fortune--2020-03-04--China’s new, combative response to hacking from the U.S.

This article first appeared in Data Sheet, Fortune’s daily newsletter on the top tech news. Sign up here.
America calls out China’s hacking so frequently that when accusations flow the other way, it’s notable.
One of China’s top cybersecurity companies, Qihoo 360, on Monday accused the U.S. Central Intelligence Agency of hacking Chinese organizations across a wide array of industries including aviation, oil and gas, and government. Qihoo alleges that the CIA infiltrated targets in Beijing, Guangdong, and Zhejiang between September 2008 and June 2019—an 11-year spree of breaches.
The Qihoo report follows a similar one published in September by Qi An Xin, another Chinese cybersecurity firm. Both rely on “Vault 7,” a cache of CIA documents exposed by WikiLeaks in 2017. The Chinese firms parsed the trove of leaked documents to match attacks they observed with likely perpetrators. (Joshua Schulte, a former CIA employee, is currently standing trial in the U.S. for allegedly leaking the Vault 7 documents.)
Since the Chinese cybersecurity firms’ reports draw so heavily from what is already in the public domain, they don’t contain much new information. But they do seem to signal a new, more combative approach by China in responding to breaches from abroad—even as the country comes under increasing fire for its own hacking escapades.
The U.S. Justice Department has been indicting more and more Chinese hackers. In recent weeks, federal prosecutors charged four Chinese nationals with hacking Equifax, the credit reporting agency that suffered a major breach in 2016. The prosecutors helped put another Chinese national behind bars for stealing trade secrets worth $1 billion from a petroleum company. And they accused two more of laundering more than $100 million in cryptocurrency on behalf of North Korea.
Beijing already seems to be seizing on the Qihoo report to undermine the U.S. “The findings, if confirmed, lay bare the US’ astonishing hypocrisy in accusing China of cyber attacks against its institutions and even imposing sanctions on Chinese entities and individuals, despite itself attacking China for years,” wrote one columnist for Global Times China, a Communist party tabloid. “If the revelations are confirmed, swift action must be taken against the involved US institutions, including the CIA, its hacking group and personnel involved in the cyber attacks.”
But there’s a big difference between China and America’s hacking. The former all too often breaches businesses in apparent attempts to steal trade secrets for economic gain. The latter has, from what anyone can tell, penetrated networks for intelligence-gathering—an activity that U.S. authorities would argue falls within acceptable nation-state hacking norms.
It’s unlikely China will take action against the alleged CIA hackers, given a widespread, tacit understanding that certain forms of international espionage are OK. If it does, the two superpowers’ spy games will substantially escalate.
Robert Hackett
Twitter: @rhhackett
Email: robert.hackett@fortune.com
THREATS
Feel the Bern. Someone has been impersonating Democratic presidential hopeful Bernie Sanders and attempting to set up meetings with other campaigns under the pretext. Meanwhile, a third of American voters say they have little confidence in an accurate vote tally in the upcoming U.S. presidential election, according to a recent poll. The vulnerability of many election-related websites—plus Los Angeles County, which debuted a brand-new voting system with unresolved security flaws—probably aren't helping to assuage people's fears.
Going viral. Misinformation related to the fast-propagating coronavirus disease, or COVID-19, is getting more engagement online than official reports out of the World Health Organization or the Centers for Disease Control and Prevention. A news-rating startup called NewsGuard found that false and misleading sources received 142 times more likes, shares, and comments than legitimate sources. Meanwhile, the wonks over at Citizen Lab, an academic group based out of the University of Toronto, revealed how Chinese censors have been restricting the flow of information about the disease.
NSO no-show. The Israeli spyware-maker NSO Group failed to show up to court in California after being sued by WhatsApp, resulting in a notice of default that could swing a decision in WhatsApp's favor. The Facebook unit alleges that NSO Group used software vulnerabilities to help remotely hack hundreds of smartphones. NSO responded that WhatsApp “prematurely moved for default before properly serving NSO with the lawsuit," despite WhatsApp cataloguing its many efforts to serve legal documents to the company.
Too big for your breaches. Walgreens has warned that an app used by its customers to track prescriptions may have leaked people's personal information between January 9th and 15th. Visser, a firm that supplies parts for Tesla and SpaceX, also told TechCrunch that it was “the recent target of a criminal cybersecurity incident, including access to or theft of data.” And Carnival Cruises disclosed that two subsidiaries—Holland America and Princess Cruises—suffered a data breach involving people's credit card information and Social Security numbers.
Sophosticated dealmaking. Private equity firm Thoma Bravo closed its $3.9 billion acquisition of Sophos, a British cybersecurity firm. Sophos had raised $500 million in venture capital before going public on the London Stock Exchange in 2015.
"Indicting nation-state hackers is like pissing your pants"
ACCESS GRANTED
People who claimed to be manipulated by electronics, mass media, and hidden machinery used to be considered delusional, paranoid, or insane. Today, in the age of Facebook and hyper-targeted advertising, they don't sound so crazy. In a feature for The New Atlantis, a journal of technology and society, Geoff Shullenberger reveals how belief in mind control—once deemed crazy—became conventional wisdom. (I particularly like the anecdote about the 18th-century "air loom" device, believed by one paranoid schizophrenic to be a treasonous, technologic puppet-master of sorts.)
The worries stirred up by the Cambridge Analytica story — whether they were an outburst of irrational panic or a recognition of new political realities — were just the latest in a long history of anxieties about technologically enabled mass deception and manipulation. The potential for such an enterprise entered the realm of the imagination well before anything like it was technically feasible. But the earliest people to imagine it were not technology critics or political reporters. They were paranoids in the original sense of the word: individuals regarded as insane.
FORTUNE RECON
Amazon’s Alexa can now give you detailed information on your medications by Sy Mukherjee
The autonomous vehicle war is very much a money war by Polina Marinova
What is Clearview AI and why is it raising so many privacy red flags? by Alyssa Newcomb
More and more companies are gaining an appetite for A.I. acquisitions by Jonathan Vanian
A little taste of Brainstorm Finance, Fortune's fintech conference by Robert Hackett
ONE MORE THING
Last week we ran a small excerpt from Wired editor Stephen Levy's new book about Facebook. Tech blog OneZero recently ran a passage from a prior Levy book, Crypto, that's worth rereading. It details the breakthroughs of Whitfield Diffie, a massively influential cryptographer whose work forms the basis of digital security. As Levy writes, "In short, Diffie had not only figured out a way to assure privacy in an age of digital communications, but he had enabled an entirely new form of commerce, an electronic commerce that had the potential not only to match but to exceed the current protocols in commercial transactions."
We salute you, Mr. Diffie.


fortune--2020-03-04--The coronavirus testing conundrum

The coronavirus testing conundrum

When will PlayStation 5 and Xbox Series X debut ?
With coronavirus , it ’ s anyone ’ s guess

This is the web version of Brainstorm Health Daily, Fortune’s daily newsletter on the top health care news. To get it delivered daily to your in-box, sign up here.
Happy Wednesday, readers.
I promised you a major coronavirus dispatch yesterday. Well, it went up last night.
In the course of writing this story on the mess that is the coronavirus testing procedure (and what such tests might cost a patient), I reached out to every state department of health in the country. All 51 of them (every state plus DC), alongside urgent care centers, pharmacy chains, the Centers for Disease Control (CDC), and others.
And while a handful of these agencies responded on the record, either via email or in telephone interviews, it was striking to see how many simply pointed to press releases, declined to talk to me at all, or didn’t respond. (Some have begun reaching out to me since the piece was published last evening.) The CDC declined multiple requests for comment. California’s health department declined multiple requests for comment. CityMD, one of the largest urgent care centers in New York, didn’t respond to multiple requests for comment.
Of course, part of that silence is likely due to the fact that many of these organizations have their hands full with the coronavirus situation. But there’s clearly also some confusion about how the process works, and how federal, state, and local agencies interact with the health care system.
The good news: Multiple health departments told me that coronavirus tests are finally making it to local labs that are cleared to conduct such testing. But as for how much such testing costs patients? That’s a lot more nebulous.
For instance, the two coronavirus tests which are cleared for use (the CDC’s and one developed in New York) should ostensibly be free. But that isn’t always how it works out in practice. A hospital stay or quarantine could still cost you thousands of dollars even if the coronavirus testing, itself, is free. So how “free” is it, then?
For many, many more details about what we now know about this procedure, head on over here.
Read on for the day’s news.
Sy Mukherjee
sayak.mukherjee@fortune.com
@the_sy_guy
DIGITAL HEALTH
Livongo doubles its membership. Digital chronic health management firm Livongo continues to grow its footprint. The company, which went public last summer, says its membership nearly doubled in 2019, with nearly 223,000 active members at the end of last year. Its most popular product remains its flagship diabetes program, which uses connected devices and glucose monitors while simultaneously linking patients with health coaches via an app who give them personalized advice based on their blood sugar levels and other biometrics. I spoke with the company's leadership during its IPO to discuss its strategy and secret sauce. (MedCity News)
INDICATIONS
Takeda is trying to make a blood plasma-based coronavirus drug. Takeda, Japan's largest drug maker, is joining the ranks of companies developing coronavirus treatments. What's different about Takeda's approach, however, is it utilizes blood plasma from coronavirus patients who have actually recovered from COVID-19, the respiratory disease caused by the pathogen. That's the second bit of major news from the company in a week—recently, it scooped up a smaller biotech in order to build its celiac disease treatment pipeline. (Wall Street Journal)
THE BIG PICTURE
Supreme Court takes up major abortion case. Obamacare isn't the only thing headed back to the Supreme Court. A long-brewing fight over abortion rights will now be overseen by the justices. Arguments in the case, which centers on a Louisiana law that would require doctors who perform abortions to have special "admitting privileges" (and therefore would cause nearly all clinics in the state which provide such services to shut down), began at 10 a.m. this morning. There are five conservatives on the court versus four liberals, so it could all come down to one vote. States and the Trump administration have been cracking down on abortion providers in recent years. (Reuters)
WHO: Coronavirus mortality rate up to 3.4%. The World Health Organization on Tuesday said that the death rate from novel coronavirus is at 3.4%, higher than the seasonal flu. However, the agency also stated that it's not quite as transmissible as influenza, though the severity of the disease is graver. This is a global estimate which one official described as "crude," and cautioned would change over time as more data is gathered. Deaths outside of China, where the outbreak originated, are now outpacing deaths within China, with Iran, Italy, and South Korea reporting the most cases.
REQUIRED READING
Meet the A.I. that helped Facebook remove billions of fake accounts, by Jeremy Kahn
Will the coronavirus cancel the 2020 Olympics?, by Eamon Barrett
Bloomberg, Sanders, and Warren want to use post offices as banks, by Nicole Goodkind
More and more companies are gaining an appetite for A.I. acquisitions, by Jonathan Vanian
Sign up for other Fortune newsletters.


fortune--2020-03-04--Tesla skimps on warranty costs to inflate its profits, critics allege

Over the last four months, Tesla’s shares have nearly tripled in value after the company’s quarterly earnings twice beat Wall Street’s expectations. But some Tesla critics allege that those profits were the result of misleading accounting.
They claim that Tesla has inflated its profits by artificially lowering its “warranty reserve,” the money it sets aside to pay for future repairs to cars covered by warranties.
In every quarter last year, Tesla earmarked less money per car to cover repairs than in the previous quarter, according to calculations by Fortune that were based on the company’s regulatory filings. If Tesla had continued to set aside the same amount of money per car for warranties as it did in late 2018, its 2019 profits would have been reduced by tens of millions of dollars.
In its most recent quarter, for example, Tesla reduced warranty funding per car by 6% compared to the previous quarter. That reduction alone, according to Fortune’s calculations, added close to $10 million to the company’s fourth-quarter profits.
Tesla did not respond to multiple requests for comment about its accounting changes. PwC, the accounting firm responsible for auditing Tesla’s financial reports, said it was unable to comment.
Tesla could have a reasonable explanation for reducing its warranty funding. For example, it may have determined that its newer cars require less long-term maintenance.
For its part, the Securities and Exchange hasn’t questioned Tesla about its maintenance funding for the cars it sells. In September, the agency did seek information about how Tesla classifies the cost of repairing leased vehicles. Tesla responded by arguing that its earmarks for lease maintenance was in line with accounting standards. The SEC completed its review without taking further action.
But Tesla’s critics, mainly smaller investors who organize on Twitter and have only limited support from institutional analysts, see something nefarious in the company’s warranty accounting more broadly. Some of those critics are short sellers, meaning that they profit when a company’s stock declines, motivating them to dig for bad news, or in some cases, cast doubts on justifiable accounting.
“By underestimating your warranty reserve, you’re understating the cost of goods sold,” says Lawrence J. Fossi, a retired family fund manager and business attorney who writes about Tesla analysis under the pseudonym Montana Skeptic for investing blog Seeking Alpha while holding a short position in Tesla. “It would inflate [Tesla’s] gross margins, and also their bottom line. And if you’re in growth mode, it’s a significant distortion.”
Is Tesla understating its future warranty obligations?
Most new cars sold in the developed world come with warranties – commitments by manufacturer to fix the car for a certain amount of time or miles driven. To meet that commitment, auto manufacturers set aside a percentage of the proceeds from each sale to pay for future service.
This ‘warranty reserve’ is considered a cost, reducing the profitability of each car in proportion to the predicted amount of money needed for future warranty service. Tesla’s warranties are for as long as eight years, or 100,000 to 150,000 miles, meaning most of the cars it has ever sold—as well as some certified pre-owned cars it has sold more than once—are still under warranty.
Getting a clear picture of the total costs is complex because the numbers provided by Tesla lack detail and include some unrelated expenses. Most importantly, Tesla’s maintenance cost for leased cars, a growing portion of its business, isn’t included in its warranty reserve, and instead appears quarterly under a different line item.
A portion of Tesla’s warranty earmarks also covers non-automotive products such as solar panels and batteries used to store power for buildings. Similar to Tesla’s automotive business, some of its energy products are sold under warranty, while other products are leased, and therefore are not under warranty.
Therefore, it’s difficult to know how much Tesla’s energy business contributes to the overall warranty reserve. However, energy makes up only 6% of the company’s current revenue, and was effectively flat for 2019. So it is unlikely to have accounted for substantial changes to warranty reserve levels.
Additionally, Tesla’s tweaks to its warranty reserve may also reflect foreign exchange fluctuations, or other unknown factors.
With those unknowns, Fortune’s calculations, after adjustment for leased cars, showed a clear trend. In the fourth quarter of 2018, Tesla budgeted an estimated $2,007 per car to pay for repairs for the duration of the cars’ warranties. By the fourth quarter of 2019, the allocation had declined almost 27%, to just $1,467 per car.
These changes in Tesla’s warranty accounting had a major impact on its reported profits. If the company had set aside the same amount per car delivered in the fourth quarter of 2019 as it did for the same period in 2018, its warranty funding would have cost an estimated $207 million, instead of the actual contribution of $151.3 million.
The implied savings of $56 million would have accounted for more than half of Tesla’s $105 million in total fourth-quarter net profit.
Many analysts and investors base their projections about Tesla’s future on the profit margin of each car it sells – its so-called ‘automotive gross margin,’ which includes warranty costs. A higher gross margin would make the carmaker appear to be a bigger money maker, thereby pushing investors to bid up its stock price.
Fund manager Mark Spiegel has approached the issue from a different direction, and says he found even larger discrepancies. Based on what Tesla said it actually spent to maintain cars under warranty in the third quarter of 2019, Spiegel estimated that the cost of maintaining a Tesla over its lifetime is $3,232 per car. Funding fourth-quarter 2019 warranty costs to that level would have cost $333 million, $182 million more than the actual declared cost – enough to more than wipe out Tesla’s fourth-quarter profits.
“It’s clear based on the revealed amount of warranty spend . . . that the reserve is too small,” Spiegel, a longtime, vocal Tesla short-seller, tells Fortune.
Craig Irwin, a senior analyst at Roth Capital Management, is also skeptical of Tesla’s accounting. Irwin lowered his rating on Tesla’s stock to a “sell” in late October, partly because he saw problems with the warranty accounting. Irwin describes the warranty accounting changes as seeming “somewhat artificial rather than organic” and “aggressive.”
Irwin’s skeptical downgrade, of course, has turned out to be at the very least ill-timed. Anyone who took his advice in October has missed the stock’s historic run from $327 to over $850, before pulling back to nearly $750 based on fears over the impact of coronavirus on sales and production. Either the details of accounting have been overwhelmed by optimistic market sentiment, or many others have looked at the criticisms and found them unconvincing.
Did the cars just get that much better?
And there are plausible, benign explanations for Tesla’s steadily-declining warranty commitments. Tesla had a notoriously rocky rollout for its Model 3 sedan in late 2017, including many of the cars being built using what CNBC described as “shortcuts,” or under improvised conditions including in a tent factory.
“I think it’s likely that they’ve gotten better at making the Model 3,” says Fossi, the blogger. “The later [cars] are probably more reliable.”
Such improvements may have lowered Tesla’s internal forecasts for lifetime warranty service costs for cars manufactured more recently. Even Spiegel’s own estimates of Tesla’s real repair costs have declined. For the third quarter of 2018, he calculated the expense at $3,500 per car, compared to $3,232 in the same period a year later. If Tesla’s warranty costs are truly declining, there’s less reason to question the company’s profitability.
By some measures, Tesla’s warranty funding is more than adequate. In fact, compared to some other automakers, it’s near average.
Business news publication Barron’s calculated that Tesla’s third quarter additions to the warranty reserve were 2.7% of the company’s car sales – slightly higher than the auto industry average of 2.5%. That’s despite the fact that electric engines have fewer parts that are subject to wear than internal combustion engines, making them potentially cheaper to maintain.
Future risks
The accuracy of Tesla’s warranty reserves may, one day, have a concrete impact on investors. Increasing warranty repair costs could deplete current reserves. If that happens, the company would have to sharply increase its warranty contributions, which would in turn reduce profits. Tesla includes a boilerplate statement about that risk in its regulatory filings, saying “Our current and future warranty reserves may be insufficient to cover future warranty claims, which could adversely affect our financial performance.”
For the moment, what’s most notable about Tesla’s accounting is that for many investors, it simply doesn’t matter. “The growth story is what matters,” says Albert Meyer, founder of Bastiat Capital, which says its investing principles are “anchored in forensic accounting.” But when it comes to Tesla, and the warranty reserve specifically, Meyer throws up his hands.
“Maybe it should be $5 million more. Maybe it should be $10 million more,” he says. “But does that really matter? With Tesla, people just shrug it off.”
More must-read stories from Fortune:
—How 5G promises to revolutionize farming
—Did the ‘techlash’ kill Alphabet’s city of the future?
—College backlash against facial recognition technology grows
—In A.I., what would Jesus do?
—Coronavirus is giving China cover to expand its surveillance. What happens next?
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-03-04--The bitter lesson founders can learn from Eden’s acquisition of Managed by Q

Be careful who you sell your company to.
That timeless lesson is in full view today: WeWork has sold Managed by Q, the New York City-based on-demand office services startup. Here’s the twisted story of the battle over it.
In April 2019, WeWork agreed to acquire Managed by Q for $220 tomillion. According to the terms of the deal, Managed by Q CEO Dan Teran would stay on after the acquisition, and the company, along with its 500 employees, would remain a wholly-owned separate entity from its parent.
But then WeWork’s plans for a flashy initial public offering imploded, and it had no choice but to put the office services firm on the chopping block as part of its cost-cutting measures. As the situation got more serious, Teran was determined to try to control his company’s fate. He began raising money to buy back his company at a fraction of the price for which it was acquired.
But there was an outside bidder lurking: Eden, a San Francisco-based startup and one of Managed by Q’s biggest competitors, was also interested in buying Teran’s company.
About three months later, Eden has won the bitter battle for Managed by Q. Teran was unable to win back ownership of his firm. According to TechCrunch, the purchase price was $25 million, a tiny slice of what WeWork paid for the company less than a year ago. (Eden declined to confirm or correct the amount with TechCrunch.)
Eden also announced a $29 million funding round led by JLL Technologies, which was used to fund the acquisition.
It’s a blow to Teran, but the story serves as a reminder that once you sell your company, its fate is fully in the hands of its new owner. Some version of the WeWork fiasco might happen more often than we realize.
Polina Marinova
Twitter: @polina_marinova
Email: polina.marinova@fortune.com
VENTURE DEALS
- Alignment Healthcare, an Orange, Calif.-based insurance company, raised $135 million. Investors include Fidelity Management & Research Company, T. Rowe Price Associates, Inc., and Durable Capital Partners L.P.
- Boutiqaat, a Kuwait-based beauty products e-commerce company, is raising between $100 million and $150 million in funding, according to Reuters. The deal could value the company anywhere between $800 million to $900 million, Read more.
- Netlify, a San Francisco-based platform that automates web projects, raised $53 million in Series C funding. EQT Ventures led the round, and was joined by investors including Andreessen Horowitz, Kleiner Perkins, and Preston-Werner Ventures.
- Five, a U.K.-based self-driving company, raised $41 million in Series B funding. Investors include Trustbridge Partners, Direct Line Group, Sistema VC, Lakestar, Amadeus Capital Partners, Kindred Capital and Notion Capital.
- Sensel, a Mountain View, Calif.-based developer of touch interfaces, raised $28 million in Seris A funding. Investors include Susquehanna International Group, Morningside Group, SMiT, Palm Commerce Holdings Co. Ltd, Chariot Gold Limited, SV Tech Ventures, and Innolinks Ventures.
- Sourcegraph, a San Francisco-based startup that provides Universal Code Search, raised $23 million in Series B funding. Craft Ventures led the round, and was joined by investors including Redpoint Ventures and Goldcrest Capital.
- Talespin, a Culver City, Calif.-based spatial computing company, raised $15 million in Series B funding. Cornerstone OnDemand led the round, and was joined by investors including HTC and Farmers Insurance Exchange.
- Membrion, a Seattle-based manufacturer of ion exchange membranes, raised $6 million in Series A funding. Bellingham Angel Investors led the round, and was joined by investors including WRF Capital and SeaChange Fund.
- Arya Collateral Warehousing Services Pvt Ltd, an India-based storage and warehousing services company, raised $6 million in pre-Series B funding from Omnivore and LGT Lightstone Aspada.
- BoxLock, an Atlanta-based developer of delivery technology for homes and businesses, raised $4.5 million in funding. Investors include Dan McHugh, former CEO of Livingston, Southern Air and DHL Asia Pacific, Michael Monahan, former CFO/COO of Pitney Bowes, and Robert Williams, former Amazon and Microsoft executive.
HEALTH & LIFE SCIENCES
- Culture Biosciences, a South San Francisco biotechnology company, raised $15 million in Series A funding. Cultivian Sandbox Ventures led the round, and was joined by investors including The Production Board, Verily Life Sciences, Section 32, YCombinator, and E14 Fund.
PRIVATE EQUITY DEALS
- Direct Health Care Group, a portfolio company of ArchiMed, acquired GATE Rehab Development, a Sweden-based developer of rehab equipment.
- AE Industrial Partners acquired G.S. Precision, Inc, a Brattleboro, Vermont-based manufacturer of high precision components and specialty hardware used primarily in aerospace engines and defense systems. Terms of the transaction were not disclosed.
- Vision Innovation Partners acquired Baltimore Eye Physicians, a Baltimore-based ophthalmology practice. Financial terms weren't disclosed.
- Summit Partners made a majority investment in Viroclinics Biosciences B.V., a Netherlands-based specialized contract research organization. Financial terms weren't disclosed.
OTHER DEALS
- Thermo Fisher Scientific Inc agreed to acquire Qiagen NV (NYSE:QGEN) in an $11.5 billion deal. Read more.
IPOs
- Nikola Corporation, a Phoenix-based maker of zero-emission semi trucks, plans to go public via merger with blank check company VectoIQ Acquisition Corp. (NASDAQ: VTIQ). The enterprise value of the merger is $3.3 billion. The company plans to remain NASDAQ-listed under ticker symbol "NKLA." Read more.
- Banque du Caire, an Egyptian state-owned bank, plans to offer a minor $500 million stake via initial public offering starting mid-April, per Reuters. Read more.
- Prima Foods SA, a Brazilian meatpacker, filed for an IPO that is expected to raise $222 million in the country, Reuters reports citing sources. Jose Batista Junior backs the firm. Read more.
EXITS
- Exor agreed to sell PartnerRe, a Bermuda-based reinsurer, to Covea for $9 billion in cash, according to Reuters. Read more.
PEOPLE
- Laconia Capital Group promoted Geri Kirilova to partner.
- Winston Lin joined Verizon Ventures as a principal.


fortune--2020-03-04--As coronavirus savages world’s mega-fortunes, U.S. surges ahead as home to the fabulously rich

The U.S. is home to even more of the super-rich.
The country created the most individuals last year — 13,443 — with fortunes of $30 million or more, according to Knight Frank’s 2020 Wealth Report. China was second with 7,892 new ultra-high-net-worth individuals, while Japan was a distant third.
“Asia is becoming more and more important, but America is incredibly successful at remaining right at the fore,” said Liam Bailey, Knight Frank’s global head of residential research.
The survey highlights increasing wealth across the U.S. and China even as trade tensions escalated between the nations last year, sparking fears of a global recession before an initial agreement was reached in December. Some of those gains disappeared during last week’s coronavirus-fueled rout of equity markets, when the combined fortunes of world’s 500 richest people dropping $444 billion over five tumultuous trading days.
“The spread of the Covid-19 illness is a serious and concerning development with a significant human impact but which also has the real potential to create economic and market uncertainty,” Bailey said. “It is another headwind for the world economy.”
The number of ultra-high-net-worth individuals worldwide increased 6% to 513,244 from a year earlier, according to the Knight Frank report. North America had the largest number, while Asia’s 13% growth — the highest globally — edged it closer to leapfrogging Europe into second place.
Growing fear over coronavirus is battering commercial airline stocks, but private jet operators are seeing a spike in demand as well-heeled travelers look to minimize their public exposure and find alternatives to suspended flights. The majority of private jet flights last year were to U.S. destinations, with the most popular route between Los Angeles and Las Vegas, according to Knight Frank.
More must-read stories from Fortune:
—Before coronavirus, there were SARS and MERS. Do epidemics ever really end?
—Coronavirus is giving China cover to expand its surveillance. What happens next?
—The Greek economy is roaring back—which could lead to mass evictions
—10 journalists who deserve justice immediately
—Fortune Explains: Tariffs and trade wars
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-03-04--California’s boardroom diversity experiment delivers mixed results

This is the web version of the Broadsheet, Fortune’s daily newsletter for and about the world’s most powerful women. To get it delivered daily to your in-box, sign up here.
Good morning, Broadsheet readers! The Supreme Court will hear oral arguments in June Medical Services v. Russo, Elizabeth Warren has a rough Super Tuesday showing, and we get the first results from California’s new boardroom diversity law Have a wonderful Wednesday.
– Mixed boardroom bag. California’s grand experiment to add women to corporate boards is well under way and the first signs of how effective it is are in. The results are mixed at best.
Of 625 companies listed on a report from the California Secretary of State earlier this week, 282 reported to have at least one female director, as required by the new law aimed at increasing boardroom gender diversity. The Secretary of State indicated that another 300 companies didn’t turn over the required information about board makeup, though some of those firms do appear to have at least one female director. Then there are 43 companies that reported no women on their board, indicating they are in violation of the new regulation.
Information about compliance—or lack thereof—with the new law is somewhat limited because California is currently engaged in litigation over it. If companies are eventually penalized for failing to fulfill the state’s new quota—the law enforces a $100,000 fee for the first violation and $300,000 for any violation after that—it will be the first-of-its-kind regulation in the U.S.
The new law, you’ll recall, tiptoes into territory that’s already well-charted outside the U.S.; countries like Norway, Germany, and France implemented quotas years ago. Yet such mechanisms remain hugely unpopular in U.S. boardrooms, with 83% of all directors opposing them, including more than half of women surveyed, according to PwC research. California is often a testing ground for progressive regulation, but so far no other states have followed its lead entirely (Illinois came close), perhaps due to the on-going lawsuits.
Nevertheless, there’s evidence the law is moving boardroom diversity in the right direction; women assumed 45% of new board seats at California-based Russell 3000 companies, versus 31% of board appointments nationwide, according to Bloomberg data.
And Keith Bishop, a former financial regulator in California, told Bloomberg that the law has been a wakeup for firms across the country, even as it’s challenged in court. “Whether the law is ultimately upheld or not,” he said, “I think it’s had an effect.”
—
In other California news, the state was one of 14 to hold Super Tuesday primaries yesterday. Elizabeth Warren, the only viable female candidate still in the Democratic race, did not win the contest there; what’s worse, she failed to claim victory in her home state of Massachusetts. The latter loss capped a disappointing evening for her campaign. More on that below.
Claire Zillman
claire.zillman@fortune.com
@clairezillman
Today’s Broadsheet was produced by Emma Hinchliffe.
ALSO IN THE HEADLINES
- A super eventful Tuesday. After Elizabeth Warren's disappointing showing in last night's primary results, the chorus—among Bernie Sanders supporters and even President Trump—calling for her to drop out has grown louder. Warren has so far resisted that pressure. The new frontrunner for the Democratic nomination is Joe Biden, who claimed victory in at least nine states, leading the delegate count. (He had an eventful night for other reasons too: Dr. Jill Biden and senior adviser Symone Sanders fought off an anti-dairy protester who stormed the stage.) Among closely watched down-ballot races, Jessica Cisneros lost her bid to unseat Rep. Henry Cuellar in Texas; Rep. Kay Granger fended off her primary challenger in the state; alleged child molester Roy Moore lost out on a runoff to appear on the ballot again in Alabama; and the race to replace Rep. Katie Hill in California is headed to a runoff, with Christy Smith at the top of the pack.
- Justice(s) watch. The Supreme Court today is set to hear oral arguments in June Medical Services v. Russo, the abortion clinic case that could reshape abortion rights in America and leave Louisiana with only one clinic. It's the first time the Supreme Court will hear an abortion-related case since two justices appointed by President Trump joined the bench. The case will test the current court's approach to precedent (a similar issue was decided in 2016) as well as "the argument that abortion itself can be harmful to women, and that restricting access to the procedure therefore is beneficial to women." Wall Street Journal
- MPW IWD. Ahead of International Women's Day, tune into the Fortune 500 Daily wherever you get your podcasts for today's episode about Kohl's CEO Michelle Gass and tomorrow's covering Accenture CEO Julie Sweet. Fortune
- Turnaround and out. Helena Foulkes, the former CVS executive who as CEO of Hudson's Bay Company engineered an attempted turnaround of the business, will depart the post after finalizing a deal for the Saks Fifth Avenue parent to go private. She joined Hudson's Bay in 2018 and during her tenure sold off Lord & Taylor, Gilt, and some European operations. Wall Street Journal
MOVERS AND SHAKERS: Americares promoted Jenny Goldstein to SVP and chief development officer. Laura Newinski has been elected to serve as KPMG's next deputy chair in the U.S.; she currently serves as vice chair of operations.
IN CASE YOU MISSED IT
- Kim speaks. Kim Yo-jong, sister of North Korean leader Kim Jong-un, made her first ever official public statement. In it, she condemns South Korea as a “frightened dog barking;” the country recently protested against North Korea's live-fire military exercise. Kim, who in January was named a first vice-department director of the central committee of the ruling Workers’ party, has in the past had a more friendly relationship with the South, and her statement signals "heightened pressure," experts say. Guardian
- Building history. The Pritzker Architecture Prize, or the "Nobel of the architecture world," went to two women, Yvonne Farrell and Shelley McNamara. The Irish duo co-founded the firm Grafton Architects and are the fourth and fifth women to ever win the prize. They're known for work that is sensitive to natural elements, from North King Street Housing in Dublin to the University of Engineering and Technology in Lima, Peru. NPR
- Parental leave report. U.K. Prime Minister Boris Johnson is expecting a child with his fiancée Carrie Symonds—the baby will be at least his sixth—and yes, he will take paternity leave. Johnson says he plans to take two weeks off after the child is born this summer; David Cameron and Tony Blair also both took paternity leave while in office. Guardian
- Behind the scenes. How did the jury come to decide to convict Harvey Weinstein? This story goes inside their deliberations. With Dunkin' Donuts and Sour Patch Kids strewn across the table, they decided to focus on whether each specific act happened and whether it was a crime—mostly disregarding the complicated relationships between Weinstein and the women who testified. New York Times
ON MY RADAR
Two new moms return to work—one in Seattle, one in Stockholm Harvard Business Review
The upside of raising a 'rude' daughter Gen
Rent the Runway adds a new subscription option CNBC
Jessica Simpson's mesmerizing memoir of recovery and X-ennial fame The New Yorker
PARTING WORDS
"It definitely feels pretty good to pin a guy."
-Heaven Fitch, the North Carolina 16-year-old who became the first girl to win a state's men’s wrestling championship


fortune--2020-03-04--Why you’re mad as hell about the Astros, but not Wells Fargo

Over the past few months, it has come to light that the Houston Astros used a high-tech/low-tech strategy to steal signs from opposing catchers and to signal them to batters. This scheme involved cameras and players banging on trash cans. The Astros think it helped their players.
Not everyone is so thrilled with the Astros, of course. Indeed, fans and even other players have reacted with outrage to the news of the scheme. And players caught up in significant scandals like Pete Rose and Shoeless Joe Jackson have been banned for life from the game.
By way of contrast, think about scandals in business. People who act unethically in business and the organizations they work for may get punished, but they aren’t tarred forever as cheaters. Michael Milken may have been indicted for racketeering and securities fraud, but he emerged afterward to be a philanthropist—and was recently pardoned by President Trump. Even companies like BP and Volkswagen, which had significant environmental scandals, or Wells Fargo, which defrauded customers, remain profitable companies.
A core difference between sports like baseball and business involves our focus on the process versus the outcome. In sports, the process for playing the game is the whole point. We create arbitrary rules for a sport (like not touching the ball with your hands in soccer or having to run the bases counterclockwise in baseball), and then we see which people and teams can excel within that set of rules. Often, the game makes no sense without those rules.
In contrast, the central focus for business is the outcome. Companies have some goal—often to sell a product or service—and they want to find ways to achieve that goal. Indeed, we often hold up people who break the mold of how a particular business operates through disruptive innovation as examples of the best of what business can achieve. Netflix disrupting Blockbuster by renting movies without having brick-and-mortar stores was not seen as cheating, but rather as a more positive kind of game-changer.
Of course, business does operate within a system of laws. In general, though, the rules we place around business are designed to prevent a desire for short-term gains to cause significant problems for markets in the long term or to keep any single entity in a market from amassing too much power to control prices in order to allow the “free hand of the market” to operate. That is, the purpose of rules in business is for regulation, not to define the task itself.
As a result, people’s reactions to rule infractions differ in each context. Sports fans treat the central rules of their sport as “protected values.” A protected value is one for which we will not accept tradeoffs. We react to violations of these values with outrage. We may allow some rules of sports to be bent (players in professional basketball often take more than one step after they stop dribbling), but we do not dispense with the rules altogether. And a team or player that flouts those rules bears the brunt of the outrage of fans, management, and even the officials of the league governing the sport.
The rules of business are often enforced with sanctions of some kind. As a result, following these rules is treated as a business decision rather than an ethical choice, where the fine to be paid because of a violation is just another cost of doing business to be weighed against the cost of complying.
One core outcome of this difference in the way rules are treated in sports and business is the legislative response to scandals involving rule-breaking. In sports, persistent rule-breaking is often met with changes in rules and tougher enforcement of existing rules. Lance Armstrong was stripped of his Tour de France victories after revelations that he was doping during his string of victories. Testing for anabolic steroid use among baseball players was increased after high-profile cases like Barry Bonds’s.
In business, there is resistance to changes in regulation after scandals, and even when legislation is put in place, it is often rolled back after the initial furor dies down. For example, after a variety of questionable financial practices combined to create the 2008 financial crisis, regulations including the Dodd-Frank Act were put in place. By 2018, those regulations were rolled back.
Sports have always allowed a certain amount of deviation from rules, as long as they do not fundamentally alter the spirit of competition. Groundskeepers in baseball have often made subtle changes to the field, like giving it extra water, in order to favor the home team. Likewise, we want businesses to question core assumptions of industries in order to disrupt markets.
Perhaps, though, ethical violations in business should be treated with the kind of outrage that greets sign-stealing and doping. It might just help business not repeat some of the biggest mistakes of the past.
Art Markman is executive director of the IC2 Institute at the University of Texas at Austin and author of Bring Your Brain to Work.
More opinion in Fortune:
—Coronavirus shows why we need vaccines before, not after, an outbreak
—How Democrats’ impeachment campaign helped Trump
—Being a CEO is more tenuous than ever. How I survived 30 years at Aflac
—How Warren Buffett built Berkshire Hathaway
—Are the Houston Astros irredeemable cheaters? Or are they all of us?
Listen to our audio briefing, Fortune 500 Daily


fortune--2020-03-04--Bloomberg, Sanders, and Warren want to use post offices as banks

Most American city dwellers are used to seeing a favorite ice cream shop or watering hole seemingly replaced overnight with a shiny new consumer bank. The switch from PBR to APR can be quick and ruthless, but it has come to be expected.
Now, proposals by presidential candidates former New York City Mayor Michael Bloomberg, Sen. Bernie Sanders (I-Vt.), and Sen. Elizabeth Warren (D-Mass.) could turn the United States Postal Service’s 31,324 offices into quasi-banks.
But unlike the shuttering of mom-and-pop shops in favor of ATM vestibules, this progressive plan would work to service the 25% of U.S. households (closer to 50% for Hispanic and African-American households) that are either unbanked or underbanked and often fall prey to payday lenders and others peddling unsavory and egregiously high-interest loans.
Nearly 60% of Americans live in zip codes with one or no banks available to them, and using the post office to provide financial services could open new doors to financial planning and saving.
Bloomberg has in the past called the United States Postal Service (USPS) antiquated and falsely accused the institution of using taxpayer dollars (it is self-funded). “Members of both parties spend money to protect public sector jobs in antiquated industries—maintaining traditional postal service in the Internet age is a good example of that,” he said in a 2014 speech at the The Economic Club in Washington, D.C.
Bloomberg, until recently a Republican who served as a partner at an investment bank and owns a private financial firm, has surprisingly eschewed his moderate roots and signed on to support the progressive ideals of postal banking. As part of his proposed presidential financial reform plan, released in February, he would offer a “curated selection of financial services” through the USPS.
The plan, says his campaign, would aid the Postal Service, which lost nearly $8.8 billion last year. The details, however, are still TBD. The campaign tells Fortune that they would lean heavily on the trust that the public already has for the USPS, which has a favorability rating of 90%, higher than any other federal agency.
“This would be a very good opportunity to create a safe place for financial services. You can be sure you won’t get a bad payday loan here,” says Mark Whitehouse, a policy adviser to the Bloomberg campaign. “We’ll provide a selection of services offered by private companies and give them a nationwide reach.” The services, he said, would have to pass certain federally mandated guidelines: no overdraft fees, and inexpensive loans. “The goal here is to make banking less expensive for the poor.”
The services would be based on a Federal Deposit Insurance Corporation pilot program of “safe accounts,” which provide free direct deposit, automatic saving, and online access, opening balance requirements of less than $25, and a monthly minimum balance of just $1. They would also provide small-dollar loans and allow for kiosk bill payment.
At the end of the pilot program’s first year, 81% of checking accounts and 95% of savings accounts remained open. Banks that participated in the programs reported no extra costs involved in implementing the program.
The Bloomberg campaign says that it would work with outside nonprofit organization Cities for Financial Empowerment Fund to ensure that all of the companies contracted meet basic requirements. This year, the organization, in partnership with the Federal Reserve Bank of St. Louis, tested out implementing its Bank On National Account Standards. It worked alongside four large financial institutions with positive results: Almost 3 million accounts were opened, representing 60% of zip codes nationwide.
The campaign pictures partnering with fintech companies that offer low rates but typically don’t have brick-and-mortar outposts. It’s possible that Postal Service workers will be trained to administer loans and open bank accounts on behalf of said companies. But most importantly, says Whitehouse, the post office would become a hub for government-vetted information.
“The problem is that for-profit schools and payday lenders spend tons of money on marketing, and they tend to target these communities,” he says. “People don’t receive the information they need to make sound decisions about financial services.”
The Bloomberg campaign isn’t the first to suggest such a change. The USPS Office of the Inspector General released its own white paper on the idea years ago, concluding, “The Postal Service arguably has the only public or private infrastructure that can reliably reach people in every American neighborhood. By bundling residual in-person services from several industries that are going digital into a single network of post offices, the Postal Service could help industries and citizens, and find much-needed new revenue.”
Between 1911 and 1967, banking services were provided at post offices under the United States Postal Savings System, signed into law by President William Howard Taft. Postal banks serviced nearly 4 million customers and held almost $3.4 billion in deposits at its peak around 1950. Eventually, the creation of the FDIC restored trust in private banks and rendered the postal bank redundant.
In recent years, facing insurmountable minimum balances, excessive charges, and overdraft fees that disproportionately impact those with median annual incomes of less than $30,000 (with interest rates sometimes higher than 3,500%), Democrats have suggested using post offices to institute banking services that specifically aid low-income Americans.
Sen. Kirsten Gillibrand (D-N.Y.) proposed last year to turn post offices into banking centers, and Warren and Sanders have also embraced the progressive idea. Moderate candidates with closer links to the banking industry have, however, left the concept off their campaign website policy pages (former Vice President Joe Biden uses the cause of saving the post office as a way to collect potential voter data on his own site).
Mark Dimondstein, president of the American Postal Workers Union, tells Fortune that while he hasn’t heard from the Bloomberg or Warren campaigns directly, he has worked with the Sanders campaign, and they are “very, very supportive” of postal banking and expanding financial services.
The next President, he says, will have a significant amount of control over the direction of the Postal Service, appointing people to the postal board of governors with confirmation by the Senate. There are currently four vacancies on the nine-person board with another expected to open up next year.
The board will be able to sign off on a number of financial services without congressional approval.
“Something has to be done in a more serious way with this predatory payday lending and check cashing industry,” says Dimondstein. “And what better way to deal with it than have the public entity within every community trusted by all, both in terms of the agency itself and the workers that serve it.”
The union, which represents nearly 225,000 members, proposes beginning with basic expanded financial services like payroll cashing, ATMs in every post office, electronic bill payment through the postal system, and electronic money transfers.
“People who work hard for their money and who don’t have access to banks at all could come to a post office, cash their check, put it on some kind of no-fee or low fee plastic instead of relying on predatory lending,” says Dimondstein. “Low-income workers who get stuck in this alternative financial industry of payday lending and check cashing spend about 10% of their incomes on fees and services. So if that can be diminished to 1%, then we’re helping to manage income inequality.”
While the prospect of light banking at postal offices seems like a no-brainer, Dimondstein says his union has faced opposition from trade groups like the American Bankers Association.
“Although there have been a number of proposals over the past few years to turn the U.S. Postal Service into the world’s largest shadow banking system, we are very concerned that allowing the U.S. Postal Service to provide banking services will be beyond the Postal Service’s core competencies, will raise a number of serious regulatory and consumer protection questions, and will present significant competitive issues for private sector entities,” the ABA wrote in a letter to Congress in 2018.
President Donald Trump’s administration also opposes the idea, writing in a 2018 Treasury Report (that recommended the Postal Service consider privatizing), “Given the USPS’s narrow expertise and capital limitations, expanding into sectors where the USPS does not have a comparative advantage or where balance sheet risk might arise, such as postal banking, should not be pursued.”
But Dimondstein argues that large banks aren’t interested in serving low-income Americans. He says he’s befuddled by their opposition to handing off the job to someone else.
“I think it’s ideological. I don’t think it’s even about revenue because the banks are pulling out of these neighborhoods or they were never in these neighborhoods,” he says. “I think it’s hostility to anything that belongs in the public domain and for the public good. So, you know, it’s whatever their lobbying efforts are, whatever their influence is, but we aren’t trying to go up against the banks tomorrow with a public savings bank in the postal office.”
As the Postal Service continues to lose money at a rapid clip, Republicans have moved to privatize the institution.
But advocates for the Postal Service argue that it was a 2006 piece of Republican legislation that requires the USPS to pre-fund all future retiree health benefits that led to the current financial hemorrhage. The congressional mandate, according to former Postmaster General Megan Brennan, has led to 80% of the agency’s losses.
“The pre-funding mandate is an onerous, draconian, and absurd mandate that needs to be fixed on its own,” says Dimondstein. He doesn’t think that allowing the Postal Service to profit off offered financial services will be enough to fill the pre-funding hole that led to a net loss of $8.8 billion in fiscal year 2019 even with a $514 million increase in operating revenue.
But, he says, it would certainly bring in revenue while providing a social service to solve a social problem.
“The predatory payday lending industry, according to the Office of the Inspector General of the USPS, is an $89 billion industry,” says Dimondstein. “There is a lot of revenue to be gained.”
More must-read stories from Fortune:
—Are we undergoing an industrial revolution or a phase change?
—Twitter’s testing new ways to fight misinformation. Is open-source the answer?
—Meet Trump’s Giuliani-approved power broker—and Melania’s new senior adviser
—Angela Merkel is on her way out. Meet her potential replacements
—How the 2020 election could influence your personal finances
Get up to speed on your morning commute with Fortune’s CEO Daily newsletter.


fortune--2020-03-04--What makes this San Diego tennis resort one of the best in the world

Thanks to the perpetually warm and sunny weather, Southern California has been traditionally a fantastic destination for tennis. Over the years cities like San Diego, Palm Springs, and Los Angeles have hosted a number of high-profile tournaments that lure equally high-profile athletes. Similarly, many of the region’s resorts have dedicated themselves to courting enthusiasts with impressive tennis facilities, and the best of them might just be tucked away in an affluent development north of San Diego: Rancho Valencia Resort & Spa in the tony hamlet of Rancho Santa Fe.
Tennis has always been part of Rancho Valencia’s DNA: When it opened in 1989, its courts were used for the celebrity-attended John Gardiner Tennis Camps. Back then, tennis travel was a much bigger market than it is now, so having 18 on-premise courts made the resort a popular stop among jet-setters looking to enjoy court time on their vacations. But the tennis camps no longer exist, and over three decades, Rancho Valencia changed ownership and underwent modifications and refurbishments. But its commitment to tennis has never wavered.
The 18 courts are still there; none have been sacrificed for trendier amenities, as many other properties all over the world have done. “Tennis has always been considered a sport rooted in health and wellness. It is social and accessible to all ages,” says Coni Thornburg, the property’s general manager. “That is why it has helped frame the culture we have built at Rancho Valencia and has remained so popular with our guests.”
The spa and pool area. Courtesy of Rancho Valencia Resort & Spa
This culture of tennis has only strengthened over time. Guests meander around dressed in fashionable athletic attire, whether traditional Wimbledon whites or the latest from Stella McCartney’s collaboration with Adidas. And it’s not unusual to overhear spirited conversations about Serena or Roger during breakfast or at the pool.
A stay at Rancho Valencia feels a lot like entering a tennis dreamscape. It’s a lush 45-acre retreat dotted with stunning Spanish colonial architecture, where the dulcet thwacking of ball to racket provides the soundtrack. San Diego native and two-time U.S. Open doubles champion Robin White has been its guardian as director of tennis since 2012. Taking on the role of overseeing the program here is a bit of a full-circle moment for White, who during her career reached the sport’s top 20 and battled against the likes of Steffi Graf and Martina Navratilova.
“I was a member here when I was still competing on tour. I played on these courts back when the trees you see were still bushes,” White recounts. “I was watching what the then director was doing and thinking she has a pretty good gig. It was also the first time I saw a female tennis director.”
The yoga pavilion at night. Courtesy of Rancho Valencia Resort & Spa
The bushes are now the citrus trees, olive trees, and eucalyptus trees that surround the racket-sport facilities (there are pickleball courts, too) giving the place a beautiful garden-like atmosphere. But they’re not the only things to have grown. White spearheaded the transformation of two existing hard courts into European-style red clay, which are new to this part of the United States. White says feedback from guests who travel from the East Coast, where a lot of resorts feature easier-on-the-knees green clay, inspired the decision to switch them over. She’s also expanded the size of her staff of tennis pros to ensure that under her tenure the level of excellence expected of Rancho Valencia’s tennis program continues to rise.
“Watching this place grow has been thrilling,” White adds. “Because as soon as you walk in, you know that this is a special place.”
So special that some of tennis’s best have camped up at Rancho Valencia. During the 2019 off-season, 2020 Australian Open finalist Garbiñe Muguruza and her coach, 1994 Wimbledon winner Conchita Martínez, trained at the resort; so has world No. 1 Novak Djokovic, who White says was a total gentleman.
The wine room. Courtesy of Rancho Valencia Resort & Spa
Tennis-related activities here include everything from one-on-one lessons to half-day drills for more advanced players. There’s a membership program for locals, and many use the facilities regularly, including kids hoping to take their skills to the big leagues. A few courts are even reserved on weekend mornings for a group of guys to play round robin on, and resort guests are welcome to join. The pro shop can also match those looking to get court time with other guests or members. One of the very best perks here is that there’s no added cost to use the courts or to borrow rackets and the ball machine. Many resorts charge a fee for these services, but not Rancho Valencia.
That level of thoughtful hospitality is vital to the resort’s allure. Because if it’s only about tennis, other properties might offer more playing surfaces (some even have the notoriously difficult to maintain grass courts) and a wider variety of programs. But what makes Rancho Valencia stand out is that holistically, the excellence at the tennis courts extends everywhere else on the property.
Inside one of the hacienda bedrooms. Courtesy of Rancho Valencia Resort & Spa
The 49 beautifully rendered and spacious casitas take guests to the Mediterranean with their red-tile roofs, roaring fireplaces, and colorful landscaping. The Agave Suite, which measures 900 square feet and is priced at $699 per night, is the smallest of them, outfitted with plush Frette robes, deep-soaking tub, and an outdoor patio. The 1,300-square-foot Valencia Suite (from $1,199 per night) is more transporting still with its massive outdoor space featuring a tiled fireplace and Jacuzzi.
The dining concepts (there are three, including one in the spa) are tastefully executed with the finest ingredients, but they’re more approachable hangouts for guests and locals rather than intimidating destinations for haute cuisine. Nothing is so preventively fancy that a guest couldn’t roll in for a meal after a grueling tennis match.
Lobster tacos Courtesy of Rancho Valencia Resort & Spa
The luxurious spa, too, is world-class, with its aqua therapy pools and high-end treatments. Like access to the tennis courts, the spa facilities—along with the 95 fitness and wellness classes scheduled throughout the week—are always available to guests. Everything in the minibar in the casitas is woven into the rate too. And other perks include Champagne at check-in, tequila tastings with the beverage director, and a fleet of Bentleys that guests can use for a drive up Highway 101.
More must-read stories from Fortune:
—The drinks America’s best bartenders make for themselves
—This new river cruise ship offers the Mekong’s most luxurious adventure
—Inside the most influential fashion show in menswear
—5 things Madewell’s CEO always packs when traveling
—WATCH: Can San Francisco Be Saved?
Follow Fortune on Flipboard to stay up-to-date on the latest news and analysis.


fortune--2020-03-04--6 takeaways from Biden’s big Super Tuesday bounce

Super Tuesday is the biggest day on the primary calendar, and the results seem very likely to reshape the Democratic presidential race in ways few people could have predicted a couple of weeks ago.
Here are some takeaways from the results.
Biden storms back
It is hard to overstate the speed and depth of the comeback of former Vice President Joe Biden. He was embarrassed in Iowa, New Hampshire and Nevada and left many Democrats looking for an alternative.
A decisive victory in South Carolina left him buoyant but also highly vulnerable heading into Super Tuesday, with 14 primaries spread from Maine to California. He had little money and only limited organization in place.
Mike Bloomberg had placed a $500 million bet that Biden would falter. Sen. Bernie Sanders had built his own kind of firewall — not in a small state like South Carolina, but in the biggest of them all, California.
But Sanders’ perceived strength and Bloomberg’s weakness drove many Democrats into Biden’s arms. In a remarkable 24 hours, Biden secured the endorsements of three former competitors who appeared at show-of-force events in Dallas, and he harnessed the elusive power of momentum.
Biden’s night started with an emphatic, 30-point victory in Virginia, a state where the profile of the electorate includes many of the college-educated suburban voters who powered Democratic victories in the 2018 midterm elections. Bloomberg spent more than $12 million in television ads in Virginia and millions more on field organization. Biden spent about $200,000.
Biden built on that throughout the night, in North Carolina, Minnesota, Massachusetts and across the South. Biden’s success fundamentally reset the race, with the contest almost certainly now between him and Sanders, who ran strong in the two largest states, winning California and finishing second to Biden in Texas.
They seem destined for a long, state-by-state fight defined by their starkly different visions of what Democrats need to defeat President Donald Trump.
Sanders unbowed
Sanders claimed the night’s largest trophy, California, a state where he had committed substantial time and effort, while Biden had only a minimalist campaign. It was a measure of how strategic the Sanders campaign has been and why he remains so formidable.
It was also a place where he assembled a coalition that included young voters and Latinos, something he was able to do in Texas, the second biggest delegate prize of the night, as well.
Democratic presidential candidate Sen. Bernie Sanders, I-Vt., accompanied by his wife Jane O’Meara Sanders and other family members, speaks during a primary night election rally in Essex Junction, Vt., Tuesday, March 3, 2020. (AP Photo/Matt Rourke) Matt Rourke—AP Images
Winning California was critical for Sanders, who had long held a strong lead in the polls there.
But he lost in a number of states his campaign had been banking on, from Minnesota to Massachusetts. The Sanders campaign has gambled that, with a divided electorate, he could use his unshakable base to power him to plurality victories across the country. That theory showed flaws on Super Tuesday.
And there were warning signs beyond his big losses in the south, a region where Sanders has always struggled. He lost Minnesota and Oklahoma, two mostly white states that he won during his 2016 insurgent run against Hillary Clinton. That suggests Sanders is seeing erosion in his white support from his prior races. Even in his home state of Vermont, Sanders didn’t perform as well as he did in 2016.
Now Sanders finds himself in much the same place as four years ago, a defiant insurgent with passionate support facing off against the favorite of the party establishment.
His national footprint, loyal following and strong fundraising mean he’s still in a solid position despite the Super Tuesday bruising. But Sanders may need a different approach going forward other than railing against the leaders of the party whose voters will determine whether he’s their nominee.
Bloomberg’s checks bounce
Bloomberg has often described himself as a data-driven manager. By any measure, the numbers look very bad for the billionaire former mayor of New York.
He is highly unlikely to win a state and is not on track to accumulate a serious number of delegates.
According to AP VoteCast, a majority of Democrats in several states would be disappointed if Bloomberg were the nominee. Even in Virginia, where he helped fund gun control efforts and elect women to state legislative and congressional seats, he dramatically underperformed.
He has no clear path ahead, and given that his reason for running was predicated on a Biden failure, the rationale for continuing is not readily apparent. He is competing with Biden for anti-Sanders votes, while the Biden campaign worries that Bloomberg’s unorthodox strategy is depriving him of delegates he would need to overtake Sanders.
In Florida on Tuesday Bloomberg insisted he’s staying in, but it will get harder for him to make that argument if he starts approaching the status of John Connally, another big-spending party switcher who flopped in the 1980 GOP primary and only netted a single delegate.
Warren plan for winning yields losing
Sen. Elizabeth Warren did not win a single state Tuesday and finished an embarrassing third in her home state, Massachusetts.
Her once ascendant campaign has been on a consistent downward trajectory, languishing at the bottom of the field in many states — sometimes even below Bloomberg, the object of her repeated scorn.
She was in Michigan on Tuesday night, delivering her standard stump speech as if nothing had changed.
Her supporters hope she accumulates enough delegates to be a player and possible consensus nominee at a brokered convention. But candidates run for president, not convention broker.
The devil is in the delegate count
Candidates don’t become the nominee by winning states, they do it by winning delegates. And it may be days — or weeks — before we know exactly where everyone stands in that ranking.
Much of that is because California, with its whopping 415 delegates, counts extremely slowly. The state has a permissive voting system that requires ballots mailed in on election day to be counted, and the tallying could stretch into April.
Many in California voted early, before Biden’s resurgence, so he may gain as the count drags. But Sanders’ backers are usually a late-voting cohort — on election night in 2016 he was losing the state to Clinton by double digits but was only down by about 7% in the final results released weeks later. So it’s hard to know how to parcel out the state’s bounteous rewards.
Other states like Colorado may take multiple days to finish their count and reward delegates. It’s likely this hurts Sanders long term — the western states where he was strongest take the longest time, while the eastern ones where Biden romped reported results quickly, helping solidify the image of the former vice president’s comeback.
Voters get off the fence
The Democratic electorate has spent 15 months in paralysis as voters agonized over which of a sprawling, diverse field was most likely to beat Trump. On Tuesday, about one-third of Democrats had to make a decision. Many of those who waited until the last minute picked Biden.
From about a quarter of voters in Texas to just over half in Minnesota, much of the Super Tuesday electorate hadn’t made up their minds until the final days, according to AP VoteCast. In North Carolina and Minnesota, about half went to Biden. In Virginia, two-thirds did. Biden won all three states.
In many states, these late deciders were somewhat older, slightly more likely to have graduated college and more likely to identify as moderate or conservative. They were helped by strong signals from the Democratic establishment. Biden’s centrist rivals, former South Bend, Indiana, Mayor Pete Buttigieg and Minnesota Sen. Amy Klobuchar, dropped out and endorsed him, and the former vice president racked up nods from dozens of Democratic luminaries in the 72 hours after his commanding win in South Carolina on Saturday night.
For much of the cycle, Democrats indicated they hadn’t made up their minds on whom to support. If they continue to lock in on Biden in the states that vote after Super Tuesday, it could provide a critical advantage.
More must-read stories from Fortune:
—Are we undergoing an industrial revolution or a phase change?
—Twitter’s testing new ways to fight misinformation. Is open-source the answer?
—Meet Trump’s Giuliani-approved power broker—and Melania’s new senior adviser
—Angela Merkel is on her way out. Meet her potential replacements
—How the 2020 election could influence your personal finances
Get up to speed on your morning commute with Fortune’s CEO Daily newsletter.


fortune--2020-03-04--Meet the A.I. that helped Facebook remove billions of fake accounts

Facebook has lifted the curtain on a key technology that has enabled it to address one of its toughest challenges: eliminating fake accounts used for everything from spam ad campaigns to the spread false information.
The Internet media giant revealed details on Wednesday of how it designed an artificial intelligence system and trained it to be accurate enough to automatically detect accounts that violate its policies.
Policing its vast social network has become an increasingly existential problem for the company as faces the growing threat of regulation worldwide. The public and lawmakers have been dismayed by the role the social network has played in everything from Russian interference in the 2016 U.S. Presidential election to Myanmar’s genocide against the Rohingya Muslim population. Government officials and users have also become alarmed about hate speech, bullying, phishing, and financial fraud perpetrated on the platform.
Five years ago, Facebook relied largely on users to flag offending accounts to human reviewers. But the volume of problematic accounts Facebook has to deal with is massive: in the third quarter of 2019, the last period for which the company has released numbers, Facebook blocked some 1.7 billion offending accounts. And that doesn’t even include accounts the company prevents from ever being created in the first place, said Bochra Gharbaoui, a data science manager on Facebook’s Community Integrity team. At any time, Facebook estimates that 5% of its active accounts are fraudulent.
Relying on human reviewers has created other problems too. Facebook has used contract workers to review suspect content and behavior, but these workers are often low-paid and suffer mental health issues due to their constant exposure to disturbing posts, images, and videos.
Mark Zuckerberg, Facebook’s founder and chief executive, told U.S. lawmakers in 2018 that A.I. would help the company deal with the flood of problematic content. But it is only recently that the company’s researchers and engineers have started to make progress on fulfilling Zuckerberg’s pledge.
Thanks to A.I.-enabled tools, in the third quarter of 2019, Facebook took action against 99.7% of the fake accounts it blocked before other users flagged them to a human review team, the company said.
Facebook has a difficult needle to thread when it blocks accounts: it wants to catch and stop all the policy violations, including every fake account, without inadvertently blocking legitimate users. But if its criteria for detecting violations and taking action is too loose, other users will be victimized and the company itself could find itself at the center of another public relations debacle.
Both false positives and false negatives need to be minimized, Gharbaoui said. “This is a very hard tradeoff,” she said.
The problem is also difficult because scam artists, fraudsters and, yes, some governments, are always trying to figure out ways around Facebook’s defenses, explained Brad Shuttleworth, a Facebook product manager for community integrity.
The machine learning technique Facebook created, which it calls “deep entity classification,” or DEC for short, could be adapted by other companies that need to moderate conversations and content, such as rival social networks, messaging apps or video game companies, said Daniel Bernhardt, engineering manager in Facebook’s Community Integrity group in London, who worked on the system. The company is publishing the general architecture of DEC and details about how it was trained, but it is not making the trained model itself available to other companies.
DEC relies on several clever bits of thinking and engineering. The first was Facebook’ recognition that trying to train an algorithm by having it review standard account features—such as the IP address used to create the account, the age of the account, the number of likes a page has, or how many other users the account was connected to—would result in a screening model that was either too easy for someone with malicious intentions to game, or that would produce too many false positives.
Facebook’s solution was to look at each account, not in isolation, but in the context of all the other accounts and pages it was linked to, extended out to two degrees of separation. And then, instead of using direct features of that individual account, such as likes or friends, it fed the system aggregate metrics, such as the median number of Facebook friends across all those first and second order connections. (These metrics, by themselves, don’t indicate whether an account is legitimate. They are simply a way to vastly increase the number of metrics the model is analyzing so it can build a much more detailed statistical picture of the account.) This data, which Facebook calls “deep features,” is inherently more difficult for a malicious actor to tweak and result in far fewer numbers of false-positives or false-negatives.
Despite its vast size and the thousands of humans reviewers it employs to screen its content, Facebook said it is prohibitively time-consuming and expensive to create a high-quality, human-labelled dataset large enough to train a machine-learning algorithm to detect each type of abuse (such as fake accounts, spammers, financial scams or compromised accounts) with the kind of 99%-plus accuracy that Facebook needs.
So Facebook’s second clever bit of engineering was to figure out how to take a small, high-quality human-labelled dataset, which would normally be too small to train a highly-accurate deep learning algorithm, and enhance it by also using a much larger, computer-labelled, but less accurate, dataset. It does this by dividing the system into two separate modules.
In the first module, Facebook takes the set of deep features for each account and runs them through a multi-layer neural network, a kind of machine learning software loosely based on the human brain. In this case, the algorithm must learn what pattern of deep features correlates with what kind of account: is it a normal account or spam account or phishing account, etc.? And it learns to do this by referring to a large set of training samples, consisting of 5 million examples of fake accounts, that have themselves been rather crudely labelled by separate pieces of existing software.
Facebook then takes that statistical pattern for each account type and feeds it into the second module, where a different kind of machine-learning algorithm, called a gradient-boosted decision-tree, scores each account for the same categories —spam, fake account, phishing, bullying, etc.—but based on a much smaller set of high-quality, human-labelled training data. (In the case of fake accounts, about 100,000 human-labelled examples.) The results of this scoring then determine whether and what action Facebook will take against the account.
This results in a system that is more than 97% accurate in classifying accounts, far better than other methods could achieve.
The system is not designed to spot political disinformation campaigns, Shuttleworth said. Instead, Facebook has a separate “information operations” team working to combat that problem—including, in some cases, the use of differently-constructed machine learning algorithms.
Facebook is not the only company working with artificial intelligence that has found benefits from splitting a problem into two separate modules that feed one another. DeepMind, the A.I. research company owned by Google-parent Alphabet, used a similar two-step approach when it developed a system to spot over 50 sight-threatening eye conditions from eye scans. One module, which does computer vision, identifies features in the scans, while the second module makes a diagnosis based on these features. The system has the added advantage of being far more interpretable than a single black box module.
More must-read stories from Fortune:
—How 5G promises to revolutionize farming
—Did the ‘techlash’ kill Alphabet’s city of the future?
—College backlash against facial recognition technology grows
—In A.I., what would Jesus do?
—Coronavirus is giving China cover to expand its surveillance. What happens next?
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-03-05--In automation, imagination is now the constraining factor

The group behind one of America ’ s best restaurants is quickly expanding across Philadelphia

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning.
One reason I love CEO Daily readers is because of their fervent commitment to keep me educated. My recent posts on Robotic Process Automation (RPA)—which involves computer “robots” that watch what people do on a computer screen and then automates it—have led to a not-entirely-solicited crash course on the topic. I’ve now met the CEOs of the three market leaders—Automation Anywhere, UiPath and Blueprism—and have learned a great deal along the way.
My interest stems from this: Numerous studies show that most Fortune 500 CEOs believe Artificial Intelligence is critical to their company’s future, and say they are investing in it. But if you ask what kind of A.I. they are investing in, most confess it is RPA. I will leave it to technologists to debate whether RPA should be considered A.I. at all. But the use of RPA among big companies is clearly exploding—which is why the aforementioned three CEOs all are riding galloping stallions. It’s “the fastest growing segment of the enterprise software market,” says Gartner. And it’s no surprise Microsoft plans to enter the market next month. Other enterprise software firms inevitably will follow.
Interestingly, the RPA CEOs agree with me that many companies use their tools simply to automate existing (and often bad) processes, rather than to transform their businesses. The result is reduced labor costs, but not necessarily new value for customers. Some “view it as a slightly-more sophisticated version of off-shoring,” acknowledges Jason Kingdon, chairman of Blueprism, who stopped by the Fortune offices yesterday.
But at its best, Kingdon insists, RPA empowers leaders to reinvent. Because the tools are so easy to use, they free executives from the constraints of the IT department, and let them innovate on their own. The best users of the tools “are really reinventing work,” Kingdon says. “Imagination is now the constraining factor.”
That should become a catch phrase for the new era: “Imagination is now the constraining factor.” Technology is making amazing things possible. But what we do with that technology is the domain of humans. The future doesn’t belong solely—or even primarily—to people who write code. It belongs to people who can imagine the future.
More news below. And by the way, another reason I love CEO Daily readers is because they care about the future of Fortune. Many of you subscribed yesterday. Those who didn’t can go here today. It pays to know.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
Coronavirus bankruptcies
The first major corporate casualty of the coronavirus outbreak is Flybe, a British airline that was until today a major player on domestic routes and those to nearby European cities. Flybe was already in very serious financial difficulty, but the virus's impact tipped it over the edge. A Japanese cruise operator also went bankrupt earlier this week due to passenger cancellations—again, it was already a financially troubled business. Fortune
Market volatility
After a decent day for U.S. markets yesterday (thanks to Joe Biden's re-ascending fortunes and the House's passage of a coronavirus-targeting emergency spending package), Asian markets followed suit—the Shanghai Composite even returned to positive territory for the year. Thanks to profit warnings from companies such as Continental, Europe did not follow suit, with the Stoxx Europe 600 down 1.2% at the time of writing. U.S. futures also point to a negative open. Wall Street Journal
German warning
Germany's BDI business association has warned of a prolonged recession this year in the industrial sector, which has already endured six consecutive quarters of contraction. BDI: "With the production slumps in China and the quarantine measures taken by individual countries, it is becoming clear how vulnerable the export-oriented and internationally organized German economy is." Reuters
Kabloomberg
Michael Bloomberg has quit the Democratic presidential race after a poor Super Tuesday showing (the Financial Times' acidic headline: "Bloomberg, victor in American Samoa, quits race"). Bloomberg is now endorsing Joe Biden. Meanwhile, Elizabeth Warren's team has reportedly been talking to both the Sanders and Biden camps about a potential endorsement once she pulls out, again due to lackluster results. FT
AROUND THE WATER COOLER
Lego stores
Lego plans to open 150 branded stores around the world this year. The expansion comes in the context of what the Danish company says was a 3% contraction of the global toy market last year. CEO Niels Christiansen: "Some of the changes in the retail landscape have put toy retailers under pressure... But we see the great power of people getting their hands on bricks." BBC
Olympic effort
Japan's government has committed to hosting the Olympic Games from July as planned, despite the coronavirus outbreak reaching new parts of the country. However, a state visit to Japan by Chinese President Xi Jinping has been put on ice. Reuters
Airbnb coronavirus
Airbnb has rolled out a special policy for booking that need to be changed because of the coronavirus's impact. It's an "extenuating circumstances policy" that allows guests or hosts to change or cancel a booking free of charge, if the cause is coronavirus-related travel restrictions or warnings, or containment measures. CNBC
Pot bubble
Fortune's Anne Sraders has a fascinating piece on why investors soured on the cannabis industry. She writes: "Last year, investors clamored to buy into the burgeoning cannabis industry in a moment of market zeitgeist…But within six months those wide-eyed investors were looking at an entirely different picture. Wall Street grew weary as major cannabis companies reported disappointing earnings, laid off employees, and even in some cases, faced compliance scandals." Fortune
This edition of CEO Daily was edited by David Meyer.


fortune--2020-03-05--No conveyor belt sushi, cherry-blossom viewing parties: Coronavirus reshapes daily life in Japan

Japan’s attempts to control the coronavirus are leading to some strange sights.
Take the country’s famed conveyor-belt sushi restaurants, where the belts that normally carry morsels direct to customers’ tables now stand still due to hygiene concerns.
Daily life around the world is being reshaped by the spreading virus, but with Prime Minister Shinzo Abe saying now is a “critical moment” to forestall a mass outbreak, some Japanese companies are taking increasingly desperate steps to stop the spread. The country already has more than 300 confirmed cases despite a profound lack of testing.
Sushi chains including Kappa Create Co. and Hamazushi Co. have halted their conveyor belts, asking clients instead to order using touch panels. Restaurants have been some of the hardest-hit by the virus, as more companies encourage remote working and tell staff not to eat out with clients.
And some industries are more vulnerable than others. Movie theaters in the country would normally be readying for one of the busiest times at the box office, with students about to start their spring vacations, which run from the end of March into April.
Instead at 109 Cinemas, a chain run by Tokyu Recreation Co., there’ll be no more sharing a bucket of popcorn. Every second seat will be kept empty in an attempt to attract customers despite a wave of delays to new releases. Those include the latest James Bond movie, Walt Disney Co.’s Mulan remake, as well as installments in domestic franchises Ultraman and Doraemon that target elementary schoolers. Shares in Toho Co., which both runs theaters and releases movies, are down almost 22% year-to-date.
Students are being kept at home by an unprecedented call by Abe to shut schools nationwide. Education Minister Koichi Hagiuda said today that 99% of schools have responded to Abe’s call, Kyodo reported, affecting around 13 million schoolchildren. That’s bad news for the likes of Round One Corp., which runs amusement centers with bowling alleys and karaoke parlors popular with kids, and which has seen its shares drop to the lowest in more than three years.
Viewing Parties
The virus is also poised to disrupt the most iconic time of year in Japan — cherry blossom season. In a few weeks, parks would normally be heaving with revelers, but Tokyo’s government has this year called on residents to refrain from holding cherry-blossom viewing parties, where food and drink traditionally flow liberally, citing the spread of the virus. The cherry blossoms are normally one of the country’s top tourist draws, and by one estimate have an economic impact of more than 650 billion yen ($6 billion).
Meanwhile across the country, concerts and other live events across the nation are being shut down, after more than a dozen infected were identified as being linked to the live music scene in Osaka. Ticket provider Pia Corp. is among the biggest losers, seeing a 40% plunge since the start of the year, while storied concert venue operator Tokyo Dome Corp., a recent target for activist investor Seth Fischer, has lost nearly a quarter of its value.
And residents can’t even use the time to get fit. Running machines and exercise bikes are as stationary as the sushi conveyor belts, with gyms identified as another hotspot where the virus has easily spread. Curves Holdings, which runs gyms for women and began trading just Monday in Japan’s first spinoff listing, will shutter its gyms for a week. Shares were down as much as 8.7% Thursday.
More must-read stories from Fortune:
—Before coronavirus, there were SARS and MERS. Do epidemics ever really end?
—Coronavirus is giving China cover to expand its surveillance. What happens next?
—The Greek economy is roaring back—which could lead to mass evictions
—10 journalists who deserve justice immediately
—Fortune Explains: Tariffs and trade wars
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-03-05--The coronavirus exposed a flaw in global supply lines. It’s time to build better ones

Down $ 52,000 in a day : Furious Robinhood customers want payback following the app ’ s two day outage

This is the web version of The Loop, Fortune’s weekly newsletter on the revolutions in sustainability. To get it delivered daily to your inbox, sign up here.
Good morning.
These past two weeks I’ve been writing pretty exclusively on the spread of Covid-19 so, with coronavirus on the brain, I’m dedicating today’s newsletter to the topic as well.
The outbreak—which has infected over 95,000 people worldwide—has had a profound effect on both business and the environment, with what’s good for the latter often being bad for the former.
For starters, up to 13,000 daily flights were cancelled between January 23 and February 13 as passenger numbers dropped and governments implemented restrictions on arrivals from infected regions. Obviously, the grounded planes won’t be pumping carbon into the air but the drop-off in tourism is hammering hoteliers, food and beverage, and the airline industry.
Case in point: the U.K.’s recently-rescued Flybe declared bankruptcy this morning, as Fortune’s David Meyer reports.
Meanwhile, reduced productivity in China has cut oil demand 20% in the country and had a knock-on effect worldwide. The prolonged closure of factories has cut emissions from coal fired power stations, which accounts for 59% of China’s energy needs, too. The result: clearer skies and a cleaner atmosphere.
The factory shutdowns have also exposed a vulnerability in global supply chains, however, the majority of which route through China at some point and are now struggling to get back online. The result here: an uptick in first quarter revenue warnings, from the likes of Nike, Apple, Maersk and more.
Admittedly, most multinational corporations were already aware of that vulnerability—it was highlighted by the trade war. But now the coronavirus is placing new emphasis on the need for companies to develop “China plus” strategies, which involves building manufacturing capacity in areas outside of China to mitigate the risk of another total shut down.
The coronavirus crisis will pass, and the world’s manufacturing hub will get back to work. But that doesn’t mean we should return to business as usual. In “China plus” there’s an opportunity for investors to implement sustainable development practices and build capacity the right way. Among other things that means ensuring renewable energy supplies, living wages, and legal labor.
More below.
Eamon Barrett
eamon.barrett@fortune.com
BEYOND THE WALL
After months of planning, Fortune implemented a paywall today. You might not have noticed it yet—newsletters remain free to sign up for and receive. However, if you want to read the web version of a newsletter, or any of Fortune's exclusive content, you'll have to join us over the wall.
Our editor-in-chief Clifton Leaf explains Fortune's shift to a paywall here, and we invite you—our dedicated readers—to subscribe at a special discount here.
CARBON COPY
EU Green deal
The European Commission unveiled plans for its first ever climate law, which aims to make the 27-country bloc climate neutral by 2050. Environmental campaigners, and some EU member states, have criticized the law for being too weak. The proposal, for instance, delays setting a higher target for reducing carbon emissions by 2030. BBC
Internalizing the issue
According to the New York Times, an official in the U.S. Interior Department spearheaded a campaign to insert climate change denial into the agency’s official reports since 2017, including false information such as debunked claims that more carbon dioxide in the atmosphere is beneficial. The official, Indur M. Goklany, was promoted to the office of the deputy secretary in 2017, where he was put in charge of reviewing the agency’s climate policies. The New York Times
Garden State
Singapore, which currently calls itself the Garden City, has hopes to upgrade its moniker to a “city in nature” by 2030. To do that, the city state is planting 1 million trees over the next ten years and designating 200 hectares of land as nature parks. However, the more important step Singapore is taking so far as climate change is concerned is its plan to reduce the emission of hydroflurocarbons (HFCs)—a greenhouse gas. HFCs are refrigerants in air conditioners, which tropical Singapore depends on. Bloomberg
IN CASE YOU MISSED IT
H&M made its former sustainability chief its CEO. Now it wants to help other fashion houses become sustainable—for a fee by David Meyer
The oil industry is finally talking climate crisis, but don’t expect change to come easily by Katherine Dunn
Germany, the engine of Europe, plans to ditch nuclear and coal—regardless of whether renewables can fill the void by Christiaan Hetzner
Galapagos cruises spotlight economic and environmental pressures challenging the islands by Jim Clarke
Why investors suddenly turned on pot stocks by Anne Sraders
How states can overcome new federal barriers to clean energy by Christopher Crane
CLOSING NUMBER
23 billion
That’s how many single-use plastic bags New Yorkers get through per year. Well, no more—not since the state implemented a law Sunday that prohibits New York shops from handing out plastic bans. Paper bags are okay but will come at a five-cent fee to the customer. There are exceptions to the ban, of course. Customers on food stamps will be exempt from the paper bag fee and takeout food can still be delivered in plastic, for some reason. California, Hawaii and Oregon have already introduced similar bans, as have a number of countries around the world.