fortune--2020-06-12--The Wing charts a path forward without its CEO

Good morning, Broadsheet readers! A tragedy inspires action in Iran, U.S.A. Swimming is accused of ignoring sexual abuse, and The Wing charts a path forward after the resignation of Audrey Gelman. Have a relaxing weekend.
– Winging it. What is The Wing without Audrey Gelman?
That’s the question the women’s co-working company will have to answer in the coming weeks and months after Gelman yesterday resigned her position as chief executive of the high-profile startup she co-founded in 2016. Accused by former employees of fostering a toxic work environment that didn’t live up to its feminist ideals when it came to the women—and especially the women of color—who actually worked there, Gelman also oversaw a business struggling mightily in the wake of the coronavirus pandemic.
Employees who spoke out about their experiences at the company might answer that first question simply: The Wing without Gelman may be a healthier place to work. Ninety-three percent of current employees began a digital walkout from their jobs yesterday, refusing to return until leadership addressed a set of demands; organizers have declined to share with the press the specifics of what they’re asking. Employees announced the walkout by tweeting the phrase “Audrey Gelman’s resignation is not enough”—implying that her leadership was part, but not all, of the problem. (Gelman will reportedly retain her seat on the company’s board of directors.)
To the rest of world, The Wing’s path forward isn’t so clear. The company has always been heavily entwined with Gelman’s own personal brand. Co-founder Lauren Kassan has worked more behind the scenes; she and two other Wing executives, Celestine Maddy and Ashley Peterson, will form a new “Office of the CEO” in the wake of Gelman’s departure. The New York Times reported that CFO Diedra Nelson, one of three black women in the executive suite, resigned.
And, of course, Gelman’s exit adds to a growing list of female founders facing pressure because of a disconnect between their feminist brands and the realities inside their companies. Just earlier this week, Reformation founder Yael Aflalo apologized after being accused of racist behavior, saying she was “not a very good leader.” Refinery29 continues to struggle with how it has treated black writers—see more below—and editor-in-chief Christene Barberich has resigned. In the months before national attention turned so strongly to racism and injustice, the founders of Bumble, Outdoor Voices, and Away all faced criticism over their leadership of consumer businesses that are, to varying degrees, geared toward women.
These upheavals pose the question: Is it even possible to build a business based on feminist values? One thing’s for certain: to do so invites a higher standard. If you don’t live up to that standard—for every woman who works for you—the whole thing will crumble.
Emma Hinchliffe
emma.hinchliffe@fortune.com
@_emmahinchliffe
ALSO IN THE HEADLINES
- Refinery reporting. In more news of upheavals at feminist-branded companies, this story goes more in-depth on the turmoil at Refinery29. CNN's Kerry Flynn spoke to more than 60 staffers over the past nine months to learn about what they describe as a "toxic" culture. CNN
- Underwater. It's not just gymnastics. Six women filed a lawsuit against U.S.A. Swimming, alleging that the organization failed to protect them from sexually predatory coaches in the 1980s. USA Swimming said in a statement that it is "committed to providing a safe environment and a positive culture for all its members.” New York Times
- Action after tragedy. After the brutal killing of an Iranian 14-year-old named Romina by her father, Iran's government passed legislation being referred to as "Romina's Law." The measure makes it a crime to emotionally or physically abuse or abandon a child. New York Times
MOVERS AND SHAKERS: Former Apple retail chief Angela Ahrendts joins the board of WPP. WNYC hired former San Francisco Chronicle editor Audrey Cooper as editor-in-chief. Raytheon Technologies promoted Dantaya Williams to chief human resources officer. Digitalundivided named Lauren Maillian interim CEO.
IN CASE YOU MISSED IT
- Top tiers? Sen. Kelly Loeffler has faced public criticism over stock trades in the coronavirus era—trades that were possible because of her enormous personal wealth. But the executive-turned-lawmaker isn't shying away from her past in business. Recent fundraising efforts offered donors three tiers: investor, shareholder, and board member. The Daily Beast
- Anti-anti-vax. Shirley M. Tilghman, president emerita of Princeton University, writes for Fortune about an issue the world may be confronted with soon: how to counter vaccine skepticism once there is a vaccine for the coronavirus. Fortune
- Seattle sparring. As protesters gather in an "autonomous zone" within the city of Seattle, Mayor Jenny Durkan sparred with President Trump over his threat to use federal resources against the demonstrators. Specifically, Durkan told Trump to "go back to your bunker." CNN
ON MY RADAR
Country group Lady Antebellum changes name due to slavery connotations Fortune
Can Anna Wintour survive the social justice movement? New York Times
The racial reckoning in women’s media Vox
U.S. Soccer lifts ban on kneeling during national anthem NPR
PARTING WORDS
"When my agent called and said, 'You’re a New York Times best-seller again,' I just sat there. It was kind of a gut punch."
-Author Ijeoma Oluo on her book, So You Want to Talk About Race


fortune--2020-06-13--A kind of ‘Magic’: One nerd’s quest to shake up video games and create a $1 billion market

Thunk—the dice land on the wooden table, and Zvi Mowshowitz cackles. A lucky roll has endowed two playing cards in his deck with special powers. He turns the plastic-coated slips of paper, illustrated with leaping superheroes, into a horizontal position indicating combat mode. The imaginary characters attack, dealing fatal blows to the overmatched defenses of his opponent. Victory!
The scene could take place in any basement or game shop in the country—anywhere nerds gather to send card-bound wizards, warriors, and Valkyries into battle. But this match is unusual. On this mid-April morning the setting is a luxury loft in Manhattan’s tony Tribeca neighborhood, where a stylish venture capitalist and a husky-voiced historian of pop culture are, as gamers say, “playtesting.”
The pair’s business partner and temporary adversary, Mowshowitz, is no ordinary player. A 41-year-old with unkempt hair and black glasses, Mowshowitz explodes frequently into laughter, eerily similar to that of the boy-genius Mandark from the ’90s cartoon series Dexter’s Laboratory. Mowshowitz has a fondness for novelty T-shirts: Today’s reads, “Question Authority: Ask Me Anything.” He’s famous in geek circles as a champion of Magic: The Gathering, a fantasy card game beloved by millions of people.
Mowshowitz made his name as a David among Goliaths. His slingshot: using low-value cards to triumph over opponents with more powerful hands.
Now Mowshowitz is playing a bigger game. He wants to deploy the same strategy against a video game industry worth more than $100 billion that is, in Mowshowitz’s view, exploiting fans with addictive, money-grubbing ploys like forcing them to “grind,” or engage in repetitious quests. Mowshowitz’s target is a niche corner of the industry known as digital collectible card games, which are forecast to grow to a $2 billion market this year from $1.5 billion last year. Perhaps the crowning example, Hearthstone, a breakout mobile game, claimed to have 100 million players as of November 2018.
Mowshowitz’s plan is both radical and simple: Create an utterly engrossing game that doesn’t resort to conventional, predatory tactics. In it, players battle one another with digital trading cards featuring superheroes and robots. Central to the plan is an online marketplace where players can buy, sell, or trade the individual digital goods they acquire—no hoops required. It’s a feature absent in recent, free-to-play hits like Hearthstone.
The concept seems obvious enough. Game players have been able to trade cards in the physical world for decades. But online newcomers have, for a variety of reasons, legal and otherwise, stubbornly refused to support the ability.
Mowshowitz has rallied a pair of converts to his cause. By his side is Brian David-Marshall, the aforementioned historian who is working with Mowshowitz as product director for Emergents. Among David-Marshall’s credits are having opened a store called Neutral Ground in a loft in Manhattan’s Chelsea district that, though now closed, retains a mythic status among the initiated—the Studio 54 of the gaming set. (On some nights, David-Marshall would keep his store open until two or three in the morning as Magic players—everyone from middle-aged math nerds to maladjusted middle schoolers—plunked down creature cards from their deck in battle after battle.)
The other member of the trio is Kathleen Breitman, the 30-year-old CEO of Coase, the startup developing the game. The name is a nod to the celebrated economist Ronald Coase.
If Mowshowitz and David-Marshall bring gaming pedigree to the project, Breitman brings connections to venture capital and influential people beyond the gaming world, including billionaire crypto enthusiast Tim Draper as a backer. Having done stints at two pillars of the financial establishment, the Wall Street Journal and the hedge fund Bridgewater, Breitman is best known for leading a cryptocurrency project with her husband that raised $234 million in 2017. A savvy networker with the ability to charm—she and her French husband, Arthur, were featured on the cover of Wired magazine last year—Breitman flits between New York and Paris, leaving a trail of cocktails and bon mots in her wake.
Together, Breitman, Mowshowitz, and David-Marshall are throwing a gauntlet at the gaming industry. If their game, now being rolled out to early testers, catches on, one industry veteran predicts it could help spawn a new billion-dollar industry centered on the trade of digital goods. Others are less optimistic, pointing out that new games face entrenched competitors. Often they fail.
Mowshowitz is unfazed by the skeptics. Shuffling a deck of superheroes, he reflects on the many times he’s won as an underdog. He plans to do it again—this time, by overturning the conventional logic of digital game design, translating the appeal of the original nerd card game Magic into software, and potentially igniting a new virtual card-collecting frenzy in the process.
Making magic happen
In the late 1980s, inklings of a new kind of game began to jell in the mind of Richard Garfield, a mathematician and Bell Laboratories alumnus. He arrived at the idea to combine collectible cards with a fantasy battle game. As in the business of baseball cards, some cards would be rarer than others, and they would be sold in randomized packs—an innovation distinguishing Garfield’s design from most other contemporary tabletop card games. Magic: The Gathering was born.
When the first Magic cards appeared on the West Coast in 1993, they won instant, ardent fans. Teens and adults alike were absorbed by the otherworldly mythology of the Dungeons & Dragons–like universe. They became hooked on buying “booster packs” to acquire new cards they could employ in personalized decks. The game went viral the old-fashioned way, through word-of-mouth, as players introduced it in comic-book shops and college campuses across the country.
For its fans, Magic: The Gathering was a deeply personal affair. “Magic is closer to role-playing than any other card or board game I know of. Each player’s deck is like a character,” the game’s creator, Garfield, would later relate in an account cited by the New Yorker.
Players assumed the role of spectral beings called “planeswalkers” that can summon pretend beasts and enchantments into battle. This fantasy backdrop—and a complexly layered rule book—were core to the game’s appeal. Constructing a deck was, for many people, an intimate act. Different personalities tended to gravitate toward one of five colors on Magic’s “color wheel,” a sort of Hogwartsian sorting hat. White characters, for instance, were associated with law and order, while black ones embodied ruthless power. Green characters stood for communal values and so on.
Magic soon became a full-fledged craze. “I found out about it when I was doing event marketing for comic stores. People were desperately seeking out the cards. I was physically accosted by someone who was so angry we didn’t have it, he literally shook me by the lapels,” David-Marshall recalls.
While Magic cards were the source of a rich, high-fantasy culture, they were also appreciating in real-world dollars. Not long after Magic launched, trouble arose in the form of a market bubble as speculators tore open piles of $3 booster packs in hopes of finding rare cards they could flip for a profit. It was tulip mania for the geek set. The phenomenon boosted sales. But the mania also threatened to ruin the integrity and underlying fun of the game, and to turn Magic into a flash-in-the-pan fad like Pogs, which today is more of a historical curiosity than a game.
For Wizards of the Coast, the company that owned the game, building a sustainable franchise required thinking like a central banker. The company could have milked the Magic bubble for all it was worth, but Wizards instead chose a different strategy, flooding the market with certain cards in order to erode their resale value, much to the chagrin of speculators. It also introduced tournament rules requiring players to use cards of recent vintage, meaning no one could win by purchasing and deploying all-powerful cards, like the much-coveted Black Lotus. In deliberately popping its own bubble, Wizards made a risky bet, but one that proved prescient.
The shake-up worked. Magic: The Gathering kept thriving. Today, the Magic universe operates much like a well-governed Scandinavian country of 38 million people—the estimated number of players around the world—and has spawned a rich fan culture and a series of imitators. The secondary markets are still going strong as well; in 2019, a Black Lotus sold for more than $166,000 on eBay.
Despite its early success, Magic fumbled while crossing over to the computer screen. Hasbro, the parent of Wizards of the Coast, has offered a desktop-only version of Magic on the Internet for years, but it has remained comparatively niche. Last September, Hasbro made a new attempt to refresh the franchise with the release of Magic: The Gathering Arena, which takes cues from rival Hearthstone. But while the early response has been positive, Arena can only be played on desktop, not mobile, and, like Hearthstone, players cannot trade and resell cards as they can in the physical world—typically through secondary markets. (Bruce Dugan, a spokesperson for Magic, says mobile is “something we’ll consider.” And while technically there are underground markets where people can buy and sell Hearthstone and Arena accounts, these are rather dubious and breach the games’ terms of service agreements.)
In building a digital game they hope will replicate the fun of Magic, members of the Emergents team are paying close attention to the lessons of the groundbreaking game. “Just as all philosophy is a footnote to Plato, all card games are a footnote to Magic,” Breitman says.
The team, and its scruffy leader Mowshowitz, believes it has finally cracked the code. As the crew tilts against a gaming industry colossus, Mowshowitz holds the lance. He’s not just an expert player and, in Breitman’s words “a video game snob,” but also a Martin Luther figure who likes to call out exploitative and manipulative behavior on the part of other game designers. Maybe there’s a little Don Quixote in him, too.
A sample opening hand from the game during alpha play testing. Art by various artists. All art is tm and copyright Emergent Inc.
Escaping the rat race
Mowshowitz’s introduction to games came early when, as a small boy, he would play chess against his father. Those games had a twist. In their first matches, Mowshowitz’s father played only with a king and pawn, letting the young boy advance with a full board of chess pieces. In time, as Mowshowitz learned to checkmate the depleted force, his father added more pieces to his side, making the task harder.
He encountered a similar mismatch of forces as a teenager when he immersed himself in Magic, crisscrossing New York City to attend tournaments in search of prize money and prestige. While his parents, both Columbia University professors, earned a comfortable living, Mowshowitz had only a paltry allowance. His relative penury required him to build his deck—the set of 60 or so cards used in a Magic game—from others’ cast-off cards, and develop unorthodox strategies to win.
Mowshowitz would make such game play his calling card, earning renown as he won matches with low-value cards. Such abilities led gaming companies, including Magic’s Wizards of the Coast, to invite Mowshowitz to test trial versions of their games. On several occasions, he “broke” the game—geek lingo for finding a flaw in the design that produces automatic victory. (See, for instance, TurboZvi.) During a stint in the Western U.S., Mowshowitz took up a different sort of gaming. He made a modest fortune playing poker in Indian casinos outside Denver, and then worked in Las Vegas for the professional gambling industry. Mowshowitz won’t provide specifics about his job duties other than to say they involved math.
This isn’t surprising. When Mowshowitz speaks, one can almost see a cascade of equations popping from his brain as he parses the probability of every situation around him. His math prowess also leads him to speak of certain integers with tenderness. “Seventeen has a special place in my heart. It’s the most random number,” he notes in passing when recalling his days at his high school math club.
Mowshowitz left the world of Las Vegas for stints at the quant firm Jane Street and, later, as CEO of MetaMed, a short-lived medical research startup. But he is now expending all his number-crunching abilities on his crusade with Emergents. His quest: to design a new type of game that knocks down a pillar upon which gamemakers historically earn money.
Mowshowitz is doing away with “loot boxes.” Critics say these grab-bags—which offer the promise of winning special weapons or other game enhancements—are akin to lottery tickets. They accuse the gaming industry of manipulating players, especially children, into spending hundreds or even thousands of dollars (or playtime hours) to obtain digital junk. Controversy over loot boxes has led politicians in the U.S. and Europe to call for banning them.
Loot boxes manipulate players by preying on their biological foibles, says Mowshowitz. He points to the practice of “Skinner boxing”—a science term for putting a rat in a box and then training it to perform an activity in return for a pellet of food.
In the case of video games, Skinner boxing uses virtual rewards. In lieu of pellets, the gamemaker offers in-game money, weapons, level-ups, hypnotizing noises, and various trinkets to induce players to spend more time in a game—which usually leads to tedious, repetitious activity. The practice isn’t a conspiracy theory hatched by Mowshowitz. Search the Internet for “Skinner box and video games,” and you’ll discover the term is commonplace in design discussions. For game makers, manipulating players to play for longer periods of time helps convert some fraction into customers willing to pony up for more loot boxes, thereby boosting revenue. But the upshot is, in Mowshowitz’s view, the games become monotonous.
A marketplace for gaming goods—which Emergents is baking into its game—seems like an unlikely fix for these problems. But Mowshowitz is convinced that such a market will be transformative. “When you don’t allow trading, you force people to grind,” he says, explaining how a player might have to roam the same small corner of a game for hours to acquire a certain tool or weapon.
Mowshowitz also believes the industry’s failure to build in-game trading options undermines imagination. When every player has to grind to acquire goods, he says, they will gravitate toward one of a few tried-and-true, proven-to-win, deck-building strategies described on gaming blogs. In his view, a store where players can buy or swap tools and weapons will encourage them to explore unorthodox tactics and new ways to gain an edge. This is what Mowshowitz did in the physical world of Magic card games, and he’s convinced the lesson would apply equally to online games.
All of this, though, raises an obvious question: If secondhand digital goods can unlock a billion-dollar industry and make games more fun, why is no one doing it?
From left: Brian David-Marshall, Kathleen Breitman, and Zvi Mowshowitz. Jeff Roberts
Where others failed before
There are good reasons why the video game industry is reluctant to offer players a way to sell and swap their wares.
Unsurprisingly, the first reasons are legal. For starters, explicitly stating card values could be a tacit omission that the company is hosting private lotteries, which are illegal in certain parts of the world, including many states in the U.S. As a result, Wizards of the Coast and other companies have wisely operated under the cover of better-left-unsaid deniability, leaving the business of marketplaces to independent resellers. Secondly, these markets can be abused by fraudsters. As the makers of Counter-Strike: Global Offensive recently discovered, almost all of the traders in their marketplace were money launderers seeking to cash out ill-gotten gains.
There’s another set of reasons—commercial ones—that in-game marketplaces are rare. Game makers fear that markets for used items could eat into the sales of new ones.
Traditionally, such sales involved fare like swords or gold in World of Warcraft, but lately more sales are coming in the form of what gamers call “chrome” or “skins”—swag to adorn a player’s character such as sunglasses or new shoes. Chrome has become especially conspicuous during the craze over the game Fortnite. Owning it has became so important among high school kids that those with unadorned avatars have been mocked for being “a default,” and bullied into spending money to dress up their digital character. In 2018 alone Fortnite reaped $2.4 billion on sales of chrome. In Fortnite, where the proceeds of every pair of digital sneakers and sunglasses goes right into the pocket of the game maker, Epic Games, who in their right mind would risk undercutting that margin by allowing stores for resold goods? Cash cows get milked, not slaughtered.
Michael Pachter, an analyst with Wedbush Securities, says the fear of cannibalization is real but also overstated. “It’s like fake sunglasses. You can’t say every person who pays $10 for knock-off Louis Vuittons would have spent $200 if the fakes weren’t available,” he says.
But even if game makers can be persuaded that secondhand goods won’t eat into their sales, there is another reason why games have shied away from used goods markets—and why the likes of Hearthstone and Magic Arena enable no forms of trading at all. It is rooted in fear that a person—or bot—with multiple accounts will game the system, grinding to earn rare cards and then trading all that loot to a single account. The cards might lose their value, the game might lose its purpose.
Game designers are very aware of predecessors’ missteps when it comes to offering an in-game trading house. In 2011, video game giant Blizzard introduced an “auction house” to Diablo III, a hack-and-slash role-playing game. The auction house was supposed to provide an in-house alternative to eBay and other unauthorized trading forums. It was also supposed to add a fun new economic element to the Diablo franchise. Unfortunately, the auction house spawned an unintended consequence in the form of economic mercenaries—often from China and Russia—who, aided by bots, played the game solely to obtain and sell used weapons. These interlopers would hawk their digital haul in the official auction house where wealthy traders took the other side of the transactions, buying the best weapons needed to defeat Diablo’s toughest bad guys. Soon, Diablo’s elite ranks featured a growing number of gamers who had engaged in “pay to win”—a taboo in the gaming world. The ensuing backlash led Blizzard to shut down the auction house in 2013.
As with the speculative bubble that almost destroyed Magic in its early days, the Diablo fiasco shows how perverse economic forces can ruin an otherwise popular game. The episode led many in the gaming industry to conclude in-game trading markets do not work. Indeed, Mowshowitz acknowledges the Emergents crew have been quizzed by potential investors about how they plan to avoid a Diablo-style debacle.
Mowshowitz responds by drawing an analogy to the physical gaming world. “In Magic: The Gathering, there’s this guy we call ‘Mr. Suitcase’ who shows up at tournaments with every possible card,” he says. In that world, Mr. Suitcase is kept in check by Wizards of the Coast tournament rules that narrow the types of cards that can be deployed in a given match. When it comes to Emergents, Mowshowitz envisions sorting players into tiers that pit those with card decks of similar value against one another. (This system won’t preclude a crafty player with modest resources challenging a “Mr. Suitcase,” but will ensure most matchups are evenly balanced.)
Breitman, the CEO, has also thought deeply about the pay-to-win problem, though her perspective is a more academic one. In her studies, and in building the cryptocurrency company Tezos, she’s read extensively about finance and game theory—good training, it turns out, for understanding the role of economics in designing a game.
Breitman says that Diablo’s auction house failed because the game’s free-to-play model was easily exploited by bots and rogue actors. And even though Emergents will include a free version—new players will receive a handful of cards at no cost—she says the game will be designed so that players can’t use bots to “grind” and amass items for resale.
But even if the Emergents crew has found a way to beat the bots, their quest will only be a success if people decide to play their game in the first place—and that could be a tall order. Hearthstone remains the most popular digital collectible card game by a long shot, and some of the very tactics Mowshowitz despises are what have kept players casting spells on their phones for hours on end. Few rival versions of the game (“Hearth-clones,” as they’re known) have gained any traction.
“A lot of games have tried to copy Hearthstone’s approach but haven’t differentiated themselves,” says NPD Games analyst Matthew Diener. “There’s a lot of skeletons on the side of the road. Blizzard really has a hammer lock on the space.”
The odds may be daunting, but the Emergents team members have one more attribute—beyond Mowshowitz and David-Marshall’s gaming cred and Breitman’s economic savvy—that could help them pull off a breakout game. They believe they have an ace up their sleeve in the form of a new technology called blockchain.
Deploying one of the game’s “sweeper” actions, cards that are capable of removing a lot of rival characters from the board. Nova art by Steve Ellis and Bottled Lightning Studios. Other art by various. All art is tm and copyright Emergents, Inc.
Blockchain in the balance
The term blockchain achieved buzzword status in 2017, and many people have since written it off as a fad. But as with other new technologies, blockchain is both overhyped and misunderstood. For the Emergents group, it falls to Breitman to make the case that blockchain technology can solve the challenge of introducing used-goods markets and transform game play.
At its essence, a blockchain is simply a new type of software that is run across multiple computers to create a permanent, tamper-proof ledger. The most famous example is the Bitcoin blockchain, but there are numerous other examples, including Tezos, which Breitman and her husband created in 2014. These and other blockchains can all be used to create a public and trusted transaction record. Currently, industries as diverse as finance, shipping, and precious gems are using blockchains to track products and establish proof of origin.
In the world of gaming, a blockchain could be used to establish an inviolable record of who owns a given piece of digital property—be it a sword, a monster, or a rare pair of sunglasses. In the case of Emergents, a blockchain will provide an authoritative record of which players own a given card at any time. It’s as if the game’s overseers have been given an army of infallible accountants to help ensure its economic integrity.
The use of blockchains in video games offers another intriguing possibility: the creation of a new class of digital collectibles for fans. Specifically, a player could pay to obtain the same digital card or sword used by an elite player in a tournament; a blockchain would confirm its provenance. It would be the gamer equivalent of buying a bat used by a star player in the World Series.
While blockchain is a novel technology for gaming, it’s notable that many of the most prominent people in the world of blockchain and cryptocurrency are Magic fans. These include Vitalik Buterin, the creator of Ethereum, the second most popular digital currency after Bitcoin. Jesse Powell, the CEO of cryptocurrency exchange Kraken, recalls playing against Mowshowitz in Magic tournaments. (Mt. Gox, an early, major Bitcoin exchange, started its life as a “Magic: The Gathering online exchange.”) Such figures and their immense social media followings could give a boost to new video games that embrace blockchain.
All of this, of course, depends on whether gamemakers can integrate blockchain technology seamlessly in the first place. John Hanke, the CEO of Niantic Labs, creator of Pokémon Go, cautions that “the game has to come first.” He means that if a game doesn’t grip people, it doesn’t matter what technology might be supporting it on the back end.
Others have had this same revelation. “At the end of day, you have to have a triple-A quality game and be incredibly fun to play. You cannot compromise on that,” says James Ferguson, CEO of Immutable, a Coinbase- and Naspers-backed startup that’s creating a blockchain-based digital card game called Gods Unchained.
That’s not the only competition Emergents has. In 2018, the cryptocurrency company Ripple and a consortium of gaming industry veterans announced a $100 million fund for game makers to integrate blockchain technology. Kevin Chou, previously the cofounder and CEO fo Kabam, a hit mobile game maker that had partnerships with Star Wars, Marvel, and Lord of the Rings franchises, is now leading Forte, a blockchain gaming startup. And John Linden, the former head of Call of Duty, is now CEO of Mythical Games, and he is overseeing new games with blockchain built in.
“What’s beautiful about blockchain is it’s a paradigm shift rather than a new platform. Using blockchain to track and trade in-game assets changes the opportunity for what can be sold,” he says.
Linden, as well as Breitman and others, are all betting that blockchain will bring a technological leap forward in gaming akin to the introduction of the joystick or online multiplayer games before it. For them, it’s not a question of whether blockchain will transform gaming, but rather who will be the first to pull it off.
It takes Moxie
In the Tribeca loft, Mowshowitz invites the venture capitalist to join him in combat against another investor at the table. She sits, and the pair shuffle around physical cards—the Tinkerer and the Striker and Shimmer Storm—which the team is using to demonstrate the game while developers build out a digital version.
“We’ll play Dimetrodon to get rid of their Beacon so we can play our Beacon!” Mowshowitz tells his bemused partner. His eyes glint when he draws another card. The piece features a character named Moxie. She is, apparently, ultra-powerful. In a few minutes, it’s all over as Mowshowitz deploys Moxie to decimate the last of his opponent’s forces.
Afterward, as the small assembly tucks into doughnuts from Brooklyn’s popular Dough bakery, the investors quiz Mowshowitz about launch plans for the game. One critical decision will be whether the Emergents team can license a set of characters from a familiar brand like Marvel or Game of Thrones, or if it will rely on the Tinkerer, Dimetrodon, and others who come from a little-known collection devised by David-Marshall.
The Emergents crew have been in talks with big-name studios, they say, but so far have met reluctance. “Nobody wants to be the first penguin,” says Breitman, who predicts companies will be more willing to license their intellectual property once they see the first blockchain game gain traction.
Mowshowitz, meanwhile, is quietly confident that his quest to build a better version of online gaming will succeed. He is used to encountering skeptics and surprising them when his predictions turn out to be correct. If Mowshowitz gets the last laugh—which everyone will know by its abrupt and clamorous detonation—as he has so many times before, the success of Emergents could crack open an enormous new vertical in an already massive video game industry, which eclipsed the global film business in revenue in 2018.
John Linden, the Mythical Games CEO known for formerly heading up mega-franchises like Tony Hawk Skateboarding, has seen this happen before. He cites the example of Amazon-owned Twitch, where millions of fans watch video games live-streamed, as well as the growth of brands buying sponsorships inside online games. In Linden’s view, the introduction of a secondhand goods market into popular games could trigger another financial bonanza.
“Every time we’ve given people a chance to be more involved in the games and make some money,” he says, “it births a new multimillion-dollar industry.”
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fortune--2020-06-13--What to know about Juneteenth this year as protests against racial injustice sweep the U.S.

Why Citi is the latest Wall Street giant to back the new MEMX stock exchange , launching this fall

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Juneteenth is a celebration of black history and freedom that relatively few white Americans had heard of till recently, if at all. Now suddenly, Juneteenth is prominent on the nation’s calendar, propelled there by sweeping protests against racial injustice, a controversial decision by President Donald Trump in scheduling a campaign rally (later rescheduled) and the decision by some high-profile companies to make the day a holiday for all employees.
What is Juneteenth?
The holiday gets its name from June 19, 1865. That’s the day the Union army arrived in Galveston, Texas, to announce that all African-American slaves in the state were free in accordance with President Abraham Lincoln’s Emancipation Proclamation. The state was the last in the Confederacy to receive word that the Civil War was over and that slavery had been abolished, and the last where the federal Army established its authority.
What’s is the significance of Juneteenth?
As early as 1866, freed African Americans in Texas held a celebration on the date to commemorate the end of slavery. As black families emigrated from the southern U.S. after the Great Depression, observance spread throughout the country. In 1968, shortly after Martin Luther King Jr.’s assassination, his Poor People’s Campaign held a Juneteenth Solidarity Day, giving the holiday a new prominence in the civil rights movement.
Is Juneteenth an official U.S. holiday?
In 1980, the Texas legislature made it an official state holiday. Currently, 46 states and the District of Columbia mark the occasion as a holiday or a day of observation. But the holiday was still little known enough in 2017 outside the black community that the television show “Black-ish” could build an episode around how few of the show’s white characters had heard of it.
Why has Juneteenth been gaining prominence?
In recent years, a number of Juneteenth commemorations were tied to themes raised by Black Lives Matter, a protest movement that was founded in response to police killings of African Americans. Black Lives Matter protests erupted around the nation in recent weeks after George Floyd died at the hands of police officers in Minneapolis on May 25.
What did Trump do?
He announced plans to hold a rally in Tulsa, Oklahoma, on that day. He hasn’t had an in-person rally since lockdowns were imposed to limit the coronavirus pandemic’s spread in March. The move sparked an immediate reaction.
What was the criticism about?
The choice of the date and the city riled both historians and African Americans for what they see as insensitivity to racial issues. In 1921 white rioters attacked a predominately black district in the city, Greenwood, killing up to 100 black residents and destroying hundreds of buildings. It’s considered the worst incident of racial violence in U.S. history.
What does Trump say?
Trump said in an interview with Fox News on Thursday that his campaign didn’t intentionally choose Juneteenth as the date for the rally. Late Friday night, he tweeted that “Many of my African American friends and supporters have reached out to suggest that we consider changing the date.” He said that “out of respect for this Holiday,” the rally would be moved to the 20th. Paris Dennard, senior communications adviser for black media affairs at the Republican National Committee, had said earlier in the day that he had discussed the Greenwood massacre with Trump at a White House meeting last week. Trump told him he had recently read about the incident. Dennard said that he raised Tulsa with the president as an example of economic destruction and how long it could take black communities to recover from riots and looting.
Which companies are making it a holiday?
Jack Dorsey made both Juneteenth a formal company holiday at both Twitter Inc. and Square Inc., both of which he leads. Vox Media Inc., Nike Inc., the New York Times and the National Football League all followed suit, while Facebook Inc. said it plans to cancel meetings that day for a “day of learning” about the experience of black Americans. MasterCard said it would give employees the day off and encouraged them to educate themselves about the history of racism in America or volunteer with a civil rights organization. Twitter, in particular, has publicly leaned into the Black Lives Matter movement, changing the bio for its corporate Twitter account, where it has 58 million followers, to #BlackLivesMatter and changing its account photo to a black Twitter logo.


fortune--2020-06-13--NCAA encourages day off from college sports on election day

What to know about Juneteenth this year as protests against racial injustice sweep the U.S .

The NCAA on Friday encouraged its 1,100 member colleges and universities to give athletes the day off from sports on election day, responding to grassroots movements of activism from players and coaches.
Following nationwide protests of police brutality and racial injustice, Georgia Tech announced earlier this week it was giving nine fall sports teams a day off from athletic activities on Nov. 3 so athletes can vote in person.
UCLA followed with a similar announcement and Wisconsin said Friday it would also skip athletic activities on election day.
“We just want them to exercise their responsibility to have their voices heard and vote,” Wisconsin athletic director Barry Alvarez said. “I want to make that as easy as possible for them.”
At schools all over the country, coaches and players have organized team-wide voter registration efforts, marches and rallies. The Clemson football team helped organize a March for Change scheduled for Saturday on its campus in South Carolina.
The protests were sparked by last month’s death of George Floyd, a handcuffed black man who who died after a white Minneapolis police officer pressed his knee into Floyd’s neck for several minutes.
The NCAA did not mandate a day off for athletes on election day. Some competitions are already scheduled for that day. For example, the Southeastern Conference women’s soccer tournament is slated to begin Nov. 3.
Instead, the NCAA encouraged schools to assist students in registering to vote and to give them a day off from athletics to vote.
“We encourage students to continue to make their voices heard on these important issues, engage in community activism and exercise their Constitutional rights,” the NCAA said in a statement.
In the Mid-American Conference, Buffalo’s football team is schedule to play at Northern Illinois on that Tuesday night in November. Though MAC Commissioner Jon Steinbrecher released a statement Friday saying the schools, conference and ESPN will work to move the game to a different date,
The Division I college basketball season will start about a week after election day.
SEC Commissioner Greg Sankey told AP educating student-athletes about absentee voting, because many students won’t be registered to vote near their schools, is as important as giving them time off on election day.
Sankey told AP that during a recent video call with the league’s football coaches they discussed having speakers talk to their teams about the electoral college, the electoral map and how elections are decided at the local, state and federal level.
“Non-partisan. We want people to make their own decisions about voting. But part of our responsibility is to educate,” Sankey said. “That’s probably the first time our football coaches’ meeting has included a discussion of the electoral college.”
Eric Reveno, the Georgia Tech assistant men’s basketball coach credited with starting the #AllVoteNoPlay movement on Twitter, said the NCAA made a step in the right direction.
“However, we need to move beyond a recommendation,” Reveno tweeted. “We need to act. The @NCAA needs to act. We need #AllVoteNoPlay in the rule books.”


fortune--2020-06-13--Why Citi is the latest Wall Street giant to back the new MEMX stock exchange, launching this fall

The Members Exchange has a new member in its ranks.
The upstart stock exchange, founded and backed by many of Wall Street’s biggest financial firms, has added Citigroup to its group of investors, it announced Thursday. The Members Exchange, also known as MEMX, is slated to launch Sept. 4 and aims to shake up the New York Stock Exchange-Nasdaq duopoly that has long dominated the U.S. equities market.
Citi’s investment comes in the wake of a $65 million funding round sealed by MEMX earlier this year. That round saw a wave of new investors—including JPMorgan Chase, Goldman Sachs, BlackRock, and Wells Fargo—join an initial group of seed backers that featured Morgan Stanley, Bank of America, Charles Schwab, Citadel Securities, and Fidelity Investments. MEMX had raised a total of $135 million in funding prior to Citi’s backing, according to PitchBook data.
“Although we recently closed our latest round of financing and are focused on launch, we didn’t want to pass up the opportunity to add another significant market participant to our list of supporters,” MEMX CEO Jonathan Kellner said in a statement. “We look forward to working with the Citi team and leveraging their market structure expertise.”
Kellner also announced that MEMX has received approval from the Financial Industry Regulatory Authority (FINRA) for its routing broker-dealer, MEMX Execution Services. The fledgling exchange received the Securities and Exchange Commission’s approval to operate in May.
Wall Street firms have flocked to MEMX amid heightened disquiet in recent years regarding the fees that the NYSE and Nasdaq charge broker-dealers. The exchange aims to offer a streamlined, more transparent platform that aims to “lower pricing on market data, connectivity, and transaction fees,” according to its website.
But breaking the NYSE and Nasdaq’s stranglehold has proven difficult in the past for upstart exchanges. The Investors Exchange (IEX)—which featured prominently in Michael Lewis’s 2014 book Flash Boys: A Wall Street Revolt—launched to much fanfare in 2016; today, IEX only garners around 2% of U.S. stock trading volume.
MEMX plans to begin platform testing on June 29, with member certification starting on July 13. The exchange is currently working to connect and onboard more than 50 market participants to its platform, Kellner said, with the goal of “launch[ing] with a truly diverse set of liquidity.”


fortune--2020-06-13--Why COVID-19 is a wake-up call for sustainability

The Belgian-born American chemist, Leo Baekeland, could never have imagined that his invention of plastics would be so ubiquitous in our world today. Neither could he have imagined that plastics would be mishandled so irresponsibly that millions of tons of plastic waste would be left untreated, accumulating every month on this beautiful planet.
Every year, around 350 million tons of plastic waste are globally generated, and shamefully, less than 16% of this waste is recycled. If we believe a 2018 McKinsey report, it will take just one decade for our plastic waste to rise to an alarming 460 million tons per year. Despite the best of intentions and numerous debates and discussions, the global recycling rate has been declining over the last two years and will continue to do so into next year.
The production of prime plastics (virgin plastics produced from petrochemicals) has seen a growth of 3% per annum over the last few years. However, it is disheartening to know that the recycling rate had been growing by less than 2% and is now on a negative trend. At this rate, there would be 12 billion tons of plastic waste on this earth by 2050; allow me to emphasize that I said billions, not millions.
Is this the legacy we want to leave for future generations? Do we want our children and grandchildren to grow up with mountains of plastic in their backyards?
COVID-19 has proved beyond any doubt that we cannot live without plastics. The World Health Organization recently estimated that the world is using about 89 million masks and 76 million gloves each month, spiking our consumption of single-use plastics. Plastics have saved thousands of lives. I am afraid that the pandemic may put the topic of sustainability in the back seat.
My company, Gemini Corporation, is one of the world’s largest enablers of plastics recycling and could benefit from the solutions offered in this article.
How did we arrive at this broken state of plastics recycling? The world has yet to grasp the enormity of the issue at hand. There is a tremendous amount of ignorance at the general public and government levels. The problem is much more serious than we are being led to believe.
International trade has decreased from 15 million tons in 2015 to less than 5 million this year. Moreover, as per the Basel Convention, which will take effect next year, every contract will need to be approved by the environmental authorities of both importing and exporting countries, creating a heavy administrative burden. These rules will likely cause a further reduction in trade, which will inevitably exacerbate the low recycling rate.
Furthermore, petrochemical companies are investing $200 billion toward new capacity in plastics production, whereas investment in recycling is substantially lower. Globally, 2 billion people have no access to a basic waste collection system.
The coronavirus pandemic has reiterated that we cannot live without plastic. It’s high time that we channel our efforts toward real solutions.
The need of the hour is to increase the rate of recycling. In order to increase this rate to 40% in the next five years, we need to triple the amount of waste we are recycling. In the best-case scenario, mechanical recycling capacity can be increased by only 6 million to 8 million tons annually. This would be enough to cover only the incremental waste generated each year, leaving the majority of existing plastic waste to end up in landfills and oceans.
At the same time, the commercial success of chemical recycling technology is a few years away. Moreover, chemical recycling plants require a relatively large quantity of plastic waste, as feedstock, to operate. More often than not, there isn’t enough plastic waste in one location to feed a plant, and bringing in waste is a logistical, administrative, and financial burden.
The movements of plastic waste today are being monitored in the same ways used for blood diamonds or other hazardous goods. Let there be a free flow of plastic waste with proper checks and balances.
People need to be educated about the significance of plastic. As we wake up in the morning, the first thing many of us do is reach for our mobile phones, which are made with plastics. We commute to work in vehicles made with plastics. We use computers, laptops, and printers—all made with plastics. Plastics touch the life of every person every day, everywhere. Plastics provide flexibility, innovation, and cost efficiency. They enhance design and are extremely lightweight.
Yet there is a war on plastic. Many compare plastics to tobacco and pollution. The truth is we need plastics, and we need them desperately. It is equally necessary to recycle them properly.
We must see COVID-19 as a wake-up call for sustainability. It is time to make significantly more ambitious plans. As governments provide assistance and loans to recover from the pandemic, they should focus on a green recovery. Contracts and loans should be granted with green conditions in place.
Everyone wants sustainability, but nobody wants to pay for it. The economics of recycling are complex. The industry should be prepared to pay a premium for recycled material over the prime material. External costs must also be kept in consideration.
Governments should take steps to promote demand for recycled material. They can take initiatives like offering tax concessions on scrap and recycled material and incentivizing public procurement of products made from recycled material.
The European Union is considering the introduction of plastic waste tax. It’s a pity that this tax revenue is being considered for a purpose other than plastics recycling. This tax revenue should be used only for the promotion of recycling.
Many leading companies and brand owners have made commitments to the Ellen MacArthur Foundation to use 5.4 million tons of recycled plastics by 2025. Shareholders, auditors, and fund managers should monitor these commitments to ensure that they move from paper to practice.
Once these steps are taken, we will be much better equipped to handle climate change.
Surendra Patawari is chairman of Gemini Corporation.


fortune--2020-06-13--Carl Icahn files plans to raze a former Trump casino in Atlantic City

Billionaire investor Carl Icahn has filed plans to demolish a former Atlantic City casino built by Donald Trump before he was president, but Icahn and the city have not yet agreed on when the towers will come down.
Mayor Marty Small held a news conference Thursday to announce that Icahn’s company has filed demolition plans with the city that call for both towers of the casino to be imploded, a departure from initial discussions that would have razed only one.
But Icahn’s plans call for the structures to be demolished by June 2021, a timetable Small called “not acceptable.”
“My administration’s goal is to get it down by the end of this year, or by late February,” the mayor said.
Icahn and his representatives did not respond to messages seeking comment. In March, Icahn said through a spokesman that his company had already committed itself to tearing down the building and did not need to be prodded by the city, which took Icahn to court to force demolition.
The damaged exterior of the former Trump Plaza casino is seen in Atlantic City, N.J., Thursday, June 11, 2020, where pieces of the building have broken loose and crashed to the ground. Today the city announced that Carl Icahn, the billionaire investor who owns the building, has filed plans to demolish it within a year, but the city wants it down sooner than that. (AP Photo/Wayne Parry)
In recent years, Icahn has requested the use of more than $5 million in redevelopment tax payments that Trump Plaza made while it was operating to help offset the cost of demolition.
“That is not part of the equation,” Small said.
The mayor commended Icahn for being willing to work with the city to bring down the former casino, which Trump opened in 1984 in a prime spot at the center of Atlantic City’s Boardwalk where the Atlantic City Expressway deposited cars entering the resort.
It closed in 2014, one of four Atlantic City casinos to shut down that year, followed by another former Trump casino, the Taj Mahal, in 2016. That property has since reopened as the Hard Rock casino.
But Trump Plaza has sat empty for six years, and has been deteriorating. Earlier this year, large pieces of the facade broke loose from one of the hotel towers and came crashing to the ground. In a recent storm, additional debris fell from the structure onto the Boardwalk.
“Vacant buildings are not good for a city, especially high rises,” said Fire Chief Scott Evans. “We’ve been responding to this building many times, mostly for debris falling from the building. Debris has fallen from the 34th floor. It’s nerve-wracking for us when we get high winds. I cringe.”
Trump cut most ties with Atlantic City in 2009 aside from a 10% fee for the use of his name on what were then three casinos in the city. That stake was extinguished when Icahn took ownership of the company out of bankruptcy court in February 2016.


fortune--2020-06-13--How Rhode Island Gov. Gina Raimondo is leading through crisis—and leading the nation in coronavirus

How Rhode Island Gov. Gina Raimondo is leading through crisis—and leading the nation in coronavirus testing

It was around 11 p.m. on a Friday night, sometime in the early, nonstop weeks of the worsening global coronavirus pandemic, when Rhode Island Gov. Gina Raimondo realized she needed help. Every infected person in her state was spreading the virus, on average, to four other people—a worrying rate of transmission, particularly in one of the nation’s most densely populated states.
Rhode Island’s 100 or so contact tracers were working furiously to manually trace the contacts of COVID-19 patients, but they couldn’t keep up with the fast-spreading coronavirus. “We would test people, write down all their information, put it in a garbage bag, tie up the garbage bag, bring it to the department of health and manually go through everything,” said Raimondo speaking at a Fortune Most Powerful Women event on Thursday afternoon. “I learned very quickly that speed matters,” she added, noting that she was probably not the only governor dealing with such low-tech tools at that point.
At that late hour, thinking of the need to quickly track down the contacts of every Rhode Islander who tested positive for the novel coronavirus and get them into quarantine, she called some people she knew at Salesforce, the San Francisco–based software company. Could its technology help?
The tech firm’s software is now used by Rhode Island’s state labs, allowing the human contact tracers to move more quickly and accurately, in just one of a number of public-private partnerships that has bolstered Raimondo’s multipronged effort to keep COVID-19 in check in her state. (She also cited a highly impactful partnership with CVS, the state’s homegrown drugstore chain turned health care juggernaut, which opened the first of its high-volume, rapid drive-thru testing facilities in Rhode Island.)
Under Raimondo’s leadership, the state does appear to have turned the tide against COVID-19: The virus’s reproduction rate is down from four in those early days to less than one, and Rhode Island now leads the nation in testing, with 17% of the state’s residents having been screened for COVID-19, compared to 7% nationally, according to the governor.
Raimondo had prioritized testing in the state’s pandemic response from the outset after studying the success of Singapore and South Korea and sees it as key to her strategy to reopen—and keep open—the state’s economy.
“My nightmare is having to close this economy again. I never again want to shut down our economy. It’s way too devastating,” she said. “Testing will allow us to pinpoint the problems and then pinpoint our lockdown to a school, to a company, to a community.”
The state is using a three-part testing strategy that Raimondo calls SOS—symptomatics (testing all symptomatic cases in two days or less), outbreaks (responding within four hours and screening everyone at the site), and surveillance (proactively testing communities).
Raimondo said she has made testing available in every community, concentrating particularly on making sites easily accessible and nonthreatening—walk-up clinics in school parking lots, for example—to the state’s most vulnerable populations. After seeing mass protests in Rhode Island over the police killing of George Floyd—the governor and her family participated in them as well—Raimondo encouraged all protesters to get tested for COVID-19 and made the service free to them.
The governor is also betting this testing infrastructure will allow for the physical reopening of schools in the fall. On Wednesday, she announced Rhode Island children would be back in classrooms come Aug. 31. “It was a big deal to put that flag in the sand,” said Raimondo. “Kids deserve it. Kids need it. Frankly, the economy needs it.” (She simultaneously announced that Rhode Island schoolchildren will never again have a “snow day”—instead, they will have distance learning days.)
She added the state will plan for all scenarios but said she made the decision to reopen schools in order to start the detailed planning process required to do so.
As decisive as her leadership has been, Raimondo, who is in her sixth year as the state’s executive, acknowledged managing the crises of the past few months—a global pandemic, mass unemployment, and civil unrest—hasn’t been easy. “I’m very comfortable making decisions, and making tough decisions, but this has been like nothing else,” she said. “There are no good options. Option A is bad. Option B is really bad, and Option C is pretty bad. Necessarily, you have a lot of critics.”
Raimondo has tried to compensate for that challenge through a combination of empathy and overcommunication. “Not a single human being in this state hasn’t had a lot of really bad days,” she said. “You have to really internalize that.”
She holds regular press conferences and beyond the advice of experts has sought feedback from various professional and community groups to grasp the issues they’re facing. “I have found myself in a position of holding people’s hands and walking them through this process,” she said. “Overcommunicating and two-way dialogue is incredibly helpful even when you don’t have the answer.”
As her state’s economy continues to reopen and families look to a return to school this fall, Raimondo said she is focused on not going back to “normal,” but something better than that. She and her team are looking closely at the disparities in opportunity—in health care, education, housing, and other areas—this crisis has laid bare. “We want to build a better, smarter, stronger, fairer Rhode Island,” she said.


fortune--2020-06-13--Return of the dividend: Dick’s Sporting Goods and Target up dividends on reopening optimism

Dividends are back.
Two major retailers—Dick’s Sporting Goods and Target—reinstated or raised their stocks’ dividends, respectively, as stores start reopening across the U.S.
Target announced Thursday it was raising its quarterly dividend by 3%, from 66 cents to 68 cents a share (the 49th consecutive year the company upped its annual dividend). And Dick’s Sporting Goods, which had suspended its dividend in April, reinstated its dividend, paying investors 31 cents a share.
For those like LPL’s Ryan Detrick, the move by big retailers to up or reinstate dividends sends a loud and clear message to Wall Street: “‘We are strong and when we get to the other side of this we’ll get even stronger and we’ll put our money where our mouth is by upping dividends and showing confidence,'” Detrick tells Fortune. He suggests the move is something of a vote of confidence in the consumer—”They think Main Street will support them, clearly, or they wouldn’t do this,” Detrick says, so “they’re trying to drum up some confidence from Wall Street.”
For one, Dick’s Sporting Goods, which had suspended its dividend and share buyback program, cited “strong early sales” from a bounce-back at its reopened stores, as the company expects to have “nearly 100% of its stores re-opened to the public by June 30” the company said. But the sports retailer was certainly not alone in suspending or cutting dividends during the coronavirus crisis. A slew of companies (many in hard-hit sectors like airlines and retail) suspended dividends earlier this year, including carmaker Ford, Delta Airlines, and Macy’s, as the coronavirus crisis forced companies to scramble to conserve cash.
But now, some companies are striking a more optimistic tune—and reinstating or raising dividends is a sign some retailers, at least, aren’t predicting the worst: “They wouldn’t be doing this if they thought a second wave would shut down the economy again and the consumer wouldn’t be strong coming back,” notes Detrick. “The fact that they are [upping dividends] is a resounding strength for the consumer to really bounce back here.”
While early signs show the economy is beginning to pick up, retail sales in particular are clawing their way back. In April, retail spending dropped a record 16.4%, with clothing stores and sporting goods being among the worst-hit areas as stores across the country shuttered up. Other retailers long on the brink of trouble, like J.C. Penney, filed for Chapter 11 bankruptcy.
Some analysts fear Dick’s Sporting Goods, for one, might not have what it takes as more stores compete online. “Dick’s may be the largest pure sporting goods chain in the U.S., but nearly all items in its inventory are available at other stores and online,” Morningstar’s David Swartz wrote in a note. The acceleration of online sales has been across the industry board, but those like Swartz aren’t convinced the sports giant can hold its own, as other competitors like Amazon and Walmart edge in on its business (some of Dick’s big vendors have relationships with many of the company’s larger competitors, he notes). Plus, “Although e-commerce (16% of last year’s revenue) has been a bright spot (with sales growing to $1.4 billion in 2019 from $500 million in 2013), we think Dick’s large base of about 850 stores limits its flexibility,” he writes.
Target’s online sales, meanwhile, appear ripe for growth: The company reported comparable online sales up 141% in the 1st quarter. Target CEO Brian Cornell said on the company’s earnings call in May that the retailer also saw “a broad surge in sales in more discretionary categories, including apparel,” noting that over the last couple weeks of April, the company had “some of the strongest comparable sales growth we’ve experienced in our history.”
“This is a vicious recession, we know that, but some of the tried and true companies that we’ve realized we really do need are actually doing okay,” LPL’s Detrick suggests.
Target’s stock is down roughly 2% in the past month, while Dick’s Sporting Goods’ stock is up over 38% since mid-May.


fortune--2020-06-13--Why your next bottle of rosé probably won’t be French

It’s been charged that millennials killed wine (right down to the cork). Regardless of how true or not that might be, they certainly haven’t killed rosé.
On the contrary, they’re probably responsible for its revival. And while many naysayers might have thought rosé was a flash in the pan a couple of years ago, it’s not fading to black.
“For a long period in the U.S., rosé wine had an image of being a sweet, fruity wine, which held the variety back from greater acceptance,” says Ryan Lee, IWSR market analyst. “French producers successfully marketed and expanded tastings over a number of years to change the American consumer’s perception of what rosé wine is. This has helped grow interest in the category and greatly increase the number of rosés available. Now that rosé wine is widely known and adored, more producers—especially domestic producers—have their own dry rosés.”
But while France’s Provence region is synonymous with rosé, as U.S. consumers further latch onto the pink-hued wine, they’re learning, branching out, and purchasing rosé wines from other regions. They’re looking not only across the U.S. and toward other New World winemakers but also toward France’s neighbors in Europe, which share similar climates and produce comparable quality wines, but often charge far less per bottle or case.
Rosé was the only varietal to grow at double-digit levels in 2019, compared with 2018, according to the Wine Institute. Courtesy of Studio Cru
These winemakers have good reason to invest in rosé production right now. Dollar sales of rosé wine in the United States have grown year over year annually for the past three years, most recently by 42% in 2019, according to Nielsen.
Volume growth for rosé table wine grew 3.2% in 2019 year over year, compared with an overall decrease of 1% for still wine last year, according to IWSR data. Red wine decreased 0.9% and white wine dropped by 1.9%. Over the past five years (from 2014 through 2019), rosé has demonstrated a 1.7% compound annual growth rate, while total still wine has posted growth of 0.8% CAGR.
The market research firm examined off-premises dollar sales of table rosé before the impacts of COVID-19 accelerated, as sales in the past three months have spiked significantly. But analysts say that is more representative of a shift from the on-premises space (bars and restaurants) to off-premises (retail) rather than total industry overall gains. (Nielsen’s total U.S. off-premises measured channels include grocery stores, drugstores, mass merchandisers, select dollar stores, select warehouse clubs, military commissaries, convenience stores, and liquor stores.)
Domestic (U.S.) table rosé is growing faster than imported table rosé—increasing its share of total rosé sales, but at lower price points. Table rosés from Italy are performing particularly well in the U.S., with nearly 20% year-over-year dollar sales growth, primarily in the $8 to $11 bottle range. Another top performer is New Zealand table rosé, which is experiencing 16% year-over-year dollar sales growth, driven by the $11 to $15 price range.
“French table rosé is still growing in the U.S. off-premises space—particularly at a higher price point—but is losing share,” says Danny Brager, senior vice president of beverage alcohol at Nielsen. French rosé dollar sales share actually declined 1.7% year over year as of February 2020. And total French still wine in the U.S. was down 4.9% in volume last year, according to ISWR.
Off-premises sales for rosé table wine. Courtesy of Nielsen
Nevertheless, France still remains supreme in rosé, ranking No. 1 on the list of the top 10 importers of rosé table wine to the U.S., followed by Italy, New Zealand, Spain, Portugal, Argentina, Chile, Australia, South Africa, and Germany.
While there are French rosés on the market at standard prices, most fall within the premium segment (defined by IWSR as over $10 per bottle).
“French rosé wine is expensive for your average consumer,” Lee notes. According to IWSR research, the average retail price of a bottle of rosé table wine in the U.S. is $8.32. “Domestic (U.S.) producers are bringing to market products at more attractive price points, by comparison. The domestic producer’s additional inventory and supply surplus also allows for new, higher-quality brands to enter the market at lower prices than in years’ past.”
And the sheer number of new rosés for consumers to discover seems endless these days. “Consumers are willing to pay more for a rosé, but it’s the wine profile that keeps them coming back,” says Stephen Brauer, CEO of wine importer Evaton, which specializes in Iberian table wines. “Fortunately, you don’t have to spend a lot of money to enjoy a wonderful rosé.”
Millennials, more than any other demographic, have been a key driver for the rosé category’s success. Global consumption of rosé wine has soared in 17 years, growing 40% between 2002 and 2018, according to Rosé Wines World Tracking. Within the U.S. market, Brauer says millennial consumers are looking for light and easy drinking wines, but they are also looking for a lifestyle. “More than just a summertime drink, rosés offer something special that is affordable and accessible,” he says. “Pink makes every occasion glamorous, regardless of your budget.”
The new Mateus dry rosé, made by the most prominent family-owned Portuguese wine producer, Sogrape. Courtesy of Mateus
Message in a bottle
As consumers continue to look for the next big thing, Portugal is a prime alternative. Before the outbreak of COVID-19, when nonessential travel was not an issue, Americans were flocking to Portugal at staggering numbers. In recent years, Portugal became a top travel destination and has been dubbed the Best European Tourist Destination by the World Travel Awards three years in a row (2017 through 2019). Plus Wine Enthusiast named it one of the 10 Best Wine Travel Destinations in 2019.
“What people find in Portugal are phenomenal wines at an unbelievable value,” Brauer says. “The popularity of rosé in recent years can be attributed to the considerable improvement in overall quality of rosé wines that can now be found on the market and also the wine’s amazing versatility. Around the world, consumers enjoy rosé in cocktails, as an aperitif, or as an accompaniment to a variety of summer meals.”
Evaton, the U.S. arm of Portugal-based wine producer Sogrape Vinhos, is celebrating the relaunch of a dry rosé from Mateus, a leading Portuguese family-owned winery to the northeast of Porto, and one of the top producers within the Sogrape portfolio. The original Mateus rosé was conceived and developed as a sweet and slightly effervescent wine in 1942. As consumer tastes have changed over the years, Mateus adapted—primarily for the U.S. market—with its first dry-style rosé wine. “With Mateus dry rosé, we have adapted our wine style to current consumer tastes and believe we offer a wonderful product that can compete with the top French Provence rosés,” Brauer says.
“One of the most important elements that we look for in all of our rosé wines is drinkability, which combines elegance, delicious flavors, and balance,” says António Braga, enological director at Mateus. “In the specific case of Mateus dry rosé, we are looking for freshness, fruit expression, and integrated acidity, [which] will deliver a wonderful mouthfeel.”
Mateus, the crown jewel of the Sogrape wine portfolio, was born in 1942 as a pink-colored wine in a bottle inspired by the flasks used by soldiers in World War I. Courtesy of Mateus
Mateus is available in over 120 markets, with its top market being its home country of Portugal. And local consumption has been strong, growing from 179,000 cases shipped in 2010 to 275,000 cases in 2019.
But the U.S. is the only market where the Mateus dry rosé is launching. “In the U.S., we took a bold, different approach given the American taste profile and developed a dry-style rosé, that is a lighter pink color and less sweet,” says Raquel Seabra, an executive board member of Sogrape. “We have really focused on bringing our brand into the digital space and have placed a lot of our efforts in building our social channels that we believe capture the true lifestyle essence of Mateus. The pink wine, the iconic packaging, and the overall love of the brand has been perfect in the social media landscape for reaching our core target consumer.”
Seabra also points to the success of multiple form factors among U.S. consumers, especially 187 milliliter bottles (versus an average of 750 milliliters in a standard bottle of table wine). “The bottle size allows consumers the perfect portion for any occasion, and the shape itself is quite unique,” Seabra says, explaining the bottle was designed to reflect the flasks worn by soldiers in World War I.
The Gorgo Bardolino Chiaretto has a bright and intense pink hue, with a delicate bouquet and a zesty finish. Courtesy of Cantina Gorgo
Untapped potential
Americans looking for an Italian summertime drink might be conditioned now to order an Aperol spritz. But in the shadow of the Instagram-approved cocktail, Italy has substantially grown its rosé wine production and sales both within its own market as well as across the European Union and the U.S. in recent years.
Made from red grapes using white-wine-making practices, Chiaretto is a dry and crisp rosé produced in the region surrounding Lake Garda, between Milan and Venice, in northern Italy. (The name Chiaretto derives from the Italian term chiaro, meaning “light” or “pale.”)
Lake Garda is the most important region for rosé in Italy, producing more than 10 million bottles annually on average, and rosé makes up 6% of the Italian wine market. That upward trend is poised to continue in spite of the coronavirus pandemic, as the region shipped 2.6 million bottles of Chiaretto during the first quarter of 2020—half a million more than in the first quarter of 2019.
With a lower ABV, Cantina Gorgo’s Chiaretto rosé is ideal for pairing with a light lunch. Courtesy of Cantina Gorgo
Cantina Gorgo, a wine estate southeast of Lake Garda, has seen its Chiaretto sales shoot up 60% in the past three years, thanks to sales in Italy and abroad. The winery’s primary market is the wider European Union—notably Germany. But Gorgo co-owner and winemaker Roberta Bricolo says the largest and most recent order requests have been from the U.S. (especially New York and Massachusetts), Canada, and the U.K. as supermarket chain Waitrose has added Gorgo Chiaretto wines to all of its locations.
While consumers’ first love might have been Provence rosé, Bricolo says, she thinks there is a lot of untapped potential in the global market. “The key for us to emerge was to introduce the Italian flair and flavor to the rosé scene,” she adds.
Roberta Bricolo, one of the owners of the family-run Cantina Gorgo, established by her father in 1973. Courtesy of Cantina Gorgo
Cavalchina, just down the road from Gorgo, has also seen its rosé sales soar, and Chiaretto is one of its bestsellers. The winery produces 800,000 cases per year, on average, and half of that is exported. The only problem: The winery sells out of its product every year. In 2019 Cavalchina sold all of its rosé within Italy, the wider EU, and the U.S., and it has observed increased demand across all of those markets.
And yet, despite the growing business, the Piona family doesn’t plan on expanding or buying more land beyond its 110 hectares (272 acres), because they want to keep it sustainable as a family business.
“Sincerely, I think that trends may come and go, and we are seeing that also for rosé wine,” says Francesco Piona, whose father, Luciano, was one of the two brothers who established the winery in 1962. Sales figures demonstrate that rosé definitely has near-term staying power, but what is extra special about Chiaretto is that it is one of the few rosés that does age well and is often received better if it is held for a few years. “The market wants a young wine, but you can age it two to three years,” Piona notes.
The Azienda Agricola Cavalchina winery near Lake Garda in northern Italy. Courtesy of Cavalchina
Rosy reputation
The U.S. doesn’t have one particular region dedicated to rosé production, akin to Lake Garda in Italy or France’s Provence. But industry experts point toward California and Oregon as competitive options, from San Luis Obispo up to the Willamette Valley.
Jessica Kogan, chief marketing officer of Cameron Hughes Wine and Vintage Wine Estates in the San Francisco Bay Area, suggests that the U.S. style of rosé is “generally more lush and modern.” And most rosés made here are dry and often lower in alcohol, making them more palatable for summer.
“Most consumers want a dry California rosé, where the only perceived sweetness is coming from the natural red fruit flavors from the grape itself,” says Kogan. “Many of our consumers consider rosé to be a more uncomplicated drinking experience as the wine can be easily paired with a variety of foods or enjoyed by itself.”
“Our rosés typically lean on the fruit-forward side (albeit dry), with summer strawberry and melon flavors, unoaked and balanced acidity. Our Napa rosés are produced from varieties including Zinfandel, Sangiovese, and Malbec,” says Kogan. Courtesy of Cameron Hughes Wine
Kogan says she recently had a customer from Texas tell her he was ordering a case of [Cameron Hughes] rosé as his “summer porch pounder” because it was cool and easy to drink. “Consumers often choose rosé over white wines as it provides the wine drinker a chilled and refreshing experience without the oaked or acidic flavors of California’s leading white wine varieties that many wine drinkers find polarizing,” she explains. Chardonnay, in particular, has a rough reputation for being overly oaky and buttery, whereas a Sauvignon Blanc is oft criticized for being too grassy and vegetal.
Rosé, however, feels a bit heartier than a white wine, but not as heavy as a red on a warm day. “A rosé is usually understood before its first sip—the drinker can anticipate its subtle red fruit, its crisp finish, and its often smooth mouthfeel,” Kogan says.
But rosé—especially in the U.S.—had to overcome a poor reputation of its own to get where it is now.
“For quite some time, dating back to the 1970s, rosé was considered inferior wine—think boxed wine, often sweet,” Kogan says. “Up until five-ish years ago, rosé was definitely a hard sell through the direct-to-consumer channel and not typically included in wine club shipments. Improved education and simply getting it in customers’ hands has been key.”


fortune--2020-06-14--A Q&A with the U.K. father and son duo focusing on children during the coronavirus pandemic

As the U.K. prepared to go into nationwide lockdown this spring, Raj Bhopal, 67, an emeritus professor of public health at the University of Edinburgh, decided to come out of retirement and go back to work.
His 35-year-old son Sunil, a pediatric public health doctor, chair of the International Child Health Group, and an academic at the University of Newcastle and the London School of Hygiene and Tropical Medicine, also saw his job shift—he was heading back into hospitals to prepare for a wave of patients infected with COVID-19.
The U.K.’s pandemic hasn’t gone like they expected. In the months since, father and son have become academic collaborators, publishing a piece on mortality rates for children as a result of the virus. They’ve also both become outspoken critics on the lack of detail in the U.K.’s lockdown and reopening strategy, arguing that it doesn’t acknowledge the impact on some of society’s most vulnerable members: children, migrants, and the homeless.
They’re now calling for a more “honest” conversation about the risks and tradeoffs of emerging from lockdown.
This interview has been edited for brevity and clarity.
Fortune: What have the past several months been like for you?
Raj: I’ve been retired nearly two years. And when this happened, I thought, well, this is my field. I know a lot about epidemiology, public health, infections. So I couldn’t just keep my feet up. I usually just work one leisurely day a week, and I decided to put myself back to work.
So I’ve been pretty busy. And it’s been very stressful because it’s not just the work, it’s following the news, and the mismatch between what I would expect to be happening.
I’ve been in public health since 1983. This is my second pandemic. I was there right at the beginning of the AIDS pandemic. I remember the feelings then, and now to come back to it a second time around and watching what’s going on in the world and the sense of great unease as to how badly it’s being handled. It’s been, I think for myself, I would have to say it is very stressful. And yet I recognize that I’m one of the most privileged people around.
The nearly empty Royal Mile in Edinburgh during the coronavirus pandemic on April 17, 2020, after the U.K. went into lockdown in late March.
Raj, what was the moment when you decided, “I’ve got to start working again”?
Raj: About 10 days before the lockdown was announced in Scotland, I could see things were beginning to move. Because I’m a chess player, and our chess club locked down about 10 days before the Scottish government announced a lockdown. And the golf club also started to communicate with each other. And I realized the public was way ahead of our politicians.
[The chess club] knew I’m a public health academic doctor. So they were asking me questions, and I was answering the questions according to the official guidance I was reading in my journals. And very shortly I realized that what I was reading was wrong, and that the public was ahead of me. And then I thought: I need to get on top of this. I can’t just rely upon what I’m hearing on the news. I can’t just rely upon the summaries in the journals like the BMJ. I have to understand this disease for myself. Probably around about the 15th of March, I realized that something terrible was about to happen.
Sunil: As the pandemic transitioned here in the U.K., I was asked to come out of my academic role and out of my community-facing role where I normally see children at home, and purely work in the accident and emergency department. It was a big change for me professionally. We were are all really scared because we didn’t know what was going to happen. We thought there was a pretty reasonable possibility that our children’s accident and emergency [units] were going to be full of sick kids. We were really, really worried about it. And we can talk about how that panned out, but essentially we’ve not seen that. We’ve not seen A&Es full of really, really sick children. We’ve seen actually children not being brought to hospital, which is its own concern. We’re still trying to unpick the reasons behind that, but it’s been quite a strange period for me as a children’s doctor.
Sunil, particularly for children, as we were going into the lockdown in the U.K., what were your concerns about the other health impacts this might have?
Sunil: It was quickly apparent to those of us in the children’s sector that it was going to exacerbate problems that already existed for children—particularly children at risk of abuse and neglect, on that end of the spectrum, but actually for all children. And we know that these periods, whether it’s early life or adolescence, whatever it is, that whole period of childhood is so crucial to children’s lifelong well-being. We really don’t have the luxury of messing it up. What was worrying to me and to others was that we weren’t hearing anything about it particularly from government. I watched those political briefings here in the U.K. every day, looking for some acknowledgement of what was happening to children. Putting children away, hiding them away at home, it’s different to keeping adults away. I don’t think that was acknowledged. And I really struggled to find a sense that the government were thinking deeply and clearly about this.
Children maintain social distancing measures while waiting with parents to enter Earlham Primary School, which is part of the Eko Trust, on June 10, 2020, in London. As part of COVID-19 lockdown measures, Earlham is teaching smaller “bubbles” of students as a way to maintain social distancing.
Raj, when did you start to see that this might have an outsize impact on minority communities in the U.K.?
Raj: I taught my undergraduate and postgraduate students for 35 years in public health. We always start with the most underprivileged people first. If we can solve the problem for them, we can solve it for the whole of society, but if we solve it for the privileged people, we don’t solve it for the whole society. And my first concern was about the beggars on the streets. I had noticed a lot of beggars in the streets during the lockdown, and I wrote to our public health agency to say that we need to do something about getting the beggars off the streets, because they’re in danger themselves and also to other people. So where are they going to go? In fact, I said to a beggar, “You shouldn’t be on the streets.” And he said to me, “You tell that to our government.”
And then I thought to myself: Who’s going to be the greatest risk is going to be the undocumented migrants because they have no recourse to public funds. People don’t know where they are. They tend to work in very difficult circumstances, usually in the restaurant trade, caring for people. No one will notice or think about them. So those are the first two groups.
Then of course, I knew that ethnic large groups do tend to have varying problems. We needed to study them. I wasn’t quite sure what was going to happen, but I knew that with this particular virus, and most viruses, most infections, they affect people who live in overcrowded households, overcrowded work settings, large families.
And I also was worrying about places of worship. I know for my own community—I’m a Sikh—I go to the Gurdwara. It’s busy. The men shake every single person’s hand. That’s the culture. And I also have been to mosques, and I know what it’s like to go to a church on a Sunday. So I was worrying about these sorts of places.
I wanted to get your thoughts on the recent protests.
Sunil: I think what we have to recognize is that there are all sorts of causes of inequality and hardship, and COVID is one of those. And it’s brought such huge amounts of difficulty to our country, to the globe. But it’s not the only one. And racism is another one, and it’s a really important one. And it’s really important that we continue to fight on all of these different fronts to keep things moving.
That’s part of what my argument is about children—that in the super important focus on COVID, we can’t just forget all the other things that are going on. It’s about considering things in the whole. And one of the things I learned from my dad growing up—as a child and through my career—is that you approach all problems taking a lens that is all encompassing, and that’s a real public health approach. And it’s really, really difficult to do.
Raj: [On the protests], I think the people have spoken. They have said to us very clearly, some things matter even more than health. Justice. Injustice. Racism. The way we organize our societies. These things matter more than our health. And indeed, health is not the most important thing. Even as a public health doctor, I have to admit health is not the most important thing.
[For example], I’ve been talking to my family and saying that if I was given the choice between being unemployed or getting COVID-19, and I was under 50, I’ll have COVID-19 any day, rather than being made unemployed. If I’m over 50 I don’t want to get COVID-19—I take the risk of being unemployed.
A protester holding a placard during a Black Lives Matter demonstration in London. Rahman Hassani/SOPA Images—LightRocket via Getty Images
What do you think of the U.K. government’s reopening strategy?
Sunil: Society has to decide: What does it value? That we get the economy moving is incredibly important. So they’re going to make decisions that might seem a little bit strange to people who really are desperate to see a particular person in their life, their uncle, aunt, grandparents, whatever, you know. You see this on social media all the time: Why is the Premier League football opening, but I still can’t see so-and-so?
I think that government should be really explicit about why it’s choosing these things and allow and encourage conversations about what’s important to people. Children get missed. Young people get missed because they don’t have a voice. They struggled to raise it themselves. They’re not thinking about these groups.
I think that the crucial thing is that a variety of voices are heard—those who are voiceless or powerless. Some of those groups we’ve talked about today. The homeless, people from minority ethnic groups, children, you can go on.
Raj: I think what we all have to remember is that health and wealth are very closely intertwined. If you’re wealthy, you’re definitely healthy. If you’re poor, your health is much worse. Health and unemployment are closely interrelated.
So getting that balance right is extremely difficult. I’m so glad I’m not a politician. Easier to be a public health doctor and a public health academic at these times because our job is to supply the information or maybe supply the analysis that will help people make the decisions. Making the decisions is very difficult.
In my view, we should have acted in January. Even February was too late. Acting in March was definitely too late. But that’s okay, that’s all history now. We have to think about the future, not the past, and the retrospectoscope, as I like to call it, it’s a wonderful instrument—but it was never invented. So it’s very easy to look back with hindsight and say, We should have done that. Maybe we can learn the lessons for the future.
We’ve got to think about what do we do now. And the answer is we can’t stay in lockdown much longer, but I would like a more honest debate about the pros and cons of various things. I’d like to see the evidence. And it’s very hard to get the evidence from government. [The government’s] not intending to publish its evidence.
And I think there should be a more public debate about what’s going on. Some people will prefer to take the risk; some people prefer to take no risks. We should be giving people more of an individual choice on how to act.
Of course, we have to work collectively as a society to minimize the risk in society, but we can’t be in lockdown for a year. We can’t be in lockdown for five years. Because the idea that this is all going to go away is not right. We’re not going to get a very effective treatment that’s going to solve the problem. We’re all hoping for a vaccine, but the experience of vaccines for infections of this kind is not good. We have to be hopeful. We have to be optimistic. But we also have to be realistic.


fortune--2020-06-14--Big investors like Bitcoin for the wrong reason

Why every company needs to ‘ reimagine ’ their workplace , according to PwC ’ s U.S. CEO

Institutional investors were warming to Bitcoin just as the pandemic struck. Now the main reason they found cryptocurrencies appealing no longer appears justified.
Nearly four out of five institutional investors said they find something to like about digital assets such as Bitcoin, according to the results of a new survey by brokerage firm Fidelity. The foremost reason, as reported by 36% of respondents, was that they believed cryptocurrencies were “uncorrelated to other assets,” like stocks.
But the economic devastation of the recent coronavirus pandemic has seemingly shattered that investment thesis. The wave of destruction has exposed entanglements between digital currencies and the stock market that undermine the very reason investors said they were most interested.
A secret romance
In mid-March the markets crashed. The S&P 500, a common stock market measure, plummeted 14% between March 10 to 12, as did Bitcoin, which lost about 38% of its market value on March 12 alone.
The selloff revealed that stock and cryptocurrency values are at least partly linked, rather than being independent of one another. In April, a study by Binance, the world’s largest cryptocurrency exchange, found the correlation of Bitcoin’s price to the performance of the S&P 500 was “relatively high” at 57% for the first quarter. The correlation was even higher, 64%, when comparing Bitcoin to the Russell 2000, another stock market index that features smaller-cap stocks.
While Bitcoin boosters may have considered the unexpected ties between Bitcoin and the stock market to be a fluke—the relationship “remains very unlikely to persist” in the months ahead, the Binance report’s author wagered—recent market movements suggest otherwise.
Since April, Bitcoin and the stock market have moved closer in lockstep. As the following chart from Coin Metrics, a cryptocurrency data firm, shows, the correlation has trended upward from “zero” in March, when the Fidelity study ended, to more than 0.2 last month. (On the vertical axis: “0” means uncorrelated, “1” means correlated.)
Correlation between Bitcoin and the S&P 500 has trended higher in recent months. (Screenshot of Coin Metrics chart)
The correlation may be getting stronger. On Thursday, after Fed chair Jerome Powell gave his dour assessment of the global economic outlook, investors reacted negatively, causing the stock market’s biggest selloff since March. The S&P 500 dropped 5.7%, and Bitcoin—which had gained 30% for the year, despite its March turmoil—dipped 6.4% to $9,100.
The coincidences between Bitcoin and the stock market’s ups and downs reveal a hard truth.
The anti-Midas touch
As investment firms—which hold great sway in traditional asset markets—have extended their influence to digital currencies, their gyrations now reverberate beyond the stock market and into cryptoland.
Established institutional investors tend to hold larger positions in the stock market. Sometimes, when volatility strikes, they’re hit with margin calls, requirements by brokerages for more cash deposits to cover possible losses.
In practice, this means institutional investors may be forced quickly to liquidate positions elsewhere. It can lead to Bitcoin, among other holdings, getting jettisoned.
These circumstances are pushing the two formerly disparate realms more in sync. It’s a self-defeating cycle. The very reason professional investors have taken a liking to Bitcoin—a supposed lack of correlation to other assets, like stocks—is justifying its addition to more portfolios, thereby reducing its independence from other assets.
The consequence of these strengthened ties is paradoxical. It’s as though collectors, valuing the worth of treasures by their shininess, ruined relics simply through the frequency of their touching them, smudging surfaces and causing the objects to lose their luster.
Ria Bhutoria, director of research at Fidelity Digital Assets, Fidelity’s two-year-old cryptocurrency-oriented business, says this greater correlation between digital assets and the stock market could be temporary. “There are brief periods of correlation during turbulence and uncertainty,” she says. But over the long run, she adds, there’s reason to believe, based on past experience, that the correlation could “end up trending back down over time.”
Only time will tell how investors will treat Bitcoin in the event that economic conditions worsen. The Fidelity team is watching closely what may happen, Bhutoria says, in a “prolonged risk off period,” referring to a situation in which investors off-load riskier assets, like high-yield “junk” bonds, and head for assets considered safer, like U.S. Treasuries.
That is, will investors treat Bitcoin as a life jacket, a refuge to preserve people’s wealth, or will they treat it as flotsam?
All that glitters is not gold
The two other top reasons institutional investors said they liked digital assets were purely speculative.
About a third of respondents to the Fidelity survey, which included interviews with 800 U.S. and European institutional investors between November and March, said they liked digital assets such as Bitcoin because they “consider it an innovative technology play.” Another third, 33%, said they liked it because it had “high potential upside.”
These traits—a fancy tech angle and the possibility of a get-rich-quick opportunity—represent the antithesis of the philosophy of the world’s most famous value investors. Warren Buffett, chief among them, has likened Bitcoin to “rat poison squared.”
An affinity for Bitcoin is perhaps more suited to the mentality of high-risk, venture capital investing. But since central banks around the world have adopted near-zero—and in some cases negative—interest rates, many investors find themselves in search of yield elsewhere, including in riskier assets, such as cryptocurrencies.
Some investors worry that a Fed bent on printing money to stave off financial calamity could result in higher inflation down the line. A portion of these investors believe Bitcoin could serve as “digital gold,” like the real-world yellow stuff, a possible hedge against inflation.
Yet, ironically, one asset to which so-called digital gold appeared least correlated in the first quarter was…gold. Another chart provided by Coin Metrics reveals the increasingly untethered relationship between Bitcoin and gold in recent months.
Correlation between Bitcoin and gold has decreased in recent months. (Screenshot of Coin Metrics chart)
While the circumstances of the market today may be ephemeral and anomalous, they call into question beliefs held by many professional investors and cryptocurrency believers. At least today, people’s most common assumptions appear to jar against reality.
As the dust kicked up in the wreckage of the pandemic settles, investors may have to rethink what they find appealing about Bitcoin.