fortune--2020-10-19--China’s GDP growth in Q3 offers little for other economies to emulate

On Monday, China reported 4.9% gross domestic product growth in the third quarter compared with last year, missing the 5.3% mark predicted by economists polled by Bloomberg. The latest figures brought China’s GDP growth in the first three quarters of 2020 to 0.7%. Overall, it’s a comeback from the first quarter, when China’s GDP contracted a historic 6.8%.
“China’s quick recovery was a product of its stringent lockdowns, massive [COVID-19] testing, population tracking, a large economy that can afford to be somewhat insulated, and fiscal stimulus via credit expansion,” analysts at Nomura said in a note on Monday.
But other economies might not find a blueprint for recovery in China’s example. Not only have many nations failed to implement effective lockdowns, but China’s growth largely has been fueled by exports to countries still struggling with COVID-19.
Selling overseas
Demand for personal protective equipment (PPE), such as masks, and electronics, such as laptops, has boomed in China as many of its Western trading partners endure pandemic-induced lockdowns.
Because China implemented a stringent lockdown at the outset of the COVID-19 epidemic, factories were able to reopen relatively early in the year and pivot to fulfilling such demand. In the first half of the year, exports of medical equipment surged 46%, while exports of laptops jumped 9%.
China’s central bank, the People’s Bank of China (PBOC), has also injected hundreds of billions into the economy through monetary easing, such as cutting the amount of cash banks are required to keep in reserve in April, which freed up capital for the economy.
But analysts at Oxford Economics expect the PBOC to ease these measures in the fourth quarter as the bank “turn[s] its attention towards the risks” incurred by raising national debt—which Beijing did by issuing billions in bonds this year.
Dual circulation
On Sunday, PBOC governor Yi Gang said China’s economy “remains resilient” and said monetary policy should focus on bolstering domestic demand. Improving domestic demand is one facet of President Xi Jinping’s nebulous “dual circulation” policy initiative, which state media has touted in recent weeks as a new formula for economic growth.
“Essentially, the [dual circulation policy] aims to build up domestic economic strength through rebalancing in the face of intensifying external risks while maintaining China’s deep engagement with the global supply chain,” says TS Lombard lead economist Bo Zhuang.
Beijing isn’t aiming for total self-sufficiency, Zhuang says, but it does want to increase domestic demand and better supply that demand at home, perhaps by producing items it currently imports, like advanced semiconductors. The rebalancing comes against the “backdrop of deglobalization” as well as China’s deteriorating relationship with the U.S.
Nomura analysts say Beijing’s focus on “internal circulation,” or the ramp-up of domestic demand that’s satisfied locally, was “increasingly evident” in the third quarter. Retail sales for September grew 3.3% over the year before, compared with just 0.5% growth in August.
Growing alone
Broadly, economists expect China’s recovery to continue at a moderate pace, with household consumption picking up in the fourth quarter and becoming a more important driver in the first half of next year. Oxford Economics predicts China’s GDP will grow 2% for the full year.
Such moderate uptick is a far cry from the 6% growth Beijing targeted before the pandemic began, but, according to the IMF, 2% would still make China the only major economy to see positive growth this year.


fortune--2020-10-19--President Trump has failed the test of modern leadership

The polls are wrong .
The U.S. presidential race is a near dead heat , this A.I .
‘ sentiment @ @ @ @

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning.
CEO Daily readers regularly remind me that this is a business newsletter, not a political one. But the line between the two has never been bright and has grown fuzzier in recent years. Business leaders feel compelled to take strong stands on issues once considered the realm of politics and government—climate change, inequality, racial injustice, and, most recently, public health. Meanwhile, President Trump feels free to personally intervene in individual business decisions with unprecedented abandon—his role in the TikTok deal being only the latest example.
So allow me a moment to reflect on the coming U.S. election. Some business leaders will be tempted to vote for the man who managed to achieve the unachievable by rewriting the corporate tax code, which previously penalized American-based businesses relative to overseas competitors; and who rolled back the regulatory tide of the Obama administration.
But as we have written here often, an ever-growing group of corporate leaders also recognizes that society is demanding a different kind of leadership. Today’s leaders increasingly embrace purpose beyond profit; provide their employees connection to a cause bigger than themselves; spend less time telling people what to do and more telling them how to do it; empathize, inspire, motivate, and urge their people to do, as my friend Dov Seidman puts it, not just the next thing right, but the next right thing.
Any way you measure it, Donald Trump has failed that test of leadership. Whether it’s his denial of science, his disregard for data and facts, his flirtations with dictators and violent extremists, his mismanagement of the pandemic, or his alienation of an amazingly broad array of talented people who worked for him, Trump is the antithesis of what CEOs tell me on a daily basis that they value in leaders.
If companies can do better, so can the country. The big problems mentioned above won’t be solved without a partnership between leaders in business and government. We don’t know yet if a President Biden can rise to that leadership challenge. But we do know President Trump can’t. Time to try something new.
And by the way, even if you disagree with the opinion expressed above, I hope you will all agree with this: Every business leader has a responsibility to both enable and encourage their colleagues and employees to do their civic duty and vote. Low participation rates in American elections have allowed the extremes to have outsized influence over both political parties. Higher participation rates would advance the common good.
For a deeper look at the state of American politics, read editor-in-chief Clifton Leaf’s essay for the November issue of the magazine, online here. Other news below. And check out our two new weekly podcasts: Brainstorm (Apple/Spotify), in which Fortune editors Brian O’Keefe and Michal Lev Ram look at how technology is tackling some society’s toughest problems—the latest episode focuses on fighting wildfires with technology—and Reinvent (Apple/Spotify), in which Adam Lashinsky and Beth Kowitt look at companies reinventing themselves, from Momofuku to BP.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
Most Powerful Women
Fortune's 2020 list of the 50 most powerful women is out, and this year it's topped by (in descending order) Accenture CEO Julie Sweet, GM chair and CEO Mary Barra, and Fidelity Investments chair and CEO Abigail Johnson. Fortune
Chinese economy
China's National Bureau of Statistics says the country's GDP was up 4.9% from a year ago. Local economists expected 5.2% growth. Nonetheless, the pace of China's recovery is clearly picking up, and retail sales are doing well. Fortune
Big Tech
The U.K.'s competition regulator has threatened to lay into Google and Facebook if the government doesn't curb their powers quickly enough. Competition and Markets Authority (CMA) chief Andrea Coscelli: "Plan A is to have a regulatory framework. If [within a year] there is little action because of COVID-19 and Brexit then we would certainly do something ourselves directly—that is plan B." Financial Times
Instagram probe
And over in Ireland, there's yet another probe into Facebook's privacy practices—or more specifically, those of its Instagram unit, which is being probed over its handling of children's personal data. A U.S. data scientist complained to the Data Protection Commission about Instagram making public the email addresses and phone numbers of under-18 users. Irish Times
AROUND THE WATER COOLER
Credit scores
You'd think people's credit scores would be getting hammered during this recession, due to missed debt payments, but actually the average FICO credit score rose between April and July. For that, thank government and lender assistance during the pandemic. But there is one downside: lenders' underwriting models are being scrambled. Also, it goes without saying that credit scores could look a lot worse soon, if there isn't a new deal on aid for the unemployed. Wall Street Journal
Europe's CDC
The pandemic has exposed the shortcomings of the European Centre for Disease Prevention and Control, which has been powerless to take any coordinating role in the EU's response. Incredibly, that lack of power is by design, as this piece explains. Politico
Quarantine alternatives
The air travel industry is scrambling to come up with a viable alternative to mandatory quarantines for incoming travelers. Here's Conrad Clifford, Asia-Pacific chief for the International Air Transport Association: "What we've seen so far is if there's a 14-day quarantine, it's the same as closing your borders." IATA's preferred solution would involve testing before departure. Fortune
Stratospheric antennas
Deutsche Telekom has successfully tested a stratospheric base station for providing connectivity in hard-to-reach places back on the ground. The test used an adapted propeller plane, but Telekom's partner, a U.K. startup called Stratospheric Platforms, is developing its own pilotless craft that will use a hydrogen fuel-cell system. Reuters
This edition of CEO Daily was edited by David Meyer.


fortune--2020-10-19--Keurig is a machine: How the beverage giant is leveraging A.I. to fuel growth

For decades, the worlds of cold and hot beverages in the U.S. have remained separate domains, each dominated by undisputed champions. In carbonated soft drinks, Coca-Cola and PepsiCo have long shared almost three-quarters of the market, while Starbucks has reigned as the place to go for coffee. None of the three stalwarts are even lukewarm about combining hot and cold segments in a big way. But in a beverage market as roiled as every other part of the consumer economy is this year, a surprise winner—little-known Keurig Dr Pepper—is taking gallons of market share.
Though KDP is less than half the size of Coke and Pepsi in U.S. soft drinks, it is running neck and neck with the two giants in the share of the extra cans and bottles thirsty stay-at-home Americans are quaffing versus last year. In the 20-week period ended July 26, KDP has grabbed 34.1% of the $1.4 billion increase in revenue for all U.S. carbonated soft drinks, according to Consumer Edge. That boosted its overall market share from 22.7% to 24.0%. “KDP has done the best job of any beverage company in navigating the crisis,” says Consumer Edge analyst Brett Cooper.
KDP’s rise is especially remarkable because it’s a new enterprise formed just over two years ago via the $18.7 billion merger of coffee purveyor Keurig Green Mountain and soda maker Dr Pepper Snapple. The deal was a giant bet that by assembling and promoting a broad portfolio of classic names and high-growth newcomers in categories much smaller than Coke’s or Pepsi’s colas or Starbucks’ coffee brand, KDP could create a business more powerful than the sum of its parts.
That strategy is the brainchild of KDP’s CEO, Bob Gamgort, an industry lifer who revived two struggling franchises, Pinnacle Foods and Keurig Green Mountain, but whose ultimate dream was building what he bills as “the first modern beverage company.”
Courtesy of KDRP
“We backed Bob with a total of $17 billion. First, when we bought Keurig and brought him in as CEO, then when we bought Dr Pepper Snapple,” says Olivier Goudet, CEO of JAB, the Luxembourg holding company that has also assembled a coffee empire in Europe. (It’s backed by the Reimanns, one of Germany’s wealthiest families, and along with minority partners holds 44% of KDP’s shares.) “It was all a wager on Bob, because he knew choosing hot or cold was getting only half of the picture. He sees consumer patterns changing before anyone else.”
Over several long phone conversations, Gamgort described his blueprint to Fortune. “The industry viewed beverages much too narrowly,” he says. “Over half of Starbucks’ drinks have ice in them. When someone needs a boost in the afternoon, they may choose a coffee, or a Dr Pepper or our Adrenaline Shoc energy drink. Yet the industry and Wall Street looked at hot and cold as two completely different segments. When we merged, no one got it.” His goal, he explains, was to create the broadest possible lineup. “We need to be as important as possible to a Walmart or Amazon, and we get there by offering a portfolio that meets every consumer need,” says Gamgort, 58.
$11,100,000,000 KDP’s revenue last year
At $11.1 billion in revenue last year, KDP ranked as the seventh-largest food and beverage company in America. But the company has cornered something that has proved elusive to companies in the best of times, but especially during a pandemic: a broad, diversified portfolio that has churned out predictable earnings. For the first six months of 2020, revenues rose a sturdy 3% to $5.5 billion, while adjusted profits jumped 11.7% to $877 million. By contrast, Coke’s income dropped 15.4% from January to June, and Pepsi earnings were down 6.0% in the two quarters ending in mid-June. While KDP stuck to its earnings guidance, pledging to meet the 3% to 4% revenue and 13% to 15% earnings-per-share targets set in early 2020, the fog of COVID prompted Coke, Starbucks, and most other food and beverage players to declare the market too mercurial to forecast.
Gamgort was gaining on the giants pre-COVID and had a feeling the crisis could work in his favor, but only if the company pivoted fast and accepted that the future would be different and that what consumers wanted was changing, probably for good. “We didn’t think the world would return to normal,” he says. “We forged a blueprint that makes disruption our friend.”
The first signal that we were living in a new world came in early March from KDP’s “connected panels,” the 10,000 at-home brewers linked electronically to its data centers. It was Gamgort who introduced the panels as part of his Keurig Green Mountain rescue plan. The connected brewers read the image of every K-Cup pod to identify the brand and flavor using visual recognition technology, so that KDP sees instantly any change in the daily cups families are drinking, and the names and blends they prefer. “We saw this minute-by-minute data showing people were leaving the cities and sheltering in place and that coffee consumption was through the roof,” says Gamgort. That data from the at-home coffee side also showed what was coming in soft drinks. “We knew few people would be stopping to buy drinks at gas stations or local stores or in restaurants,” says Gamgort. He immediately anticipated that in the stay-at-home economy, families would be stockpiling soda by purchasing where they could buy big quantities in a single trip, at the megastores such as Walmart and Kroger.
Cases of Diet 7UP cans in production at Keurig Dr Pepper’s facility in Irving, Texas. Michael Riddell—Courtesy of KDRP
“We predicted they’d want big packs of cans, because they’re easiest to store in the garage,” says Gamgort. “Cans stay fresher than bottles, and the kids and adults can pull out a can at a time.” The rub was that Gamgort saw no way his domestic can suppliers could possibly make enough of them. Miraculously, the Mexican government declared beer a nonessential product, shuttering factories and leaving the local canmakers with loads of capacity. “We pounced on that opportunity,” recalls Gamgort. “We told the producers in Mexico, ‘We’ll take all the cans you can give us.’ Competitors ran out of cans. We got the cans.”
KDP ramped up production of 12-packs of cardboard-bound 12-ounce cans and cut back on bottles. KDP employs a direct-store-delivery or DSD model, meaning that in three-quarters of the nation, KDP’s 6,000 trucks deliver shipments from 160 distribution centers directly to stores as varied as a 7-Eleven to a Kroger. Then, a KDP merchandiser wheels a “U-boat” cart carrying the brands to the beverage aisle and personally stocks the shelves. The merchandisers often visit a big store several times a week for three or four hours. They transmit up-to-the-minute updates on what’s selling and how fast to KDP’s data centers. “If you just ship to the retailer’s warehouse, you don’t get that kind of data and don’t realize for another week what’s selling. By then it’s too late,” says Gamgort.
34% share of the increase in overall carbonated soft drink sales KDP has captured
82% percentage of the total coffee pod market that KDP controls
Other trends were emerging too. Demand for classics such as Canada Dry ginger ale and A&W root beer took off. “We cranked up the bestsellers and made a lot less of the slower moving varieties,” says Holand Lujan, who heads KDP’s distribution network in the South. Factories cut way back on Cherry 7 Up and Diet Squirt. But the swing to big sellers made the merchandisers more productive. The pallets that used to contain 55 separate items were carrying as few as 15, in much bigger quantities, cutting the time required to stock shelves.
Coffee followed the same pattern. The company’s Keurig brewers are the bargain “razor” sold near breakeven to lure customers to the lucrative “blades,” KDP’s K-Cup pods. KDP produces an estimated 10 billion-plus pods a year, an astounding 82% of the total market. It buys and grinds the coffee, fills the pods, and distributes to stores both for brands it owns, led by Green Mountain and Original Donut Shop, and under some two dozen names it licenses, among them McDonald’s McCafé, Newman’s Own, and Krispy Kreme (it also packs the pods for Starbucks and Dunkin’ Donuts). Once Gamgort saw customer pod usage spike, “I turned our factories to maximum output, way in advance of retail orders. We were watching inventories build when we hadn’t seen any sales yet.” The connected brewers also showed that people were drinking much more premium coffee, perhaps because when you’re not getting a $3 cup at Starbucks, you’re fine spending 70¢ on a gourmet K-Cup. Once again, KDP greatly increased production of such staples as Green Mountain, and temporarily halted production in niche brands. At the peak, at-home K-Cup pod sales were running 30% higher than last year, an extraordinary number for a product that grows in the mid–single digits.
The question now for the self-professed challenger is how to achieve strong growth in two slow-to-modestly expanding businesses. So far, KDP has managed to translate revenues waxing at around 3% into adjusted earnings gains in the 15% range. But it’s generating those outsize leaps in profits chiefly by lowering expenses and reaping big savings from the merger. When cost cutting runs its course by the close of 2021, Gamgort will need to garner much higher revenue growth. “He wants sales growth of 5% to 6% a year, not the couple of points a year that are the norm in the business,” says Paul Michaels, a KDP director and former global president of Mars, where he was Gamgort’s boss and mentor in the 2000s.
In beverages, that’s a high bar. It’s likely that KDP will give back at least part of the big 1%-plus gain in market share that its jackrabbit moves won in the pandemic, something Wall Street anticipates as evidenced by the stock’s flatline performance over the past year.
But looking ahead, Gamgort has several things working in his favor. First, starting around 2021 KDP will have retired enough debt that it can use its formidable free cash flow for acquisitions. Gamgort proved to be a master at purchasing and growing brands in the past; he built Mars’ pet food franchise to rival Ralston Purina’s through acquisition of Greenies and other names and revitalized Pinnacle’s tired portfolio with a move into healthy frozen foods via the purchases of Birds Eye vegetables, Evol natural meals, and Gardein, maker of plant-based protein foods.
We forged a blueprint that makes disruption our friend. Bob Gamgort, CEO, Keurig Dr Pepper
Second, Gamgort recognized that getting Keurig brewers in more households was what growing K-Cup pods was all about. He sharply cut the prices of the cups and machines, taking a temporary hit to sales to lure more customers, and in the process doubled the number of U.S. homes with brewers to the current 31 million, representing about one household in four. That leaves plenty of room to run: In Europe, over 50% of all homes have brewers. Here, the changes in customer tastes in the pandemic are likely to stick.
Third, the “flavors” sector (carbonated drinks that aren’t colas) is already growing a point or more faster than soft drinks as a whole. Adding new flavors to old-line brands can provide an extra lift. Two promising entries off to fast starts are spicy Canada Dry Bold, and Dr Pepper & Cream Soda.
The fourth lever is called Allied Brands, which acquires names typically owned by entrepreneurs or private players (think Adrenaline Shoc, a sports drink invented by beverage legend Lance Collins, or Don’t Quit! protein shakes from Jake “Body by Jake” Steinfeld). In the past, the old Dr Pepper Snapple would distribute such brands but didn’t secure the rights to buy them if they took off, and would often lose out to Coke or another big bidder. Once again, Gamgort broke the mold. He’ll offer to make a new beverage an Allied Brand only if the owner agrees to give KDP the right to purchase it based on a predetermined formula.
But perhaps the best thing Gamgort has going for him is that he’s embracing—rather than dreading—the uncertainty that lies ahead. “Our rivals are rolling over and hoping that the status quo returns, and it’s not returning,” he says. That paradigm-busting audacity has given KDP the biggest caffeine buzz in beverages.
A version of this article appears in the November 2020 issue of Fortune with the headline, “Keurig is a machine.”


fortune--2020-10-19--Anti-5G saboteurs raise alarm across Europe

Europe’s timely rollout of 5G is being threatened by the sabotage of new infrastructure and other expressions of mistrust, more than half the European Union’s countries warned Monday.
In a letter to the European Commission, 15 countries said they were witnessing “increasing activity of the anti-5G movement across the European Union,” with vandalism and disinformation that constitute “a threat to the economy of the affected member states [and] hinder also the ability for the European Union to meet its ambitious 5G goals.”
Every new generation of mobile broadband technology is met by opposition from people who claim, with little in the way of evidence, that the technology’s radio waves cause adverse health effects. 5G has been no different—and indeed this year the conspiracy theories have in some cases merged with those surrounding the novel coronavirus to create a new fantasy (debunked here) in which 5G helps COVID-19 spread by harming people’s immune systems.
This has led some people to set telecom masts on fire—there were at least 140 arson attacks in the first half of the year—and to threaten the engineers who deploy 5G infrastructure.
According to the EU countries that wrote to the Commission Monday, the solution lies in better communication with the public, and an urgent—as in before the end of 2020—effort to counter online disinformation about 5G.
“The increasing mistrust to the mobile radio equipment could have negative implications on the rollout of mobile network infrastructure (mast and antennas) as well as the 5G small-area wireless-access points infrastructure,” wrote the countries—Austria, Bulgaria, Croatia, Czech Republic, Cyprus, Estonia, Finland, Greece, Latvia, Lithuania, Luxembourg, Poland, Portugal, Slovakia, and Sweden.
“It is important to act now to inform the public of the benefits of 5G as enablers of the digital and green transformation of our businesses and society. As Member States, we think there is an urgent need for an EU communication strategy that provides reliable information to the EU citizens as well as awareness-raising campaigns regarding 5G and [electromagnetic fields].”
The Commission, the EU’s executive branch, should be receptive to this language—the 5G rollout is a centerpiece of its pandemic recovery plan, partly owing to the technology’s likely future role in health care and logistics, and partly because it is seen as essential to the bloc’s competitiveness in the coming years.
However, the countries also urged the Commission to promote “a broad and inclusive debate” about the latest generation of mobile broadband.
“The fears and worries of those people that are opposed to introducing 5G for reasons relating to EMF [electromagnetic field] concerns have to be taken seriously,” they wrote.
Earlier this month, a survey conducted for the European Telecommunications Network Operators’ Association (ETNO) showed most Europeans are positive about the advent of 5G, but also most are unsure what to make of “5G myths” such as the technology’s negative impact on bees. The Ipsos survey suggested two-fifths of people wanted better government communication about 5G.


fortune--2020-10-19--How the secretive CFIUS became a powerful weapon in the trade wars

This summer, when the Trump administration ordered the popular social media app TikTok to sell its U.S. operations, it marked a new escalation in the U.S.-China trade war. The clash also introduced much of the general public, including lip-synching teens and their parents, to a secretive body called CFIUS—the Committee on Foreign Investment in the United States—which can block or unwind foreign acquisitions of U.S. assets in the name of national security.
CFIUS (pronounced “SIFF-ee-us”) will have final sign-off on a proposed deal to deliver partial control over TikTok to a coalition of U.S. investors and companies, including Oracle and Walmart. Once an obscure nook in Washington’s regulatory labyrinth, CFIUS has grown dramatically in power and influence in recent years, as Congress beefed up its mandate as part of a technological arms race with China and other rivals. Its widening ambit could redefine the relationship between foreign companies and the U.S. government. But the TikTok saga, which could see a prominent supporter of President Trump obtain a big stake in the app, is also stoking a backlash among critics who see CFIUS as a powerful tool for crony capitalism.
Illustration by Sam Island
CFIUS was established in 1975 by President Gerald Ford to safeguard strategic industries like oil and munitions from foreign control. For decades it was rarely invoked: Brian Fleming, a former national security lawyer for the Justice Department who is now an attorney at Miller & Chevalier, estimates that the Obama and Trump administrations blocked fewer than one deal a year between 2009 and 2017.
The pace accelerated, however, as the Trump administration adopted a more bellicose stance on China—and as lawmakers across the political spectrum grew more worried about data, patents, and tech expertise passing out of U.S. control. In 2018, CFIUS stopped China’s Ant Financial from buying money-transfer service MoneyGram and scuttled an effort by Singapore-based Broadcom to acquire chip giant Qualcomm. That same year, Congress passed the Foreign Investment Risk Review Modernization Act (FIRRMA). That law not only expanded CFIUS’s enforcement powers but also gave it a new mandate to protect U.S. consumer data—such as that collected by TikTok and its Chinese parent company, ByteDance.
The advent of FIRRMA has triggered a stampede of CFIUS actions. The review process is highly secretive, but according to the Washington Post, the panel has launched dozens of investigations this year alone, aimed primarily at companies that received investment from China or Russia. Some probes retroactively examine deals completed years ago: The TikTok investigation, for example, rose out of ByteDance’s 2017 purchase of a Los Angeles–based company called Musical.ly.
CFIUS is composed of the chiefs of nine federal agencies, headed by the secretary of the Treasury. It can intervene in any deal involving foreign investors in which there are national security concerns—a rationale that can extend to nearly any transaction, lawyers object. While social media platforms like TikTok and Tencent’s WeChat have been the most prominent recent targets, other industries are in the panel’s crosshairs. Nevena Simidjiyska, cochair of the international trade group at Fox Rothschild LLP, which has seen an uptick in CFIUS work, says the mobile game industry—which has many ties to China—is likely the next to face scrutiny.
For decades, CFIUS was rarely invoked. But a 2018 law has triggered a stampede of new investigations.
Simidjiyska and others argue that CFIUS review is highly vulnerable to political influence. Members of Congress who wish to flaunt nationalist credentials can lean on CFIUS to block a deal or unwind it retroactively. And U.S. companies have also urged lawmakers to demand CFIUS investigations into their corporate rivals.
In this new climate, lawyers say, companies are increasingly taking steps to avoid CFIUS scrutiny. Some might structure deals in such a way that foreign investors have only a passive role, with no board seats or executive presence; others might simply decline Chinese investment altogether. And in some cases, companies quietly pull the plug on a planned deal upon learning that CFIUS intends to make a negative recommendation to the President. While firms can turn to the courts if they view CFIUS’s actions as arbitrary or heavy-handed, this may be a long shot. Only one company has gone to court over a CFIUS order, and the case settled without a ruling on the underlying issues. And U.S. judges typically give the executive branch broad deference on matters of national security.
That deference, along with CFIUS’s growing scope, has amplified complaints that the process could be used for nakedly political ends. Many China hawks shared President Trump’s stated concerns about the influence of TikTok and WeChat. But his open advocacy of an ownership bid by Oracle—whose cochairman, Larry Ellison, hosted a top-dollar fundraiser for the President earlier this year—has raised hackles in Congress and C-suites alike.
“Have we broken the fourth wall when it comes to CFIUS, and entered a bold new world where the President can intervene and meddle in a way no one envisioned?” asks Fleming, the former Justice Department lawyer. “With this President, all bets are off.” It remains to be seen whether the TikTok affair is a one-off, and whether the enmeshing of geopolitics and business would continue under a different President, of either party.
Sany Heavy Industry Co Ltd President attends a news conference in Beijing, October 18, 2012. Obama’s order for Ralls Corp ,a division of Sany Heavy Industry, to divest its interests in the projects, near a military facility, marked the first time since 1990 that a U.S. president has formally blocked a business transaction on security grounds. Jason Lee—REUTERS
Tougher over time
Since its creation in 1975, CFIUS has slowly evolved from a regulatory footnote to a trade-war weapon. Some key dates from the pre-TikTok era:
1988: Growing teeth
Concerned over Japan’s tech prowess, Congress gives CFIUS the power to reject foreign investments.
1990: That deal won’t fly
The administration of George H.W. Bush uses CFIUS to order a Chinese firm to divest MAMCO Manufacturing, a Seattle-based aircraft-parts maker.
2006: Shape up or ship out
The Dubai Ports World consortium strikes a deal to obtain control of six U.S. seaports. CFIUS approves the plan, but Congress votes to block it.
2012: Blowing in the wind
President Obama orders Chinese-owned Ralls Corp. to divest wind turbines it acquired near a Navy site in Oregon.
2018: The art of no deal
President Trump invokes CFIUS to bar Singapore-based Broadcom from carrying out a $117 billion hostile takeover of chipmaker Qualcomm.
A version of this article appears in the November 2020 issue of Fortune with the headline, “A powerful tool for trade hawks.”


fortune--2020-10-19--The holidays used to be UPS’s busiest time. Then came COVID-19

Carol Tomé expected to be doing a lot more gardening when she retired as CFO of Home Depot in 2019. But the board of UPS, where she’s served since 2003, had other plans. So in June, Tomé took off her gardening gloves and took the reins of the storied delivery company. We talked to the new CEO about what it’s like to lead a 113-year-old giant through a pandemic.
This edited Q&A has been condensed for space and clarity.
From CFO to the big show
After 24 years at Home Depot, you walked into a new job in the middle of a crisis. How has UPS been impacted by COVID-19?
Tomé: So, unlike a lot of companies, the majority of UPSers get up every day and go to work. You know, they put on their uniform, right? They can’t work remotely. You can imagine what we had to go through—just imagine hundreds of thousands of package cars, having to make sure that they’re clean. We’ve adapted pretty well based on all the feedback I get. We have had unprecedented demand come our way.¹ In the second quarter alone, we had to hire 40,000 people just to get the packages delivered.²
You helped Home Depot survive the 2008 recession. Are there strategies you gleaned from those tough times that you’re applying now?
We had to make some very hard decisions at Home Depot. We had to make some decisions to close stores, to exit businesses.³ But what we didn’t do was take anything away from the frontline associates who were in the stores every day. We continued to make merit increases, we continued to pay a bonus.
The phrase we used back then is, “A crisis is a terrible opportunity to waste.” Which, ironically enough, is what I said when I came to UPS.
I came here at the height of the pandemic, and one of the things that was getting in our way competitively was time in transit. We weren’t as fast as some of our competitors. We had launched an initiative to tackle that problem,⁴ but we weren’t planning to complete it until June 2021. So I asked, What’s getting in the way? And the team said money. I said, We’ve got money, let’s accelerate it. So we will be done this month. Why waste the crisis, right? Pull forward, make the investments now.
In the second quarter alone, we had to hire 40,000 people just to get the packages delivered. Carol Tomé
While your e-commerce business, which involves a lot of single deliveries to homes, has been growing during the pandemic, don’t you face a challenge of declining large shipments to stores? Those are generally more profitable routes.
A lot of what’s happened in this current economic environment is that business has softened up a bit and the pipeline has been filled up with e-commerce. We’re looking at how we can pivot our business model over time to have better balance in the portfolio. And that balance comes by growing small- and medium-size businesses, who really value our end-to-end network from pickup to delivery. Candidly, we had lost share in the small and medium sizes. Part of the reason why is we didn’t have the fastest time in transit. So you can understand why I was so passionate about accelerating that initiative.
Not all of your important customers fit into that small/medium size category. Amazon is a huge customer⁵ but is also becoming a competitor with its own delivery network.
Amazon’s an important customer, but we have so many important customers. And for us, it’s about each customer having a relationship that’s mutually beneficial. Some customers need us for returns; some customers need us for end-to-end pickup and delivery. Some customers want to use our access points. Our job is to understand each customer’s need and to serve them the best way that we can.
During your tenure as CFO at Home Depot you worked with five CEOs and helped sales increase almost eightfold to over $110 billion. What did you learn that you’re bringing to your new job?
I learned that the answer to really all of the strategic questions facing a company can be found by listening. In the Home Depot world, that meant listening in the stores. So in my free time, in the evenings, on the weekends, I would put on an apron and work in the stores. And I really got to understand the experience through the lens of the customer.
I also learned the power of what they called an inverted pyramid, where the leadership team is at the bottom of the pyramid, because we bear the weight for the actions that we take and the decisions that we make. We bear that weight so that we can free up our associates who are at the top of the pyramid, so that they can take care of the customers. If you bear the weight, you can free up people to do the right thing, to give the best experience.
There are only 37 women CEOs in the Fortune 500 now, counting you—you increased the total. What should corporate America be doing to increase the number of female corporate leaders?
We have to be intentional. I recall, at Home Depot, I had a senior officer opening and wanted to fill it with a diverse person. I had a bunch of amazing candidates, but [they didn’t fit the bill, so] I kept it open for a year. Ultimately, it happened to be a woman that took that job, and she’s doing an amazing job. But we had to have intentionality.
And we need to reach behind us and pull those people up with us. I have done that, and we’ll continue to do that. The first executive officer I named here at UPS was our chief communications officer, Laura Lane. This was an executive vice president job I created; the first job I created since I joined [went to] a woman.
Putting her stamp on it
Now that you’re a few months in, what are your biggest goals as CEO?
To impact people, help them get to their highest potential. I view that as job number one. Job number two is to get the stock price moving.⁶ That’s a lot about business model and capital allocation. And job number three is whenever I get ready to retire, that I have CEO succession-ready candidates.
There are several things that should not change, that are super important to who we are as a company. We landed on five. Our values. The dividend is an important part of the value proposition that we give to our shareholders; we’re committed to paying our dividend and increasing it over time. Our solid credit rating. Our brand relevance—and relevance is about doing good, be it our approach to social justice, or philanthropy, or diversity and inclusion. And then the last is the importance of our dual class share ownership. Those are the five things that shouldn’t change. But everything else in our portfolio is under review. And I mean, everything else is under review.
You told the analysts on Wall Street that you want to make UPS “better, not bigger.” Any examples of what maybe was making the company bigger—not better?
An example: I had the leadership team together and we put all our initiatives up on the wall around the conference room. I gave everybody 10 green dots and 10 red dots. Green were for those initiatives that we thought were wildly important. Red were for those we should stop doing.
All the green dots went up. No red dots. I said: You have to. So we went around again, and everybody used the red dots, which is very helpful, because it allowed us to say this is not important, right? We can put that on the shelf right now.
It allowed us to narrow our focus. It’s so critically important. You know, what is Lewis Carroll’s saying? “If you don’t know where you are going, any road will get you there.” That’s effectively where we were. We’re getting much tighter on what the action is that we’re going to take.
So we’re looking at how we can use technology to automate some of the manual processes in our facilities. How we can introduce technology to eliminate the people tasks? A really good one is robotic labeling. Rather than people putting labels on packages, having robotic arms putting labels on packages. We have that under a pilot, and it’s progressing nicely.
As the first outsider CEO, what have you noticed so far about the UPS culture—what needs to change?
I knew the company as a board member, but the truth is as a board member, you fly pretty high. As CEO, I started to go deep. I’ve been able to spend some time out in our facilities. I believe the answers to everything can be found inside the facility, talking to folks and talking to customers.
I believe the answers to everything can be found inside the facility, talking to folks and talking to customers.
What I see are some opportunities from a culture perspective. One of those is the happiness factor. We measure employee satisfaction based on likelihood to recommend the company to others. Last fall, in our survey, our likelihood to recommend score was not good at all: 51%. That means 49% of UPSers wouldn’t recommend us to their friends or family. Nope, nope. That’s not going to work for us.
What’s the root cause? It’s a lot about recognition, celebration, building financial plans so you can pay people bonuses; that’s an important part of it. And I don’t think it’s going to be that hard to move the needle.
Between the lines
(1) They’ve got mail: UPS handled an average of 21.1 million U.S. packages per day in Q2—typically a slow period—a 23% increase from the previous year, and almost reaching the blockbuster 23.1 million packages per day average of the 2019 holiday season.
(2) Parsing the Parcel Service: At the end of 2019, UPS had 495,000 employees, more than 1,000 package facilities, 125,000 delivery vehicles, and 261 planes.
(3) A different sort of renovation: Home Depot’s revenue plunged $13 billion during the 2007–2009 recession, and it closed 15 stores. It cut 2,000 administrative jobs and closed its Expo home design centers, laying off another 5,000 workers.
(4) The need for speed: Starting in 2019, UPS added Sunday pickup and deliveries, ordered dozens of new airplanes, and poured money into expanding its ground fleet and logistics systems.
(5) Customer and competitor: As of January, Amazon, which has its own delivery business, accounted for roughly 12% of UPS’s revenue.
(6) UPS stock performance: Shares have doubled since Tomé took over on June 1.
Oct. 7, 2015: $102.24
Oct. 7, 2020: $174.99
Source: Bloomberg
A version of this article appears in the November 2020 issue of Fortune with the headline, “The Conversation: Carol Tomé.”


fortune--2020-10-19--How Jane Fraser broke banking’s highest glass ceiling

CEOs of seven of the largest U.S. banks appeared before the House Financial Services Committee in April 2019. When the panel—all men, all white—were asked under oath if their successors were likely to be female or a person of color, no one raised his hand.
Without saying a word, the CEOs had put a fine point on a hard truth: Wall Street had never had a female CEO, nor was one likely in the near future.
The message they sent was antithetical to the mood of corporate America at the time. The #MeToo movement had prompted a harsh reexamination of office workplace dynamics; institutional investors were demanding that boards of directors add more women; and companies—banks included—were preaching the merits of diversity.
The moment left such a bleak impression that Fortune dedicated pages of its 2019 Most Powerful Women issue to asking three pressing questions: Why had bank CEO suites remained so impenetrable to women? Who might be the first to break through? And when?
We now have a definitive answer to those last two questions: Citigroup in mid-September announced that Jane Fraser would succeed Michael Corbat as chief executive in February. Barring something unforeseeable, Wall Street banks’ long-standing glass ceiling is history.
But Fraser’s appointment doesn’t eliminate the culture that had kept women out of the corner office for so long. In fact, it raises a new set of questions: Who is the woman who will be the first female CEO of a big Wall Street bank and how did she achieve what has, for so long, appeared unachievable?
On one hand, the most recent stage of Fraser’s career follows what Jane Stevenson, head of CEO succession at executive recruiter Korn Ferry, calls “the blueprint”: She worked her way through key business units at the bank and left each better than she found it. Yet at the same time, her refusal to sacrifice her personal life at the altar of her career flouts many of the old “rules” for getting to the top. That ability to find a middle way—to forge a new path through a very old maze—may indeed be an essential part of what makes her uniquely qualified for the job she’ll step into next year. And so, for that matter, is her willingness to talk candidly about navigating the labyrinth.
Fraser, 53, was born in St. Andrews, Scotland. (Yes, as a matter of birth she has an affinity for golf.) She moved to Australia for high school and with aspirations to be a doctor. But she soon learned she was bad at biology but fond of math and economics, which made banking a natural career fit.
From the University of Cambridge, she landed at Goldman Sachs in London at the tender age of 20. She would lament years later that she was “the boring British girl” in the office. “Everyone else was much more exotic, from all over Europe. They were a little bit older, they spoke multiple languages, and I just thought they were so much more interesting than I was,” she said in a 2016 address to the Americas Society and Council of the Americas. The feeling was motivation enough for her to leave London for Madrid, where she spent two years as an analyst at consultancy Asesores Bursátiles and worked on her Spanish—a skill that would prove especially useful years down the line.
After business school at Harvard in the early 1990s, her career diverged further from the typical banking trajectory. Rather than return to a place like Goldman, she opted to join consulting firm McKinsey for a reason she doesn’t sugarcoat: The women she saw in the banking industry at that time “were rather scary,” she said in the 2016 speech.
Those were the days of big shoulder pads and manly suits. The women and many of the men didn’t seem “that happy,” she recalled. “They were very successful. They were brilliant. But it was tough.”
In short: She wanted a life.
Working at McKinsey was still demanding, but it offered the same dynamic—being a trusted adviser to a client—with more predictability.
Celeste Sloman
She got married two years later and got pregnant the same year she was up for partner. “I got quite a lot of advice, ‘Don’t get pregnant in your partnership year.’ And I just thought that was nonsense,” she told me at Fortune’s Most Powerful Women Summit in October. The firm informed her she’d made partner two weeks after she gave birth.
After that moment—having a baby, making partner—she did heed a different piece of advice: “I remember one of my mentors saying to me, ‘You’re going to have several careers in your life, and your careers are going to be measured in decades. So why this sense of rush and trying to have everything at the same time?’ ” It led her to make a decision that she says was critical: She chose to work the entirety of her five-year partnership—until she left McKinsey for Citi in 2004—part-time.
“It wasn’t easy—my own ego suffered a bit on that one, because you do see people who are more junior than you who are accelerating faster in their careers,” she said. “But that’s what enabled me to actually feel happy and have a balance in my professional life and personal life.”
That experience changed her perspective—and changed how she operated at the office.
“When I got back to working again and working full-time,” Fraser said, “my clients used to tell me, ‘You’re a much more empathetic person; you were just this machine before.’ ”
In 2004, Fraser joined Citi as head of client strategy in the bank’s investment and corporate banking division in London. This is the moment she returned to the traditional banking playbook and began tearing through it. Over the next 16 years, she took on a series of jobs at Citi that taught her about different parts of the business, gave her experience leading units that had their own profit and loss statements or P&L, and offered her opportunities to build relationships and a standout reputation within the firm. “Look at her background,” Stevenson says. Fraser’s rotation in and out of jobs was “an artful process that came together over a decade,” she says. “These kinds of roles lend credibility” when boards are weighing succession plans.
It helps, of course, if some of those roles require you to make tough choices or oversee troubled businesses—and if you prove you have what it takes to handle the demands.
After her run in investment and corporate banking, then-CFO Gary Crittenden offered Fraser the job of global head of strategy and M&A in September 2007 as the financial crisis was mounting. She took the job and relocated to New York to help then-CEO Vikram Pandit decide how to shrink the bank. She orchestrated the sale of Citi’s Japanese securities business to Sumitomo Mitsui Financial Group in a $8 billion deal that gave the bank a vital capital boost in 2009. She also laid the groundwork for Citi’s sale of its Smith Barney brokerage to Morgan Stanley. During her time in the role, she executed more than 25 deals in 18 months. The bank sold nearly a trillion dollars’ worth of assets and cut 100,000 jobs in the process.
Fraser recalls that work as one of her foundational experiences as a leader. “It does make you sit there and be more definitive and less wishy-washy,” she told me in October. “What does being client-driven really mean so it’s not just a plaque on the wall? What are some of the strategic choices you make? Do them early and do them well and stack them up to win…Nothing like a crisis to have your steepest learning curve.”
Fraser’s career path is “the blueprint … an artful process that came together over a decade.” Jane Stevenson, head of CEO succession, Korn Ferry
Valuable as the experience was, Fraser still wanted to run a business. Pandit gave her that chance in 2009, sending her back to London for four years to cater to Citi’s wealthiest clients as head of the private bank. It was a sexy job, especially compared with what came next: serving as CEO of CitiMortgage in St. Louis. She took that job in 2013, when the mortgage business was, as she admitted in the 2016 speech, “the scourge of the earth” following the subprime crisis. She oversaw the slow and painful process of righting the ship, as Citi paid hundreds of millions of dollars to settle claims that it had sold faulty mortgages to Fannie Mae and Freddie Mac years earlier.
Then, in 2015, Fraser got yet another turnaround job, when Corbat named her CEO of Citi’s Latin America business.
Latin America is the smallest of Citi’s regional divisions by net revenue but has the highest rate of return, making it something of a crown jewel. Its retail arm in Mexico, then known as Banco Nacional de México or Banamex, is one of Mexico’s biggest banks, and its 1,400 branches account for more than half of Citi’s physical locations globally.
When Fraser took over, the division was tarnished. In February 2014, Citi disclosed that oil services firm Oceanografía had allegedly defrauded Banamex out of $400 million. Months later, Banamex disbanded a unit of the bank that provided security to executives after discovering that employees had engaged in illegal activity by offering unauthorized services to outside parties.
In a 2017 interview with American Banker, Fraser talked about trying to change the bank’s culture in Latin America so employees would be “more comfortable escalating issues, or saying, ‘I’m not comfortable with what my boss [has] done.’ ” A big part of that effort was convincing employees that the bank would act on allegations of wrongdoing. “A lot of this comes down to trust,” she said. People must believe that “if they raise an issue they’re going to be okay, and you will do something about it.”
With Fraser as CEO, the Latin American division also sold off consumer banking and credit card operations in countries like Brazil, Argentina, and Colombia to more narrowly focus on its institutional business in the region.
At the same time, Citi poured $1 billion into Mexico, the only Latin American country where it still has retail operations. The four-year investment, announced in 2016, was intended to upgrade the customer experience with new ATMs, new digital tools, and branch makeovers.
During Fraser’s tenure, net revenue and net profit for the Latin America division grew 8% and 38%, respectively.
Fraser’s next promotion, in October 2019, to president and CEO of global consumer banking, was an indication that the work she’d done in Latin America had pushed her to the next level. It was confirmation of what colleagues say was already obvious: that Fraser was Corbat’s heir apparent. “Giving her the consumer business, which is half of our revenues and a line operating business, and making her president was … to tee her up to get ready to be CEO,” Citi chair John Dugan says.
But Citi officially launched Fraser into the top job sooner than expected. When Fraser was named president, Corbat indicated he had “years” left at Citi, but his No. 2 got the nod 11 months later.
Corbat called himself “a steadfast believer in term limits” in explaining the timing in a LinkedIn post. Dugan says Corbat had always planned to leave in 2021 but decided to depart on the early side so Fraser could “own” the bank’s efforts to improve controls and risk processes.
The accelerated timeline also gave Citi an advantage that wasn’t lost on the board—it got to be first to name a female CEO. “We were delighted to beat everyone to the punch. It was going to happen, and we were delighted to have a candidate who was so eminently qualified for the job,” Dugan says.
While Fraser’s ironclad résumé looks, in many ways, like that of the big bank CEOs who’ve come before her, her personal approach to her work doesn’t always conform to the corner office mold.
She’s appeared unafraid of sharing the moments of self-doubt that so many CEOs seem to hide away in the backs of their custom closets. She says her initial response to being offered the global head of strategy and M&A was that she wasn’t good enough for the role. She recalls a friend convinced her, saying, “Why are you worried about failing? Go for it. What does it matter if that’s the case?”
Fraser’s willingness to talk about the human side of the job—whether lapses in self-assuredness, the demands of parenthood, the past failings of bank culture—sets her apart not just from her Wall Street peers, but from other women who have achieved “firsts” in their industries, some of whom fear that by being open about such things they’ll be pigeonholed by the label, female CEO. Fraser sees it as an advantage: “I can be more vulnerable in certain areas; talking more about the human dimensions of this than some of my male colleagues are comfortable [with],” she told me in May. “I don’t feel that’s in any way soft or weaker; I actually think it’s much more powerful.”
Before her posting to Latin America, Fraser succeeded Cecelia Stewart, now retired, for a stint as CEO of Citi’s U.S. consumer and commercial bank. As part of the leadership transition, the pair met with bankers across the country. Stewart recalls Fraser could “just naturally sit down and talk with someone and connect with them, whether it was work-related or life-related.”
“For a person—male or female—to have that level of compassion in their leadership style and that openness and willingness to discuss all different types of situations is critically important,” Stewart says. The approach is especially well suited for the pandemic. “2021 and 2022 for corporate America may look really different,” Stewart says, “so having a leader like Jane who is flexible, who is willing and open to lead through that kind of change, whatever that turns out to be, is terrific and a positive for Citi.”
Breaking the glass ceiling, of course, was just the beginning. Big banking’s first female CEO is not inheriting a well-oiled machine.
Less than a month after Citi named Fraser its next CEO, Citi agreed to pay $400 million after the Federal Reserve and Office of the Comptroller of the Currency reprimanded the bank for long-standing deficiencies related to its risk controls. The action followed an embarrassing episode in August in which Citi erroneously sent $900 million to Revlon lenders, roughly 100 times as much as they were supposed to receive. The OCC order gives the regulator veto power over any major Citi acquisition and, if necessary, the right to mandate changes to the bank’s senior management team or board.
It is “not typical” for the regulators to “come down so hard unless they’re really not happy,” says Arthur Wilmarth, a George Washington University law professor who has studied bank regulation. In a statement, Citi said it was disappointed to have fallen short of the regulators’ expectations and has “significant remediation projects underway.”
Investors are also eager for Fraser to address Citi’s profitability, which has long trailed that of its Wall Street rivals.
Another challenge is more out of Citi’s control. “We’re in the middle of a pandemic and recession. Loan losses are going to go up, and interest rates are at historic lows,” says Barclays analyst Jason Goldberg. Fundamentally, it’s a hard time to be a banker.
The regulatory action was a sucker punch to Citi, but Wilmarth argues that, in a way, it actually bolsters Fraser’s position. Under the circumstances, “I doubt that she would’ve gotten the job without the implicit blessing of the regulators,” Wilmarth says. (Citi declined to comment.)
Goldberg says Fraser’s track record means she’s well suited to meet the moment. Citi “is in need of some retooling,” he notes. “She has a lot of experience cleaning things up and turning things around.”
Fraser echoes that point in conversation in October. In the face of any crisis, “I think it’s going back and saying, ‘What are some of the root causes and then how do you turn that into an opportunity to really leapfrog and take the bank to a different level?’ ” Fraser says. “And then how do you galvanize the organization to work toward that? I did that with the private bank, did that with mortgages, did that in Mexico. And I’m excited to do it here too.”
In September, Fraser was the first woman to get a Wall Street CEO job. Come February, she’ll be the first one to do the work.
A version of this article appears in the November 2020 issue of Fortune with the headline, “The first lady of Wall Street.”


fortune--2020-10-19--Ones to watch: These executives could be the next to land on the Most Powerful Women list

Placing bets on which executives will land on the Most Powerful Women list in coming years? These are the names to put your money on:
Courtesy of Honeywell
Que Dallara
President and CEO, Connected Enterprise, Honeywell
Spearheading the industrial giant’s migration from smokestacks to software stacks.
Courtesy of Google
Halimah DeLaine Prado
General Counsel, Google
The new top lawyer takes the job at a key moment, amid antitrust claims and employee complaints.
Gonzalo Marroquin—Patrick McMullan/Getty Images
Susan Huang
Cohead, Investment Banking, Morgan Stanley
Huang, often mentioned as a CEO contender, is one of the first women to run a Wall Street i-banking business.
Phillip Farrone—WireImage/Getty Images
Pearlena Igbokwe
Chairman, Universal Studio Group, NBCUniversal
Igbokwe was promoted last month to fill the shoes of industry player Bonnie Hammer.
Rachel Murray—Getty Images
Meredith Kopit Levien
CEO, New York Times
At 49, the youngest CEO in the Gray Lady’s 169-year history is steering the paper through a critical period for media.
Courtesy of the Clorox Corporation
Linda Rendle
CEO, Clorox
The 42-year-old took the helm in September, guiding Clorox through an unprecedented surge in COVID-driven demand.
Rodin Eckenroth—Getty Images
Ann Sarnoff
Chair and CEO, WarnerMedia Studios and Networks Group
She now runs the vast majority of content at AT&T’s entertainment giant.
Marc F. Henning—Courtesy of Walmart
Latriece Watkins
EVP, Consumables, Walmart U.S., Walmart
Oversees key pandemic categories like household chemicals and paper goods.
Paul Morigi—Getty Images
Toni Townes-Whitley
President, U.S. Regulated Industries, Microsoft
Expanding the tech company’s cloud business to sectors like education and health care.
A version of this article appears in the November 2020 issue of Fortune.


fortune--2020-10-19--This ace engineer powered Amazon through the COVID crisis

Even under normal circumstances, Amazon’s global distribution network represents one of the planet’s most complicated logistics systems—an intricate dance of places, people, and technology whose choreography moves millions of packages a day.
When COVID-19 hit, normal went out the window. Pandemic lockdowns forced almost everyone in the U.S. to work, learn, and above all shop from home. A sudden surge of orders, including panic-buying of staples like bulk foods and toilet paper, brought chaos to Amazon’s operational web. And since most employees in that network couldn’t work from home (it’s hard to deliver a package or drive a forklift from your living room) the company suddenly became responsible for the safety of hundreds of thousands of essential workers—many of them at risk of exposure to the novel coronavirus.
Both of those challenges landed squarely on the desk of an executive who had been at Amazon for less than a year. Alicia Boler Davis joined Amazon in April 2019 as vice president of global customer fulfillment. As that sweeping title suggests, Boler Davis is in charge of much of the vast infrastructure that makes Amazon shopping feel effortless to consumers. “The fulfillment operations are the heartbeat of Amazon’s retail operations,” says Colin Sebastian, an analyst at Baird Equity Research who tracks the company. That would make Boler Davis the pacemaker: She runs the company’s hundreds of warehouses worldwide, overseeing employees, logistics, and processes, as well as technology that includes shelf-stocking robots. Customer service falls under Boler Davis’s umbrella, too—and in the pandemic, Amazon’s customers suddenly needed more service than ever before.
Boler Davis is the first Black person and only the fourth woman to join Amazon’s leadership “S-team.” Chona Kasinger for Fortune Chona Kasinger for Fortune
While Boler Davis was an Amazon newbie, she was anything but a rookie. She came to Seattle after 25 years as a top performer at General Motors—where she managed factories, negotiated with unions, oversaw the development of a new hit car model, and helped navigate the company through a perilous recall. “At Amazon, there’s a very high bias for action,” Boler Davis says. “Once you define a problem, you move very quickly to finding solutions and trying out different ideas. And then when you find something that works, you replicate that as quickly as possible.” The huge and varied toolkit that Boler Davis had developed at GM prepared her to do exactly that as COVID’s challenges escalated.
Among the first problems for her to solve was an overloaded supply chain. Amazon had to delay shipments for weeks on customer orders of nonessential items as it prioritized moving cleaning supplies, protective gear, and other pandemic-related needs. At the same time, the sheer volume of new demand created bottlenecks that demanded a speedy expansion of its distribution pipeline. Boler Davis took that expansion into overdrive: After increasing the square footage of its facilities worldwide by about 15% annually over the past few years, Amazon will grow it by 50% in 2020 alone. And most of the 200,000 workers Amazon has hired in the past six months—a staggering accomplishment in its own right—went straight in to staff those new facilities.
Far more daunting were the demands of keeping that staff safe. For Boler Davis, that meant adding social distancing rules in warehouses, conducting temperature checks (initially with handheld devices, later with thermal cameras), adding COVID-19 testing, and overhauling 150 different processes in all. Even Amazon’s logistics algorithms, which guide staff as they fill orders, had to be rewritten to account for less dense staffing. Critical items like masks and sanitizing supplies were continually running low, forcing Amazon to find new suppliers. “It was probably one of the most challenging things I’ve ever done,” says Boler Davis.
Amazon didn’t earn a perfect grade on safety, especially early on. Some warehouse employees complained that they couldn’t qualify for paid sick leave; New York City employees started a GoFundMe campaign to support fellow workers taking unpaid time off. A few warehouses had to close when workers tested positive. But when Boler Davis and other executives grasped the scope of the pandemic, Amazon started spending like mad—$4 billion in the second quarter alone—to revamp procedures and add safeguards.
320,000,000 Total square feet of floor space in Amazon logistics facilities worldwide as of Oct. 2020 (Source: MWPVL International)
Earlier this month, Amazon reported that almost 20,000 of its 1.4 million frontline employees, a figure that includes Whole Foods staff, temps, and seasonal workers, had tested positive since the beginning of March. As high as that headline number sounded, it represented an infection rate of only 1.4%—and the company says that it added up to 42% fewer positive cases than would be expected based on infection rates in the communities where it operates.
Amazon’s overhaul paid off financially, as well. The company’s second-quarter revenue soared 40% from a year earlier, to a record $88.9 billion—driven primarily by the tidal wave of new e-commerce, which accounts for almost 60% of the company’s total sales. Its profits in that chaotic second quarter doubled to a record $5.2 billion. And Amazon’s resilience reassured investors, who have pushed its stock market value to $1.6 trillion.
The success against COVID likely boosted Boler Davis’s stock as well. This August she was named to Amazon’s S-team (the “S” stands for “senior”), the select inner circle that advises CEO and founder Jeff Bezos. Boler Davis, now 50, is the first Black person and only the fourth woman ever named to the S-team. Some analysts think she may rise further next year, in a reshuffling after the planned retirement of Jeff Wilke, CEO of consumer at Amazon and Bezos’s longtime No. 2.
It has been a fitting arc for someone who proved at GM that she could thrive as a senior leader (she served five years as a top lieutenant to CEO Mary Barra) and a nimble problem-solver. How Boler Davis helps Amazon navigate its non-pandemic problems—and there are plenty, including tumultuous labor relations and challenges from competitors—could help determine how long the company remains dominant. While Amazon declined to make current colleagues available to talk about Boler Davis, conversations with former GM colleagues offered a sense of how many strengths she brings to that role.
Boler Davis grew up in Detroit. Her mother was a bookkeeper, while her father worked in a Ford plant, then went to college in his thirties and became a salesman for IBM. (After her parents divorced, Boler Davis lived with her mother, but both of them stayed involved in her life and education.) There wasn’t much money to spare when she was young, and Boler Davis recalls trying to fix things around the house when she was 9 or 10 years old. Extricating a toy from the back of an old dryer wasn’t too tough; splicing the melted cord of an iron was trickier. Back then, “I couldn’t Google how to do those things,” she recalls. “I’ve gotten shocked a couple of times.”
A GM-sponsored summer engineering course during high school sparked bigger ambitions in a kid who liked to figure out how things worked. After graduating from Northwestern with a chemical engineering degree, Boler Davis joined GM in 1994, taking a manufacturing job at the massive Detroit-Hamtramck facility. She was spotted quickly as “someone we thought would be a senior executive someday,” recalls Chris Taylor, a former GM human resources leader. “She was one of my high-potential people.” By 2007 she had become GM’s first African-American female factory manager, overseeing the Arlington, Texas, plant that made Cadillac Escalades.
Her next big break involved a much smaller car. In 2010, GM tapped Boler Davis to oversee a new subcompact model, the Chevrolet Sonic. She was in charge of engineering the car as well as coming up with a plan for manufacturing it. For the young manager, the assignment meant “looking at the different areas that have to work together in order to deliver a great product,” she says. “That was fun.” The project required working closely with GM’s partners in South Korea, at the time a male-dominated culture, recalls Joel Soares dos Anjos, a former GM executive who now works for Hyundai in Brazil. “Alicia played very well between multiple cultures and countries,” he recalls. In arguments, she treated men respectfully but advanced her own agenda firmly, and often won.
Introduced at the Paris Motor Show late in 2010, the Sonic, which came in bright colors and included a hatchback version, quickly shot up sales charts. It went on to win frequent awards for best quality and reliability in the subcompact category. This year, research firm J.D. Power said the Sonic had the fewest quality issues of any model in any category. GM will soon discontinue the Sonic, as part of a broader shift toward electric vehicles, but it was a durable hit. It also helped Boler Davis land the job of vice president for global quality and U.S. customer experience in 2012—reporting to another fast-rising GM exec, Barra, who would become CEO in 2014.
During Boler Davis’s tenure as quality czar, GM substantially improved its record on that front. She says she sought to listen to employees at every level for suggestions, looking for opportunities to implement good ideas from one plant across the company’s operations. “When you talk with a lot of higher-ups, you know, their eyes wander, they’re moving on,” recalls Jonathan Jones, a longtime shift leader at a GM factory in Fort Wayne who has had many meetings with Boler Davis. “She was different. It always seemed like she cared what you had to say.”
Her knack for responsiveness also helped GM stem a major customer-relations crisis. In early 2014, the company had to recall almost 2 million vehicles that had faulty ignition switches. Customer service call volume doubled, but Boler Davis created a SWAT team of 100 reps who were specifically trained to handle recall questions, and they reduced wait times to under a minute.
Barra tapped Boler Davis in 2016 as executive vice president of global manufacturing and labor relations, where she would fill the shoes of a retiring legend, 37-year veteran Jim DeLuca. The role meant overseeing 171 factories in 31 countries, employing 180,000 workers. For Boler Davis, the return to manufacturing revived memories of her earliest days at GM. “I spent a lot of my career in the plant. You know, I grew up in the plant,” she says. “To be able to come full circle and have responsibility for global manufacturing was pretty humbling.”
The promotion also raised her public profile—and put her on the radar of one of the few companies whose logistics needs are as complicated and intricate as GM’s.
Jeff Wilke, a Princeton-trained chemical engineer, has long been Jeff Bezos’s right-hand man—and is one of the architects of Amazon’s enormous e-commerce apparatus. A few years back, a mutual friend introduced Wilke to Boler Davis, and they met for lunch. She recalls being impressed with Wilke’s depth of knowledge about his company’s vast operations; he could talk about Amazon the way she could talk about GM.
Boler Davis didn’t know much about Amazon at the time beyond having shopped there. But after she did some research, she was impressed by its customer-centric culture: It “resonated with my values and how I like to work,” she says. Wilke was equally impressed, and the meeting led to a job offer. (“I knew the automobile industry and loved it, but why not go and try something different?” Boler Davis now says.) In an email to employees this summer, announcing Boler Davis’s appointment to the S-team, Wilke wrote, “We hit it off right away. I was so impressed with her leadership experience, technical acumen, and especially her dedication to the workers on the shop floor.”
All three of those strengths are now being tested. Even before COVID hit, Amazon was aiming to offer one-day delivery in more of the country for a broader array of goods—and sometimes struggled to speed up delivery while handling greater volume. Its warehouse network, analysts agree, needs to be both bigger and more efficient, with more locations closer to customers. At the end of 2019, Amazon had about 175 fulfillment facilities worldwide. But “we’re adding a ton,” Boler Davis tells Fortune; today, “I’d say we probably have 250 to close to 300 across at least 16 countries.”
“I imagine [Boler Davis’s] role will only become more important to Amazon as they insource more transportation and delivery,” says Sebastian, the Baird analyst.
With both its retail operations and its profitable cloud services business throwing off cash, Amazon’s infrastructure spree hasn’t fazed investors. The stock is up more than 80% this year. As Google, Microsoft, and other competitors cut into Amazon’s cloud lead, the company’s cash flow could weaken in the future; antitrust threats could also, at least in theory, erode profits. But for now, Boler Davis’s team is in the enviable situation of having the money to build whatever they decide customers need.
100,000 New workers Amazon expects to hire in the U.S. and Canada in the last three months of 2020
Putting people in those new warehouses could be a trickier proposition. Just ahead is the holiday shopping season, traditionally Amazon’s busiest. Boler Davis announced recently that the company would need to hire another 100,000 workers by the end of this year just in the U.S. and Canada. (The humans won’t be working alone: Integrating more of Amazon’s new shelf-stocking robots is also a priority, as Boler Davis brings the new facilities online.)
Hiring good employees quickly is never easy, and it’s made more difficult at Amazon by controversy around working conditions. In addition to complaints about sick-pay benefits, the company has faced criticism over its wages and its workflow, in which algorithms dictate movements and breaks are tightly monitored, according to some current and former employees. The Teamsters and other unions have tried to organize Amazon’s workforce, though without much success so far.
Throughout her automotive career, Boler Davis had a reputation for building good relationships with the rank and file, and Amazon would certainly benefit if she could do the same there. At GM, “our hourly workforce contributed a lot to the ideas, to the improvements, to how things were done,” she says. “That’s something that I definitely bring with me: the expectation of engagement.”
As someone who knows what it’s like to be the only woman or the only Black person in a room, she also wants to bring people like her up through the company. “It can be hard being the only one. Whether you’re carrying it around on your shoulders or not, it’s the reality,” she says. She already has some protégés and has spoken at Amazon employee affinity group meetings. “I think I’m off to a good start,” she says.
As she strives to build cohesion, there’s at least one enthusiastic hire Boler Davis can claim credit for. Jonathan Jones, the factory shift leader from Fort Wayne, recently decided to leave GM after 17 years—for a job as an Amazon operations manager. Watching Boler Davis’s ascent gave him confidence, Jones says: “It’s hard to leave, but she made me feel like this is a good call.”
A version of this article appears in the November 2020 issue of Fortune with the headline, “Amazon’s ace engineer.”


fortune--2020-10-19--How Fortune ranks business’s Most Powerful Women in the COVID era

The pandemic and its human and economic toll. The fight for racial justice. The climate crisis.
No one needs a reminder of the existential threats the world is contending with in 2020—we’re living them every day. And the impact of these crises is anything but short-term: They will remake our lives over this new decade and beyond.
Simply put, 2020 is the year when we said a final goodbye to business as usual.
So as we prepared our 23rd Most Powerful Women list, it became clear that the approach we have taken with this ranking for the past 22 years must change too.
Since its beginning in 1998, this list has relied on four criteria: the size and importance of each woman’s business in the global economy; the health and direction of the business; the arc of her career; and her social and cultural influence. This year, we added a new dimension: We wanted to understand how an executive is wielding her power. In this moment of crisis and uncertainty, is she using her influence to shape her company and the wider world for the better?
That’s why you’ll see as our new No. 1 Accenture CEO Julie Sweet, who is steering the professional services firm—valued at nearly $150 billion—as it helps its clients navigate this new world order. Carol Tomé, the former CFO of Home Depot, lands at No. 5, having taken on the top job at UPS just as the shipping giant is playing an increasingly critical role in the coronavirus economy. Jane Fraser, the incoming CEO of Citi, is making her return to the list at No. 6. She is breaking one of the most formidable glass ceilings by becoming the first female CEO of a major Wall Street bank.
To be clear, business performance still matters as much as it ever has. The retail world is a prime example of an industry in which the disparate impact of the pandemic shook up this year’s list: While the CEOs of some struggling retailers fell off our ranking, it elevated executives like Walmart International CEO Judith McKenna (No. 10) and Home Depot executive vice president Ann-Marie Campbell (No. 15)—both hailing from companies poised to emerge from this period stronger than ever.
But in other industries, the new criteria tipped the scales. Iconic tech executives like Facebook COO Sheryl Sandberg (No. 8) and Google’s Susan Wojcicki (No. 18), CEO of YouTube, both dropped in their rankings. Through the lens of our new metric, their failure to rein in misinformation on their platforms overshadows their companies’ strong financial performance.
We wanted to understand how an executive is wielding her power. In this moment of crisis and uncertainty, is she using her influence to shape her company and the wider world for the better?
In addition to the 16 public company CEOs on our domestic list—whose companies account for more than $1 trillion in market cap—newcomers made their debuts in roles that are crucial in the quest to build more socially and environmentally conscious companies. Former EPA administrator Lisa Jackson (No. 35), who heads Apple’s sustainability efforts, reports directly to CEO Tim Cook and is responsible for ensuring that the tech juggernaut hits its goal of becoming carbon neutral by 2030. Intel chief diversity and inclusion officer Barbara Whye (No. 40), an engineer by training, is not only making sure her company reflects the true composition of the U.S. workforce but is also helping to set standards and metrics across the tech industry. At Amazon, former GM executive Alicia Boler Davis (No. 12) has the massive task of keeping the company’s hundreds of thousands of warehouse employees safe as they work on overdrive to meet ballooning consumer demand.
Our list this year also reflects industries that have not had much of a presence in our rankings in the past. As president and COO of SpaceX, Gwynne Shotwell (No. 48) is sending astronauts into space from U.S. soil for the first time in years. And in more terrestrial endeavors, Simon & Schuster SVP and publisher Dana Canedy (No. 50), the first Black person to head a major publishing imprint, is set to have an outsize impact on our culture.
We ended up with 13 newcomers and a ranking of women who are trying to use their power to make certain that their companies and communities emerge from this trying period better off than they were before. The result is a list that is more diverse, in every sense of the word, than we’ve had in the past—essentially a list that is more reflective of the moment we’re living in.
The 2020 Most Powerful Women list was written by: Danielle Abril, Kristen Bellstrom, Robert Hackett, Matt Heimer, Emma Hinchliffe, Aric Jenkins, Beth Kowitt, Michal Lev-Ram, Sy Mukherjee, Aaron Pressman, Lucinda Shen, Anne Sraders, Jonathan Vanian, Phil Wahba, and Jen Wieczner
A version of this article appears in the November 2020 issue of Fortune.


fortune--2020-10-19--These women are changing business for the better—and Fortune’s coverage is changing, too

It is hard to change any institution—particularly one as revered as Fortune’s annual ranking of the Most Powerful Women in Business. But in 2020, a year unlike any other, our MPW team concluded that our venerable list would benefit from a crucial tweak. It needed a measure of influence and power that went beyond the company P&L—a sense that the women on this prestigious roster aren’t just great business executives, but also leaders who have used their power and influence to shape their companies “and the wider world for the better,” as Fortune’s Kristen Bellstrom and Beth Kowitt write in their introduction to this year’s package.
To be sure, business prowess still takes a front seat, as it has for the previous 22 years we’ve published our ranking. Witness the fact that the 16 CEOs on our 2020 list who run public companies oversee businesses with a combined market value of over $1 trillion.
Which brings me to our No. 1 choice this year, Accenture CEO Julie Sweet, who just rounded the calendar on her first year helming the professional services giant. And a big year it has been. The company, which commands a market cap of close to $150 billion, brought in $44.3 billion in revenue in its latest fiscal year, while profits rose 7% from the previous year. As the team writes: “Sweet steered Accenture’s more than half-a-million employees in 51 countries through the pandemic, a crisis that has made the firm’s skills more essential than ever.” Those skills, in case you’re wondering, involve helping much of the rest of the corporate world get through their own digital transformations. Or as Kristen puts it, succinctly: “When the pandemic hit, everybody had to accelerate their five-year plans into a week and a half. That’s what Accenture does.”
Illustration by Tracie Ching
Claire Zillman’s wonderful and timely profile of Jane Fraser, who in late September was announced as the next CEO of Citigroup, offers another inside view of power and influence in action. Fraser’s power is the ceiling-smashing type—in February, she’ll become the first woman to head a major U.S. bank—and her career is a model for anyone unwilling to give up their family life in order to pursue a blazing rise to the top. It turns out you can have both.
To capture this “New Face of Power on Wall Street” on our cover, we asked Washington, D.C., artist Tracie Ching to render Fraser in illustration. “Tracie has this very classic engraving style that makes her subjects come alive in vibrant color, giving her work a dramatic, modern ‘poster’ feel,” says Fortune creative director Peter Herbert, whose redesign of our print magazine was recently honored with Folio Magazine’s Ozzie Award.
One of the joys of making magazines is getting a chance to see the words, photographs, graphical elements, art, and design linger together on the page. When they interact just right, you can feel a bolt of energy inside. I hope you can feel that, as I do, in the pages of our November issue.
A version of this article appears in the November 2020 issue of Fortune with the headline, “Change for the better.”


fortune--2020-10-19--What business can learn from the NBA bubble

It had already been a tough year for the NBA.
It started last fall when the general manager of the Houston Rockets sent out a tweet that was sympathetic to the protestors in Hong Kong, which got the NBA taken off of broadcast television in China and cost the league millions. Then David Stern, the legendary former NBA commissioner, died unexpectedly on New Year’s Day. Just a few weeks later, the death of retired Laker superstar Kobe Bryant and his 13-year-old daughter in a helicopter crash rocked the world.
Then one month after the All-Star weekend, just before the Utah Jazz and Oklahoma City Thunder were about to tip off, the game was postponed. A Jazz player had tested positive for COVID. Soon, the entire league shut down.
“If the NBA had spent the first part of the 2019-2020 season swimming through some big rapids, COVID just sent it over the waterfall,” says Adam Lashinsky in this week’s episode of Reinvent, a podcast about fighting to thrive in a world turned upside down by COVID-19.
This week’s episode takes listeners inside Lashinsky’s recently published feature story, written with Fortune deputy editor, Brian O’Keefe, about the NBA bubble—the protected environment the league created to keep players safe in order to finish out its season.
How the NBA bubble came to be is far more than a sports story; it’s also a lesson in leadership and business. “The NBA taught us that you pay attention to your product first and foremost, and in the NBA’s case, its product is the game of basketball,” Lashinsky says during the episode. “That means having a good relationship with its players, listening to the their concerns, being flexible and adaptable, and doing everything you can to stay in business—including, by the way, spending a whole bunch of money if that’s what it takes to get it done and keep the brand intact.”
Lashinsky breaks down how the bubble worked with 300 grown men, the team staffs, league officials, and the media all in this protected environment on a campus at Disney World in Orlando.
“If the rest of the country had even done a fraction of what the NBA had done, the virus might have taken a different course,” Lashinsky explains.
The NBA used high-tech tools like technology from Kinexon, a real-time geolocation technology company, that tracks athletes’ performance to monitor social distancing. It also embraced low-tech solutions like discouraging players from licking their fingers, spitting, clearing their noses, or touching their mouth guards.
In all, the NBA spent $180 million dollars on bubble-related expenses that resulted in not a single positive test of a player, coach, or any of the people living on the campus in Orlando. The NBA faced a revenue shortfall of $1.5 billion associated with the pandemic, but that number would have been much higher if they hadn’t been able to play those games.
“They came out of this having shown that they could respond to a crisis, and still do pretty darn well,” Lashinsky says, “which is pretty good for the brand of the NBA.”
To hear from NBA commissioner Adam Silver, Andre Iguodala of the Miami Heat, and more analysis from Lashinsky, listen to the episode in its entirety.


fortune--2020-10-19--Move over tech stocks. This emerging sector is now fueling the equities rally

This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.
Good morning. Global stocks and U.S. futures are starting the week on strong footing with plenty of green on the screens from Tokyo to London. Solid Chinese economic data and a new stimulus deadline are supporting the risk-on mood. Meanwhile, looking back over the past month, we analyze the big run by consumer discretionary stocks.
Let’s see where investors are putting their money.
Markets update
Asia
The major Asia indexes are mostly higher in afternoon trading with the Nikkei up 1.2% .
are mostly higher in afternoon trading with the up . China’s 3Q GDP grew 4.9%, slightly off economists’ expectations. But the strong pick-up in retail sales bodes well for a steady economic recovery.
grew 4.9%, slightly off economists’ expectations. But the strong pick-up in bodes well for a steady economic recovery. Time to ditch quarantine? That’s what IATA thinks. The world’s airline trade body is pushing for an alternative to the 14-day quarantine, likening it to “closing your borders.”
Europe
The European bourses are trading higher out of the gates with Stoxx Europe 600 up nearly 0.5% despite concerns over Brexit, COVID and recession.
are trading higher out of the gates with up nearly despite concerns over Brexit, COVID and recession. Europe’s economy is careening towards a double-dip recession as the autumn wave of COVID cases continue to swell.
is careening towards a as the autumn wave of COVID cases continue to swell. Meanwhile, finance jobs in London are vanishing fast.
U.S.
U.S. futures are in the green this morning, and ticking higher. That’s after the Nasdaq closed down on Friday, capping a volatile week.
are in the green this morning, and ticking higher. That’s after the closed down on Friday, capping a volatile week. House Speaker Nancy Pelosi set tomorrow as the final deadline of getting a stimulus deal done. Investors cheered the news, lifting U.S. futures overnight.
set tomorrow as the final deadline of getting a stimulus deal done. Investors cheered the news, lifting U.S. futures overnight. It’s official. The U.S. deficit topped $3.1 trillion in the fiscal year ending Sept. 30. We knew it would be a record, but the numbers are still eye-watering. It’s more than double the previous record of $1.4 trillion in 2009. Meanwhile, America’s debt-to-GDP ratio is on pace to top 100% this year .
in the fiscal year ending Sept. 30. We knew it would be a record, but the numbers are still eye-watering. It’s more than double the previous record of in 2009. Meanwhile, America’s is on pace to top . The big earning calls on deck this week include: Netflix, Tesla, Coca-Cola, AT&T and Procter & Gamble.
Elsewhere
Gold is up, trading around $1,915/ounce .
is up, trading around . The dollar is flat.
is flat. Crude is down ahead of today’s big OPEC+ meeting, with Brent trading above $42.50/barrel.
***
Big returns
Tech stocks have taken a bit of a breather in recent days with the Nasdaq finishing down over four straight sessions. Even still, the index closed in positive territory for the week, speaking to investors’ unflinching faith in the mega-cap tech stocks.
Zooming out over the past month, tech stocks have had one of their best stretches of the year, with the Nasdaq 100 up 9% since mid-September. It’s a run that few Wall Street pros had predicted.
That said, this rally doesn’t entirely resemble the one we saw in August. While growth stocks are flying again, there’s been a pullback in gold and Treasurys. And consumer discretionary stocks, led by Nike, have really taken off in the past month.
As this morning’s chart, courtesy of Goldman Sachs shows, the consumer discretionary category has leaped over gold and Russell 1000 Growth to become the third-best performing segment of 2020.
That more sectors are contributing to this bull run is a positive sign of a more broad-based recovery, or, at least, investors’ faith in a broad-based recovery.
And the big losers? Those names haven’t changed. Financial stocks have performed slightly better in the past month, but they’re still down 17% on the year (vs. -18% a month ago). Meanwhile, energy stocks continue to fall (now down 47% YTD) even as crude oil prices stabilize.
If you want to find bears in this market, you’ll find them there.
***
Postscript
Last night, we gathered around the TV to catch Prime Minister Giuseppe Conte’s national COVID address. A lot of Italian businesses had been fretting the government would impose new restrictions along the lines of the French. In the end, we dodged the worst—no blanket curfews, no school closures and no shut down of gyms and restaurants.
Conte gave local mayors the option to dial back these activities where needed. Italians may see certain piazzas close at 9 p.m. to keep large crowds from gathering. But that just means la dolce vita will be limitata, not eliminata.
Italy without its famed la dolce vita social life is just not the same country. But it looks safe for now, we all hope, as the government opts for a softer touch this time around.
It marks a big difference from seven months ago when the country was overwhelmed by the deadly first wave of coronaviruses cases. Public health officials these days say the latest outbreak is not an alarming one as the number of hospitalizations and deaths, a lagging indicator, are still under control.
And, as Franco Locatelli, a chief public health advisor to the government, said yesterday on Italian television, a big percentage of the new “positive” COVID cases are of the milder, asymptomatic variety. “I’m neither panicked nor alarmed,” he added.
Locatelli is Italy’s answer to Anthony Fauci. I interviewed him recently just as cases started to spike in Italy. He told me then that the case load would get worse, but that this time the country was far better prepared.
As I wrote in the article, Italian politics can seem like a zoo sometimes, but during the COVID outbreak government officials have looked clear-eyed and coordinated. There have been no rambling endorsements of untested COVID cures like hydroxychloroquine or embarrassing U-turns.
“Let me put it this way,” Locatelli told me, “some decisions taken by other countries would not have been taken in Italy.”
Italy, this time around is getting a lot more attention for what it’s doing right. There’s a strong partnership between politicians and the scientific advisors. And the public trust remains solid.
This autumn surge feels very different.
***
Have a nice day, everyone. I’ll see you here tomorrow.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.
Today's reads
The dot-com bubble revisited. If you were to add all the tech companies in the S&P 500 they'd account for approximately 40% of the benchmark's value. If that holds up through December it would surpass 1999, the year of the great dot-com implosion, the Wall Street Journal reports. The valuations were far more out of whack then, but analysts are still concerned about Big Tech's big influence on this 2020 bull run.
The virus, stupid. With just over two weeks to Election Day, there's something odd playing out in the stock market. Stocks in "election-sensitive" sectors—think tech, energy and health care—aren't swayed by much the polls, even as they solidify towards Joe Biden. That's because the markets are focused on something else, reports Fortune's Shawn Tully: Vaccines.
The impact of a Biden tax hike. Ask the experts, and they'll tell you the Biden tax plan will either boost economic growth (Moody's) or shrink GDP in the years to come (the American Enterprise Institute, plus others). Who's correct? The New York Times digs into the numbers. Incidentally, here's what the experts said when Fortune asked what impact a Biden presidency would have on the stock markets.
Some of these stories require a subscription to access. There is a discount offer for our loyal readers if you use this link to sign up. Thank you for supporting our journalism.
Market candy
Quote of the day
Are you better off than you were four years ago?
Ronald Reagan, of course, goes down in history as the presidential candidate who forever changed politics when he asked America that very question 40 years ago. Pollsters will tell you though that the more people who answer in the affirmative doesn't always translate to a vote for the incumbent. This year, the election calculus is even more tricky to forecast, reports Fortune's editor-in-chief Clifton Leaf, who formulates a question that would be even smarter to ask Americans this election season.