fortune--2020-02-17--Did the ‘techlash’ kill Alphabet’s city of the future?

This article is part of a Fortune Special Report on Rethinking the City.
Jesse Shapins’s blue and orange polka-dotted Stan Smiths squish the refuse-speckled muck of Toronto’s harbor.
Protected from the winter chill by a buffalo plaid jacket, hot pink toque, and Karl Marx–style beard, Shapins is showing off his adopted home. For the past couple of years, Shapins, a Colorado native and BuzzFeed alum with a Harvard Ph.D., has lived and worked in and around this muddy, 12-acre plot of industrial barrenness. This is Quayside (pronounced “key-side”), where Sidewalk Labs, the Google sibling and Alphabet subsidiary that focuses on urban infrastructure, intends to develop a Torontonian tomorrow-land.
So far, the area consists of nothing much. A “poutinerie” food truck idles in an unpaved parking lot. Long-abandoned soybean storage silos loom nearby. A few run-down charter boats line a slip where a flotilla of mallards honk at passersby.
A multiple-exposure photograph, composed in-camera with no manipulation in post-production, shows scenes from Toronto’s hustling business district, the empty Quayside site where Sidewalk Lab’s hopes to develop, and the skyline of the city on Feb. 3, 2020. Photograph by Sarah Palmer for Fortune
As he explains the interlocking technologies that may someday converge here, Shapins rotates his hands as though manipulating a Rubik’s cube. Sidewalk’s “urban design and digital integration director” (yes, it’s ungainly) outlines a mini-city of eco-friendly laminated timber, some dozen buildings soaring up to 35 stories. These mixed-use structures will be replete with solar arrays and rainwater-draining “blue roofs.” Underground, conduits to an efficient thermal grid will supply heat, and A.I.-powered pneumatic tubes will sort recycling.
The neighborhood Shapins describes will be a marvel—if it ever gets built. Sidewalk won a bid to propose plans for the area three years ago, pitching Quayside as a tech-centric model for urban reinvention. Since then, however, the project has been mired in controversy, amid an outcry over data mining and objections to the civic encroachment of a powerful corporation. While polling has found that only 17% of residents oppose the project, that minority has voiced its views loudly. Chief among the dissenters is Jim Balsillie, the former co-CEO of BlackBerry maker Research in Motion, who says the deal “was mismanaged” from the start. One local leader compares Quayside to Guadalcanal, a similarly tiny tract of land where a particularly bloody World War II battle was fought.
Bureaucratic combat continues. “Anytime you do something bold and ambitious it’s going to have both ups and downs,” says Toronto Mayor John Tory, who backs the plan. Waterfront Toronto, the nonprofit development corporation that manages the minuscule patch of land, says it will decide by May 20 whether to proceed. But while Waterfront Toronto appears likely to approve Sidewalk’s plans, the Quayside vision has been drastically scaled back—offering a lesson in the perils of public-private partnership.
As more of the world’s population migrates to cities, the planet’s environmental crises are concentrating there too. Already cities are the world’s biggest emitters of greenhouse gases, while generating immense amounts of trash and consuming copious quantities of water and energy. “Cities need to be more efficient in the way they interact with the environment,” says Sasson Darwish, an RBC Capital Markets managing director and “smart city” financier. “The way you can do that is through data.”
Data, of course, is Alphabet’s business. And for Toronto—whose population is increasing at a faster clip than any other big city north of the Rio Grande—Sidewalk seemed like an ideal partner. When Waterfront Toronto welcomed Sidewalk in 2017, Eric Schmidt, then Alphabet’s executive chairman, joked that the company’s founders were excited about “all the things you could do if someone would just give us a city and put us in charge.”
Torontonians had concerns. Sidewalk’s arrival coincided with a mounting “techlash,” as consumers grew distrustful of Big Tech’s data gathering. And its plans for Quayside depend on sensors embedded throughout the environment—gathering data on where people go, how they live, and more.
Early on, opponents blasted Sidewalk as a thinly disguised attempt to gobble up data on citizens’ real-world habits, extending Google’s dominance from Internet to omnipresence. Sidewalk remained adamant it would anonymize Quayside data, where possible, and never use it to support Google’s advertising machinery. For some, those assurances fell flat. And Sidewalk’s proposal to establish an independent “data trust,” which could have put that data up for grabs by third parties, alarmed privacy advocates even further.
Sidewalk Labs model of its sustainable and futuristic neighborhood on a 12 acre industrial site on Toronto’s waterfront. STR/AFP/Getty Images
Dan Doctoroff, Sidewalk’s CEO, says ads play no part in its business model: “Zero—not one bit.” Still, Alphabet expects the unit to earn an “adequate financial return,” says the former CEO of Bloomberg, the news and financial-data company, and former New York City deputy mayor. Sidewalk plans to invest in real estate. It anticipates earning fees for advising developers. And the firm will invest in, sell, and manage new smart-city tech. (It already has a stake in such products as an energy-efficient alternative to traditional electric wiring.)
But to some critics, that profit-seeking motive is part of the problem. “People are talking about privacy when what they should be talking about is privatization,” says Bianca Wylie, a founding member of the #BlockSidewalk movement. Under the Quayside model, she says, the government would cede control of public goods to largely unaccountable private interests. Further, she argues, Sidewalk is “A.I.-washing” infrastructure with complex tech that could result in vendor lock-in—making Toronto dependent on Sidewalk for its own growth. “I have no interest in being Larry Page’s hobby,” Wylie says, referring to Alphabet’s cofounder.
The grinding conflict has forced Sidewalk to tamp down its ambitions. The company sharply downsized its proposed development, which originally encompassed hundreds of acres beyond the Quayside site, including a potential Canadian headquarters for Google on a nearby island. This fall, Sidewalk dumped its “data trust” idea. In November it agreed to effectively leave data governance questions to the discretion of, well, government—plus Waterfront Toronto, whose board is appointed by municipal, provincial, and federal officials. (Even that compromise has critics: The Canadian Civil Liberties Association sued to stop the deal, and CCLA director Michael Bryant contends that Waterfront Toronto “has zero experience or jurisdiction to manage people’s data—any more so than they could build a nuclear plant.”)
All this wrangling is the antithesis of the agile, move-fast culture of Alphabet’s Silicon Valley home turf. Doctoroff concedes that “in retrospect we should have listened sooner and better and carved it back to what we knew would be politically acceptable.” Still, even in its truncated state, he sees Quayside becoming a showcase for Sidewalk’s city tech—a sort of in situ product catalog. For Alphabet, even a mini-display may be worth the wait. The smart-city industry—a category that includes automation in infrastructure, energy, and transportation, among other areas—is a $500-billion-a-year industry, according to Allied Market Research. Capturing even a small share could be a boon for a digital giant eager to expand beyond advertising.
For now, though, Sidewalk’s city of the future remains on hold. At nearby construction sites, cranes pluck up I-beams and send them skyward, cement trucks roll, and workers clank away. At Quayside, the waterfowl still hold sway.
A version of this article appears in the March 2020 issue of Fortune with the headline “Upgrade, Interrupted.”
More from Fortune’s special report on cities:
—Why the modern city needs a makeover
—The city that sees it all
—Can San Francisco be saved?
—5 big ideas for fixing global cities’ most daunting challenges
—20 maps charting the rise of the modern megacity
Subscribe to Eye on A.I., Fortune’s newsletter covering artificial intelligence and business.


fortune--2020-02-17--The city that sees it all

The city that sees it all

This article is part of a Fortune Special Report on Rethinking the City.
On an evening in late January, the Shenzhen North train station is a microcosm of a fast-changing metropolis—and a potential flash point for chaos.
Shenzhen has 12.5 million residents, about 10 times as many as in the 1990s. Millions of workers have immigrated here, drawn to its booming tech economy. Tonight, on the eve of Chinese New Year, hundreds of thousands of them are returning to their family homes for the holiday. Scores of travelers spill out onto the lawn in front of the station, laden with luggage and gifts. And with concerns mounting over the coronavirus epidemic, the crowd buzzes with an undercurrent of unease.
But Shenzhen North also showcases this metropolis’s web of “smart city” technology—and that web keeps the crowd moving smoothly. The effect begins as passengers approach the station. Subway cars and stops are plastered with automated screens that steer users to the nearest escalators. Passengers use their phones to swipe through subway gates, reducing delays. Those who drive to the station pull into a smart parking lot, where automated systems guide them to open spots. And there’s no waiting to pay parking fees—they’re automatically charged to drivers’ bank accounts, with the help of A.I.-powered cameras that read license plates.
Inside the station, the faces of Chinese nationals are scanned at security checkpoints. Passengers then enter a hall lined with hundreds of cameras, as well as security robots. If anything obstructs the flow of humanity, authorities spot it quickly and respond accordingly.
Shenzhen North is just one example of how technology imposes order in China’s smartest city. Shenzhen has become an urban laboratory where tech companies collaborate with city planners on strategies for responding to the challenges of an exponentially growing population—approaches that could catch on globally as more countries’ economies urbanize. The result is a city where authorities collect massive troves of data to manage traffic congestion, pollution, and resources like water and electricity. It’s also a city where the tradeoff between personal privacy and civic efficiency is tilting decisively one way.
Decades ago, China designated Shenzhen as a Special Economic Zone, showering local companies with tax breaks and freedom to experiment. Some of China’s largest tech companies are now headquartered here, including social media and gaming giant Tencent, telecom-equipment maker Huawei, and dronemaker DJI. Last year, Shenzhen’s economic output reached $374 billion, surpassing Hong Kong’s. When Mabel Zhang was growing up in a nearby city, Shenzhen was a drab stopover on the way to Hong Kong. Now in her late twenties, Zhang is a Shenzhen resident and booster. “It’s fast and young and active,” she says. “People have so many new ideas.”
Among those ideas is technology-driven urban management. With help from its tech giants, Shenzhen has built a sophisticated, centralized data infrastructure, supported by a Chinese government mandate that cities build such platforms.
One company at the core of the effort is Huawei, whose willingness to cooperate with authorities has made the U.S. and other nations reluctant to do business with it. (The company says it doesn’t use its equipment to gather information about customers.) Huawei has partnered with Shenzhen to build a “city brain” of sorts. “Most cities approach this project by project, but that’s not very efficient,” says Edwin Diender, Huawei’s chief digital transformation officer. Shenzhen instead aggregates inputs from a wide range of city services into a “command center” feed.
At any given moment, countless cameras, sensors, and devices feed vast amounts of data into a central platform, whose results are displayed on a single, huge digitized wall. The feed helps managers gauge and respond to traffic patterns, water usage rates, and even the capacity of parks, while deterring crime. It also breaks down information silos, enabling officials to more quickly anticipate how, say, a new housing development might affect traffic patterns and electricity use. To feed this data-hungry machine, Shenzhen has automated processes for household registration for new residents—the better to make sure each of its many metrics stays up to date.
Some benefits of the technology are already easy to spot. Drivers in urban China have long endured intense road congestion. But Shenzhen’s “traffic brain,” which among other things adjusts traffic lights based on real-time road-use data, is helping cars flow more smoothly. In interviews, several residents highlighted the security that comes with data gathering as one of the city’s most attractive features. Dylan Li, a tech worker from Hubei province, tells Fortune, “There are many, many cameras, so [Shenzhen] is very safe.”
This brainpower will soon be amplified by 5G technology, which can make communication among sensors, devices, and databases almost instantaneous. More than 13,000 base stations have been built around Shenzhen, which will make the city the first in China to receive full 5G coverage, possibly as soon as August. Richard Hu, an urban planning professor at Australian National University who has studied Shenzhen, says the 5G rollout could hasten a range of benefits, including the introduction of autonomous vehicles and better access to medical care. (Last March, using a 5G connection, doctors in Beijing manipulated a robot to perform brain surgery in Shenzhen, some 1,200 miles away.)
In China, a “smart city” is a city of surveillance, and that fact can overshadow the advantages. Supporters point to the role of surveillance in public safety: In some cities, for example, city-management data has helped officials find and treat people who have been exposed to the coronavirus. Critics point to the deployment of technology in Xinjiang, where China’s use of a high-tech network to monitor members of the Uighur minority has prompted a fierce debate about the balance between security and human rights. Even in Shenzhen, some residents say they find the constant use of facial recognition intrusive.
Recently, Shenzhen’s city government has offered a rare public reflection on this technology. At another high-speed train station, Futian, Shenzhen is cosponsoring with Hong Kong an exhibition called “Eyes of the City.” The show, which runs through March, features installations examining the role of technology in urban life. One such work invites viewers to reflect on facial recognition, and asks whether they wish to be tracked with the technology through the exhibition. According to organizers, a large majority of participants opt out—a sign that Chinese citizens may be less comfortable with such tracking than conventional wisdom suggests.
Carlo Ratti, chief curator of “Eyes of the City” and director of the Senseable City Lab at MIT, tells Fortune he hopes the exhibit “encourages individuals to take a stance.” Given their influence in smart-city tech, Ratti says, Shenzhen and China “should also be the first place to promote a debate” about it.
The influence is spreading: Shenzhen officials are helping develop master plans for city-management systems in Chile, Cambodia, Sri Lanka, and Nigeria. (Hardware from Huawei and ZTE, another Shenzhen-based manufacturer, is part of the bargain.) But the debate over data gathering, for some of the leaders disseminating the technology, is nearly moot. For improving urban efficiency, Huawei’s Diender says he sees “no other way forward than surveillance.” Asked whether Shenzhen’s model will spread globally, he responds, “The short answer is yes.”
This article appears in the March 2020 issue of Fortune.
More from Fortune’s special report on cities:
—Why the modern city needs a makeover
—Can San Francisco be saved?
—5 big ideas for fixing global cities’ most daunting challenges
—Did the “techlash” kill Alphabet’s city of the future?
—20 maps charting the rise of the modern megacity
Follow Fortune on Flipboard to stay up-to-date on the latest news and analysis.


fortune--2020-02-17--Why the modern city needs a makeover

Why the modern city needs a makeover

How Apple defied the odds to post the biggest quarterly profit ever

It’s a strange, if mesmerizing, thing to peer out through a glass wall onto the rooftops of skyscrapers many stories below—to look down and see spires and helipads and glistening office towers that appear no bigger than Lego blocks. Yet it’s even stranger and more mesmerizing to peer out of that same 98th-floor window and see a building that’s over 90 meters taller—a steel-and-concrete linebacker of a facade that seems to snarl back, “What are you lookin’ at?”
That was my experience this past November, sitting at the not-quite-rooftop bar of the Four Seasons Hotel in Guangzhou, China, which occupies the top floors of the Guangzhou International Finance Center, the 23rd-tallest building in the world … and staring out at the Chow Tai Fook Finance Centre, the seventh-tallest building in the world, seemingly inches away.
Strange and mesmerizing, as I said. It’s also a neat visual summary of a transformation that’s remaking the very contours of the planet. Last year saw the completion of a record 26 “supertall” buildings—those at least 300 meters (90-plus stories) high—according to the Council on Tall Buildings and Urban Habitat.
The city of Shenzhen, which Fortune’s Grady McGregor writes about in this issue, has even outpaced Guangzhou in this race to the clouds—building a record number of buildings at least 200 meters tall in each of the past four years.
But the most compelling story, as Grady discovers, is not how high Shenzhen’s skyline goes, but how deep into the city authorities can see—and how profoundly that’s changing life for its residents. At the heart of this metamorphosis is technology, naturally. Just as Elisha Otis’s “safety elevator” allowed the first generation of urban high-rises to rise high, human ingenuity is enabling the modern metropolis to become more sophisticated than ever, while growing bigger than ever.
The embedded cameras and sensors in China’s vanguard “smart city,” for example, help keep crowds moving at rush hour, ease traffic congestion, fight crime (through ubiquitous facial recognition tools), and enable emergency workers to respond quicker to accidents. Shenzhen residents seem to enjoy the benefits, as Grady reports. Some, though, haven’t reckoned with the cost, which is a further erosion of personal privacy.
Perhaps no place on earth captures the union of technology and urbanity, though, quite like San Francisco—a city in which captains of industry and entrepreneurship collide on a daily basis with homeless people living in sidewalk encampments. Downtown has turned downtrodden, and in a deeply thoughtful and thought-provoking article, Fortune executive editor Adam Lashinsky asks “Why?”—and if there’s anything that can be done about it.
“The City,” from San Francisco to Shenzhen, may be the most important node in the network of global business. Please read on for our thoughts on how to reimagine it for the coming decades.
A version of this article appears in the March 2020 issue of Fortune with the headline “A Tall Order.”
More from Fortune’s special report on cities:
—The city that sees it all
—Can San Francisco be saved?
—5 big ideas for fixing global cities’ most daunting challenges
—Did the “techlash” kill Alphabet’s city of the future?
—20 maps charting the rise of the modern megacity
Subscribe to Eye on A.I., Fortune’s newsletter covering artificial intelligence and business.


fortune--2020-02-17--5 big ideas for fixing global cities’ most daunting challenges

This article is part of a Fortune Special Report on Rethinking the City.
Cities are complex organisms, which means no aspect of urban life operates in a vacuum. Systems are interdependent, problems tend to have multiple causes, and potential solutions are usually multi-faceted, too.
Fortune spoke with a range of experts, specializing in housing, urban design, transportation, and more. We asked what they see as the biggest challenges facing our largest metropolises, and how they believe these problems can be solved.
Their answers probe the past to anticipate the future—and look around the globe to find possible solutions. And indeed, no matter how seemingly insurmountable the problem, chances are that somewhere in the world, there’s a city that’s making strides toward fixing it.
The problem: outdated tech
The solution: As the amount of data urban centers produce, capture, and rely on to guide public policy continues to mushroom, it’s time to rethink cities’ approach to software, says Ben Cerveny, president of the Foundation for Public Code. Most are either trying to build their own—despite limited resources and expertise—or relying on third-party products they don’t know how to, or can’t, adapt or update. One solution: sharing tools with one another; he cites Barcelona’s Decidim, a platform for involving citizens in decision-making, as an example. Cerveny also advocates for an open software-development process. Not only does going open-source offer cities access to fresh ideas, he says, but it helps policymakers better understand the software itself. After all, says Cerveny, “software will almost always be the way that policy is implemented in the future.” —Lydia Belanger
The problem: climate change
The solution: The idea that there’s any single way to fight climate change is part of the problem. In reality, the effects are already unfolding, and cities must make a variety of “tough choices around where, what, and who to protect,” says Jonathan Woetzel, leader of McKinsey’s Cities Special Initiative. He points to India’s national cooling plan as a model; in addition to attempting to cut emissions, it promotes “cool roofs” and other building changes designed to make high temperatures more bearable. Cities will also need to create policies that encourage citizens to change their behavior to adapt to new climate realities, he says (think shifting school vacations). And bigger metropolises must share best practices—and financial resources—with their smaller neighbors, says Woetzel: “We have to collaborate to meet these challenges.” —Emma Hinchliffe
The problem: inefficient buses
The solution: Buses, which are cheaper and less complicated for cities to install than trains, are an essential aspect of public transportation, yet ridership is declining. In the U.S., for example, bus commutes dropped 11% from 2000 to 2018. To get more butts in bus seats—and more cars off the road—a 2018 study from McGill University researchers finds that cities must reverse the current trend of shrinking bus service and routes. A more futuristic fix: electric buses, which are quieter, more comfortable, and, most important, more eco-friendly, says Institute for Transportation and Development Policy spokesperson Jemilah Magnusson. In Shenzhen, China, the fully electric fleet of more than 16,000 buses has reduced annual CO2 emissions by 1.4 million tons, according to the ITDP. For more, see our story on Shenzhen in this issue. —L.B.
The problem: lack of affordable housing
The solution: There is not a single U.S. city where a full-time employee earning minimum wage can afford to rent a two-bedroom apartment, according to the National Low Income Housing Coalition. While employers like Amazon and Microsoft have taken steps to tackle the issue, Affordable Housing Institute CEO David A. Smith thinks there’s potential for business to pitch in on a far larger scale. He points to the Community Reinvestment Act of 1977, which pushed banks to provide more credit to local low- and moderate-income borrowers. A similar law aimed at encouraging employers to provide funding for housing development could have a huge impact, he says, “provided it’s enacted collaboratively with industry.” —L.B.
The problem: urban isolation
The solution: Society is battling a “loneliness epidemic,” says former U.S. Surgeon General Vivek Murthy, and urban sprawl is a major contributor. Three-quarters of the residential land in most cities is zoned exclusively for detached, single-family homes, says Ellen Dunham-Jones, director of Urban Design at Georgia Tech School of Architecture. And when cities do build apartment buildings, they tend to be massive in order to maximize efficiency, she says. The catch: Both building styles leave residents isolated and, often, anonymous to neighbors. To build urban connections, planners are increasingly looking to retrofit unused industrial spaces like parking lots and loading docks into shared spaces, says Dunham-Jones. An example: Tulsa turned a polluted former trucking depot into a park and an area for community activities that draw about 3,000 people a week. —L.B.
More from Fortune’s special report on cities:
—Why the modern city needs a makeover
—The city that sees it all
—Can San Francisco be saved?
—Did the “techlash” kill Alphabet’s city of the future?
—20 maps charting the rise of the modern megacity
Follow Fortune on Flipboard to stay up-to-date on the latest news and analysis.


fortune--2020-02-17--Can San Francisco be saved?

Can San Francisco be saved?

This article is part of a Fortune Special Report on Rethinking the City.
London Breed is making the case for tough love. It’s early January, and the first African-American woman to be elected mayor of San Francisco is giving an inaugural speech that neatly encapsulates the hope and despair that define San Francisco today. The city enjoys a thriving economy with low unemployment, a gleaming new arena for the multiple-championship-winning Golden State Warriors (poached from its less-wealthy neighbors across the Bay in Oakland), and its status as the “capital of the resistance” to Donald Trump (House Speaker Nancy Pelosi represents the city in Congress). But then, inevitably, there is the city’s battle with homelessness and housing affordability. “The suffering on our streets, it offends our civic soul,” says Breed, 45, evoking the plight of the unhoused but also their impact on everyone else. “We are no longer accepting that compassion means anything goes on the streets.”
Breed’s prescription is more housing—a goal that, she insists, can’t be thwarted by letting “disingenuous warnings of shadows and height get in the way.” This last bit is a nod to objections that all too often stymie construction projects in the city. She also directs her ire at the 11-member Board of Supervisors, seated in the fifth row in front of her, who recently voted their disapproval for a statewide bill that would have eased housing density restrictions. “Density,” says Breed, “is not a dirty word. We can’t say we need more housing and then reject policies that allow us to actually build housing.”
San Francisco has seen its economy soar, but its problems have grown as well. Photograph by Winni Wintermeyer
Hours later, Breed is onstage again, this time a block away at the Bill Graham Civic Auditorium, to swear in Chesa Boudin, a former public defender who’s been elected district attorney against a candidate favored by Breed. Boudin, 39, vowed during his campaign not to prosecute so-called quality-of-life crimes like public urination and sex solicitation. It has been much commented on that Boudin’s parents were members of the Weather Underground, the radical-left militant organization, who were sent to prison on murder charges when he was an infant. And the rapturous crowd that has come to cheer for him represents the city’s “progressive” wing, a left-of-the-left cohort that mistrusts Breed’s centrism. Housing isn’t on Boudin’s agenda, but social justice is. He promises to end the system of cash bail and blames a wave of car break-ins on wealth inequality. Breed, who grew up in San Francisco public housing, has called for a crackdown on lawlessness. But Boudin, who is white, a former Rhodes scholar, and a transplant to the city, tells the crowd that San Francisco “is ready to leave the racist, inhumane, ineffective ‘tough on crime’ policies in the past.”
It is tempting to call out the contrast between Breed and Boudin as a continuation of San Francisco’s unique left-vs.-left politics, a battle that has raged for years. Yet the city’s squabbles lay bare bigger problems. San Francisco’s crises are getting worse, with no end in sight and little indication its leaders plan to work together to solve them. Even as the local economy soars on the strength of the technology industry that dominates the Bay Area, homelessness levels have surged. Housing is so scarce and expensive that many lament the increasing inability of cops, teachers, and the like to afford a home.
If tech leaves, it could be like banking leaving in the 1980s. Chris Larsen, San Francisco native and executive chairman of fintech company Ripple
The city has become a punch line—and a punching bag. Official San Francisco takes umbrage at the scrutiny of outsiders who have weighed in on its dystopian cityscape: Trump, Fox News, and attendees at a JPMorgan health care conference, to name a few. Yet in the next breath these same boosters typically acknowledge, if quietly, that the criticism is valid.
Already there are signs of a business backlash. Companies from $35 billion-in-valuation tech-payments startup Stripe to stalwart brokerage Charles Schwab have announced plans to move their headquarters out of the city. They’re following in the footsteps of drug distribution giant McKesson, which relocated its HQ last year to tax-friendly Texas. Another gut punch came in December when Oracle announced that this year it would hold its annual OpenWorld developer conference—a massive tech gathering and mainstay in the city for more than two decades—in Las Vegas. Twitter CEO Jack Dorsey has told investors his company will look to expand outside its home city, saying “Our concentration in San Francisco is not serving us any longer.” And serial entrepreneur Chris Larsen, the executive chairman of fintech startup Ripple, frets that a tech exodus could mimic the earlier departure of another once-dominant industry. “If tech leaves, it could be like banking leaving in the 1980s,” he says, referring to a dark era in the city’s economic past.
Even as the startup scene continues to flourish in San Francisco, the number of homeless people in the city grows. PHOTOGRAPH BY WINNI WINTERMEYER
Though colored by local politics, San Francisco’s challenges resonate well beyond the Bay Area. The city’s problems are hardly unique—either in California, where nearly 27% of the country’s homeless population lives, or in the rest of the U.S., where income inequality helps explain once-in-a-generation political upheaval. There’s also no denying that the city’s outsize success exacerbates its woes. “It’s still where everyone in the world wants to come,” says David Chiu, an assemblyman who represents San Francisco in the state legislature. “San Francisco is viewed as the beacon of openness and diversity and innovation, whether you are a first-generation immigrant, work in a restaurant, are a tech founder, or an LGBTQ kid not supported by your family.” The question is at what point the city’s many challenges begin to dim that light.
On a recent afternoon I go for a walk that most tourists in San Francisco stumble upon only accidentally—and then exit as quickly as possible. My tour guide is Joshua Bamberger, a physician who has devoted his career to public service. He’s 57 and wears a faded Boston Red Sox cap over his bald pate. A longtime official at the city’s Department of Health, he helped buy, build, or otherwise develop much of the city’s housing for the homeless. We start in the Tenderloin, a perennially down-on-its-luck neighborhood immediately next to the flashy Union Square shopping district. Bamberger, who worked for the city for 27 years, proceeds to show me many of the 43 apartment buildings where his department placed patients with a wide variety of ills and needs.
Last year Bamberger joined the University of California San Francisco, the state’s premier medical school, to study homelessness. His appointment was funded by a $30 million grant by Marc Benioff, the software titan, and his wife, Lynne. The idea is that a rigorous understanding of the problem would lead to solutions based as much on the data as on compassion. We pause in front of the Camelot Hotel, a dreary residential building with no private baths, and then the Windsor, a similarly downtrodden relic. Both are among the first efforts by the city to house the homeless. Nearby are newer, starkly different buildings, including the Curran House, a brightly painted apartment building. Bamberger says the medical services provided at the older and newer buildings are similar, as are the health issues its residents face. Yet one of the brighter facilities, 149 Mason Street, experienced a 2% mortality rate during a five-year stretch of his tenure, compared with 7% at the drabber Windsor during the same period.
Our tour runs through the good, the bad, and the ugly of San Francisco’s approach to homelessness. The “supportive housing” the city funded is a public sector triumph, putting roofs over the heads of 7,700 people at any given time. Everywhere, though, are squalid tent encampments that never fail to shock in such a rich city. I have lived in San Francisco for more than 15 years and share the prevailing concern that conditions have deteriorated dramatically. Bamberger and I step over human feces, a commonplace occurrence that, together with ubiquitous intravenous drug needles, has taken on metaphorical power for civic failure. “We are doing so much,” says Bamberger. “But we are not making progress. We cannot keep up with the disparity of wealth.” The dichotomy, he says, is “hard to reconcile. This city … ” he says, his voice trailing off. “It breaks your heart.”
Chris Larsen, CEO of Ripple, photographed at the Ripple offices in downtown San Francisco. PHOTOGRAPH BY BRIAN L. FRANK
The official charged with mending what is most broken is Jeff Kositsky, head of the Department of Homelessness and Supportive Housing. Mayor Ed Lee, Breed’s predecessor, who died suddenly in office two years ago, created the department in 2016 and tapped Kositsky, a former nonprofit executive, to take on an assignment several others had turned down. Kositsky’s unenviable task is to simultaneously figure out how to house a growing homeless population while also responding to community anger over the unsanitary and possibly dangerous encampments in their midst.
Kositsky’s overall approach mirrors the goals of the Benioff effort at UCSF by focusing on data. He has built a “coordinated entry system,” a database of people on the streets that documents their needs and problems. He says for too long the city hosted a kind of “homeless talent competition,” a system where the best nonprofit case managers, including himself, helped land their clients preferred spots—as opposed to a more efficient allocation of resources. “From about 2005 to 2016, the time our department started, San Francisco nearly doubled its spending on homelessness,” says Kositsky. “But during that time, we saw a 13% increase in homelessness.”
For all the years of trying, the city’s approach amounts to an endless series of experiments—and a tragic game of Whac-A-Mole. It has built a network of “navigation centers,” shelters with up to 200 beds that allow residents to bring their pets, belongings, and partners. (Other shelters have stricter rules, causing many to opt to stay outdoors.) Kositsky says in late 2016 there were 39 encampments with six or more tents. “Today there are zero,” he says. “There are no large encampments that have been in place for a month or longer.”
Statistics, of course, don’t always tell the full story, and it is Kositsky’s “for a month or longer” qualifier that undermines his assertion. The city’s public works arm, in conjunction with the homelessness department, conducts frequent sweeps of the camps—moves opposed by homeless advocates for their cruelty—that effectively serve to push people from one sidewalk to another. On a recent day cycling through the Mission neighborhood, for example, I see multiple squalid encampments, some above and some below the six-tent marker. For all the efforts, the city’s homeless population has grown from below 7,000 to more than 8,000 over the past five years.
As with everything else in San Francisco, solving homelessness is deeply political. A citywide ballot initiative in 2018 to tax businesses with more than $50 million in annual revenue to pay for additional homeless services won 61% of voter support. Benioff, whose Salesforce is one of as many as 400 affected companies, supported and helped finance the measure. Breed, as well as business leaders like Twitter’s Dorsey, opposed it, saying the city needed to make do with the estimated $380 million it already spends annually on homeless services. Although the city is collecting the tax, the funds are being held in limbo because of a court challenge by an anti-tax group. Says Benioff: “It’s an emergency situation. We desperately need more money.”
A portion of that funding, if it finds its way into government coffers, would go to yet more housing for the homeless. Margot Kushel, director of UCSF’s Center for Vulnerable Populations, as well as the research project Benioff is underwriting, decided as a young doctor to focus her career on the housing aspect of homelessness. “It became clear to me that health care is such a small part of the mix of what makes people healthy, and that with people who are homeless without housing, there was no health. It hardly mattered.” Her conclusion was that treating people for illnesses, only to see them return quickly to hospitals or clinics with ailments exacerbated by conditions on the street, made no sense. Says Kushel: “I often say there is no medicine as powerful as housing.”
It all seems so simple. If housing is the problem, then what’s needed is more housing. But in San Francisco, nothing is simple. Finding places to build has always been a problem in the city, surrounded as it is by water on three sides and packed into a scant 47 square miles. The politics of NIMBYism (“Not in my backyard”) exacerbated matters, pairing the strange bedfellows of homeowners wanting to preserve the tranquility of their neighborhoods with activists opposed to gentrification and the perceived greediness of real estate developers. Some 75% of the city, most of it in the western reaches approaching the Pacific Ocean, was “downzoned” years ago, meaning it is next to impossible to build anything there other than single-family homes.
Enter Scott Wiener, the state senator representing San Francisco, who for three consecutive years has tried and failed to pass legislation to stimulate construction statewide. Wiener’s most recent bill would have “upzoned” areas near mass transit centers, making it tougher for locals to oppose development. At 6-foot-7, Wiener looms over the housing debate in San Francisco in every way. He is a walking, talking, tweeting machine when it comes to housing statistics. “We rank 49th out of 50 states in homes per capita,” he says. “In the early ’60s, when we were a state of 15 million people, we were building between 250,000 and 330,000 units of housing a year. We’re now a state of 40 million, and we build between 70,000 and 90,000 units a year. So our population has almost tripled, and housing production has collapsed. We planted negative seeds, and we are now paying the price.”
Tech money has helped fund plenty of improvements, such as the Salesforce Transit Center downtown. PHOTOGRAPH BY WINNI WINTERMEYER
The housing facts aren’t in dispute. What to do about it is. Opposition to Wiener’s bill, which was voted down in late January, came from affluent parts of the state but also from housing advocates who saw it as a boon for developers at the expense of sufficiently subsidized housing. The challenge, they say, isn’t so much improving density as ensuring that housing production becomes more equitable across income levels. Peter Cohen, codirector of the Council of Community Housing Organizations, sees a direct line from luxury housing development to income inequality to homelessness. “We’re continuing to see the very, very bottom of the economic spectrum get worse,” says Cohen, whose four-person outfit, which represents 24 member organizations, wields tremendous power over San Francisco housing policy. “And that ain’t going to be solved by building new condos” in the city’s fastest-gentrifying neighborhoods, including the South of Market district, home to his organization’s office.
It’s an emergency situation. We need more money. Marc Benioff, Salesforce founder, on why he backed a controversial new corporate tax to fund homeless services
Arguments can be made on every side of the debate, including the cultural and social benefits of preserving communities for the people who live there. Advocates in Chinatown, for example, have fought for years to keep market-rate development out of the neighborhood, which is enticingly close to downtown. “Our concern is that Chinatown is the Mission in 1998,” says Malcolm Yeung, deputy director of the Chinatown Community Development Center, referring to the Latino neighborhood that has become ground zero of techie condos, restaurants, and bars, a trend that began with the dotcom bubble. “Chinatown has a deep, historic identity tied to a people-of-color community,” says Yeung.
Newcomers and old-timers alike agree on the need for change but see little common ground on next steps. “We let the problem get so bad that all of the true solutions feel like whiplash,” says Laura Foote, executive director of a pro-housing organization called YIMBY Action (the “Y” stands for “yes”). Foote was a vocal proponent of Wiener’s failed housing legislation, Senate Bill 50. “I have sympathy for people who feel like SB-50 goes too far,” she says. “Those same people will say this isn’t going to solve all problems. But that’s true of all laws. There is no law that solves all problems.”
Seven years ago the University of California San Francisco’s medical school asked real estate developers to bid on a parcel of land it no longer wanted. Located on the edge of a leafy western neighborhood called Laurel Heights, the 10.3-acre site housed a 1950s-era office building and row after row of parking spaces. Prado Group, a local developer, together with another partner, won the ensuing auction and bought the land in 2015 for just under $90 million. Its plan, which requires an additional $700 million in financing, was to build 13 more structures, including 744 housing units. Twenty-five percent of those would be offered at government-defined “affordable” rates and set aside for senior citizens.
What happened next shows the difficulty of getting things done in San Francisco. Dan Safier, CEO of Prado, calls the Laurel Heights project a “poster child for process” in the city. His firm began holding community meetings in the middle of 2015, hosting more than 170 sessions, in places from auditoriums to coffee shops. It accommodated a city planning department request that the existing office building be cleaved in two to create a pathway to the neighborhood. The project finally made its way through the city’s planning commission last September. The full Board of Supervisors, whose members can torpedo projects they don’t like, approved it in November. Then, in January, a neighborhood association filed suit, arguing the project violates California’s environmental-impact law.
Lava Mae founder Doniece Sandoval photographed in Downtown San Francisco. Lava Mae is a non-profit that sets up showers and provides personal hygiene supplies for the homeless both in San Francisco and internationally. PHOTOGRAPH BY BRIAN L. FRANK
Suffice it to say that Prado has yet to break ground—and won’t anytime soon. Safier says the soonest the litigation could make its way through courts is September and that it will take an additional 18 months to get permits, arrange financing, and start building. The best-case scenario would see completion in 2027. Says Safier: “This represents 50 years of structural problems that have gotten worse over time.”
Donald Karr uses a Lava Mae portable shower setup for the homeless in downtown San Francisco. PHOTOGRAPH BY BRIAN L. FRANK
City governance itself is a structural problem. A municipality that is also a county of just under 900,000 residents, San Francisco has 37,000 employees and an annual budget of more than $12 billion. It is governed by a complicated and often duplicative web of 52 departments and 27 commissions. There is a police department and a police commission, for example. Mass transit, the airport, and the port are three separate entities. And a favorite response to crisis is to create more bureaucracy. In late January, when the powerful head of the city’s public works department was arrested by the FBI on corruption charges, a supervisor suggested creating a new commission to oversee the department and, for good measure, breaking it in two.
As a result of what doesn’t work, well-meaning San Franciscans take matters into their own hands, often with a spin on what locals call “San Francisco values.” Larsen, the Ripple cofounder and a San Francisco native, got so fed up with the car break-ins in his tony Russian Hill neighborhood that he personally funded security cameras to capture images to help the police. He stresses that the cameras he buys, a program he has expanded to other neighborhoods, don’t use facial recognition, automated license-plate reading, or audio. Says Larsen: “It’s the perfect balance between privacy and safety.”
A homeless encampment in San Francisco, between the on- and off-ramps of Interstate 80. PHOTOGRAPH BY WINNI WINTERMEYER
San Franciscans have attempted novel fixes for even the most severe problems. Six years ago Doniece Sandoval, a veteran public relations executive, decided to help the homeless by creating a mobile shower service called Lava Mae. The nonprofit emulates the best practices of the hospitality industry by calling the people it serves “guests” and “unhoused neighbors.” It has expanded beyond showers by hosting periodic “pop-up care villages” outside the main branch of the San Francisco Public Library, featuring services including wound care, haircuts, massages, hot lunches, and even a snappy jazz band.
Sandoval says she figured her pilot program would serve as a temporary demonstration project for the city and that city officials would “push me out of the way and say, ‘We’ve got it.’ ” The city did institute a public toilet service, but not showers. She recently stepped down from running Lava Mae, which is focusing on training nonprofits in other cities on how to replicate its offering. Sandoval acknowledges exhaustion and frustration with the status quo. “The vast majority of people here care,” she says. “They just don’t know how to help.”
Lowell Caulder might be the most quintessential San Franciscan I’ve met. Black and gay, from a working-class family in Fort Wayne, he knew as a teenager he wanted to leave Indiana. (“Really quickly,” he says.) He interrupted his studies at Harvard Business School to start a mobile dentistry business in San Francisco. In its early days, Studio Dental parked a converted trailer in front of growing tech companies like Dropbox and offered care to their mostly young employees. When Caulder and his business partner decided they needed a permanent space, they found one in the Tenderloin for the same reason the neighborhood once housed longshoremen and other temporary workers in its residence hotels: It was cheap. “It was the only place we could find,” he says.
Lowell Caulder, who runs a dentistry business, has faith that San Francisco can overcome its problems without losing its unique character. “Let’s get creative about solutions.” PHOTOGRAPH BY BRIAN L. FRANK
Despite having located his business in one of urban America’s most challenging neighborhoods, Caulder, 33, remains bullish on San Francisco. He’s at once a capitalist who craves the rewards of entrepreneurial success and a true believer in the values that make San Francisco unique. Over breakfast in December, I ask him if San Francisco needs its version of Rudy Giuliani, who before his turn as the Trumpian caricature he is today was “America’s mayor,” credited with cleaning up New York City. Caulder suggests he wants the cleanliness without the nastiness. “As an entrepreneur, I know rules spur creativity,” he says. “And if our rule is that I can’t stop you from shitting on the sidewalk, then that forces us to increase our cleaning services, to build 24-hour bathrooms, to meet people where they are. I’m okay with that.”
Caulder’s San Francisco, in other words, is at peace with its urban quirks while striving to be livable: “We don’t want to displace people who are here. We want to protect immigrants and the least powerful people in our community. We want it to be safe. I’m fine with those rules. But let’s accept them and then get creative with solutions. I think that’s the only way to do it and not have Giuliani’s San Francisco.” Listening to him, you just might envision a San Francisco—and a country—where well-meaning people listen to one another and work together on thorny problems. If only it were that easy.
Editor’s note: An earlier version of this article stated that London Breed is the first woman to be elected mayor of San Francisco. She is the first African-American woman to be elected mayor of San Francisco.
A version of this article appears in the March 2020 issue of Fortune.
More from Fortune’s special report on cities:
—Why the modern city needs a makeover
—The city that sees it all
—5 big ideas for fixing global cities’ most daunting challenges
—Did the “techlash” kill Alphabet’s city of the future?
—20 maps charting the rise of the modern megacity
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-02-17--The Conversation: Microsoft CEO Satya Nadella on how the tech industry can win back public trust

This edited Q&A has been condensed for space and clarity.
A question of trust
In January, you wrote a LinkedIn post¹ about using technology to foster empowerment and trust. But research conducted by Pew in 2017 suggests that although more people will use tech in the next decade, they won’t necessarily trust it. How will you bridge that gap?
Nadella: A book my colleague [Microsoft president] Brad Smith wrote is called Tools and Weapons, and I think that’s a good metaphor to keep in mind. Digital technology is perhaps the most malleable resource that we have. It can be both a tool and a weapon. So, let’s first talk about the tool and how it empowers.
There are three things we need to think about. First, is economic growth from technology equitable? You cannot have just the tech industry growing; you have to have all industries growing. The great convergence between emerging and developed markets needs to continue.
It’s a mistake to think that what led to success will lead to new success. History will come back and bite you in the ass. Satya Nadella
Second is trust. You can’t have unintended consequences. Privacy—you have to think about data and privacy rights as a human right. Cybersecurity—a trillion dollars or so in the economy is lost because of cyberattacks, and most of the impact is felt by small businesses and consumers. As technology providers, we are the first responders. We have to build the core infrastructure, and even the engineering processes, to ensure that there is more trust in technology.
The last piece is sustainability. You can’t talk about growth or trust without thinking about not breaking the planet.
Sure. But when consumers are seeing tech companies misuse their personal information, or learning they’ve been the victims of data breaches², how can the industry regain their trust?
We can borrow from a lot of other industries that have gone through this. Why, for example, do I trust the food I eat and food safety laws and regulations? For us, it starts by allocating talent and resources so that we are thinking about the unintended consequences of the technology we are building.
Let’s take A.I. ethics. You are introducing a model that, say, is built on a human corpus of language—it’s going to pick up a bunch of bias based on the data it trained on. The first way to protect against that is by having a diverse team building the model³ in the first place. Let’s not abdicate control. Do we have the internal processes to ensure more diversity in our teams? We have engineering processes for doing secure code—what is the moral equivalent?
That’s the type of work we have to do. But there will be laws and regulations that society has to come up with. The combination of those two is what will help us trust in technology.
The food industry comparison is fascinating because, like tech, food is something that affects everyone. But also because it took the jolt of Upton Sinclair’s The Jungle to convince Americans that we needed food safety regulation. Does tech need something that shocks us that way to spur change?
I hope not. We’re already living in a world where technology is everywhere. It’s becoming embedded in our lives and society and economy at such scale.
With great (economic) power comes great responsibility
How do you think Microsoft should be regulated?
We can’t wait for [regulators]—so the question is, How do we regulate ourselves? We took GDPR, for example, and said, “Let’s be compliant—but more importantly, let’s take the data rights and make it available all over the world.”⁴ Because in the United States, I’m hoping there will be more federal regulation around [data privacy] and laws that we’ll have to follow.
I’ve been thinking an awful lot about the role of the private sector in society. A modern tech company’s reach is broad and deep. For society’s ills, where do you draw the line for government responsibility versus Microsoft’s?
It’s a great question. I love the definition that Colin Mayer, who’s an Oxford economist, wrote: Companies exist to create profitable solutions to the challenges of people and planet. I do think the private enterprise as a social institution is the best mechanism we have come up with to allocate resources efficiently. But it also has to be governed such that these private enterprises are actually creating solutions, not creating problems. That, I think, is the real crux of it.
Your core business model must be aligned with the world around you doing well. You can’t do all of this ESG [environmental, social, and governance] work on one side and break the world on the other side. That’s just not acceptable. I go to sleep at night knowing that if Microsoft does well, we have helped a small business become more productive, or a large company make its employees more competitive. That, to me, gives me license to operate, quite frankly, anywhere in the world. Without it, why would anybody want a multinational company operating in their community?
Then you have to think about obligations you have. There are employees at Microsoft who are full-time and others who are non-full-time. The non-full-time folks didn’t have the same parental leave policy as our full-time folks, but they sit amongst us. So we said, “Hey, you know what? We’ll pay for it.” Same thing with middle- and low-income housing. We need people of all incomes. They can’t have the burden of a commute. So we used some of the balance sheet money⁵, with permission from our shareholders. It’s not about virtue signaling. It’s about actual obligations that are in the interests of our long-term shareholders.
I’m still not sure where you draw the line between company and governmental responsibility. Let’s go back to parental leave, for example. Despite its economic might, the U.S. is one of the only countries in the developed world not to provide federal paid leave. It’s always welcome for a private company to offer great benefits, but isn’t that the kind of thing that should be national policy?
Absolutely. One piece of legislation that I admire in the U.S. is the Americans With Disabilities Act. What an amazing thing for people with disabilities—and I have personal experience⁶. That’s what enlightened governments do for large swaths of their citizens who need services. It’s not about any one company building a wheelchair ramp; it’s about everybody being required to make it possible for people with disabilities to fully participate in our economy.
I live as a citizen of the United States hoping that there will be decisions, regulations, or government programs like that. The democratic process is what’s going to lead to that. It’s not some arbitrary proclivity of a CEO. The thing that I feel sensitive to, as the CEO of a multinational American company, is, Before I turn all the obligations over to the government, what should we do?
Beyond the cloud
Let’s change gears. When this magazine wrote about you in 2016, Microsoft was on the verge of a historically high stock price. It’s now three times that.⁷ Your big bet was the cloud. That paid off, but its explosive growth is starting to slow. What’s next?
Computing is becoming embedded in a world of people, places, things. There is increasing digitization, at a broad scale, in the economy. We’re still in the early days. The tech industry is still just 5% of GDP. It’ll be 10% of GDP. But the question is, What’s the other 90% of GDP doing with all this technology? I don’t need to look around at what’s next. I need to look at what’s right in front of us. What are we doing in precision agriculture? How are medical outcomes getting better? How are e-commerce and retail becoming more personalized? How is banking becoming more inclusive?
For you, it’s about the application of technology.
Absolutely. There’s an installation phase, then a deployment phase, of these technologies. In the next 10 years, I’m looking forward to software and digital technology helping every industry, the way electricity did. We are a platform company. And one of the core rules of stable platforms is, you have to have more value above the platform than in the platform.⁸
On this day six years ago was the announcement that you would become the third CEO of Microsoft. What’s the worst advice you’ve received?
To look in the rearview mirror and think that what led to success somehow can lead to new success. Because it doesn’t. History will come back and bite you in the ass. That’s what I think. You have to have that learning mindset going forward. It’s not deterministic. There’s no God-given right that, because you achieved something, you will achieve it again.
Past performance does not guarantee future results.
That’s right.
Between the lines (footnotes)
(1) Big buy: In 2016, Microsoft acquired LinkedIn for $26.2 billion—its largest acquisition ever.
(2) Security check: Microsoft, like most tech companies, has experienced data breaches, including one in January 2020.
(3) The company’s diversity download:
Gender breakdown (globally): men (70.7%); women (29.2%)
Race/ethnicity breakdown (U.S.): white (52.1%), asian (33.3%), hispanic (6.2%), black (4.4%)
Source: Microsoft
(4) Your data, your decision: GDPR, which allows consumers more control over their data, took effect in the EU in May 2018. Microsoft has extended the same rights to its global user base.
(5) An issue that hits home: The company made a $500 million commitment in 2019 to preserve existing affordable housing, build new units, and partner with nonprofits to address the issue in the Puget Sound region where Microsoft is headquartered.
(6) Family man: Nadella has three children; his son has cerebral palsy, and one of his daughters has a learning disability.
(7) Soaring stock: Stock price as of Feb. 7, 2020: $183.89
Source: S&P Global
(8) Parsing the platform: Successful platform companies generate more value by facilitating commerce (think Google for ads, Amazon for retail) than they do by offering goods or services of their own.
A version of this article appears in the March 2020 issue of Fortune with the headline “The Conversation: Satya Nadella.”
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—Airbnb’s bottom line is hurting. New safety efforts could make matters worse
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fortune--2020-02-17--20 maps charting the rise of the modern megacity

This article is part of a Fortune Special Report on Rethinking the City.
Over the past few decades, the population of Delhi has more than tripled, to 30 million—and the challenges of managing India’s largest metropolis have increased almost exponentially. In November, for instance, a spike in Delhi’s pollution maxed out air-quality monitors and caused flights to be diverted. Across the globe, rapidly growing megacities are grappling with similar problems, from overwhelmed sewers to crippling traffic to buckling infrastructure. According to the United Nations, the world’s urban population was 746 million in 1950, or about 30% of the total. Today some 4 billion people, more than 50% of the global population, live in cities. And by 2050, the UN projects, 68% of people will reside in urban areas. At right are the world’s 20 most populous “urban agglomerations,” as defined by the UN’s system of measuring extended city areas. Each is seeking the right blueprint for growth.
A version of this article appears in the March 2020 issue of Fortune with the headline “Plotting the Rise of the Megacity.”
More from Fortune’s special report on cities:
—Why the modern city needs a makeover
—The city that sees it all
—Can San Francisco be saved?
—5 big ideas for fixing global cities’ most daunting challenges
—Did the “techlash” kill Alphabet’s city of the future?
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-02-17--Japan’s economy lurches toward a possible recession

Japan’s economy lurched toward a possible recession after taking another battering from a sales-tax hike in the last quarter that left it at a low ebb as the coronavirus outbreak hit activity at the start of 2020.
Japan’s gross domestic product shrank at an annualized pace of 6.3% from the previous quarter in the three months through December, the biggest slide since a previous tax increase in 2014, according to a preliminary estimate by the Cabinet Office Monday.
Economists surveyed had predicted a fall of 3.8%, flagging the adverse impact of the tax hike, weak global demand and typhoon disruption. The far worse-than-expected outcome showed that some of the government confidence in measures to cushion the blow of the tax hike was misplaced.
The result also raises the possibility that with the virus outbreak still spreading, Prime Minister Shinzo Abe may have to consider another round of extra spending to support growth, little more than two months after his most recent stimulus package.
“I’m getting ready for another contraction in Japan’s first quarter. There just aren’t any positive factors to build a positive growth forecast,” said Mari Iwashita, chief market economist at Daiwa Securities Co., flagging her view that the economy is likely falling into recession.
Iwashita expects the government to form another extra budget once it becomes clear the economy has stayed in a funk in the first quarter.
The Abe administration and the Bank of Japan had expected a smaller impact from the tax hike compared with the experience in 2014, when it buckled the economy by more than 7%. The tax increase this time was smaller, foods were exempted and the government deployed a raft of counter measures aimed at smoothing out fluctuations in demand.
But economists said some of the government steps, such as rebates on spending via cashless transactions, had limited impact as they didn’t appeal to an older segment of the population not used to mobile phone payment platforms. The figures laid bare the vulnerability of domestic consumption to sales tax hikes, according to Takashi Shiono, an economist at Credit Suisse Group AG.
The latest data showed private consumption plunged by an annualized 11% in the quarter, as households slashed their purchases of cars, cosmetics and domestic appliances. In 2014 the hit was 18%.
Businesses also scaled back investment by 14%, preferring to wait for signs of a recovery from the tax shock before committing to further spending.
While the initial trade deal between the U.S. and China should have offered a tail wind for investment this quarter, the unexpected virus outbreak may instead amplify caution in the boardrooms of Japan Inc.
“Concern over the virus is only intensifying and the mood of self-restraint is going to spread more broadly. I’m becoming downbeat on Japan’s economy,” Shiono said.
The virus has already stopped the visits of hundreds of thousands of Chinese tourists to Japan at the beginning of Japan’s Olympic year, hitting an important source of spending revenue. The longer the outbreak disrupts production and domestic demand in Japan’s biggest trading partner, the more likely Japan’s exporters will suffer and parts supplies may dry up.
Government officials stuck to their line that the tax impact on the economy was smaller this time than in 2014, but hinted that more spending could be in the pipeline if a slump looked certain.
“We will keep paying careful attention to the virus’s effect on tourism and the wider economy,” said economy minister Yasutoshi Nishimura in a statement. “According to the level of emergency, we will take necessary steps as needed in a flexible manner, and respond fully.”
Abe unveiled initial measures to counter the impact of the coronavirus last week, but so soon after releasing his economic package in December, he is likely to want to see harder evidence of a recession before mulling another large spending spree. Speaking in parliament on Monday he said the government would keep a close watch on the economic mpact of the sales tax and the virus.
While the BOJ has flagged its concern over the virus, it is also likely to emphasize the need for more data to assess the underlying trend. Given the growing side effects of its massive easing program and the relative stability of Japan’s currency, economists see additional action by the bank in the near future as unlikely.
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fortune--2020-02-17--GM is exiting 3 more markets

GM is exiting 3 more markets

General Motors Co. will leave Australia, New Zealand and Thailand by year-end as it exits poor-performing markets and focuses on new technologies such as self-driving cars and electric vehicles.
The largest U.S. automaker will take $1.1 billion in charges mostly in the first quarter, of which $300 million is cash, to cover the costs of leaving those markets, it said in a statement. The restructuring marks the end of the 164-year-old Holden brand in Australia, while in Thailand, GM is withdrawing the Chevrolet badge and selling its Rayong plant to China’s Great Wall Motor Co.
Chief Executive Officer Mary Barra is shrinking GM to the point where it gets almost all of its profits from the Americas and China. She’s reducing the company’s global presence and betting on technology rather than pouring money into struggling markets.
“I’ve often said that we will do the right thing, even when it’s hard, and this is one of those times,” Barra said in the statement. “We have the right strategies to drive robust returns, and prioritizing global investments that will drive growth in the future of mobility.”
The downsizing is part of a long-running strategy at GM since the Detroit-based company emerged from bankruptcy in 2009. The company pulled the Chevrolet brand from Europe in 2015, left Russia that same year and sold its German Opel unit and British Vauxhaul brand to France’s Peugeot SA in 2017.
The company will wind down sales, design and engineering operations in Australia and New Zealand and retire the Holden brand by 2021. GM President Mark Reuss ran Holden in 2008 and 2009, but since then its market share has fallen to 4.1% from almost 13%.
The reorganization kills off an Australian icon. Holden produced the country’s first wholly locally made car in 1948. By the end of the century, the Commodore sedan was the country’s best-selling car and remained so until 2011.
But the brand’s future in Australia has been in doubt since GM closed its Holden factory in the South Australian suburb of Elizabeth in 2017. The company has been struggling in Australia for several years with low sales volumes and high manufacturing costs.
As GM downsizes overseas, the company is pouring money into electric vehicles in a bid to catch Tesla Inc. GM has already spent several billions to develop self-driving cars with Cruise LLC, which it bought in 2016.
With Australia and New Zealand being chopped from GM’s global network of markets, the company’s primary focus other than the U.S. will be China, Mexico and South America.
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—Can you catch it twice? Answers to 5 pressing coronavirus questions
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—Bernard Arnault was briefly the world’s richest man. Then coronavirus struck
—Will summer kill the coronavirus?
—My boss wants me to travel during the coronavirus. Do I have to go?
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fortune--2020-02-17--Fears of a global coronavirus contagion rage as 3,000 cruise ship passengers return home

More than 3,000 travelers on two coronavirus-stricken Carnival Corp. cruise ships are returning home, fanning out to more than 40 countries and fueling fears of further contagion from the deadly virus.
The U.S. on Monday began evacuating its citizens from the Diamond Princess off Yokohama, Japan, where 70 new cases of the virus were confirmed over the weekend. Canada, Hong Kong and other countries also plan similar evacuations of hundreds. On Saturday, an 83-year-old American woman tested positive in Malaysia, a day after she and more than 2,200 others were cleared to leave the cruise ship Westerdam in Cambodia. The ship arrived there after being turned away by five other ports.
“This woman was on the boat and was infected for a few days — she could have potentially exposed other people on the boat who have now gone home,” said Stanley Deresinski, a Stanford University professor and infectious disease specialist at the university hospital. “There’s a possibility that anyone who is infected and asymptomatic could start a chain of infection wherever they return to.”
The startling number of cases on the Diamond Princess, which accounts for the biggest cluster of coronavirus infections outside of China, and the newly detected case from the Westerdam raise questions about the effectiveness of containing the virus on cruise ships. Those concerns have prompted a growing number of Asian countries to block the luxury liners from their ports, threatening earnings of companies like Carnival and Royal Caribbean Cruises Ltd.
“Cruise ships are very high-risk for transmission of illnesses,” said Jean-Paul Rodrigue, a professor of transport geography at Hofstra University in New York. “People are circulating all over, you’re using the same corridors, touching the same handles and railings. It’s easy to catch something.”
The Westerdam spent two weeks in limbo before Cambodia permitted the ship to berth on Feb. 13. Passengers were allowed to leave the next day without a quarantine, and the American woman then traveled to Kuala Lumpur to seek a flight back to the U.S.
Malaysia has since said it won’t allow any more travelers from the Westerdam to transit through the country, causing the cancellation of three charter flights to shuttle passengers out of Cambodia.
Health experts are raising the alarm about the Westerdam passengers after their release without a quarantine order at a time when the death toll from the disease has topped 1,700 globally. Most countries planning evacuations of those on the Diamond Princess in Japan have also announced plans for quarantines upon return.
Westerdam passengers should at minimum be monitored by local health authorities and quarantine themselves, Deresinski and other health experts said. Authorities could also consider testing returning travelers from the ship if feasible, the Stanford doctor added.
“It doesn’t require prolonged exposure to be infected,” Stanford’s Deresinski said.
The incubation guideline for coronavirus is two weeks — nearly the entire time the ship was on the sea after departing Hong Kong Feb. 1 and becoming a floating pariah. Because the ship was at sea for the required 14-day quarantine, passengers are free to travel after they leave the ship, a U.S. State Department spokesperson said.
Holland America Line — owned by Miami-based cruising giant Carnival — has maintained there was no known case of the disease during the voyage. Knowing when the American woman was infected and by whom is key to determine the risk that other passengers may come down with the virus.
“I don’t know enough about this patient to know if it is possible they were infected prior to boarding, and had a long incubation period,” said Ben Cowling, a professor of epidemiology at Hong Kong University. “Perhaps it is more likely that they were infected on board, which suggests that there was at least one other case on board i.e. the person who infected them.”
The U.S. doesn’t have “sufficient evidence” to determine when she may have been exposed or where, said the State Department spokesperson.
The infected woman was cleared to travel from Cambodia after filling out a health questionnaire and undergoing temperature checks. After she and 144 other Westerdam passengers arrived in Malaysia to transit to other flights, the woman had a fever, was coughing and had difficulty breathing. Two tests confirmed the diagnosis, according to the health ministry. Her 85-year-old husband tested negative as did six other passengers who were quarantined.
Cruise ships have struggled in recent years to battle isolated outbreaks of other maladies like the norovirus, a gastrointestinal illness that’s highly contagious. Still, the quarantine of entire ships due to coronavirus is unprecedented and threatens to upend the cruise industry in Asia and beyond. Vietnam became the latest country to say it wouldn’t allow a cruise ship to dock — forcing the AIDAvita carrying more than 1,100 European passengers to cancel its plans to visit the country.
A strict quarantine on the Diamond Princess, operated by Princess Cruises also owned by Carnival, hasn’t abated infections, which have surged on the ship, while remaining contained in Japan. The 355 cases aboard compare with 59 for all of Japan, a country with a population of more than 125 million.
U.S. passengers leaving the ship will be subject to an additional 14-day quarantine. Those displaying symptoms will remain in Japan for quarantine, while anyone not boarding the flights will have to wait until March 4 at the earliest to return.
More than 600 Americans on the Westerdam are making their way home, the biggest group by nationality. About 233 guests and 747 crew remain on the ship in Sihanoukville, Cambodia, out of 2,257 who were on the voyage, according to a Holland America Line statement.
V. Padmanabha Rao, 81, and his 20-year-old grandson are still waiting for details on when they can leave the ship. The captain announced Sunday afternoon that remaining passengers will likely face a delay as Cambodian authorities plan additional health screenings that may include throat swabs, Rao said.
He and the other remaining passengers have been discussing the evacuations from the Diamond Princess, and hope their governments will do the same for those still in Cambodia.
“You can’t believe how crazy it’s been,” said Rao, who lives in Fredericksburg, Virginia. “The uncertainty is the worse part of everything.”
The retired thoracic surgeon said he and his grandson plan to quarantine themselves voluntarily for 14 days after getting home.
“I don’t want to endanger my neighbors, family or friends,” he said. “Maybe everyone on this boat should go on to a quarantine. That’s the only safe way to prevent any further spread back home.”
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fortune--2020-02-17--‘A slower return to normal:’ Apple expects to miss revenue targets due to China’s coronavirus

Facebook CEO Zuckerberg looks to calm ‘ tech lash ’ with call for government rules on political ads and data

Apple Inc. doesn’t expect to meet its revenue guidance for the March quarter due to work slowdowns and lower demand due to the outbreak of novel coronavirus in China.
The company said that the iPhone, which generates the bulk of Apple’s revenue, is temporarily constrained due to production ramping up more slowly than anticipated. “Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated,” the company said in a statement Monday. In addition, demand for iPhones has been reduced because stores in China have been closed or operating with reduced hours and few customers, the company said.
Apple had forecast revenue of $63 billion to $67 billion for the fiscal second quarter ending in March. Analysts on average estimated $65.23 billion, according to data compiled by Bloomberg. The company said in January when it announced its guidance that it anticipated factories reopening beginning Feb. 10. That process however has been slow as factory workers and manufacturing partners look to contain the virus, which has resulted in about 1,800 reported deaths in China, from spreading further.
“This is the double-edged sword of being in China,” said longtime Apple analyst and Loup Ventures co-founder Gene Munster. “They’re the only big company with China exposure, so they are working through the pain of what has largely been a success for the company over the past decade.” The Cupertino, California-based technology giant said that, outside of China, products and services sales have been “strong to date and in line with our expectations.”
Apple didn’t say what its new revenue outlook is for March but that situation is “evolving.” The company said it will share more information during its April earnings call.
Apple had been planning to start producing a new low-cost iPhone in February, putting it up for sale as early as March, Bloomberg News has reported. It’s unclear how coronavirus has impacted those plans.
The company said that despite missing its guidance, all of its manufacturing sites for iPhones in the region have reopened. In addition to iPhone constraints, the company cited its inability to sell products at its retail and partner stores in China due to the virus. China represents Apple’s third-biggest market in terms of revenue and has 42 stores, which have have been closed for much of February.
“Stores that are open have been operating at reduced hours and with very low customer traffic,” Apple said in its statement. “We are gradually reopening our retail stores and will continue to do so as steadily and safely as we can.” Apple said its contact centers and corporate offices in China have already reopened. It has opened a few stores in China, including in Beijing and China, but with limited operating hours.
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fortune--2020-02-17--Facebook CEO Zuckerberg looks to calm ‘tech lash’ with call for government rules on political ads an

Facebook CEO Zuckerberg looks to calm ‘tech lash’ with call for government rules on political ads and data

For years, Facebook Inc. lobbied governments against imposing tough regulations, warning in some cases that they could harm the company’s business model. Now, it’s pleading for new rules for the good of its business.
“If we don’t create standards that people feel are legitimate, they won’t trust institutions or technology,” Facebook’s Chief Executive Officer Mark Zuckerberg said in an op-ed in the Financial Times on Monday. It coincided with a visit to Brussels, home of the European Union’s institutions that have crafted some of the toughest rules in recent years.
Silicon Valley firms have suffered from what’s been dubbed as a “tech lash,” with users frustrated over how web platforms profit from their data. Facebook has borne the brunt of that disenchantment following a series of missteps including privacy breaches and accusations it didn’t do enough to stop election manipulation on its platform. Meanwhile, Facebook’s user growth is stagnating in the U.S. and Canada – its most important markets.
“I believe good regulation may hurt Facebook’s business in the near term but it will be better for everyone, including us, over the long term,” Zuckerberg said in the op-ed, echoing comments he made over the weekend at the Munich Security Conference.
In Brussels, Zuckerberg is due to meet with European Union tech czar Margrethe Vestager and other senior EU officials as the bloc prepares new legislation in areas including artificial intelligence, gate-keeping tech platforms and liability for users’ posts, all of which could impact Facebook’s business.
Zuckerberg has previously called for global regulation covering election integrity, harmful content, privacy and data portability. He said Facebook will publish a white paper on Monday raising questions it hopes new regulation will address.
Political Ads
In the op-ed, Zuckerberg said Facebook was hoping for clarity around what constitutes a political ad — especially if paid for a group not directly affiliated with a political party, such as a non-governmental organization. Companies also need clearer lines around data ownership to enable users to move their information between services, he said.
In addition, the Facebook chief said the company would look into opening up its content moderation systems for external audit to help governments design regulation in areas like hate speech.
Zuckerberg reiterated that private companies like Facebook shouldn’t be in charge of making decisions that balance social values, and hopes that regulation will draw cleaner lines to help companies navigate those decisions, even as regulators in Europe are also investigating Facebook over its compliance with existing privacy and antitrust rules.
“People need to feel that global technology platforms answer to someone,” Zuckerberg said, but also stressed that the plea “isn’t about passing off responsibility.” He said that Facebook is continuing to make progress on some of the issues on its own.
Brussels Visits
Zuckerberg’s Brussels visit follows a recent trip by Alphabet Inc. Chief Executive Officer Sundar Pichai in January who came to discuss regulating artificial intelligence ahead of the EU’s plans to be unveiled this week, when it’s also likely to spell out proposed liability rules for tech platforms later this year.
It’s not a coincidence that the chief executives of tech firms like Facebook and Google are making the pitch for regulation in the EU capital. They have seen before that, when the EU sets sweeping laws on tech, like the General Data Protection Regulation, the impact can reverberate far beyond its borders.
When it comes to liability for what users post on its platform, Zuckerberg said over the weekend that a third regulatory system should be created — somewhere between newspaper publishers, who can be sued for what journalists write in their pages, and telecommunications companies, who aren’t liable for customer conversations.
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fortune--2020-02-18--In China, oil won’t be the only energy sector battered by the coronavirus

This studio is behind the murals at some of the world ’ s top hotels

When it comes to energy, the coronavirus doesn’t discriminate.
Restrictions imposed on travel and working hours as the virus has expanded are now expected to make deep dents in Chinese oil demand this year, redrawing the supply-demand balance and likely undoing the bullish influence of OPEC cuts and major supply disruptions in markets such as Libya.
But due to China’s position as both a manufacturing and consumption powerhouse—not just for oil but for renewable energy—the virus’s fallout will extend far beyond fossil fuels.
Supply chain disruptions are now expected to back up an already tight supply chain for manufacturing wind turbines, and potentially put the brakes on the rapid growth of battery storage.
Wind turbines
Production delays to manufacturing as a result of the outbreak could cause installations of wind turbines in China to drop by as much as 50% this year, according to energy consultancy Wood Mackenzie.
“Due to an already tight supply of key components such as turbine blades and main bearings before the Covid-19 outbreak, first-quarter production delays have already reduced annual output of those components by about 10%,” in China, said Wood Mackenzie senior consultant Xiaoyang Li.
China has the largest wind power capacity in the world, according to the Global Wind Energy Council. In 2018, China and North America together made up about 50% of total installed capacity worldwide, the Council says.
If the outbreak comes under control in the next few months, those wind power elements without supply bottlenecks—generators, for instance—should be able to bounce back, says Li. But if the virus continues to wreck havoc into the middle of the year, she forecasts that the estimated new capacity for this year could drop by as much as half.
The impact won’t only be felt domestically. Installations of wind turbines in the U.S. could also be stalled, with the fallout from the virus expected to strain supply chains for key parts produced in China that were already bottlenecked before the outbreak—putting at risk 6 Gigawatts of wind power capacity scheduled to be installed this year, Wood Mackenzie says.
Battery storage
It’s not just wind turbines, either. Last week, the consultancy warned that the virus had already cut into the production of battery storage by 10% so far in 2020, compared to the pre-virus production forecast.
Manufacturing in Hubei province—where the virus originated—and surrounding provinces are responsible for manufacturing more than 60% of the country’s total battery cell production, according to the consultancy.
That means the outage could also snarl the incredible growth in battery production and the rise of the electric vehicle, delaying development not just in China—the world’s largest market—but in North America and the U.K. too.
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