fortune--2020-09-01--Former Google chief Eric Schmidt warns of China’s “high-tech authoritarianism”

China will lead the world in artificial intelligence if the U.S. fails to spend billions of dollars more on research.
Former Google chief executive Eric Schmidt sounded the alarm bells last week, describing China’s potential leadership in A.I. as a security threat that could lead to “high-tech authoritarianism” worldwide.
“If we don’t act now, in 10 or 20 years we’ll say, ‘How could we have missed this?’” Schmidt said during an online event hosted by the Bipartisan Policy Center (BPC) think tank.
Schmidt, now the chair of the U.S. Department of Defense’s Defense Innovation Board, says that increasing government funding in A.I. research is crucial because it “can’t be made up by private philanthropy.” The amount of money needed to fund A.I. research projects—those that may not have an immediate impact—is so great that no company (not even Schmidt’s former employer) can provide a substitute.
Martijn Rasser, senior fellow for public policy at the Center for a New American Security (CNAS), an influential think tank, shares Schmidt’s view. He said that his group is urging the U.S. to spend $25 billion annually on A.I. research by 2025. For comparison, the White House said in February that it would increase non-military A.I. research spending to $2 billion annually by 2022.
“A.I. is going to be such a fundamentally enabling technology that we cannot afford to shortchange ourselves,” Rasser said.
Politicians and Schmidt, who has invested in A.I. startups and has a huge holding in Google-parent Alphabet, appear to be stoking fears about China’s dominance as one way to create a sense of urgency about increasing national A.I. funding.
Rep. Will Hurd (R-TX)—who, along with Rep. Robin Kelly (D-IL), CNAS, and the BPC, has been working on research intended to help Congress create an A.I. national strategy—cited China as the biggest threat facing the U.S. several times during the talk.
“They don’t care about civil liberties,” Hurd said about China’s hunger for online data to train its A.I. systems at the expense of people’s personal privacy. Some politicians are concerned that China’s views about A.I. and privacy will spread around the globe if the country becomes the world’s leader in A.I.
U.S. tech giants like Facebook and Google, whose executives lawmakers recently grilled about alleged anti-trust violations and weak consumer data protections, were barely mentioned during the event. These tech giants lead other U.S. companies in A.I., putting lawmakers in a predicament over whether they should break them up or impose significant fines that could limit their progress in A.I., potentially strengthening China and its own tech giants.
Hurd had one telling comment that gives a flavor of what some lawmakers are thinking regarding action against the tech giants as it relates to A.I.
“I don’t believe that breaking up some of the great American companies is the way we’re going to out-compete China,” he said.
Schmidt echoed Hurd’s comments, saying that the government needs to be sure that “American companies be the ones that dominate us globally.”
Jonathan Vanian
@JonathanVanian
jonathan.vanian@fortune.com
A.I. IN THE NEWS
Quantum (financial) leap. The White House said that it would invest $625 million into five new research centers that specialize in quantum computing, which researchers are hoping will be the next evolution of modern-day computing. Fortune’s Robert Hackett has the details:
The institutes, which include participation from major research universities and tech companies, will be led by Department of Energy's Argonne, Brookhaven, Fermi, Lawrence Berkeley, and Oak Ridge national laboratories. The investment is part of $1.2 billion earmarked by the National Quantum Initiative, a bipartisan bill that was signed into law last year. The remaining funds, worth $300 million, are set to be supplied by partnering corporations such as IBM, Microsoft, Intel, and others.
It’s a bird, it’s a plane… A standard Cessna 172 four-seat airplane outfitted with autonomous-flying software was able to fly on its own for 15 minutes last fall, in what was believed to be "the first complete civilian unmanned flight over a populated area,” Eye on A.I. scribe Jeremy Kahn reported. The feat was revealed by Reliable Robotics, a startup founded by former SpaceX and Tesla technologists that has exited out of “stealth” and aims to specialize in autonomous cargo deliveries. The startup’s CEO Robert Rose said that he believes the company will be able to use its technology for autonomous deliveries within two years. From Jeremy’s report:
So far, Reliable has had to have an observer on the ground directly watching its airplane fly because of FAA rules that stipulate civilian drones must be flown within direct line of vision of a human operator. But Rose believes this regulatory barrier can also be overcome to let autonomous aircraft fly far greater distances. “I believe it can all be done within the existing regulations,” he says.
China’s new A.I. rules. China is imposing new restrictions on A.I. technologies that would require “local commerce authorities” granting licenses to companies exporting their A.I. out of the country, The Wall Street Journal reported. The move could complicate the potential sale of ByteDance’s TikTok video-sharing service to U.S. acquirers like Microsoft, Walmart, and Oracle, the report said.
China last made changes to its technology export list in 2008, the Commerce Ministry said in a statement posted on the Chinese government’s website. It said adjusting the list was imperative, given the rapid development of science and technology and China’s “continuous improvement” in industrial competitiveness.
Amazon’s delivery drones get a thumbs up from the FAA. The Federal Aviation Administration has given Amazon approval to operate its Prime Air delivery drones, CNBC reported. From the article:
The approval will give Amazon broad privileges to “safely and efficiently deliver packages to customers,” the agency said. The certification comes under Part 135 of FAA regulations, which gives Amazon the ability to carry property on small drones “beyond the visual line of sight” of the operator.
Making WebEx smarter. Cisco said it would buy the startup BabbleLabs, which specializes in using machine learning to eliminate background sounds and unwanted noise from audio and video clips. The networking giant said that the BabbleLabs team would join Cisco’s WebEx video conferencing unit. Cisco did not reveal how much it spent on BabbleLabs, which raised about $18 million, according to deal-tracking service Crunchbase.
EYE ON A.I. TALENT
Scale AI has hired Brad Porter to be the computer vision software startup’s chief technology officer, Bloomberg News reported. Porter was previously the top robotics officer at Amazon, working on projects like warehouse robotics, drones, and delivery robots. Porter was one of a select few Amazon employees to be given a “distinguished engineer” title. In a LinkedIn post, Porter explained that his new role at the startup will give him time to work on the “unsexy part of AI,” referring to data training and the underlying machine learning infrastructure that powers more exciting uses.
“The sexy parts of AI are the fancy algorithms and powerful silicon that allow AI practitioners to build a model that attempts to match the performance of humans,” Porter wrote. “But if you don’t find a way to capture the performance of humans in an accurate and computer-understandable manner, it is extremely hard to build a model that matches that performance.”
Facebook hired Ankit Jain to be a senior research scientist in machine learning. Jain was previously a senior research scientist at Uber’s A.I. labs.
EYE ON A.I. RESEARCH
An A.I. bias toolkit for everyone. LinkedIn has made its LinkedIn Fairness Toolkit (LiFT) available for the public to download via GitHub. The software and methodology is based on the social networking service’s research into A.I. fairness and ethics and is intended for others to use to “detect and monitor bias” in A.I.-powered products. From LinkedIn:
The LinkedIn Fairness Toolkit (LiFT) library has broad utility for organizations who wish to conduct regular analyses of the fairness of their own models and data...
The LinkedIn Fairness Toolkit (LiFT) has already been used to measure the fairness metrics of training datasets for several models prior to their training at LinkedIn. Although we only have a limited subset of member demographic data, our use of the tool has been encouraging so far.
FORTUNE ON A.I.
50 new planets, including one as big as Neptune, are identified using A.I.—By Robert Hackett
Amazon jumps into smart wearables market with Halo activity tracking band—By Aaron Pressman
Why Palantir’s departure won’t doom Silicon Valley—By Michal Lev-Ram
Mark Zuckerberg: Facebook made an ‘operational mistake’ with Kenosha militia group—Danielle Abril
BRAIN FOOD
Pig brain food. Elon Musk’s brain technology startup Neuralink revealed that its human-brain computing interface can be used to monitor a live pig’s brain activity in real time. During a live demonstration, a pig named Gertrude was shown frolicking in a small enclosure while the startup’s surgically implanted embedded brain device tracked the swine’s “neural spikes.”
It was quite the sight, and it showed that Neuralink’s technology appears to work. But it’s still a small step in the company’s quest to make technology that could help restore brain functions with people with neurological disorders.
As Fortune’s David Morris reported, some researchers believe that “the company isn’t offering much that’s new, and that its biggest speculative claims aren’t grounded in current science.” Andrew Jackson, a professor of neural interfaces at Newcastle University, questioned the startup’s claims that the technology could eventually help record memories.
From the report:
“There is a big difference between recording brain cells and ‘reading thoughts,’ especially when it comes to higher-level cognitive functions we don’t understand as well,” Jackson said. “The idea of ‘writing to the brain’ is even more questionable…There are fundamental limitations to targeting specific networks of neurons in a meaningful way using electrical stimulation.”
And before you go, I'd like to introduce you to our Fortune video series, AI Minute. Check out this video where Jeremy talks about the relationship between A.I. and poetry.


fortune--2020-09-01--Apple is prepping 75 million 5G iPhones for later this year

One university may have the best COVID testing operation in the U.S.—and tests students twice a week

Apple Inc. has asked suppliers to build at least 75 million 5G iPhones for later this year, roughly in line with last year’s launch, in a sign that demand for the company’s most important product is holding up in the midst of the global pandemic and recession.
The Cupertino, California-based technology giant anticipates shipments of these next-generation iPhones may reach as high as 80 million units in 2020, according to people familiar with the situation. Apple plans to launch four new models in October with fifth-generation wireless speeds, a different design and a wider choice of screen sizes, said the people, who asked not to be identified discussing unannounced products.
Among a comprehensive product refresh in the fall, Apple is also preparing a new iPad Air with an edge-to-edge iPad Pro-like screen, two new Apple Watch versions and its first over-ear headphones outside the Beats brand. A smaller HomePod speaker is in the works, too. An Apple spokeswoman declined to comment.
Suppliers to the Silicon Valley giant rose on Tuesday. Taiwan Semiconductor Manufacturing Co. and LG Display Co. closed 2% up, lens supplier Largan Precision Co. climbed 4.1% and headphones assembler Goertek Inc. gained 2.1%. Apple rose 2% at 10:07 a.m. in New York.
Apple and its manufacturing partners always ramp up production ahead of the rollout of new iPhones each fall. In the summer of 2019, suppliers were preparing to make components for as many as 75 million handsets. The target in 2018 was similar, so this year’s goal of 75 million to 80 million units is a bullish sign. Key iPhone assembly partner Hon Hai Precision Industry Co., also known as Foxconn, has put up several notices on WeChat over the past month recruiting workers for its main iPhone campus in the central Chinese city of Zhengzhou.
While the Covid-19 outbreak has hammered the global economy and disrupted supply chains, Apple is seeing strong demand for iPhones, iPads and Mac computers from people working and studying remotely. Revenue from iPhones crushed Wall Street expectations in the most recent quarter. The device still generates almost half of Apple’s sales, and that often tops 60% in the holiday season. Apple shares have soared 76% this year, making it the first U.S. company to surpass $2 trillion in market value.
The four new phones will be split into two basic and two high-end models for the first time, and all will feature OLED displays with improved color and clarity. The two regular iPhones will come in a new 5.4-inch size and a 6.1-inch option, while the Pro devices will offer a choice of a 6.1-inch or an enlarged 6.7-inch display, which will be the largest Apple’s ever put in an iPhone.
All of the new smartphones will have updated designs with squared edges similar to the iPad Pro, and the high-end phones will continue to use stainless steel edges versus aluminum sides on the cheaper variants. The company is also planning a dark blue color option on the Pro models to replace the Midnight Green of 2019’s iPhone 11 Pro line.
At least the larger of the Pro phones will have the same LIDAR camera as on the latest iPad Pro, which allows augmented-reality apps to have a greater understanding of their surrounding environment. Among the most significant improvements of the new handsets will be the new A14 processor, upgrading speed and power efficiency.
Some Apple employees testing the new devices think that the new 6.7-inch screen is one of this year’s most notable improvements, the people familiar with the situation said. A few testers have also found that some of the current 5G networks are not improving connection speeds much, the people added.
Apple plans to ship the lower-end phones sooner than the Pro devices, according to people familiar with the staggered release strategy. During a recent conference call, Apple said the new iPhones would ship a “few weeks” later than last year’s models, which started shipping Sept. 20. This year’s rollout is on course to be the latest since the release of the iPhone X in November 2017.
The design of this year’s iPhones and many features were finished before Covid-19 spread, but the pandemic did create issues for final testing and delayed the start of production by several weeks. While the new iPhones won’t ship until later, Apple’s iOS 14 software will arrive in September, the people said.
The new Apple Watch lineup will include a successor to the Apple Watch Series 5 and a replacement for the Series 3 that will compete with lower-cost fitness devices such as those from Fitbit Inc.
The smaller HomePod will help Apple renew its push into the smart home at a lower price, albeit with fewer speakers inside the device than the current $299 model. While the first HomePod was praised for its audio quality, consumers have panned its limited Siri functionality and price. Earlier this year, Apple merged some of the Apple TV and HomePod engineering teams as it looks to renew its focus on home devices.
Apple has also been developing a new Apple TV box with a faster processor for improved gaming and an upgraded remote control, however that device might not ship until next year, according to people familiar with its development. The company is working on a feature for the new remote similar to Find My iPhone that would make the TV accessory easier to find. The company’s other product in development is called AirTags, designed for locating physical items, which will be equipped with a leather carrying case, Bloomberg News has reported.


fortune--2020-09-01--Zoom CEO’s wealth jumps by $5.2 billion following surge in quarterly revenue

Zoom Video Communications Inc.’s Eric Yuan extended the scorching pace of his wealth accumulation on Tuesday.
Yuan’s net worth soared by $5.2 billion as shares of his virtual-meeting company surged 32% to $429.28 at 9:34 a.m. in New York following Monday’s report of a jump in quarterly revenue. The boost lifted the chief executive officer’s fortune to almost $22 billion, according to the Bloomberg Billionaires Index.
It’s been a year filled with eye-popping rallies for the richest names in the tech world — Amazon.com Inc.’s Jeff Bezos saw his net worth grow by $13 billion in one day in July, and Tesla Inc.’s Elon Musk added $8 billion in 24 hours last month. Both men have reached record levels of wealth, with Bezos crossing $200 billion and Musk surpassing $100 billion last week.
Zoom has been one of the clearest beneficiaries of the coronavirus pandemic, with businesses and educational institutions turning to the service to work and teach remotely.
The software maker reported Monday that sales jumped 355% to $663.5 million in the three months through July 31 from a year earlier. It was the second-largest surge among Nasdaq 100 Index members last quarter, only behind biotech firm Moderna Inc., data compiled by Bloomberg show. Zoom said sales will be as much as $2.39 billion in the fiscal year ending in January, meaning revenue would almost quadruple in just one year.
The founder of the San Jose, California-based company, whose net worth is mostly made up of his more than 50 million Zoom shares, is one of the biggest gainers this year. Yuan, 50, was $12.8 billion richer as of the Monday close after the stock surged almost fivefold.
–With assistance from Pei Yi Mak.


fortune--2020-09-01--The humbling of Europe’s most-hyped startup incubator: Rocket Internet

Rocket Internet, the German startup incubator that was once the darling of Europe’s technology sector and a thorn in the side of the Silicon Valley startups whose business models it shamelessly ripped off, announced Tuesday that it plans to delist from the Frankfurt and Luxembourg stock exchanges after seeing its shares fall 13% this year.
Rocket says it has plenty of access to money to fund its startups from private investors and doesn’t need the public markets anymore. But it’s hard to read Rocket’s decision as anything other than a humbling blow for Oliver Samwer, Rocket’s brash cofounder and chief executive officer, who once boasted that he wanted to “own the Internet” and claimed his Berlin-based “startup factory” could churn out one successful tech firm after another.
Founded in 2007 by Samwer and his two brothers, Rocket’s formula was to find promising new online business models—usually copying those of fast-growing U.S. e-commerce firms—and rush to create copycat versions in different parts of the globe before the originals could expand internationally. Samwer claimed its companies could execute faster and better than tech firms elsewhere, giving them a competitive advantage.
Rocket helped put Berlin’s startup scene on the map. Many of the young business school graduates who flocked there to work for companies being incubated by Rocket have gone on to found their own technology startups or became local venture capitalists.
But Silicon Valley entrepreneurs and investors have long griped that Rocket merely produced “built-to-be-bought” clones that did little but exact a tax on American innovation—forcing the U.S. pioneers to spend more to enter new markets. Critics also accused Samwer of pumping up the valuation of Rocket’s startups through venture capital rounds led by his own, separate startup investment fund, Global Founders Capital.
Rocket did not respond to Fortune’s request for comment.
Controversial growth metrics
Rocket’s tendency to overvalue its own startups became apparent once the company went public in October 2014. Rocket used a controversial metric, called last portfolio value, or LPV, which valued these startups based on their last financing round—even though those rounds often involved Rocket itself or related funds and might not reflect current market dynamics.
The difference between Rocket’s valuations and more conventional ones became apparent when investors compared Rocket’s books with those of Swedish investment firm Kinnevik, which was once a big shareholder in Rocket and had coinvested in many of its startups. Kinnevik used far more conservative metrics to value these young companies. Its figures and Rocket’s were often miles apart. For instance, the Swedish firm valued Westwing, an e-commerce retailer, at $304 million in June 2016; at the time, Rocket said the company was worth $576 million. Rocket’s valuation of Home24, another home decor merchant, was seven times what Kinnevik thought the company was worth.
To be fair, Rocket has had some big successes: Zalando, which started as a German Zappos clone and has become one of Europe’s top online clothing retailers. Publicly listed, it is now worth $24 billion. Delivery Hero, an online food delivery app Rocket backed, also went public and is now worth $22 billion. It was added to Germany’s blue-chip Dax last month.
HelloFresh, a meal-kit delivery company, is listed and worth $8 billion. Earlier, Rocket made a killing off its investment in CityDeal, a coupon clone of U.S. company Groupon, that the original acquired in 2010. It also created Lazada, a Southeast Asia–focused consumer electronics e-commerce play that Alibaba eventually spent $1 billion to acquire majority control of in 2016.
Hits and misses
But it’s never been clear Rocket’s winning formula was anything of the sort. The company has more misses than hits—anyone remember once high-flying African e-commerce firm Jumia? It went public at lofty valuations only to see its shares tank. The same happened with Home24 when it eventually went public. Brazilian fashion retailer Dafiti has limped along through a succession of down rounds. Meanwhile, the crop of startups Rocket has launched and incubated since its own IPO have not exactly become overnight successes. (Grosenia? FlashCoffee?)
Of course, the whole model of venture capital is that most portfolio companies won’t make it. VCs typically depend on just one or two blockbusters to make their fund’s promised returns. But Samwer always claimed Rocket wasn’t a typical venture capitalist. By copying business models and extensively sharing resources and back-office technology between its portfolio companies, he had supposedly removed much of the risk from startup investing.
Well, not so much. Once worth more than $8 billion, Rocket’s market valuation is now just $3 billion. That’s a significant discount to the net asset figure of $4.9 billion it reported in December 2019. (The company has said that the COVID-19 pandemic may have significant impact on the valuation of its portfolio companies as slower global economic growth dims their prospects.)
Rocket’s investors are being offered €18.57 in the going-private deal. That’s below the stock’s 200-day moving average—no great thank-you for those who had faith in Samwer’s vision.
Samwer himself isn’t going anywhere. He’s not tendering the 4.5% of Rocket he owns, and his investment fund, Global Founders, is retaining its 45% stake too.
Samwer, never shy, has often been quick to boast of his “own the Internet” entrepreneurial prowess. Of course, it’s easier to brag when your accounts aren’t subject to public scrutiny.


fortune--2020-09-01--Can Neuralink take a ride on Elon Musk’s reputation?

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Last week, Tesla CEO Elon Musk demonstrated the latest iteration of Neuralink, his brain-implant startup that aims to one day help paralyzed people walk and even save memories or control computers with just a thought.
Researchers, though, had mixed reviews of the technology, which displayed a personable pig dubbed Gertrude’s brain activity via beeps and boops: Some neuroscience researchers praised Musk for making progress on the technology over the course of a year as well as his high ambitions, while others noted that the demonstration of data being carried to and from the brain was nothing new and has existed for some time.
Scientists took issue in particular with Musk’s speculation that users may eventually be able to “save and replay memories”—a completely different ballpark from recording brain activity, per my colleague David Z. Morris. Musk responded to criticism via Twitter, saying academia tends to “overweight the value of ideas & underweight bringing them to fruition.”
Still, Musk does have a knack for building a following through his moonshot bets: Think of that SpaceX Mars colony. Perhaps more visibly, Tesla has accumulated diehard fans in the form of retail traders who have helped push up the company’s valuation seemingly in excess of its financial performance. Riding on the company’s soaring stock price, Musk is now wealthier than Mark Zuckerberg.
For an idea of just how wild that is: Facebook earned revenue of $36.4 billion and net income of $10.1 billion in the first half of 2020. In the same period, Tesla posted revenue of $9.8 billion with a mere net income of $197 million.
A blast from WeWork past: Remember the out-of-left-field bets made by WeWork when co-founder Adam Neumann was CEO? Those investments included Wave Garden (a maker of wave pools) and Laird Superfood (a maker of natural food products).
After saying it would divest of the former, It seems that WeWork has also sold stock of the latter, per a filing with the Securities and Exchange Commission. Laird Superfood filed for a $40 million IPO on Monday, and revealed sales of $13.1 million and a loss of $8.5 million in 2019. The filing noted that Laird had repurchased stock from WeWork’s Creator Fund on Nov. 18. On that same date, Laird said it repurchased shares from an unnamed “private investor” for $7.5 million while terminating the investor’s obligation to fund an additional $10 million. While the investor sold back shares for $12.32, the carrying value of the stock was $24.63 apiece.
WeWork invested in Laird as part of a $32 million funding round in early 2019. Read more.
Lucinda Shen
Twitter: @shenlucinda
Email: lucinda.shen@fortune.com
VENTURE DEALS
- NeuroPace, a Mountain View, Calif.-based medical technology company, raised $33 million in funding. Accelmed Partners led the round and was joined by investors including Revelation Partners, Soleus Capital, KCK Group and OrbiMed Advisors.
- Sarcos Robotics, a Salt Lake City-based maker of robots for productivity and safety, raised $40 million in Series C funding. Rotor Capital led the round.
- Hazel Health, a San Francisco-based provider of healthcare to K-12 students, raised $33.5 million in Series C funding. Owl Ventures and Bain Capital Ventures led the round.
- Pyramid Biosciences, a Boston-based biotechnology company developing new precision therapies focused on cell surface receptors, raised $28 million in funding. Investors include Adage Capital Management, Averill Master Fund, and J.W. Childs Associates.
- InfoSum, a London-based provider of marketing infrastructure, raised $15.1 million. Upfront Ventures and IA Ventures led the round and was joined by investors including Ascential, Akamai, Experian, ITV and AT&T’s Xandr.
- One Concern, a Menlo Park, Calif.-based maker of A.I.-based tech for disaster risk reduction, raised $15 million from SOMPO.
- Apna, a Bengaluru-based recruitment platform, raised $8 million in Series A funding. Lightspeed India and Sequoia Capital India led the round. Read more.
- Climax Foods, a Berkeley, Calif.-based food data science company, raised $7.5 million in seed funding. Investors in the round include At One Ventures and S2G Ventures.
- Semalytix, a German startup using public data to deliver insights on treatment experiences, raised €4.3 million in Series A funding. btov Partners led the round. Read more.
- Reflexion, a Lancaster, Pa.-based cognitive sports training service, raised $1 million in Seed funding. 1855 Capital led the round.
PRIVATE EQUITY
- Frontline Road Safety, a portfolio company of The Sterling Group, acquired Apply-A-Line, a Washington-based provider of road and airport striping solutions. Financial terms weren't disclosed.
- ArchiMed acquired a majority stake in NAMSA, a Toldedo, Oh. medical device testing company. Financial terms weren't disclosed.
- Service Champions, a portfolio company of CenterOak Partners, acquired ASI Hastings, a San Diego, Calif.-based provider of residential HVAC and plumbing services. Financial terms weren't disclosed.
- Summit Partners made a minority investment in CluePoints S.A., a provider of software for clinical trials. Financial terms weren't disclosed.
OTHERS
- Nestlé is acquiring the remaining stake it doesn't own of Aimmune Therapeutics, a peanut allergy treatment company for about $2.6 billion.
BREAKUPS AND BANKRUPTCIES
- Shiloh Industries, a Valley City, Oh.-based vehicle components maker, filed for bankruptcy and plans to sell its assets to private-equity firm MiddleGround Capital for $218 million.
IPO
- Wish, a San Francisco-based e-commerce company last valued at more than $11 billion, and run by ContextLogic, filed confidentially for an IPO.
EXITS
- Bayer agreed to acquire a 70% stake in Care/of, a New York-based provider of vitamin and supplement subscriptions, valuing the startup at $225 million,per Bloomberg. Tusk Ventures and Goodwater Capital are among Care/of's investors. Read more.
- An investor group including the Thai Union Group acquired Golden Gate Capital’s remaining stake in Red Lobster, an Orlando, Fla.-based restaurant chain. Financial terms weren't disclosed.
- TigerConnect acquired acquisition of Adjuvant’s Call Scheduler, a physician scheduling tool. Financial terms weren't disclosed.
F+FS
- Thoma Bravo is aiming to wrap up fundraising on a trio of funds that could total over $21 billion, per the WSJ. Read more.
- L Catterton has raised over $3.7 billion for its ninth fund, per an SEC filing. Read more.
- Warburg Pincus is seeking to raise $2.5 billion for its second financial sector fund, per Bloomberg. Read more.
- Owl Ventures, a San Francisco-based edtech-focused venture firm, closed on a pair of funds with $585 million. Owl Ventures IV has $415 million while a growth stage opportunity fund has $170 million committed.
PEOPLE
- IVP named Army Tunjaicon as an investor. Tunjaicon was previously at Qatalyst Partners.
- TA Associates hired Benjamin Bold and Daniel Gold as vice presidents in the Boston office and Harry Mahadevan as a vice president in the London office.


fortune--2020-09-01--Samsung’s third folding phone tries to reduce the price of entry without actually cutting the cost

Samsung has unveiled its third generation of folding smartphone, the Galaxy Z Fold2 5G, with a host of improvements—and several ways to reduce the price for consumers.
On the outside, the new version now has a larger 6.2-inch screen, up from just 4.6 inches on last year’s original Z Fold. Inside, a slightly bigger folding 7.6-inch screen has reduced bezels and a refresh rate of up to 120Hz, double the rate of the older design, to make animations appear smoother.
The phone also gets “sweeper technology,” a set of interior brushes designed to keep dust and dirt out of the hinge mechanism that first debuted on Samsung’s Galaxy Z Flip six months ago. Samsung says it also improved the glass on the screen and made the hinge mechanism stronger.
Some things haven’t changed, however. The phone still folds down the middle like a book using interior hinges, includes compatibility with superfast 5G networks, and retails at a starting price of $2,000. The phone is available for preorder on Tuesday and arrives in stores on Sept. 18.
Samsung’s Galaxy Z Fold2 5G phone costs $2,000 and folds down the middle like a book. Courtesy of Samsung
High prices and some early reliability problems have convinced most consumers to avoid the folding phone segment so far. Samsung, Motorola, and Huawei among others have released a variety of folding designs, all at prices above $1,000, and none have become a big hit yet. Samsung says it’s working on cheaper models, and next week Microsoft will release its new twist, the Surface Duo, which seeks to be more durable by having two separate screens that fold closed in the middle.
But until prices fall, Samsung and its carrier partners are also innovating on reducing the cost of entry for the Z Fold2 5G.
First, Samsung is letting owners of either of its earlier folding models trade in their existing phone and get a credit of up to $800. Owners of other smartphones can get up to $650 through a trade.
Next, Samsung developed a program that works sort of like leasing. Participants in the “guaranteed buyback program” pay half of the price of the Z Fold2 5G split over 20 months, or about $50 per month, and then can return the device to receive full credit for the remaining 50% of the price.
Finally, the company is throwing in a grab bag of discounts and offers from others. The Galaxy Z Premier Service includes membership to the Founders Card entrepreneur-oriented service, a prepared meal from a Michelin star restaurant via Tock, and passes to exclusive golf courses from ClubCorp. Buyers can also get one-on-one tech support from Samsung.
The Z Fold2 5G also gets some new software tricks, like letting the screens on the inside and outside be turned on at the same time, so if the user is taking a picture, the subject of the photo can also see what the picture will look like. The phone can also take advantage of Android apps that have been updated for use on tablet screens by, for example, displaying a list of items next to the content of a selected item.
The Fold2 5G follows the original Fold unveiled at Mobile World Congress in February 2019 and delayed for release until last fall because of durability issues. Samsung’s second folding phone was the Galaxy Z Flip, announced in February of this year.


fortune--2020-09-01--Uber is cracking down on passengers who don’t wear face masks

Uber is reinforcing rules for passengers who don’t wear face masks—a practice the company implemented for both drivers and passengers in May in light of the coronavirus.
If a driver reports that a passenger did not wear a face mask during a ride, the Uber app will require that passenger to send a selfie showing them in a mask before taking another ride. The mask verification feature will roll out to the U.S. and Canada by the end of September. Uber expects to later expand the feature to Latin America and other countries.
The news comes as Uber tries to bring riders back to its service at a time when people are staying home and avoiding close contact with others to prevent contracting the coronavirus. Meanwhile, some rides in cities across the nation have turned hostile, as passengers of ride-hailing services have become verbally and, in some cases, physically aggressive after being asked to wear a mask.
Uber said about 99.5% of trips have had no reported mask issue, and that the new selfie-verification feature is “focused on the small percentage of riders who do not follow the policy.”
Since May, Uber drivers have been required to verify that they are wearing masks through the selfie feature on the app before going online. Since then, more than 3.5 million drivers on Uber and Uber Eats have completed more than 100 million selfie verifications, according to Uber.
“We firmly believe that accountability is a two-way street,” said an Uber blog post published Tuesday. “With the addition of this new feature, one driver’s feedback can help ensure the safety of Uber for the next driver.”


Zoom is on fire

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.
Four months and a business lifetime ago, critics were poking holes in the newfound success of videoconferencing upstart Zoom Video Communications. Its safety wasn’t up to snuff, its product was engineered in China, and too many of its newest customers weren’t paying.
This latter group was of particular concern. Virtual bar mitzvah celebrations, surprisingly delightful Zoomtails with distant friends, and rapid adoption by schools catapulted Zoom into the zeitgeist. But non-business uses sucked up Zoom’s server capacity without generating much revenue. As Michal Lev-Ram wrote in Fortune in April: “Zoom may have become a beloved household name even as it faces unexpected scrutiny for its less-than-perfect security. But its success when the world returns to normal is anything but assured.”
The good news for Zoom is that the world hasn’t returned to normal. Its gross margins indeed have been walloped by all the spending to support a rapidly growing business. Adjusted gross margins dropped 10 percentage points from the year before, according to the company’s quarterly earnings released Monday. Yet because Zoom is growing its base of revenue-paying customers too, and making so much money in the process, the hit to margins feels practically meaningless.
Zoom says the percentage of revenue attributed to customers with 10 or fewer employees jumped to 36%, from 30%. Quarterly revenue hit $664 million, a fivefold jump from the year before. It generated $373 million in free cash flow. The year-ago figure was just $17 million.
Zoom already was a modestly hot company when the year began, the result of a product popular with businesses and a successful IPO. With the pandemic, it is on fire, and whatever its challenges are, they seem minor. In pre-market trading this morning, its stock is now well above 10 times the $36 IPO price from April last year. And if any company can claim that even in a post-pandemic world its product will remain relevant, Zoom is it.
Adam Lashinsky
@adamlashinsky
adam.lashinsky@fortune.com
This edition of Data Sheet was curated by Aaron Pressman.
NEWSWORTHY
You can't handle the truth. With Australia planning a law to force Internet companies to pay publishers when their users share news articles, Facebook says it may have to prohibit news sharing. Under the proposal, publishers could set any price they wanted, Facebook says. “This is a decision we’re making reluctantly,” Campbell Brown, Facebook’s vice president of global news partnerships, explains. And I don't know if it's depressing or exciting that this is the most popular story on Fortune.com this morning, but Tesla's stock rise pushed Elon Musk past Mark Zuckerberg to become the third-richest human on Earth (I'm sure Musk would want us to include in the solar system).
Eyes without a face. After years of offering free trial subscriptions, Netflix has a new gambit: free shows. Numerous Netflix originals including Stranger Things, Love Is Blind, and the Academy Award–nominated The Two Popes can be watched at netflix.com/watch-free, no sign-up required. It's full movies but only one episode of each TV series. While you're binging, ponder whether Walmart needs to add video streaming to its Amazon Prime competitor, Walmart+. The $98-a-year service, launching Sept. 15, includes free shipping for many items and a gasoline discount. Speaking of shipping stuff, TikTok is adding a commerce feature to let its top creators sell merch.
Bank account bingo. The leaky supply chain at Apple says the company is planning a busy fall schedule with new 5G iPhones, an iPad with a bezel-less display, two new Apple Watches, over-the-ear headphones without the Beats brand, a smaller smart speaker, and a partridge in a pear tree. The iPhone will come in four sizes, from 5.4 inches to 6.7 inches, Bloomberg reports.
Like a bridge over troubled water. For reasons I'm not quite certain on, Microsoft's amazing new Flight Simulator 2020 offers an incredibly realistic and detailed view of the world, except for certain famous buildings and structures (try flying over Australia's Sydney Harbor Bridge). So an enterprising group has sprung up on Reddit to hack the game by pasting in better images from Google Maps. Hopefully, they won't need to hack any maps at Amazon to get their drone fleet off the ground. The company just got the FAA's coveted Part 135 "air carrier" designation for its delivery drones, following in the footsteps of UPS and Alphabet's Wing.
Acquisitions and mergers looking a little stodgy. On Wall Street, in a reshuffling of the private equity world, KKR sold Texas software firm Epicor to Clayton Dubilier & Rice for $4.7 billion. KKR bought Epicor four years ago for $3.3 billion from private equity firm Apax, which took the software company private in 2011 for $2 billion. Also, online used item seller Wish has filed confidentially to go public. The 10-year-old company was valued at $11 billion in its last private fundraising.
FOOD FOR THOUGHT
Amazon founder and CEO Jeff Bezos is only 56 and, by all accounts, happy to stay working for a while longer. Geekwire publisher John Cook, based in Seattle, is still into playing the guessing game of who might be next in line now that Jeff Wilke, long considered the heir apparent, is leaving.
Succession is more than the name of an HBO drama. It’s one of the hardest things for a company to get right. And there is added complexity with a company of Amazon’s size, reach and — shall we say — uniqueness. (Or peculiarity, as people at the company would say.) And, of course, there is also the challenge of replacing a charismatic founder in Jeff Bezos.
In that regard, companies often look for successors who can help define a new age. Tim Cook brought complementary skills to Apple, just as Satya Nadella added a different style to Microsoft from the Steve Ballmer era. Amazon may look for that complementary person for its next leader, someone who is different from Bezos.
That’s often the better strategy for companies looking at succession.
ON THE MOVE
Google named 14-year veteran Halimah DeLaine Prado as its new general counsel. DeLaine Prado previously ran Google's product legal team... venture capitalist Marc Andreessen and DoorDash exec Gokul Rajaram joined the board of crypto startup Coinbase while former AOL chair Barry Schuler and VC Chris Dixon step off...after 21 years as the boss, Zappos CEO Tony Hsieh is leaving and COO Kedar Deshpande becomes CEO of the Amazon unit...Nutanix founder and CEO Dheeraj Pandey is retiring and a search is underway for his replacement...former Expedia Group CEO Mark Okerstrom is joining Seattle shipping startup Convoy as president and chief operating officer.
IN CASE YOU MISSED IT
‘Colonialism’ and crypto claims: Why the .io domain name extension faces an uncertain future By David Meyer
Investors riding high on Apple and Tesla stock splits could get clipped, data shows By Robert Hackett
Slack’s new product is a think tank By Michal Lev-Ram
Neurologists aren’t so sure about Elon Musk’s Neuralink brain implant startup By David Z. Morris
Michelangelo vs. MacGyver: Who will design the offices of our post-COVID future? By Clay Chandler and Eamon Barrett
Institutional investors must take action on diversity in venture capital By Emma Hinchliffe
‘The Dream Architects’: Inside the making of gaming’s biggest franchises By David Polfeldt
(Some of these stories require a subscription to access. Thank you for supporting our journalism.)
BEFORE YOU GO
Back when my kids were little, we often spent bedtime reading about the adventures of Frog and Toad. If we were still in that mode, it would be Frog and Toad Tentatively Go Outside After Months in Self-Quarantine, a brilliant spoof by Jennie Egerdie:
“I have so much work to do,” sighed Toad.
He set his Zoom background to a picture of his room when it was tidy.
“There,” said Toad. “Now I am professional.”
Now go be professionals!
Aaron Pressman
@ampressman
aaron.pressman@fortune.com


fortune--2020-09-01--Walmart’s Amazon Prime challenger is launching Sept. 15

Walmart Inc.’s answer to Amazon Prime finally has a launch date.
The new subscription program, dubbed Walmart+, will be available on Sept. 15, the world’s largest retailer said in a statement. The program costs $98 a year, a discount to rival Amazon’s $119 annual Prime membership, and includes unlimited free delivery from stores — including groceries — plus gasoline discounts.
“We’ve tried to make a membership that makes it easier for customers to shop, manage their daily lives, and to manage their pocket books,” Janey Whiteside, Walmart’s chief customer officer, said in an interview.
Investors cheered the upcoming launch, with shares rising as much as 3% in early trading Tuesday. Shares were already up 17% year to date.
Grocery Push
The roll-out heightens Walmart’s competition with Amazon as retailers of all types try to capitalize on soaring consumer interest in e-commerce during the pandemic. Walmart has picked up millions of new customers in recent months thanks to its low prices on food and essentials, a ubiquitous brick-and-mortar store network with 4,700 locations, and improvements to its online division, which nearly doubled its U.S. revenue last quarter.
The service, which includes some delivery options as fast as same-day, will help it maintain its dominance in grocery. Although Walmart is still by far the nation’s biggest grocer, it has recently lost share to mainstream supermarkets, which have expanded sales at a faster pace during the quarantine. Walmart+ expands on an existing grocery-delivery subscription that Walmart introduced last year.
“During the pandemic, we’ve seen the way that customers shop evolve more rapidly than ever,” Whiteside said. The new service will help customers “lift the cognitive load” and keep more money in their pockets. “We consider it a life hack.”
The delivery pass will not apply to online orders that don’t come from stores, where a $35 minimum basket is still required for most items to get free shipping.
Later Launch
Walmart+ had earlier been expected to launch in July, a person familiar with the plans said at the time, although the company itself hadn’t announced an official date. The unveiling comes several months after pantry stockpiling hit its peak and several weeks too late for much back-to-school shopping.
“We’ve taken the time to develop a product that is grounded in meeting customer needs, and we’re launching in a few short weeks with benefits that are of the greatest help to our customers now, with much more to come,” a company spokesperson said in an email when asked about the perceived delays. “The way customers shop has drastically changed during the pandemic so we needed to make sure our benefits addressed their top concerns and that we had an offering that was ready and available to them.”
The 5-cent-a-gallon fuel discount included in the membership applies to nearly 2,000 Walmart, Murphy USA and Murphy Express fuel stations. Sam’s Club gas stations will soon be added, the company said.
Walmart has tried to mimic Amazon Prime before, testing a program called ShippingPass that it shuttered in 2017. The fees from a monthly subscription service could help boost the profitability of Walmart’s U.S. e-commerce business, which generated $21.5 billion in sales last year but was nonetheless in the red.
It’s a busy time for Walmart on the digital front, as the company confirmed last week that it’s partnering with Microsoft Corp. in an effort to purchase the U.S. operations of social-media giant TikTok. Walmart has already been rethinking its online operations, shuttering the Jet.com e-commerce site earlier this year and selling several brands to help bring cohesion to its offerings.(Adds additional company comment, shares trading)
–With assistance from Gerald Porter Jr..


fortune--2020-09-01--India tried to tame COVID-19 by sacrificing its economy. It got the worst of both worlds instead

In late March, India’s Prime Minister, Narendra Modi, declared a nationwide 21-day lockdown to stop the spread of the coronavirus among the population of 1.3 billion. It was one of the strictest in the world, with the government confining people to their homes, suspending transport networks, and closing almost all businesses, offices, and places of worship.
Implicit in India’s lockdown was the social contract that governments and citizens have entered into worldwide: short-term economic sacrifice in exchange for the public health benefit of slowing the spread of COVID-19.
But the tradeoff never materialized.
In fact, India—far more than its peers—is now getting the worst of both worlds. Its economy is experiencing its deepest recession since it started publishing gross domestic product numbers in 1996, and it has the fastest-growing number of coronavirus cases of any country on earth.
‘An exceptional contraction’
India’s gross domestic product shrank nearly 24% in the second quarter of 2020 compared with the same period last year, the country revealed Monday. The contraction is the country’s biggest in decades and the worst second-quarter decline among the world’s top five economies. (The U.S. economy, by comparison, shrank 9.5% in the second quarter.)
India’s agricultural sector grew 3.4% in the second quarter, compared with the same period last year, but besides that, the results were grim. The construction industry shrank 50%, manufacturing shrank 39%, and trade, hotels, and other services shrank 47%.
India’s economy—the world’s fastest-growing as recently as 2018—was already weakening, the result of a credit slowdown. The pandemic sent it spiraling.
“This is an exceptional contraction even if you compare it with other countries in the pandemic,” says Amitendu Palit, senior research fellow at the National University of Singapore’s Institute of South Asian Studies.
Locking down and opening up
Some economic hardship was certainly expected, given the nation’s lockdown, but the way in which India imposed its coronavirus restrictions undercut any public health benefit and complicated any rebound.
Modi announced the lockdown at 8 p.m. on March 24, and said the lockdown rules would take effect at midnight, just four hours after the televised announcement.
A view of the street near the Central Secretariat buildings in New Delhi on Aug. 31, 2020. Once the world’s fastest-growing major economy, India posted the steepest quarterly decline in GDP among the world’s top five economies. Anindito Mukherjee/Bloomberg via Getty Images
Chaos ensued, as hundreds of thousands of migrant workers were suddenly stranded in the cities where they worked, bereft of any source of income, with nowhere to shelter in place. Many people trekked on foot back to their home villages hundreds of miles away, contributing to the spread of the coronavirus across the country.
Widespread joblessness and economic damage pushed the government to ease lockdown measures in ongoing phases starting in June, even as India’s caseload ticked up.
Some two months later, public health systems across the country are straining to cope with coronavirus patients. Tests are scarce owing to overwhelming demand. There is no national mask mandate; in fact, the Ministry of Health advises that masks be worn only if a person is sick with COVID-19 symptoms or caring for someone who may have the disease.
India’s official coronavirus case tally stands at 3.69 million—third behind the U.S. and Brazil—with 65,000 reported deaths, though serological surveys in cities like Pune, Mumbai, and New Delhi indicate that the virus is much more widespread than the official numbers show. As many as 65% of surveyed people in some especially crowded areas had antibodies indicating they had contracted and recovered from COVID-19.
Shubhojit Ghose, a young professional in Bangalore, a city of 8.5 million in southern India that logged 2,821 cases on Monday, says the current situation in public places like supermarkets is “a mess,” with people crowding together, seemingly unworried about the spread of the virus. “It’s just not safe,” he said.
In Ghose’s view, India should have eased into its initial lockdown. Now, the public has no tolerance for trying it again, even as cases rise.
“We had to open up because of the economy,” he said. “[It’s] getting really bad. There’s no panic about it at all.”
“India went through a severe lockdown,” said Palit. “But the purpose of that lockdown hasn’t been served.”
Getting things under control
India’s dual crises—a flailing economy and an unchecked public health catastrophe—have left the government with few options, says Palit.
In May, India released a $266 billion stimulus package, worth nearly 10% of the country’s annual GDP. But Palit says it will struggle to offer any additional relief.
“[Government] revenue generation is at an all-time low” owing to the financial impacts of the lockdown, he said.
A man and his daughter visit a reopened temple in Chennai on Sept. 1, 2020, as the government eased a nationwide coronavirus lockdown. The lockdown, one of the world’s strictest, has not snuffed out the spread of the disease. ARUN SANKAR/AFP via Getty Images
The resources that India does have will likely be spent on trying to get the pandemic under control.
“The government needs to spend money for COVID-19 management and a vaccine program,” said Palit.
Prospects for recovery
The government is likely expecting better numbers in the third quarter, Palit says, since the period will reflect the economic reopening. (In June, the International Monetary Fund projected the Indian economy to contract 4.5% for the year; its economy grew by 3.1% in the first quarter.)
But any rebound is precarious, as the virus continues to spread.
Ghose says he has been able to work remotely for a company based in New Delhi amid the pandemic, but his father, who works for a manufacturing company with factories near Bangalore, has not fared as well. His father’s plants have reopened after India’s lockdown, but have done so cautiously.
“If there is a single worker that comes to the plant with COVID, [the company] has to shut it down,” he said.


fortune--2020-09-01--52 Black former franchisees sue McDonald’s, alleging discrimination

A group of 52 Black former McDonald’s franchisees filed a federal lawsuit early Tuesday morning, alleging that they were “denied equal opportunity to success” by the restaurant giant’s “systemic and covert racial discrimination.”
The complaint claims that McDonald’s sent Black franchisees on “financial suicide missions” by providing them with “misleading financial information” that steered them to neighborhoods with low sales volumes and high security and insurance costs.
The filing also alleges that Black franchisees were treated differently from their white counterparts in how McDonald’s graded their locations, required them to invest and rebuild in their restaurants, and denied them assistance during financial struggles.
As a result of these practices, say the plaintiffs, there has been a widening cash flow gap between McDonald’s Black franchisees and white franchisees—a gap the plaintiffs claim has more than tripled between 2010 and 2019.
The filing claims that the plaintiffs’ average annual sales were more than $700,000 less than McDonald’s national average, which led the plaintiffs to lose more than 200 stores with damages averaging between $4 million to $5 million per store.
“McDonald’s knew or should have known that these differential revenue and operating costs of Black-operated franchises as compared to white-operated franchises are not random or due to poor management,” the claim reads. “These differences are statistically significant and are the result of the historical racial bias and barriers built into the McDonald’s franchise system.”
In response to the filing, McDonald’s CEO Chris Kempczinski sent out a video message to employees and suppliers, saying, “Based upon our review, we disagree with the claims in this lawsuit, and we intend to strongly defend against it.”
The company also issued a statement, saying: “These allegations fly in the face of everything we stand for as an organization and as a partner to communities and small-business owners around the world. Not only do we categorically deny the allegations that these franchisees were unable to succeed because of any form of discrimination by McDonald’s, we are confident that the facts will show how committed we are to the diversity and equal opportunity of the McDonald’s System.”
The complaint claims that the number of Black franchisees was reduced by more than half between 1998 and 2019, from 377 to 186. McDonald’s, however, says that over the past several years there has been a consolidation of the total number of franchisees across all demographics, and that the overall representation of Black franchisees is “broadly unchanged.”
McDonald’s also said that Black franchisees, including the plaintiffs in the complaint, operate restaurants in all types of communities. The company said while it “may recommend locations, franchisees ultimately select the locations they wish to purchase.”
Cash flow at restaurants owned by Black franchisees “has been improving, and McDonald’s is committed to working with franchisees to make improvements,” the company said in its statement. In July, the company announced a new diversity and inclusion plan.
The plaintiffs’ lawyer, James Ferraro, told Fortune that McDonald’s was made aware of the impending complaint earlier this summer, and that since that time the company has undertaken a “zealous PR campaign to clean up its image with reference to Black franchisees.”
The complaint claims that McDonald’s branded itself as a “socially conscious company, committed to strengthening Black entrepreneurship, and embracing racial opportunity as a critical component of its corporate culture,” despite its “decades-long history of racial discrimination against its own Black franchisees.”
In January, two former McDonald’s executives sued the company, alleging that it fired Black leaders and pushed out Black franchisees.
McDonald’s is also locked in a legal battle with its former CEO Steve Easterbrook, who the company claims had physical sexual relationships with three McDonald’s employees and then was “knowingly untruthful with McDonald’s investigators” about those relationships.


fortune--2020-09-01--Slack’s new product is a think tank

Slack’s new product is a think tank

Back when Slack was small enough, its handful of employees had a ritual of ambling down the street to get a cup of coffee every day around 3 p.m. Of course, being Slack, the caffeine run was announced by a bot that posted a coffee emoji into Slack’s Slack.
The San Francisco–based maker of collaboration software has since gotten an espresso machine—or two or three—not to mention gone public. But the seemingly trivial decision to purchase a coffee maker wasn’t taken lightly by its management team, led by cofounder and CEO Stewart Butterfield. How would the presence of an espresso machine—and the absence of the afternoon coffee run—impact company culture, wondered Butterfield?
The way products and, more specifically, technology impact culture has always been top of mind at Slack. Its core business, to be sure, is all about how tech can bring about change (in this case, increased productivity). Slack is a communication tool for office workers, designed to all but replace email. The more companies embrace this shift to a more modern way of working, the more Slack sells its product—not that it doesn’t have intense competition. (Looking at you, Microsoft.)
It’s no surprise, then, that the company is now taking a bigger stab at becoming a thought leader in matters of the workplace of the future and the tools and cultural change that will enable it. “You have to rethink not just technology but culture,” says Brian Elliott, the former head of platform at Slack and VP of Future Forum, a new Slack-led consortium that aims to rethink the modern workplace.
According to Elliott, Future Forum is an idea that has been brewing at Slack for a while. “I remember having conversations with Stewart the second month on the job, January of 2018,” says Elliott. Both execs got busy running the fast-growing company, though, and reconvened on the idea only after the pandemic hit and forced everyone to talk about how the workplace was changing. “We started talking to other companies grappling with the same problems,” says Elliott.
How do you bring people together socially? How do you get them to collaborate best remotely? What’s the job of middle management in this new, distributed workforce? Those are just some of the questions Elliott says he hopes to be able to tackle and find solutions for via the new initiative.
At launch, Future Forum will exist as a startup incubated at Slack. But the plan is to spin it out once it is up and running. Other partner companies could include global consulting firms, specialists in human resources and diversity and inclusion, even designers who are thinking about the future role and physical layout of the office. Original research and case studies will also be part of the initiative, as well as an ongoing event series down the road.
Slack is already publishing preliminary findings of a study that explores how knowledge workers are adapting to remote work, with the full findings expected to be released in October. One of the standout stats? About 65% of white knowledge workers agree with the statement, “My manager is supportive when I need help,” compared with 46% of Black knowledge workers. Pamela Hinds, a professor of management science and engineering at Stanford University, plans to work with Slack’s new consortium on future research projects that could explore similar questions that have to do with the intersection of culture and work. (Hinds wasn’t involved with this particular survey.)
“Different groups are differentially affected,” says Hinds. “It highlights the inequities.”
Elliott agrees that balancing the needs of different employees is the hardest part of managing Slack’s current workforce. Unlike some other tech players, cushy, in-office perks were never the software company’s big appeal to workers (espresso machines are table stakes in Silicon Valley). And Slack’s employee base was already up and running on its collaboration software and many other tools that enable remote work. But that doesn’t mean that the transition to a work-from-home workforce has been easy for Slack. “Things are not going back to normal,” says Elliott.
Future Forum is likely to be just one of many attempts at making remote work, well, work. And Slack is smart to ask for partners in the quest. (On that end, Elliott says competitors would be welcome in the consortium too.) Just how collaborative can collaboration software makers be in this new reality? And how fruitful will the products of a remote think tank be? We’re about to find out.


fortune--2020-09-02--Most knowledge workers don’t want to return to the office full-time

First he took energy trading and the NYSE electronic .
Now Jeff Sprecher of ICE shares his plans to digitize @ @

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning.
Before the pandemic, the “future of work” was a topic for academics and dreamers. But now it has moved into the C suite. Every company is being forced to make to decisions about how their employees will work in the future. How often will they come to the office? Do they have to live near the office? Will their remote work undermine innovation? With remote work, how do you maintain culture?
The folks at Slack, the communications software company, announced yesterday they are forming a new research consortium—Future Forum—to help companies answer those questions. In a blog post by Brian Elliott, the Slack VP heading the effort, they revealed some intriguing early results from their research. Some findings:
Only 12% of knowledge workers say they intend to return to work full-time. 72% are looking for a combination of office and remote work.
“Work-life balance” is the thing they like most about remote work—with 52% saying it is better, and only 18% saying it is worse.
Stress and anxiety about work also improves—with 42% saying it is better with remote work, and only 20% saying it is worse.
And many see an improvement in productivity, although the results on this one are surprisingly close: 37% say it is better and 26% worse.
“My sense of belonging at work” is where remote workers took the biggest hit, with 35% saying it has gotten worse, and only 22% saying it has gotten better.
And here’s an interesting side result: 65% of white knowledge workers agree with the statement “my manager is supportive when I need help,” while only 46% of Black knowledge workers say the same. That’s a disturbing imbalance.
News below.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
40 Under 40
Fortune's annual 40 Under 40 list is out, and this year there's a change—we’re highlighting 40 influential people in each of five categories: finance, technology, healthcare, government and policy, and media and entertainment. Fortune
Vaccine club
The U.S. is refusing to join a global effort to develop and distribute a coronavirus vaccine, partly because the World Health Organization is co-leading it, and partly because it seems to be gambling that it will win the "vaccine race" on its own. The U.S.' traditional allies are backing the COVID-19 Vaccines Global Access (Covax) Facility, but the White House said it would "not be constrained by multilateral organizations influenced by the corrupt World Health Organization and China." Washington Post
TikTok algorithms
The chances of TikTok's divesting its U.S. operations anytime soon have been diminished by Beijing's export restrictions on A.I. technology, the Wall Street Journal reports. Both sides are now apparently trying to figure out the implications for the algorithms that TikTok uses—which will ultimately affect what it is that companies such as Microsoft and Oracle are bidding for. WSJ
Amazon vs. workers
Amazon has deleted job listings for intelligence analysts whose duties were to include tracking "labor organizing threats against the company." The deletions followed a massive public outcry and criticism from the likes of Senator Bernie Sanders, who said the ads showed "we must build a powerful trade union movement to stand up to the billionaire class." Amazon told CNBC one of the job posts (it's not clear which) "was not an accurate description of the role"—but didn't say what about it was inaccurate. Fortune
AROUND THE WATER COOLER
Indian lockdown
India had one of the world's strictest COVID-19 lockdowns, sacrificing its economy to save lives. But now it has its deepest recession in decades, plus the world's fastest-growing coronavirus case count. Fortune's Grady McGregor and Naomi Xu Elegant explain the situation. Fortune
Digital tax
Google will from November 1 start charging new fees for advertisements served in the U.K., Turkey and Austria—countries that are implementing new digital services taxes (DST) on the revenues earned on their turf. This could ultimately lead to an increase in the prices being charged for the advertised goods. The Register
Credit Suisse
Credit Suisse is now the subject of enforcement proceedings by the Swiss financial regulator, following the spying scandal that ended the CEO-ship of Tidjane Thiam. Switzerland's second-largest bank spied on banker Iqbal Khan, who was heading off to UBS. Now Finma wants to know whether there were violations of supervisory law. Bloomberg
Phones in trees
In Chicago, some people working for Amazon's Flex delivery service are hanging their phones in trees near Amazon warehouses and Whole Foods grocery stores, to trick Amazon's dispatch mechanism into thinking they're closer to those facilities than they are, so they get awarded delivery routes. Entrepreneurial or dystopian? Yes. Fortune
This edition of CEO Daily was edited by David Meyer.


fortune--2020-09-02--Introducing Fortune’s all-new 40 Under 40 list—and how it’s different this year

It’s been a year of monumental change. The coronavirus pandemic has touched every aspect of our lives—fundamentally altering the ways in which we work and socialize. Sparked by a series of tragedies, people in cities across America and around the world have taken to the streets and social media to push for justice and racial equality. Executives have moved quickly to support and empower employees while grappling with daunting challenges to the way their businesses operate.
To reflect this wave of transformation, we decided that we needed to embrace change in this year’s 40 Under 40. We needed to go bigger—and search more widely. Just one list of 40 emerging leaders wouldn’t be enough.
That’s why this year’s package highlights 40 influential people in each of five categories: finance, technology, health care, government and politics, and media and entertainment.
You’ll find the old favorites, such as C-suite executives, startup founders, and congresspeople. But the lists also feature people doing much of the work that has been crucial to 2020: a science communicator, an athlete standing up for racial equality, and the executive director of an organization that helps women run for office.
So what are you waiting for? Check out all five lists here.


fortune--2020-09-02--Swiss regulators extend probe into spying at Credit Suisse

Switzerland’s financial regulator started enforcement proceedings against Credit Suisse Group AG over a spying scandal that led to the ouster of ex-Chief Executive Officer Tidjane Thiam.
The move marks an escalation of regulatory involvement in the espionage charges, which also triggered probes by Swiss prosecutors. Finma said it will pursue any potential violations of supervisory law, and in particular will scrutinize how these activities were documented and controlled.
Credit Suisse is struggling to move beyond one of the most damaging episodes in its recent history after it spied on star banker Iqbal Khan, who was leaving for rival UBS Group AG. The scandal tainted the bank’s reputation, led to the exit of Thiam in a power struggle, and rattled Swiss financial circles.
Chairman Urs Rohner turned to Thomas Gottstein, a two-decade Credit Suisse veteran, to restore investor confidence. Gottstein has had to contend with a series of setbacks since the onset of the coronavirus pandemic, including losses from soured loans in Asia, allegations of conflicts of interest at the bank’s fund unit, a fraud case in its wealth business and questions about its role in helping disgraced German payments firm Wirecard AG raise funds.
Credit Suisse said in a statement Wednesday that it takes note of Finma’s decision and will continue to fully cooperate.
“The Board of Directors and the Executive Board of Credit Suisse agree and unequivocally affirm that the observation of employees is not part of the culture of Credit Suisse,” Credit Suisse said. “No further comments can be made at this stage until findings are presented by Finma.”
Shares of Credit Suisse rose 0.8% at 10:03 a.m. in Zurich trading. They’re down 24% this year.
An internal probe ordered by the bank at the time of the scandal had concluded that Thiam didn’t know about the spying, and that Chief Operating Officer Pierre-Olivier Bouee was responsible. It later emerged that ex-human resources chief Peter Goerke had been monitored, and a former U.S. executive also said she had been followed. Bouee was fired late last year.
Finma launched its own investigation in December, appointing an independent auditor who has now completed the initial probe. The regulator said enforcement proceedings can take several months and it will inform the public once they are concluded.
Finma doesn’t have the power to fine a bank, but it can demand repayment of profits deemed illicit or otherwise suspicious. Similarly, while it cannot fine individual bankers, it can ban them from the industry for up to five years.
Credit Suisse was criticized by Finma two years ago over its failure to properly oversee a former star wealth manager convicted of fraud, as well as its dealings with soccer’s governing body FIFA and two South American oil companies. At the time, the bank was ordered to improve internal controls and be subject to third party monitoring to oversee their implementation.
‘Direct Influence’
It’s not clear yet if Finma’s enforcement proceedings will lead to any new investigation into the broader scandal. Zurich prosecutors did open a probe into the original complaint that Khan filed after discovering that he was followed. Authorities also investigated the suicide of a Credit Suisse contractor caught up in the scandal.
A spokesman for the Zurich prosecutor’s office said Finma proceedings do not have a “direct influence” on its own ongoing investigations.
A message left with the federal prosecutor’s office in the Swiss capital Bern was not immediately returned. Federal prosecutors have investigated Swiss banks caught up in the FIFA affair as well as scandals involving oil producers PDVSA and Petrobras.


fortune--2020-09-02--First he took energy trading and the NYSE electronic. Now Jeff Sprecher of ICE shares his plans to d

First he took energy trading and the NYSE electronic. Now Jeff Sprecher of ICE shares his plans to digitize your mortgage

The markets rally is this close to becoming the ‘ greatest of all time ’

Here’s how confident Jeff Sprecher is that he’s on the cusp of transforming the lengthy, paper-heavy slog of getting a home loan into a fully digitized snap. Sprecher, founder and CEO of trading colossus Intercontinental Exchange (ICE), is making the biggest takeover bet in its history that he can transform what’s arguably the most despised, unreformed relic in financial services. To up the revolution, he’s paying private equity firm Thoma Bravo a staggering $11 billion to purchase Ellie Mae, a small but sprinting provider of software that automates the origination process for banks and brokers.
Ellie Mae, reckons Sprecher, adds the big missing piece he needs to make navigating the entire trip electronic, from getting quotes from lenders to recording the note with the county clerk. Once that link is in place, says Sprecher, the process that now takes two months or more, costs around $8,000, and ferries stacks of documents in a slow-motion loop among lenders, lawyers, and notaries will all happen online in an “e-closing room,” take a couple of weeks tops, and cost $2,600 less.
It’s hardly surprising that Sprecher—who is married to Kelly Loeffler, currently the junior U.S. senator from Georgia—is heading the crusade to modernize mortgages. He’s the leading figure in remaking old-line exchanges dominated by traders shouting bids from “open outcry pits” into electronic platforms. Twenty years ago, he created the forerunner to ICE by buying a failing oil and gas exchange in Atlanta for $1,000. Sprecher built on its success to computerize energy markets through ICE’s acquisition of the International Petroleum Exchange, agricultural commodities via the New York Board of Trade, and equities through its 2013 purchase of the New York Stock Exchange.
Instead, what’s remarkable is the size of the deal, amounting to 18% of ICE’s $57 billion market cap, and that he’s paying multiples of what he thought Ellie Mae was worth less than two years ago. In effect, Sprecher is making a gigantic wager that, first, Americans will soon be getting most of their home loans online in one of the biggest fintech upheavals ever, and second, that ICE will be both the first mover and the leading provider, garnering rich gains from what looks like a superexpensive acquisition.
Jeff Sprecher, founder and CEO of trading colossus Intercontinental Exchange, is making the biggest takeover bet in ICE’s history by transforming the way Americans get their mortgages. Photo-Illustration by Fortune; Original Photos, Sprecher: Liz Erikson; Houses: Paul Taylor—Getty Images
Never waste a crisis
When COVID-19 struck, ICE Mortgage Services was already collaborating with Ellie Mae to furnish the digital pieces ICE was missing. But their joint campaign for getting banks, lawyers, or title insurers to switch from people and paper to clicks was progressing slowly. Then overnight, the confluence of two potent forces shrank what looked like a long timetable. First, the pandemic changed going digital for major parts of the process from a choice parties could put off to a must-have. Lockdowns prevented customers from visiting banks, law offices, and mortgage brokers, so borrowers shopped online and signed their mortgage notes at virtual closings. Taking those first steps led participants to do more and more online.
Second, record-low interest rates ignited a historic boom in refinancing. That put pressure on banks and attorneys to move faster so that the big backlog didn’t grow even larger, extending what already were long delays. Once again, the solution was going electronic. The sudden shift in momentum convinced Sprecher that the transition was now accelerating, so that the growth in customers joining a fully automated ecosystem over the next few years would be enormous. Suddenly, what Ellie Mae offered––the bridge to creating that end-to-end, all-electronic platform––was a lot more valuable. “All at once, COVID hits, and we see everyone from lenders to lawyers to title insurers flocking to go to our digital platforms,” Sprecher tells Fortune. “In part, it was that sea change that gave us the confidence to buy Ellie Mae.”
Sprecher has long viewed taking the $3 trillion a year market for new home loans the way of energy and equities as the biggest untapped opportunity in financial services. For the past three years, he’s been assembling pieces. That task requires ensuring that the two main parts of the process, origination and closing, are fully electronic and that they are linked seamlessly so that participants can do everything online, from customers shopping for loans to lenders recording mortgage trust notes with the counties.
Origination is often called the “front end” of the journey, encompassing all the steps up to the “closing.” It includes what’s long been the slowest, most people-intensive area. That’s “underwriting,” the part where lenders review the borrower’s file to judge if he or she qualifies, and the client’s lawyer rereviews the bank-approved documents to correct any mistakes. Closing, referred to as the “back end,” happens after underwriting and covers registering the legal documents with government agencies and industry databases. Ellie Mae’s sweet spot is originations; ICE is the leading force in streamlining the back end. As we’ll see, their union targets automating the elaborate dance between lenders and lawyers that turns what’s now a long journey into a digital jaunt.
Ellie Mae’s “Insights,” a data analysis tool. Courtesy of Ellie Mae
The murky world of getting a mortgage
The mortgage process consists of six steps, the first four constituting origination, and the final two forming closing, or the back end. The first step is “prequalification.” It’s where the customer contacts lenders to review the rates and other terms they’re offering. Second comes the “application”; the borrower chooses the product that fits his or her needs and sends an application to the broker or commercial or investment bank to request the loan. The third step is “processing.” It has two parts. The customer provides the lender all the information for income and asset verification and also marshals the services the lender requires, from securing an appraisal to getting a mortgage as well as flood and title insurance.
Those three stages are relatively easy to automate. Customers routinely canvass lenders online at sites such as Rocketmortgage.com or Ellie Mae’s Encompass site. Lenders have long offered platforms for customers to upload their financial data online. Where the process turns to molasses generally comes in Step 4, “underwriting.” It covers the review of all documents first by the lender, then separately by the borrower’s “settlement agent,” a fancy term for his or her lawyer.
The banks typically print out all the loan, appraisal, title, and other documents and review them for errors, and to verify that the loans comply with guidelines from federal and state agencies, and purchasers such as Fannie Mae that bundle and sell them as mortgage-backed securities. “The mortgage regulations enacted in the wake of the financial crisis forced the banks to check carefully for mistakes, and they usually do it manually, by ‘stare and compare,’” says Sprecher.
Today, because of the backlog, the bank’s sign-off typically arrives more than two months after the process begins.
Next comes the second, client-protection part of the underwriting. The lender sends the same package, amounting to thousands of pages, to the borrower’s lawyer, whose staff combs through the documents that lender just reviewed, also to fix mistakes. The lawyer sends their corrections back to the lender, and when the latter agrees that the changes are on point, underwriting is completed, and the loan is ready to close. The lawyer’s review usually takes two additional weeks or more, so that loans that in most periods go from shopping to closing in two months, now stay in the pipeline for 90 days.
Step 5 is closing. When the customer is buying a house, the purchase and mortgage closings usually happen at the same time. Most Americans have attended the ceremony, often on multiple occasions. You go to your attorney’s office, sign reams of documents, including the mortgage note witnessed by a notary who’s usually on the lawyer’s staff. Meanwhile, reps from the lender and title insurer pop in to handle last-minute issues from their side. When the mortgage is funded, the paper records get boxed, stamped with a bar code, and go into the lender’s warehouse. If the loan goes to foreclosure, the bank dispatches someone to find the right box and dig out the relevant files.
Step 6 is the part of closing often known as “post closing.” The lender officially enters the loan into MERS or the Mortgage Electronic Registration Systems (as we’ll see, now part of ICE) using an ID number assigned during underwriting. MERS is a giant database that catalogs the owners and servicers for 85% of all the home loans in America and tracks changes when the mortgages, mortgage-backed securities (MBS), or servicing rights are sold. The beauty of MERS is that when one member buys the loan or servicing rights from another, the transaction is documented electronically, waiving the need for transferring paper deeds or rerecording paperwork with the local county. Subscribing to MERS gives all of those parties immediate digital access to the profiles of loans they have originated, are servicing, or are pondering buying.
Besides dragging on for two months or more even when applications are modest, the process is extremely expensive. In the past decade, the average cost to customers has doubled from $4,000 to $8,000. “Two-thirds of that increase comes from adding the people needed to do all the checking mandated by the regulations,” says Sprecher. For Sprecher, the best way to start his campaign for shaving thousands in fees and achieving the, say, 10-day originations was targeting the old-fashioned back end. “At ICE, we’ve specialized in building the closing and post-closing part first, as we did in energy and as we’re doing now in fixed income,” says Sprecher. “Establishing the back-end logistics is more valuable than building the front end, matching buyers and sellers. When you’ve built the back end, people will come on the front end, they’ll come through the door.”
In 2016, ICE made its initial move by purchasing a key building block for its new back-end project, MERS. Since then, it’s succeeded in multiplying the lenders and servicers who subscribe by connecting them electronically to the MERS network. Fee-paying members register new mortgages with the click of a mouse; save by nixing paperwork when loans are sold; and track industrywide sales of loans and servicing rights that provide valuable data for identifying trends.
In May of 2019, ICE added the second big segment to its infrastructure by paying $335 million for Simplifile, a service that electronically records mortgages with the local counties, crucial to ensuring that the lender can fully enforce the loan’s terms. “That was a big step towards automation,” says Sprecher. “Before Simplifile, the lawyer had to walk into a county clerk’s office with the paper mortgage note, or send it in by FedEx. It could sit on someone’s desk for days before going into the public record.” Simplifile now digitally connects 23,000 attorneys’ offices with 2,000 county registries.
Prior to buying Simplifile, ICE formed a partnership with Ellie Mae. The software provider offers the equivalent of an App Store for home loans. Its Encompass software connects mortgage-shoppers with lenders, appraisers, title insurers, and the like, and speeds the early steps of the process by enabling customers to upload financial information and service providers to make offers, all online. At the time, Ellie Mae was making slow but steady progress attracting users. But the once the client chose a lender and loan, and the bank issued a commitment and guaranteed rate, the digital highway stopped, and the players trudged over the dirt road of underwriting.
ICE president Ben Jackson helped Sprecher complete the deal to buy Ellie Mae while the country was in lockdown. Photo-Illustration by Fortune; Original Photos, Jackson: Liz Erikson; Houses: Hal Bergman—Getty Images
The partners’ goal was making underwriting, the poky part in the middle, fully electronic. When that happened, they could offer an all-in-one solution since Ellie Mae was the leader in the first stages of the front end and ICE dominated the back end. In 2018, Sprecher pondered buying Ellie Mae. “They were clearly the best guys in the digital mortgage business,” says Sprecher. But he also believed that to transform the process fast and create a mass-market product on the scale of a Salesforce or a LinkedIn, Ellie Mae would need to move to a cloud-based platform that could handle giant volumes of data. “They were working on a cloud-based platform,” he recalls. “But we weren’t sure they could get there. Our thinking at the time was ‘What do we do with a legacy software business?’” Adds ICE President Ben Jackson, “There was a question mark on whether they could get customers to a cloud-based version of their app. We thought it would take longer than it did.” A second factor, says Jackson, was that ICE hadn’t added Simplifile yet, and hence didn’t have the closing architecture completed, crucial to taking the entire workflow electronic.
In February of 2019, Sprecher and Jackson got a shock. Thoma Bravo announced that it was purchasing publicly traded Ellie Mae for $3.7 billion, $1.2 billion over its value prior to the deal. “We thought Thoma Bravo really paid up,” says Sprecher. “We were wrong.” Thoma Bravo is expert in making the investments needed to put the software enterprises it buys on a superfast track. The firm allowed Ellie Mae to hire lots of new people to hasten its move to the cloud. “It’s hard to do that in a public company,” says Sprecher. “Thoma Bravo takes a similar view to us in finding companies going from analog to digital and making it happen fast.”
Following the acquisition, ICE and Ellie Mae continued working together on a fully digital platform. Sprecher and Jackson were astounded by their partner’s rise under Thoma Bravo. While many companies lose revenues during a shift to the cloud, Ellie Mae’s sales took off. By the time COVID-19 hit, Ellie Mae had a cloud-based platform fully in place and was attracting fee-paying borrowers, banks, brokers, real estate agents, and sundry service providers at a rapid rate. Then, the pandemic turbocharged Encompass. “Suddenly, everyone’s working remotely, and for the first time, we see mass adoption of digital tools for mortgages,” says Sprecher. Over two years, Ellie went from providing software handling 38% of the early origination steps for all new home loans to almost half. Since the start of 2019, its revenues have doubled to an annualized run rate of $900 million.
That explosion prompted Sprecher and Jackson to radically reassess Ellie Mae’s worth. “Ellie wasn’t for sale,” says Jackson. “Thoma knew they had a P/E winner. We knew that convincing them to sell would take persuasion, so during the lockdown, Jeff and I got on planes and met with Ellie’s leaders and the Thoma folks in the Bay Area.” Sprecher says he would be reluctant to make an acquisition involving lots of restructuring in the COVID work-at-home world, but was comfortable buying Ellie Mae because it didn’t need fixing. “In this environment, we couldn’t have done a deal like the NYSE that required refocusing the business,” he says. “But with Ellie, we took a calculated risk. The company is so well run that even if the integration takes two or three years, far longer than in normal periods, the deal will work.”
On Aug. 6, ICE unveiled that it was purchasing Ellie for $11 billion, $7.3 billion more than Thoma Bravo had agreed to pay 18 months before. Despite the gigantic sticker, investors welcomed the news, sending ICE shares up 3% the next day, and 5% since the announcement. The combination should greatly benefit from the recent surge in home sales, and, especially, the leap in refinancing. “On almost 90% of all home loans, people are paying between 0.5% and 0.7% more than what they would on a new mortgage, many of which are being offered at around 3%,” says Jackson. “Refinancing a typical loan can bring $200 a month or more in savings.”
The ‘e-closing room’
As Ellie Mae’s numbers show, the convergence of the lockdown and bargain home loans is luring customers to traverse far more of the passage online. Still, the extra business so far is coming mostly in the early steps of the process offered by Ellie and in the all-electronic registry provided by ICE. The big question is whether the mass migration will extend to the slow walk in the middle, underwriting. The signs are positive, as evidenced by the growing popularity of the solution ICE and Ellie have long been working on, the “e-closing room.”
The goal is getting all participants to tie in to a single site. That’s the e-closing room. Lenders post all the documents required for closing on the site, and service providers upload appraisals and title and flood insurance contracts. The customer’s attorney reviews all the documents in the e-closing room, eliminating the need for banks to send huge paper-stuffed packages to law offices. The banks make changes, and attorneys check for mistakes, all at the same time. In fact, Ellie Mae has already added technology that greatly reduces errors. Thoma Bravo purchased A.I. software for Ellie that flags mistakes, identifying, for example, if a field that’s supposed to have nine digits shows eight. “You have no mailing, no calls, a completely digital forum,” says Jackson.
The e-closing rooms are also designed to host the final closings. Taking that meeting online used to be more difficult, in part because most states required that a notary, usually someone in the lawyer’s office, witness the customer’s signing of the mortgage note in person. The pandemic has moved all but half a dozen states to allow remote, digital notarization, lifting a barrier to making the process all-electronic. In an e-closing, no paper is generated. The mortgage note is replaced by an electronic “e-note.” All the closing documents go into a digital vault that attorneys and lenders can access online.
Clearly, getting the parties into the e-closing room is the holy grail for revolutionizing just about the most arduous process in our financial lives. And these virtual confabs where everyone can talk to everyone are taking off. Late last year, less than 1% of the mortgages Ellie Mae handled used an e-closing room. That number has tripled to 3%, and it’s rising fast. “We’re getting near the tipping point you see in all markets that go from analog to digital,” says Sprecher. “Once you reach it, the entire business converts fast. In the future, most lenders will be outsourcing the whole process to ICE Mortgage Services.” It’s a big ambition. But it’s a target made-to-order for Jeff Sprecher.


fortune--2020-09-02--The markets rally is this close to becoming the ‘greatest of all time’

This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.
Good morning, Bull Sheeters. European stocks and U.S. futures are climbing again as a host of economic indicators point to an improving economic outlook and a recovering labor market. The S&P 500, meanwhile, is well on pace to score its greatest rally of all time.
Let’s see where investors are putting their money.
Markets update
Asia
The major Asia indexes are mixed in afternoon trading, with Japan’s Nikkei up nearly 0.5% .
are mixed in afternoon trading, with Japan’s up nearly . Saudi Aramco shares are down 0.9% in morning trade. That’s after a report that Saudi crude imports to the U.S. hit a 35-year low in August.
in morning trade. That’s after a report that to the U.S. hit a in August. Australia managed to dodge recession during the global financial crisis, but it hasn’t been so lucky this time round, with GDP falling by a record 7% in the latest quarter.
Europe
The European bourses opened in the green with Germany’s Dax up more than 1% .
opened in the green with up more than . The euro is flat this morning. It was cruising to a 2-year high yesterday when the ECB’s Philip Lane declared that euro appreciation “ does matter .” Those words sent the common currency crashing back down to Earth. Spoiler: he’s correct.
is flat this morning. It was cruising to a 2-year high yesterday when the ECB’s Philip Lane declared that euro appreciation “ .” Those words sent the common currency crashing back down to Earth. Spoiler: he’s correct. Former ECB President Mario Draghi wants the Euro zone to think creatively about the €750 billion coronavirus bailout package, urging governments to invest in sectors that will spur job creation rather than to hand out subsidies to prop up the status quo.
U.S.
The U.S. futures again point to a strong open. That’s after the S&P 500 and Nasdaq closed at fresh all-time highs yesterday, led by Apple and Walmart.
again point to a strong open. That’s after the S&P 500 and Nasdaq closed at fresh yesterday, led by Apple and Walmart. Walmart+, the retailing giant’s answer to Amazon Prime, will go live on Sept. 15. In pre-market trading, shares are up nearly 1% after big gains on Tuesday.
the retailing giant’s answer to Amazon Prime, will go live on Sept. 15. In pre-market trading, shares are up nearly after big gains on Tuesday. The Republicans and Democrats are still far apart on a possible CARES Act II, but Treasury Secretary Steve Mnuchin testified yesterday that more stimulus spending is “critical to the economic recovery.” It’s campaign season. Expect both sides to come closer to a deal.
Elsewhere
Gold is down, trading near $1,970/ounce .
is down, trading near . The dollar is up slightly.
is up slightly. Crude is higher with Brent climbing above $46/barrel.
***
Greatest of all time
The S&P 500 closed yesterday at 3,526.65, reaching its seventh all-time high over the past 10 trading sessions.
Usually, in election years, investors sit it out in September and October. They don’t jump back in and trade until mid-November once the dust has settled.
But this year, the bulls are out in force ahead of Election Day. If the S&P were to climb a further 104 points—a mere 2.9%—by Election Day, we would be crowning this the GOAT rally. Yes, it would be the “greatest of all time,” according to BofA Securities, surpassing the previous record-setting rally from 1938.
Tech stocks and the Fed are the biggest drivers of this bull run. In fact, if the S&P were to magically reconstitute itself as a tech-exclusive club, the index would be trading roughly 20% higher.
And if it were comprised entirely of banks and energy stocks? The S&P would then be trading more than 40% below yesterday’s close.
To repeat: September is historically a slow month for stocks, particularly in presidential election years. Judging by this morning’s futures rally, you can throw out that history lesson.
***
Have a nice day, everyone. I’ll see you here tomorrow.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.
Today's reads
Net-worth watch. Zoom Video Communications CEO Eric Yuan is having one heckuva pandemic. Yuan's net worth soared at one point yesterday by $5.2 billion after the stock took off, boosting his personal fortune to almost $22 billion, according to the Bloomberg Billionaires Index.
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