.K.’s Brexit referendum from Russian interference, long-awaited report shows

Nextdoor CEO Sarah Friar on the power of hyperlocal community and diversity in the boardroom

Many in the U.K. were hoping that a key parliamentary report into Russian influence and disinformation would finally settle the question of whether Russia interfered in the Brexit referendum or not. After all, given Russia’s desire to weaken the EU, it had every motive to do so.
Sadly, the report—belatedly published Tuesday by Parliament’s intelligence and security committee—does not do that. It could not, because nobody in the government and intelligence services gave the lawmakers on the committee any assessment of Russian attempts at interfering in the referendum.
The committee reported that nobody in the government or British intelligence was watching out for Russian interference when the 2016 referendum took place, and nobody bothered to try spotting it after the fact.
And the government of Prime Minister Boris Johnson—one of the leading advocates of Brexit, and the U.K.’s former foreign secretary—is still refusing to conduct an inquiry.
“The U.K. is clearly a target for Russia’s disinformation campaigns and political influence operations,” the committee’s report read. “However…It has been surprisingly difficult to establish who has responsibility for what. Overall, the issue of defending the U.K.’s democratic processes and discourse has appeared to be something of a ‘hot potato,’ with no one organization recognizing itself as having an overall lead.”
The committee also said MI5—the U.K.’s domestic intelligence service—had given it “just six lines of text” when asked if there was any secret intelligence to back up widespread public reports about the use of Russian disinformation channels and “bots” and “trolls” to influence the referendum in favor of Britain’s exit from the EU.
The report has been ready for publication since last October, but Johnson blocked its release until well after the November general election, which saw him elected with a thumping majority.
Reading the report, it is not hard to see why he delayed its release. It notes that credible reports of Russian interference in British politics date back to at least 2014, when a Scottish independence referendum took place, but it was only after Russia’s 2016 hack on the U.S. Democratic National Committee that the U.K. government “belatedly realized the level of threat which Russia could pose in this area,” the report said.
“It appears that the [British] Intelligence Community did learn lessons from the U.S. experience, and [the government] recognized the Russian threat to the U.K.’s democratic processes and political discourse,” the report read. “Had the relevant parts of the Intelligence Community conducted a similar threat assessment prior to the referendum, it is inconceivable that they would not have reached the same conclusion as to Russian intent, which might then have led them to take action to protect the process.
“We have not been provided with any post-referendum assessment of Russian attempts at interference,” the committee complained in the report. “This situation is in stark contrast to the U.S. handling of allegations of Russian interference in the 2016 presidential election, where an intelligence community assessment was produced within two months of the vote, with an unclassified summary being made public.
“Whilst the issues at stake in the EU referendum campaign are less clear-cut, it is nonetheless the Committee’s view that the U.K. Intelligence Community should produce an analogous assessment of potential Russian interference in the EU referendum and that an unclassified summary of it be published.”
So, is that going to happen? No.
According to the government’s response to the report, “a retrospective assessment of the EU referendum is not necessary.”
The government did react a little more warmly (if vaguely) to the committee’s recommendation of a new “protocol” with social media companies such as Facebook, which would “ensure that they take covert hostile state use of their platforms seriously, and have clear timescales within which they commit to removing such material.”
“The Government’s relationship with the social media companies continues to evolve. In the context of the COVID-19 response, we are learning valuable lessons which will be applied to our future approach to countering disinformation and other forms of online manipulation,” the government said in its response.
“While the Government welcomes the actions taken by social media companies thus far, including the cooperation they have shown in tackling these issues together, there still issues to be addressed.”


fortune--2020-07-21--Why McKinsey built an ’emotion archive’

Why McKinsey built an ’emotion archive’

This is the web version of Business By Design, a weekly newsletter exploring design’s transformative influence on industry and enterprise. Sign up to get it delivered free to your inbox.
In February, the design arm of McKinsey & Company, the global consultancy, caused a stir in the commercial design world by declaring, after a study of 1,700 major companies, that two-thirds of CEOs have no idea what designers do.
Now McKinsey has launched a project that may help resolve that mystery—or at least some of it.
In April and May, as the coronavirus spread from China to the rest of the world, a team of 15 McKinsey designers embarked on an ambitious effort to understand how the pandemic is reshaping the values of global consumers and workers. The team, spread across five time zones and working from home via video calls and digital whiteboards, tracked the lives of more than 100 people in eight different countries. Instead of poring over spreadsheets or crunching numbers, the McKinsey team employed ethnographic methods such as video diaries and one-on-one interviews to collect, categorize, and interpret data on a squishy and elusive phenomenon: human emotions.
The team’s findings are summarized in a series of essays online under the heading “The New Possible.” One explores the promise and peril of working from home. (Martin from Leicester enjoys managing tenants from his wife’s dressing table, while Sarah from Chicago laments having to stack up pillows to work from her bed because her partner took over the desk.) Another describes how the pandemic is forcing people from all cultures to become more introspective and think more purposefully about their values and what really matters in their lives. (Benjamin, an IT manager from Singapore, says he wants to live like a stray cat, who doesn’t need a big house but can “eat and sleep well at any place it likes.”) There is an essay on how people are coping with increased financial pressures amid the crisis and another on the connection between COVID-19 and mental health.
What’s remarkable about these essays is that they don’t sound very McKinsey-like. (Full disclosure: I used to work at McKinsey.) They’re focused on people, not companies; illustrated with photos and video, not bar charts or spiderweb graphs; and woven together with stories that are open-ended rather than pressed into a list of didactic “takeaways.”
“This is a new way for McKinsey to look at the world, through these human stories,” says McKinsey Design partner Jeff Salazar, a driving force behind the “New Possible” project. “For consumers and employees, the pandemic has stirred up a whole bunch of complicated new stuff… People are recommitting to values: health, family, purpose. They’re aligning those values to brands and employers that are truly delivering on purpose. It’s not just millennials, it’s everybody…But this is something you just can’t capture with surveys. It requires a lot of interpretation.”
Salazar is a partner at Lunar, the San Francisco-based industrial design firm McKinsey acquired in 2015. He has won awards for work on personal computers, electric scooters, and toothbrushes, and is steeped in the methods of user-centric design. Where consultants with a traditional business background are trained and rewarded for finding the best answer to multiple-choice questions fast, designers like Salazer are apt to wonder why there aren’t more choices, question the question itself—then ask if they can just go hang out with customers.
That’s an approach that drives many CEOs nuts. But Salazar argues design can be an invaluable lens for re-examining business models in a time of maximum economic and social upheaval.
For now, the McKinsey Design team is resisting the temptation to use the New Possible study to make specific recommendations to clients. The idea, Salazar says, is to start a conversation, not to hand clients a set of predetermined solutions. If anything, he worries that the New Possible report may be “a little too polished.”
“I am a designer,” Salazar says. “My impulse is to be transparent, just put the raw data out there and let everyone figure out what it means.”
To that end, his team worked with data scientists to create an “Emotion Archive” by tagging 800 comments from people who participated in the study according to a framework of primary emotions developed by emotional design guru Robert Plutchik. The comments can be filtered to show how frequently people in different countries expressed different emotions.
I’ll admit: the idea of a giant firm like McKinsey creating something as touchy-feely as an “emotion archive” may be a little hard for many CEOs to get their head around. And yet, many professional services firms have followed McKinsey’s lead in bolstering their design capabilities to serve a broader range of clients. Innumerable books and essays on business leadership in our hyper-connected modern economy (some of them by McKinsey) stress the importance of listening, empathizing with employees and customers, and leading by inspiration. At the very least, the archive offers an innovative tool for empathy at a time when CEOs are more isolated than ever.
More design news below.
Clay Chandler
-clay.chandler@fortune.com
NEWS BY DESIGN
Send rubes
A hack on Twitter last week, in which fraudsters took control of several verified accounts in order to dupe followers into sending them bitcoin, highlighted a major vulnerability in Twitter’s admin access. The event also sparked concern over how the social media giant might be manipulated to influence the upcoming U.S. national elections. A rethink in how prominent figures should engage with the public is underway.
Ramped
The New York Times is running a series on how the Americans With Disabilities Act has reshaped the U.S. in the 30 years since it was signed into law. Cityscapes have changed, with access ramps, Braille signage, warning tiles on street corners and other design features proliferating. But the legislation still has room for improvement.
Working while Black
Since the killing of George Floyd in late May, Black designers have seen a substantial increase in business and followers as campaigns seize upon the Black Lives Matter movement to promote artists of color. But for some Black designers the sudden interest is "bittersweet," leaving them wondering whether they're being hired for their creativity or for their skin color.
End game
The drug design industry has been working overtime this year, racing to create a cure for COVID-19. A problem has emerged: how do you know when a new drug works? Traditionally, drug manufacturers look at how many lives the drug saves—but that requires people to die. In the early days of COVID-19, researchers tried new metrics to define the efficacy of a drug.
Branded content
Following its April release of 44 at-home experiments to teach children about engineering, Dyson recently released a pdf pack that teaches teenagers how engineering can “solve global problems.” Lesson one: air pollution. The at-home curriculum is also a handy piece of PR for the British design brand, as a whole segment looks at how Dyson’s Pure Cool fan treats pollution indoors.
Off the wall
The Frieze London and Frieze Masters art fairs in the British capital have been cancelled due to the pandemic. The fairs, scheduled for October, are normally the centerpiece of London’s busy art market week. The sales will go online.
Slacker
Gmail is integrating Google Chat, Rooms and Meet into one app for its G Suite business users. The consolidated platform is an attempt to take on Slack and other workplace messaging platforms. The redesign puts communication tools front and center, while moving collaborative tools—such as Google Docs—into a supporting role.
EXECUTIVE SUMMARY
Caleb Watney—a fellow at libertarian think tank R Street—writes for The Atlantic that the engine of U.S. innovation is slowing, retarded by a disastrous government response to the pandemic and the growing exclusion of foreign students.
“Until now, the U.S. maintained its reputation as the global epicenter for talented scientists and technical practitioners through sheer inertia,” Watney says, arguing that talent has streamed to America largely because that’s where talent already is. The pandemic, and the atmosphere around it, threatens to break this inertia in three major ways:
First, the flow of talent to the U.S. is slowing as students stay at home or struggle to get visas; second, partly as a consequence of the first, university hubs are in “financial turmoil;” and lastly, the flow of information and ideas around hubs such as Silicon Valley has been impeded by most engineers working at home.
The decline of U.S. innovation, Watney says, would unfold over decades or years but the starting point is now. The solution? The government needs to do more to support universities and do less to block immigration. But reversing the work from home trend—or mitigating its impact on communication—won’t be so simple.
QUOTED BY DESIGN
"Customers are looking for experiences that they find familiar, that they find convenient, and that are uplifting in some way."
Starbucks CEO Kevin Johnson speaking on how the pandemic has affected customer expectations. The biggest change is a preference for the “familiar,” as opposed to the old desire for the something novel. However, Starbucks will be rolling out a novel experience: “walk thru” coffeeshops, with the first planned for Manhattan. It’s unclear how the walk thru concept differs from taking a coffee to-go, but slapping a moniker on it marks yet another departure from the “third space” concept that Starbucks built its brand on.
This week’s edition of BxD was curated by Eamon Barrett. Email him tips and ideas at eamon.barrett@fortune.com


fortune--2020-07-21--Why the world’s most valuable unicorn is shunning a U.S. IPO

China’s Ant Group, an Alibaba affiliate, is planning a dual listing in Hong Kong and Shanghai in what could be the biggest initial public offering this year—and a signal that the world’s tech giants are starting to choose sides as the U.S.-China feud bifurcates the global market.
Ant, a financial technology firm that runs China’s dominant digital payment platform, was last valued in 2018 at $150 billion; stock analysts estimate a current value of $200 billion, making it arguably the world’s most valuable unicorn. Ant will debut simultaneously on Shanghai’s tech-focused Star Market and on the Hong Kong Stock Exchange, where Alibaba is listed.
Alibaba founder Jack Ma started Ant in 2014 and has a controlling 50% stake in the fintech firm. The companies closed a deal last year that ended their profit-sharing arrangement and gave Alibaba a 33% equity interest in Ant.
Between regulatory uncertainties in the U.S. and proximity to its main markets, listing in Hong Kong over New York is “the easier way for Ant,” said Bruce Pang, head of macro and strategy research for China Renaissance Securities. “In the past two years, the odds for [Ant] listing in New York have just been getting lower,” Pang said. “It has to be thinking about all these uncertainties and risk factors.”
Ant’s decision to spurn U.S. bourses in favor of two exchanges near its headquarters in Hangzhou, China, some 100 miles southwest of Shanghai, speaks to the chasm in today’s technology space and the knock-on effects of the unrelenting U.S.-China tension over data, human rights, and trade.
Low odds
Regulatory scrutiny of Chinese companies in the U.S., and the home field advantages of China—policy support, convenience, and access to the domestic market, Ant’s largest—are all possible reasons the firm settled on Shanghai and Hong Kong to go public, Pang said. An Ant representative didn’t immediately respond to a request for comment.
Ant’s dual IPO comes as more Chinese companies list closer to home. Some Chinese companies already listed in the U.S. have pursued secondary listings in Hong Kong or Shanghai as a sort of backup plan should the U.S. become more hostile; others have delisted from U.S. exchanges altogether. Such moves seem to be in response to regulatory changes at home and an increasingly inhospitable U.S. climate.
The U.S. Senate in May passed a bill to delist companies that don’t comply with audits, and Nasdaq said it would tighten its regulations for companies that want to list. Neither change targets Chinese companies specifically, but one of the sponsors of the bill said it was aimed at China, and Nasdaq’s announcement followed allegations of financial fraud in two Nasdaq-listed Chinese companies. The U.S.-listed Chinese firms that could be affected by the Senate bill have a combined market capitalization of around $1 trillion, roughly 3% of the U.S.’s total equity market cap.
Ant is the highest-profile and most valuable company yet to shun New York in favor of exchanges closer to home. It operates the online payment service Alipay, which has 1.2 billion users globally. Alipay is China’s most popular mobile payment platform with a 55.1% market share.
Ant’s choice of IPO venues means U.S. investors will not be able to buy shares of the firm. That isn’t the case with Alibaba, which is listed in both New York and Hong Kong. Pang said he has spoken to U.S. investors who are disappointed that they won’t be able to buy shares in Ant because “they’ll lose the opportunity to invest in the growth of China’s new economy sectors.”
A changing climate
Even before its IPO announcement, Ant has had to rethink U.S. expansion plans as trade war tensions spilled over into dealmaking. In January 2018, the U.S. blocked Ant’s attempt to buy U.S. money transfer company MoneyGram in a $1.2 billion deal, citing national security concerns.
Jack Ma said in January 2017 that he would create 1 million jobs for U.S. workers through Alibaba’s expansion into the U.S. By 2018 he had rolled back the pledge, saying that because of trade tensions between the U.S. and China, “there is no way to complete the promise.”
What’s more, U.S. government skepticism of Chinese tech companies has surged this year. Some U.S. lawmakers are pushing to ban the short video app TikTok because it is owned by Chinese tech firm ByteDance, another highly valuable unicorn.
The domestic regulatory environment may have also played a part in Ant’s choice of listing location. Ant is domiciled in China and requires approval from Chinese regulators to list in markets outside China. A senior Ant executive told the Financial Times that the company waited to “secure the full support of Beijing” before it announced the IPO.
Ant said the capital raised from the dual offerings will be used to develop its presence in global markets, expand tech investment, and digitize China’s service industry. That global market expansion will take place largely in Asia, where Ant has established partnerships with nine digital payment startups in India, the Philippines, and elsewhere.
Ant changed its name last month from Ant Financial Services Group to Ant Group, in an effort to shift public perception of Ant as a financial firm to Ant as a technology company.
Ant’s IPO decision will benefit Hong Kong’s exchange at a moment when political uncertainty has thrown the city’s status as a financial hub into question. In fact, the city has experienced a sort of windfall as Chinese firms look for U.S. alternatives.
U.S.-listed Alibaba completed its secondary listing in Hong Kong in November. The e-commerce giant’s Hong Kong listing wasn’t an option until 2018, when Hong Kong’s exchange tweaked its regulations to allow companies with weighted voting rights to list. The change was aimed at making Hong Kong’s board more attractive to big tech companies like Alibaba and Ant.


fortune--2020-07-21--Nextdoor shows the value of a profit-driven approach to community-building

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning.
In our Leadership Next podcast today, my cohost Ellen McGirt interviews Sarah Friar, CEO of Nextdoor.com. That’s a business I barely knew before the pandemic. But now it’s become a critical source of intelligence–where to find scarce items, who’s providing the best home services during lockdown, and, especially, what new wild animals have been spotted in the neighborhood.
I won’t spoil all the suspense, but Sarah said a couple of things during the interview that I want to share here. She grew up in Northern Ireland, which she said gave her a strong sense of “both the blessing and the curse of strong communities.” And she sees Nextdoor as a way to “ultimately cultivate a kinder world.”
She also sees it as a good business–it was valued at $2.1 billion after last year’s fundraise–and therein lies the magic that motivates us at Leadership Next. If she had taken the non-profit route to community building, she would have been “eternally stymied by being small.” But “if you get a good business model working, it kicks into gear and allows you to really bring those dreams to life.”
Ellen also talked to Sarah about the controversy Nextdoor.com found itself in recently when moderators removed posts related to Black Lives Matter. It’s a fascinating conversation about the challenges of moderating information platforms, which you can listen to here.
More news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
EU stimulus
Following their longest-ever summit – more than four days long – the EU's national leaders finally agreed on the terms of the union's €750 billion ($860 billion) COVID-19 stimulus package. In the end, €390 billion will be disbursed in the form of grants, with €360 billion coming as low-interest loans. With almost a third of the cash being earmarked for fighting climate change, this is the biggest green stimulus package in history. Fortune
Markets up
The above news has sent European markets soaring – the DAX rose 2%, and the pan-European Stoxx 600 rose by more than 1.2%. U.S. futures look rosy too. Financial Times
IndiGo cuts
Another week, another bad-news story from the pandemic-struck aviation sector. This time it's India's largest carrier, IndiGo, which will cut a tenth of its staff–that's around 2,400 people. CEO Ronojoy Dutta: "It is impossible for our company to fly through this economic storm without making some sacrifices, in order to sustain our business operations." BBC
Prime Day
Amazon has delayed this year's U.S. Prime Day to… sometime later this year? The ecommerce giant says it will share "more details soon" about its blockbuster summer sales event, which usually happens in mid-July. Third-party sellers have been told to use the week of October 5 as a "placeholder date" but there's no official confirmation yet. CNBC
AROUND THE WATER COOLER
Hong Kong
Tech startups are already starting to move data and people out of Hong Kong – or are at least drawing up plans to do so – following the imposition of China's sweeping national security law on the island. "If we follow the law in Hong Kong, we may violate other countries' regulations," said Oursky co-founder Ben Cheng. Police there can now ask companies handling data to delete or restrict access to content deemed to endanger national security. Fortune
Uber algorithms
The taxi drivers who have been suing Uber over workers' rights in the U.K. (Uber's final appeal starts today) have now also launched a data-protection complaint against the firm in Amsterdam, site of its international HQ. The complaint says Uber does not give its drivers all the personal data it holds on them if they ask, and claims it is also breaking Europe's tough GDPR rules by not explaining the logic its algorithms use to allocate rides. Fortune
Ant Group
Some analysts think that Alibaba affiliate Ant Group, which yesterday announced plans to float in both Shanghai and Hong Kong, may be more valuable than some of Wall Street's biggest banks. The financial outfit offers mobile payments (Alipay), wealth management, business loans and insurance–and now it's focusing on financial technology products for enterprise customers. CNBC
Convention needs
The Republicans need their upcoming party convention to be a big event, but the Democrats are planning to lay low, writes Fortune's Nicole Goodkind. Why's that? Because the Democrats are already leading and can benefit from keeping stage time–which might otherwise highlight internal divisions–to a minimum, while President Trump could potentially use the GOP event to break through a news cycle that is not helping him one bit. Fortune
This edition of CEO Daily was edited by David Meyer.


fortune--2020-07-21--Nextdoor CEO Sarah Friar on the power of hyperlocal community and diversity in the boardroom

No-one tried to protect the U.K. ’ s Brexit referendum from Russian interference , long-awaited report shows

Nextdoor is many things to many people. To investors, it is a growing San Francisco tech company. To employees, it’s a hyper-local social platform. And to its many millions of users, it is a community hub at a time when a pandemic has forced many people into isolation at home.
As the former vice president of finance and strategy at high-flying business software maker Salesforce—then the CFO of payments company Square during its highly publicized IPO—Nextdoor CEO Sarah Friar knows a thing or two about sudden growth.
On the July 21 episode of Fortune’s podcast Leadership Next, Friar tells cohost Ellen McGirt about how she’s navigating the sharply increased usership that her company is experiencing in the wake of the coronavirus. Between February and March, the number of active users on Nextdoor increased 80% each week.
“There’s never been more need for local and the power of proximity,” Friar says, adding that the power of social trust is growing during the pandemic and that people are increasingly choosing to get their news from local sources.
As more people use the service, opportunities grow for local businesses to advertise and share information. Friar hopes the trend will help small businesses that have been hit hard by stay-at-home orders.
McGirt notes that as Americans battle simultaneous pandemics—COVID-19 and systemic racism—many Black neighbors have not felt welcome on Nextdoor. To combat that, Friar says her company has made battling racism and hate speech on the platform a top priority. She also notes that the structure of the service allows users to speak to people very different from themselves—unlike some other prominent social media platforms. With kindness reminders, moderation, and the following of community guidelines, Friar says Nextdoor can create real change.
Besides, “Black Lives Matter is a local conversation,” Friar says. Unlike many national issues, it has a place on Nextdoor and should be discussed. “We felt it was time to really say, this is something that, at a community level, we need to want to talk about, be able to talk about, and be able to talk about in a constructive way,” Friar says.
Changing gears (at about the 18:30 mark), McGirt and Friar discuss representation in technology and in the broader world of business. “I’m a natural optimist but a frustrated optimist when it comes to diversity,” Friar says, citing the fact that only 7% of Fortune 500 CEOs are women.
In the year and a half since taking the reins at Nextdoor, Friar has seen the company’s board of directors as well as its senior executive teams shift from including mostly men and very few women to near parity in terms of gender. To accomplish such chase, Friary says leaders must be very explicit in their goals and then hold themselves and their teams accountable. Corporate leadership should openly talk about these goals and make clear that one of the criteria they are grading their talent on is supporting diversity, she adds.
Friar closes out the conversation by sharing what she has learned about building community.
“The neighborhood is the unit of change,” she says, “and I think the only way we will solve these big societal problems is by starting at a grassroots level.”


fortune--2020-07-21--EU leaders agree on $860 billion coronavirus recovery fund

European Union leaders agreed on a landmark stimulus package that will see the bloc issue 750 billion euros ($860 billion) of joint debt to help member states mitigate the economic downturn.
The agreement, in the early hours of Tuesday after more than four days of acrimonious negotiations in Brussels, required the unanimous approval of all 27 member states and represents a victory for German Chancellor Angela Merkel and French President Emmanuel Macron, who drafted an early outline for the proposal in May. The emergency fund will give out 390 billion euros of grants and 360 billion euros of low-interest loans.
Almost a third of the funds are earmarked for fighting climate change and, together with the bloc’s next 1 trillion-euro, seven-year budget, will constitute the biggest green stimulus package in history. All expenditure must be consistent with the Paris Agreement’s goal of cutting greenhouse gases.
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The emergency funds will not only unleash vital financial support to the southern European economies hit hardest by the virus, but serve as validation that the bloc can offer meaningful solidarity to members in need. With more than 100,000 Europeans dead from the virus and an economy to rebuild, investors were looking for a display of unity to sustain the rally in stocks.
“I am very relieved,” Merkel said afterward. “We have come up with a response to the biggest crisis the EU has faced.”
Clashing Interests
Italy, the original European epicenter of the pandemic, will likely be the biggest beneficiary from the plan and expects to receive about 82 billion euros in grants and about 127 billion euros in loans, according to initial estimates, a senior Italian official said. Provisions to combat sliding democratic standards in eastern Europe were weakened at the last-minute to get the deal over the line.
“This agreement sends a concrete signal that Europe is a force for action,” Charles Michel, president of the EU leaders’ council, said at a press conference afterward. “I believe this agreement will be seen as a pivotal moment in Europe’s journey.”
The agreement did not come easy. Talks came close to collapse at several points over the summit as clashing national interests suggested consensus might be out of reach.
While governments all agreed that economic contractions of as much as 10% in some countries called for extraordinary measures, they bickered for hours over the final amount of grants, as well as how future disbursements could be scrutinized.
Crucially, the final compromise also included budget rebates for four fiscally hawkish northern countries, reducing their annual net contributions. Denmark, Germany, the Netherlands, Austria and Sweden will get more than 50 billion euros in rebates over seven years.
In the end, it largely came down to offering enough sweeteners to that group, which had been pushing for a smaller package. To bring them on board, Merkel, Macron and leaders from Europe’s South agreed to reduce the grants envelope from 500 billion euros as proposed.
“We are 27 around the table and we managed together to produce a budget,” Macron said at a press conference alongside Merkel. “In which other political sphere in the world is that possible, is that done? None.”


fortune--2020-07-21--Startups are already moving data and employees out of Hong Kong over its new security law

China’s sweeping national security law has forced technology firms to reconsider their presence in Hong Kong. The nimblest among them — the city’s startups — are already moving data and people out or are devising plans to do so.
Beijing’s polarizing law, which took effect this month, upended Hong Kong’s tech scene just as it seemed on a path to becoming a regional hub. Entrepreneurs now face a wave of concern from overseas clients and suppliers about the implications of running data and internet services under the law’s new regime of vastly expanded online policing powers. Many are making contingency plans and restructuring their operations away from Hong Kong.
Their actions may foreshadow similar decisions from internet giants like Facebook Inc., Alphabet Inc.’s Google and Twitter Inc., all of which confront the same set of uncertainties. The larger firms are taking time to fully assess the impact of the new law, while sentiment in the city itself is dour with about half of U.S. business people saying they plan to leave, according to a recent survey by the American Chamber of Commerce in Hong Kong.
“We are now in a dilemma. If we follow the law in Hong Kong, we may violate other countries’ regulations,” said Ben Cheng, co-founder of software company Oursky. “We worry that people will not trust us someday if we tell them we are a Hong Kong-based company.”
Twelve-year-old Oursky has already had trouble in the short period since the law came into force, with some foreign cloud service providers refusing to work with Hong Kong-based entities and reviewing the practice, Cheng said without elaborating. To circumnavigate these issues, his company will set up offices in the U.K. in about a year and then expand to Japan.
Tech companies that handle data are particularly vulnerable under the new law. Police can ask them to delete or restrict access to content deemed to endanger national security, with non-compliance punishable with a fine of HK$100,000 (around $13,000) and six months in prison for representatives of infringing publishers. Such provisions put technology companies under “tremendous risk and liability,” said Charles Mok, a Hong Kong lawmaker. “It’s a signal to these companies to be very careful. If you want to be safe and you don’t want the uncertainty, then maybe you have to leave Hong Kong.”
In recent years, the global financial center has grown into an attractive destination for fintech entrepreneurs, and its close proximity to Shenzhen and the so-called Greater Bay Area has helped foster research and development ties between startups and Chinese universities. Hong Kong had been expected to reach $1.7 billion in datacenter revenue by 2023, rivaling nearby Singapore whose server market brought in $1.4 billion last year, according to data from Structure Research. All that is now under threat.
More than half of Measurable AI’s clients are U.S.-based. The Hong Kong firm tracks business receipts and provides transactional data to hedge funds and corporations, many of whom have expressed concern about how data trade may be affected by the Beijing law as well as Washington’s retaliatory measure of rescinding Hong Kong’s special trade status. “Right now might be a good time for us to rethink how we can restructure or have the operations outside of Hong Kong,” co-founder Heatherm Huang said, adding that the company’s accelerating plans to migrate parts of its business development and sales to Singapore and New York.
“Doing a startup in Hong Kong is already difficult. It’s a super expensive city,” Scott Salandy-Defour, co-founder of energy-tech startup Liquidstar, told Bloomberg News. Even before the new law, the situation in the city was fraught with U.S.-China tensions over everything from trade to human rights. Investors have become very cautious about people and businesses with ties to China and the new law “is like the last nail in the coffin,” said the entrepreneur, who is now planning to relocate to Singapore.
One founder of an edtech venture, who like several executives interviewed asked not to be identified because of the sensitivity of the issue, said their company had transferred all its data to portable offline storage in case there was a need to leave Hong Kong in the future.
“This would be just a short-term phenomenon. I think after they understand the society is more stable, businesses will come back,” said Terence Chong, an associate professor of economics at the Chinese University of Hong Kong. “Hong Kong is the gateway to China. If they want to have access to China’s market, it is the best place for them.” Supporters of the law see it as a necessary step to restore investor and business confidence by curbing months of sometimes-violent unrest that have rocked the former British colony.
For some, the allure of closer integration with China through the Greater Bay Area is too good a chance to pass up. “I think Hong Kong can still play the role it’s always played, bringing international and Chinese players in technology closer together,” said Tony Verb, co-founder of GreaterBay Ventures.“I don’t see reasons right now to run away.”


fortune--2020-07-21--Jeff Bezos is now personally worth more than the market valuation of Exxon, Nike, and McDonald’s

Jeff Bezos added $13 billion to his net worth on Monday, the largest single-day jump for an individual since the Bloomberg Billionaires Index was created in 2012.
Amazon.com Inc. shares surged 7.9%, the most since December 2018 on rising optimism about web shopping trends, and are now up 73% this year.
Bezos, Amazon’s 56-year-old founder and the world’s richest person, has seen his fortune swell $74 billion in 2020 to $189.3 billion, despite the U.S. entering its worst economic downturn since the Great Depression. He’s now personally worth more than the market valuation of giants such as Exxon Mobil Corp., Nike Inc. and McDonald’s Corp.
Mackenzie Bezos, his ex-wife, gained $4.6 billion Monday and is now the 13th-richest person in the world.
Other tech titans are also enjoying a surge driven partly by people forced to stay at home and helped by the boost given to markets by unprecedented stimulus efforts by governments and central bankers.
Facebook Inc. Chief Executive Officer Mark Zuckerberg has added almost $15 billion to his net worth so far this year, even as the company deals with brands boycotting ads on the social network.


fortune--2020-07-21--‘Lights Out’: A new book investigates how and when things fell apart at General Electric

By September 2008, the financial crisis was in full bloom. Banks were failing, markets were reeling, and the government scrambled to prevent a total collapse of the U.S. financial system. Battered investors winced at the expectation that another corporate behemoth might suddenly fall. Few were looking in the direction of General Electric, a world-famous industrial company sitting on a massive finance division: GE Capital.
When it was all over, GE had slashed its dividend for the first time since the Great Depression, gone hat in hand to the Treasury for help staying afloat, and permanently injured its once impregnable reputation among investors. GE’s entangled reliance on its financial services business was painfully exposed, a burden that would never quite go away for the industrial conglomerate.
This is the story of the early days of that pivotal moment in the company’s history.
Below is an excerpt from our new book, Lights Out: Pride, Delusion, and the Fall of General Electric, available July 21.
Authors Thomas Gryta (left) and Ted Mann. Courtesy of Bryan Murray; Tom Williams
Beverly Hills was mild and clear on the evening of Sept. 11, 2008. The last person you expected to see among the swaying palms of Los Angeles on that particular night was Jeff Immelt.
On the other side of the country, huddled in the deep canyons of downtown Manhattan, the most powerful minds on Wall Street were wrestling with a financial contagion that had choked the economy and would topple some of the world’s mightiest financial companies.
General Electric wasn’t technically a bank, but its finance organization dwarfed most banks in the country. Because of its industrial core and positive messaging to the market about its condition, not to mention its reputation, the company wasn’t on anybody’s radar as the crisis deepened.
But that ended quickly.
A few days earlier, Immelt had made a call to Treasury Secretary Hank Paulson to tell him that GE was having some problems selling its commercial paper to investors. (As noted earlier, the paper is short-term debt that companies use to meet the cash needs of their operations.) Commercial paper was GE’s lifeblood. It used its stellar triple-A credit rating to get cheap access to tens of billions of dollars in commercial paper to keep GE Capital running smoothly. If GE couldn’t access that market, it couldn’t meet its massive obligations. It would be technically insolvent.
Paulson was alarmed by the call, he later wrote in his memoir On the Brink. He and Immelt had a history together. They did business when Paulson was a banker and executive at Goldman Sachs. Both had played football at Dartmouth, although they had graduated a decade apart, and both attended Harvard Business School. Paulson was known to be dead serious, while Immelt always seemed to have time for a joke.
These were not ordinary times. Just days earlier, the U.S. government had seized control of mortgage giants Fannie Mae and Freddie Mac, and things were about to get a lot worse. For GE, the storm was in sight.
In Beverly Hills, Immelt was heading to the Hotel Beverly Terrace and a restaurant called Trattoria Amici. He wasn’t meeting government officials, bankers, or advisers to help get GE through the financial apocalypse. Rather, he was meeting with Steven Spielberg, along with Universal Studios president Ron Meyer and DreamWorks CEO Stacey Snider.
It was purely social, the companies assured the show business press, not a deal meeting.
Immelt, like his predecessor, enjoyed being involved in the media business. Owning NBC, and eventually Universal as well, had brought the industrial giant onto the red carpets of Hollywood and into the halls of Rockefeller Center, recalling the days of giant corporate conglomerates that could, and did, own anything.
After GE bought Universal Studios, Immelt used to show off previews of blockbuster movies coming out of the division at the large executive leadership meetings of internal managers. The workers in the crowd, who were from all divisions, weren’t always impressed with the highlighted big-budget output of the movie studio.
During a Q&A session in one meeting, an employee asked Immelt how it felt to be a media mogul. The boss gave a characteristic full laugh and snarky response.
“I’m not a media mogul, I’m the media mogul’s boss,” he told the group.
Even in the depths of the financial crisis, Immelt had joked to people that “the good news is that we own CNBC,” which saw skyrocketing ratings during the never-ending news cycle.
Meanwhile, back in New York, regulators and the heads of the major banks were facing an inconceivable weekend of round-the-clock work to avoid catastrophe in the banking system. By Monday morning, Merrill Lynch was sold and Lehman Brothers had declared bankruptcy.
He might have been in Beverly Hills, but Immelt was closely following GE’s exposure and navigation during the crisis. He had flagged the difficulties that GE was having in the commercial paper market to regulators, but he hadn’t communicated those concerns to investors or the public. In fact, GE was explicitly communicating the opposite by insisting that it wasn’t having problems. The coming weeks would bring recurring assurances from GE that everything was fine, but the wide gap between those assurances and reality couldn’t remain open for very long.
In fact, precisely what Pimco’s Bill Gross had warned about in 2002 was now coming to a head. He had said that GE’s dependence on commercial paper was dangerous because the company wasn’t fully backing up its needs with a contingency plan, as many financial services funds did, or were required to do.
Trust and confidence are everything in finance. People put their money in a bank only because they are very confident that they can get it back if needed. If their confidence wavers, they’ll pull their money out and stop using the bank. When that happens all at once, the bank fails. For its part, GE certainly didn’t want its counterparties to get spooked; that could increase the cost of borrowing or even freeze the market altogether.
On Sept. 14, a Sunday, GE’s investor relations department issued a letter reiterating that the company was in healthy condition and maintaining that its commercial paper programs continued to be “robust” and that “we are not raising external capital and have no need to.”
But the very next day, Immelt showed up at Paulson’s office in the evening to again sound the alarm about potential problems at GE. He told the Treasury secretary that the commercial paper operation was getting worse and that GE was having a hard time selling debt that lasted longer than overnight.
That Monday night, New York Federal Reserve president Tim Geithner had a meeting on his schedule for 7:00 p.m. with a simple title: “GE Issues.”
The financial crisis changed the world’s view of commercial paper. Although it had long been considered easy to access, fully trustworthy, and a liquid source of funding, the crisis raised doubts and caused much of the commercial paper market to disappear. This is a real problem when an entire portion of the economy is depending on it to function.
The collapse of commercial paper was similar to a gasoline crisis. Roads and highways were built with the assumption that gas will always be available. So if all the gas stations go empty, the entire automobile transportation system eventually stops working. And when the gas stops flowing, the reaction is predictable: People panic, prices rise, and some start hoarding, but there’s little that most people can do.
Commercial paper was not a new concept. It was how Marcus Goldman and Jeffrey Sachs got their start on Wall Street after the Civil War. As a tool that allowed companies to quickly borrow or lend, preventing costly cash shortages and bringing them a return when there was extra cash, commercial paper met a need to stabilize the cash holdings of businesses.
In their research, two finance professors from New York University’s Stern School of Business found that there was about $2 trillion in commercial paper outstanding in the United States at the beginning of 2007. The first disruption began just months later, in late July, when two Bear Stearns hedge funds went bankrupt because of massive losses on subprime mortgages, causing other funds to reassess their own holdings in similar mortgages and mark them down. The moves triggered a cascade of fear and devaluations. Some funds halted client withdrawals because they couldn’t value assets fast enough.
The mortgage contagion infected other businesses as investors suddenly became cautious about using commercial paper, a large portion of which used mortgages as collateral. This set the stage for another shock to the market a year later when Lehman Brothers went bankrupt over a weekend. Investors holding commercial paper sold by Lehman found themselves without a chair when the music stopped.
The most notable impact of Lehman’s failure was the major losses taken by a money-market fund, the Reserve Primary Fund, with $65 billion in assets, when its shares fell below $1, breaking yet another source of a once-dependable investment. People rushed to salvage anything they could by trying to get their money back; it was a full-edged run on the bank that stopped on Sept. 19 only because the U.S. government jumped into the fray and said that it would insure investments in such funds.
This fixed the problem—but you can’t unring a bell. If major sellers of commercial paper could go bankrupt overnight, that changed every investor’s assessment of the risks involved. When money-market funds began deemphasizing commercial paper in their holdings, demand dropped as supply remained unchanged. It became harder and more expensive to access the market. For a massive user of commercial paper like General Electric, this was suddenly an existential problem.
On the morning of Sept. 20, a Saturday, Jeff Immelt and Keith Sherin traveled to GE’s Fairfield headquarters to meet with two bankers coming up from Manhattan. David Solomon and John Weinberg, top advisers from Goldman Sachs, arrived expecting a meeting about the crisis at hand and a discussion of potential defensive moves for GE. As the meeting got under way, it was clear that Immelt had other concerns.
Was Goldman Sachs going out of business and what would that mean for GE? Five days after Lehman’s shocking bankruptcy, Immelt was worried that a Goldman collapse would destroy all remaining confidence in the markets. For some, if a bank like Goldman went down, there was little chance that GE could stay above the fray. The bankers left Immelt with a strong assurance that Goldman wasn’t going anywhere.
Five days later, on Sept. 25, GE again tried to reassure investors that it was performing well in a tough environment, but it was also clearly starting to show signs of stress.
GE lowered its financial projections for the soon-to-end third quarter to reflect “the unprecedented weakness and unpredictability in the financial services markets,” which it didn’t expect to improve anytime soon. GE again backed its commitment to its triple-A debt rating, an often-stated source of pride for Immelt, and said that it wouldn’t need to raise additional long-term debt for the rest of the year.
But GE also ominously showed that it was moving to retain cash by suspending its stock buyback program, on which it had spent $278 million in September—even as it faced an increasingly difficult time funding its operations. GE’s required regulatory filing on the news was dry, saying that the company would reduce its commercial paper levels. But its messaging to the public was more upbeat.
In referring to the commercial paper reduction, GE’s press release said that it was making the moves “although demand remains strong” for its debt. Both Immelt and Sherin made the point that retaining more cash, especially in GE Capital, was not only prudent, given the ongoing uncertainty, but would also make it much easier to “participate in M&A [mergers and acquisitions] that we plan on doing over the next 18 months.”
It was dubious at best that GE might be considering buying companies while the sky was falling.
The marketing message was that GE was performing well compared to its peers, and that it was taking the precautions that would be expected of a highly regarded triple-A-rated company. When asked, Immelt ruled out raising equity capital by selling shares to the market.
“Again, we feel very secure about how the funding looks and the strength of the company and the strength of the balance sheet,” Immelt told investors. “We really believe in our business model and feel secure that we’re well positioned here.”
But the spin wasn’t working. The market needed a real sign of confidence in GE.
The company spent a lot of time and money on convincing the general public of its importance and central role in American life. Wall Street was indifferent to that and worried only about GE Capital, the financial services leviathan that produced half of GE’s profits.
The continued caution around commercial paper was causing real problems for GE. In the market, spooked investors didn’t want to hold the paper for too long, so it was being sold for shorter durations. As a result, companies had to sell paper more often, causing the number of issuances to skyrocket even as the amount of total outstanding paper plummeted.
This was what Jeff Immelt meant when he told Hank Paulson that GE was having a hard time selling paper for any duration longer than overnight.
The afternoon of Wednesday, Oct. 1, 2008, Immelt talked on the phone with Tim Geithner, according to phone records published by the New York Times. Also on the hourlong talk was GE’s general counsel Brackett B. Denniston III, among others.
Like most companies, GE had access to some cash through bank credit lines, an arrangement that allowed it to draw up to a certain amount at a determined rate. For many companies, bank credit lines serve as insurance against a cash crunch.
But in the financial crisis, when nervous investors feared any sign of the next domino to fall, these bank lines weren’t always a lifeline. When Countrywide Financial tapped its credit lines for $11.5 billion in the summer of 2007, it was a clear sign of desperation. With the questions swirling around the market, GE’s bank lines were now effectively useless. Drawing on them would be the equivalent of shooting a flare into the sky and would almost certainly send investors, customers, and counterparties running away for fear that GE was in trouble. That could start a death spiral for the company. Even a healthy company can be destroyed by a runaway panic.
All this being said, in the minds of many, GE wasn’t Lehman Brothers. It wasn’t going to fail or have to declare bankruptcy. The extent of its military business alone made it unlikely that the government would allow GE to implode. The core businesses were considered strong—health care, jet engines, power turbines, and media—and they were all seen as solid bets for the future of America and the world. GE had real businesses owning real assets with real customers, and it was producing cash.
But GE was in fact in trouble. And it needed some help.
Excerpted from LIGHTS OUT: Pride, Delusion, and the Fall of General Electric by Thomas Gryta and Ted Mann. Copyright © 2020 by Thomas Gryta and Ted Mann. Used by permission of Houghton Mifflin Harcourt. All rights reserved.