fortune--2020-06-24--‘Definitely not out of the woods’: IMF further slashes estimates for global GDP growth

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It’s looking more like the worst-case scenario, according to the International Monetary Fund.
The IMF slashed its global growth outlook, estimating global GDP will fall –4.9% in 2020, almost 2% below its April 2020 World Economic Outlook forecast, the IMF said Wednesday. The IMF has called the current recession the worst economic downturn since the Great Depression, noting Wednesday the “COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated,” expecting recovery to be slower than the fund previously estimated.
“We are definitely not out of the woods. We have not escaped the great lockdown,” IMF’s chief economist Gita Gopinath said at a press briefing. “This is a crisis like no other and will have a recovery like no other.”
Meanwhile, the outlook for 2021 isn’t much better. The IMF now projects global growth in 2021 to come in at 5.4%—down from 5.8% in April and over 6% below pre-COVID estimates. Notably, the fund said the “adverse impact on low-income households is particularly acute, imperiling the significant progress made in reducing extreme poverty in the world since the 1990s.”
Despite some countries beginning to reopen, continued social distancing measures, the negative impact of safety and hygiene standards on surviving businesses’ costs, and “scarring” from massive unemployment and business closures may slow a rebound in economic activity, per the IMF’s grimmer forecast.
Meanwhile, the fund said massive fiscal stimulus measures, which now amount to roughly $11 trillion globally, have helped shore up countries’ economies, but that “sizable fiscal support has further stretched public finances.” The IMF now projects global debt will exceed 100% of GDP this year. The fund notes that policies must now shift to aiding recovery, but that debt load and uncertainty of the virus could limit the effectiveness of further fiscal measures.
Although some countries like the U.S. are starting to see a rebound in unemployment, the IMF said the decline in activity has taken a “catastrophic hit to the global labor market,” noting the decline in work hours in the second quarter will likely be equal to more than 300 million full-time jobs.
Hit to the U.S. economy
In the U.S., the IMF projects the economy will take a –8% hit this year—some 2.1% lower than forecasts in April—before recovering 4.5% in 2021. The Fed recently painted a marginally more optimistic picture, estimating the U.S. economy will shrink by 6.5% in 2020.
Over the past several weeks, the U.S. has slowly been reopening, but spiking cases in some states and the possibility of reinforcing restrictions could further hamper the country’s rebound and the restarting of economic activity. Mohamed El-Erian, chief economic adviser at Allianz, recently told Fortune that “there are difficulties in reopening when it comes to consumer engagement and operational issues on the business side.” Growth and what shape the rebound might take in the U.S. have been heavily debated in recent weeks.
At a virtual Bloomberg event Tuesday, Treasury Secretary Steve Mnuchin said that while data will show a bad second quarter, “You’re going to see a spectacular rebound off the bottom in the third quarter.”
Meanwhile, economists like Moody’s Mark Zandi note that while initial growth coming out of shutdowns may be strong, “a V-shaped recovery is out of the question. That’s not happening,” he recently told Fortune, noting that the virus is doing “meaningful structural damage to the economy.” Even as states reopen, “the economy is going to go sideways until we get a vaccine or therapy that’s widely distributed and adopted,” he said.
On the upside, IMF’s Gopinath said the strength of the economy coming into the crisis should help this recession be shorter and less deep than the Great Depression, and that “better news on vaccines and treatments and further policy support could trigger a faster recovery.” However, “on the downside, further waves of infections can reverse increased mobility in spending and rapidly tighten financial conditions, triggering debt distress,” Gopinath said. She added the cumulative global loss for this year and next is expected to hit $12.5 trillion.
The IMF also took aim at the stock market’s recent performance, saying the “extent of the recent rebound in financial market sentiment appears disconnected from shifts in underlying economic prospects”—a theme investors have been noting for quite some time as U.S. markets have rebounded roughly 40% since March lows.
Still, the IMF emphasized there was a “higher than usual” level of uncertainty with its projections, as the virus remains unpredictable. On Tuesday, there were over 35,000 new coronavirus cases in the U.S.


fortune--2020-06-24--Facebook ad boycott: ‘It’s not going to do anything to the company financially’

The coronavirus pandemic is changing political polling as we know it

The growing number of companies that are pausing ads on Facebook in response to the social media giant’s handling of hate speech and violence will have little impact on its business, analysts said.
“It’s not going to do anything to the company, financially,” said Brent Thill, an analyst at investment banking firm Jefferies. “You have 8 million advertisers. If a handful leave, there’s a short-term air pocket, but it’s minor.”
The movement was launched last week by advocacy groups including the Anti-Defamation League, the National Association for the Advancement of Colored People, and Common Sense Media. They asked businesses to pause their advertising on Facebook in July to send a “powerful message”: “Your profits will never be worth promoting hate, bigotry, racism, antisemitism, and violence.”
So far, more than 10 companies, including REI, Patagonia, and Unilever’s Ben & Jerry’s, have joined the campaign. “Facebook, Inc. must take the clear and unequivocal actions to stop its platform from being used to spread and amplify racism and hate,” Ben & Jerry’s tweeted on Tuesday after joining.
In a statement, Facebook responded to the boycott: “We respect any brand’s decision and remain focused on the important work of removing hate speech and providing critical voting information,” said Carolyn Everson, vice president of Facebook advertising. “Our conversations with marketers and civil rights organizations are about how, together, we can be a force for good.”
The boycott follows Facebook’s decision to leave several of President Trump’s inflammatory posts on its service. In them, Trump said “when the looting starts, the shooting starts,” in reference to the Minneapolis protests against racial injustice, and threatened “serious force” if anyone tried to set up an autonomous zone for protesters in Washington, D.C.
Facebook argued that Trump’s comments didn’t violate its policies, prompting public backlash and criticism by the company’s own employees.
Now some advertisers are taking a stand against Facebook and demanding that it do more. But the impact on Facebook’s revenue is expected to be limited, if there’s any impact at all.
For one thing, Facebook’s auction-based ad system can quickly fill ad space with marketing messages from other companies. Furthermore, the boycott is supposed to be only temporary.
The movement “would have to get hundreds, if not thousands of advertisers to join in order for there to be any real impact,” said Colin Sebastian, an analyst at investment bank Baird. “A boycott like this is much more symbolic.”
Michael Levine, an analyst at financial research firm Pivotal Research Group, said advertisers recognize that Facebook has a big impact on their sales. So many advertisers are unlikely to join the movement, and if they do, it would be brief. “This is their way of saying, ‘I’m not cool with what you’re doing,’” he said. “But…not to the point that I’m going to blow my business up.”
Mark Shmulik, an analyst at brokerage firm AB Bernstein, said the companies that joined the movement will likely have a very tough decision to make in August, when the boycott is supposed to end. “If Facebook makes no incremental changes, I’m curious what the brands’ next move is,” he said. If they just switch ads back on, “that’s being somewhat disingenuous. If they’re willing to hold out, it becomes more interesting.”
Shmulik also said he’s hearing that ad agencies, which manage the campaigns for corporate clients, are informing those clients about the ban, either encouraging them to join or telling them it’s an option. While that may or may not increase participation in the movement, it could create peer pressure if they see a number of their competitors participating.
This isn’t the first time that advertisers and the public have tried boycotting Facebook. And in the previous cases, those boycotts caused little lasting change, analysts said.
For example, in 2018 companies including Mozilla and wireless speaker maker Sonos pulled their ads from Facebook after discovering it had left millions of users’ personal information vulnerable to Cambridge Analytica, a data analytics company that vacuumed the personal information of millions of Facebook users.
Users also lashed out over the incident by creating the hashtag #DeleteFacebook to encourage others to quit Facebook. But users and revenue continued to grow.
“This is not a new dynamic for Facebook,” Sebastian said. “Advertisers announce they’re leaving the platform for various reasons. Based on historical patterns, we wouldn’t expect much of an impact.”
Working in Facebook’s favor is that it collected $70.7 billion in revenue last year, meaning any ad boycott would have to be huge to make a dent. Additionally, its executives know that the service still provides ad customers with some of the highest returns in digital advertising, said Thill of Jefferies.
“At the end of the day, they are running this as a for-profit business,” he said. “There is a $700 billion ad market heading toward becoming a trillion-dollar market that they’re vying for. That’s their true north.”


fortune--2020-06-24--Trump administration to scale back federal coronavirus testing support as cases spike across the U.S

Trump administration to scale back federal coronavirus testing support as cases spike across the U.S.

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The Trump administration is pulling back support for several federal coronavirus testing sites at the end of June even as cases spike in densely populated states like Texas and Florida.
Officials from the Department of Health and Human Services (HHS) said that the 13 testing sites closing down relied on an “antiquated model” that no longer made sense for current coronavirus testing.
“We are not withdrawing federal support. We’re providing federal support in a different way,” HHS assistant secretary Admiral Brett P. Giroir told reporters on a press call Wednesday.
Administration officials also emphasized that the move was “in no way meant to decrease” the amount of COVID-related testing being conducted—possibly a reference to President Donald Trump’s recent controversial comments that he’d asked to “slow down the testing” as that would deflate the number of reported cases in the U.S. There have been nearly 2.4 million reported COVID-19 cases in the U.S. and 122,000 American deaths to date, per the data collected by Johns Hopkins.
Giroir said the federal government’s approach had evolved following an initial emergency situation and dearth of testing. “It’ll be up to the governors and local officials,” he said, as well as public-private partnerships between pharmacy chains such as CVS and local governments. Federal support will shift from conducting testing sites to supporting more than 600 testing sites run by local leaders and businesses. He also emphasized that certain pharmacies providing testing services will still receive billions in HHS-provided funds in order to facilitate diagnostics.
But seven of the 13 testing sites losing funding are in Texas, which has seen sharp spikes in both positive COVID cases and hospitalizations. And the idea of turning power over to state and local authorities has been met with skepticism by regional lawmakers.
“Withdrawing support will place a heavy burden on the City of Houston Health Department, Harris County Public Health, and their partners,” wrote a congressional delegation from Houston in a letter to HHS on Tuesday.
There are also broader technical issues with managing test results locally. In Austin, the reliance on fax machines by local health systems has reportedly lengthened waiting times.


fortune--2020-06-24--Should the government buy airplane seats so passengers can social distance? American Airlines pilots

Should the government buy airplane seats so passengers can social distance? American Airlines pilots think so

American Airlines Group Inc.’s pilots called on the U.S. government to pay for enough jetliner seats to enable social distancing during the coronavirus pandemic, saying the move would help support carriers through the worst collapse in industry history.
The estimated cost of the proposal would be about $1.9 billion a month for the 10 largest U.S. carriers as they operate an average 40% of their normal flying capacity, the Allied Pilots Association said in a statement Wednesday. That would rise to $3.8 billion when the airlines reach 80% of normal schedules and decline as immunity to the virus rises, the union said, adding that actual costs of the program are likely to be lower.
The plan furthers calls to expand federal aid for devastated U.S. airlines, which already have received $25 billion for payroll costs and can borrow another $25 billion from the Treasury Department. As the pandemic gutted demand, carriers slashed flying, shrank fleets and encouraged workers to take leave or early retirement. Yet the risk of mass job losses looms when restrictions tied to the federal support expire after September.
“We’re still in an absolutely critical zone when traffic is just over 20% of what it was in 2019,” union President Eric Ferguson said in an interview. “It’s still quite dire.”
The largest U.S. airlines have limited the number of tickets they sell on each flight to allow middle seats to remain open, although some only do so when demand allows. The limits are designed to help prevent spread of the virus. But carriers have said that forgoing the sale of as much as 40% of seats per plane isn’t sustainable.
Under the APA proposal, “the government would purchase enough seats on each flight to eliminate the need for any passenger to sit next to a stranger,” Ferguson said in the statement. “Passengers would be encouraged to fly more, airlines would be encouraged to operate more flights, and the government would ensure the preservation of critical transportation infrastructure and associated jobs.”
Lawmaker Discussions
Payments would be based on the previous year’s cost to fly each seat a mile to ensure “a level playing field,” the APA said. The union said it has begun discussing the proposal with lawmakers.
“We can appreciate the APA’s resourcefulness in devising an idea designed to support the recovery of air travel,” said Matt Miller, an American Airlines spokesman, though the carrier doesn’t plan to lobby for additional support. The Treasury and Transportation departments didn’t respond to requests for comment.
The proposal follows a call Tuesday by the National Air Carrier Association for an extension of existing federal payroll support as airlines wait for more passengers to resume flying. The group represents discounters such as Spirit Airlines Inc. and Allegiant Travel Co., as well as smaller air cargo carriers and charter operators. Larger airlines haven’t sought additional federal assistance, according to their trade group, Airlines for America.
The Air Line Pilots Association, the largest labor group representing aviators, didn’t comment directly on the APA proposal. Such a plan isn’t among its current lobbying efforts, which include an extension of the federal payroll support program or similar efforts “to ensure the stability of the airline industry and a robust rebound,” ALPA said by email.
While domestic leisure travel has risen slightly, in some cases producing crowding on the smaller number of flights available, airlines have said that a full recovery could take as long as three years.


fortune--2020-06-24--Jack Ma is no longer the richest man in China

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Tencent Holdings Ltd.’s $40 billion surge this week and the recent ascent of Pinduoduo Inc. have reshuffled the ranking of China’s richest people.
The country’s largest game developer has surpassed Alibaba Group Holding Ltd. as Asia’s most-valuable company, with its shares rising above HK$500 in intraday trading Wednesday for the first time. Pinduoduo, a Groupon-like shopping app also known as PDD, has more than doubled this year.
The rallies have propelled the wealth of their founders, with an added twist: Tencent’s Pony Ma, worth $50 billion, has surpassed Jack Ma’s $48 billion fortune, becoming China’s richest person. And Colin Huang of PDD, whose net worth stands at $43 billion, has squeezed real estate mogul Hui Ka Yan of China Evergrande Group out of the top three earlier this year, according to the Bloomberg Billionaires Index.
The coronavirus pandemic has accelerated the digitization of the workplace and changed consumers’ habits, boosting shares of many internet companies. Now tech tycoons are dominating the ranks of China’s richest people. They occupy four of the top five spots: Ding Lei of Tencent peer NetEase Inc. follows China Evergrande’s Hui.
‘Perform strongly’
Tencent has come a long way since hitting a low in 2018, when China froze the approval process for new games. Since then, the stock has almost doubled, and last month the tech giant reported a 26% jump in first-quarter revenue.
“Tencent’s online games segment will probably perform strongly through the Covid-19 pandemic, and most of its other businesses are relatively unscathed,” said Vey-Sern Ling, a Bloomberg Intelligence analyst.
That has been a boon for Pony Ma, 48, who owns a 7% stake in the company and pocketed about $757 million from selling some 14.6 million of his Tencent shares this year, data complied by Bloomberg show.
The native of China’s southern Guangdong province studied computer science at Shenzhen University and was a software developer at a supplier of telecom services and products before co-founding Tencent with four others in the late 1990s. At the time, the company focused on instant-messaging services.
It has been a long comeback for Pony Ma. He overtook real estate tycoon Wang Jianlin as China’s second-richest person in 2013 and topped Baidu Inc.’s Robin Li as the wealthiest in early 2014. Later that year, Alibaba went public in the U.S., catapulting Jack Ma’s fortune.
Bloomberg Intelligence’s Ling notes, however, that Tencent’s jump this year has lagged behind some internet peers, especially those in e-commerce, games and online entertainment. Just consider: Tencent shares have climbed 31% in 2020, while PDD’s American depositary receipts have more than doubled. Alibaba, meanwhile, has advanced just 6.9%.


fortune--2020-06-24--Valuation: The coronavirus is crushing airlines, but these stocks should bounce back

“The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.”
—Warren Buffett, Fortune, 1999
When the stock market gyrates as wildly as it has this year, it doesn’t do any good to gyrate along with it. Much better to return to investing’s first principles, one of which I wrote about last month: Buy businesses that you wouldn’t mind owning if the stock market were closed for an extended period. This month, I want to explore an important corollary to this concept as seen through the prism of aerospace stocks, which I own a lot of on behalf of my clients: distinguishing between temporary losses and permanent ones.
Investors last got a good lesson in this subject more than a decade ago, when the financial crisis represented a reckoning for some businesses and a great buying opportunity for others. Heading into the 2008–09 financial crisis, for example, Wells Fargo was by far the best-capitalized and best-managed bank. Early in the crisis, Treasury Secretary Hank Paulson called the major banks to Washington to offer them rescue packages; only Wells objected. “We don’t need your [expletive deleted] money,” then-CEO Dick Kovacevich reportedly told federal officials.
Wells was forced to take the funds, but mainly it used the crisis to get stronger, cutting expenses and doubling its low-cost asset base by buying Wachovia at a fire-sale price. Most of the other banks, however, weren’t as well prepared. Lehman Brothers went bust, Bear Stearns sold itself to JPMorgan Chase for cents on the dollar, and Citigroup had to raise so much new equity capital that even today, more than a decade after the crisis, a Citi share is worth roughly 10% of what it was before 2008.
The crisis laid bare banking cultures that were all too commonly characterized by loose lending standards and undisciplined expansion. I knew Wells didn’t have such a culture, so after its shares declined 40% in late 2008 I began to buy Wells stock for Gravity Partners and its clients. In the months that followed, the market didn’t agree with me: The stock fell another 20%, and then another 35%, and I was buying more all the way down. By early 2009, Wells stock price was $8, Gravity’s cost basis was roughly $15, and I was not feeling very smart.
A year later, however, the market had regained its reason and saw Wells for what it was: a well-managed bank that had used the crisis to its advantage. The stock was $30 in early 2010, and I had made Gravity’s clients money on an ultimately successful but often harrowing bet—namely, that the market is driven by emotion in the short run but by a rational weighing of value in the long run.
Aerospace stocks under pressure
Wells has been on my mind these days as Gravity’s core aerospace holdings have come under tremendous pressure. Stocks like Heico, Safran, and Woodward fell more than the market during the initial coronavirus panic, and while Heico has fully participated in the market’s rapid recovery, many aerospace companies have lost 30% to 35% of their value year to date. Heico is one of the best companies I’ve ever studied and a subject for a future column if it ever gets cheap enough. Meanwhile, what do I do with my other aerospace stocks? Are their losses temporary or permanent?
Note here that I am not talking about airlines, which have been perennial investment disasters. Commercial airlines have always been bad businesses: capital-intensive, cyclical, and rightly seen as commodities. When the U.S. deregulated airfares in the early 1980s, a bad industry got worse as discount carriers entered the market and fare wars began a long race to the bottom. I never understood why Warren Buffett made his latest airline-sector bet a few years ago; even when the post-2009 bankruptcies allowed U.S. carriers to consolidate, the industry never found the discipline required to make it a decent business.
As a result, the airlines in my opinion will remain quasi-public utilities that are shored up every so often by governments because their citizens want and need to fly. By contrast, the companies that supply the industry with parts, both in the new-build market and in the spare-parts aftermarket, couldn’t be more different. As you can see by the chart above, the component makers Gravity owns have been long-term outperformers. These companies have generations of embedded intellectual property and manufacturing know-how that makes competing against them very difficult. To bring either a new plane or a new jet engine to market takes years of design work and testing; it also costs a minimum of $10 billion. As a result, only three enterprises in the world can make commercial jet engines. Only two companies can design and assemble commercial planes. Similar dynamics prevail in smaller niches of the aerospace market: Honeywell dominates avionics, for example, the critical controls in the cockpit, and Woodward dominates the design and manufacture of fuel systems for jet engines.
So aircraft component manufacturers are all inherently good businesses, characterized by high barriers to entry and an oligopolistic structure. Until this pandemic, they were also perennial growers: Over the past 60 years, passenger miles flown have grown at a 5% to 6% annual rate, and demand has been so steady that in the past 50 years there have been only five years of negative traffic growth. This is because aerospace represents a classic call on rising incomes worldwide: Despite generations of air-travel expansion, 80% of the world’s population have yet to set foot on an airplane. Every year, 100 million people in China—roughly one-third of the entire U.S. population—take their first flight.
Because there are only two airplane makers of any worldwide scale, Boeing and Airbus, most component makers sell to them at break-even or even at a slight loss. However, because the airline passenger industry is so fragmented—there are nearly 1,000 registered commercial carriers worldwide—the balance of power shifts to the component makers in the aftermarket. With only a few companies making spare parts, and with hundreds of different airlines buying them, it’s the manufacturers that have the leverage. It is common in the industry for a parts-maker to make zero margin selling to Boeing and Airbus and 40% margins in the aftermarket.
A new normal in travel
The pandemic will not alter the oligopolistic structure of the aerospace industry, but it may well bend the historical 5% to 6% annual growth curve downward. Travel is now down dramatically, and it may not come back to pre-virus levels even after we establish a regimen of testing and drug protocols. Humans may for a time be too afraid to fly, and a new normal may evolve in which people, particularly in developed markets, forgo vacations and nonessential business trips.
It’s hard to imagine, however, that this crisis scars humanity so deeply that human beings lose their desire to travel. Whether it’s the Icelandic sagas or the Aboriginal walkabout, journeys are deeply ingrained in the human psyche. It will take a lot to dislodge this predilection, especially in emerging markets, where people have been waiting to make enough money to finally buy a plane ticket. The average Western European, for example, travels by air twice a year; the average Eastern European travels only once every two years. These per-capita differentials are even more stark in places like India and Nigeria. To posit a secular decline in the worldwide aviation industry is therefore to bet that not only Westerners will retard their travel, but that other people who have been yearning to experience places they’ve seen only on TV will relinquish this dream.
Thus it’s hard for me to imagine that the growth curve of airline travel will be bent materially downward for any sustained period of time. This leads me to believe that when it comes to most aerospace component makers, their stock market losses are likely temporary rather than permanent. It is true that post-pandemic, some aerospace companies may never be as valuable as they were pre-virus. These will likely be those that have played the short- rather than the long-term game: underinvesting in R&D, for example, or abusing their market dominance and subsequent pricing power. In a new, more cost-conscious world these companies will face a reckoning with their customers.
Gravity, however, owns no such businesses. Indeed, we own aerospace companies that set their prices fairly, invest heavily in innovation, and in general offer their customers great value. As a result, they are secular share gainers, which means that they should prosper even if we posit a slower-growing airline ecosystem. In a column tomorrow, I’ll talk about one of those companies in particular.
Adam Seessel is the portfolio manager at Gravity Capital Management LLC, a registered investment adviser. Certain of the securities mentioned in the article may be currently held, have been held, or may be held in the future in a portfolio managed by Gravity. The article represents the views and belief of the author and does not purport to be complete. The information in this article is as of the publication date, and the data and facts presented in the article may change.


fortune--2020-06-24--The top business books of 2020 so far, according to Amazon

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Amazon on Wednesday announced the Best Books of 2020 published to date, as chosen by the retailer’s literary editorial team.
Although Amazon, which launched in 1994 as an online bookseller, said earlier this year that it would deprioritize book sales while concentrating on other arms of its e-commerce empire during the economic shutdown, the retail giant is still continuing to publish an annual midyear list. The top 20 books of the year so far—published between January and June of 2020—spans top picks across fiction and nonfiction, mystery and thrillers, children’s and YA (young adult), and more.
“We read voraciously throughout the year, and we usually read the books well before they are actually published,” Chris Schluep, Amazon books editor, tells Fortune. “By May or so, I have a good idea of what business books have stuck with me—either something that made me think differently, or a best-in-class, or a book that I just can’t get out of my mind.”
A team of seven, the Amazon Books editors have read hundreds of titles over the past six months to whittle the pile down to these top 10:
Based at Amazon HQ in Seattle, the Amazon Books editors also read countless business books, and determined these 20 titles to be the best business books of 2020 so far:
Looking forward (because yes, there are still six more months of 2020), the Amazon Books team already has a long to-read list before completing a comprehensive “Best Of” list for the year.
“Ray Dalio’s Principles was our top pick a couple years ago, and I’m always interested in his take on things, so The Changing World Order, which publishes in September, is one I’m looking forward to reading,” Schluep says. “I would also say Your Next Five Moves, a book about business strategy, is on my radar. But there is nothing more fun than discovering a gem you didn’t expect to find, so I’m looking forward to a surprise or two before the year is over.”


fortune--2020-06-24--Streaming is the future, but Amazon wants to invest in live TV. Here’s why

For a company as disruptive as Amazon, investing more money into something like traditional linear television feels odd. Network ratings are in continual decline, while streaming consumption on platforms like Netflix, Disney+, and yes, Prime Video, soars.
But further investment in live TV is exactly what the e-commerce behemoth is exploring. A new report from tech publication Protocol pointed out a number of new job postings for Amazon’s Prime Video department focusing on linear broadcasting. “It is Day 1 for the linear TV experience on Prime Video,” one of the postings for a software development engineer says. “This is your opportunity to take an active role in shaping the future of digital video by defining the next generation of what Amazon customers are watching.”
A source Protocol described as an “industry insider” told the outlet that Amazon has been “actively pursuing” deals to license live and linear programming. “You should assume they’re talking to everybody,” the source added. Amazon declined to comment to Protocol on the matter.
When contacted by Fortune, an Amazon spokesperson said that Amazon already had hundreds of live TV stations around the world, and that some like CBS All Access and Showtime were available to customers who sign up for those subscriptions to access a 24/7 feed. “There isn’t anything new here,” the Amazon spokesperson said. “Just adding teams to support our current offerings.”
However, Prime Video is still adding employees to its ranks with job listings boldly declaring that hires can “redefine how customers watch 24/7 linear broadcast TV content.” A listing adds that a product manager role will “work directly with global business stakeholders to identify opportunities to improve acquisition, engagement, and content selection,” suggesting that Amazon is indeed looking into more licensing deals.
Even though on-demand streaming services have become the go-to mode of consumption for television watchers, live television still matters. For now, it remains the primary destination for sports, award shows, and certain popular reality-TV series. People still need to access scheduled linear programming; they’re just doing it less through traditional cable and satellite providers. Services like Hulu have combined original streaming programming and standard live TV channels with success. Amazon may be after a similar model. “Although video on demand is on the rise, the global viewing hours weighs in favor of live or scheduled TV and [over the top] linear streaming is predicted to grow by 64% in next two years,” one of Amazon’s job postings says.
The company has already shown its eagerness to dip into programming such as live sports, having licensed NFL Thursday Night Football and the English Premier League in recent years. Amazon also began streaming live news channels like ABC News, CBS News, Bloomberg, Reuters, and more on its Fire TV devices last year.
If Amazon were able to secure more licensing deals with linear broadcast networks, it could make Prime Video an especially compelling offer. As Protocol points out, it could be a more narrow take on live TV, leveraging much of its existing original content combined with a limited selection of “must see” channels. But if those licensing deals included things like major sports leagues or access to popular reality television, Amazon could have a particularly enticing offer for customers in hand.
The future—at least for now—is not a lack of live TV; it’s just live TV that’s actually convenient to access and worth paying for. With Amazon’s streaming apps, Fire TV compatibility, and other benefits like its two-day delivery and grocery services, Amazon may well offer that.


fortune--2020-06-24--The Coronavirus Economy: Not even a pandemic could stop this Los Angeles food truck from setting up

The Coronavirus Economy: Not even a pandemic could stop this Los Angeles food truck from setting up a new shop

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Happy Ice was found by Lemeir Mitchell, who moved to Los Angeles after his father was sentenced to life in prison and his brother passed away in a motorcycle accident. Mitchell got his start in the new city as a tattoo artist, sleeping in the shop to make ends meet, and quickly fell in love with L.A.’s food truck culture. That’s where his idea for Happy Ice was sparked.
With support from his mother, Mitchell opened Happy Ice as a food truck concept on Melrose Avenue in September 2017, and the water-ice brand has since gained a cult following of celebrities such as Angelina Jolie, Post Malone, and Ellen DeGeneres. In 2018, Mitchell partnered with investor Ted Foxman, who provided Happy Ice with close to $1 million and kick-started Mitchell’s plan to open a brick-and-mortar location.
After many COVID-related setbacks and Mitchell’s move to hand out Happy Ice to protesters in the midst of the Black Lives Matter demonstrations in Los Angeles, the storefront finally opened its doors this past weekend on June 20.
Fortune spoke with Mitchell and Foxman for a new series, The Coronavirus Economy, about how the outbreak has affected their business, their thoughts on the future, and how they are working through the pandemic.
The following interview has been lightly edited and condensed for clarity.
Fortune: Building upon a successful food truck business, you were already far along in the process of launching a brick-and-mortar location this year. Then COVID-19 got in the way. When did you know the pandemic would affect your plans?
Mitchell: We had a final inspection with the Los Angeles Health Department scheduled for March 16, my birthday. This inspection would give us final approval to open. They were supposed to come at 10 a.m., and we got an email at 9 a.m. that they were not coming anymore. So that was an unfortunate birthday non-present.
As the weeks went on this spring, how did you push ahead with trying to open Happy Ice’s stand-alone location? And how was business for the food trucks?
Mitchell: We just had to be patient and wait for the Health Department to come in for the final inspection and approval. It’s been a month since we got the approval, and now we are pushing to get everything done for the opening, including training the staff. During the lockdown we were prepping for the grand opening as much as possible and talked about how we want it to run, along with merchandising ideas. We also connected with influencers and searched for a PR company.
As far as the trucks go, the business was amazing. We were unsure if we wanted to reopen at first, so we took it one step at time to get our feet wet. After being closed for over three weeks, we sent out only one truck with limited hours when we first reopened. It was so busy—we were very surprised. So we went back again, and it was busy again and got even busier, so we decided to extend our hours. And it stayed busy. We became the go-to destination since parents were home with their kids and had limited options to get out of the house and do something fun with the family. During the pandemic, it has been busier than ever before.
After many COVID-related setbacks the storefront on Melrose Avenue finally opened its doors on June 20. Courtesy of Happy Ice
Although Happy Ice’s storefront hadn’t opened yet, you offered free scoops to protesters in the midst of the Black Lives Matter movement in Los Angeles. There’s also been a concerted push on social media to spotlight and encourage the support of black-owned business nationwide. What can members of the business community—especially nonblack consumers and business professionals—do to amplify and sustain support for black-owned businesses?
Mitchell: I think what people can do is continue supporting businesses and spreading the word. Continue to help with exposure and posting on social media. Support the businesses by physically going to the stores. A lot of people will be happy to see what black-owned businesses have to offer.
With me and Ted, he saw that I had a bigger idea than just selling water ice and making money; he saw potential. When he and I met, I did not have the funds to build a storefront, but he knew my idea was a good one. So what I am trying to say is that people can provide further support by getting behind black-owned businesses financially to help them prosper. Having a mentor in Ted has also been very important.
Foxman: Using social media to convey your support for a brand has never been easier. People just have to fall in love with the brand and share their enthusiasm with others. Be on the lookout for people who have great potential and deserve opportunity, and get out there to help them with their idea.
Last weekend, Happy Ice finally opened the doors to its storefront. How did the opening go?
Mitchell: If I had one word to describe this experience, it’s “unbelievable.” Opening this store and everything that went into the opening of the store has been the experience of a lifetime—breathtaking, unbelievable. I opened the shop, I proposed to my future wife; this was one of the best days of my life. I wouldn’t have changed anything about the way this entire experience went—even with the challenges that arose. It feels like there’s someone up above guiding me every step of the way, giving me the route to follow (shout-out to my brother Kevin “CBK”).
I’m so grateful to everyone who came to support us every step of the way and especially on our opening day. It was an incredible experience filled with happiness. We were busy the entire day, with a socially distanced line down several blocks—people coming from the start to the very end of the day to try Happy Ice. It was a wonderful celebration and a dream come true for me and my whole family.
While the pandemic is expected to continue indefinitely, what is your long-term plan for keeping both the food trucks and the brick-and-mortar location going? And have you implemented any special precautions for social distancing?
Mitchell: We are following the guidelines as requested. Both locations are to-go, and we will continue to be to-go until told otherwise. We are also helping promote safety in a way where our own Happy Ice merchandise is used to make people feel safe. For example, we will have our own Happy Ice bandannas that people can use to cover their faces. We are also planning to start shipping Happy Ice directly to people’s doorsteps; this will be happening in the next four to six weeks.
On a personal note, how have you been faring amid all this?
Foxman: This period in time has been difficult for many people. But this situation just inspires me more to push forward and to provide people with something special and positive. We are more driven than ever because we are providing something that is very difficult to achieve right now—that is, having a positive and enjoyable time with your family and friends.
Mitchell: It has been a challenging moment for the world. I became stronger at this time. I had a lot of time to think about the brand. I had more time to work with my staff. We upgraded the experience to make people feel special. Everything that is happening is because I had more time than usual to think about it. The world did not give us much to be happy about, but Happy Ice is definitely a shining light for me right now and hopefully for everyone who experiences it with us. Now is the time to be inspired. Our purpose and our mission is to bring happiness to people and create a space for unity and community—that’s become more important now than ever.


fortune--2020-06-24--Get Americans back to work—but not at just any job

More than 21 million Americans are out of work in the wake of the COVID-19 crisis, and the country’s unemployment, presently at 13.3%, is as high as we have seen since the Great Depression. That sort of economic destruction presents profound, long-term risks for social and economic inequality.
But the rush to get displaced workers back to work may actually make matters worse—because while the seeds of inequality take root during periods of economic crisis, the economic benefits of recovery are inequitably distributed among educational haves and have-nots.
Of the 7.1 million net jobs lost during the Great Recession, nearly all were occupied by workers holding less than a bachelor’s degree. But only 3 million of the jobs added during the recovery went to that population—a net loss of 4 million, even with record economic growth.
Workers who earned a degree in the years that followed the financial crisis came out ahead. But too few Americans earned college degrees during the recession. As a result, the top 1% captured 85% of wage gains in the decade that followed.
With the benefit of hindsight, we can now see that wage stagnation after the financial crisis resulted, in part, from a fixation on “shovel ready” training policies that were well-intentioned enough but prioritized short-term security over long-term potential. According to Jobs for the Future CEO Maria Flynn, the bottom quartile of Americans without degrees entered the pandemic “weakened by decades of stagnant real wages, automation of low-skill jobs, and the erosion of benefits—including health insurance—as the ranks of gig workers grew.” As a result, the first workers fired were the last hired. But we now have an opportunity to change that.
Victory, in the short term, has to be about more than getting a displaced retail worker into a training program that lands the person a higher-paying job. It has to be about more than unemployment rates and incremental wage gains. Recovery policies must also take a long view.
Doing so will first require us to recognize our bias for chronic low expectations and the path of least resistance. It’s easy to take a victory lap after placing a high school dropout into a program that lands them a job, any job, regardless of its long-term earning potential. But for many Americans, stopping there would be a tragic failure.
My life is a testament to the danger of low expectations. As a teenager from rural North Carolina, few believed in me. Like many in my family, I dropped out of high school. Were it not for a North Carolina law that would have taken away my driver’s license if I did not reenroll in school, my story might have stalled there.
As a community college student, I met faculty who pushed me to think beyond a high school diploma. I transferred to the University of North Carolina at Chapel Hill as one of the school’s few nontraditional students at the time. When the Great Recession hit, I doubled down and went on to graduate school at Brown, and then Harvard.
Every step of my education journey could have been my last. My life certainly would have been improved by earning my high school diploma or landing a better-paying job, but the invisible hand of policy, and a cadre of dedicated educators, nudged me to do even more. For the last eight years, I’ve worked as a higher education innovation consultant, a challenging and rewarding job that I probably couldn’t have attained if I’d stopped with a high school diploma or even a bachelor’s degree.
To turn our economy back on, colleges and universities will need to think differently to provide workers with the training and education they need to navigate an uncertain future. Not every student will want or need a two- or four-year degree or flourish in a graduate program. But as more people come to higher education in the coming months and years, policymakers, faculty, and administrators should all work to ensure those necessary short-term programs can also serve as stepping-stones to something more. It is a moral and economic imperative.
We need only look to history to know this can and does work. Passed during World War II, the G.I. Bill extended educational benefits to a generation who would rebuild our country. We believed then in the power of encouraging more, not less, from our soldiers coming home. This not only ensured that wartime hardships translated to peacetime prosperity, but also cultivated a new generation of leaders in government, business, the arts, and science.
That legacy presents a history worth repeating. Today’s low-wage workers and high school dropouts can become the scientists who help avert our next public health crisis, or leaders who help the economy get back on track. They can become teachers and technologists who ensure continuity for a generation of students when barriers of time and space once again threaten to interrupt learning.
But first, in our haste to get Americans back to work, we must reject chronic low expectations—and the risk of stagnation that comes with them.
Terah Crews is a vice president of learning solutions at Guild Education.


fortune--2020-06-24--Why companies like Porsche and Nestle are turning to worker-owned talent site Braintrust for new hir

Why companies like Porsche and Nestle are turning to worker-owned talent site Braintrust for new hires

There’s a new player in the world of freelance marketplaces. It’s called Braintrust and, like incumbents TaskRabbit and Upwork, it provides a website to connect contract workers and firms looking to hire them. But Braintrust stands out for a number of reasons—including its high profile clients.
Since launching in 2018, the San Francisco startup has attracted blue chip companies like Blue Cross Blue Shield, Porsche and Nestle to its platform, as well as the space agency NASA. Until now, Braintrust has chosen to operate in what Silicon Valley types call “stealth mode,” relying on word-of-mouth and eschewing media publicity.
According to founder Adam Jackson, Braintrust has attracted major firms because its fees—typically 10% of a successful hire’s starting salary—are much lower than the 50% or more some headhunters and talent agencies charge. Meanwhile, Braintrust has attracted a high skilled pool of talent to its platform, including veterans from Google, Facebook, Microsoft, Airbnb and other high profile tech firms.
“We aim to bring in folks who don’t want to be employees—people who don’t want to sit on the 101 [freeway] and drag themselves into a cubicle every day,” Jackson tells Fortune.
Such workers include project managers, coders and designers, and are vetted by Braintrust before they can join the platform.
Jackson, who made his name in Silicon Valley by founding the service Doctor on Demand, says high skilled workers have an extra incentive to join Braintrust. Namely, unlike other labor marketplaces, the startup doesn’t take a cut of the pay workers receive from companies that hire them. Meanwhile, Braintrust is also using the novel technology known as blockchain to provide talent with an ownership stake in the platform.
All of this represents a potentially disruptive model for not just the high end labor market, but many other services as well. According to Jackson, his broader goal is to one day “kill the middlemen,” including the companies that facilitate ride-hailing and food delivery. He describes such industries as a “shitty business” in need of reform.
The notion of disrupting giants like Uber and DoorDash seems far-fetched but the early success Jackson has achieved with Braintrust suggest its model could catch on more broadly. But that will require people to understand how Braintrust works in the first place.
A gig economy controlled by workers
Services like TaskRabbit and Uber have flourished because they act as online intermediaries between those who supply labor—drivers, handymen and so on—and those looking to purchase it. They have been a boon for consumer and also created the millions-strong labor market known as the “gig economy.”
Critics, however, claim these services are exploitive, pointing to controversial practices such as Doordash’s attempts to pocket workers’ tips. According to Jackson, such practices arise because the interests of online middlemen are not aligned with the workers they help supply.
In launching Braintrust, Jackson believes he’s found a way for the bulk of the money that would be collected by middlemen to flow to workers instead.
His solution relies on the use of blockchain, which is the technology underlying virtual currencies like Bitcoin. Blockchain creates a permanent. tamper-proof ledger run across multiple computers, and the use of digital tokens that—similar to shares of stock—can serve as both money and a voting mechanism.
In the case of Braintrust, the startup plans to give out tokens to the skilled workers who sign up for the platform, as well as to those who refer others or assist the company with coding tasks. The tokens can be used to vote on choices like product road maps, or new lines of business.
This means, says Jackson, that there’s no possibility of Braintrust one day imposing measures harmful to workers, such as a 15% levy on their income—for the simple reason that the majority of token owners would never vote in favor of such an arrangement.
Meanwhile, for the companies that use Braintrust to hire talent, the blockchain part of the platform is invisible.
“We don’t even mention it to Porsche. All we say is we are killing the middleman, and saving most of the 50% fee the company would pay to an agency,” says Jackson, explaining that all of the parties on Braintrust use cash to arrange their transactions.
It remains to be seen, however, how many workers on Braintrust will want to bother with blockchain tokens in the first place. Gig workers, after all, are primarily concerned with getting paid rather than participating in esoteric online governance schemes. There’s also no successful precedent for what Braintrust is trying to do, which is essentially to build a giant online workers’ co-op.
Jackson acknowledges that schemes for large worker-owned industries have historically failed, and devolved into chaos or tyranny. But he says the distinct governance tools offered by blockchain means there is an unprecedented opportunity to make it work.
And in the case of Braintrust, Jackson says, the talent who join the platform are sophisticated when it comes to technology, and open to embracing blockchain. In the future, he adds, blockchain voting will become so user friendly than anyone, including the average Uber driver, will be comfortable using it.
Jackson is so bullish on his blockchain-based business model that he says he intends to start a fund and support any startup that employs it. Other areas he believes are ripe for disruption include consulting and the legal field.
A sign that Jackson’s dreams might not be far-fetched comes in the form of an endorsement from the CEO of a company he is looking to disrupt. In a statement on Braintrust’s website, TaskRabbit’s CEO praises the startup for finding a new way to align the incentives of workers and the companies that employ them.
More coronavirus coverage from Fortune:


fortune--2020-06-24--GNC is the latest retailer to file for bankruptcy, closing up to 1,200 stores

Add GNC to the list of retailers too fragile to withstand the stress on their business from the COVID-19 pandemic.
GNC’s parent company, GNC Holdings Inc., filed for Chapter 11 bankruptcy protection late Tuesday, and the health and wellness retailer said it plans to close “at least 800 to 1,200 stores,” or approximately a quarter of its North American fleet. GNC was slammed by yearslong sales declines that made it impossible to meet enormous debt obligations coming due this year.
The company joins the ranks of J.C. Penney, Neiman Marcus, J.Crew, Stage Stores, and Tuesday Morning—debt-laden retailers filing for bankruptcy protection after being pushed over the edge by weeks of closed stores during the pandemic.
While GNC stores are small in size, typically between 1,000 and 2,000 square feet, there are too many of them in relation to the company’s declining revenues. In 2019, GNC net sales were $2.1 billion, down from $2.7 billion four years earlier. Much of that sales decrease has come as consumers have increasingly turned to purchasing vitamins and other nutritional products online. The bankruptcy gives GNC the opportunity to quickly shed stores, many of which are in malls where shopper visits have long been in decline.
“This acceleration will allow GNC to invest in the appropriate areas to evolve for the future, better positioning the company to meet current and future consumer demand around the world,” the company said in a statement.
The chain sells health and nutrition products such as vitamins, supplements, minerals, herbs, sports nutrition, and diet and energy supplements and earns 88% of its revenue in North America. In addition to its own stores and those run by franchisees, GNC has mini-shops at 1,600 Rite Aid drugstores, a chain with its own sales problems.
At the close of its most recent quarter ended in March, GNC had $895 million in long-term debt coming due this year and reported a net loss of $200 million, creating an untenable situation. And that was before the full impact of COVID-19, which closed 30% of its stores.
GNC’s case is the classic tale of a brick-and-mortar retailer getting its e-commerce business going too late. Online sales rose 25% last quarter but were too small of a business to make up for the huge declines in-store.
The company is starting its sale process in bankruptcy court with a potential bidder—an affiliate of its largest shareholder, China-based Harbin Pharmaceutical Group Holding—making a starting offer worth $760 million, as GNC looks to reemerge from Chapter 11 as a viable company.


fortune--2020-06-24--Why Americans are uneasy about COVID-19 contact-tracing

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.
Coronavirus contact-tracing efforts face a mega-sized uphill battle.
When it comes to using new technology, like smartphone location data, to help contain the pandemic, people have major reservations. More than half of Americans—53%—say they’re uncomfortable with data collection for contact tracing, according to a new study commissioned by Okta, a company whose software helps people log into online accounts.
The poll’s findings do not inspire confidence in contact tracing’s ability to find public favor. The vast majority of Americans—84%—fear that data collection efforts aimed at helping to contain the coronavirus cost too much in the way of privacy. Even more Americans—87%—worry that such efforts will make their data insecure.
The U.S. is not alone in its reluctance. Other countries are struggling to find a receptive audience for their contact tracing apps: In France, only 1.8 million people, or 2.7% of the population, have downloaded the country’s contact tracing app since it became available on June 2. Elsewhere in Europe, only around 5% of the populations of Italy (3 million people) and Denmark (300,000 people) have downloaded their respective apps.
Germany has fared better; in the week since its app debuted, it has reached 12 million downloads, or 14% of the population.
Having solicited reader feedback about contact tracing efforts in last week’s column, I am surprised neither by the survey results, nor by the struggle countries are facing. Like the more rigorous Okta study—which polled more than 12,000 people across six countries—the anecdotal evidence I gathered was overwhelmingly negative. People are skeptical of the premise that contact tracing apps are an effective or worthwhile pursuit, and they are especially wary of potential threats to privacy.
Here’s what you said. (Names are cited with reader permission.)
“I would not support or use. The benefits for me are less than giving up any degree of privacy. I’m healthy and practice social distancing and wash/sanitize often.”
—Denise Thomas
“Do I trust that the information collected won’t be used against me? Based upon what’s been published…I think not for now.”
—Gary Bielous
“In spite of the fact that Coronavirus contract tracing is probably a good cause and suggestions are being made with the best of intentions, citizens are right to be hesitant to give in to such initiatives.”
—JD Dillon
“I see high downsides and almost nonexistent upsides to this idea.”
—Nathan Schiller
“I’m sure that various law enforcement agencies would see it as an invaluable tool…. I feel certain it would also be used to infringe on our constitutionally protected rights of assembly and association. I also feel, just generally, that barring some strongly articulable reason to the contrary, where I go and who I associate with are my private business. That is one aspect of freedom, it is valuable to me, and I am loathe to give it up involuntarily.”
—M.K.
“The peace of mind that is brought by knowing that if I ventured into an area that later is found to have cases of Covid-19 is much greater than the concern that the government can monitor my actions. I don’t have anything to hide about what I do and where I go. Knowing I am at risk or others are at risk because of contact is much more important for law-abiding people.”
—James Warner
If Data Sheet readers are any indication, public health officials have their work cut out for them when it comes to persuading people to download and use contact-tracing apps.
Robert Hackett
Twitter: @rhhackett
Email: robert.hackett@fortune.com
THREATS
Flipping the bird. Tweeter-in-chief Donald Trump threatened in a post on Twitter to use "serious force" against protesters in Washington, D.C. The birdie-blogging site said the tweet violated its rules "about abusive behavior," and it slapped on a warning label. This is the fourth time Twitter has found the president's rhetoric to be in breach of its policies.
From wunderbar to verboten. German fintech darling-turned-drama queen Wirecard's until-recent CEO Markus Braun was arrested by police after the company said $2 billion on its balance sheet probably does not exist. Now out on €5 million bail, Braun faces suspicions of financial fraud, though he has long denied such impropriety.
The farmer in the Dell. Dell is reportedly exploring a sale of its 81% stake in the cloud software giant VMware, worth some $50 billion. The PC maker could use the money to pay down $48 billion in debt, money it raised to complete a mega-merger with tech giant EMC in 2016. Investors drove Dell shares up 21% in extended trading on the news.
Like a hole in the head. Three Republican Senators—Lindsay Graham of South Carolina, Tom Cotton of Arkansas, and Marsha Blackburn of Tennessee—have proposed a piece of encryption-related legislation. The bill would force tech companies to help investigators access encrypted data when ordered by a court. Though the bill does not mandate a "backdoor," security experts warn any encryption workarounds weaken security for everyone.
Another one bites the dust. Facebook is discontinuing Oculus Go, its cheapest virtual-reality headset model. The company will instead focus on selling more expensive models, like the Quest and Rift S. Facebook is also piloting a crowdsourced prediction app called Forecast. The app is available only to a limited set of testers, but their predictions are publicly available here.
Distributed Denial of Tweets. An activist group called Distributed Denial of Secrets, or DDoSecrets, published nearly 270 gigabytes of hacked law enforcement data, claiming it originated with Anonymous, a sprawling hacker group. The data appears to have been purloined from Netsential, a Texas-based web design and hosting shop that helps build police data-sharing portals. Twitter suspended DDoSecrets' account after the group tweeted links to the hacked material.
Is that your tweet or are you just happy to see me?
A NOTE FROM ADAM
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Fortune does so much more, of course. Through our print magazine and recently redesigned web site, we provide in-depth storytelling about the most important subjects in business, lists that help you put multiple industries in context, and incisive analysis that makes sense of a complicated world.
That journalism is expensive to produce, and I’d like to personally encourage you to support it by subscribing to Fortune today. The tech industry is central to everything that happens in our topsy-turvy times. We’re committed to continuing to tell you about—as are our Fortune colleagues covering multiple industries around the world.
—Adam
ACCESS GRANTED
Adults have a hard enough time keeping up good password hygiene. But children have an even harder time, as Karen Renaud, a professor of cybersecurity at Scotland's Abertay University, writes for the Wall Street Journal. One piece of advice, which parents can teach their young: Come up with a silly sentence for your password. (For the grownups: I recommend a password manager.)
The problem is that password “good practice” requires skills that very young children might not yet have developed, even as many of them are using online devices from a very young age.
For example, consider a 4-year-old who is just learning how to read. She would likely be hard pressed to memorize an alphanumeric password, because she doesn’t yet know her alphabet. Instead, she may have to remember a shape on the keyboard. As children learn their alphabet, they start being able to reproduce simple passwords. But because they type very slowly, they will have a hard time remembering the moving position within the password while they search for the right key.
FORTUNE RECON
Everything to know about Apple’s new Mac chips by Aaron Pressman
What is Fastly? Analysts say the best-performing tech stock during the pandemic may still have room to run by Anne Sraders
T-Mobile tries to back out of promise to create 1,000 California jobs by Scott Moritz
Twitter flags another Trump tweet. This time it’s for threatening potential protesters by Kurt Wagner
Tesla, Google, and Chamber of Commerce CEOs among business leaders slamming Trump’s visa ban by Phil Wahba
Why the C-Suite is now overseeing corporate A.I. projects by Jonathan Vanian
ONE MORE THING
The space race is heating up. Last week Chinese scientists reported major progress on technology that could enable an ultra-secure, global communications network beamed from space. This week China launched into orbit the final satellite in its BeiDou-3 navigation system, meaning the country no longer will need to rely on the U.S.'s GPS.
Keep your eye on the sky, folks.


fortune--2020-06-24--Why the Regus and Spaces CEO is doubling down on office space despite COVID-19

In May, IWG PLC, the U.K.-based company behind managed office brands Regus and Spaces, announced its intention to raise a $390 million war chest. The company said the stock offering would help it expand its footprint of office locations globally.
Pursuing that sort of strategy in the middle of the COVID-19 pandemic might strike many as, well…counterintuitive might be the politest way to put it.
After all, a lot of prognosticators think the world won’t need so much office space in the future. The pandemic seems to have revealed that, for many businesses, working from home works just fine. Plus, many companies have shed staff and won’t need quite so many desks even when they do reopen for business.
But Mark Dixon, IWG’s chief executive officer, says he’s convinced the world will still need offices. In fact, he thinks the world will need a lot more of the kind of flexible space IWG offers. And Dixon, the billionaire cofounder who owns 28.5% of IWG’s shares, has put his own money on the line too: He’s invested more than $110 million of his own funds in the new fundraising effort.
Dixon says that with the wheels coming off at rival WeWork—the industry upstart that had once threatened to bury veterans like IWG, but may now count itself lucky to merely survive—the industry is ripe for consolidation. In early June, IWG took over a 30,000-square-foot space in Hong Kong’s Causeway Bay neighborhood from WeWork. It was the first time IWG had assumed management of a former WeWork property. It probably won’t be the last.
Last week, Dixon and I chatted over a Zoom call about IWG’s bold strategy. Here’s our conversation (edited for clarity and brevity):
Fortune: Many people are doubtful about the future of the commercial real estate because they think the changes we’ve seen in how people work during the coronavirus pandemic will become permanent. Yet IWG is doubling down on office space. Can you explain your strategy?
Dixon: What is the future of commercial real estate? Well, it is going to change completely, and [the coronavirus] is a catalyst for change. But we are part of that change. Yes, we use commercial real estate, but we do it in a digital way, where we are allowing people to work from anywhere, at any time. We are also distributed throughout the country. We are not all in city centers, or all in one place. WeWork, as you are aware, claimed they were the biggest occupiers of space in London and New York. Clearly that is not something you would want to claim today. You would actually want to say we are everywhere in the U.K., which IWG is, with multiple brands throughout the U.K., throughout the United States. In the U.K., we have more than 300 locations; in the U.S., 1,100 locations. We are in every state, except Alaska.
Fortune: But what about the idea that working from home is going to be permanent?
Dixon: Effectively the whole world changed in a very short space of time. It wholesale and fundamentally changed, in several days. But it’s a change that’s been coming. It was already happening, but it just had off-the-charts acceleration during COVID, and it will stick afterwards. So CEOs, CFOs, are saying, “Actually, it wasn’t that bad. We actually got quite a lot done with this distributed work.” That means decentralized, people working not in one big central office. And that is what changes fundamentally. Forever. Now, it takes time because one of the reasons it doesn’t all change immediately is people have to get out of those big central offices. And that takes time. But they are starting to do it right now. If they can get out, they are getting out. So, this is bad news if you own a lot of real estate in big city locations. It’s good news if you own real estate where people live: suburbs, small villages, and towns. That is where people will want to work some of the time in the future. And in a Zoom- and Teams-based world there is absolutely no need for you to spend an hour of your valuable time, or two, or three, to commute into an office to use a computer and a mobile phone that you have in your bag. It is just madness. So basically, the workplace becomes this hybrid. People can work from home, and people have been doing that. They did it before COVID, they just did a lot more during COVID. So it will be from home. It will be from offices near where they live. And then they go to the headquarters to do important stuff: meet, collaborate, new ideas, business reviews, the stuff that you need to do face-to-face.
Fortune: So you don’t think the office itself is over?
Dixon: The office is not going away. It is changing. It is metamorphizing into a digital thing. In effect, your office is on your laptop and on your mobile phone. Where you actually sit to do work is not about equipment anymore, it is about concentration, lack of interruption; it is about social interaction more than anything else. So if you ask someone, “What would you really like?” They’d say, “Well, I’d like to work from home a small amount of time, and be able to do that effectively. I’d like to have a workplace that I could cycle to, walk to—that would be great some of the time. And I’d like an office in say, London or Birmingham or Manchester that I could go to when I need to collaborate with colleagues.” So, one day a week, one day a month there, but most of the time in a local office. The company gets lower cost. The company gets more productivity, more bang-for-their-buck in the person, if you like. The employee, the team member has a vastly improved life because instead of spending 5,000 pounds in the U.K., on average, on a [commute by rail], they spend next to nothing. They get to see their kids. And the company gets an office in [a small town] for that person, or for 100 people, rather than for 1,000 people in London. That is why it has to happen. It is the economics of the workplace that drive everything. And the economics are proven now in spades with COVID—proven.
Fortune: Why did you do this fundraise?
Dixon: There is one answer to that question: demand. When we spoke to our investors, we said, “Listen, we can see this demand coming.” Now, it’s hard to see it when you are right in the middle of COVID. Just to be clear, this is a very difficult period of time for us as a company—and we are very clear about that, from a short-term perspective. From a medium- to long-term perspective, there is going to be huge demand for workplaces, but in different places. Big companies are saying to their employees, we will give you an office near your house, but they don’t want to rent a separate office there, do they? Because, administratively, that would be horrific. So they want to buy space on a platform that all of their people can use anywhere at any time. That’s what we do. We also have great support and products for people working at home. So, we do home and local already. We just think we are going to be doing a lot more local. And clearly there will be other opportunities. We think the next year there will be consolidation. That is the impact of COVID. In order for investors to get any return, and to get safer returns, which they will be looking for, whether it’s our industry or any other, consolidation is the safest way.
Fortune: In the past few years you have been up against these very fast-growing, venture-backed players like WeWork and Knotel. Do you think they’ve had their day? They were struggling a bit even before this crisis, but the pandemic has dealt them another massive blow.
Dixon: If you were using the words “struggle before this crisis,” that is probably an understatement—and this is both Knotel and WeWork. Books are being written on this subject at the moment. What happened was, this was a phenomenon, which is the lure of the WeWork valuation. Very sensible investors put lots of money into things like Knotel, WeWork, and others in the hope that somehow, the normal rules of economics would be suspended for these types of companies and somehow growth trumps reality. When in fact, with the, let’s say, the veil being drawn aside after the failed IPO last year of WeWork…I am just stating the obvious that it was a huge amount of hype and not much substance, and a huge amount of, just massive capital wastage and destruction. On an unprecedented scale. Lots of people thought, “Hey, we could get 20 times revenue valuation.” And so they invested. But the reality is, this is a tough business, and it is not one, even in good times, for the fainthearted. It has to be operated very well. It needs scale. And it is quite easy to lose money if you are not firing on all cylinders at all times. Now, [WeWork] made it look easy. And even we thought, for a time, “We must be doing something wrong.” We said, “Hold on a second, what can’t we see?”
Fortune: So do you feel vindicated now?
Dixon: No. I get no satisfaction at all. No vindication. I’ve been in this business more than 40 years, and I’ve seen a lot, and I’ve never seen anything like that. My sadness is for the thousands of people losing their jobs and hundreds, if not thousands, of investors losing their money. Vindication? Look, in this market there is plenty of room for competitors. But it is distorted competition that it is hard to understand and hard to deal with. But no, no. Look, it was helpful for a time. It certainly got the name of the industry out there. But a lot will change now. With COVID-19, what people are interested in is good old-fashioned things like cash flow. There is a new reality in the world today that wasn’t there, even last year.
Mark Dixon, CEO of IWG Courtesy of IWG
Fortune: What about the configuration of offices. How are you thinking about reconfiguring the spaces you manage during the pandemic?
Dixon: Most of our space is configured in small offices. Less than—about half of 1%—of our revenue comes from coworking areas, open areas. So we are already configured in [a way that works for social distancing]. Just to dispel a couple of myths, in a normal office, you are all working open plan, and you are all sharing the kitchen. So everything is shared in every company office in London or New York. But it is shared by people from the same company, who are not necessarily cleaner—you know, they are just people. But this notion that somehow, it has been proposed many times to me during this crisis, that people mix more in a coworking building or a shared office. Actually the opposite is true. Traditional, single-tenant, single-company offices would have more mixing than we would. Having said that, we’ve done all the configuration changes. We’ve put separation in. Temperature control for people. We’ve got app locators, layers of things to make the buildings as safe as they possibly can be. Both for our teams and for customers. So a lot of effort has gone into that. Limiting the number of people in the lifts. That sort of thing. It is all basic stuff, but it needs to be done. For as long as the COVID crisis is there, you have to do this. And then you just do social distancing everywhere. Quite a few customers have taken extra space to distance their people a bit more and so on.
Fortune: Do you think there will be long-term effects in the way offices are designed? Are we going back to the 1950s, when everyone had their own office with a door?
Dixon: Having an office with a door makes no difference. It is a bizarre idea when you think about it. Even when you have an office with a door, it is cleaned by cleaners overnight, you have colleagues coming in all day. This sort of notion, if somehow I shut myself away in an office in a huge office building—I mean, just stay at home if you are worried. That’s the only way you are going to be safe. And even then, you take a risk that your kids are going to bring it back, or your wife, or your friends. What are you going to do? In the end you have to make a decision: “Am I going to be a hermit, or am I going to live my life, taking precautions?” Yes, we are in the eye of the storm at the moment. I think there will be a prolonged focus, even after the crisis is finished, on cleanliness. The main change is going to be hybrid working. The whole notion of you sort of having a desk in London, and just by the way to caveat this, this probably only works for about a third of the population—maybe even half. But if you are in an advertising agency, you need to be together. If you spend your time all day, every day, with clients in London, you need to be in London. You can work remotely, but you would want to go to London for editorial meetings maybe once a week, once a month, once a fortnight. But this hybrid working becomes the norm. You’ll meet people in two years’ time, and it won’t be unusual to have someone who tells you, “Yeah, I work from home, I’ve got an office I use down the road, and I go into London once a week. My life is infinitely better than it was. I am more productive. I have saved my commuting money, and most importantly I got back 10 hours per week.” And if the company asks me what you’d prefer most of all, they’d say, “Give me the 10 hours per week.”
Fortune: I notice you took over this Hong Kong property from WeWork. But I thought you were arguing that people won’t need big city office space going forward?
Dixon: In the city centers or big city centers, people will require space, but less space. Let’s say you have a 100-person headquarters in London today. In two years’ time, that will be maybe five people in the headquarters, some meeting rooms and collaboration areas, and all the other 95 people are working either from home or near where they live. So you need space in London, but you don’t need as much space. And we can see that already happening. We saw that before the crisis. This is called hub and spoke. You heard Mark Zuckerberg talking about it, and many other companies are doing it. So you get a hub in the big city, you let people work where it’s convenient around that city, but you’ve got to have the beating heart to bring people together. Whether it is a hub in Houston, or a hub in Birmingham, then all the people who live around there can come into the hub, they don’t have go into London or come into Silicon Valley.
Fortune: You have been using a franchise model to expand. Does that help you lower the risk of this expansion, because the franchisees are taking on the risk of finding the right location and the risk of managing that space properly?
Dixon: We run a pretty de-risked portfolio anyway. And that is one of the big differences between us and WeWork, Knotel, etc. We avoid risk. If you avoid risk, you grow more slowly. But franchising reduces some of the risk, yes, but we are doing it to grow more quickly. For us to do more centers in North and South Dakota and the Highlands and islands of Scotland, we need franchise partners to do that. We want to be in every town and city and village and provide a workplace. And we need franchise partners to do that. It is not so much about risk. It is about growing more quickly, it is about having more capital sources, and it is about then having more local management—all three things.
Fortune: There is an increasing emphasis from companies on reducing their carbon footprint. But if you have people spread out in more offices, it might be harder to manage that environmental impact. Are you helping your customers track their carbon footprints across all the space they are using?
Dixon: They are asking us, and we are working on metrics to help them with just that. It was, if you had gone back to the end of last year, it was very high up on the list of things they wanted. Now everyone has met their environmental targets just by having people work at home or close to home. But the impact on the environment is astounding, and I think that will become another driver [of a more distributed workforce]. The environment is a huge driver. That is what people want. Plus, if you are running a company it is just cheaper.
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fortune--2020-06-24--Stimulus round 2 could pass in July, says Treasury Secretary Mnuchin

The Trump administration is discussing another stimulus package with lawmakers that could be passed in July, the latest effort to revive the U.S. economy amid the coronavirus pandemic, said Treasury Secretary Steven Mnuchin.
President Donald Trump has said he’s considering sending another round of economic stimulus payments in a rescue package that he expects will be released “over the next couple of weeks.” Stocks rose Tuesday on optimism for more stimulus.
The Trump administration has privately discussed a $1 trillion measure as a way to stimulate jobs growth after the Covid-19 pandemic.
Meeting with GOP Senators
Mnuchin reiterated that he and the president are not inclined to shut down the economy a second time if there is a resurgence in coronavirus cases. He noted that in March when businesses were ordered to close, hospitals had been overwhelmed with patients and ventilators were running low.
“Right now we’re in a different situation,” Mnuchin said. The shutdown in March and April left more than 40 million people out of work.
Earlier Tuesday, Mnuchin met with Republican senators, who are considering whether the next stimulus measure should include another round of direct payments to individual households.
“We want to take our time and make sure we are thoughtful,” Mnuchin said after meeting with the lawmakers. “Whatever we do will be much more targeted and much more focused on jobs and bringing back jobs.”
Several Republican senators stood up in the meeting and urged Mnuchin to be cautious in doing more deficit spending and to narrow down any aid, lawmakers said.
At the center of the debate is whether to send a second round of payments to low- and middle- income individuals to help bolster household budgets that have suffered as the coronavirus has forced millions out of jobs and caused mortgage delinquences to reach their highest levels in nearly a decade. Trump has signaled approval for the idea, but support is mixed among congressional Republicans about whether the cost is worth it.
Lawmakers included an initial round of $1,200 checks to individuals earning up to $75,000 and $500 for their children in the stimulus package passed in March. The payments phased out for those earning up to $99,000. The Senate hasn’t yet begun serious negotiations on another stimulus bill, but those talks are expected to begin in mid-July.
Trump signed a $2.2 trillion stimulus into law in late March that’s provided payroll support to small businesses, $1,200 direct payments to families and boosted unemployment checks for millions of people out of work. The small business program’s initial $350 billion was later retopped with $310 billion.
The stimulus came after stay-at-home orders and social distancing measures were put in place to slow the spread of the coronavirus. The virus has killed more than 120,000 people in the U.S. and put millions of people out of work.(Updates with Mnuchin meeting with GOP senators in fifth paragraph.)
–With assistance from Laura Litvan and Laura Davison.


fortune--2020-06-24--Amazon launches a $2 billion clean energy fund

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Criticized for its lack of environmental friendliness, e-commerce giant Amazon is launching a $2 billion venture capital fund that will invest in companies that “facilitate the transition to a low carbon economy.”
Dubbed The Climate Pledge Fund, the new pool of capital will go to companies in transportation, energy generation, battery storage, manufacturing, and food and agriculture, per the Wall Street Journal. Amazon is considering “pre-product startups to well-established enterprises,” according to a statement from Jeff Bezos. While the time horizon of the fund is unclear, Amazon says the $2 billion is an “initial” number.
Matt Peterson on Amazon’s corporate development team is leading the fund alongside Kara Hurst, who heads the company’s sustainability team.
Amazon is seeking to reach net zero in carbon emission by 2040 and plans to run on completely renewable energy by 2025. It’s already made investments in electric vehicles, leading a $700 million round in EV startup Rivian, which is expected to produce some 100,000 delivery vans for the e-commerce company as part of a separate deal.
But remember…the company has been criticized for its lack of environmental protections. A business of ferrying around billions of packages a day is inherently one that takes a toll on the environment, at least for now.
Female founders weather the coronavirus: As the coronavirus was unfolding in April, Term Sheet asked Forerunner’s Kirsten Green if she thought female founders would be disproportionately dinged by a downturn. Her response: “I sure as hell hope not.”
Now there are some early numbers, per my colleague, Emma Hinchliffe.
“New survey data suggests that, in some ways, women-run startups may actually be better positioned to make it through the economic downturn than their peers,” she writes. “The female-founded companies reporting increased revenue are all in the wellness and home categories, according to Female Founders Fund’s survey. They include sexual wellness brands, makers of home hair care and fitness products, and sellers of ‘alternative adult beverages.’” Read more.
Lucinda Shen
Twitter: @shenlucinda
Email: lucinda.shen@fortune.com
VENTURE DEALS
- DispatchHealth, a Denver, Colo.-based provider of in-home health care, raised $135.8 million in Series C funding. Optum Ventures led the round and was joined by investors including Alta Partners, Questa Capital, Echo Health Ventures, and new investors Oak HC/FT and Humana.
- UJET, a San Francisco-based provider of cloud customer support solutions, raised $55 million in funding. Sapphire Ventures led the round and was joined by investors including GV,, Citi Ventures, Kleiner Perkins, DCM, and Resolute Ventures.
- SQream, a New York-based provider of data analytics, raised $39.4 million in Series B+ funding. Mangrove Capital Partners and Schusterman Family Investments led the round and were joined by investors including Hanaco Venture Capital, Sistema.vc, World Trade Center Ventures, Blumberg Capital, Silvertech Ventures and Alibaba Group.
- Librestream, a Winnipeg, Canada-based provider of augmented site inspection tech, raised $24 million in Series D funding. Investors include Canadian Business Growth Fund, Export Development Canada, and Pender Technology Inflection Fund.
- HelloOffice, a San Francisco-based commercial real estate brokerage, raised $20 million Series A funding. Point Ventures led the round and was joined by investors including Initialized Capital, Founders Fund, SaaStr, House Fund, and Jake Gibson.
- Cyclica, a Toronto-based biotech company, raised CAD$23 million ($17 million) in Series B funding. Drive Capital led the round and was joined by investors including Chiesi Farmaceutici, and GreenSky Capital.
- Urjanet, an Atlanta, Ga.‚based utility account aggregator, raised $14.7 million in Series D funding. Investors included Equifax, Oak HC/FT, Pete Kight, Grotech Ventures, and Correlation Ventures.
- Pipe Technologies, a Los Angeles-based provider of a financing to SaaS platforms, raised $10 million in funding. Fin VC led the round.
- Tara Biosystems, a New York-based vitro human biology company, raised $10 million in extended Series A funding. Investors include OMX Ventures, Merieux Equity Partners, and LifeForce Capital.
- Soil Carbon Co, an Australian company converting atmospheric CO2 into stable soil carbon using microbial fungi, raised $6.8 million in seed funding. Horizons Ventures led the round and was joined by investors including Grok Ventures; Mike Cannon-Brookes (Atlassian cofounder) and his wife Annie’s investment fund, the Australian government’s Clean Energy Finance Corporation and Lowercarbon Capital.
- RenoFi, a Philadelphia-based home renovation loan provider,raised $6.4 million in Series A funding. Canaan Partners led the round and was joined by investors including First Round Capital and Comcast Ventures.
- Authomize, a Tel Aviv-based authorization management solution, raised $6 million in seed funding. Investors include Blumberg Capital, M12 Microsoft's venture fund, and Entrée Capital.
- Calibrate, a New York-based one-year telemedicine program that helps overweight shed pounds, raised $5.1 million in seed funding. Kirsten Green at Forerunner Ventures led the round and was joined by Redesign Health.
- Cape Privacy, a New York-based privacy platform for collaborative data science and machine learning, raised $5 million in seed funding. Boldstart Ventures and Version One led the round and were joined by Haystack, Radical, and Faktory Ventures.
- Satelytics, a cloud-based geospatial analytics software company monitoring environmental changes, raised $5 million in funding from bp ventures.
- Tatch, a New York-based startup developing a patch to diagnose sleep disorders, raised $4.3 million in seed funding. Spark Capital led the round and was joined by investors including Abstract Ventures and Correlation Ventures. Read more.
- DriveU.auto, an Israeli autonomous driving startup that spun out of video transmission technology company LiveU, raised $4 million in new funding. RAD group co-founder Zohar Zisapel led the round and was joined by investors including Two Lanterns Venture Partners, Yigal Jacoby, and Kaedan Capital. Read more.
- Treehouse, a Los Angeles-based gaming startup, raised $2.6 million in seed funding. LVP led the round and was joined by investors including Transcend Fund and Super Evil Megacorp CEO Kristian Segestrale.
PRIVATE EQUITY
- A consortium of investors will invest in select Abu Dhabi National Oil Company gas lines for $10 billion. Investors included Global Infrastructure Partners, Brookfield Asset Management, Singapore’s sovereign wealth fund GIC, Ontario Teachers’ Pension Plan Board, NH Investment & Securities and Italy’s Snam. Read more.
- Charlesbank Capital Partners invested in Aptean, a Alpharetta, Ga.-based provider of enterprise resource planning and supply chain solutions. Financial terms weren't disclosed.
- RJD Partners acquired Improve International, a provider of education to the veterinary sector, from Benchmark Holdings (LON: BMK) for £12.8 million ($16 million).
- A water quality platform created by KKR and XPV Water Partners acquired Environmental Dynamics International, a Columbia, Mo.-based maker of diffused aeration systems. Financial terms weren't disclosed.
OTHERS
- Gilead Sciences (NASDAQ: GILD) will acquire a 49.9 % stake in Pionyr Immunotherapeutics, a South San Francisco, Calif.-based maker of cancer immunotherapies, for $275 million.
- Volkswagen (DE: VOW) is weighing a bid for Europcar Mobility Group (EPA: EUCAR), a French car-rental company, per Bloomberg. Read more.
- Fosun International (HK: 0656) is in talks to sell a $1.3 billion stake in Cainiao, a parcel tracking platform launched by Alibaba, to investors including Alibaba. Read more.
- Credit Suisse (NYSE: CS) agreed to acquire as much as 35% of modalmais, a Brazilian digital broker. Read more.
- Dell Technologies is weighing a spinoff for its roughly $50 billion stake in VMware, per the Wall Street Journal. Read more.
IPOS
- MessageBird, a Dutch software company rivaling Twilio, is preparing for an IPO in 12 months. Read more.
- BigCommerce, an Austin-based e-commerce software developer, is preparin for an IPO this year, per Bloomberg. The deal could value the company at $1 billion. Investors include General Catalyst and GGV Capital. Read more.
EXITS
- Schneider Electric SE and Emerson Electric Co. are among the companies considering a bid for OSIsoft, an industrial software maker that could value it at $4 billion, Bloomberg reports citing sources. SoftBank Group backs the firm. Read more.
- Mastercard (NYSE: MA) agreed to acquire Finicity, a provider of real-time access to financial data for $825 million. Finicity’s existing shareholders have the potential for an earn-out of up to an additional $160 million if performance targets are met. Finicity is backed by Experian Ventures and Nordmark Group.
F+FS
- KKR & Co. has raised over $10 billion for its third Asia fund. Read more.
PEOPLE
- Bessemer Venture Partners promoted Mary D’Onofrio to vice president.