fortune--2020-03-05--Alex Garland’s new sci-fi series ‘Devs’ aims to mix quantum mechanics with ‘elegance’

For British writer-director Alex Garland, the idea always comes first—not the characters, not the plot.
And so it is that Devs, his new series debuting Thursday on FX on Hulu, takes quantum mechanics for a head-spinning ride through a bucolic Silicon Valley campus teeming with Russian spies, a plucky software engineer and her two boyfriends, one ruthless Big Tech mogul, and a homicidal ex–CIA “security” director—all entangled in a secretive mission to tame the time-space mysteries of the universe.
Garland, who earned an Oscar nomination for his robot-on-steroids Ex Machina script and directed Natalie Portman’s aliens-on-earth sci-fi freak show Annihilation, went down the rabbit hole that led to Devs a few years ago when he burrowed into the field of quantum physics.
“For me, the ideas always come way before anything else,” says Garland, whose biologist grandfather won a Nobel Prize for medicine. He tells Fortune: “What happens is, I get obsessed with something, read as much as possible, turn it around in my head, and then at some point, usually years later, a story suddenly starts to coalesce around that idea.”
Nick Offerman plays Forest in Alex Garland’s FX on Hulu series “Devs.” The character is a departure from standard-issue Silicon Valley stereotypes. Miya Mizuno—FX
In the case of Devs, Garland explains, “The starting point was me trying to get my hand around quantum mechanics. It appears to be the best way we have of understanding how the universe works, and yet it’s completely counterintuitive. As human beings, we’re imbued with this intense certainty that we have free will. But when you really look at it [through the prism of quantum mechanics] you can easily think, ‘Oh, free will doesn’t exist at all.’”
In Devs, true believers subscribe to the metaphor of “tramlines,” which supposedly map out a deterministic sequence of events forward and backward through time. Using staggeringly powerful quantum computers, researchers on the show “replay” atomically precise reconstructions of historic events on a giant screen and calculate the future before it happens. Mastery of this time-hopping technology leads to feelings of godlike omniscience.
“As soon as I say, ‘messianic tech leader,’ I’m sure two or three names immediately pop into your head,” Garland notes. “These people clearly see themselves as gatekeepers who hold the key to something like magic—the magic of science or technology.”
Garland is just getting started. “A product launch is like a church [service], as if you’re being offered enlightenment or improvement: ‘If I buy this thing, my life will be better.” Often it just feels to me like there’s a hell of a lot of Kool-Aid getting drunk, when you have this messianic quality ascribed to tech leaders pursuing something more grand or philosophical than money and power. It’s like, ‘Maybe if I follow, I’ll get there too.’”
Garland, who wrote the screenplay for “28 Days Later” and directed movies including “Annihilation,” says, “My absolute ambition is elegance.” Miya Mizuno—FX
In Devs, the object of adoration is Forest, the deceptively low-key Big Tech entrepreneur whose Amaya corporation is located—like Apple, Google, and Facebook—within commuting distance from San Francisco. Garland cast author-comedian-woodworker Nick Offerman (Parks and Recreation) in the role.
“As soon as we met, it became obvious to me that underneath the humor, Nick has this soulful almost melancholy quality. Yes, there’s this this very apparent warmth to him, but something sadder sits behind it. That’s essentially what I was looking for in the character of Forest,” Garland says.
With his long hair, bushy beard, flannel shirts, and burly build, Offerman’s Forest departs from standard-issue Silicon Valley stereotypes. “He’s not the guy wearing a hoodie that actually costs $2,000,” Garland says. “He could have been one of those mega-wealthy hipsters, but Forest had this terrible thing happen to him, and it tilted everything. Technology, money, prestige—none of it means anything to him anymore, because Forest has been changed by tragedy.”
The top-secret research led by Forest and his brainy lieutenant, Katie (Alison Pill), attracts unwelcome attention from software engineer Lily Chan, played by Sonoya Mizuno. “Some actors want to be liked by the audience, but Sonoya’s not like that. It’s up to the audience to step towards her,” Garland says.
As with his previous projects, Devs traffics in what Garland calls “hard science fiction.” He notes, “I try to be rigorous with the science, otherwise what’s the point?”
Mizuno, a Japanese-born British actress who previously appeared in Annihilation and Ex Machina, invested her Devs hero with the quicksilver combustibility required for the role. “Sonoya has a very specific energy about her,” Garland says. “I needed her to play this alternating state between being very reserved, almost remote, and then suddenly exploding into action. She can’t be knocked off course.”
Mizuno as Lily in the new FX on Hulu series “Devs.” Garland says the actress has a very “specific energy about her.” Miya Mizuno—FX
His first screenplay, for the 2002 zombie flick 28 Days Later, directed by Danny Boyle, featured a “rage virus” bearing eerie similarities to current TV news footage of coronavirus patients being torn from their homes by men in hazmat suits. In 2016, he directed Annihilation, which depicted a bio-morphing planet in a state of ecological crisis. Ex Machina stretched current advancements in A.I. to chilling extremes.
“In all the work, my absolute ambition is elegance,” Garland says. “Specifically, I’m trying to create an elegant construction between theme, character, and story. Earlier in my writing career, the arguments behind the stories would work well at times, but then they’d fall apart, and I’d try to use Band-Aids and bits of corrugated iron and wood to hold it all together and make it look like a structure.”
In his mature work, he says, “I’ve attempted to get more disciplined so that everything cross-relates in a meaningful way to everything else, all in service to the larger argument.”
Garland regards the eight-episode Devs limited series, filmed in and around Santa Cruz, Calif., as his most ambitious undertaking to date.
“When you move from film to television, you have way more time, which is harder in some ways because the story can become unwieldy, and you have more things to deal with,” he says. “But if you get it right, TV can actually be more elegant.”
He remembers being moved by one particularly bittersweet sequence shot at a sun-dappled Northern California dam. “I knew by that point how everything was going to fit together, and I felt a kind of rush come over me: ‘I’m doing the right thing at the right moment for the right reasons.’”
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—Contagion writer, scientific adviser reflect on film’s newfound relevance amid coronavirus crisis
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fortune--2020-03-05--Elizabeth Warren drops out of 2020 presidential campaign after Super Tuesday rout

Old Navy chief Sonia Syngal named CEO of all of Gap Inc .

Elizabeth Warren, who electrified progressives with her “plan for everything” and strong message of economic populism, dropped out of the Democratic presidential race on Thursday, according to a person familiar with her plans. The exit came days after the onetime front-runner couldn’t win a single Super Tuesday state, not even her own.
The person wasn’t authorized to speak about Warren’s intentions and talked to The Associated Press on the condition of anonymity.
Warren’s exit extinguished hopes that Democrats would get another try at putting a woman up against President Donald Trump.
For much of the past year, the Massachusetts senator’s campaign had all the markers of success, robust poll numbers, impressive fundraising and a sprawling political infrastructure that featured staffers on the ground across the country. She was squeezed out, though, by Vermont Sen. Bernie Sanders, who had an immovable base of voters she needed to advance.
Warren never finished higher than third in the first four states and was routed on Super Tuesday, failing to win any of the 14 states voting and placing an embarrassing third in Massachusetts, behind former Vice President Joe Biden and Sanders.
Her exit from the race following Sen. Amy Klobuchar’s departure leaves the Democratic field with just one female candidate: Hawaii Rep. Tulsi Gabbard, who has collected only one delegate toward the nomination. It was an unexpected twist for a party that had used the votes and energy of women to retake control of the House, primarily with female candidates, just two years ago.
Warren’s campaign began with enormous promise that she could carry that momentum into the presidential race. Last summer, she drew tens of thousands of supporters to Manhattan’s Washington Square Park, a scene that was repeated in places like Washington state and Minnesota.
She had a compelling message, calling for “structural change” to the American political system to reorder the nation’s economy in the name of fairness. She had a signature populist proposal for a 2% wealth tax she wanted to impose on households worth more than $50 million that prompted chants of “Two cents! Two cents!” at rallies across the country.
Warren, 70, began her White House bid polling near the back of an impossibly crowded field, used wonky policy prowess to rocket to front-runner status by the fall, then saw her support evaporate almost as quickly.
Her candidacy appeared seriously damaged almost before it started after she released a DNA test in response to goading by Trump to prove she had Native American ancestry. Instead of quieting critics who had questioned her claims, however, the test offended many tribal leaders who rejected undergoing the genetic test as culturally insensitive, and it didn’t stop Trump and other Republicans from gleefully deriding her as “Pocahontas.”
Warren also lost her finance director over her refusal to attend large fundraisers, long considered the financial life blood of national campaigns. Still, she distinguished herself by releasing dozens of detailed proposals on all sorts of policies from cancelling college debt to protecting oceans to containing the coronavirus. Warren also was able to build an impressive campaign war chest relying on mostly small donations that poured in from across the country — erasing the deficit created by refusing to court big, traditional donors.
As her polling began improving through the summer. Warren appeared to further hit her stride as she hammered the idea that more moderate Democratic candidates, including Biden, weren’t ambitious enough to roll back Trump’s policies and were too reliant on political consultants and fickle polling. And she drew strength in the #MeToo era, especially after a wave of female candidates helped Democrats take control of the U.S. House in 2018.
But Warren couldn’t consolidate the support of the Democratic Party’s most liberal wing against the race’s other top progressive, Sanders. Both supported universal, government-sponsored health care under a “Medicare for All” program, tuition-free public college and aggressive climate change fighting measures as part of the “Green New Deal” while forgoing big fundraisers in favor of small donations fueled by the internet.
Warren’s poll numbers began to slip after a series of debates when she repeatedly refused to answer direct questions about if she’d have to raise taxes on the middle class to pay for Medicare for All. Her top advisers were slow to catch on that not providing more details looked to voters like a major oversight for a candidate who proudly had so many other policy plans.
When Warren finally moved to correct the problem, her support eroded further. She moved away from a full endorsement of Medicare for All, announcing that she’d work with Congress to transition the country to the program over three years. In the meantime, she said, many Americans could “choose” to remain with their current, private health insurance plans, which most people have through their employers. Biden and other rivals pounced, calling Warren a flip-flopper, and her standing with progressives sagged.
Sanders, meanwhile, wasted little time capitalizing on the contrast by boasting that he would ship a full Medicare for All program for congressional approval during his first week in the White House. After long avoiding direct conflict, Warren and Sanders clashed in January after she said Sanders had suggested during a private meeting in 2018 that a woman couldn’t win the White House. Sanders denied that, and Warren refused to shake his outstretched hand after a debate in Iowa.
Leaning hard into the gender issue only saw Warren’s support sink further heading into Iowa’s leadoff caucus, however. But even as her momentum was slipping away, Warren still boasted impressive campaign infrastructure in that state and well beyond. Her army of volunteers and staffers looked so formidable that even other presidential candidates were envious.
Just before Iowa, her campaign released a memo detailing its 1,000-plus staffers nationwide and pledging a long-haul strategy that would lead to victories in the primary and the general election. Bracing for a poor finish in New Hampshire, her campaign issued another memo again urging supporters to stay focus on the long game — but also expressly spelling out the weaknesses of Sanders, Biden and Pete Buttigieg, the former mayor of South Bend, Indiana, in ways the senator herself rarely did.
Warren got a foil for all of her opposition to powerful billionaires when former New York Mayor Mike Bloomberg entered the race. During a debate in Las Vegas just before Nevada’s caucus, Warren hammered Bloomberg and the mayor’s lackluster response touched off events that ended with him leaving the race on Wednesday.
For Warren, that led to a sharp rise in fundraising, but didn’t translate to electoral success. She tried to stress her ability to unite the fractured Democratic party, but that message fell flat.
By South Carolina, an outside political group began pouring more than $11 million into TV advertising on Warren’s behalf, forcing her to say that, although she rejected super PACs, she’d accept their help as long as other candidates did. Her campaign shifted strategy again, saying it was betting on a contested convention.
Still the longer Warren stayed in the race, the more questions she faced about why she was doing so with little hope of winning — and she started to sound like a candidate who was slowly coming to terms with that.
“I’m not somebody who has been looking at myself in the mirror since I was 12 years old saying, ‘You should run for president,’” Warren said aboard her campaign bus on the eve of the New Hampshire primary, previewing a ceasing of campaigning that wasn’t yet official. “I started running for office later than anyone who is in this, so it was never about the office — it was about what we could do to repair our economy, what we could do to mend a democracy that’s being pulled apart. That’s what I want to see happen, and I just want to see it happen.”
She vowed to fight on saying, “I cannot say, for all those little girls, this got hard and I quit. My job is to persist.”
But even that seemed impossible after a Super Tuesday drubbing that included her home state.
More must-read stories from Fortune:
—Are we undergoing an industrial revolution or a phase change?
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—Angela Merkel is on her way out. Meet her potential replacements
—How the 2020 election could influence your personal finances
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fortune--2020-03-05--Toyota recalls another 1.1 million vehicles, Lexus models included

Toyota has drastically expanded a recall of a wide variety of problems, due to issues with the fuel pumps.
The automaker on Wednesday upped the number of recalled Toyota and Lexus models from 700,000 to 1.8 million. Owners of those vehicles will be notified by early May.
“The subject vehicles are equipped with a fuel pump which may stop operating,” the company said in a post on its Website. “If this were to occur, warning lights and messages may be displayed on the instrument panel, and the engine may run rough. This can result in a vehicle stall, and the vehicle may be unable to be restarted. If a vehicle stall occurs while driving at higher speeds, this could increase the risk of a crash.”
Wednesday’s additional recall affected the following makes and models:
2013-2015 Model Year Lexus LS 460;
2013-2014 Model Year Lexus GS 350;
2014 Model Year Toyota FJ Cruiser, Lexus IS-F;
2014-2015 Model Year Toyota 4Runner, Land Cruiser; Lexus GX 460, IS 350, LX 570;
2015 Model Year Lexus NX 200t, RC 350;
2017 Model Year Lexus IS 200t, RC 200t;
2017-2019 Model Year Toyota Sienna; Lexus RX 350;
2018 Model Year Lexus GS 300;
2018-2019 Model Year Toyota Avalon, Camry, Corolla, Highlander, Sequoia, Tacoma, Tundra; Lexus ES 350, GS 350, IS 300, IS 350, LC 500, LC 500h, LS 500, LS 500h, RC 300, RC 350, RX 350L.
Owners can call Toyota at 1-800-331-4331 or Lexus at 1-800-255-3987 for additional information. They can also go online to nhtsa.gov/recalls and enter their Vehicle Identification Number (VIN) or license plate information and find out if their vehicle was recalled.
The Toyota/Lexus recall is one of the larger recalls for the auto industry in some time. Last September, GM recalled 107,000 Chevy SUVs after learning a suspension weld could break, causing steering problems. And Ford, in particular, has had a number of major recalls in the past 15 months. In January 2019, it recalled 953,000 vehicles as part of the ongoing Takata airbag recall. The following month, it issued three rapid fire recalls on over 1.8 million cars and pickups, including 1.5 million F-150s. Then, in May 2019, a quarter-million Ford Fusions were recalled over a flaw that could lead to the cars rolling away.
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—Contigo children’s water bottles recalled for possible choking hazard
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—How “for women, by women” Lola views its investor’s Trump ties
—WATCH: Inside the algorithm powering Stitch Fix
Follow Fortune on Flipboard to stay up-to-date on the latest news and analysis.


fortune--2020-03-05--CRISPR has a milestone moment in treating blindness

This is the web version of Brainstorm Health Daily, Fortune’s daily newsletter on the top health care news. To get it delivered daily to your in-box, sign up here.
Good morning, readers.
Let’s talk about something that’s not coronavirus for just one second.
The world of CRISPR gene editing had a hallmark moment this week. For the first time ever, scientists have used the technology—which allows them to slice and dice portions of genetic code—inside of a person’s actual body.
This CRISPR therapy was developed by the gene-editing focused biotech Editas Medicine and its partner Allergan, the pharmaceutical giant best known for the cosmetic treatment Botox, and used to treat a patient at the Casey Eye Institute at Oregon Health & Science University with a rare genetic disease which causes blindness.
Within a month, researchers expect to see whether gene editing can literally restore sight to the blind.
What makes this such a milestone moment is the fact that, till now, CRISPR technologies haven’t been performed inside of an actual cell within a human body rather than a petri dish.
We’ll see what the ultimate results are. But the genomic revolution appears to plow forward unabated.
Oh, and by the way… You may have noticed some changes on Fortune‘s website. We’ve shifted to a tiered paywall strategy in order to fuel the smartest, most comprehensive business analysis we can. And you, dear readers, can capitalize on an initial 50% discount.
Less than $25 will get you full digital access to our stories (as well as access to our app) for one year under the discount; less than $50 will get you our gorgeously redesigned print magazine on top of digital access. Head on over here to learn more about our new structure and claim your discounted rate.
To be clear, our newsletters (Brainstorm Health Daily included) will remain free to sign up for and read via email, but readers will need to pay to subscribe in order to access the site version of newsletter stories.
If you have any questions or problems, hit up feedback@fortune.com for general questions and support@fortune.com for specific questions about your subscriptions. Or just shoot me a note.
Read on for the day’s news.
Sy Mukherjee
sayak.mukherjee@fortune.com
@the_sy_guy
DIGITAL HEALTH
Bristol-Myers Squibb and Voluntis team up on a digital cancer project. U.S. drug giant Bristol-Myers Squibb announced that it's teaming up with Voluntis, a digital health firm, in order to create apps that would help cancer patients keep track of their symptoms and monitor their disease. The ultimate goal, as with many digital health apps, wouldn't be to just passively track biometrics—but to offer personalized and real time advice to patients on how to manage their cancer.
Amazon may expand its virtual care clinics to Virginia employees. Washington Biz Journal reports that Amazon is eyeing an expansion of its virtual doctor visit service, Amazon Care, to its second headquarters in Virginia. That would require some regulatory wrangling in the commonwealth, but the service (which allows for employees to use a mobile app to chat and interact with their doctors) is already available at Amazon's Seattle HQ. (Washington Biz Journal)
INDICATIONS
Quest Diagnostics gets into the coronavirus testing space. Private companies are now beginning to join the likes of the Centers for Disease Control (CDC) approved labs in providing coronavirus testing. Quest Diagnostics, a juggernaut in the diagnostics space, said on Thursday that it would begin receiving samples for potential COVID-19 cases as soon as Monday. "Quest's national scale, diagnostic expertise and innovation, and relationships with half the country's physicians and health systems is a vital complement to the efforts of the CDC and other public health labs to contend with a growing number of suspected COVID-19 cases in the United States," said Quest CEO Steve Rusckowski in a statement.
THE BIG PICTURE
California declares state of emergency following first coronavirus death. California has declared a state of emergency after the first coronavirus-related death was reported in Los Angeles on Wednesday. The number of confirmed cases in the state now stands at 60, and there have now been at least 11 confirmed coronavirus linked deaths in the U.S. In case you haven't had a chance, check out my report on the complicated process of coronavirus testing. (Los Angeles Times)
REQUIRED READING
Coronavirus officially claims its first corporate casualties, by David Meyer
Researchers say they found a hole in PayPal's security, by David Z. Morris
Why we launched a paywall, by Clifton Leaf
Sign up for other Fortune newsletters.


fortune--2020-03-05--Donald Trump merch store opens in contested Philadelphia suburbs

A shop selling President Donald Trump-themed merchandise in a suburban Philadelphia strip mall has emerged as a magnet for the president’s backers and a reflection of Pennsylvania’s status as a political battleground this year.
The Trump Store in Bensalem specializes in gear fit for the president’s biggest fans—T-shirts promoting a border wall, hats, beanies, mugs with his cartoon face, even an inflatable innertube with Trump’s head flashing two thumbs up. On a recent weekday afternoon, it did steady business over about three hours, with two to three customers continually streaming in and out.
The town is on a political fault line, tilting slightly Democratic in recent presidential elections, though Trump improved the GOP’s fortunes in 2016 over Republicans’ 2012 performance. Experts are watching the region as a key to the presidential race. In fact, Trump is slated to hold a town hall in Scranton on Thursday evening, about two hours from Bensalem.
Mike Domanico, the shop’s owner, is a former general contractor who got into the T-shirt business in 2017, when he noticed that the 10 or so Trump shirts he offered for sale at car shows sold out fast. Domanico, 60, himself a Trump backer who said he’s been following him since the 1980s, opened a kiosk in a nearby mall before expanding to the store early this year.
The shop does about 350 sales a day, with the average customer spending about $60, according to Domanico. The top sellers are two T-shirts, he said: one that has the president’s signature in gold above a brick wall and says, “Border Wall Construction Co.” The phrases “Build the Wall” and “Deport Them All” are printed underneath.
The other alludes to former President Barack Obama, saying, “Trump 45 Because the 44 didn’t work for 8 years.” The shirt has a golden gun on it, an apparent pun of .45-caliber and .44-caliber handguns.
“People that love Trump, they really love him,” Domanico said. “They want to wear the hats, the shirts, bumper stickers and mugs. They want to show their support. I think that’s what it’s all about.”
The president’s signature red caps, though, aren’t in the lineup. Domanico said he wouldn’t stock Make America Great Again or Keep America Great merchandise because of a trademark the Trump campaign holds on those slogans.
Political paraphernalia and candidate-specific merchandise is nothing new. The current crop of Democratic candidates offer merchandise for sale on their websites. In 2008, a poster depicting Barack Obama and the word “HOPE” came to symbolize his presidential campaign and was highly circulated.
But Chris Borick, a political science professor and the director of Muhlenberg College’s Institute of Public Opinion, notes something different about the demand for Trump gear.
“It’s the president’s standard approach to say stuff that’s over the top. He revels in it, and I believe a number of his supporters feel the same. They’re juiced to be able to actually find ways to do that. You see the flags on houses and big signs, hand-painted signs, all part of that showy image,” he said. “There’s not a showman better than Donald Trump and folks like to be part of the game.”
Jim Smith, 56, is a tractor-trailer driver who recently moved to Hazelton, Pennsylvania, though he was a lifelong Bensalem resident before that. He was making his second visit to the shop recently to stock up on T-shirts. For him, they are a way to grab people’s attention.
Smith said he plans to give them out to people who “are sitting on the fence” politically. “It’s a conversation starter,” he said.
Dave Russell, 75, and Ron Soto, 82, both of Levittown, Pennsylvania, stopped by the store to buy a couple of shirts. Russell said he was pleasantly surprised to find there was enough demand to support a shop.
Russell, an Air Force veteran who retired from construction, said he came out to buy a “Veterans for Trump” shirt to show his support. He said Trump was the only president he remembered keeping promises.
“The politicians would tell you they’re going to do this, they’re going to do this, they’re going to do this. And then they get into office and the first thing they would do is tell you why they couldn’t keep the promises they made,” he said.
The shop sits in a strip mall, about 20 miles from downtown Philadelphia, along a busy road between a Guatemalan bakery and a travel agency. A worker at the bakery declined to discuss the shop, but Anu Mathew, who works at the agency called Riya the travel expert, said the shop seems to have increased foot traffic and has been good for his business as well.
Bensalem, in Bucks County, voted for the Democrat in the last two presidential elections despite Republicans’ cutting into Democrats’ margins. Trump won Pennsylvania over Hillary Clinton by less than 1 percentage point in 2016. The county’s voting record in 2012 and 2016 reflects Bensalem’s; but despite swinging for the Democrat in the presidential, Bucks voters went with the GOP for the U.S. House in 2012 and 2016.
Both Democrats and Republicans view Bucks as heavily in play in 2020, according to Borick.
“If you’re Donald Trump and you can perform well in a place like Bucks County, you’re probably going to win Pennsylvania,” he said.
More must-read stories from Fortune:
—Are we undergoing an industrial revolution or a phase change?
—Twitter’s testing new ways to fight misinformation. Is open-source the answer?
—Meet Trump’s Giuliani-approved power broker—and Melania’s new senior adviser
—Angela Merkel is on her way out. Meet her potential replacements
—How the 2020 election could influence your personal finances
Get up to speed on your morning commute with Fortune’s CEO Daily newsletter.


fortune--2020-03-05--Researchers say they found a hole in PayPal’s security. PayPal says it’s no big deal

More than two weeks after a third party publicized security vulnerabilities in PayPal’s service, the online payments giant hasn’t fixed them while denying there’s a problem.
Cybersecurity publication CyberNews reported in February that it had discovered six vulnerabilities in PayPal’s systems. One of the most serious would allow hackers with stolen login information to bypass PayPal’s usual controls and take over a victim’s account.
PayPal says the bypass isn’t a threat because of existing safeguards it has in place.
CyberNews says the main vulnerability is in a PayPal security check called “Authflow,” which detects whether a login attempt is made from a new device, location, or IP address, and can block the login if it’s suspicious. Bypassing this system, CyberNews says, could let attackers who have obtained customer login information to take over accounts from a phone or PC halfway around the world.
Because PayPal has not patched the vulnerability, CyberNews has not fully disclosed how it works. Zak Doffman, a cybersecurity contributor for Forbes, recently wrote that CyberNews had demonstrated the exploit to him, and that “it did appear at face value to bypass the [device and IP] check.”
HackerOne, a service that handles security vulnerability reports for PayPal, declined to comment to Fortune. But CyberNews shared communications in which HackerOne downplayed the significance of the CyberNews report, saying “there does not appear to be any security implications as a direct result of this behavior” because the exploit requires the attacker to already have the victim’s account password. PayPal does not dispute the validity of CyberNews’ core findings, but it says that it does not consider issues involving stolen credentials to be bugs.
However, PayPal account information is frequently offered for sale on darkweb marketplaces, often for pennies. Login information can be obtained using techniques including “credential stuffing,” which can detect whether a password stolen from one site has been re-used for a PayPal account.
However, PayPal says in statements to Fortune that, even if a hacker exploited the flaw discovered by CyberNews, “there are multiple additional compensating controls for users whose accounts are compromised, including fraud prevention and dispute processes,” and that “these claims present limited real-world impact.” The statement suggests PayPal would reverse fraudulent charges or otherwise compensate users whose accounts are compromised using the method.
PayPal also recommended that users implement two-factor authentication “whenever possible” to prevent account compromise, though it is not required.
Additionally, CyberNews researchers says PayPal’s bug-reporting procedures conflict with widely-accepted standards, and have stymied efforts to report and fix the vulnerabilities. The publication says it tried to report its findings directly to PayPal in November, but was unable to get much of a response.
Instead of acting on the tip, PayPal shortly thereafter referred the researchers to a bug bounty program managed by HackerOne that provides compensation for reports of security vulnerabilities. CyberNews reported its findings through HackerOne in January.
However, CyberNews lead researcher Bernard Meyer says it had contacted PayPal directly because submitting the tip through a bounty program wasn’t CyberNews’ first choice: “The point wasn’t for us to get money, it was for PayPal to patch something that effects thousands or millions of people.”
More must-read stories from Fortune:
—How 5G promises to revolutionize farming
—Did the ‘techlash’ kill Alphabet’s city of the future?
—College backlash against facial recognition technology grows
—In A.I., what would Jesus do?
—Coronavirus is giving China cover to expand its surveillance. What happens next?
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fortune--2020-03-05--Can Kleiner Perkins regain its old magic with its new $700 million fund?

For its 19th fund, Kleiner Perkins has raised $700 million to invest in early-stage companies across sectors including enterprise, consumer, fintech, and healthcare.
The team consists of longtime partners Ted Schlein and Wen Hsieh and relative newcomers Mamoon Hamid and Ilya Fushman. In the last year, they invested in 30 seed and Series A round companies, including Rippling, Cameo, and Propel.
When the storied firm raised its last fund in February 2019, the slogan was “Back to the Future,” indicating a return to Kleiner’s roots. But there wasn’t much of the old Kleiner DNA left at the firm to help that goal.
Kleiner wanted to “return to its roots” because early-stage is where the big money is made. The 47-year-old firm used to be a hit machine, making investments in the early rounds of knockout companies like Google, Amazon, and Electronic Arts, that went on to become industry titans. But Kleiner’s glory days ended years ago.
The firm missed the early window on some of the biggest deals that defined the last decade — Facebook, Twitter, and Snapchat. Returns across its early-stage practice had suffered as a result. I detailed Kleiner’s rise, fall, and fracture in my feature story, “How The Kleiner Perkins Empire Fell.”
Now, Kleiner’s slogan for its latest fund is to deliver “Returns of the Jedi.” But no catchy phrase nor Luke Skywalker can regain that old Kleiner magic. Only stellar returns can do that.
REALLY?: Alright, can someone explain to me why Quibi, the short-form video streaming company, needed to raise even more money? The startup already had a war chest of capital, but it just raised another $750 million.
In other words, investors have given a company with no live product a whopping $1.75 billion in total funding so far. Its offering of more than 50 original shows is scheduled to launch on April 6. Like I said in my Quibi hot take in January, for all this money and all this talk, I really hope the future Quibi’s envisioning becomes reality.
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Polina Marinova
Twitter: @polina_marinova
Email: polina.marinova@fortune.com
VENTURE DEALS
- Hailo, a Tel Aviv-based AI chipmaker, raised $60 million in Series B funding. Investors include ABB Technology Ventures, NEC Corporation, and Latitude Ventures.
- Ordr, a Santa Clara, Calif.-based security platform for enterprise IoT and unmanaged devices, raised $50 million in Series B funding. Investors include Mayo Clinic and Kaiser Permanente Ventures.
- Suki, a Redwood City, Calif.-based voice-enabled digital clinical assistant, raised $20 million in Series B funding. Flare Capital Partners led the round, and was joined by investors including Breyer Capital, Epsilon Health, First Round Capital and Venrock.
- Dexai Robotics, a Boston-based AI robotics company focused on commercial kitchen automation, raised $5.5 million in seed funding. Hyperplane Venture Capital led the round.
- Reserved.AI, a Seattle-based developer of a platform that helps customers automate and manage their cloud expenses, raised $3.3 million in funding. Investors include Amplify Partners and Pioneer Square Labs.
- Zabo, a Dallas, Texas-based a cryptocurrency data aggregation platform, raised $2.5 million in funding. Moonshots Capital led the round, and was joined by investors including Blockchange Ventures, Castle Island Ventures, Digital Currency Group, CoinShares, Tezos Foundation, and Capital Factory.
HEALTH & LIFE SCIENCES
- Kinnos, a Brooklyn, N.Y.-based infection prevention company, raised $6 million in funding. Prolog Ventures led the round, and was joined by investors including Allston Venture Fund, Partnership Fund for New York City, Golden Seeds, and MEDA Angels.
PRIVATE EQUITY DEALS
- Duraco Specialty Tapes, a portfolio company of OpenGate Capital, acquired Infinity Tapes, a manufacturer of customized adhesive products, from a private seller. Financial terms weren't disclosed.
- L Catterton made a minority investment in FYidoctors, a Canada-based optometrist-controlled eye care company. Financial terms weren't disclosed.
OTHER DEALS
- Ant Financial acquired a minority stake in Klarna, a Sweden-based payments provider. The deal values Klarna at $5.5 billion.
- Equinix, Inc. (Nasdaq: EQIX) acquired Packet, a New York-based bare metal automation platform, in a deal valued at $335 million.
- Hyperice acquired NormaTec, a Newton Center, Mass.-based medical device company. Financial terms weren't disclosed.
IPOs
- SBI Cards and Payment Services, the Indian credit card arm of the State Bank of India, may raise up to $1.4 billion in an IPO in the country. Carlyle backs the firm. Read more.
FIRMS + FUNDS
- Quona Capital, a Washington D.C.-based venture firm, raised $203 million for its Accion Quona Inclusion Fund.
PEOPLE
- Inspired Capital named Chris Brown as a principal and Kamran Ali as a senior associate.
- Joe Silver joined Sun Capital Partners, Inc. as a managing director.


fortune--2020-03-05--Glitches in new voting system blight California primary

A series of changes in California meant to boost voter turnout and smooth its new Super Tuesday primary election led to a surge in last-minute voters, computer problems and short-staffing that appeared to catch elections officials by surprise, triggering scathing criticism Wednesday.
Long lines, sluggish computer connections and general confusion plagued polling places statewide — raising serious questions about the ability of the most populous state to handle November’s general election, when millions more voters are expected. Critics called for an overhaul before then.
Los Angeles County rolled out a new $300 million voting system, including new scanning devices and voting machines that the state certified despite known security and technical problems. Many of the voting devices didn’t work and there were not enough check-in machines or poll workers, leading to wait times of two hours or more.
Bernie Sanders’ presidential campaign filed a legal complaint in the county that has more than a quarter of California’s 20 million voters, a county supervisor demanded an investigation and a Democratic Party leader gave a stinging rebuke of the “abysmal” infrastructure.
“It was an overwhelming experience during a time where voter turnout should have been high,” county party chairman Mark J. Gonzalez said in a statement. “It’s Turn OUT, not Turn AWAY.”
Secretary of State Alex Padilla, a Democrat who oversees California’s elections, did not respond to multiple requests for detailed explanations Tuesday and Wednesday.
The state voter database was not available part of Tuesday, so poll workers in 15 counties could not print out ballots, register voters or check whether voters had already cast ballots. Some counties said the system was slow all day. A spokesman for Padilla said there was no evidence of malicious activity but did not explain what caused the failure.
“We tried a lot of new things, and we’re going to need to make adjustments,” said Kim Alexander, president of the nonpartisan California Voter Foundation. “It was not good timing to roll out all this new technology in a major election.”
A crush of voters in the 15 counties that replaced traditional neighborhood polling places with fewer multipurpose vote centers delayed the reporting of results in some counties. The centers, where people could register and vote, were designed to make voting more convenient.
In Butte County in Northern California, registrar Candace Grubbs said she delayed reporting initial results Tuesday night because so many voters were still in line and she didn’t want to influence their vote.
Connections to the state database were sluggish all day, contributing to the long lines, she said.
“Voting centers were designed by academic liberals, but are not practical,” said Bob Mulholland, a Democratic National Committee member in Chico. “I’m very disappointed that California, technology capital of the world, has lines four or five hours long and software that’s breaking down all over the place.”
Mulholland said he warned early on that voting centers did not make sense in a densely populated state like California, where many voters live in cities. He said he received calls Wednesday that the last Butte County votes were not cast until 12:20 a.m.
“California brags about early voting — actually it ended up causing late voting,” he said.
State lawmakers will likely launch an informal inquiry after ballot counting concludes, said Democratic Sen. Tom Umberg, chairman of the Elections and Constitutional Amendments Committee.
“Our job is to do better. That’s our job. So if people decided not to vote because the lines are too long? That means we need to fix it,” he said. “We don’t want to have people waiting in long lines in November.”
A bottleneck of angry voters led to wait times of up to four hours in Los Angeles County, according to Sanders’ lawsuit filed late Tuesday. He went on to win California, which has the nation’s largest haul of Democratic delegates.
Los Angeles County Supervisor Janice Hahn called the problems unacceptable and called for an investigation to be completed within 30 to 60 days.
“Certainly you expect some bugs in the system, but I was uncomfortable with what I was hearing yesterday,” she said Wednesday.
County Registrar-Recorder Dean Logan apologized late Tuesday. He called it “a challenging day” and acknowledged that the system in which 979 vote centers replaced more than 4,500 polling places “needs quite a bit of refinement.” He hasn’t responded to repeated requests for more details.
The county’s new touch-screen voting devices, meant to boost accessibility, operated slowly at times because so many voters were trying to use them at once, said Mike Sanchez, a spokesman for Logan. More devices were added at some polling places and there were no indications of security breaches, he said.
“I think we perhaps overestimated how many of those voters would take advantage of the early voting period,” Logan said.
Election integrity activists had warned that the county’s system was bound to experience serious failures and should never have been certified by the state. Technical and security defects had been identified in testing, including the ability for attackers to bypass seals, locks and sensors and boot from a USB port, which could allow election data to be modified.
More must-read stories from Fortune:
—Are we undergoing an industrial revolution or a phase change?
—Twitter’s testing new ways to fight misinformation. Is open-source the answer?
—Meet Trump’s Giuliani-approved power broker—and Melania’s new senior adviser
—Angela Merkel is on her way out. Meet her potential replacements
—How the 2020 election could influence your personal finances
Get up to speed on your morning commute with Fortune’s CEO Daily newsletter.


fortune--2020-03-05--Fears of the ‘worst case’ for coronavirus are growing in Silicon Valley

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.
I met Wednesday in San Francisco with Ian Bremmer, the globe-trotting political scientist/consultant/budding media entrepreneur. We sat on a sunny bench overlooking the bay as he shared his view of the risks the world faces. He’d spoken at a jam-packed event in Oakland the night before and had been visiting his Silicon Valley clients, who are concerned about worst-case scenarios from the coronavirus crisis.
I wanted to know his worst-case outlook, but I asked him to start with the best. An optimistic way forward would be a quick re-starting of the Chinese economy, with a v-shaped recovery; low U.S.-China tensions; and a seasonal dwindling of the virus in the U.S., making it a non-issue come election season. The worst case: A relapse in China, leading to political instability there; Trump blaming China for the world’s problems, escalating trade tensions; and a significant U.S. outbreak.
“There’s a vast amount of space between those two scenarios,” said Bremmer, using an expression rather than ‘vast amount’ that he wouldn’t be able to say on PBS.
Bremmer continues to travel. He says his firm follows the daily CDC travel guidelines, so they’re not seeing clients in Japan. He was unconcerned about shaking hands. (“I wash them a lot.”) He thinks most people in the U.S. aren’t anywhere near panicking.
Bremmer also cops to having been surprised by Joe Biden’s amazing rebound in the presidential election. He thinks a combination of a weakening U.S. economy, Trump’s poor response to the coronavirus, and the greater likelihood of an uncontested Democratic convention now make the general election a “coin flip.” A couple weeks ago he rated Trump’s re-election prospects as high as 65%.
I asked Bremmer his biggest area of concern that isn’t on most people’s radars. Without hesitating—I’ve never seen him hesitate—he answered: “the de-legitimization of the U.S. election.” He thinks if Trump loses narrowly, he’ll challenge the results, including using “extra-legal” means. Bremmer believes the U.S. can handle whatever Trump throws at it—and he also thinks Democrats will litigate a close election. But he thinks it will be ugly. As a certain poorly behaved politician might say: Sad!
***
Uber CEO Dara Khosrowshahi said at a Morgan Stanley conference in San Francisco on Wednesday that he’s become more comfortable, not less, with his target of Uber sort-of becoming profitable by the fourth quarter. He also said Uber remains committed to its costly self-driving car unit, suggesting Uber, unlike competitors, has the simpler task of providing rides on limited routes it knows will be the most profitable. “This is not a science experiment for us,” he said, without naming which competitors he thinks are tinkering less purposefully. “This is a commercialization strategy.”
***
We have gone a step beyond asking you to register to read most of the stories on our web site. Now we’re asking you to pay a subscription, just like the old days pre-Internet (though this newsletter remains free). There is a 50% discount for our loyal readers if you use this link to sign up.
Adam Lashinsky
@adamlashinsky
adam.lashinsky@fortune.com
This edition of Data Sheet was curated by Aaron Pressman.
NEWSWORTHY
Fresh as the morning dew. Have a snarky comment you'd rather not live forever in Twitter's timeline? The company is letting some users try a new kind of post: Fleets, as in fleeting thoughts. Fleets automatically disappear after 24 hours. Kinda like Snapchat. Or Facebook Stories. Or Instagram Stories. Critics of the move got the hashtag #RIPTwitter trending. A perhaps more useful feature addition comes from Google. The mobile Google Assistant can now read web pages aloud and even translate them into other languages. I wonder if "Hey Google, read this newsletter" will work?
The sky was the color of television tuned to a dead channel. Finally, a company is taking a stand and saying, no, we will not produce our own TV shows. Cut all the cords you want, but we won't do it. After a report in Hollywood said set-top box maker and streaming service Roku would make its own shows, the company shot back: “We aren’t creating any original shows and don’t have any plans to do so at this time." Meanwhile, among those who definitely are making their own shows, it's getting more expensive. Short-form video service Quibi raised $750 million of backing, adding to its initial $1 billion from 2018.
The minute you sneeze. In your daily 21st century-plague update, workers at Amazon and Facebook in Seattle tested positive for COVID-19. The companies, along with Microsoft, told non-essential employees in the city to work from home for the next few weeks. The South by Southwest conference is still on, but Apple and Netflix pulled out. Also Fortune has started a newsletter focused just on the coronavirus outbreak's impact on business. Sign up now for daily updates in your inbox.
From a safe distance. On Wall Street, a tech company that was supposed to benefit from the virus outbreak disappointed investors. Zoom Video Communications said its revenue jumped 78% to $188 million. That was better than analysts forecast on average, but didn't meet the wildest dreams of some shareholders. Zoom shares, which had zoomed up 72% in 2020, lost 6% in pre-market trading on Thursday.
FOOD FOR THOUGHT
The .ORG section of the Internet started off as the online neighborhood for non-profits. It's evolved since then, but still retains that aura, which may be why so many people are concerned about a $1 billion deal to sell the .ORG address registry, known as the Public Interest Registry, to a private equity firm called Ethos Capital. Cara Gagliano, an attorney at the non-profit Electronic Frontier Foundation, has an essay this week on why the sale is such a terrible idea. She's particularly concerned with Ethos CEO Erik Brooks saying the deal would allow for risky new products.
This is not the selling point Brooks seems to think it is. .ORG’s value to its registrants is being a reliable and recognized domain for hosting their websites and email systems—which it already offers. The .ORG registry should decidedly not be in the business of taking risks with non-profits’ essential infrastructure by adding bells and whistles that no one is asking for. If those risks don’t pan out, it may well be the non-commercial .ORG community that suffers as Ethos makes up for the loss by skimping on technical upkeep, raising prices, engaging in censorship-for-profit—or bankrupting PIR and walking away with the gains.
IN CASE YOU MISSED IT
Exclusive: For $3, a ‘robot lawyer’ will sue data brokers that don’t delete your personal and location info By Jeff John Roberts
Down $52,000 in a day: Furious Robinhood customers want payback following the app’s two day outage By Lucinda Shen
Want to solve America’s problems? Start with broadband By Adrianne Benton Furniss
After folding phone screens, get ready for unrolling displays By Aaron Pressman
Why it’s so hard to find the next Warby Parker By Nicole Gull McElroy
Tesla skimps on warranty costs to inflate its profits, critics allege By David Z. Morris
Meet the A.I. that helped Facebook remove billions of fake accounts By Jeremy Kahn
BEFORE YOU GO
The latest round of emoji additions includes a key bit for amateur astronomers and people who like rings: the planet Saturn. But every phone OS maker and app developer got to create their own version of the Saturn emoji, and some did better than others at truly capturing the gas giant's essence. Outer space scientist James O'Donoghue compared the emojis and declared a winner. No spoilers, but contestants got dinged for showing Saturn's ring tilting at more or less than its actual 26.7 degree tilt.
Aaron Pressman
@ampressman
aaron.pressman@fortune.com


fortune--2020-03-05--After folding phone screens, get ready for unrolling displays

After seeing rivals introduce mobile phones that fold top-to-bottom and side-to-side, Chinese manufacturer TCL Communication offered a new twist on the foldable on Thursday: a phone with a roll up display.
The concept device, which TCL had originally planned to unveil at the canceled Mobile World Congress last month, at first looks like an ordinary smartphone with a 6.75-inch display. But the concept is that pressing a button on the side activates a tiny motor that extends the phone’s body on one side and unrolls more screen, almost doubling the total display area. When not in use, the extra screen area is hidden in the body of the phone, where it can’t be damaged.
TCL didn’t say when the phone would go on sale or how much it would cost.
Phone makers have been scrambling over the past year to come up with new designs that pack more display area into the same-size device as a typical phone or create smaller devices that unfold into full-size devices. For example, Samsung debuted its $1,400 Galaxy Z Flip last month with a 6.7-inch screen that folds in half to fit more easily in a purse or pocket. But many of the new devices have suffered from flaws and quality issues, while costing a premium over even most high-end smartphones.
In January, TCL showed off a folding phone prototype that folds in half like the Flip or Motorola’s revived Razr phone.
But the company’s newest model offers a wholly original design not seen on rival devices. “There is still plenty of room for new ideas when it comes to flexible and foldable display technologies, and it’s critical for us to think outside the box and lead with innovation,” Shane Lee, general manager at TCL, said in a statement.
The prototype is only 0.35 inches, or 9 millimeters thick, just barely thicker than an iPhone 11 Pro or Galaxy S20 phone, TCL says. The screen has no visible creases or wrinkles, unlike many foldable models, TCL said.
The company also showed off a folding tablet design with three screens. Completely unfolded, the device looks like a tablet with a 10-inch screen. With two of the screens folded, it appears more like a rather thick phone with a 6.7-inch display. Again, TCL didn’t say when the folding tablet would be available or how much it would cost.
More must-read stories from Fortune:
—How 5G promises to revolutionize farming
—Did the ‘techlash’ kill Alphabet’s city of the future?
—College backlash against facial recognition technology grows
—In A.I., what would Jesus do?
—Coronavirus is giving China cover to expand its surveillance. What happens next?
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-03-05--AT&T nabs Google Cloud for 5G services partnership

AT&T and Google are partnering to help their corporate customers use the carrier’s new superfast 5G network to speed up cloud applications.
The new wireless technology offers much faster download speeds than current 4G LTE networks, as well as quicker response times for data requests. Under the new collaboration, customers of Google’s cloud services will be able to access AT&T’s 5G network and run applications on computer servers positioned across the country. The distributed servers combined with the 5G wireless network will be a boost for applications that need fast response times, like new cloud gaming services.
AT&T announced a similar deal with Microsoft’s Azure unit in November and rival Verizon has a partnership with Amazon’s cloud business. The goal is to generate new revenue from corporate customers that use 5G networks, which cost tens of billions of dollars to build. Consumers with 5G mobile phones aren’t paying much more than they did with today’s 4G, so the carriers are looking for new revenue streams, like 5G cloud services.
The AT&T-Google collaboration will be aimed at customers wanting to access apps that incorporate features like artificial intelligence, machine learning, and big data analysis via processors in Google’s cloud servers. A wide array of businesses will be targeted, as the services could “address a diversity of use cases, driving real business value in industries like retail, manufacturing, gaming and more,” Google Cloud CEO Thomas Kurian said in a statement.
For example, a company may deploy video cameras to monitor foot traffic in its stores. Footage from the cameras could be uploaded to Google servers for automated analysis via AT&T’s 5G network.
Google and AT&T are also planning to deploy servers in scattered, smaller installations across the network, supplementing Google’s massive regional data centers, to reduce response times. The service ultimately could be used to power consumer devices, as well, like virtual and augmented reality glasses. Using the fast 5G connection to a local server could reduce the need to put power-hungry and weighty processors in the glasses themselves.
The companies are not disclosing their business arrangements, such as how much the 5G cloud services will cost or how the partners will split the revenues.
AT&T’s partnership with Microsoft is farther along, with AT&T describing it as “an extensive, multi-year alliance,” compared to the new services from the Google deal which are “currently a proof of concept.”
More must-read stories from Fortune:
—How 5G promises to revolutionize farming
—Did the ‘techlash’ kill Alphabet’s city of the future?
—College backlash against facial recognition technology grows
—In A.I., what would Jesus do?
—Coronavirus is giving China cover to expand its surveillance. What happens next?
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-03-05--How states can overcome new federal barriers to clean energy

In the absence of federal action to address climate change, many states have adopted their own climate goals and established innovative policies that prioritize solar, wind, nuclear, and other forms of clean energy. Combined with actions in the private sector, these policies offer a measure of hope.
But now federal regulators have determined that it isn’t enough for markets to be merely neutral on the question of clean energy. Instead, regulators are actively working against states in their efforts to transition from fossil fuels. If left unchallenged, these actions will preserve a broken system, penalizing states that have tried to help clean energy producers thrive in federally regulated energy markets.
States face a stark choice. If they accept the constraints of the new federal market rules, they’ll go backward in the fight against climate change. But there is a better option. States can take back control over their energy choices by withdrawing from the federally regulated capacity market and securing clean generation for their citizens.
At Exelon, we stand with the majority of Americans who say they want more access to clean energy and increased action on climate change. Our fleet of nuclear, wind, solar, and hydro power plants produce about 12% of all the carbon-free energy on the grid today. But market policies that don’t favor carbon-free energy have put many nuclear plants across our industry at risk of early retirement. Scientists and economists from Massachusetts Institute of Technology, the Organization for Economic Cooperation and Development, and the Center for Climate and Energy Solutions agree that the fastest and most cost-effective way to meet our climate goals is to combine existing nuclear plants—which produce nearly 60% of the nation’s carbon-free energy, based on our analysis of Energy Department data—with new renewable resources and other innovative technologies.
Several states recognize this and have moved to protect their nuclear resources while they continue to promote more renewable energy. But the latest federal regulatory action will reverse that progress.
This situation came about when the Federal Energy Regulatory Commission (FERC) issued an order in December that will prevent zero-carbon energy resources that benefit from state clean energy policies from fully participating in the nation’s largest regional power market, called PJM.
PJM operates the grid and governs power sales for all or parts of 13 states and the District of Columbia. In his dissent to the decision, FERC Commissioner Richard Glick noted that the new market rules could cost consumers as much as $2.4 billion a year, while giving a lifeline to coal and other polluting power plants that might otherwise have retired to make way for cleaner energy.
The results could be devastating to our environment, public health, and economy as development of new renewable energy is hindered and more of our nation’s existing nuclear plants are priced out of the market.
Illinois provides a stark example of the damage this policy could cause. In 2016, the state passed the Future Energy Jobs Act to bolster renewable energy development and aid two Exelon nuclear plants that were slated to close due to declining power prices. FERC’s decision undermines this legislation and could stymie the state’s efforts to support renewable energy development and preserve nuclear plants, which provide about half of Illinois’s total energy supply, including 90% of carbon-free energy. Such an outcome would significantly raise carbon emissions and put the state’s goal to achieve 100% clean energy by 2050 all but out of reach.
The problem stems from the way PJM ensures that it has enough energy to keep the lights on during times of peak demand, such as on a hot summer day. It does this by requiring power producers to sell their generating “capacity”—essentially a commitment to provide power when it’s needed—in an annual auction. That auction determines what price all producers receive in exchange for making their power plants available to supply electricity to the 65 million people in PJM’s territory.
In simple terms, FERC’s order forces carbon-free power generators that are prioritized under state clean energy programs to bid into the auction at artificially inflated prices that don’t account for the state incentives they receive. The higher bids will all but ensure these generators lose out to dirtier fossil fuel plants. This will force homes and businesses to buy power at higher prices from polluting plants they would rather see retired. It also robs carbon-free energy of an essential source of revenue and will make it more expensive for states to support the clean resources needed to meet their climate goals.
This is a direct attack on states’ authority to protect their citizens from pollution and represents a massive, consumer-funded giveaway to coal and other polluting power generators.
The current order only applies to states served by PJM. But given that polluting generators pressured FERC to impose its restrictions on PJM, it’s only a matter of time before they ask regulators to extend similar restrictions to other regional power markets.
The only clear solution is for states to circumvent FERC’s order by withdrawing their utilities from the PJM capacity market and setting up their own process for securing adequate power generation to meet consumer demand. This would allow states to continue prioritizing clean energy over fossil fuels that contribute to global warming and air pollution.
In coming months, every state within PJM will have to confront this issue or pay the price in the form of higher energy costs and increased environmental and economic damage.
That’s a price none of us can afford.
Chris Crane is president and CEO of Exelon.
More opinion in Fortune:
—Coronavirus shows why we need vaccines before, not after, an outbreak
—How Democrats’ impeachment campaign helped Trump
—Being a CEO is more tenuous than ever. How I survived 30 years at Aflac
—How Warren Buffett built Berkshire Hathaway
—Are the Houston Astros irredeemable cheaters? Or are they all of us?
Listen to our audio briefing, Fortune 500 Daily


fortune--2020-03-05--It’s okay to say ‘no, thanks’ to the next rung in the career ladder

This is the web version of the Broadsheet, Fortune’s daily newsletter for and about the world’s most powerful women. To get it delivered daily to your in-box, sign up here.
Good morning, Broadsheet readers! Bloomberg drops out, Mary Barra unveils GM’s electric vehicle plan, and sometimes passing on a career opportunity is just fine. Have a terrific Thursday.
– A different take on ambition. When it comes to advancing our careers, women have gotten used to reading the stories urging us to think bigger, to embrace risk, to pitch ourselves for the project even when we don’t meet 110% of the criteria, and to apply for—and take—the big, scary job or promotion.
And there are, of course, plenty of times when that’s excellent advice. But the ubiquity of that type of thinking is also part of what made me think “yes!” when I read The Cut’s recent interview with Denise Pickett, president of global services at American Express.
In the interview, Pickett is clear that she thinks of herself as ambitious and aims to inspire that same ambition in the people she works with. Yet she doesn’t shy away from talking about times when she’s chosen to say no to major career opportunities. Here’s what she had to say about one such experience:
“When I was a VP, I was offered a pretty big promotion to the next level. It was my first chance to run a business. But I said no, because I had three children under the age of 7, and to be successful at the job, I’d have to travel 75 percent of the time. It just wasn’t going to work. That’s a decision I’ll never regret. In that moment, the right thing for me was being ambitious about my personal life. Being ambitious isn’t always about climbing the corporate ladder. It’s about being your best self across the spectrum of things that are meaningful to you. You can’t make a wrong decision if you follow that compass. You just can’t. So while I would say that part of being ambitious is taking risks. I don’t mean just saying yes — I also mean risks with saying no.”
Refreshing, right? Obviously, if you want the big job, take it. Even if it scares you, even if it feels like a gamble. But if you don’t—if the timing feels wrong, or you get that nagging feeling that you’d only be doing it because of some nebulous sense that you “should”—saying no is okay too! Choosing not to pursue one opportunity doesn’t mean you’re not ambitious, that you’re settling, or that you won’t ultimately end up with the career you’ve always wanted. It might just mean you have different priorities right now. And, as Pickett explains, that can be its own sort of ambition.
A housekeeping note: As some of you may have noticed, Fortune launched a paywall this week. The Broadsheet will remain free, but if you’re looking for a way to support those of us who produce it, please become a subscriber! Readers even get a discount—you can check out the options here.
Kristen Bellstrom
kristen.bellstrom@fortune.com
@kayelbee
Today’s Broadsheet was produced by Emma Hinchliffe.
ALSO IN THE HEADLINES
- Bye, Bloomberg. After Elizabeth Warren's takedown and Super Tuesday results, Michael Bloomberg is out of the race for president, he announced on Wednesday. Warren, despite the disappointing results for her campaign this week, is still in.
- Their day in court. As the Supreme Court justices listened to oral arguments in June Medical Services v. Russo yesterday, abortion rights advocates came away from the day more hopeful than some would have expected going in. Potential swing vote Chief Justice John Roberts repeatedly asked Louisiana Solicitor General Elizabeth Murrill, arguing in favor of the state's restrictions on abortion, about precedent—the core issue in this case, as its argument doesn't much differ from the last abortion rights case the Supreme Court decided in 2016. Justice Brett Kavanaugh, known to be in favor of restrictions on abortion, also revealed his potential stance on this case. In this Glamour piece, you can also read about the lawyers fighting to preserve abortion rights. Vox
- It's electric. GM CEO Mary Barra yesterday unveiled a new electric vehicle platform and the automaker's broader electric vehicle strategy, vowing to "put everyone in an EV" as the company spends $20 billion over five years. "We believe climate change is real," Barra said. Plus, GM wants to convince Wall Street that it can catch up to Tesla. MarketWatch
- Coronavirus report. The International Monetary Fund will implement a $50 billion aid package for low-income and emerging market countries affected by the virus, managing director Kristalina Georgieva announced. The Bill & Melinda Gates Foundation will pay for 15,000 medicinal molecules to be shipped from California to a lab in Belgium to help develop a cure for the disease. And Rent the Runway took the proactive step yesterday of informing customers about how the brand, led by CEO Jen Hyman, cleans its rental clothing: "There is currently no evidence that COVID-19 can be transmitted from soft surfaces like fabric or carpet," the company told its subscribers.
MOVERS AND SHAKERS: President Trump named Nancy B. Beck, a former chemical industry executive and former head of the Environmental Protection Agency’s office of chemical safety, to lead the Consumer Product Safety Commission.
IN CASE YOU MISSED IT
- Hotel human trafficking. Dozens of lawsuits filed across the country accuse the nation's biggest hotel chains—Hilton, Marriott, Wyndham Hotels and Resorts—of ignoring sex trafficking at their locations. Federal sex-trafficking statutes are rarely used against large corporations, and the plaintiffs are asking not just for damages, but for the hotels to work to prevent trafficking in the future. Hilton says it is committed "to protecting people from exploitation;" Marriott says it has trained workers to spot signs of trafficking; and Wyndham says the company condemns human trafficking. Wall Street Journal
- Presidential statements. Venezuelan President Nicolás Maduro said during a televised event to promote a women's healthcare plan that the country's women should "give birth." "Every woman is to have six children! Every one! For the good of the country!" he exclaimed. The comments drew extra offense considering Venezuela's economic crisis, which had forced many parents to flee as they try to support their children. In Japan, Prime Minister Shinzo Abe agreed with last year's #KuToo movement that Japanese women should not be required to wear high heels to work.
- Cricket, cricket. First surfing, now cricket. The cricket competition the Hundred will split £600,000 in prize money evenly between the men’s and women’s competitions, the England and Wales Cricket Board announced. Professional female players still earn less through their contracts—an average of £8,000 for women compared to £66,600 for men—but the equal prize money is "an important step in the right direction," Beth Barrett-Wild, head of the women’s competition, said. Guardian
- RIP, Rosie. Rosalind P. Walter was working the night shift in 1942 driving rivets into the metal bodies of Corsair fighter planes when she became "Rosie the Riveter." A newspaper column about Walter and the war effort inspired a song that has been part of the popular imagination for more than 70 years. Later in life, Walter went on to become a well-known philanthropist and a principal backer of PBS; she supported PBS because she felt public television filled gaps in her education, since she wasn't able to attend college during World War II. She died at 95 on Wednesday. New York Times
ON MY RADAR
It will be hard to get over what happened to Elizabeth Warren Gen
The Dixie Chicks release first new music in 14 years—a scathing anthem called ‘Gaslighter’ Washington Post
Ronan Farrow condemns his publisher over Woody Allen memoir Guardian
How Hayley Williams saved herself (and, BTW, Paramore) New York Times
PARTING WORDS
"Don’t be afraid of failure. I mean, not total failure. Total failure, yes, would be bad."
-Northwestern University Kellogg School of Management dean Francesca Cornelli


fortune--2020-03-05--Montreal’s empty storefront problem is a lesson to every city

Instead of poring over laptops, people in the back of an old-school café in Montreal’s Mile End are reading, chatting, and decompressing from a busy week. Three middle-aged men—including the owner of the storied Club Social, the Saint-Viateur Street haunt that once served as a private hangout for Italian immigrants—gripe about escalating rents in the neighborhood.
“They’re pushing out businesses. No one can afford these rents!” one exclaims, while the others nod.
I eavesdrop while waiting for my café au lait. Coincidentally, I’m here to interview Susan Usher, a local property owner and a member of a neighborhood citizens’ committee, for the very same reason: How rising rents—some double, triple, even quadruple their local market value—are keeping storefronts empty and plunging the area in an ever-evolving state of transition and, at times, even disrepair.
“Why on earth is nothing better than something?” asked Usher over the Friday evening din of the busy café. As the owner of a building with a ground-floor retail space and two apartments above (including her home), she could never survive months without a storefront tenant.
“These are not people like me,” she said, referring to those snapping up commercial buildings to leave them vacant. “These are deep pockets that can sit on a property, that can refuse to renew a lease with someone, then leave it empty for a year or two years, and for whatever reason it doesn’t seem to bother them.
“That’s when we introduce the word ‘speculative,’” she continued. “A loss in one place is written off [against] a profit in another.”
Speculation is a phenomenon taking over the world’s real estate, in which investors play the market by sinking cash into properties then sitting back and watching as they gain value. Many don’t get into the game to be landlords; they just want the returns. If a building doesn’t earn rental income, there’s always the losses column on their tax forms.
This problem is not unique to Mile End. In 2018, London had nearly 25,000 empty commercial spaces. In New York City neighborhoods, commercial vacancy rates fluctuated between 10%–20%—more than double a healthy rate. Pockets of other cities struggle too.
To be fair, not all empty storefronts are caused by active speculation. Some buildings are owned by the heirs of original buyers who have long since paid the mortgage, and who are now just waiting around for a big payday. Some are owned by well-intentioned landlords looking to find quality tenants at a time when e-commerce and same-day delivery are putting the squeeze on brick-and-mortar retail.
But speculation is growing, and when it’s motivated purely by profits it can poison entire neighborhoods.
Inside the financial game of speculation
There are some investors trying to do the right thing.
As the owners of 16 retail properties, Ali and Yousef Farasat of Montreal’s Immobilier YULiv do their best to skirt the empty storefront problem by negotiating fair rents with quality tenants. “You’ve got to pick some retail stores that are going to bring traffic to the street, and even take less money at times for doing that,” says Ali Farasat. “For us, it’s easier to rent lower, but to a better tenant.” Even with that philosophy, though, there are times when they have a tough time finding good tenants.
But there are growing numbers of properties being scooped up by people and companies looking to park their wealth in a locale more certain to generate generous gains than the stock market. The real estate industry, and the banks that underwrite it, are more than happy to accommodate.
“Banks are definitely a large driver of the real estate industry because the owner of the building gets to depreciate 100% of the purchase price regardless of whether it was raised through debt or equity,” says Kurt Koegl, a CPA focused on real estate and a partner at Marcum LLP, referring to U.S. law. “Levering the building, especially when interest rates are low like they are today, really multiplies the return that landowners get.”
Lending agreements can include covenants that dictate how much in liquid assets an owner will maintain or what the debt-to-equity ratio will be, Koegl continued. These covenants protect the bank’s mortgage investments. They can also indirectly affect how much rent a landlord is willing to accept. Depending on how rich the investor is and where he or she is located, sometimes it’s easier to set the price impossibly high and wait it out for a big-ticket retailer who will lock into a multiyear lease. With that, landlords can make back in just a few months what they would have earned from years with a low-paying tenant.
In Montreal as in New York City, there seems to be little rhyme or reason about which areas get hit hardest by the speculation machine. One of NYC’s most famous neighborhoods, Greenwich Village, has one of the city’s highest commercial vacancy rates.
Rather, when a building is bought by a relatively price-insensitive entity to serve as a high-interest bank account, it seems to be more about the type of property. Speculators usually like luxury condos, which they can flip onto the short-term rental market and make a killing.
But who would speculate on an ailing industry like brick-and-mortar retail?
Cities need to step up—fast
When storefronts are involved, it’s often because there are residential units above, said Gregg Bishop, NYC’s commissioner of small-business services. “It’s quite possible that the residential income is enough to carry the building, so therefore there isn’t that urgency to get the commercial space rented,” he explained. “That’s kind of the worst-case scenario.”
To some investors, storefronts may be a write-off, but to a neighborhood they’re a symbol of community health. Restaurants, bars, and cafés are local anchors, bringing foot traffic to an area, Bishop said. Street furniture and landscaping—benches, plants, lights, murals—keep people around, which improves vibrancy and security. Popular businesses inspire others nearby to open.
But even a poorly maintained building gains value over time. And without someone keeping a close watch on street-level properties, blight and crime can find an easier foothold.
About a mile’s walk southwest from Montreal’s Club Social, a two-story building that spans the entire length of a block is covered in colorful street art—some beautiful, some not so much. Urban affairs consultant Glenn Castanheira points to the building. It used to house a mechanic shop known as George’s Garage.
“A staple that was known in the neighborhood forever has been [mostly] vacant for 15 or 20 years,” he explained on a frigid February afternoon from inside the warm café across the street. The only tenant—a local favorite serving Lebanese food—is moving across the street soon, at which point the dilapidated building will be fully vacant. The widow who owns it will eventually pass it on to her teen grandson when he comes of age, said Castanheira.
Whether those who can’t be bothered to lease at decent rents are slumlords or rich investors, the effect is the same: nothing, when there could be something.
Empty storefronts are a particularly hot topic in Montreal at the moment. The city government recently convened a committee and held public consultations on the matter. As of July 2019, the city had an average ground-floor vacancy rate of 15%, with some areas as high as 26%. The city has implemented some measures to help offset the issue, including lower property taxes for the first $500,000 of assessed value, and a financial assistance program for businesses affected by major street work.
Other cities around North America are trying to address the scourge of empty storefronts in their own ways. San Francisco has a legacy business program and a formula business restriction. New York City is building a vacancy registry and wants a vacancy tax. Chicago heavily fines, and even prosecutes, building owners who let their empty buildings fall into any state of blight.
In Castanheira’s opinion, addressing the issue of empty buildings without building a more supportive, data-informed environment for streetfront small businesses to thrive in will only perpetuate the problem. He compares the reaction to the response to global warming: No one does anything until the house is on fire.
“If it’s not crisis time, it’s T-minus 12. We’re really close,” he said. “Once you cross that line of rents being too high, or an x proportion of properties being in the hands of a certain type of landlord, it’s really hard to go back.”
More must-read stories from Fortune:
—Are we undergoing an industrial revolution or a phase change?
—Twitter’s testing new ways to fight misinformation. Is open-source the answer?
—Meet Trump’s Giuliani-approved power broker—and Melania’s new senior adviser
—Angela Merkel is on her way out. Meet her potential replacements
—How the 2020 election could influence your personal finances
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fortune--2020-03-05--Exclusive: For $3, a ‘robot lawyer’ will sue data brokers that don’t delete your personal and locati

Exclusive: For $3, a ‘robot lawyer’ will sue data brokers that don’t delete your personal and location info

In January, a new law gave consumers the power to stop companies collecting their personal information. The law, known as the California Consumer Privacy Act (or the CCPA), can be a powerful tool for privacy, but it comes with a catch: Consumers who want to exercise their CCPA rights must contact every data broker individually, and there are more than a hundred of them. But now they have an easier option.
On Thursday, a startup called DoNotPay unveiled a service it calls Digital Health that automates the data-deletion process. Priced at $3 a month, the service will contact more than 100 data brokers on your behalf and demand they delete your and your family’s personal information. It will also show you the types of data the brokers have collected—such as phone number or location info—and even initiate legal proceedings if the firms fail to comply. The monthly fee also gives subscribers access to DoNotPay’s other automated avenging services, like appealing parking tickets in any city, claiming compensation for poor in-flight Wi-Fi, and Robo Revenge, which sues robocallers.
The data deletion service is the latest brainchild of Joshua Browder, who launched DoNotPay as a way to fight parking tickets when he was a 19-year-old at Stanford University. The startup has been hailed in the media as a time-saving “robot lawyer” and has reportedly saved consumers over $4 million in fines.
In an interview with Fortune, Browder says he was inspired to extend CCPA’s services to data deletion after receiving numerous robocalls on Christmas Day. Browder says data brokers are a key source of information for robocallers as well as being a threat in their own right.
The technology that underlies DoNotPay’s parking ticket and CCPA services are the same: bots. The bots send emails on customers’ behalf and also reply to any follow-up requests companies might send back.
In the case of companies who receive a CCPA data deletion request, they might ask for additional information such as a photo or a birthdate. In such cases, DoNotPay’s bots will contact the customer for the additional data, and then use the new information to respond to any other data brokers that make similar requests. And while the CCPA is a state law that technically only covers California residents, many companies are acting as if it applies country-wide—and, in any case, Browder says DoNotPay uses a California P.O. Box when it reaches out to companies.
Browder also emphasizes that DoNotPay will never sell consumer data itself, and that the company’s own terms of service allow it to be sued if it ever does. He also believes data brokers do no good for consumers.
“There’s no reason an average person wants one of these privacy brokers to have their data,” he says.
Location and facial recognition: A creeping threat
DoNotPay’s service comes at a time of mounting concern over how the Internet and cell phones are letting companies track people all the time, online and in the real world. In December, for instance, the New York Times obtained files that showed how a data broker could see and record the movements of millions of people. The exposé, which included sensitive records such as people moving from the White House to their homes, belied claims by the ad industry that data is anonymous.
Browder describes companies that amass such data as “truly shady.” He has a similar view of firms like Clearview, a facial recognition company that has gained notoriety by scraping billions of personal photos from the public Internet.
Such stories are one reason laws like the CCPA are gaining traction around the company. But while such laws shift a measure of power back to the consumer, most people haven’t even heard of the most invasive information gatherers in the first place. These companies have names like SkyHook and NinthDecimal and make their money selling data to marketers. Others, including Clearview, sell the data to law enforcement as well.
According to Browder, DoNotPay lets consumers purge their data from most of the 20 or so companies named in the New York Times exposé. He says the remaining firms cited in the Times story do not collect significant data and that the only to block them is by changing your default phone settings.
Browder says DoNotPay will also send requests to facial recognition companies, including Clearview, which has amassed a decade’s worth of photos on millions of people by scraping social media and other sites.
All of this suggests consumers may finally be able to avail themselves of the same automated tools to delete data that companies use it to collect it in the first place.
How data deletion works
The CCPA provides consumers with a number of clear rights: the right to see what data most companies have collected, the right to have that data deleted, and the right to tell companies not to collect it in the future.
But while the broad principles of the CCPA are clear, there is still uncertainty of how it will work in practice. This is in part because the law only went into effect in January, and the California Attorney General has yet to issue final regulations about how it will work in practice.
According to Glenn Brown, an authority on data issues at the law firm Squire Patton Boggs, many companies are still grappling with how to identify the personal data they collect, and to provide a process for consumers to file CCPA requests.
There is also the question of what sort of demands companies can make of consumers—such as requests for photo identification. While such demands might amount to unjustified obstacles in some cases, Brown notes that they well might be legitimate. For consumers with common names, like John Smith, a company is within its rights to require more details, to ensure it is handling the data for the correct person.
Browder says that DoNotPay’s lawyers have told him that certain requests—such as a demand for a drivers license—are illegal and that his company is ready to sue companies that demand them.
Those who sign up for DoNotPay’s data service can begin the process with simply an email address—or several of them, including those for family and friends. The company will also permit customers to pay $3 to delete their data once, rather than sign up for a monthly subscription.
DoNotPay is also encouraging consumers to view the CCPA as a financial weapon that they can wield against broader forms of corporate wrong-doing. Browder says deletion requests cost companies $10 on average, and he envisions consumers running campaigns to punish firms that misbehave.
“We see this as a tool to help consumers fight back against any injustice that they experience,” Browder says. “For example, if an airline makes you wait in a long line to check in, you can cost them $10 with a data deletion request.”
All of this suggests the CCPA, and automated tools like DoNotPay, may be inaugurating a new era where personal information—long treated as an economic commodity by companies—may be becoming personal again.
More must-read stories from Fortune:
—How 5G promises to revolutionize farming
—Did the ‘techlash’ kill Alphabet’s city of the future?
—College backlash against facial recognition technology grows
—In A.I., what would Jesus do?
—Coronavirus is giving China cover to expand its surveillance. What happens next?
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-03-05--Fortune poll: Nearly half of American travelers are reconsidering their international trips due to c

Fortune poll: Nearly half of American travelers are reconsidering their international trips due to coronavirus fears

This is a preview of Fortune Analytics, Fortune’s upcoming newsletter of business insights from proprietary data and exclusive surveys. To get it delivered to your in-box, sign up here.
I was all set to depart for Las Vegas at the end of March to speak on a panel at the Adobe 2020 Summit. But that panel, along with the entire live part of the conference, which expected to have more than 20,000 attendees and Tom Brady as its keynote speaker, was scratched Tuesday as a result of COVID-19 fears.
If one canceled conference can nix thousands of flight tickets, it raises the question of how deeply COVID-19 concerns will impact airlines and tourism—and the overall economy. Already, air travel is starting to take a hit. Airlines like Delta have temporarily cancelled or reduced flights to countries like China, South Korea, and Italy that have been affected by the virus. And United Airlines announced that it will cut a portion of domestic and international flights.
To learn more about how coronavirus fears are impacting travel, Fortune and SurveyMonkey polled more than 2,600 Americans last week. We asked about their international but not domestic travel plans, since the survey was fielded prior to the outbreaks in the U.S.
Our poll found that, surprise, Americans are now more hesitant to go through with their abroad travel plans. But the numbers are stunning. Among folks who planned to fly internationally this year, 42% say they’re less likely to now. That number is even higher among just business travelers, with 46% saying they’d be less likely to travel internationally for work.
Of course, not everyone who says they’re less likely to travel internationally is going to follow through. However, these results do give airlines and tourism businesses a clear warning: They’re in for some turbulence—something that all the cancelled conferences and expos the past few days, including Facebook F8 and Google I/O, are making all the more clear.
The full results to our travel and airline survey will publish on Monday, March 16th in Fortune Analytics, our soon-to-launch premium newsletter that will bring you business insights based on exclusive surveys and proprietary data. (Interested? Learn more.)
*Methodology: The Fortune-SurveyMonkey poll was conducted among a national sample of 2,626 adults in the U.S. between February 24 to 27. This survey’s modeled error estimate is plus or minus 3 percentage points. The findings have been weighted for age, race, sex, education, and geography.


fortune--2020-03-05--Why plunging Treasury yields are so alarming

Just past 2 p.m. on Tuesday, Victoria Fernandez, chief market strategist at Crossmark Global Investments, was watching the 10-year Treasury make history. And wondering when people would realize how bad it was.
“It’s at .93,” she said as the yield dropped below 1% for the first time ever. “It’s starting to feed on itself,” she said. A moment later: “We’re now down at 11 basis points. It’s .91.”
The yield would eventually close the day at 1.02%. Technically the rate is still positive. If someone plans to buy a house, it means even lower mortgage rates, which key off the 10-year bond, are probably on their way.
But take inflation into account and the effective—or real—rates are negative. For the time being, and maybe the foreseeable future, the world of fixed income investment has turned upside down. Retirees, savers, insurance companies, pension funds, and others that depend on generating a return over time with little risk are facing a world where they are going to lose money.
Yields plunge
Yields on mid-range U.S. bonds like the 5-year, 7-year, and 10-year have wobbled since the financial crisis. As the graph below of nominal yields (not taking take inflation into account) shows, they’ve been dropping.
One reason is monetary policy. Central banks like the Federal Reserve, European Central Bank, and Bank of Japan pushed down the interest rates at which banks borrow money. The goal was to stimulate growth. The more liquidity there was in the system—the greater economic activity there would be, or so economic theory assumed.
Growth never took off. Japan and Europe have pushed interest rates below zero and held them down. The U.S. has continued to see above-zero, but historically low, rates.
Indeed, bond yields have been generally declining since 1981, when interest rates and inflation were in double digits and pushed rates to historical high points. Today, yields are lower than in the 1960s. The below graph shows what has happened to 10-year Treasury yields over time.
In an era where GDP is not growing like it once did, investors look for something they can count on, and U.S. Treasurys are top of the list—safe and paying more than other sovereign debt. Because yields move inversely from demand, the more parties looking to buy Treasurys, the lower the yields.
And that has brought one more complication.
Real negative yields
Yields on Treasurys have fallen so far that they are now below inflation rates. In real terms—subtracting inflation—the 5-, 7-, and 10-year Treasurys are in negative territory, as tracked by the Treasury Department.
The real yield of a 10-year as of Tuesday’s close was -0.43%. Someone buying a bond and holding it would lose principal over time. And when yields are low, people at or near retirement, pension funds, insurance companies, and others that need predictable and safe income are in trouble.
“This is certainly a brave new world where you’re lending money [by investing] … and it feels more like a borrowing transaction,” said Derek Klock, a professor of practice in the Department of Finance at Virginia Tech. “It’s topsy-turvy. You’re basically paying for safety.”
That can make sense in some circumstances. Last August, a complicated structure allowed a Danish bank to offer negative mortgage rates. Backing each mortgage, and taking the loss, was an institutional investor that needed a place to store money to meet future obligations. The negative rate for the pension fund was less of a loss than government bonds would have offered at the time.
Real negative rates are a problem for every person and institution that depends on a dependable and safe passive income from investments. “This is really a sad situation for retirees who are so dependent on the fixed income investments that they have,” Fernandez said.
“People have made money on rates going lower and lower and lower,” said Bruce Monrad, chairman and portfolio manager of Northeast Investors Trust. But the strategy depends on a continued drop so a previously purchased bond, even if negative in nominal or real terms, looks good in comparison to purchasing a new one.
The dynamic has changed fixed income investing from a ‘way to generate future revenues’ game and into a ‘bigger fool’ trading strategy. The investor profits from selling to the bigger fool that follows. At the moment, though, there’s little other choice.
“We’re frankly of the mind that most investors in debt securities, even though the Treasury pays them next to nothing, may be the only ones getting adequate returns for the risk they’re facing,” said Robert Phipps, director of wealth and capital management firm Per Stirling. At least the money is safe compared to other investments, such as equities and corporate bonds.
And that may be the mantra for today’s world. The new goal isn’t to make as much as possible, but to lose at little as you can.
This story has been updated to clarify some of the economic factors underpinning the drop in yields.
More must-read stories from Fortune:
—Coronavirus spreads to a previously healthy sector: corporate earnings
—A Fed rate cut won’t cure what’s ailing the stock market
—How companies like Ernst & Young are going to extremes to avoid infections
—These cities have the most jobs with six-figure salaries
—Credit Karma was acquired rather than pursuing an IPO. Will more companies follow suit in 2020?
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