fortune--2020-10-17--Are we better off than we were four years ago?

Forty years ago, a 69-year-old candidate for President stood on a Cleveland debate stage 15 feet from the incumbent, turned to the television audience, and asked a question that would seemingly change the race overnight: “Are you better off than you were four years ago?”
It was Oct. 28, 1980, and opinion polls until then had been suggesting a close contest between the two nominees, former California Gov. Ronald Reagan, the Republican, and President Jimmy Carter, the Democrat—with the most recent of surveys splitting down the middle as to who had the edge. But the challenger’s question that evening, posed at the end of a cordial 90-minute exchange, clarified the choice in a flash. The American economy was wilting under the burden of “stagflation,” a portmanteau that roughly translated to “everything stinks”—the unemployment rate was mired at 7.5%, inflation was soaring, gasoline prices had climbed by more than a third in just the past year. Reagan, “the Great Communicator,” had framed those gloomy circumstances in a handful of words—and one week later he won the White House in a landslide, carrying 44 of the 50 states.
Four decades later, on the cusp of another presidential election, it might seem that there’s no question that’s more relevant to voters than the one Reagan asked—and a few pollsters, as you might expect, have already asked it. A September survey by the Financial Times and the Peterson Foundation found that a plurality of U.S. voters, 35%, felt better about their present financial situation, and 31% felt worse, compared with four years ago; a later poll by Gallup painted a more upbeat picture, with a clear majority of registered voters (56%) saying they were better off today. Both surveys would seem to portend good news for President Donald Trump as he faces off against former Vice President Joe Biden.
Yet here’s a surprise: The answers tell us little about how voters will actually fill out their ballots. “We’ve done a lot of research and have never really found a link between people’s own finances and how the vote turned out,” says Jeffrey Jones, who oversees all U.S. polling for Gallup, including the “better off” survey above. “People are not really self-interested when they think about how they’re going to vote, it’s really sociotropic voting: They care more about what’s going on out there as opposed to their own situation,” he says.
Photo-Illustration by Selman Design
Far more predictive of election outcomes, says Jones, are a trio of Gallup surveys—those measuring Americans’ confidence in the economy overall, satisfaction with the way things are going in the U.S., and presidential approval—that look at the state of the nation as a whole. (In each, the President’s rating is currently underwater, and particularly so compared with previous incumbents who won reelection.)
The material question for voters, then, isn’t “Am I better off?” but rather “Are we better off?” Indeed, that was the true focus of the question Reagan framed 40 years ago, a fact that has been too often missed. As the candidate went on to prompt his TV audience in 1980:
Is it easier for you to go and buy things in the stores than it was four years ago? Is there more or less unemployment in the country than there was four years ago? Is America as respected throughout the world as it was? Do you feel that our security is as safe, that we’re as strong as we were four years ago?
U.S. voters today are facing additional questions that drive, perhaps, even more deeply to who we are as a nation: our shared sense of purpose, our trust in the institutions of government and society, even the way we talk and listen to one another. In every election, of course, voters will inevitably make personal choices on the basis of ideology, philosophy, or morality—as it should be. This year, though, there is one fundamental question that voters of every political bent ought to ask before they cast their ballot: Is the United States of America more or less united than it was four years ago?
Me vs. we
“Human nature really is the fundamental force that governs politics in any society at any time,” says Mike Leavitt, who was elected three times as governor of Utah and later served in President George W. Bush’s cabinet as secretary of U.S. Health and Human Services. “And this division between ‘Am I better off?’ and ‘Are we better off?’ is really the conflict between (me) individual liberty and (we) security: We give up one in order to gain the other.” Leavitt, a conservative Republican, sees the struggle between these two eternal goals—liberty and security—as a legitimate, and even necessary contest. But he is concerned with how brutal the battle has become, though he contends the vitriol has been building for far longer than in just the past four years. “We’re seeing people on both extremes who seem willing to color outside the lines, to break the covenant of democracy. And that offends us, and it scares us, because it’s not consistent with [the pact] we’ve all entered into.”
Data from the Pew Research Center shows how hardened the divisions between left and right, Democrat and Republican have become. Though the major parties are growing further apart on issues, the bigger concern is not ideological but personal. “Partisan antipathy—this is the sense that I not only disagree with the opposing party, but I take a rather negative view of the people in that party—has been growing since the mid-1990s,” says Carroll Doherty, the Pew Center’s director of political research. But in 2016, Doherty says, those negative feelings began to spike. The share of Republicans who describe Democrats as more immoral than other Americans grew from 47% in 2016 to 55% in 2019, according to Pew research. The share of Democrats who describe Republicans as immoral rose 12 percentage points, from 35% to 47%. Nearly two-thirds (63%) of Republicans surveyed by Pew said Democrats are more “unpatriotic” than other Americans (23% of Democrats feel the same about Republicans), and the share in each party who view the other as more “close-minded” or “lazy” than their countrymen has climbed as well. Overwhelming majorities in both parties say the divide between them is growing, with some three-quarters of Republicans and Democrats acknowledging that they “cannot agree on basic facts” when it comes to the views of the other side. Dispiritingly, Pew found, huge percentages on both sides of the aisle (53% of Republicans and 41% of Democrats) do not want their leaders to seek “common ground” with the other party if it means giving up anything.
Doherty emphasizes that Pew’s latest study was conducted a year before the presidential election—and before the coronavirus pandemic: “While we can’t extrapolate … it’s possible that these negative sentiments could have grown,” he notes.
“There is this existential struggle for the soul of America in which neither side can win, and it’s all about the threat of the other side,” says political scientist Lee Drutman, a senior fellow in the political reform program at the New America foundation. “We have half of the country who’s convinced that the other half of the country—if they got power—would be illegitimate and substantially destructive.” Drutman, whose book Breaking the Two-Party Doom Loop: The Case for Multiparty Democracy in America was published in January, contends that the escalating hyper-partisanship has “simplified” politics into this us-versus-them, good-versus-evil binary.
Trump’s rhetoric has been an “accelerant” to the long-simmering anger on both sides, says Drutman. The fiery invocations he unleashed at his campaign rallies didn’t end when he got to the White House. They got louder and fiercer and were echoed on social media. Says Alan Abramowitz, a professor of political science at Emory University: “He went from dog whistles to a bullhorn”—from quietly tapping into racial, ethnic, and partisan resentment to stadium-size chants.
The high-decibel roar of his MAGAphone has had an effect that goes well beyond “rallying the base,” says Lilliana Mason, associate professor of government and politics at the University of Maryland, and author of the book, Uncivil Agreement: How Politics Became Our Identity. It has encouraged and even normalized politically based violence, she says—pointing, for example, to the rise in “anti-immigrant” hate groups in the U.S., which has risen in parallel with the anti-immigration rhetoric of politicians. (The number of such groups has more than doubled since 2014, according to the Southern Poverty Law Center.) “There are a lot of people warning about radical, mainly right-wing, violence specifically around the 2020 election,” says Mason, “but we’ve already seen heavily armed men walking through American cities.” To glimpse the potential danger, witness the brazen plot by members of self-styled militia groups to kidnap Michigan Gov. Gretchen Whitmer, which was revealed by the FBI in October. These are things “we couldn’t even imagine in 2016,” Mason says.
A long to-do list
As much as this negative partisanship has torn America’s social fabric, it has made legislating all the more challenging—particularly at the federal level where “to get anything done, you have to be able to build coalitions that to some extent cross party lines,” says Abramowitz. Indeed, Drutman says the problem goes even deeper: “One of the fundamental conflicts in the American system is that we have political institutions that are set out to encourage broad compromise, and we have a party system that has evolved to make compromise very difficult. So we have a different set of electoral and governing incentives from the start.” The escalation in political vitriol only widens the gap between them.
To thrive over the next century—and in a world that’s more competitive, economically, than ever before—Americans must invest in the nation, just as any business needs to invest in itself in order to grow. That means funding job reskilling programs and rebuilding critical infrastructure, a sprawling mandate that spans from repairing crumbling roads and bridges to constructing advanced 5G telecom networks. The Social Security system did not get less wobbly on its own; it will need to be fixed somehow. We still have to rein in runaway health care costs, and get the still-raging pandemic under control, to say nothing of preparing for whatever outbreaks are yet to come. There are even knottier problems to contend with—climate change, criminal justice reform, crafting an immigration policy that sustains both industry, U.S. security, and a sense of fairness. And ultimately, we’ll have to find a way to put the millions of people who lost their jobs in the wake of COVID-19 shutdowns back to work (see our election package). It’s no small list of must-dos.
Paying for all of this is, if anything, a more daunting challenge: Our spendaholic leaders in both parties have already emptied America’s wallet, and we’re in hock up to our shorts. The federal debt held by the public will reach 106% of our GDP in 2023, according to the Congressional Budget Office (see chart)—and the fever line rises relentlessly from there. We’ll have to be creative and ambitious in our problem-solving—and, yes, that means the warring parties must set aside their bitterness and work together.
It also means we’ll have to hot-wire business growth in the U.S. “It sounds probably academic and otherworldly to say the solution is innovation,” says Edmund Phelps, winner of the 2006 Nobel Prize in Economics and director of the Center on Capitalism and Society at Columbia University. “But quite frankly, I’m not sure how far we can progress if we don’t get the economy to be delivering better than it has been for the past 40 or 50 years.” Phelps says he is happy that companies are starting to aggressively push back on Trump administration tariffs as well as on an immigration policy that is “blocking the talents that companies need for developing new products.” Phelps is particularly keen to see the next administration embrace international trade. “It could be a source of new energy in the business sector in this country. That will be great for jobs and wage rates and everything else,” he says.
Sandi Peterson, a member of the board of directors at Microsoft and a partner at Clayton Dubilier & Rice, a New York private equity firm, is equally frustrated with Trump’s immigration policy. “If we don’t get our act together, the innovation engine of the United States—where all the smartest people in the world showed up and created all this amazing stuff—is gone,” she says. “People won’t come here to study anymore. People won’t come here to try to work anymore, because they can’t get visas,” says Peterson, who was formerly group worldwide chairman for Johnson & Johnson. Luring talent from overseas “is what has driven the economy of this country for an incredibly long time—and we just really messed it up.”
The challenge for voters, on this front, is to guess what’s the best way to fix this: Give Trump another chance or clear the slate and start over.
Trust and credibility
Whoever ends up being in charge on Jan. 20, 2021, will have another urgent task: rebuilding trust in the institutions of government itself. Over the past four years, agencies that used to be considered nonpartisan and independent from political pressure—including the CDC, FDA, and the Justice Department—have been viewed by many with skepticism and suspicion, as they have seemed to bend to White House talking points. “All of these institutions used to be neutral arbiters,” says New America’s Drutman. “And in a political system where everybody can agree on a basic procedural fairness and can accept the idea of a legitimate opposition, then these institutions can maintain their independence.” But this is one more lost treasure, it seems, in our era of fevered hyper-partisanship.
Such infighting has implications for our national security, says the University of Maryland’s Mason: President George Washington warned against this in his farewell address, she reminds us. “If you allow factions to form, you open the nation to foreign interference because we start fighting ourselves,” says Mason. “When we create this very deep partisan divide, it makes us weaker as a nation, and it makes it much easier for other nations to mess with us.”
Brian Finlay, president and CEO of the Stimson Center, a nonpartisan think tank devoted to studying global security and other critical issues, agrees. “We’re now in a world where our adversaries have identified the fundamental weaknesses of our system,” says Finlay. “They’ve exploited the divisions. They’ve exploited the technology weakness that they’ve seen by convincing our children that the Washington Post doesn’t have credibility. Our adversaries have wised up, and now they’re attacking our elections, which is like shooting fish in a barrel. They don’t need to send armed combatants to the United States. They can do it from their basement computers.”
It is hard enough to defend against such asynchronous warfare. It is harder still to do it without alliances, partnerships, and pacts. The U.S. has long entered into multilateral agreements—to stem Soviet expansion and aggression in the Cold War, limit the spread of nuclear weapons around the world, prevent illegal fishing, and naturally, sell more American goods.
But in the past four years, President Trump has pulled us away from many of these critically important alliances—even “terminating” our relationship (in the middle of a global pandemic) with the World Health Organization, an institution that the U.S. pushed for, and helped create, in 1948. He has also scuttled the Trans-Pacific Partnership (TPP) trade agreement, which was “designed to implant a countervailing force against an aggressive China across Southeast Asia,” says Finlay. “Now China has managed to turn the scales on us, and we’re playing small ball on a country-to-country basis. We’re trying to convince the Vietnamese not to allow the Chinese to build dams on the Mekong instead of building a coalition of American interests that give us a global trading advantage.”
We also exited the Intermediate-Range Nuclear Forces (INF) Treaty that President Ronald Reagan signed with Soviet Premier Mikhail Gorbachev in 1987, and which helped to end the Cold War. We abandoned the Open Skies Treaty, which had broad bipartisan support, and Trump yanked the U.S. out of the Paris Agreement on climate change.
These are yet more self-inflicted wounds when it comes to America’s health, prosperity, and security—and one more consideration for voters as they head to the polls. But let’s keep it simple: Are we better off than we were four years ago, or is it time for a change?
This article appears in the November 2020 issue of Fortune.


fortune--2020-10-17--What happens if Trump or Biden dies before the election?

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When Americans cast their ballot for November’s election, they will be voting for the two oldest Presidential candidates in history: Donald Trump will be 74 on Inauguration Day, and Joe Biden will be 78. The age of these men, as well as the President’s recent hospitalization for COVID-19, raise the awkward question of what happens if they should die before or shortly after the election.
The U.S. Constitution provides clear rules in the case of the death or incapacity of the President and Vice President during his or her term. But the law is less clear when it comes to what happens when a presidential candidate dies near Election Day—a gap that could put U.S. democracy under further strain if such a tragedy should occur.
Here’s what the law says about what could happen in the unlikely event Trump or Biden should find themselves unable to assume the presidency.
If a candidate dies, can’t they put someone else’s name on the ballot?
No, at this point it’s too late. According to Jason Harrow of Equal Citizens, a nonprofit that seeks to improve U.S. democracy, many voters have already cast their ballots. He notes that U.S. law requires military voters to receive ballots at least 45 days before the election—so redoing ballots is out of the question.
Does this mean voters could be stuck with a deceased candidate?
Technically, no. That’s because the electoral college system means voters don’t vote directly for President but for the candidate’s respective electors—a group of party officials who choose the President on behalf of their state’s voters.
So can the electors simply choose someone else if the candidate dies?
This is where it gets messy. The Supreme Court recently upheld laws in various states that punish so-called faithless electors, who cast their vote for someone else. The decision involved Colorado electors for Hillary Clinton who voted instead for former Secretary of State Colin Powell in 2016. The court made clear electors do not have discretion to pick someone else.
A footnote to the Supreme Court’s ruling, however, suggested states could release electors from their obligation in the event the candidate died. For practical purposes, Harrow says, the political parties—in the form of the DNC or RNC—would tell the electors whom they should vote for instead. This would almost certainly be the vice presidential candidate, Kamala Harris or Mike Pence.
But Harrow, who recently coauthored an article with Harvard Law professor Lawrence Lessig about the death of a presidential nominee, says states should pass laws—as California and Illinois have already done—that clarify the role of electors.
What if the candidate dies right after the election?
This would also be a messy situation. While Election Day is Nov. 3, the electors only meet in their respective state capitols to choose the President on Dec. 14. If Biden or Trump should die during this interval, the political parties would likely provide guidance for the electors to choose the vice presidential candidate instead.
There is also another key interval: the time between when the electors choose the President-elect, on Dec. 14, and Inauguration Day, which falls on Jan. 20. If the winning candidate dies during this time, the situation is less complicated. According to Harrow, the rules on presidential succession—set out in the 25th Amendment of the Constitution and a 1947 succession law—would be in effect. In this case, he says, the Vice President–elect would assume the presidency on Inauguration Day.


fortune--2020-10-17--Will the world’s first ‘travel bubble’ actually work?

Rival financial hubs Hong Kong and Singapore are set to become the first regions in the world to open a reciprocal “air travel bubble,” after ministers from both governments announced a preliminary agreement Thursday. Under the deal, residents from either city would be able to travel to the other without undergoing quarantine—so long as they test negative for COVID-19.
“This is a milestone in our efforts to resume normalcy while fighting against the long-drawn battle of COVID-19,” Hong Kong Secretary for Commerce and Economic Development Edward Yau said. Full details of the arrangement are still being hashed out, but Yau has “every confidence” the plan can “come to fruition very soon.”
Previous “travel bubble” hopes have not lasted long.
Tourists walk past the Rain Vortex in Singapore’s Jewel Changi Airport terminal ROSLAN RAHMAN—AFP/Getty Images
Governments have floated the notion of opening travel bubbles since at least May—when Australia and New Zealand were mulling the idea. But the concept has so far proven too optimistic as sudden spikes in local case numbers put travel plans on hold.
At best, countries have implemented unrequited quarantine exemptions. On Friday, for example, Australia welcomed passengers from New Zealand without quarantine, but New Zealand still requires all tourists to undergo a two-week isolation.
The Kiwi nation has kept COVID-19 largely under control, with daily case numbers mostly in single digits since May.
Hong Kong and Singapore haven’t been out of the woods quite so long.
Hong Kong underwent a “third wave” in August, in which total infection numbers increased nearly fivefold. And Singapore is still practicing social distancing due to its huge spike in April that ratcheted its total caseload to over 57,000.
But Singapore Transport Minister Ong Ye Kung says that both Hong Kong and Singapore have “low incidence” of COVID-19 cases and have “robust mechanisms” to manage outbreaks. “This has given us the confidence to mutually and progressively open our borders to each other,” Ong said.
Hong Kong Disneyland reopened in September, with masks mandatory for all except mascots. Li Zhihua—China News Service/Getty Images
On Thursday, Singapore reported three new coronavirus cases, completing four days of single digit growth. The same day, Hong Kong reported 12 COVID-19 cases—the highest single day rise in a week. Although those numbers are low compared to many other places, Hong Kong’s hyper vigilance makes even a spike of 12 cases cause for concern.
Just last week, Secretary for Health Sophia Chan floated the idea of enforcing mandatory COVID-19 tests as some experts warned of a possible “fourth wave” of infections following a daily increase of 18 cases.
Last month the city tested close to 2 million people to counter its third wave, which experts blamed on Hong Kong’s previous quarantine exemptions. Those exemptions waived the 14-day isolation period for certain groups, such as sea and air crew members.
“I think the risk posed to Hong Kong by travelers from Singapore would be minimal,” says Hong Kong University epidemiologist Ben Cowling, citing the city’s low case numbers. “But it would still be important to arrange testing for travelers from Hong Kong or Singapore either shortly before departure, or to arrange testing on arrival.”
The floating Apple Store in Singapore’s Marina Bay is a new photo spot for tourists. Bryan van der Beek—Bloomberg/Getty Images
The travel bubble could ease financial strain on airlines and the tourism industries of both cities. Shares in Hong Kong’s flag carrier Cathay Pacific closed up 6% on the news on Thursday after making its biggest gains in seven weeks.
The route between Hong Kong and Singapore is normally the 17th busiest in the world, with Hong Kong tourists accounting for 3% of all visitors to Singapore last year. This year, of course, that flow came to a near halt. In Hong Kong, visits from Singapore dropped over 93% in the first eight months of 2020.
Under the preliminary agreement, travelers will be required to obtain a negative COVID-19 test from a facility recognized by both Hong Kong and Singapore governments. Airlines will also have to run dedicated routes—not allowing for transit passengers—and group tours will not be allowed.
Hong Kong’s government last month said it hoped to open travel bubbles with ten other countries, including New Zealand, Vietnam, South Korea, Germany and France.
But with social distancing measures still enforced in Hong Kong—limiting dining groups to four people, closing public beaches and cancelling public events—many of the usual tourist activities will be off-limits when travelers arrive.


fortune--2020-10-17--A fortuitously-timed acquisition moved this Fortune 500 fintech’s strategy ‘years ahead’ during COVI

A fortuitously-timed acquisition moved this Fortune 500 fintech’s strategy ‘years ahead’ during COVID

Plenty of businesses have seen the pandemic decimate their prospects as entire industries shut down, or customers pare back. But a lucky few have seen the opposite: a strategy that was already underway before the pandemic now looks brilliant because of it.
Such is the case with Fidelity National Information Services (FIS),the Jacksonville-based finch company which is ranked No. 303 on the Fortune 500. For most of its 52-year history, FIS focused on financial products and services.
Early last spring, FIS had decided to branch out, acquiring Worldpay, a company that processes some 40 billion transactions a year, for $43 billion. “By the time the pandemic hit we really had the heavy lifting on the integration [of Worldpay] complete,” Gary Norcross, CEO of FIS, recently told Fortune. “We’ve seen huge growth in our digital channels. We took advantage of a number of things in the market.”
With consumers around the world stuck at home, Norcross says, the pandemic moved e-commerce years into the future. Indeed, an IBM analysis finds the pandemic sped up the shift from physical stores to e-commerce by five years. At the same time, consumers are relying more on digital transactions and moving away from paper currency—which dates back to the 11th century when it was introduced by the Song Dynasty in China.
“Worldpay was exciting for us: We felt that the use of paper currency was going to continue to decline,” Norcross says. When FIS bought Worldpay it expected digital transactions to eat away at cash usage, but it didn’t imagine it would be this fast.
If not for the acquisition of Worldpay, overall FIS’s revenue would have dropped 7% in the second quarter of 2020 as a result of the global recession. Instead it rose 40%, from $2.1 billion to nearly $3 billion. The jump primarily came from absorbing Worldpay’s merchant business: FIS merchant revenue climbed from $97 million in the second quarter of 2019, to $812 million in the second quarter of 2020.
Stephen Biggar, director of financial services research at Argus Research, told Fortune that the purchase will bolster the company’s operating margin from ranging in the mid-30s to mid-40s. “They couldn’t have known an enormous surge in digital payments was coming … but along comes the pandemic and it just shots the digital side through the roof,” Biggar says.
Peter Krukovsky, senior analyst of ratings and research at Moody’s Investors Service, adds that the acquisition also helped the fintech to integrate itself further with financial institutions.
There’s an old saying that it’s better to be lucky than good—but as FIS has found, it’s even better to be both.


fortune--2020-10-17--Being honest about car prices wins salespeople more business, study finds

Turns out honesty really is the best policy.
Researchers at the University of Texas at Austin recently found that the more honest a salesperson is (as indicated by revealing the true invoice price of a car early on in negotiations), the more a customer will ultimately spend.
As the researchers found, “According to the old theory of negotiation, as a seller you would never want to sacrifice the lowest price you’re willing to accept,” writes Sebastian Hohenberg, assistant professor of marketing at the university’s McCombs School of Business who co-authored the research with Yashar Atefi of the University of Denver, Mike Ahearne of the University of Houston, Zachary Hall of Texas Christian University and Florian Zettelmeyer of Northwestern University.
But that’s changing: the old paradigm of “information asymmetry” whereby the salesperson knows far more than the customer, is breaking down. Most customers already know the invoice price before they walk into a dealership, presumably having done their internet research. So having it disclosed by the salesperson built trust—and then they were more likely to elect additional services and upgrades later in the sales process.
How did they find this out?
By observing negotiating at a major U.S. auto dealership chain, then looking at short-term and longer term sales. “Of the 400 observed negotiations, 30 involved the salesperson disclosing the invoice price of the car early on, 44 disclosed it later, 25 did so only in response to prodding from the customer, and 301 never disclosed the price. The researchers found that sellers who revealed cost at the beginning of a negotiation had customers who spent significantly more in the back end—around $1,400, on average—compared with salespeople who revealed price later or not at all.”
Indeed, that points to a strategy that could be applicable elsewhere in the business world: Information can be “strategically sacrificed” to build trust and increase profits.
Hohenberg says this also calls for a rethinking of how salespeople are paid. “Most salespeople are incentivized for immediate purchase,” he said. “But the profits that accrue due to the immediate purchase later on are way more beneficial for the company.”


fortune--2020-10-18--Bank of America just ended a weak quarter—but there were 3 little-noticed bright spots

Around Christmas of last year, Bank of America looked as though it had clinched one of the biggest comebacks in banking history. After flirting with bankruptcy in the great financial crisis, BofA went on a half-decade tear to post $29 billion in net income for 2019, a 75% jump in just two years. CEO Brian Moynihan was doing what had seemed impossible: closing the profits gap with longtime universal banking champ, Jamie Dimon’s JPMorgan Chase, and BofA easily outracing another rival it has long lagged, Wells Fargo. In late 2016, Wells Fargo’s market cap was 40% bigger than BofA’s. Then BofA took off, and scandal-scarred Wells stalled. By the close of 2019, BofA’s share price had doubled to $35, and its $300-billion-plus valuation dwarfed Wells’ by the same 40%.
Then the COVID-19 crisis pummeled BofA’s profits and stock price. By deeply discounting what was, even before, a modest valuation, Wall Street is signaling that the bank will earn a lot less in the future than it made last year.
Its new earnings report is turning investors even more negative. On Oct. 14, BofA announced a steep drop in profits to levels far short of the numbers JPMorgan unveiled the day before. Net earnings for the third quarter fell to $4.9 billion, down from $5.8 billion in Q2 and $7.0 billion in Q4 of 2019. By contrast, JPMorgan earned $9.4 billion in Q3, notching the second-best quarterly number in its history. BofA’s results sorely disappointed Wall Street, sinking its shares by 5.33% to $23.62 at the close. That selloff was something of a surprise, since the numbers were more or less in line with analysts’ expectations. BofA narrowly beat the FactSet consensus for earnings. Revenues fell short by just 2%, and it way outperformed on credit costs, taking a hit of almost half-a-billion dollars or one-third below what Wall Street expected.
As he made clear on the call, Moynihan is doing nothing to change the steady course that looked like such a winner a few months ago. He’s deploying a compelling consumer strategy: Instead of aggressively pushing banking products, or even wooing new clients, he focuses on growing along with his existing customers by gaining a bigger “share of wallet” as their incomes and needs increase. The idea is that folks with checking accounts at BofA’s 4,300 branches will stick with the bank for credit cards, car loans, and mortgages, and managing their nest eggs via a private banker or Merrill Lynch financial adviser. That’s business that Moynihan says “sticks to your ribs.”
Because BofA funds its gigantic, nearly $1 trillion in loans almost entirely with ultra-low-cost deposits, it’s bound to generate big and growing profits, as long as it holds overhead and credit costs in check. So far, Moynihan has aced both goals, keeping overall expenses virtually flat. He’s holding defaults at among the lowest for any bank via his policy of granting credit card loans to people who are already solid customers, and avoiding high exposure to risky sectors such as commercial real estate.
What’s potentially troublesome is that profits didn’t fall because the COVID-19 crisis unleashed another wave of credit losses. Instead, BofA’s bedrock businesses throttled back. So the question arises: Will BofA quickly get back on track to earn around $30 billion a year, or will a low-rate, post-pandemic economy cause BofA to become durably less profitable than over the past few golden years?
One thing’s for sure: Wall Street’s now expecting BofA to earn even less in future quarters than the $4.9 billion posted in Q3. BofA’s current market cap is $205 billion, down from $305 billion at the end of 2019. Let’s say investors give its shares a price/earnings multiple of 15, well below the S&P 500 average of 21 over the past three decades. In that case, they’d be expecting BofA to be generating just $14 billion a year in earnings, or $3.5 billion a quarter, 29% below what it made in Q3. Talk about how-low-can-you-go expectations.
This writer—who praised Moynihan’s grow-with-your customers approach when he introduced it in 2011—is betting that BofA rebounds strongly.
Here are takeaways pointing to a resurgence in future quarters.
Credit costs dropped from huge back to normal, and Moynihan believes he’s booked all the damage upfront
As I described in my story on JPMorgan Chase’s report, a new accounting regime, in place since the start of 2020, requires that banks book all of their projected losses, over the entire life of all of their loans, in the current quarter. That applies even if the borrowers are still paying on time. So instead of taking those expenses gradually as credits actually go delinquent, banks now must take the entire wallop upfront.
As a result of the new rules, BofA shouldered $9.9 billion in provisions—a direct blow to earnings—in Q1 and Q2 of 2020. That’s almost triple the total for all of 2019. But in Q3, credit costs dropped to $1.4 billion. In the consumer bank that also makes small-business loans, the progress was particularly impressive, with provisions cratering from $2.55 billion in Q2 to just $479 million.
Of course, BofA took those big provisions in Q1 and Q2 because its models, based on extremely conservative assumptions on future GDP growth and unemployment, are forecasting that it will eventually need to charge off $9.9 billion in loans to businesses and people pounded by the pandemic. But as Moynihan noted on the conference call, we’re seeing little sign of damage so far. Only 0.54% of BofA’s over half-a-trillion dollars in consumer loans are more than 30 days past due. The mortgages, car loans, and the like no longer covered by forbearance are showing few defaults. As Moynihan put it, the charge-offs anticipated by the big provisions in the first half “have yet to materialize.”
Moynihan stated that he doesn’t expect to see a surge in charge-offs until mid-2021. “What we thought would happen in Q3 got pushed out, and keeps getting pushed out,” he said, attributing the delay in part to government assistance to families and small business, but also noting that consumers’ excellent payment record so far appears to signal that losses may not be as high as BofA anticipated.
Still, he says that there is “too much uncertainty” to begin lowering reserves, a move that would prove a windfall for profits, and could happen. In a statement that marks good news for future profits, Moynihan predicted that BofA now has all the reserves it needs to weather the crisis. If that’s the case, provisions in the next few quarters should be minimal.
But here’s the problem: Provisions were already low in Q3, yet BofA earned 16% less than in last year’s Q3, not to mention 30% less than in Q4. So what’s holding BofA back, and will the slowdown persist?
BofA is taking a one-two punch from low rates and a flatlining loan portfolio
A crucial source of growth is NII, or net interest income. Last year, BofA’s NII expanded by over $700 million to 1.5%. Although that’s a small increase, it enabled BofA to sustain its already high profitability, aided by Moynihan’s signature tight grip on expenses. But in Q2, NII dropped from $12.34 billion to $10.24 billion, or 17%. The decline has two sources. The first was a decline in interest rates that shrank the margin between what BofA collects on its loans and what it pays to depositors and savers. Second, BofA’s loan book not only stopped growing, but shrank a bit. Its total portfolio declined $18 billion or 1.85% over the past year.
In addition, total expenses at $14.4 billion were running almost 5% above the annualized rate in 2019. Moynihan and CFO Paul Donofrio ascribed the increase to a jump in one-time litigation costs, and $300 million to $400 million in extra expenses caused by the crisis, including the spending to process millions of PPP loans to small businesses, a burden just partially offset by fees.
To regain its pre-COVID pace, BofA needs to get NII growing again and wrestle down costs
As Moynihan acknowledged on the call, rates on his loan portfolio should remain extremely low going forward. As he also pointed out, BofA can offset that drag by growing the loan book that’s now treading water. In other words, attracting more borrowers will more than make up for the lower monthly payments it receives on its credit card loans and mortgages.
That’s just what BofA has been doing, and doing safely, for the past several years. Its total lending portfolio has waxed from by over $40 billion or 4.4% from 2017 to 2019, pretty much in line with the economy, including a $4 billion increase in credit card loans carrying average rates of 10.8%.
But can BofA get its loan book growing again? A bellwether is what’s happening with deposits. Gathering millions more checking account customers means that those extra households will add to revenues by taking out more credit card, car, and home loans over time. In the past year, BofA’s consumer deposits have surged by one-fifth, from $709 billion to $861 billion. By the way, the fall in rates is far from a total negative; the average BofA pays on those deposits has fallen from 0.11% to 0.05%. (The additional expense per dollar of deposits in manpower, real estate, and the like is an additional 0.8%, bringing the total to well under 1%. See why banking can be a great business?)
Hence, BofA appears to be fast gaining customers and expanding market share. That means its loan portfolio should wax a perhaps a point faster than the real growth in the economy. It’s also likely that Moynihan will put expenses back on the previous track of around $55 billion a year, and as in the past, hold the increases below the rate of inflation. The extra litigation expenses will phase out, and so will the extra spending on COVID.
Of course, BofA is essentially a machine designed to expand with the incomes of Americans and magnify profits by holding expenses constant, dollar for dollar. So if family incomes and GDP go flat for an extended period, BofA’s earnings will suffer. But a bet that the U.S. economy will come back is also a bet that BofA’s earnings will rebound, only faster.


fortune--2020-10-18--The irreverent toilet paper startup that cleaned up during the pandemic lockdown

This is an installment of Startup Year One, a special series of interviews with startup founders about the major lessons they have learned in the immediate aftermath of their businesses’ first year of operation.
Who Gives a Crap was founded by Simon Griffiths, Danny Alexander, and Jehan Ratnatunga when they learned how many people live without access to a toilet. Currently, that figure hovers around a staggering 2 billion. The startup says it donates half its profits from the sale of everyday products (like toilet paper) to do good globally.
Most recently, the company announced a carbon neutral shipping program in which the direct-to-consumer toilet paper brand will purchase carbon offsets through Pachama—which supports emissions reductions through forestry projects—at no extra cost to its customers.
Fortune recently spoke with cofounder and CEO Simon Griffiths about how the first few months are going and what the company plans to do next.
The following interview has been condensed and lightly edited for clarity.
Simon Griffiths of Who Gives a Crap Courtesy of Who Gives A Crap
Fortune: What inspired the launch of Who Gives a Crap—as well as the irreverent name? Why would consumers turn to this brand instead of one they might be familiar with on store shelves?
Griffiths: Back in 2012, I learnt that 2.4 billion people didn’t have access to a toilet, and that number wasn’t improving very quickly. I spent some time thinking about how overwhelmingly big that statistic was, then one day I walked into the bathroom and had a quarter-second epiphany: I could sell toilet paper, donate half of the profits to help fund organizations building toilets, and call it Who Gives a Crap.
Besides our name—and our love of puns—I think people reach for our product because they care about our mission and want to be a part of it. Not having a toilet isn’t just inconvenient, it’s also really dangerous. To put it in perspective, 297,000 die annually from diseases caused by improper sanitation. That’s why we donate 50% of our profits to our charity partners working in water, sanitation, and hygiene. We given $5.8 million USD, to date. We’ve definitely come a long way since our first $2,200 donation in 2013.
We’re also dedicated to sustainability—something we know our customers care about. All of our products are plastic-free and made from recycled materials or fast-growing bamboo, and we just launched global carbon neutral shipping.
The company’s 100% recycled toilet paper was rated the most sustainable toilet paper by the Natural Resources Defense Council (NRDC). Courtesy of Who Gives A Crap
Along with hand sanitizer and face masks, toilet paper could be described as one of the most coveted items of 2020, especially in the earliest days of the pandemic shutdown. What was business like in the spring? How has it progressed since?
It certainly was quite a time to be in the toilet paper business. At the start of March, we saw our daily sales double, then increase fourfold, then twelvefold. It looked like we were going to do a 30x to 40x day-of-sales next, so we decided to mark our store as sold out so that we could make sure that we had enough product for our subscribers. At the panic-buying peak, we were selling 28 rolls of toilet paper per second, and our wait list grew to over half a million people.
Since then, as a product category, toilet paper sales are a bit slower because people stocked up earlier in the year. However, we’re seeing our direct-to-consumer sales channel remain high because more people are shopping online. We’re happy to be fully stocked and ready to ship to all of the new customers that have recently discovered us, as well as our subscribers who are ready to stock up again.
The rolls are packed in paper—not plastic. Courtesy of Who Gives A Crap
That said, what has it been like to secure funding for your startup? Is it primarily self-funded, VC-backed, or some mixture of both?
We’re totally self-funded, starting with a crowdfunding campaign in 2012. We realized toilet paper wasn’t the most exciting product to crowdfund, so to help get people’s attention I agreed to sit on a toilet in a [drafty] warehouse until we had presold the first $50,000 of product. Since then, we’ve bootstrapped the business, using debt to help us manage our working capital and annual donations. We repaid all of our debt about 18 months ago and are now able to grow the business from the sales that we make.
If I think back at all we have accomplished by bootstrapping, it’s pretty incredible. We now have operations in Australia, Europe, the United Kingdom, Sweden, and the United States, with more expansion in the works.
“I realized the size of the global philanthropy market is relatively fixed: to double the market size we would have to get everyone to give twice as much every year for forever, which simply isn’t possible. So the current system meant that organizations were competing against each other for funding,” Griffiths says. Courtesy of Who Gives A Crap
Post-pandemic and five years down the road, where do you see this company in the market?
Two of our core goals are to grow our donations and to try to be a positive influence over other businesses.
To grow our donations we need to find more people who will be excited to use our products, or we need to create new products that our existing customers can fall in love with. So when I look forward five years, I’d love to see us being a household name globally, selling into even more countries with a broader range of products.
In terms of influencing other businesses, I think society is currently at a tipping point of a big ethical business movement, similar to where sustainability was 10 years ago. People are looking for products that do more than look good and provide a delightful customer experience; they’re looking for companies that do good. Companies with ethics and values that align with their own. Companies with a soul. This makes me incredibly excited to be an “ethical business” playing a role in this movement, and even more excited to think about what the business world will look like in five years’ time. If the biggest companies in the world adopt the same values and passion to give back that we have at Who Gives a Crap, the world will be a very different place.


fortune--2020-10-18--Stocks in ‘election-sensitive’ sectors seem oblivious to which candidate wins. Why?

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The stock market is marching to its own drummer. And neither Trump nor Biden is setting the beat.
President Trump’s policies toward business and Joe Biden’s platform on taxes, regulation, and the like make it pretty clear that some sectors would fare better over the next four years if Trump is reelected, and others would prosper more under the former Vice President. So you’d think the prices of stocks in Trump-friendly industries would surge when he pulls closer to Biden in the polls and sell off when he falls farther behind. By the same token, it would make sense that as Biden’s lead widens, as it has recently, shares in the corridors of the economy his proposals favor would follow the same pattern.
Of course, the trajectory of stocks in different industries are influenced by many forces besides the shifting odds of a Trump or Biden presidency. Among them are the Fed’s commitment to ultralow rates, the careening course of crude oil prices, and the mounting trade war with China. But according to Tom Hainlin, national investment strategist at U.S. Bank, the two paramount drivers of both the overall market and shares in different industries, are the ebb and flow of the pandemic and the probability that Congress will pass a new stimulus. “The markets are carefully watching the progress on a vaccine, that’s the key to fully reopening the economy, and the chances of a stimulus package as a bridge to get us there,” says Hainlin.
Still, the two candidates pledge to treat the same sectors in such totally different ways, that it’s worth exploring whether their fluctuating fortunes in the polls is part of what’s pushing and pulling stock prices. To find out, I looked at what’s been happening in six industries: three that should welcome a Trump presidency and three that would benefit from Biden’s proposals.
The three Trump-leaning categories are energy, health care, and technology. In energy, Trump’s been a champion of fracking and new pipelines, while Biden backs a climate-friendly agenda that could hurt oil companies. In health care, Trump’s changes in how insurers are reimbursed for drug sales looks like less burdensome than Biden’s stance for imposing price controls. And Biden’s plans for a broader public option could shrink the share of health care dollars going to private providers from insurers to HMOs. Tech is a close call. Both candidates talk about hitting social media giants with tighter regulation, but it’s likely that a Biden administration would take much more aggressive antitrust action, since Democrats regularly blast Big Tech for exerting and abusing their supposed monopoly power.
Leading the better-under-Biden roster are industrials and materials. Those sectors depend heavily on exports, and they’re suffering from the tariffs our trading partners levy in retaliation for the duties imposed by Trump. Biden is a globalist who supported the TPP and NAFTA. His policies would boost trade and lift growth for nations that buy our products, expanding overseas markets for U.S. steel, aluminum, and cars. The Biden green agenda would marshal huge subsidies for renewables such as solar, wind, and breakthrough battery technologies.
Since early April, the Trump vs. Biden polls displayed four cycles where Biden’s lead has significantly shrunk or expanded. We’ll call those episodes the Four Waves. In Wave One, running from Friday, April 3, to Friday, May 8, Biden’s lead shrank by 1.5 points to 4.4%. During Wave Two, from May 8 to June 19, Biden gained 5.1 points. In Wave Three, from June 19 to Sept. 18, Trump rebounded by 3.3 points, lowering Biden’s lead to 6.2 points, 49.3% to 43.1%. In Wave Four, from Sept. 18 to Oct. 14, Biden roared back, grabbing 3 points and establishing his current big lead of 9.2 points, 51.4% to 42.2%. Did stock prices in these six industries––all that could have plenty riding on the outcome of the election––follow the candidates’ zigzagging odds?
We’ll use the S&P industry indexes to measure the changes in five sectors and the Nasdaq Clean Edge Clean Energy benchmark for renewables. First up is the trio Trump should benefit. In tech, prices rose 15% in Wave One as Trump’s numbers improved. That seems to make sense. But in Wave Two, Trump fell far behind, and the sector did even better, waxing by 22%. Same story in the most recent four weeks of Wave Four: Trump slipped badly, and tech jumped 10.8%. The conclusion: Tech did even better when its best candidate’s poll numbers did the worst. Tech investors are yawning about the election and rejoicing over the 5G and other next-gen products they’re betting will drive today’s immense valuations to new heights.
Health care barely budged when Trump took his biggest hit in Wave Two, edging up 1%. When the gap expanded to its widest level in Wave Four, the index rose 2.3%. So the industry doesn’t seem the least bothered by the increasing probability of a Biden win.
Energy is the only sector where prices track Trump’s ups and downs. When the President’s numbers improved in Wave One, the S&P 500 Energy index rose 21%, and when his deficit expanded in Wave Four, the oil-gas-and-pipeline complex retreated 8%.
Let’s move to sectors that should be getting a Biden bump, at least in theory. When Biden got his biggest boost in Wave Two, materials went the other way, falling 6%. When the former Veep’s lead went from strong to overwhelming in Wave Four, materials rose just 1%.
As for industrials, over the two periods where the Biden lead shrank, prices increased 12% and 14%, and the two times he slipped, shares advanced 9% and 27%. Put simply, investors piling into industrials reckoned they’d thrive with either Trump or Biden in the White House.
Most mystifying of all is the reaction in green stocks. The Nasdaq Clean Edge index jumped 28% and 42%, respectively, when Trump made his best showings in Waves One and Three. Nothing against Biden: Green also gained 22% when he leaped to his widest lead in Wave Four.
The takeaway: Stocks that should benefit from a Biden presidency do no better when his polls improve than when Trump pulls closer. Of the three sectors that got a boost under the Trump presidency and risk losing that lift if he loses, only energy even remotely mirrors Trump’s prospects for reelection.
Stocks in what should be the “election-sensitive” sectors seem oblivious to which candidate wins. The narrative extends to the overall market. Biden’s proposal to raise the corporate income and capital gains rates appears to be a prescription for lowering future profits and compressing P/E multiples, how much folks and funds will pay for each dollar of those earnings. But that’s not the message the S&P 500 is sending. When Biden’s lead rose by 5.1 points in Wave Two, the S&P gained 5.7% and added another 5% in Wave Four when the chasm expanded to today’s 9.2 points.
Hainlin notes that “it isn’t unusual at all” in the run-up to a presidential election for the upfront and tangible forces that can benefit or damage businesses right now to outweigh the candidates’ positions in the minds of investors. And what’s uppermost in the minds of investors is the daily news on the the pandemic and wrangling over a new stimulus.
History also tells us that what’s proposed during a campaign often isn’t enacted. “Even if you get a Democratic sweep, it will take a long time to formulate policy and pass something,” says Hainlin. “And neither party is monolithic. For example, both Democrats and Republicans want to bring down drug prices, though in different way.” A good example of why the pandemic and stimulus are exerting a far stronger pull than possible future shifts in policy, he says, is energy. With crude oil in plentiful supply, it’s tepid global demand that’s holding prices in the $40 a barrel range. “A big Democratic victory would mean more alternative energy,” says Hainlin. “But what investors are looking for right now is the progress towards reopening that would lift demand and push up prices.”
The market is in such a party mood, so high on momentum, that it doesn’t seem to care who gets elected President. It’s been a bash. The looming policies investors are ignoring could bring a long hangover.


fortune--2020-10-18--Facebook’s new tool to stop fake news is a game changer—if the company would only use it

When an explosive—and most likely fake—story about Joe Biden’s son began to circulate online this week, Facebook did something unusual: It decided to restrict its spread while it investigated the story’s accuracy.
This marked the first prominent deployment of a tool the company has been testing for several months. Facebook calls the tool a “viral content review system,” while some news outlets and research outfits have referred to it as a “circuit breaker.” Whatever its name, the tool has enormous potential to limit a tsunami of false or misleading news on topics like politics and health.
The circuit breaker tactic is a common sense way for the social network to fix its fake news problem, but it may also run counter to Facebook’s business interest. This means that it’s too soon to say whether Facebook’s actions on the Biden post will be a one-off occurrence or a new embrace of civic accountability by a company that has long resisted it.
The promise of viral circuit breakers
Not every post on Facebook is treated equally, as most people are aware. Instead, the site’s algorithm amplifies the reach of those most likely to elicit a reaction. That’s why a picture of a new baby from a long-ago acquaintance will vault to the top of your Facebook feed, even if you haven’t seen any other posts by that person for years.
While the algorithm rewards pictures of newborns and puppies, it is also inclined to promoting news stories—including fake ones—likely to elicit a reaction. That’s what occurred prior to the 2016 election when stories from sites in Macedonia, masquerading as U.S. conservative news sites, went viral on Facebook. (The sites in questions were run by teenagers seeking to make money from ads.)
Today, the problem of fake news circulating on Facebook is just as prevalent—and possibly more dangerous. This week, the New York Times listed four false election stories circulating widely on Facebook, including a baseless rant about an impending Democratic coup that has been viewed nearly 3 million times. Another example, this one trending in left-wing circles, is a fake report about a mysterious cabal that’s blocking mailboxes to discourage voting. And last month, Facebook users circulated stories (likewise fake) that radical leftists were setting the wildfires in the West. The ensuing hysteria led to sheriffs’ offices and firefighters wasting critical time and resources on nuisance calls.
Until now, Facebook has responded to this sort of viral misinformation by pointing to its team of fact checkers it employs, which can result in Facebook taking down some stories or placing a warning label on them. Critics, however, say the process is feckless because any response typically comes days later—meaning the stories have already reached an enormous audience. Or, as the axiom goes, “[Facebook’s] lie has gone halfway around the world before the truth has had a chance to get its pants on.”
This situation led the Center for American Progress, a Washington think tank, to include circuit breakers as its first recommendation in a landmark report on how social media platforms can reduce misinformation. The idea has also been endorsed by GMFUS, another policy think tank.
“Circuit breakers like those used by high-frequency traders on Wall Street would be a way for them to pause algorithmic promotion before a post does damage,” says Karen Kornbluh, a policy expert at GMFUS. “It gives them time to decide if it violates their rules. They don’t need to take it down, but they can stop promoting it.”
Circuit breakers thus appear to be the best of all worlds: They allow Facebook to limit the spread of misinformation without taking the draconian step of removing a post altogether.
And indeed, that’s what Facebook did on Tuesday when spokesperson Andy Stone declared that the company was responding to the suspect Hunter Biden story by “reducing its distribution” while fact checkers investigated its veracity. It deployed a circuit breaker.
But it’s far from clear if circuit breakers will be a regular part of Facebook’s misinformation strategy, or if the Hunter Biden decision will stand instead as a rare exception to Facebook’s practice of letting fake news flow freely on its platform.
Can Facebook change a viral business model?
Facebook’s use of a circuit breaker is one of several encouraging steps the platform has taken this month to limit misinformation, including a ban on posts that deny or distort the Holocaust. But there are reasons to be skeptical.
As a scathing new profile of Facebook in the New Yorker observes, “The company’s strategy has never been to manage the problem of dangerous content, but rather to manage the public’s perception of the problem.”
In the case of circuit breakers, the company has been cagey about how widely they are being deployed. In an interview with Fortune, a Facebook spokesperson noted that, in most cases, few will notice when the company uses them. The spokesperson, who spoke on condition of anonymity, also cited a recent example—one involving an audio post suggesting right-wing activists run over protesters with cars—of the circuit breaker working.
But the spokesperson did not explain why the circuit breakers did not slow down the four fake stories cited by the New York Times, or provide any data about how often they have been used. Instead, she said, the system served as a backup for Facebook’s policy-based moderation tools, which she claimed do an effective job of screening for noxious content—a proposition that many critics would disagree with.
Facebook’s reluctance to elaborate is perhaps understandable. Republicans, responding to Facebook’s decision to temporarily limit the Biden story, warned they will make it easier for people to sue the company over the content its users post. In a hyper-partisan climate, any steps Facebook takes may leave it open to accusations of bias and political retaliation.
Meanwhile, Facebook has another incentive not to use circuit breakers in a meaningful way: Doing so would mean less “engagement” on its platform and, by extension, less ad money. In the view of one critic cited in the New Yorker profile, Facebook’s “content-moderation priorities won’t change until its algorithms stop amplifying whatever content is most enthralling or emotionally manipulative. This might require a new business model, perhaps even a less profitable one.”
The critic, a lawyer and activist named Cori Crider, went on to suggest that Facebook is unlikely to make such a change in the absence of regulation. The company, meanwhile, has yet to offer a convincing answer about how it plans to reconcile this tension between an ethical duty to limit the spread of misinformation, and the fact it makes money when such misinformation goes viral.
Kornbluh of GMFUS says this tension is what leads Facebook and other social media platforms to err on the side of waiting—meaning harmful posts can earn millions of views before any action is taken. She argues that this approach must change, and that circuit breakers offer the potential to do enormous good with little harm.
“A circuit breaker approach wouldn’t force them to deny anyone the right to post—but would deny them amplification,” she says.


fortune--2020-10-18--U.S. states are turning to a private Irish company to help stop the spread of COVID

Before the coronavirus pandemic, NearForm, an enterprise software company headquartered in the tiny southeastern Irish seaside town of Tramore, helped some of the most recognizable brands in the world—from Uber to Condé Nast—make quick digital transformations.
When COVID-19 hit and the Irish government needed a technology company with a reputation for being quick and nimble to build a contact tracing app in March, NearForm jumped at the chance to help.
The company’s software engineers, who were all used to working remotely even before the pandemic, created COVID Tracker, a decentralized app that keeps users anonymous but alerts them if they’ve crossed paths with someone who has tested positive for coronavirus in the past two weeks. With a 35% adoption rate, it has been such a success story in Ireland that versions are now being used in four U.S. states, with many more expressing interest.
“From getting back to life as we would like it to be, we have to get the transmission rates down so we can control and ultimately quash the virus. That’s our primary aim,” Larry Breen, NearForm’s chief commercial officer told Fortune. “The sooner we reduce those numbers, we get to open up our economies, our businesses, shops, and sports.”
In the past month, Pennsylvania, Delaware, New Jersey, and New York launched COVID Alert apps built in partnership with NearForm. The entire process, from building to deploying the app for each new government client, takes less than 30 days, according to the company.
It’s also relatively cost effective, which has caught the attention of other state governments, according to Breen. New York’s app cost $700,000 to build and deploy. By comparison, the German government spent $22.5 million to fund the development of its own contact tracing app, the Associated Press reported.
How contact tracing apps work
Contact tracing apps use the Bluetooth signal from a person’s smartphone to send anonymized keys to other people who also have exposure notification apps.
“If another app user spends 10 minutes within six feet of you, your phones swap random codes to remember the contact. These codes don’t say anything about you or your location,” NearForm explained during the setup process for the COVID Alert NY app.
Those keys, which are randomly generated numbers, are stored in a national server by the Association of Public Health Laboratories. If someone using the New York app reports he tested positive for coronavirus, anyone running the app who was near him recently will receive an alert with guidance to quarantine and get tested. NearForm said each anonymous key deletes itself after 14 days as an added layer of privacy protection.
Each state has had a patchwork of regulations, from reopening timelines to mask mandates, but the technology the app is built on seeks to make contact tracing apps interoperable across state lines.
In April, Google and Apple formed a rare partnership to create an open source API for exposure notifications, allowing companies such as NearForm to build apps using the API that don’t track a person’s movements, but are effective when it comes to breaking the chains of transmission.
Since NearForm’s app runs on the Gapple API, that means it can work with any other app built using the same code, even if a competing company makes it.
“The actual open source code sits underneath [the app] and the reports and findings and makes it publicly available,” Breen said. “Anybody with concerns is free to look.”
While NearForm initially focused on creating a centralized app, Breen said it pivoted to a decentralized approach using the tech giants’ API so the company could ensure its app would have the most profound impact on public health.
Can NearForm’s success abroad be replicated in the U.S.?
Getting people to wear a mask is still hard enough in some states, but encouraging them to download and use an app that tracks their movements, even if it’s anonymously, is an entirely new obstacle.
“Citizen adoption is one of the biggest barriers. There’s this trepidation of, ‘Am I giving away data?’” Breen said. “The more we can get consistent messaging out there about how this can affect change and save lives and start moving the country or the state back to some level of normality and take away the confusion, we can get people to more actively engage.”
Last week, more than 105,000 people downloaded New Jersey’s app, just days after it launched. In New York, there were at least 500,000 downloads days after the state’s app was available to the public. Pennsylvania reported 300,000 downloads since its app launched on Sept. 24.
“By utilizing this technology, we can quickly notify more people who have been exposed to COVID-19. This innovative solution enhances our COVID-19 response and gives residents another tool to stay calm, stay alert, and stay safe all in the palm of their hands,” Pennsylvania Department of Health Secretary Dr. Rachel Levine told Fortune. “This is a simple, secure way that each and every one of us can unite together to help protect our communities from COVID-19.”
While it’s solid progress, the downloads represent just a small percentage of each state’s population. By comparison, NearForm’s app was downloaded by 25% of the Irish population 36 hours after its launch in July and now has more than 35% adoption across the country’s population of 4.9 million people.
“We have people now who are doubting the advice they hear from public health agencies. Will people trust a contact tracing app?” said Alok Patel, a hospital physician in San Francisco and a medical journalist. “These apps have to be very clear, not just about privacy and data, but by also sharing quality information about why the app is important and how contact tracing can help break the chains of transmission.”
Even if the contact tracing apps are only as good as the portion of a population using them, a study published last month in MedRxiv found they can make a difference. If just 15% of the population of Washington State downloaded contact tracing apps and actively reported their symptoms, digital alerts could reduce COVID infections by 8% and deaths by 6%, according to the study, which was written by tech researchers and a team of academics.
Breen said NearForm has been receiving calls from governments around the world, including more U.S. states, that want to explore the possibility of launching their own contact tracing apps. As of Friday, a review of the app stores found there were just 14 states with contact tracing apps, including pilots from Arizona and California.
“Contact tracing with an app is also one extra part of all the other mitigation strategies we have,” Patel said. “If you have an app, manual contact tracing, masks, physical distancing, testing strategies, all those together will help prevent future outbreaks and ultimately help us reopen our economy, get back to the office and some sense of normalcy.”


fortune--2020-10-18--Tom Steyer thinks business is missing a big opportunity—and that Trump has done ‘nothing but whiff’

Since Tom Steyer dropped out of the presidential race in February, he has been busy proselytizing about his favorite topic: climate. Both the political and the earthly, that is.
An advisor to Democratic candidate and former Vice President Joe Biden, Steyer is warning that the planet faces imminent calamity if bold and urgent action isn’t taken. But it’s not all doom and gloom, says Steyer, a billionaire and former hedge fund manager. Humanity may yet snatch prosperity from the jaws of eco-devastation.
Fortune caught up with Steyer, whose name has been floated for a possible Biden cabinet placement. He explained the Democratic ticket’s economic recovery plans, which tie together financial stimulus and environmental policy. The discussion ranged from how Steyer is reading the markets to what technological breakthroughs he’s most excited about (see: electric vehicles, offshore windfarms, and more).
Here is that conversation, edited and condensed for clarity.
Fortune: Which is the bigger crisis facing this country, COVID or climate?
Tom Steyer: I don’t separate those. It is our ability to handle the natural world. It’s about dealing with the facts, dealing with the science, and taking into account what you need to do to avoid disaster. Joe Biden intends to deal with them in a way that also addresses our high unemployment rates and the need to create good paying middle-class jobs. Mr. Trump has done nothing but whiff.
What would a Biden presidency entail?
The biggest thing the Biden campaign has proposed is the $2 trillion “build back better” plan to rebuild the infrastructure of America over four years with an eye toward climate and clean energy—but it’s not limited to that. It includes building affordable housing and charging stations for electric vehicles. It includes weatherizing millions of houses, redoing HVACs in commercial buildings, and rebuilding the grid so it can take in renewables. It’s a huge infrastructure deal. This is critical.
The president says the plan costs too much and will destroy the economy.
The exact opposite is true. Did you read Mr. Trump’s taxes? Are you going to listen to this guy on business or economics? I did two studies five or six years ago with Hank Paulson and Mike Bloomberg with the support of American CEOs and policy leaders called “risky business” to show that moving to clean energy creates faster growth, more and better paying jobs, and better health, while avoiding the climate disaster. It is a win, win, win. Clean energy is cheaper than fossil fuel energy. Trump either doesn’t know what he’s talking about, or he’s lying. Those are the only possibilities.
What is the cost to the country—or the planet—of delaying action?
Incalculable. Your generation is going to have to deal with this every single day for the rest of your lives.
Say more.
I live in California. We’ve had over 4 million acres burned so far this year. The record before this was two years ago, 1.9 million acres. The Gulf has a record number of hurricanes. If you have a strong stomach, read about how the now-considered-unstoppable melting of the Greenland and Antarctic glaciers will affect sea level. This is not a problem you can wait four years to deal with. No, this problem will just keep escalating until we get on top of it.
China is making bold commitments. It aims to be “carbon neutral” by 2060. Do you believe, or trust, China’s leadership when it makes such pronouncements? Is there any hope of the U.S. and China working together?
I do not want the people of the United States to suffer horribly, and I don’t believe the Chinese leadership wants the people of China to suffer horribly. We can only solve this together. There is a huge business and economic opportunity up for grabs here. We can either seize it or not.
Where should the U.S. focus its attention?
Think about growth. Is growth going to come by us taking marginal market share in the internal combustion business, or is it going to come by us creating a whole new business in things like electric vehicles? Are we going to get growth by coming up with new coal plants? Or are we going to get growth by coming up with entirely new clean ways of creating electricity?
Elon Musk would appreciate your touting electric vehicles.
All I can say is the market is speaking really loudly here—really, really loudly in terms of where we’re going. The Republican Party isn’t listening. Just take a look at where people think the future is—whether that’s the balance sheets of our biggest banks, or the valuations of companies on freely traded exchanges. We say we want America to be energy independent. Let’s talk about how we’re going to do that.
Which technologies excite you most right now?
We can see how much better the battery is going to be and where solar prices are going in the next year or two. But can you really tell me how big offshore wind is? It could be huge. Can you really tell me where we’re going with clean hydrogen? That is a game changer.
As a former hedge fund manager, what advice might you have for people looking to get through this time of economic uncertainty?
I don’t really give investment advice anymore. I always say to people, if you want to do it, do it full time—be completely committed. But I will say this. It has never worked to invest in the past. We literally need to rebuild this country. Drive around and take a look. We need to rebuild the infrastructure and we have to do it on accelerated basis. This is a huge business opportunity.


fortune--2020-10-18--Valuation: Casino stocks got clobbered by COVID-19. This one is now an attractive bet

“The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.”
—Warren Buffett, Fortune, 1999
Few business models are more reliable than a casino’s. People love to gamble, and because the house has a statistical advantage over its customers in every game it runs, the more people play, the more the casino makes. Factor in all the cash people spend on dining and entertainment inside those bright, windowless boxes and you’ll understand why casinos are inherently good businesses.
In normal times, that is.
COVID-19 turned the world upside down, especially for businesses that depend on big crowds: theme parks, cruise ships, concert halls, and, of course, casinos. While most of these businesses remain severely depressed, casinos—especially the regional ones, where people drive from their homes for an afternoon or evening of gambling—are making a remarkable and unexpected comeback. Despite this, one casino stock—Gaming and Leisure Properties (ticker: GLPI)—has not fully recovered. That makes it a very good bet, indeed.
GLP is the creation of entrepreneur Peter Carlino, who nearly 50 years ago took over Penn National, a horse track near Hershey, Pa., and turned it into the nation’s largest regional casino business. Carlino’s father, who began modestly as a florist in Philadelphia, was a serial entrepreneur who sent his son to central Pennsylvania to oversee some of the family businesses, including the racetrack. In 1989, the family won the region’s new offtrack betting concession, and Carlino’s father tapped Peter to run it.
With little else to entertain them, central Pennsylvanians flocked to the Carlinos’ OTB parlors. It quickly became the family’s top moneymaker, and Peter Carlino sensed he’d found his calling. “Taking bets on horses at the OTB window is much more profitable than the track itself,” he remembers thinking. “We’re on to something.”
Carlino took Penn National public in 1994, around the same time that many state legislatures, eager for more tax revenue, began to legalize casinos. Carlino wanted in on the action and began to buy ones around the country. In 2000, he bought another horse track, this one in Charles Town, W.Va., in hopes that he could pass a local referendum to legalize gambling. An earlier measure had lost by a 2-to-1 margin, but Carlino spent in a year in Charles Town, applying his considerable charm and energy to reversing the outcome. When the second vote was held, the margin was 2-to-1 for instead of 2-to-1 against.
Carlino decorated the new casino with flashing lights and named it the Hollywood. Drawn by the sparkle and pizzazz, West Virginians made the Hollywood a huge success. This generated enough cash to allow Carlino to build or acquire the top casinos in St. Louis, Kansas City, Baton Rouge, and Columbus, all of them infused with the same aspirational glitz as the one in West Virginia.
Like a rock quarry or a cable television provider, regional casinos are inherently good businesses. Local economies can support only a few of them, and states often limit the number of licenses granted, restraining the number of competitors. Combined with Carlino’s knack for bringing flair to middle America, Penn National became an enormously successful company. From its IPO to 2013, Penn National compounded shareholders’ returns at 22.5% a year, three times the average rate of the S&P 500 over that period.
A split, and a surprise
In 2013, Penn National split in two: One company owned the casino licenses and ran the operations, while the other owned the real estate and served as the operating company’s landlord. This same structure—one “asset-light” company and one “asset-heavy”—had worked well in the hotel industry. But it surprised many when Carlino decided to run the landlord—the company that became Gaming and Leisure Properties—instead of the operator. A glimpse at the underlying fundamentals, however, explains why.
Unlike in the hotel industry, the casino operator must pay for all capital expenditures, either maintenance or expansions. The landlord pays nothing. Even better, Carlino structured the separation so that rent expense to the landlord had to be paid even before interest was paid to the banks. With little to do but sit back and collect the rent, this makes being a landlord to a portfolio of regional casinos a very good business indeed.
While the company’s 46 properties had to shut down early in the pandemic, they have now all reopened, with impressive results: Revenues are down 10% compared with last year, but operating profits are up 20%. How can this be? In one of COVID’s many unintended consequences, casino activities that pose a high risk of spreading the virus—table games like blackjack and poker, and all-you-can-eat buffets—are also a casino’s least profitable but have had to be shut down. Slot machines, on the other hand, can be spread far apart, require little human interaction, and are thus safe to play. Happily for casinos, slots also happen to be among their highest-margin games.
It wasn’t a surprise when COVID slammed the shares of Gaming and Leisure Properties, but given the above it’s curious that the stock remains down more than 10% year to date. I started buying GLPI for clients this spring, and I think it remains an attractive investment today in both the long- and short-term.
GLP’s attractive economics make it a good long-term hold, especially for those seeking income. As a real estate investment trust, or REIT, the company is required to pay most of its profits out as dividends. Short-term, there are several minor clouds overshadowing the stock that may soon lift, giving investors the potential for a relatively quick 30% upside.
When COVID first struck, GLP cut its dividend roughly 15%; it also elected to pay most of it in stock. This was not because GLP’s finances were shaky; indeed, GLP is the most regionally diversified among the three American casino REITs. Back then, it wasn’t clear how GLP’s tenants would survive the pandemic, and Carlino wanted to make sure that the company could meet its obligations. Nevertheless, cutting a dividend spooks REIT investors, so GLP has trailed its peers year to date.
The other knock on the stock is the risk of so-called iGaming, or online casino play. Just as states legalized casinos a generation ago in search of new tax revenues, states are now in the process of legalizing both iGaming and online betting on sports. Some think that iGaming may drain customers from brick-and-mortar casinos just as e-commerce has siphoned off traditional retail foot traffic. Both the evidence and common sense, however, suggest otherwise. Online gaming has been legal in New Jersey, for example, since 2013, but Atlantic City casino revenues have risen in four of the past five years. That’s because even more than shopping, gambling is something people want to experience in person. There’s a reason Carlino built his company around those flashing lights.
“People are social animals,” Carlino says. “Will they place a bet on a game on their couch? Sure. But will they also keep coming back to the casino? Of course.”
GLP has said it will restore its dividend to all cash in early 2021. At its current $2.40 payout, GLP trades at a nearly 6.5% yield. This is a discount to where it historically trades relative to 10-year U.S. Treasury bonds. When the dividend resumes in cash, I believe the stock will trade at a yield of less than 5%, which means that the stock should appreciate roughly 30%, from its current $38 to around $50 a share. The company should also increase the dividend next year, providing further upside potential.
Meanwhile, Carlino remains in central Pennsylvania, doing what he has always done: running the business, keeping his eye out for new real estate deals, and letting the stock price take care of itself. “I look at the stock price maybe once a month,” he says. “My philosophy has always been, put up the numbers; investors will figure it out.”
Adam Seessel is the portfolio manager at Gravity Capital Management LLC, a registered investment adviser. Certain of the securities mentioned in the article may be currently held, have been held, or may be held in the future in a portfolio managed by Gravity. The article represents the views and belief of the author and does not purport to be complete. The information in this article is as of the publication date, and the data and facts presented in the article may change.


fortune--2020-10-18--How a funeral inspired the pandemic’s hottest hardware

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If anyone was ill-prepared for worship in the time of coronavirus, it was the church I attend in New York’s Hudson Valley. While modern evangelical churches have broadcast systems that would put most local PBS stations to shame, our 250-year-old country parish only recently had air-conditioning installed.
So when New York’s lockdown restrictions hit in mid-March, we were forced to improvise. Initially, I and another parishioner helped our priest record services ahead of time that would be uploaded on the church’s YouTube page for Sunday morning. We used our cameraman’s DSLR camera, my iPhone, and a podcasting microphone that was gathering dust and created a serviceable multi-camera rig.
This worked for several months but as it soon became apparent that restrictions on in-person worship would continue we had to find a more sustainable solution. The issues why were twofold: posting pre-recorded videos took away from the live community that church gives people, and secondly, I was spending up to five hours per week editing the videos together.
Our initial assumption was that any sort of live-streaming equipment would be prohibitively expensive, until research led me to a product called the ATEM Mini by Blackmagic Design that was taking church technology YouTube by storm (yes, that’s a thing).
Based in Victoria, Australia, Blackmagic Design’s bread and butter is in broadcast and cinema hardware such as high-end, ultra-high resolution camera bodies and multi-input broadcast switchers that can cost north of $10,000. But in November 2019 the company introduced the ATEM Mini, a shrunken down version of its ATEM broadcast switchers. The price was a quite radical $295.
Blackmagic Design
The ATEM Mini accepts four HDMI inputs—whether they be cameras or from a source such as a video games console or PC—and allows the operator to switch between them with transitions, picture-in-picture, and advanced features like chromakey (green screen), and audio processing. Where it gets really nifty is that all the processing of the video signals is handled on the device, so that when plugged into a computer the device shows up as a USB webcam that’s ready to go in Zoom, YouTube or your video streaming platform of choice.
“The idea came to our CEO at a funeral of all things,” says Bob Caniglia, Blackmagic Design’s director of sales operations for North America. “At the funeral, people were trying to play videos back and then switch to something else, and each time they were plugging and unplugging cables. He said there all there needs to be is a little box to switch between inputs. How hard is that?”
Blackmagic’s development team soon realized there would be other applications for such a box, such as Twitch gamers, YouTubers, classrooms, business presentations, virtual conferences, and yes, churches.
What they didn’t realize is just how in-demand that product would be just months after its launch. “If someone told me last September, that by now we’d sell as many as we have I’d have asked, ‘Who’s buying this?’ But you throw a pandemic in there and all of a sudden…”
Indeed, the ATEM Mini was sold out at specialist A/V retailers and on Amazon for months. Scalpers were reselling the units at nearly double MSRP as businesses, houses of worship, and politicians made the switch to online. (Joe Biden’s campaign uses Blackmagic Design equipment for his at-home broadcasts.)
The ATEM Mini Pro (center) as part of the church live-streaming rig. Daniel Bentley
Blackmagic Design has now caught up with the backlog of orders for the ATEM Mini, and even added two new products to the line: the ATEM Mini Pro for $595, which adds an ethernet jack and encoder for directly streaming to YouTube or Twitch, recording to a hard drive from the device’s USB-C port, as well as multi-view monitoring so the director can see what’s happening on each input; and the ATEM Mini Pro ISO for $895 which adds the ability to record each individual input to a separate video file.
I gratefully accepted the offer of a review unit of the ATEM Mini Pro, and the product lived up to the hype. It’s simple to set-up (if you know how to plug an Apple TV into a television, then you already know how to set up the ATEM), and the results are surprisingly professional for such an in-expensive box. Our church has since purchased one and intends to continue streaming services once able to fully re-open. Hallelujah.


fortune--2020-10-19--Dis-United States of electricity: Mapping America’s energy supplies

The future of power generation is solar. That’s the view of the International Energy Agency in its new World Energy Outlook report, released in October. The biggest reason: Solar is now cheaper than coal or gas in most of the world. “I see solar becoming the new king of the world’s electricity markets,” said IEA’s executive director Fatih Birol. There’s still a long way to go before that forecast becomes true in the U.S. Last year, utility-scale solar produced just 1.8% of U.S. electricity, according to the Energy Information Administration, despite rapid growth in recent years. The overall portion of power from zero-emission sources, meanwhile, edged up to 38%.
A version of this article appears in the November 2020 issue of Fortune.


fortune--2020-10-19--China’s e-commerce giant Alibaba is expanding its brick-and-mortar empire

Chinese e-commerce giant Alibaba is doubling down on bricks and mortar.
On Monday, Alibaba announced that it had doubled its stake in Chinese retailer Sun Art to 72%, taking control of one of China’s largest big-box chains that sells groceries and other household goods.
“As the COVID-19 pandemic is accelerating the digitalization of consumer lifestyles and enterprise operations, [Alibaba’s] commitment to Sun Art serves to strengthen our new retail vision and serve more consumers with a fully integrated experience,” Daniel Zhang, CEO of Alibaba, said in a statement.
Alibaba purchased its new Sun Art shares from A-RT Retail Holdings, a company controlled by the French billionaire Mulliez family. The Mulliez family controlled 51% of Sun Art shares; it first invested in the Chinese retail sector in 1999.
In a filing to the Hong Kong exchange on Monday, Alibaba said it will seek to buy out the remaining shares in Sun Art for roughly $2.2 billion and plans to keep Sun Art’s Hong Kong listing.
Zhang noted that as of Monday all of Sun Art’s nearly 500 physical stores will be fully integrated with Alibaba’s online platform and that Sun Art had achieved “impressive results” in digitizing its offerings since Alibaba’s first investment in 2017.
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In 2016, Alibaba founder Jack Ma launched his vision of “new retail” as a means to blend online and offline shopping experiences and integrate more technology into each stage of the retail supply chain.
Until now, the new retail concept was most obvious in the Alibaba-backed Freshippo supermarket chain known in Chinese as “Hema.” Freshippo stores offer customers an app-driven experience; they can scan codes to learn more about in-store items, check out using their smartphones, or order groceries for pick up or delivery via Alibaba’s app.
Alibaba’s new retail strategy entails investing in existing physical retailers like supermarket brand Lianhua and retail giant Suning as a means to integrate its e-commerce data into improving real-life customer experiences.
Accordingly, in 2017 Alibaba purchased its first 36% stake in Sun Art for $2.9 billion. At the time, Alibaba wanted to use its technology and data to help Sun Art increase efficiency, learn more about Sun Art’s customers, and help the retailer sell more products online.
“Typically, Alibaba likes to be in the data technology business,” says Jeffrey Towson, a private equity investor and management professor at Peking University in Beijing.
Monday’s Sun Art deal signals a broader shift in Alibaba’s new retail strategy, Towson says.
“They now appear to view [physical stores] as their logistics and delivery system for products and services,” says Towson. “They are using these locations as forward delivery and service points within their network.”
Alibaba’s brick-and-mortar strategy is similar to that of its U.S. equivalent, Amazon, and comes as a growing number of Chinese tech and e-commerce giants seek to move more operations to physical stores. Last year, Alibaba’s largest competitor, JD.com, announced plans to build up its offline retailing presence and has made several investments in brick-and-mortar retail chains this year. Delivery platform Meituan Dianping announced its first unmanned, artificial-intelligence powered brick-and-mortar outlet this month.
Monday’s deal appears popular with Alibaba and Sun Art investors. Sun Art’s stock price jumped nearly 20% on Monday, compared with Friday’s closing price. Alibaba’s stock price also ticked up 1% on the Hong Kong exchange.


fortune--2020-10-19--How President Trump measures up on jobs in 6 charts

Last January, President Trump attended the World Economic Forum in Davos, Switzerland, and gave a speech previewing his pitch for reelection this fall. Speaking to the assembled crowd of global elites, Trump made the highly dubious claim that the economy he had inherited from President Obama was in a “dismal state,” despite the fact that the U.S. had produced 76 straight months of job growth when Trump was sworn in. And with signature bombast, the President played his, well, Trump card. The U.S., he boasted, was “in the midst of an economic boom the likes of which the world has never seen before.”
It was debatable assertion, given that economic growth had averaged a solid-but-not-scintillating 2.5% over Trump’s first three years in office. But the stock market was hitting record highs, and unemployment was at a historic low of 3.6%. Campaigning on his economic expertise seemed like a no-brainer for Trump.
Then came COVID-19.
Just weeks after Trump’s address in Davos, the novel coronavirus was declared to be a global pandemic. And while the U.S. scrambled to respond to a spiraling health crisis, the economy went into free fall. Some 22 million jobs were lost in the U.S. in March and April as businesses went into shutdown, and the unemployment rate spiked to 14.7%—the worst since the Great Depression.
More than half of those jobs have been recovered in the ensuing months. But the pace of the rebound has been slowing. After adding 1.8 million jobs in July and another 1.5 million in August, for instance, the U.S. created just 661,000 jobs in September. Heading into October, the unemployment rate was 7.9%.
Overall, the U.S. has some 3.9 million fewer jobs than when Trump took office. And new waves of layoffs could be coming as, say, cash-strapped local and state governments begin to wrestle with growing budget deficits.
But none of that has stopped Trump from attempting to sell voters on his economic prowess. In September, the Trump campaign began running a TV ad in battleground states that cast the President as the obvious choice in economic matters compared with his Democratic rival, former Vice President Joe Biden. “Donald Trump is the jobs President,” intones the narrator. “He helped create millions of jobs.” Never mind the net loss.
Given a second term, would Trump fulfill his promise to be the “jobs President”? Moody’s Analytics, for one, predicts that Biden’s policies would produce 7.4 million more jobs than Trump’s over the next four years.
To get a clearer view of Trump’s economic résumé, we examined his administration’s record in six charts, with a focus on jobs. It’s a mixed picture. His first three years in office generated solid growth, if not quite the historically great performance that he claims. The pandemic has obliterated those gains and left the nation reeling. That doesn’t give Trump a pass. The administration’s handling of the COVID-19 crisis must be factored into any assessment of the Trump Economy. Just how much credit or blame Trump deserves is for voters to decide.
A version of this article appears in the November 2020 issue of Fortune with the headline, “How Trump measures up on jobs.”