fortune--2020-09-20--Disney tailored ‘Mulan’ for China. It still ‘never had a chance’ at the mainland box office

Disney’s long-awaited and controversial live-action film Mulan hit theaters in Hong Kong on Thursday after a disappointing debut in mainland China on Sept. 11.
The film generated $23.2 million in its opening weekend at the mainland China box office, sinking below analysts’ estimates that it would rake in $30 million to $40 million. Early indications suggest the movie’s reception in Hong Kong will be underwhelming too.
The film’s mainland China debut was considered a failure not just because it missed analysts’ expectations, but also because Disney had poured five years and $200 million into the film, in part, to ensure it appealed to a Chinese audience. Disney cast actors popular in China, hired Chinese consultants, shared the script with Chinese authorities, and cut scenes that Chinese test audiences didn’t like.
“In many ways, the movie is a love letter to China,” Mulan director Niki Caro told state-run Chinese news agency Xinhua before the film’s release.
That love seems unrequited.
Movie theaters in many parts of the world, including the U.S., are shuttered because of the coronavirus pandemic. But theaters are open in mainland China and Hong Kong. Mulan “needed that China market to succeed,” said Stanley Rosen, a professor of Chinese politics, society, and cinema at the University of Southern California. Disney didn’t respond to a request for comment.
Despite the money and time Disney dedicated to courting Chinese filmgoers, Mulan faced significant obstacles before it debuted in theaters.
“There were so many criticisms of the film before it came out, it didn’t really have a chance [in China],” Rosen said.
Piracy and bad reviews
Rampant illegal downloading meant that many viewers in China had watched Mulan days before it came out in Chinese cinemas on Sept. 11. Within hours of the film becoming available on Disney’s streaming platform Disney+ on Sept. 4, it appeared on illegal streaming sites worldwide. (Disney+ is available to subscribers in more than two dozen countries in Europe, Asia, and North America. It’s not available in mainland China, but users with a virtual private network can bypass regional restrictions.)
On one popular site for pirated content, Mulan was downloaded in China more than 250,000 times in three days, the South China Morning Post reported.
Bad reviews started appearing on platforms like Douban, a Chinese social networking site, and Maoyan, China’s largest online movie ticketing site, from users who had watched pirated versions, creating “negative buzz” around Mulan days before it hit Chinese theaters, Rosen said. “Piracy led to those bad reviews, which kind of turned people off from booking a ticket.”
Director Niki Caro and actress Liu Yifei attend a “Mulan” promotional event in London on March 13. Early bad reviews hampered the film’s box office success in China. Dave J Hogan—Getty Images
Online reviewers criticized Mulan‘s lack of character development; the actors’ performances; various plot holes; the historical inaccuracy of the makeup and costumes; and confusing, seemingly slapdash references to Chinese culture.
One Douban reviewer laid out a ten-point critique of the movie that included a complaint about one scene in which Mulan’s father sharpens a knife with a piece of jade with ‘filial piety’ engraved on it. “[The jade] is related to military merit,” the reviewer wrote. “Why the hell is it engraved with ‘filial piety’?”
Another Douban reviewer called the film a “car accident” full of famous Chinese actors and “all the features of China that Americans could come up with…it’s full of Western images of China, especially ancient China.”
And that was one week before the movie officially premiered in China.
Piracy has long been an issue in China—Disney’s 1998 animated version of Mulan also suffered in the China box office in part because of mass piracy before its official release.
In recent years—under pressure from the U.S. to crack down on intellectual property theft, and alongside the growth of domestic entertainment companies—China’s government has tightened its piracy regulations. The share of people in China listening to illegally-downloaded music, for instance, dropped from 99% in 2011 to 4% in 2018.
Last year, Chinese authorities arrested 251 people and closed down 361 websites and 57 apps with connections to pirated movie production.
Mulan‘s initial straight-to-streaming release on Disney+ made it especially vulnerable to piracy. There was no need for illicit filming in a dark theater; it was already available online, making it easier to illegally copy and distribute.
Mulan‘s problems go beyond piracy.
“Aside from the piracy issue…people were concerned that you had a Western director and four screenwriters who were also Western, so it looked like just another example of Hollywoodization of a Chinese story,” Rosen said. Because of the proliferation of bad reviews online, “People were primed to be suspicious.”
Mulan has been adapted 17 times for film and television over the years; 15 of those adaptations were made in mainland China, Hong Kong, and Taiwan. The remaining two, this year’s live-action film and Disney’s 1998 animated version, were American.
Concerns about how faithfully Disney’s latest Mulan hewed to Chinese history and culture started last summer, when Disney released the trailer for the movie. One complaint pointed out that Mulan’s house is a style of architecture that did not emerge in China until several hundred years after Mulan was supposed to have lived and is associated with southern China; the Mulan folk story is set in northern China. The scenes are beautiful, one Douban reviewer wrote, “but it will make any Chinese person who has studied geography go crazy.”
Turning tide against Hollywood
As China’s $9.2 billion box office is poised to surpass the U.S. as the largest cinema market in the world, Hollywood movies’ share of it has declined as Chinese films’ share has grown. The quality, quantity, and budgets of domestic films are improving, and local films accounted for 64% of China’s total box office in 2019, compared to 62% in 2018 and 54% in 2017.
Some Hollywood staples are still hugely popular in China. Last year, Marvel’s Avengers: Endgame earned over $629 million there, making it China’s fourth-highest grossing film of all time.
But joint productions between U.S. and Chinese movie makers like The Great Wall and Hollywood movies with Chinese cultural themes like Crazy Rich Asians and The Farewell have flopped at the mainland box office. Their failures underscore the difficulty of making a movie with Chinese themes that appeals to U.S. and Chinese audiences and succeeds critically and commercially in both markets.
Director Zhang Yimou, actress Jing Tian, and actor Matt Damon at the Los Angeles premiere of ‘The Great Wall’ in 2017. In Hollywood, the film has come to exemplify the challenges of American and Chinese studios jointly producing a film that succeeds in both markets. Frazer Harrison—Getty Images
Crazy Rich Asians, a movie about a Chinese American woman who travels to Singapore to meet her Chinese Singaporean boyfriend’s wealthy family, was a hit across the globe, but flopped in China, where reviewers said it negatively stereotyped Chinese culture and was too American.
The Farewell, a film about a Chinese-American woman who travels from the U.S. to China to visit her dying grandmother, has a higher Douban score than Mulan and Crazy Rich Asians, but it still bombed when it premiered in China last year. Positive reviews praised the film’s authentic depiction of a Chinese family in China; negative reviews said the director was showing China through an American lens, and the depiction was unflattering.
Mulan, more so than the other two films, was crafted with the explicit goal of appealing to Chinese audiences—but if its online ratings and early box office figures are anything to go by, it failed to do so.
“Politics aside, the new live-action [Mulan] film is a half-baked story that caters neither to the West nor to the East,” said Ying Zhu, an expert on China-Hollywood relations who’s a cinema studies professor at the City University of New York and a faculty member at the Film Academy of the Hong Kong Baptist University.
“It’s the inbetweenness that ruins an otherwise fascinating tale. Hollywood should leave Mulan alone,” Zhu said.
The film’s “inbetweenness” is exemplified in the contrasting responses to the question of whether Mulan can be considered a ‘feminist’ hero. Some Western and Chinese viewers praised the film’s feminist messaging and its strong female protagonist, while others disliked the characterization for the same reason. One viewer told the New York Times that the film’s director had “stubbornly twisted [Mulan] into this role as an extreme feminist and hero.”
Mulan sparked controversy outside of mainland China, too, long before it was released, when actress Liu Yifei, who plays Mulan, expressed support for the Hong Kong police in August 2019 at the height of the protests in Hong Kong. Calls to boycott the movie over Liu’s remarks resurfaced when Mulan was released on Disney+ earlier this month, and protests supporting the boycott cropped up in Hong Kong, South Korea, and Thailand.
After Mulan appeared on Disney+, another controversy emerged. The credits revealed that parts of the movie had been filmed in Xinjiang, a far-western region of China where China’s government has been accused of human rights abuses towards Xinjiang’s Uighur Muslim minority.
Those criticisms, though, were largely unrelated to the movie’s poor box office performance in mainland China, where the government censors the Internet and the news is dominated by state-run media.
“The fact that it hasn’t been successful in China has nothing to do with the [Hong Kong] boycott movement or the attitude towards Xinjiang in the United States…it has to do with the quality of the film,” Rosen said.


fortune--2020-09-22--Hacker sentenced to 5 years for targeting U.S. companies

When Bill Gates thinks we ’ ll have a COVID-19 vaccine—and why that won ’ t be the end of @ @

A British man who was part of a hacking collective called The Dark Overlord was sentenced Monday to five years in prison for helping the group steal information from several companies in the U.S., including Missouri, Illinois and Georgia.
Nathan Francis Wyatt, 39, was sentenced after he pleaded guilty in federal court in St. Louis to conspiring to commit aggravated identity theft and computer fraud. He was also ordered to pay about $1.5 million in restitution.
Federal prosecutors said The Dark Overlord stole medical records, client files and personal information from the companies, then demanded between $75,000 and $300,000 worth of Bitcoin to return the information. None of the companies paid the ransom but the conspiracy did cost them because of the intrusion and release of data, federal prosecutor Laura Kathleen Bernstein said.
Wyatt set up a phone account and accounts on Twitter and PayPal that were used to communicate and receive money, she said.
Wyatt apologized during the hearing, held via Zoom, saying that he was on medication for mental problems that led him to make bad decisions, The St. Louis Post-Dispatch reported.
“I can promise you that I’m out of that world,” he said, voice breaking. “I don’t want to see another computer for the rest of my life.”
His lawyer, Brocca Morrison, noted that Wyatt did not orchestrate the hacks and is the only hacker who has been identified.
Bernstein said Wyatt’s actions helped the other hackers remain anonymous and that his phone account was used to send threatening text messages to relatives of victims.
Wyatt was indicted in 2017, but he was not extradited to the U.S. until last year after British lawyers fought to keep him in that country.
He had served 14 months in a British prison after pleading guilty to 22 charges after he was accused of demanding money from the owner of a hacked computer and using stolen credit cards.


fortune--2020-09-21--Supreme Court fight could derail chances for second stimulus check and extended unemployment benefit

Supreme Court fight could derail chances for second stimulus check and extended unemployment benefits

The death of Supreme Court Justice Ruth Bader Ginsburg wasn’t just a political and judicial earthquake—it’s also shaping up to cause real economic consequences.
For months Democratic and Republican leaders have failed to come to terms on the next broad stimulus package. The two parties are still $900 billion apart: Democrats are pushing for a package worth $2.2 trillion, and the White House is at $1.3 trillion.
But with the Republican controlled Senate planning to vote on President Donald Trump’s soon-to-be-announced Supreme Court nominee—and Senate Democrats planning to aggressively fight it—the chances of agreement on a stimulus bill before the election are falling.
If Senate Republicans do put another Trump nominated Supreme Justice on the bench, Senate Minority Leader Chuck Schumer said Saturday that “nothing is off the table next year.” That suggestion comes as some Democrats call for adding Supreme Court seats in 2021, aka “packing the court.” Those calls—and the looming Supreme Court nomination from Trump—are hardly the ideal political environment to pass a 13-figure stimulus package.
Investors on Monday priced down odds of another stimulus package as a result of the Supreme Court fight, says Dan Ives, managing director of equity research at Wedbush Securities. The S&P 500 closed down -1.2% to 3,281 points.
And partisan fighting on Monday had already started to dial up. House Speaker Nancy Pelosi released a stopgap funding bill, which Republicans rejected after learning it did not include farm aid. If a stopgap funding bill isn’t passed by the end of September, the federal government will shut down. And passing a stopgap bill is the first step towards moving onto a much larger broad stimulus bill.
The waning odds of more stimulus is bad news for jobless Americans who are set to see their weekly $300 enhanced unemployment benefits phase out this month as the funds Trump set aside through memorandum are nearing depletion. That loss for out-of-work Americans could be a drag on consumer spending—which is all ready showing signs of slowing.
And failure to pass another stimulus package means Americans wouldn’t see another $1,200 stimulus check this year, nor would there be additional aid for small businesses and state governments. Republican leaders have suggesting trying to pass another PPP as a standalone bill while Democratic leaders believe aid to states is vital to stave off mass public sector layoffs.


fortune--2020-09-21--Why GM may escape from Nikola’s wreckage unharmed

What a difference two weeks makes.
On Sept. 8, General Motors’ stock bounced nearly 10% after the legacy carmaker announced it would take an 11% stake in Nikola Motor and provide technology to the buzzy hydrogen-electric truck startup.
It’s all been, to put it mildly, downhill from there.
Allegations of fraud by Nikola have since dismembered its stock, with GM’s promised stake losing nearly $1 billion in value since the deal’s announcement. GM’s own shares also cratered Monday after the announcement that Nikola’s founder and former CEO Trevor Milton would step down as executive chairman and leave the company. GM’s stock has now given back all the gains that followed the partnership announcement.
But despite those paper losses, and the potential for more if Nikola’s situation worsens, the terms of the deal mean GM’s real downside is likely to be minimal. In fact, while some investors took the GM deal as validation of Nikola, others saw the arrangement as so one-sided that it fueled suspicions about Nikola’s business model.
Most important, GM didn’t put up any cash in the deal. Instead, its big stake in Nikola was based on sharing its battery and fuel-cell technology with the startup. Moreover, GM was also to be paid by Nikola for its engineering and manufacturing work, and for building factories for Nikola. Finally, GM’s deal would give it a claim on 80% of the valuable regulatory credits generated from the sale of Nikola vehicles. All told, GM estimated it would earn $2 billion from the deal in addition to the value of the Nikola stock.
The deal’s terms were a red flag for some analysts, and not just because of its generosity to GM. Above all, Nikola had long touted its own advances in battery and fuel-cell technology, drawing questions about why it would look to GM for those core components, and more broadly, what exactly Nikola itself was bringing to the table.
Nikola had earned a dramatic stock run-up partly by promising investors the moon: not only innovative batteries and a national network of hydrogen fuel facilities, but a list of potential vehicles that grew to a half-dozen before any of them actually went on sale.
Batteries in particular turned out to be a key issue in the fraud allegations published by short-seller Hindenburg Research two days after the GM deal was announced. Nikola, the Hindenburg report claimed, had been misrepresenting its progress in developing batteries, as well as faking a 2018 video of one of its trucks, which seemed to show it moving under its own hydrogen fuel-cell power. In fact, it was rolling down a hill, powered by an old-school technology called gravity.
Despite signaling that it would rebut the accusations, Nikola never did so convincingly, and even publicly admitted to the truck deception (while insisting that it wasn’t a deception at all). On Sept. 14, it was reported that the Securities and Exchange Commission and U.S. Justice Department were investigating the claims.
Through it all, GM stood by Nikola. On Sept. 14, for instance, GM CEO Mary Barra assured markets that GM had conducted “appropriate diligence” on the deal. After Milton stepped down, GM again stood firm, reiterating that it would close the deal as scheduled at the end of September.
That’s not as surprising as it seems. Even if Nikola collapses entirely, GM will likely come out ahead. GM can’t sell its Nikola stock for at least a year, and it’s anyone’s guess whether there will be any value left by then. But in the meantime, GM may get to test-drive an EV business on somebody else’s dime. In late July, Nikola executives said the company had about $900 million in capital, enough to start funding GM’s work on Nikola’s planned Badger electric pickup truck. Assuming that work proceeds, it will at the very least be a test bed for GM’s Ultium batteries, which GM has also licensed to Honda, and will be part of GM’s own planned slate of as many as 20 new EV models by 2023.
That’s why Morningstar’s David Whiston told the Detroit Free Press last week that, however bad things get for Nikola, the main risk for GM was “a huge PR black eye…It still looks really bad optics-wise should Nikola be charged with criminal fraud or go bankrupt.”
And to top it off, Nikola announced today that Milton’s spot as chairman will be filled by former GM vice chairman Stephen Girsky. Girsky founded VectoIQ, the so-called special purpose acquisition company, or SPAC, that allowed Nikola to become a publicly traded company. He was also reportedly the architect of the Nikola-GM deal.
So even if it suffers a reputational hit, GM could still come out ahead if Nikola continues to crumble. In the short term, cash from Nikola investors will go to fund GM engineers’ work on the Badger and other vehicles. Then, if the scandal-plagued startup can’t attract more investment, GM will be in the pole position to buy whatever’s left of Nikola—maybe even, if Nikola’s stock slides far enough, for less than GM was to be paid for its work.


fortune--2020-09-21--What Microsoft gets by buying game publisher Bethesda Softworks in a $7.5 billion deal

It may not be TikTok, but Microsoft is on the verge of acquiring a lineup of popular video game titles that could help grow its consumer and video game businesses.
Microsoft said Monday that it plans to buy Bethesda parent ZeniMax Media for $7.5 billion, which makes it the company’s biggest gaming acquisition, surpassing the $2.5 billion it spent in 2014 for Minecraft developer Mojang.
ZeniMax Media was founded more than 20 years ago and is essentially a holding company that owns several video game studios like MachineGames, Alpha Dog, and iD Software. Microsoft said that it would now own 23 video game studios as a result of its planned acquisition, up from 15.
It’s a big deal for Microsoft, which for years has been criticized for failing to have as many compelling exclusive titles for its Xbox gaming business as competitors like Nintendo and Sony do for their consoles.
Microsoft suffered a blow in August when it said it would delay the release of Halo Infinite, the latest installment in its popular Halo gaming franchise, to sometime in 2021. The latest Halo game was intended to be a big draw in persuading people to buy the company’s latest Xbox Series X and Series S video gaming consoles in November.
By purchasing ZeniMax, Microsoft now owns some of the most popular and critically acclaimed video game franchises in recent years. For instance, the fantasy adventure game The Elder Scrolls V: Skyrim is one of the bestselling video games of all time, selling over 30 million copies since its initial release in 2011. Meanwhile, Fallout 4, the most recent entry in the acclaimed postapocalyptic role-playing game series, sold a whopping 12 million copies on the day it debuted in 2015.
Other popular game franchises that are part of ZeniMax’s portfolio include the first-person shooters DOOM, Quake, and Wolfenstein.
Microsoft did not say if any of the video game franchises it would eventually own when the deal presumably closes would be exclusive to its Xbox gaming console.
But it did say that it would “bring Bethesda’s future games” into its Xbox Game Pass video game subscription service, which lets people play certain video game titles via their Xbox gaming console and personal computers for a monthly fee.
“Gaming is the most expansive category in the entertainment industry, as people everywhere turn to gaming to connect, socialize, and play with their friends,” Microsoft CEO Satya Nadella said in a statement.


fortune--2020-09-21--What Tesla’s Battery Day might reveal: Project Roadrunner, Model S Plaid, and more

Tesla investors and fans are eagerly awaiting what CEO Elon Musk has described as “one of the most exciting days in Tesla’s history.” The “Battery Day” event and shareholder meeting on Tuesday, Sept. 22 is expected to showcase Tesla’s next-generation battery technology, including batteries that store more power, but cost less to make.
“There’s one single focus in this,” says Gene Berdichevsky. “What reduces my dollars per kilowatt-hour [of battery storage] at the vehicle level?”
Berdichevsky, now CEO of battery materials company Sila Nanotechnologies, was Tesla’s seventh employee, and worked on battery design for the original Tesla Roadster. He and others believe the innovations Tesla is likely to unveil Tuesday, the fruit of years of acquisitions and in-house research, could add up to a long-term strategic advantage over competitors nipping at the trailblazer’s heels.
Project Roadrunner
For many years, Tesla CEO Elon Musk touted his commitment to “the machine that builds the machine”: aggressive automation in pursuit of big cost advantages. Tesla’s struggles with the Model 3 were a setback to that thesis, but Tesla has forged ahead with streamlining battery production under the code name Project Roadrunner, and the potential benefits are huge.
Project Roadrunner appears to involve many different advances, but a lot of attention has been paid to contributions by Maxwell Technologies, which Tesla acquired in 2019. Maxwell developed a so-called dry electrode process for battery cell production, which replaces solvent-based “wet” assembly processes, and has a plethora of potential benefits.
First, the dry electrode could slash production costs by eliminating the time- and space-intensive drying stage required with solvent-based electrode application methods. Some experts have speculated that the relatively small footprint of Tesla’s pilot battery-cell production line in Fremont, Calif., may reflect that change.
Experts also say the dry electrode process would improve battery performance, particularly charging speeds, by forming a stronger connection between elements of a battery cell. One battery industry executive, however, cautions that this process might not be deployed in the near term, describing it as next-generation technology.
Tesla also appears likely to announce a shift to what’s known as cell-to-pack production. Currently, battery cells are first assembled into “modules,” arm-length boxes that are in turn put together into car-sized battery packs. The nominal point of the modules is to make it easier to replace defective cells, but Musk early this year declared that Tesla no longer needs modules, and eliminating the intermediate step should reduce both costs and vehicle weight.
A million miles and running
Analysts have speculated about a laundry list of other innovations that could be part of Battery Day. Those include tabless electrodes, which could increase charging speeds and storage capacity while, again, reducing cost. There has also been much speculation about a “million-mile battery” capable of being recharged many more times than current models without degrading. That technology may be more expensive than what’s currently used, though, so it remains uncertain how it would fit into Tesla’s overall strategy.
Tesla could also highlight the growing range of battery chemistries it uses in different products. For instance, Tesla appears to be preparing to use heavier, shorter-range lithium-iron batteries in cheaper Chinese vehicles, freeing up more expensive materials for high-performance products like the Tesla Semi. Though it’s more of a long shot, Battery Day could include details about Tesla’s battery recycling, possibly involving Redwood Materials, a battery-recycling startup founded by former Tesla CTO JB Straubel.
There may be some non-battery announcements during Battery Day. Musk has hinted at unveiling ultra-high-performance “Plaid” versions of the Model S and Model X. There might be details about progress at new factories in Austin and Berlin. And Tesla could also announce long-anticipated body, drivetrain, or interior updates to Models S and X, which might help those high-margin vehicles regain lost ground against luxury competitors.
Digging an insurmountable moat?
Tesla’s battery improvements are part of a broader strategic push to break free from third-party battery suppliers—a shift some saw hints of in last year’s freeze on investment in the joint Panasonic-Tesla Gigafactory in Nevada. Batteries are key to an electric vehicle’s performance, and are estimated to make up as much as half of EV costs, so producing lower-cost, higher-performance batteries in-house would mean a major edge on competitors.
Tesla investor and analyst Matt Joyce believes the move is particularly crucial for Tesla right now, as a wave of both established vehicle makers and new startups prepare to battle for EV market share. Many of those competitors will be reliant on third-party battery suppliers such as LG and Samsung, limiting their ability to innovate, and even constraining their battery supplies. If Tesla can escape those constraints, Joyce says, “nobody’s going to be able to catch up.”
Tesla’s push for battery efficiency also has stakes beyond mere competition. Conventional wisdom in the EV industry has it that a battery pack costing $100 per kilowatt-hour of storage would make it possible to sell EVs for about the same price as gasoline-burning cars. Because EVs already cost less to fuel and maintain than gas-burners, this could trigger a broad and rapid transition to EVs.
It’s not certain that Tesla will reveal any detailed cost information on Tuesday. But if it does announce it has cracked the $100/kwh battery pack, using technology it owns, it would draw a clear path to long-term market dominance—and could trigger another major surge of speculative enthusiasm for the company’s already frothy stock.
Tesla is welcoming in-person visitors to its Fremont factory on Battery Day, apparently hoping to show off its new manufacturing process and other big reveals in person. Much of the event will also be streamed online, though, starting at 1:30 p.m. PT on Sept. 22.


fortune--2020-09-21--Chief health officers talk about building trust at their companies

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Around a decade ago it became fashionable for every company to call itself a technology company—no matter what industry they were in. Now, in the age of COVID, every company is a health care company. And every corporation of note is hiring, or has long-had, a chief health officer.
That role has expanded dramatically since the pandemic began. Pre-coronavirus a chief health officer might have been responsible for employee wellness and fitness programs, ensuring employees had access to mental health counseling, creating a healthy environment both physically and mentally, and responding to small-scale issues of public health such as seasonal flu.
Now the CHO is a key link between the scientific community and business, and is critical in making public health decisions for a company’s workforce.
On Thursday, as part of a Fortune Brainstorm Health virtual gathering, Fortune editor-in-chief Clifton Leaf, spoke with a panel comprised of some of corporate America’s top health specialists: Lockheed Martin Aeronautics chief medical officer Dr. Marleece Barber; CVS Health EVP and chief medical officer Dr. Troy Brennan; Disney chief medical officer Dr. Pamela Hymel; University of Miami Dean John Quelch; and IBM vice president and chief health officer Dr. Kyu Rhee.
Each of the panel spoke about how establishing trust prior to the pandemic is making it easier for them to get employee buy-in for their public health decisions.
“This integration of home and work is occurring, there’s a changing social contract between employers and employees,” said IBM’s Rhee. “We have 95% of our workforce working from home globally, but [Lockheed’s] Marleece and [Disney’s] Pam have much of their workforce at sites. They’ve got to create a culture of trust not just with customers but with employees.”
“Having been with Lockheed Martin for nearly 17 years, I’ve had time to build relationships with employees and leaders,” said Barber. “So when it came to dealing with the crisis, people could trust the information I was providing. Early on, as a leadership team, we decided that safety was our top priority and we would have very close alignment with the CEO setting the tone.”
In July, Disney re-opened Walt Disney World Orlando to the public just as Florida was becoming a hotspot for coronavirus. But as the company’s chief doctor, Hymel said they were confident they could open the gates to the Magic Kingdom without putting guests, or cast members at risk. Trust was key to that.
“For years I’ve been embedded in our leadership team, and COVID-19 really put a spotlight on the value that a chief medical officer or chief health officer brings into an organization,” said Hymel. “Because we were really able to talk about the scientific approach [regarding our parks].”
“One of the things that gave us confidence about opening Walt Disney World in Orlando is the fact that we had health and safety protocols already in place, that we knew worked, in our parks outside the U.S.”
While some new corporate titles can seem like fuzzy virtue signaling, the panel all stressed the importance of a chief health officer that gets a real seat at the table in shaping a company’s response to crises of public health.
With COVID unlikely to leave us for a good while to come, that seat will need to be permanent.


fortune--2020-09-21--Trump raises possibility of rejecting TikTok deal he had previously blessed

President Donald Trump said he might rescind his tentative blessing for a deal between Oracle and ByteDance to create a new U.S.-based TikTok service, casting doubt on the agreement as Chinese state media signaled reluctance in Beijing.
Speaking in an interview on Fox News on Monday, Trump said he wouldn’t approve the deal if the Chinese company retains control of TikTok. However, he also indicated that he expected Chinese influence to be diluted by a future public offering of the new company.
“They will have nothing to do with it, and if they do, we just won’t make the deal,” Trump said, referring to ByteDance, which owns TikTok. “It’s going to be controlled, totally controlled by Oracle, and I guess they’re going public and they’re buying out the rest of it — they’re buying out a lot, and if we find that they don’t have total control then we’re not going to approve the deal.”
Shortly after Trump’s comments, Hu Xijin, editor-in-chief of the China state-affiliated Global Times, tweeted that Beijing would likely reject the deal “because the agreement would endanger China’s national security, interests and dignity.”
The Global Times is a tabloid run by the People’s Daily — the flagship newspaper of the Communist Party. Hu’s tweets are closely watched after accurately forecasting previous moves by China’s government, though his statements at times don’t reflect official policy.
ByteDance was pressured into a deal for TikTok in August, when Trump threatened to ban the app in the U.S. over national security concerns about the service’s data gathering. After Microsoft Corp. made a proposal for a full buyout, ByteDance instead turned to Oracle’s offering, in which the Chinese parent will maintain a solid majority stake.
ByteDance may end up owning as much as 80% of TikTok Global, which would include the app’s operations in the U.S. and the rest of the world excluding China.
On Friday, Trump said that he had approved of the deal with Oracle and WalMart Inc. “in concept.”
Under the current proposal, there will be five seats on the board of TikTok Global. Walmart Chief Executive Officer Doug McMillon will become a director, the retailer said in a statement. TikTok Global will likely be headquartered in Texas and will hire “at least” 25,000 people, Trump said.
The valuation for TikTok has been a looming question in the wake of Washington and Beijing clashing over the negotiations. The company will seek a valuation of $60 billion, according to a person familiar with the matter.
TikTok Owner Is Said to Seek $60 Billion Value in U.S. Deal
TikTok Global intends to hold an initial public offering within 12 months, Oracle and Walmart said.
Oracle will get full access to review TikTok’s source code and updates to make sure there are no back doors used by the company’s Chinese parent to gather data or to spy on the video-sharing app’s 100 million American users, according to people familiar with the matter. The U.S. software giant has given reassurances it can protect TikTok user data from foreign influence.


fortune--2020-09-21--Ellen DeGeneres vows ‘new chapter’ as her daytime talk show begins its new season

Ellen DeGeneres used her opening monologue of the new season of her daytime talk show to address allegations of a toxic work environment, apologizing for things “that never should have happened.”
“I know that I’m in a position of privilege and power and I realize that with that comes responsibility, and I take responsibility for what happens at my show,” she said in a video posted Monday.
“The Ellen DeGeneres Show” started its 18th season in Los Angeles with the host on stage for the first time in months after taping from DeGeneres’s home during quarantine. There wasn’t a studio audience but a virtual one, with faces beamed in on monitors put in the audience seats.
“We have had a lot of conversations over the last few weeks about the show, our workplace, and what we want for the future,” she said. “We have made the necessary changes and today we are starting a new chapter.”
Three of the show’s producers exited over the summer amid allegations of a dysfunctional workplace that harbored misbehavior, including sexual misconduct and racially insensitive remarks. In her monologue, DeGeneres dryly joked that her summer was “super-terrific.”
The host also addressed the allegations that the off-camera DeGeneres is very different than her sunny on-air persona. “The truth is I am that person that you see on TV,” she said.
An internal company investigation of work conditions was prompted by a BuzzFeed News report in July based on 36 interviews with ex-staffers, who complained about or said they witnessed improper and unfair treatment. The people making the claims were not identified.
“I learned that things happened here that never should have happened. I take that very seriously, and I want to say I am so sorry to the people that were affected,” DeGeneres said in her monologue.
The comedian and host had sent a memo to her staff after the BuzzFeed report, recalling her early promise of ensuring a workplace where “everyone would be treated with respect.” Something changed, she said, “and for that, I am sorry.”
In a July statement, Warner Bros. said parent company WarnerMedia’s investigation revealed what it called “some flaws in the show’s daily management.”
Although not all of the allegations were corroborated, the studio said it was “disappointed that the primary findings of the investigation indicated some deficiencies related to the show’s day-to-day management.”


fortune--2020-09-21--Cord cutting is breaking records during the pandemic

A record number of consumers are dropping their cable and satellite TV subscriptions, as the COVID-19 pandemic accelerates the cord-cutting trend of the past decade.
About 6.6 million households are expected to cut the cord this year, according to research firm eMarketer. That leaves just 77.6 million still paying, a 7.5% drop, the steepest one-year drop on record, eMarketer said. From the peak of pay TV subscriptions in 2014, 23% of households have now cut the cord.
A year ago, the firm forecast that half that many homes would cut the cord in 2020. But the pandemic has sped up the trend for several reasons. Tens of millions of people have lost work, putting a squeeze on finances. Live sports, one of the biggest remaining attractions on pay TV, were also forced off the air for months, yet cable companies didn’t reduce their sports fees. And finally, the market for cheaper streaming alternatives continues to grow, led by Netflix, but now also with entries from Apple, Disney, and Comcast’s NBCUniversal.
“Consumers are choosing to cut the cord because of high prices, especially compared with streaming alternatives,” eMarketer analyst Eric Haggstrom noted in the report. “The loss of live sports in [the first half of] 2020 contributed to further declines. While sports have returned, people will not return to their old cable or satellite plans.”
Cord cutting will continue trimming subscribers from big pay TV providers like Comcast, Charter Communications, and AT&T’s DirecTV for the foreseeable future, eMartketer added. By 2024, another 15.4 million households will cut the cord, and more than one-third of all households will be off of pay TV.
The trend has been punishing TV advertising, which will drop to $60 billion this year, down 15% from 2019 and the lowest total since 2011, eMarketer said.
Cord cutting hasn’t had as harsh an impact on cable TV providers, however, because most are also among the top providers of broadband home Internet service. Comcast, for example, lost 671,000 cable TV subscribers last year but added 1.3 million Internet subscribers. And while its cable revenue dropped 1% to $22.3 billion, its Internet revenue rose by 9% to $18.8 billion.


fortune--2020-09-21--Trump designates NYC ‘anarchist jurisdiction,’ threatens to revoke $7 billion in funding for cash-st

Trump designates NYC ‘anarchist jurisdiction,’ threatens to revoke $7 billion in funding for cash-strapped city

The streets of New York may appear relatively peaceful, but according to the Trump administration, the city is in the throes of anarchy. The Department of Justice has deemed it an “anarchist jurisdiction” and threatened to take away a number of federal grants that amount to more than $7 billion—7.5% of the city’s projected total revenue—leaving the cash-strapped, former coronavirus epicenter in dire straits.
The move comes less than two months before the presidential election, which Trump has attempted to frame around “law and order,” claiming that without his leadership the country could turn to anarchy.
Attorney General William Barr justified his decision Monday morning by citing an increase in gun violence, NYPD budget cuts, and decisions to not prosecute some protesters earlier in the summer. He also designated Seattle and Portland, Ore., as “anarchist jurisdictions.”
“We cannot allow federal tax dollars to be wasted when the safety of the citizenry hangs in the balance. It is my hope that the cities identified by the Department of Justice today will reverse course and become serious about performing the basic function of government and start protecting their own citizens,” Barr said in a statement. The move comes less than three weeks after Trump issued a five-page memo to the Department of Justice asking that these “lawless zones” be cut off from federal funding.
“To ensure that Federal funds are neither unduly wasted nor spent in a manner that directly violates our Government’s promise to protect life, liberty, and property, it is imperative that the Federal Government review the use of Federal funds by jurisdictions that permit anarchy, violence, and destruction in America’s cities,” he said, giving Barr two weeks to compile a public list of cities and director of the Office of Management and Budget Russell Vought one month to provide guidance “to the heads of agencies on restricting eligibility of or otherwise disfavoring, to the maximum extent permitted by law, anarchist jurisdictions in the receipt of Federal grants.” The President did not specify how federal grants were being spent by these cities in ways that permit anarchy.
Both New York City and New York State have threatened to sue the federal government over the designation, calling it unlawful and unconstitutional. New York currently uses money provided by federal grants for its core programs, including public housing, social services, Medicaid, health, homeland security, and education.
Staten Island congressman Max Rose, who is critical of both New York City Mayor Bill de Blasio and Trump, said earlier this month that revoking funding would hurt the NYPD and lead to the opposite of what was intended.
“With this order, President Trump is joining Mayor de Blasio in defunding the police. It was wrong then, and it’s wrong now. I don’t care whether you’re a Republican or a Democrat, I will not sit back if you’re putting my constituents at risk by playing politics,” he wrote in a statement.
New York City is currently facing an $8 billion revenue gap and is struggling with a decrease in tourism, millions working remotely or unemployed, and a projected third of its 230,000 small businesses closing for good. The city already slashed $5 billion from its budget this June. New York State also faces a $30 billion budget deficit over the next two years.
“I believe the President is fundamentally a bully, which I’ve said too many times, and I’ve known him very well for a very long period of time. It doesn’t work in New York, because you can’t bully New Yorkers. We just don’t get bullied,” New York Gov. Andrew Cuomo said in response to threats of the order earlier this month.


fortune--2020-09-21--Dow plunges 800 points in brutal selloff

Stocks are falling sharply in early trading on Wall Street Monday, joining a global tumble for markets as the S&P 500 sinks more than 2%.
Losses began in Asia as soon as trading opened for the week, and they accelerated in Europe on worries about the possibility of tougher restrictions on public life due to rising coronavirus counts there, before knocking U.S. stocks and Treasury yields lower.
The losses were widespread, with almost all the stocks in the S&P 500 lower. The index was down 2.3% by mid-morning.
The Dow Jones Industrial Average was down 852 points, or more than 3%, at 26,805, as of 10:40 a.m. Eastern time, and the Nasdaq composite was down 2.4%. In another sign of the increased worry, the yield on the 10-year Treasury fell to 0.65% from 0.69% late Friday.
Wall Street has been shaky this month, and the S&P 500 has pulled back about 9% since hitting a record Sept. 2 amid a long list of worries for investors. Chief among them is fear that stocks got too expensive when coronavirus counts are still worsening, U.S.-China tensions are rising, Congress is unable to deliver more aid for the economy and a contentious U.S. election is approaching.
Bank stocks had sharp losses Monday morning after a report alleged that several of them continue to profit from illicit dealings with criminal networks despite being previously fined for similar actions.
The International Consortium of Investigative Journalists said documents indicate JPMorgan Chase moved money for people and companies tied to the massive looting of public funds in Malaysia, Venezuela and the Ukraine, for example. Its shares fell 2.8%.
Big Tech stocks were also struggling again, much as they have since the market’s momentum turned early this month. Amazon, Microsoft and other companies had soared as the pandemic accelerates work-from-home and other trends that boost their profits. But critics said their prices simply climbed too high, even after accounting for their explosive growth.
Amazon fell 1.2% and Microsoft lost 1.6%.
Tech’s losses have helped drag the S&P 500 to three straight weekly losses, the first time that’s happened in nearly a year.
Shares of electric and hydrogen-powered truck startup Nikola plunged 18.9% after its founder resigned amid allegations of fraud. The company has called the allegations false and misleading.
General Motors, which recently signed a partnership deal where it would take an ownership stake in Nikola, fell 5.6%.
Investors are also worried about the diminishing prospects that Congress may soon deliver more aid to the economy. Many investors call such stimulus crucial after extra weekly unemployment benefits and other support from Capitol Hill expired. But partisan disagreements have held up any renewal.
“With 43 days to the U.S. election, fingers crossed may be what little one can do when it comes to the fiscal stimulus hopes,” said Jingyi Pan of IG in a report.
Partisan rancor only continues to rise in the country, with a vacancy on the Supreme Court the latest flashpoint after the death of Justice Ruth Bader Ginsburg.
Tensions between the world’s two largest economies are also weighing on markets. President Donald Trump has targeted Chinese tech companies in particular, and the Department of Commerce on Friday announced a list of prohibitions that could eventually cripple U.S. operations of Chinese-owned apps TikTok and WeChat. The government cited national security and data privacy concerns.
A U.S. judge over the weekend ordered a delay to the restrictions on WeChat, a communications app popular with Chinese-speaking Americans, on First Amendment grounds. Trump also said on Saturday he gave his blessing on a deal between TikTok, Oracle and Walmart to create a new company that would satisfy his concerns.
Oracle rose 3.3%, and Walmart gained 1.1%, among the few companies to rise Monday.
Layered on top of it all the concerns for the market is the continuing coronavirus pandemic and its effect on the global economy.
On Sunday, the British government reported 4,422 new coronavirus infections, its biggest daily rise since early May. An official estimate shows new cases and hospital admissions are doubling every week.
The FTSE 100 in London dropped2.9%. Other European markets were similarly weak. The German DAX lost 3.2%, and the French CAC 40 fell 2.9%.
In Asia, Hong Kong’s Hang Seng dropped 2.1%, South Korea’s Kospi fell 1% and stocks in Shanghai lost 0.6%.
___
AP Business Writer Joe McDonald contributed.
Stock prices were updated as of 10:40 ET in the 3rd and 4th paragraphs.


fortune--2020-09-21--Snowflake drops amid warnings of a ‘violent selloff’

Shares in Snowflake Inc., which have doubled since their initial public offering last week, are “at risk of a violent selloff,” according to Summit Insights, which started coverage of the software firm with a sell rating.
Analyst Srini Nandury set a price target of $175, implying 27% downside from Friday’s close, citing competition and the stock’s expensive valuation. The initiation is the first among firms tracked by Bloomberg since shares started trading last week. The stock fell as much as 7% in U.S. trading on Monday before paring losses to trade 2.8% lower as of 10:03 a.m. New York time.
Snowflake is the most expensive name in all tech, Nandury wrote in a note, and the firm has “limited” differentiation compared with other data warehouses while also competing with traditional legacy vendors.
“For the stock to work from the current levels, Snowflake needs to execute flawlessly quarter after quarter, and have to live up to lofty expectations and grow into its valuation,” Nandury said. “While Snowflake’s management is stellar and is known for its execution, the odds of Snowflake’s stock faltering are high.”
The shares have roughly doubled since going public in New York on Sept. 16, taking Snowflake’s market value to $66.2 billion, above that of companies such as Dell Technologies Inc. The surge reflects investor appetite for stocks exposed to cloud technology, and has been accompanied by IPOs for fellow cloud firms Sumo Logic Inc. and JFrog Ltd.


fortune--2020-09-21--What the best companies for blue- and white-collar work have in common

Fortune partners with research and analytics firm Great Place to Work to analyze feedback from more than 4.7 million workers, creating annual lists of workplaces that many employees never want to leave. GPTW surveys measure factors like the level of trust between colleagues and the opportunity to reach full potential—identifying companies that excel, across industries.
At the top of this year’s list of best workplaces in manufacturing sits a familiar name: Stryker. The medical device company tops the large company segment for the fifth time in seven years. Stryker shows a commitment to diversity in both hiring practices and partnerships. In 2018 alone, it spent over $228 million with businesses owned by people of color, women, and veterans.
Among the best large companies for women, financial services powerhouses like Pinnacle Financial Partners and Edward Jones return to the top 10. Giant retailer Target, meanwhile, reported that nearly half its 1,800 stores are run by women, with more strides to come.
Best workplaces in manufacturing
1. Stryker
HQ: Kalamazoo, Mich.
U.S. employees: 18,244
Work sites: 120
2. JM Family Enterprises
HQ: Deerfield Beach, Fla.
U.S. employees: 4,247
Work sites: 26
3. Hilcorp
HQ: Houston
U.S. employees: 2,292
Work sites: 30
4. W.L. Gore & Associates
HQ: Newark, Del.
U.S. employees: 7,451
Work sites: 37
5. Mars
HQ: McLean, Va.
U.S. employees: 14,039
Work sites: 67
6. Arthrex
HQ: Naples, Fla.
U.S. employees: 3,451
Work sites: 9
7. Schneider Electric Holdings
HQ: Boston
U.S. employees: 16,312
Work sites: 194
8. Reynolds American
HQ: Winston-Salem, N.C.
U.S. employees: 5,023
Work sites: N.A.
HQ: St. Louis
U.S. employees: N.A.
Work sites: 189
10. CooperCompanies
HQ: San Ramon, Calif.
U.S. employees: 2,571
Work sites: 17
Best workplaces for women
1. Hilton
HQ: McLean, Va.
U.S. employees: 55,281
Women executives: 33%
2. Ultimate software
HQ: Weston, Fla.
U.S. employees: 5,099
Women executives: 43%
3. Target
HQ: Minneapolis
U.S. employees: N.A.
Women executives: 41%
4. Pinnacle Financial Partners
HQ: Nashville
U.S. employees: 2,397
Women executives: 19%
5. Edward Jones
HQ: St. Louis
U.S. employees: 46,572
Women executives: 22%
6. Wegmans Food Markets
HQ: Rochester, N.Y.
U.S. employees: 49,018
Women executives: 27%
7. Noom
HQ: New York City
U.S. employees: 1,140
Women executives: 13%
8. Cisco
HQ: San Jose
U.S. employees: 38,990
Women executives: 21%
9. Progressive Insurance
HQ: Mayfield Village, Ohio
U.S. employees: 39,966
Women executives: N.A.
10. New American Funding
HQ: Tustin, Calif.
U.S. employees: 3,167
Women executives: 53%
A version of this article appears in the October 2020 issue of Fortune with the headline “Blue ribbons for blue- and white-collar work.”


fortune--2020-09-21--Check out Airbus’s concepts for the world’s first ‘zero-emission commercial aircraft’

A few months ago, the French government gave the country’s aerospace sector a $16.8 billion bailout, with one notable condition: Around a tenth of the sum would need to be spent speeding up the development of a new, carbon-neutral airplane.
Airbus, the Toulouse-based European plane-building consortium, had already been working on a hybrid-electric prototype, but that project died in April, thanks to the coronavirus pandemic hitting both Airbus and engine partner Rolls-Royce hard. What the French government was proposing was not electric power but hydrogen—and it wanted a plane ready by 2035.
On Monday, Airbus showed off its first concepts for the “ZEROe” aircraft. There are three of them, and while all rely on hydrogen power—a fact Airbus claims could lead to a halving of aviation’s CO2 emissions—they are otherwise quite different.
All three concepts look at least a little different from today’s aircraft, owing to the requirements of storing and using hydrogen for power. The most radical design is for a “blended-wing body” that resembles a cross between a stealth bomber and a space shuttle. This one can carry up to 200 passengers.
Airbus’s blended-wing concept for the ZEROe hydrogen-powered aircraft, unveiled on Sept. 21, 2020. Airbus
Airbus’s “turbofan” design looks more traditional and, as the name suggests, uses a hydrogen-fueled gas-turbine engine. It can carry 120 to 200 passengers and has a range of more than 2,000 nautical miles, making it viable for transcontinental flights.
Airbus’s turbofan concept for the ZEROe hydrogen-powered aircraft. Airbus
The third design uses a turboprop engine, has half the range of the turbofan concept, and can carry up to 100 passengers.
Airbus’s turboprop concept for the ZEROe hydrogen-powered aircraft. Airbus
“These concepts will help us explore and mature the design and layout of the world’s first climate-neutral, zero-emission commercial aircraft, which we aim to put into service by 2035,” said Airbus CEO Guillaume Faury in a statement.
However, as Faury also noted, the transition from emissions-tastic jet fuel to hydrogen won’t just require new planes and engine designs; it means the retooling of an entire ecosystem, from hydrogen transport to refueling facilities to, of course, airports.
“Together with the support from government and industrial partners we can rise up to this challenge to scale up renewable energy and hydrogen for the sustainable future of the aviation industry,” Faury said.
If development of the concepts goes to plan, Airbus will officially kick off its ZEROe aircraft program by 2025, with a full-scale prototype arriving in the latter half of this decade.
However, the news did not do much for Airbus’s share price (down 3.5% at the time of writing) on a day when it, like many other travel-connected stocks, was feeling the pain of rising coronavirus case numbers and the likely impact this will have on the sector.
Despite the largesse of Emmanuel Macron’s government, Airbus was at the end of June forced to announce 15,000 job cuts. The crystallization of aviation’s potentially hydrogen-hued future does nothing to change the fact that, in 2020, airlines are far more preoccupied with staying alive than they are with taking on new aircraft. Though the pandemic is at least encouraging carriers to retire their older gas-guzzlers more rapidly than might otherwise have been the case.


fortune--2020-09-21--The ‘he said, she said’ of TikTok-Oracle-Walmart

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It’s hard to keep all the facts straight in the ongoing saga of TikTok. Even as Oracle and Walmart are set to invest in the short-form video company, the trio can’t seem to agree on exactly what kind of deal is in the works.
On Saturday, Oracle and Walmart released a joint statement announcing that the U.S. government had tentatively agreed on a deal. As part of that deal, TikTok Global, the new proposed company that is to be U.S.-based, would be “majority owned by American investors” including themselves, with four out of five members in its board of directors hailing from America. Trump seized on the fact as he announced his rationale for the tentative agreement: “It will have nothing to do with China, it’ll be totally secure, that’ll be part of the deal,” he said ahead of a campaign rally in North Carolina on Saturday. “All of the control is Walmart and Oracle, two great American companies.”
Buuuuut TikTok’s parent company ByteDance had its own statement as well, publishing an online statement in Chinese that appeared to contradict the assertion that TikTok will be majority-owned by U.S. investors. In a post addressing “unfounded rumors” around the TikTok tie-up, ByteDance wrote: “TikTok Global plans to raise a round of pre-IPO financing, after which Bytedance will control 80% of the company.”
So why is each party giving discrepant accounts on who will own TikTok Global? Well, according to Bloomberg, ByteDance will hold a 80% stake in the company, but, since 40% of ByteDance is backed by American investors, that can also translate to U.S.-based investors having a majority financial stake in TikTok Global. What this all means for voting rights is another story.
What has made this entire situation even more confusing is a statement from Oracle EVP Ken Glueck, who said in an email after ByteDance’s post went public: “Upon creation of TikTok Global, Oracle/Walmart will make their investment and the TikTok Global shares will be distributed to their owners, Americans will be the majority and ByteDance will have no ownership in TikTok Global.”
It’s clear TikTok walks a thin line between China and the U.S. in its deal to keep operations running in the States, and all parties involved are very strategically playing up their best sides to both governments. If the reports are correct, their assertions of the percentages owned aren’t incorrect—they just omit some details that would make the deal look a little less attractive in each of their home nations.
After all, ByteDance’s deal still reportedly awaits approval in China. It stands to earn brownie points from the Chinese government just as Oracle and Walmart do from Trump.
UNITY’S UNUSUAL IPO: ‘Tis the season of pumpkin spice lattes and unusual ways of going public. Shares of gaming company Unity Software surged 44% on Friday after it raised some $1.3 billion through an initial public offering.
What made this particular IPO different: While bank underwriters usually take on the main role of allocating and pricing shares in an IPO (which has resulted in criticism over banks underpricing IPOs or offering shares to preferred banking clients to the detriment of the company), Unity directly took orders from investors. “We wanted to make sure that investors we wanted were on the cap table and that we had the same expectations,” Unity CEO John Riccitiello told Term Sheet on Friday. “We felt like we were in a better position to set price and choose investors through a discovery process like that than we would’ve otherwise if that same discovery had happened on the same he-said-she-said model where bankers talk to investors and they whisper back what they heard.”
This doesn’t necessarily cut out the banks. Riccitiello noted that underwriters still introduced potential investors to the company.
JOIN US: On Wednesday Sept. 23 at 2 p.m. ET, I’ll be moderating an online panel called “Entering Hypergrowth: Lessons from NYC’s New Guards with Braze & BigID.” Hope to see you there.
Lucinda Shen
Twitter: @shenlucinda
Email: lucinda.shen@fortune.com
VENTURE DEALS
- Chime, a San Francisco-based fintech, raised $485 million in Series F funding at a $14.5 billion valuation. Investors include Coatue, Iconiq, Tiger Global, Whale Rock Capital, General Atlantic, Access Technology Ventures, Dragoneer and DST Global. Read more.
- Next Insurance, a Palo Alto, Calif.-based insurance tech startup, is in talks to raise $250 million in funding led by CapitalG. The round would value Next at $2.25 billion. Read more.
- Scopely, a Los Angeles-based mobile game developer, is seeking $200 million in funding that would value it at about $3 billion. Wellington Management and NewView Capital are reportedly leading the round. Read more.
- Playco, a Tokyo-based mobile gaming startup, raised $100 million in Series A funding valuing it at $1 billion. Josh Buckley and Sequoia Capital Global Equities led the round and was joined by investors including Sozo Ventures, Raymond Tonsing’s Caffeinated Capital, Keisuke Honda’s KSK Angel Fund, Taizo Son’s Mistletoe Singapore, Digital Garage, Will Smith’s Dreamers VC, and Makers Fund.
- Mobile Premier League, an India-based esports platform, raised $75 million in funding. SIG Global India Fund led the round.
- Outschool, a San Francisco, Calif.-based K-12 education marketplace, raised $45 million in Series B funding. Lightspeed Venture Partners led the round and was joined by investors including Reach Capital, Union Square Ventures, SV Angel, FundersClub, and Y Combinator.
- Osso VR, a Palo Alto, Calif.-based VR surgical training platform, raised $14 million in Series A funding. Kaiser Permanente Ventures led the round and was joined by investors including SignalFire, GSR, Scrum Ventures, Leslie Ventures, and OCA Ventures.
- WireBarley, a South Korea-based remittance services startup, raised $10 million in Series B funding. Investors include Magna Investment, Shinsegae I&C, and Dt & Investment.
- Accelercomm, a Southhampton, U.K.-based-based startup seeking to speed up 4G and 5G, raised £5.8 million ($7.5 million) in Series A funding. IQ Capital led the round and was joined by investors including Bloc Ventures and the IP Group.
- Ahana, a San Mateo, Calif.-based self-service analytics company for Presto, raised an additional $2.3 million in seed funding. Lux Capital led the round and was joined by investors including GV.
- Art of Sport, a Los Angeles-based personal care brand aimed at athletes, raised an undisclosed amount of funding. CircleUp Growth Partners led the round and was joined by investors including Mark Cuban, Lightspeed Venture Partners, BAM Ventures, Darco Capital and NBA veteran Wilson Chandler.
PRIVATE EQUITY
- QuantiTech, a portfolio company of Sagewind Capital, acquired Dynamic Concepts, a Huntsville, Ala.-based provider of engineering and software services for human spaceflight. Financial terms weren't disclosed.
- Axia Women's Health, a portfolio company of Audax Private Equity, acquired Ocean OB/GYN Associates, five New Jersey-based OB/GYN providers. Financial terms weren't disclosed.
- White Deer Energy acquired a majority stake in Unicat Catalyst Technologies, an Alvin, Texas-based supplier of heterogeneous catalyst products and related services.
OTHERS
- Saudi Industrial Investment Group and National Petrochemical Company, two Saudi Arabian petrochemicals companies, are considering a merger. Read more.
EXITS
- EQT agreed to acquire Casa.it, an Italian online real estate classifieds business, from Oakley Capital. Financial terms weren't disclosed.
IPOs
- Kronos Bio, a San Mateo, Calif.-based biotech developing therapies for leukemia and solid tumors, filed for an $100 million IPO. Read more.
- Shattuck Labs, an Austin, Texas-based biotech developing therapies for cancer, filed for an $100 million IPO. Fidelity, Redmile Group, and Millennium Pharmaceuticals back the firm. Read more.
- Spruce Biosciences, a California-based biotech developing therapies for endocrine disorders, plans to raise $86 million in an IPO. Omega Fund Management, HealthCap Advisor, and Abingworth Bioventures back the firm. Read more.
SPAC
- Social Capital’s Chamath Paihapitiya and Hedosophia’s Ian Osbourne plan to raise $2 billion across three new SPACs seeking to acquire tech businesses: Social Capital Hedosophia Holdings IV, which plans to raise $350 million; Social Capital Hedosophia Holdings V, which plans to raise $650 million; and Social Capital Hedosophia Holdings VI, which plans to raise $1 billion.
- FirstMark Horizon Acquisition, a blank check company formed by FirstMark Capital, filed to raise $300 million. The firm is targeting a tech company. Read more.
F+FS
- Lightspeed Venture Partners launched its Southeast Asia operations based in Singapore, with $4 billion.
- Morgan Stanley Private Equity Asia secured $398.3 million for its fifth Asia focused fund. Read more.
- Northern Light Venture Capital, a China-focused venture capital firm, plans to raise $375 million for its sixth fund. Read more.
- Kindred Capital, a London-based venture capital firm backing early-stage founders in Europe, raised £81 million ($104.2 million) for its second seed fund. Read more.


fortune--2020-09-21--A Q&A with the provocative mind behind watchmaker H. Moser

Watchmaking is an industry steeped in history and tradition, with names like Vacheron Constantin, Breguet, and Blancpain all predating the American Revolution, yet still producing fine timepieces today. (The market leader, Rolex, is a relative baby at just 115 years old.)
Flying under the radar—if a company can do such a thing for 192 years—is H. Moser & Cie., founded by Swiss watchmaker Heinrich Moser in St. Petersburg, Russia, in 1828. Moser produced pocket watches for the Russian aristocracy at the same time Gustav Fabergé was dressing them in jewelry; even Vladimir Lenin owned a Moser pocket watch. But the fame of the brand faded with the fortunes of the Imperial Court and barely survived the 20th century.
In 2012 the brand was acquired by the Meylan family, whose history in the watch industry goes back several generations. Patriarch Georges-Henri Meylan, who was CEO of Audemars Piguet for 21 years, entrusted the running of Moser to his then 35-year-old son Edouard Meylan, an engineer and Wharton MBA who was lured back to his ancestral industry. The Meylan family had identified a distressed asset but one with clear potential, a talented team of watchmakers, and a genuine history; now that asset is paying dividends. Fortune spoke with Edouard about what it takes to run an independent watch brand, how to stand out in the marketplace, and how the company is navigating a global pandemic. This interview has been edited for clarity and length.
Fortune: Is the Moser that exists today 192 years old or eight years old?
EM: Like everything, it’s an evolution, right? This brand, except for a period of 15 years during the quartz crisis [in the 1970s and ’80s], has always been in production. There has always been a continuation of philosophy and approach from the founder and the people that followed him. When I look at our products today I see many links [to the past]. But we are not stuck in history. It’s important to be inspired but not get stuck.
What were the things that attracted you to the brand?
What made me fully fall in love with Moser was its approach to engineering. It’s probably the most Germanic brand in Switzerland. And I studied engineering in Germany, my wife is German, and I have always been attracted to the philosophy of German engineers and designers like the Bauhaus. My predecessor [former Moser CEO] Jürgen Lange was East German, and I think he brought a lot of that, and I wanted to keep that. Also I fell in love with our perpetual calendar movement. I think it’s still one of the most amazing movements out there. A watch is there to give you the time and date, so it’s one of the most practical movements there is. And fumé dials, Moser was doing them in limited editions, and we thought, “Wow, this is so cool, nobody is doing that.” And now I think everybody is!
So where was the brand going wrong?
There were many things. Some quality issues. But the main thing was efficiency. When you develop products like these, if you have a pure engineering approach then you create your dream watch, which is great but also very dangerous because you’re not considering the cost of production and how much you can sell it for. So we really worked on efficiency in production. We reduced the time it took to assemble a perpetual calendar from 90 hours—that’s two weeks—to 30 hours. It took time and investment, but it’s one thing that transformed the brand from bleeding money to becoming profitable.
Another thing was brand identity. Even though the watches were costing a lot to produce, they were being sold rather cheap, and people were saying, “Oh, Moser is great value for money.” And for me that’s shocking, because value for money has nothing to do with luxury. It’s the opposite of that. So I’m trying to make an emotional link with the brand and customers. We do that through transparency and honesty, but also by being provocative and making sure nobody is indifferent about Moser—whether that opinion is good or bad.
I’m trying to make an emotional link with customers. We do that through transparency and honesty, but also by being provocative.
Speaking of being provocative, Moser makes these very elegant, classical-looking watches, but you’ve also stirred up plenty of controversy with some of your concept designs. How are these products part of the same brand?
I mean, if you look at an artist, we say in French that you cannot look at one specific painting: You need to look at a body of work to understand them. The commonality with all the concept watches is really the message behind them, rather than the product itself. It’s really that they were symbols of an idea or philosophy or values that we wanted to fight for. For example, people were asking us, “Are you going to make a connected watch? Is the connected watch going to destroy the watch industry?” And then boom, we launched the Swiss Alp watch [which bears an uncanny resemblance to the Apple Watch]. It was very classic and elegant but a modern watch. And it answered those questions.
Streamliner Centre Seconds in matrix green, 19,900 francs. Courtesy of H. Moser & Cie.
Your latest release, the Streamliner, is a stainless steel sport watch that hits on a wider trend started by the Audemars Piguet Royal Oak. How do you stand out in what is now a very crowded segment?
I said, “Okay, how do I grow my brand? I want part of this cake.” You know it’s very opportunistic how I’m saying it, but all these brands saw the same thing and came to the same conclusion. But when you’re a smaller brand you need to be able to have your product on a tray next to something from a bigger brand, and it has to stand out. So our interpretation, the Streamliner, has a very singular case that stands out and adds something to this industry, rather than being a copycat of something that has been done for 45 years. And already it has been a huge success.
As a whole, Swiss watch exports were down 35% in the first half of 2020 as a result of the pandemic. How has it affected you?
I was listening to an interview with [industry veteran] Jean-Claude Biver, who said, “Crises are opportunities for independents.” And he’s right. I have to be honest, we’ve had an amazing year. We launched the Streamliner Chronograph in January, just before the lockdown, and we had orders before we even launched it. We launched a collaboration with [fellow watch brand] MB&F, which got a lot of attention. We implemented an online platform within two weeks of Switzerland going into lockdown, and that’s now anywhere between 20% and 25% of our revenue each month, and we sell directly around the world. So if you’re a brand like ours and you have the right products and you can react, then you can still have a very successful year.
Swiss Alp Minute Repeater Tourbillon
Swiss Alp Minute Repeater Tourbillon, $350,000. Courtesy of H. Moser & Cie.
“Look Ma, no hands!” This version of Moser’s square dress watch (which bears an uncanny resemblance to the Apple Watch) takes the form to its logical conclusion by getting rid of the hands. Instead the time is told through the striking of internal gongs, which ring out the hour, quarter hour, and minute.
Swiss Mad Cheese Watch
Swiss Mad Watch, made from real Swiss cheese, 1,081,291 francs. Courtesy of H. Moser & Cie.
Moser’s Swiss Mad Watch was made to protest a change in Swiss government policy regarding the term “Swiss Made”. Previous rules meant that 50% of a watch had to be made in Switzerland to be called a Swiss Made watch. That changed to 60% but included research and design costs, so that theoretically a watch could be made nearly entirely outside of Switzerland, as long as its domestic R&D was high enough. To thumb their nose at the authorities, Moser made the most Swiss watch imaginable by setting real Swiss cheese in a resin for the case, adding a red dial with white markers to evoke the Swiss flag, and making a strap from domestic cowhide. The price, 1,081,291 francs, was meant to be “disconnected from reality” and alludes to the founding of Switzerland on August 1, 1291. Moser donated the watch, which was auctioned at Christie’s to raise money for the Foundation for Swiss Watchmaking Culture.
Nature Watch
Nature watch, actually grows plants, not for sale. Courtesy of H. Moser & Cie.
Made from natural mineral stone and lichen from the Swiss Alps, the Nature Watch concept was introduced by Moser along with the announcement that the watchmaker would be committing to zero carbon footprint and the use of Fair Trade materials in its manufacturing.
A watchmaker’s glossary
Perpetual calendar
Most watches need their date adjusted five times a year to account for leap years and months with fewer than 31 days. A perpetual calendar is a complex mechanism that will show the right date every day from now until March 1, 2100, without needing adjustment.
Fumé dial
From the French word for “smoke,” fumé refers to dials that gradate from a single color in the center to a dark outer ring, as shown on the H. Moser Streamliner Centre Seconds.
Tourbillon
Designed to counteract the effect of gravity on a pocket watch’s accuracy, the tourbillon mounts the watch’s critical timekeeping components in a rotating cage.
A version of this article appears in the October 2020 issue of Fortune with the headline “The provocateur.”


fortune--2020-09-21--From bailout debacle to global dominance: Inside the turnaround at UBS

In February 2012, Sergio Ermotti called his first town hall meeting as UBS Group’s chief executive. The stock was finally recovering in those early days, but staff morale wasn’t. As one veteran of the Swiss banking giant tells Fortune, “If you had worked for UBS in those days, the mailman would grumble at you.”
The woes of UBS, which turned 150 years old that year, had taken on the urgency of a national crisis. UBS became the foreign bank most exposed to America’s subprime mortgage debacle, decimating clients’ portfolios. In 2008 the Swiss government stepped in with a historic bailout package after UBS booked a mountain of losses. The last straw came in September 2011. A UBS trader in London executed a series of fictitious trades to cover his losing positions, moves that ultimately cost the bank $2.3 billion.
“I remember exactly where I was when I heard the news,” says Lukas Hässig, a longtime chronicler of the Swiss banking world based in Zurich. “I just thought, ‘No fucking way. UBS? Again?! Another scandal?’”
Read more: Investors are pulling money out of U.S. equities and betting on Europe. Is it time to follow their lead?
Oswald J. Grübel saw the writing on the wall. He resigned as UBS’s CEO days later, opening the door to Ermotti.
At that first staff meeting, the new boss addressed the tension in the room straightaway. How many of you, he asked, are proud to work for this bank? If you’re not, he instructed, raise your hands. “You would not believe how many people raised their hands,” he recalls, shaking his head in lingering disbelief.
As his first task, the Swiss-born Ermotti presented a radical restructuring plan to clean up the scandal-ridden bank. The safe and dependable wealth management business would be the new focus. The investment banking business, the biggest drag during the global financial crisis, would get the chop. It was a reinvention plan a CFO would love, but it rumpled the rank and file. Yes, it would boost the bank’s capital reserves (per regulators’ requirements) while cleaning up the dodgy loans on its books. But it wasn’t without risk. To work, the bank would need to rebuild ties with many of the same ultrawealthy clients it had burned during the mortgage crisis.
Ermotti, 60, will step down from his post at UBS on Nov. 1, replaced by ING Group’s former boss, Ralph Hamers. Ermotti spoke to Fortune in late August about his decade-long run in a lengthy Skype call from his home office in Lugano, on the Italian-Swiss border.
A former trader and investment banker who spent much of his career outside his homeland, Ermotti isn’t your typical Swiss banker. In past generations, UBS would recruit heavily from the Swiss military. For years, the bank’s culture remained regimented, secretive. “Only if you made it to the rank of general would you be considered for the highest executive ranks at UBS,” Hässig explains.
Ermotti was 50 in 2011 when he joined UBS from Italy’s UniCredit to run the bank’s EMEA divisions. Extraordinarily, he seized the top post months later. Job one for the former investment banker: Cut that same business at UBS down to size. None of that made him a credible champion for wealth management at first.
But Ermotti immediately saw its appeal.
Wealth management is a $135 billion business with huge upside. “One striking feature of wealth growth over the past two decades has been its extraordinary resilience,” BCG wrote in its annual wealth management report in June. “Despite multiple crises, wealth growth has proved to be stubbornly robust, springing back from even the most severe tests.”
The rich are getting fabulously richer at the fastest pace in modern history. Over the past 20 years, personal financial wealth has nearly tripled, rising from $80 trillion in 1999 to $226 trillion by the end of 2019. Catering to the needs of the top tier has caused a steady flow of commissions and fees to rain upon the world’s top private bankers and wealth management gurus.
Over the past 20 years, personal financial wealth has nearly tripled, rising from $80 trillion to $226 trillion.
Ermotti calls these “the tremendous secular trends, such as wealth creation and demographic change, that are driving today’s wealth management industry. This is as true in emerging markets as it is in Western economies—pandemic or no pandemic.”
So far, wealth management is one of the few parts of Big Finance that have yet to be severely disrupted by fintech upstarts. Ultrahigh-net-worth clients (those with a personal fortune of at least $30 million) are not so dazzled by no-fee investing apps. They’re demanding diversified investment options to make their money grow. They’re often looking beyond stocks and bonds, to business opportunities. Wealth managers get a range of questions: Should I invest in a manufacturer in Vietnam? What about a vineyard in Tuscany? How do I get in on that IPO-track tech startup?
UBS had been beefing up its wealth management team well before the global financial crisis. It was one of first big European banks to spot the huge opportunity in Asia’s wealth boom. Under Ermotti, it ramped up the business abroad while rebuilding ties with affluent Europeans. At the same time, it shrank the investment bank to boost growth elsewhere. “The capital allocated to the investment bank as a percentage of risk-weighted assets was around 75% when I joined UBS. It’s a third today, and a better reflection of our business model and expected business returns,” Ermotti explains. Investors watch a bank’s risk-weighted ratio like a hawk. The lower the number, the more flexibility a bank has to reinvest profits into things that actually grow the business: technology, recruiting talent, acquisitions, or loaning out money to more affluent clients. But a bank that’s required to put aside billions every quarter to backstop ever riskier assets is a bank with less ammunition to invest and grow.
In Ermotti’s first year as CEO, the bank was in cleanup mode. In 2011–12, UBS bundled up roughly 170 billion Swiss francs ($185 billion) in risk-weighted assets on its books and sold them off to the highest bidder. That came after UBS, in 2008, transferred a big tranche—$38.7 billion—of underperforming loans to the Swiss National Bank, which it re-sold under a single-purpose vehicle.
The restructuring paid off. “It took a few quarters to convince the markets that we were moving in the right direction. And when we got them convinced, we decided to accelerate the strategy,” he says.
By 2013, UBS had become the globe’s biggest wealth manager, eventually calling half the world’s billionaires, clients. Today, UBS has grown its global wealth management assets under management to $2.6 trillion, and competitors, including crosstown rival Credit Suisse, are quickly trying to catch up.
During Ermotti’s tenure, the wealth management unit has pulled in $362 billion in “net new money,” a much-watched metric among private bankers that serves as a proxy for customer acquisition. Making wealthy people wealthier has been exceedingly good strategy for UBS and its shareholders. The steady fees from wealth management helped grow its capital base by $11 billion in the past decade. Plus it helped produce a string of profitable years, and return more than $20 billion in dividends.
Ermotti says that COVID has fundamentally changed the wealth management business—especially when it comes to technology. “For example, we regularly run conferences for our clients where we cover big themes. Usually, we’d get, let’s say, 100 clients attending an in-person event. But because we’ve been forced to do it online, we’ve been getting three times, four times more people attending our conferences,” he says.
No bank is pandemic-proof, but UBS with its mix of wealth management and low bad-loan exposure has come close, observes Pauline Lambert, executive director of financial institutions ratings at Berlin-based Scope Ratings. “That’s a business mix and a business model that’s well suited to the COVID environment.”
Lambert points to a string of metrics that show UBS has one of the healthiest loan books and most diversified revenue streams in the banking sector, crucial in this era of low interest rates. According to Scope, fees and commissions—a highly stable inflow, even during an economic crisis—represents nearly 60% of UBS’s revenues, well above its European rivals. Meanwhile, its loan and credit provisions are minuscule. It’s had to put aside just 32¢, on average, for every $100 it’s loaned out, suggesting not only that the prospect of UBS clients defaulting on their loan obligations is relatively remote, but also that investors need not fear a replay of the 2008 financial crisis.
Lambert says investors again today would be wise to assess banks by the strength of their loan books, which could become huge liabilities in the age of COVID.
UBS paradoxically may be in better shape today during a pandemic than it was a decade ago.
In the second quarter, Ermotti and his team delivered where so many rivals could not. UBS reported a $1.2 billion quarterly net profit that amounted to a monster $250 million bottom-line “beat.” More important, Ermotti declared that the bank’s outlook already was looking up—a far cry from his biggest competitors. In the same quarter, JPMorgan Chase, Wells Fargo, and Citigroup had to set aside nearly a combined $28 billion to cover bad loans vs. just $272 million for UBS.
Investors, so far, are eyeing UBS stock cautiously: Though shares are flat year to date, that compares with a negative 28.4% performance of the Refinitiv Datastream world banks index.
Like all banks, UBS faces enormous challenges. Global economic growth will be unsteady for years. Interest rates will barely budge above zero in the world’s biggest economies. And the markets will continue to be volatile. These are not favorable conditions for a value stock, let alone a bank value stock.
But in clawing back from employees, clients, and the markets much of the respect the bank had once lost, UBS paradoxically may be in better shape today during a pandemic than it was a decade ago. That’s in no small part due to Ermotti but also to those employees who spoke up during that first meeting a decade ago and have continued to deliver since. “All those raised hands told me they really care about the future of the bank,” he says. “If you’re not committed to the bank, you know what? You’re probably not going to raise your hand.”
A version of this article appears in the October 2020 issue of Fortune with the headline “A Swiss surprise.”
Correction and update, September 22, 2020: This article has been updated to include the year, 2008, in which UBS transferred $38.7 billion in underperforming loans to the Swiss National Bank for re-sale.


fortune--2020-09-21--Investors are pulling money out of U.S. equities and betting on Europe. Is it time to follow their l

Investors are pulling money out of U.S. equities and betting on Europe. Is it time to follow their lead?

André Kostolany had a knack for beating the biggest crises of the 20th century, pocketing huge profits during the Great Depression and later during Europe’s post–World War II reconstruction. The Hungarian-born economist and stock picker famously observed that the relationship between the stock market and the economy is akin to a dog out for a walk with its owner.
The master, holding the leash, and usually behind the dog, is like the economy, he explained. The dog, darting ahead, is the stock market. Kostolany’s point: We should give the stock market credit for anticipating the future.
Read more: From bailout debacle to global dominance: Inside the turnaround at UBS
“We are now in a period where it makes sense for the markets to move ahead,” says Holger Schmieding, chief economist at Berenberg Bank in London, who’s still fond of Kostolany’s metaphor. Schmieding says the markets are scampering forward in the belief we’ve begun to beat back COVID-19—even if the economic data has yet to bear that out. And if we’re listening to the stock markets, they’re increasingly chanting: Europe, Europe, Europe. Even during the epic August equities rally, as the Nasdaq and S&P 500 were climbing to new heights, investors were trading out of U.S. stocks and into European stocks. According to Goldman Sachs, in the four weeks leading up to Sept. 9, investors pulled a combined $17.7 billion out of U.S. equities. Over the same period, they put $1.5 billion into non-U.K. European stocks. To wit, Germany’s blue-chip DAX has outperformed all three major U.S. indexes over the past month.
There are a number of reasons investors are risk-on European stocks. For starters, investors got spooked by sky-high U.S. tech-stock valuations. Emerging from the August rally, the Nasdaq 100 was trading 41% above its 200-day moving average. Compare that to the DAX, which was trading 1.4% over its 200-day moving average on Sept. 10.
But there’s also a case of Kostolany’s dog principle at play here. The markets believe Europe has done a relatively better job managing the pandemic than the U.S., therefore setting the eurozone recovery up as a real growth play. There’s sound data to back this up: The eurozone fell further in Q1 and Q2, and as such, like a growth play, presumably has more ground to pick up as the recovery accelerates (see chart below). U.S. recovery, meanwhile, is already baked into most U.S. equities high-fliers.
Europe fell farther, so investors see more upside as the economies there start to recover. Fortune chart by Nic Rapp
Does that mean Europe will emerge from COVID in better shape than America? Berenberg’s Schmieding thinks so. The U.S. economy will reach pre-pandemic GDP in Q2 2022, around the same time as the eurozone’s biggest economies, Germany and France. But, he adds, “the eurozone clearly is emerging in better shape.”
By Berenberg’s forecast, the U.S. will run a fiscal deficit in 2020 of 18% of GDP, compared with 11.5% for the eurozone. “Even starker,” he adds, “we expect the U.S. to maintain a very elevated fiscal deficit: 12% next year, compared to the eurozone’s 6.2%.” For 2022, he expects a eurozone deficit of around 3.5% of GDP, and closer to 11% for the U.S.
And, Schmieding warns, that “debt is not free forever.” Those heady U.S. deficits must be reined in eventually, which could prove painful for U.S. companies and investors.
All of which means that slow-growth Europe, which investors ignored for years, may be ready to run with the big dogs.
A version of this article appears in the October 2020 issue of Fortune with the headline “Europe shakes off its slow-growth reputation.”