fortune--2020-01-21--China braces for spread of deadly new virus as millions travel for Lunar New Year

The cold weather; congested planes and trains; distant relatives reuniting to imbibe and embrace—holidays are a hotbed for spreading germs, and this Chinese New Year could be much worse than most.
For the past five weeks China has been dealing with the outbreak of a novel respiratory infection—a brand new strain of coronavirus, which is a family of disease that includes the common cold and the deadly Severe Acute Respiratory Syndrome (SARS).
Over 200 patients have been infected across five Chinese provinces; carriers have been detected in Thailand, Japan and South Korea; airports are implementing new screening measures; and the World Health Organization (WHO) has called an emergency meeting.
On Monday, President Xi Jinping demanded that the flu-like virus be “resolutely contained,” but with millions of Chinese planning to travel during this week’s national holiday to celebrate the lunar new year, containment is going to become a much bigger issue.
A novel virus
It started in Wuhan, the densely populated capital of China’s central Hubei province, in December last year. Patients at a local hospital presented flu-like symptoms, which doctors couldn’t pin the exact cause of. That’s because doctors had never encountered the disease before. On Dec. 31, Wuhan health authorities informed the World Health Organization (WHO) those patients were suffering from a new strain of a common virus, the coronavirus, and set about containing the disease.
A seafood market, deemed to be ground zero for the viral outbreak, was shuttered and sprayed for decontamination Jan. 1. As a number of patients had visited the market before falling ill, the prevailing theory was that the coronavirus made the leap from animal to human, much in the way SARS traces its origin to civet cats.
By Jan. 14, officials had reported a total of 41 cases of infection from the novel coronavirus, all of them within Wuhan—but individuals carrying the disease had turned up in Japan and Thailand, having flown from Wuhan. Other regions have begun preparing for more carriers to arrive
The U.S. Center for Disease Control (CDC) imposed additional health screening measures at three U.S. airports for passengers arriving from Wuhan, and deployed 100 additional staff to facilitate the extra checks. The three airports—New York’s JFK, Los Angeles’s LAX and San Francisco’s SFO—receive the majority of arrivals from Wuhan, the CDC said.
In Hong Kong, a city that has vivid memories of the SARS crisis in 2002, which infected 1,750 people locally and killed 286, the health authority implemented additional screening for tourists from Hubei province on Monday. There are already at least 107 suspected cases of the new virus in the city, but zero have been confirmed.
“There may be the first confirmed case in Hong Kong at any minute, so we must not let our guard down, and have to be well prepared with the most adequate response in place,” Hong Kong health secretary Sophia Chan said.
Tallying up
As patients began appearing overseas, savvy observers questioned how the disease had managed to spread abroad but had yet to appear in any other Chinese cities. Dr Jeremy Farrar, director of global health research trust Wellcome, said, “Wuhan is a major hub and with travel being a huge part of the fast approaching Chinese New Year, the concern level must remain high. There is more to come from this outbreak.”
Unfortunately, China has a track record of hushing up epidemics. In 2003, when SARS was sweeping the nation, authorities deliberately quashed reports that a mysterious new virus was gripping the country. It wasn’t until a whistle blower, Dr Jiang Yanyong, exposed the true situation to international press that Beijing came clean about the outbreak.
A year later, Jiang thought to try his luck a second time and wrote a letter to the government, pressuring Beijing to apologize for the 1989 Tiananmen Square massacre. The good doctor was arrested shortly after.
Beijing has since reformed its epidemic control practices and was quick to alert the WHO when the new coronavirus was discovered. However, on Jan. 17 a team of researchers at Imperial College London released a report casting serious doubt over China’s claim that only 41 people had contracted the disease.
“It is likely that the Wuhan outbreak of a novel coronavirus has caused substantially more cases of moderate or severe respiratory illness than currently reported,” the authors wrote, arguing that given typical transmission rates and the volume of passengers in and out of Wuhan international airport alone, the number would more likely be at 1,723.
Days later, authorities in Wuhan announced 139 new cases of the virus, more than tripling the total infected count to 180. By the end of Monday, there were a total of 258 cases in Wuhan. Meanwhile, reported cases appeared in Beijing, Zhejiang, Shenzhen and Guangdong province, while the death count has crept to six.
In the air
Dr Josie Golding, epidemics lead at Wellcome, thinks the uptick in reported cases is normal, saying that it sounds like a virus that is growing.
“I believe China has responded well to the situation. Beijing has communicated well with the WHO on this outbreak and have openly shared the sequence of the virus, which has allowed laboratories around the world to get prepared and develop the test required to detect this,” Golding says.
The situation is developing fast. On Monday Zhong Nanshan, the man leading the team set up by China’s National Health Commission to investigate the new virus, confirmed that the disease can be transmitted between humans. Previously, investigators maintained the virus was transmitted only from animals to humans. According to Zhong, in one instance 14 medical staff were infected by just one patient.
The WHO has scheduled an emergency meeting for Wednesday to discuss how best to limit the virus’ spread, but markets are already placing bets. Shares of China-listed drug makers and face mask manufacturers surged Monday, with many rising by the daily 10% max, while Hong Kong-listed Air China and China Eastern Airlines fell 7%. When SARS struck in 2003, shares in Cathay Pacific tumbled nearly 30%.
“We’re in a much better situation now than we were with SARS,” Golding says, “We’ve learned a lot of lessons. The biggest issue now is not so much on China but it’s for the rest of the world to make sure they’re adequately prepared for these cases to come into their hospitals.”
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fortune--2020-01-22--Why the global markets seem immune to the coronavirus contagion

How this ‘ Two Popes ’ and ‘ It ’ producer is improving diversity in Hollywood while others just pay @ @

This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.
Welcome back to Bull Sheet.
I’m Bernhard Warner, Fortune‘s global editor of finance and investing.
Coronavirus. Impeachment. Boeing. Late last night I figured this trifecta of bleh news would take the markets down a notch again today. But here we are with Asian stocks rebounding nicely, Europe getting a lift, and the U.S. markets poised to open in positive territory. The Dow and S&P 500 futures are, as I write, up about three-tenths of a percent.
Was I being too alarmist? I’m not so sure.
I remember all too well the SARS outbreak, which roiled the markets in early 2003. I followed it daily from my perch on the equities desk at Reuters in London, my trusty Nokia 3210 somewhere there in the clutter.
For a quick recap: the SARS outbreak killed nearly 800 people. The psychological toll was acute.
In Asia, people dramatically altered their daily routines to avoid contracting the virus. They stayed away from public transportation, restaurants, cinemas, airplanes. Its impact on the markets and the billions it cost the global economy has been much studied in the years since. (Hat tip to my former colleagues at Reuters for this snapshot of how pandemics in the developed world mess with the global economy—and the markets.)
Today, on the eve of the Chinese New Year, humanity’s biggest occasion to travel, the coronavirus is spreading too. But we appear to be better informed this time, which could explain the so-far-so-good market reaction.
The SARS outbreak in 2003 was so unnerving because the Chinese government was so closed-lipped about the impact, and its plan to contain it. And this all predated Twitter and WeChat, so the further you were from the contagion, the more you were in the dark. In the absence of all else, the markets themselves served as a vital communications link.
Which brings me to today’s chart. I called up the market data folks at Refinitiv in London to get the MSCI China historical numbers for that period. It was more of a rollercoaster than I remember.
The MSCI China fell 11.5% in the wake of the Chinese government’s bungled communications plan back then. On and off over 10 weeks, until the end of April, the markets fell, plateaued and fell again. They eventually recovered, and then climbed, climbed, climbed. The points-swings were pretty crazy on the MSCI China—first down big, then up even bigger (39%). Eventually.
***
SARS outbreak, by the numbers
This chart is not for the faint of heart. You’d hope some version of it is tacked on the wall of a Chinese ministry as a cautionary reminder of how not to manage a contagious outbreak.
Let’s hope 2020 will be a different story.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
Today's Reads
Blow-off top. One of the crazy things about living though a prolonged bull market is you forget (or learn for the first time) the more bearish vocabulary of markets-speak. One such term is "blow-off top." In a great, chart-filled read, Erik Sherman explains what it is and why we should, gulp, plan ahead before the next one hits.
Venture this. The New Yorker's Nathan Heller does a timely deep dive into the history of venture capitalism (he looks at private equity too), asking is it really all worth the risk? In the aftermath of the WeWork debacle, it's as good a time as any to look at the track record of VCs' big bets over the years.
Cue the eye-roll. Speaking of venture capital. Fortune's Jeremy Kahn spoke to Ophelia Brown yesterday on the occasion of her Blossom Capital raising a $185 million investment pool aimed at Europe's early stage startups. As Jeremy points out, "the new fund is further evidence of the influx of U.S. money into European venture funds and European startups." Brown also gamely answers the one question she truly loathes.
Market Candy
167 million. That's how many subscribers Netflix has around the world, it revealed yesterday, sending shares higher in after-market trading. The growth is coming from overseas. An additional 8.3 million non-U.S. subscribers signed up, above the 7 million the company was expecting. Look for shares to pop this morning.


fortune--2020-01-22--The food scene in South Philly is more than just cheesesteaks

In M. Night Shyamalan’s Apple TV+ horror series Servant, Dorothy Turner, a Philadelphia newscaster on the precipice of a psychotic break, sloughs off a long day of shooting like a copperhead shedding its skin. “Every time I visit South Philly, I realize how blessed we are,” she sighs in her stately brownstone in Rittenhouse Square, the Philly equivalent of the Upper East Side.
There are plenty of people who treat South Philly like the Tijuana of the Delaware Valley—catch an Eagles game and cheesesteak then get the hell out before your BMW gets clipped—but in reality, Dorothy’s dig is staler than a week-old Wawa pretzel. Her husband, Sean, a chef, should know South Philly is full of blessings, especially when it comes to food.
Arancini with ragù and peas, served family style (naturally) at Palizzi Social Club. Mangia! Photograph by William Mebane for Fortune
In a more authentic script, he might bring up Kalaya, where Nok Suntaranon, a former Thai Airways flight attendant, has hooked the city on her sapphire butterfly pea dumplings and stir-fried cabbage splashed with fish sauce, or Angelo’s Pizzeria, where Danny DiGiampietro, a former bread deliveryman, deals chicken cutlet epiphanies on crusty, house-baked rolls. Sean might mention both restaurants opened last year on the same block of South 9th Street, the area’s spiritual center, and that while they could not be more different in terms of the food they serve, they share an independent, doing-it-my-way, South Philly swagger. But because Sean is busy with the eerie nanny who’s turned a doll into a human infant, this South Philly native will step up.
Palizzi Social Club is one of the last member-only Italian social clubs to survive in South Philly. Photograph by William Mebane for Fortune
I grew up around the corner from Rocky’s house—the shooting location from the 1979 sequel. For the first half of my life, South Philly’s culinary reputation matched that of the fictional boxer: blue-collar, gutsy, Italian American. I’ve spent the second half advocating for the preservation of that culture, as well as celebrating the new arrivals who have remade South Philly into one of the most rich and compelling areas to dine in the city. The cookbooks I cowrote with two South Philly restaurants this year, Dinner at the Club and Laurel, represent each side of this coin.
The social club is home to family-style courses, cocktails and good ol’ conversation. Photograph by William Mebane for Fortune
Both establishments are in the East Passyunk neighborhood, a parcel typified by two- and three-story brick rowhomes, modest Catholic churches that still say Mass in Italian (for the area’s OG immigrants) and Spanish (for the new ones), and South Philly’s historic commercial corridor, East Passyunk Avenue, where you can buy imported scamorza cheese and status succulents in a single shopping trip. Laurel is right on the Avenue, a relaxed salon where Nicholas Elmi expresses his vision of modern Mid-Atlantic cooking in six- and nine-course tastings. His dishes manage to be both cerebral and fun: nutty acorn-flour blini crowned with bowfin caviar and smoked maple; whole fish with hidden ripples of mushroom duxelle; a teepee of malted meringue sheltering yuzu custard. Elmi is a Patriots fan originally from New Hampshire, but Passyunk loves the Top Chef winner just the same. Whether you’re from New England or New Delhi, South Philly has always been a place where outsiders can make a new home.
Laurel’s Thalita Costa holds frozen foie gras tarts with hibiscus, black raspberry and elderberry. Photograph by William Mebane for Fortune
Joey Baldino, meanwhile, grew up around the corner from Palizzi Social Club, one of the last members-only social clubs to survive the South Philly-to-South Jersey white flight pipeline of the 1970s, ‘80s, and ‘90s. A reverse of this exodus in the last 20 years has fueled East Passyunk’s revival and Palizzi’s resurrection. Baldino took over the cozy, century-old hangout at the request of his dying uncle in 2016, changed the charter to welcome people of all backgrounds (not just Italians), and began serving his family recipes: crabs and spaghetti, stromboli, escarole and beans, and more. Palizzi’s rarely released memberships go for a democratic $20 and are so coveted, Baldino had to snuff out an eBay black market last year.
Chickory glazed Bucks County Duck with caramelized skirret and fermented currants at Laurel. Photograph by William Mebane for Fortune
Around the corner from Palizzi, a chain-link gate in the middle of the street leads into the concrete courtyard of Mighty Bread Co., Chris DiPiazza’s year-old alleyway bakery. On weekends, the neighborhood pit-mixes patiently wait for their owners to drop crumbs of yeasted jam donuts and dark sourdough toast smothered in mushrooms. The lines also stretch out the door at South Philly Barbacoa a few blocks north, where Cristina Martinez turns Pennsylvania-grown, Mexican heirloom corn into the most hypnotically fragrant tortillas. They cradle cleaver-whacked hunks of slow-cooked lamb that have earned Martinez, an outspoken undocumented person, a James Beard nomination and dedicated episode of Netflix’s Chef’s Table. Meanwhile over in Pennsport, South Philly’s historically Irish American enclave, the Taipa family from Morelos, Mexico, runs the bijou Crème Brûlée Bistro & Café. M. Night, come find me there any cold winter evening. We can discuss my consulting fee over onion soup and pistachio éclairs.
A version of this article appears in the February 2020 issue of Fortune with the headline “Beyond the Cheesesteak.”
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fortune--2020-01-22--How watches created for military and commercial divers became luxury timepieces

After World War II, men’s daily fashion began to evolve toward the casual look we enjoy today. Denim jeans, leather jackets, and rugged boots all derive from either military garb or workwear that, before the 1960s, men rarely sported outside the workplace. Teenagers shook off Dad’s suit, looking to Marlon Brando in The Wild One (1953) and James Dean in Rebel Without a Cause (1955) for an edgier dress code. But what young men wore on their wrists remained dainty (by modern standards): dress watches with cases barely larger than a quarter, made of gold-capped steel and offering little to no water resistance.
Then, in 1964, the James Bond thriller Goldfinger featured Sean Connery sporting a Rolex Submariner Ref. 6538 under the cuff of a white tuxedo jacket, a striking combo that perfectly captured the character’s elegance and ruggedness in just a few frames of celluloid.
The Submariner had been introduced a decade earlier. Its oversize, 38mm waterproof “Oyster” case was a radical departure from contemporary wristwatches. Legendary scuba pioneer Jacques Cousteau and the British Ministry of Defence were early adopters, and though constantly revised and improved—the case has grown to 40mm and features a scratch-resistant ceramic bezel—the Submariner design remains relatively unchanged.
Doxa Sub 300T Divingstar Poseidon, 42mm limited edition, available at analogshift.com. Similar models from $1,890. Photograph by Keirnan Monaghan & Theo Vamvounakis
But while the Submariner may be the archetype of the dive watch, it wasn’t the genesis. The Blancpain Fifty Fathoms came first, in 1953, as a response to a military contract from the French navy’s elite combat swimmers. Blancpain took an existing watch and added the required rotating timing bezel, a water-resistant case with a screw-down crown, and an automatic-winding movement. After being dropped from the brand’s catalog in the 1990s, the Fifty Fathoms was reissued in 2007, and the line now spans more than 20 unique models.
Both the Fifty Fathoms and the Submariner were endlessly imitated, leaving meaningful deviation from these foundational designs until the late 1960s, when Doxa—a company that was better known for dress watches—issued the first ground-up dive-watch design aimed at professional divers. The Doxa SUB 300 included a funky (and very comfortable) cushion case, a versatile beads-of-rice bracelet, a clever bezel that included the U.S. Navy’s dive time scale, a category-leading depth rating, and unabashedly bright colors. Cousteau and the red-beanied crew of his Calypso research vessel were fans, and the Doxa SUB quickly became a totem of 1970s scuba culture.
Blancpain Fifty Fathoms, Ref. 5015 1130 52A, 45mm case, steel on sail canvas strap, $14,500. Photograph by Keirnan Monaghan & Theo Vamvounakis
By the 1980s, as the well-heeled began to flaunt their wealth, dive watches, especially Rolex models in gold, had become status symbols among preppies killing time at yacht and golf clubs. In the 1990s, massive dive watches with cases the diameter of jar lids were as prevalent in boardrooms as they were on the wrists of action heroes like Sylvester Stallone. Mercifully, modern tastes have shrunk dive watches to more vintage diameters.
That these tools of the 20th century became high-fashion items of the 21st is a curious pop culture phenomenon—dive watches having long outlived their original purpose as diving tools. All modern scuba divers rely on digital computers, leaving the mechanical dive watch to persist solely—and quite successfully—as a trusted staple in our wardrobes today.
A version of this article appears in the February 2020 issue of Fortune with the headline “The Ascent of Dive Watches.”
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fortune--2020-01-22--China is guzzling crude oil. Where is it all coming from?

Over the last few years, China has surged past the U.S. to become the world’s largest importer of foreign oil. A hefty portion of that supply originates from Saudi Arabia, Iraq, and other Middle East exporters. Research firm Wood Mackenzie estimates that China will import 9.1 million barrels per day of crude in 2020, with some 3.5 million barrels, or 38%, of that total coming from the Middle East. (Russia and Africa, the next biggest suppliers to the globe’s second-biggest economy, are each expected to send 1.8 million barrels per day to China in 2020.) But China’s neighbors are even more dependent on the region: WoodMac projects that 57% of the total daily oil imports to Asia in 2020 will originate from the Middle East.


fortune--2020-01-22--5G hits the mainstream in 2020—will it live up to the hype?

After years of hype, most Americans will finally be able to use new, superfast 5G mobile networks in 2020—at least if they buy a new phone.
Last year, the four major wireless carriers—AT&T, Verizon, T-Mobile, and Sprint—started introducing 5G, but most of them added service only in parts of a few dozen cities. And even then, some of those connections were barely faster than existing 4G LTE networks.
This year, the push for 5G will accelerate. AT&T and Verizon plan to extend their 5G service nearly nationwide. T-Mobile, which already has broad coverage but with limited speeds, hopes to add faster connections. Meanwhile, Sprint’s fate is tied up in the legal fight over its proposed merger with T-Mobile. If the deal is blocked, Sprint may lack the money to expand its limited 5G footprint.
In general, the upgrades by the carriers should, for example, allow for downloading an entire 4K movie in less than a minute. They’ll also open the door to improved technology, such as virtual reality goggles that rely on wireless networks for their whizbang imagery instead of goggles that require users to strap on bulky portable computers. Additionally, businesses hope to benefit by tapping 5G to connect more sensors that measure everything from moisture on crops to traffic on roads. And 5G could help autonomous vehicles and factory robots send data back and forth so they can operate.
However, this wireless nirvana is still a few years away. Mobile carriers must add hundreds of thousands of new cellular sites. AT&T, for example, built more cell sites in 2019 than in the previous five years combined. It plans to install even more this year. “Carriers are going to make or break their reputations based on how robust their networks are,” says Chris Sambar, executive vice president of AT&T’s technology operations.
Then there’s the problem of 5G-compatible phones. So far, consumers have been able to buy only a few very expensive models, like Samsung’s $1,300 Galaxy S10 5G. More phones should be coming later this year. Still, the wireless industry’s hope that millions of people will buy new devices so they can get 5G may be too optimistic.
For one thing, many new technologies that are supposed to make 5G indispensable, including those wireless virtual reality goggles, aren’t available yet. Without a killer app, mobile carriers will have a hard time convincing consumers that 5G is worthwhile. Says IDC analyst Jason Leigh, “The simple fact of the matter is, for many, 4G LTE works perfectly fine.”
A version of this article appears in the February 2020 issue of Fortune with the headline “Getting 5G Up to Speed.”
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fortune--2020-01-22--Mysterious GPS outages are wracking the shipping industry

The call came in by radio one evening last September, at around 9 p.m. On the line was the master of a tanker, approaching the end of a monthlong journey from the Port of South Louisiana and carrying more than 5,000 metric tons of ethanol. The message was urgent: The ship’s GPS signal had suddenly disappeared—leaving the crew to navigate Cyprus’s shoreline in the dark.
On the other end of the line was the pilots’ office at the Vasiliko oil terminal, whose staff oversees shipping traffic at Vasiliko’s harbor on Cyprus’s arid, palm-fringed southern coast. Stelios Christoforou, the pilot on duty, recognized the gravity of the situation right away. In daylight, an experienced ship captain can maneuver using paper maps, markers, and the coastline as guides. But at night, GPS becomes a critical tool in unfamiliar waters—especially near Cyprus, where NATO and Russian warships roam. And any accident could spill the tanker’s cargo across miles of coastline.
Christoforou gave the tanker’s master detailed instructions over the radio. It was crucial that the ship avoid a hard-to-see fish farm that could block its path to the west, he explained. He then went out to meet the ship by tugboat; there, he assumed the controls and guided the tanker into the harbor. Christoforou knew the coast’s ins and outs intimately, having worked in the port for six years. Still, these situations made him uneasy. In years past, GPS had occasionally disappeared near Vasiliko for a few seconds, but lately it was vanishing for hours or entire days at a time. “It’s not normal,” the pilot says.
How much risk are you willing to take to avoid spending a whole lot of money?
Rick Hamilton, U.S. Coast Guard Navigation Center
In Cyprus, the not-normal has become routine: The global positioning system signal has been unreliable for much of the past two years. The outages have turned the tiny Mediterranean nation into a case study for a growing global problem: intentional interference with the planet’s most widely used navigation aid.
The sources of such disruptions are hard to trace. But navigation experts agree that they’re on the rise, often in conjunction with crime or armed conflict. And the expanding interference has exposed vulnerabilities for GPS and for the oceangoing shippers who depend on it—an industry that handles more than 80% of global trade, according to the International Maritime Organization, the United Nations regulatory agency.
In recent years, GPS has become so reliable and so ubiquitous that you can forget it’s even there—much less that it can fail. But it’s surprisingly easy, it turns out, to knock the system into disarray. The shipping industry, meanwhile, appears underprepared to cope with breakdowns and unwilling to invest in self-defense in the absence of the kind of Exxon Valdez–like disaster it has so far been fortunate to avoid. Rick Hamilton, GPS information analysis team lead at the U.S. Coast Guard Navigation Center, says shippers and governments alike face an existential question: “How much risk are you willing to take to avoid spending a whole lot of money?”
Like another revolutionary technology, the Internet, the global positioning system began as a Pentagon project; it’s still maintained by the U.S. Air Force. But in the mid-1990s, it was opened to civilians, and in 2000 the government stopped degrading the civilian signal, making GPS stronger and more reliable and hastening its adoption worldwide.
The system has rivals in Russia, China, and the EU—collectively known as Global Navigation Satellite Systems (GNSS). But GPS’s supreme advantage is its extensive coverage: A network of at least 24 live satellites positioned around the globe means you are always in sight of at least four, and a receiver—whether in an oil tanker or your smartphone—can triangulate your exact location.
Today GPS is ingrained in daily life, and especially so in business. It is used to guide ships, planes, and trains; by cranes in ports to find and stack containers; and by trucks to deliver those goods to warehouses and stores. Farming, mining, drilling for oil: Each depends on GPS in ever-growing degrees.
Christopher Nolan teaches “celestial navigation” to mid-career ship officers, most of whom have rarely or never had to use it. Photograph by Jeremy Lange for Fortune
But as GPS has become commonplace, the risks associated with losing it have grown. In a June 2019 paper prepared for the Department of Commerce, the research nonprofit RTI International estimated the cost of a 30-day GPS outage in the U.S. at $1 billion per day. The marine industry would be among those hit hardest, because of the bottlenecks an outage would cause in ports and waterways. And U.S. losses would represent only a fraction of the worldwide impact.
It would take Bond-villain-level exploits to knock GPS offline entirely. But on a local level, all satellite navigation systems are vulnerable. Their signals, which grow weaker as they travel from orbit to earth, are often interrupted accidentally, by atmospheric disturbances or faulty equipment. They can also be interrupted on purpose, by transmitters beaming a conflicting signal, a technique known as “jamming.” Typically, the stronger the conflicting signals, the farther that disruption will reach.
More sophisticated, and more malicious, is “spoofing,” which creates fake signals that convince the receiver it is somewhere it is not. Done correctly, spoofing can go undetected—and is capable of leading an oil tanker, for example, off course in open water.
High-powered jamming and spoofing are usually the work of armies and intelligence services. Military ships employ sophisticated anti-jamming technology; as GNSS-guided missiles and drones assume growing roles in combat, the cat-and-mouse of satellite disruption has become a given. Indeed, as tensions mounted between the U.S. and Iran in 2019, what appeared to be jamming and spoofing occurred in and near the Strait of Hormuz, the oil-shipping choke point between Iran and the Persian Gulf states.
Tools Chris Nolan uses to teach “celestial navigation.” Photograph by Jeremy Lange for Fortune
But commercial vessels seldom carry such technology. That’s worrisome, because small-scale GPS disruption has become something almost anyone can do. Off-the-shelf jammers, though illegal in the U.S. and many other countries, are easy to find online for as little as $20, with prices rising as their range increases. Drug-smuggling networks use jammers to mask their activities; illegal fishing operations use them to obscure where they got their catch. And thieves who steal shipping containers deploy jammers to block the trackers hidden inside them.
Perhaps more unsettling, spoofing is no longer particularly difficult either. In 2013, Todd Humphreys, director of the Radionavigation Laboratory at the University of Texas at Austin, spoofed a 213-foot, $80 million yacht. Last June, an Israeli cybersecurity firm called Regulus announced that it had spoofed a Tesla Model 3. (Tesla dismissed the report as a marketing ploy and said it did not have any safety concerns related to the report.)
As GPS has become democratized, in other words, so has disruption—making interference difficult to track or even quantify. In 2018, the Coast Guard began publishing excerpts from reports about GPS outages, including those involving “unknown interference”—a category that includes suspected jamming or spoofing. Those published reports number in the low hundreds worldwide, but Rick Hamilton adds that that’s “a very, very, very small subset of what’s going on out there.” An EU-funded project, Strike3, underscores how much bigger the problem may be. From December 2017 to October 2018, it recorded 15,200 interference “events”—of which “many hundreds” were strong enough to disrupt satellite navigation systems entirely.
Beginning in February 2016, ships near the city of Kerch and other ports along the Black Sea began experiencing odd navigation glitches. Over the following months, GPS locations for thousands of ships appeared to suddenly accelerate and move dozens of miles inland—usually to airports. These “spoofs” all took place near a geopolitical hotspot: Kerch is in Crimea, which Russia annexed from Ukraine in 2014.
Those incidents turned out to be the leading edge of a wave of GPS interference events involving commercial ships and aircraft. (See the accompanying timeline.) Many took place near contested borders or zones of armed conflict. And one particular region became a locus of anxiety: the eastern Mediterranean.
The region’s biggest shipping conduit is the Suez Canal, which conveys around 1,500 ships a month between the Red Sea and the Mediterranean, many of them oil tankers bound for Asia or the EU. The “East Med” is also ringed by areas of active combat, including a simmering insurgency on Egypt’s Sinai Peninsula and the devastating multisided conflict in Syria. And at the hub of this troubled region is Cyprus—whose strategically important ports are refueling points not just for ships using the Suez but also for warships patrolling Syria’s waters.
Tools Chris Nolan uses to teach “celestial navigation.” Photograph by Jeremy Lange for Fortune
On the south coast of Cyprus, where Stelios Christoforou works, GPS began to act strangely in January 2018. On vessels offshore or in port, loud alarms would sound as their captains lost the ability to see their GPS location. The alarms would blare as long as GPS was absent: hours, even entire days. Other times, the ships’ GPS locations would be visible—but in impossible places. “Sometimes you see the tugboats in the mountains,” Christoforou says.
The disruptions weren’t confined to Cyprus. Beginning in 2018, NATO and the U.S. Coast Guard registered outages across much of the East Med—as far north as Turkey, east to Lebanon and Israel, and south to the Mediterranean entrance of the Suez Canal, across a range of at least 65,000 square miles. “It’s a very congested area, and disruption in GPS and navigation could have devastating consequences,” says Chronis Kapalidis, a former lieutenant commander in the Greek Navy and a maritime security researcher at shipping consultancy HudsonAnalytix. By the end of 2019, GPS disruptions across the Mediterranean had been reported to the Coast Guard 38 times, referencing hundreds of incidents, including some farther to the west, to the coasts of Libya and Malta.
Unlike with most GPS interference, authorities believe they’ve tracked some East Med disruptions to their source. Investigations by the European aviation agency Eurocontrol and the Cypriot Department of Electronic Communications connected the outages to jamming signals from Syria and concluded they were a by-product of the conflict there. (Neither agency has widely publicized the finding, but both confirmed it to Fortune.)
In March 2019, a report by Humphreys, the Texas GPS expert, and the Center for Advanced Defense Studies, a research center in Washington, D.C., went further in assigning blame. The authors traced the jamming to the Khmeimim air base on Syria’s coast, the “nerve center” of Russia’s military operations in that country—around 137 nautical miles from Vasiliko. The disruptions were unusually strong and sophisticated, and the authors surmised that they were intended to protect Khmeimim from missiles and drones. The same report pointed to a Russian role in the 2016 Black Sea spoofing. It noted that many of those incidents coincided with visits by top Russian officials, including President Vladimir Putin—suggesting a protective effort of another kind.
Russia has consistently denied roles in GPS disruptions; Russian authorities did not respond to requests for comment from Fortune. But experts caution that Russia’s emergence as a plausible culprit for some interference doesn’t account for the phenomenon’s growing frequency. In other hotspots, questions about culpability persist. In the Suez, outages have been variously (and speculatively) blamed on Egyptian authorities fighting insurgents and on illegal fishing.
In December, the NATO Shipping Centre, which works with commercial shippers, said that interference continued in the East Med, with “potentially dangerous consequences.” In Vasiliko, outages have tapered off recently. Still, Christoforou and his fellow pilots remain on alert in case something goes wrong. “I worry a little bit when the vessels approach in the night,” he confesses.
At the governmental level, concern over interference is growing, but action isn’t imminent. Last June, 14 maritime groups wrote to the Coast Guard, asking it to work with the International Maritime Organization to resolve the GPS outage issue. In December, the Coast Guard told Fortune it was still in talks with the State Department about how to proceed.
Look out the window, look at the chart, and look at the GPS. In that order.
CHRISTOPHER NOLAN : NAVIGATION INSTRUCTOR (QUOTING HIS WIFE, COAST GUARD OFFICER KELLEE NOLAN)
With state actors sluggish, responsibility falls to shipowners and ship-management companies. Shippers have been reluctant to speak openly about the GPS issue, however, or about what they’re doing to bolster their defenses. Of the 26 ship-management companies contacted for this story, only two, Cyprus’s Lavar Shipping and Norway-based Wilhelmsen, admitted on the record that their ships had experienced GPS interference.
Multiple shipping experts described an industry in transition. Generally, captains and crews have the skills to cope with GPS outages. But broader changes over the past 25 years have increased shippers’ dependence on satellite navigation. Ships have become bigger, faster, and more automated, while crews have shrunk. Offshore infrastructure has proliferated—think undersea cables, aquaculture, and wind farms—making marine space much more crowded. At the same time, says Jonathan Turner, director of the English marine consultancy NLA International, a younger generation of sailors “are switching from dependency on their own skills to rely on some machines,” leaving older crew members worried about a “skill fade” among sailors unprepared for life without GPS.
No one interviewed for this story thought the disruptions outweighed GPS’s advantages: charting a course across open waters, making ports more efficient, and rescuing crews in emergencies. But while a constellation of reinforcement options exist—including more robust anti-jamming receivers, land-based backup systems, or more training—those options cost serious money. A military-grade anti-jamming antenna, for example, costs about 10 times as much as a regular antenna.
Such investments can seem daunting in an industry that reported profit margins of less than 1% in 2019. The shipping world is grappling with slowing trade, overcapacity, and new, costly fuel regulations. The upshot, sources tell Fortune, is that shipowners will be loath to pay much for GPS defenses until outages cross over from a nuisance to a crisis—that is, until a major accident occurs.
More than 5,000 miles from Cyprus, in Beaufort, N.C., Christopher Nolan has made a career of showing merchant mariners how to navigate without GPS. The former Coast Guard officer teaches “celestial navigation,” which involves determining one’s location using little more than the position of astronomical bodies in relation to the horizon—in essence, the way Magellan did it.
Nolan’s students include college-age kids and amateurs but also mid-career officers. For them the two-week courses are a requirement for licenses to command large vessels outside U.S. coastal waters. Some have studied traditional navigation, but they tend to be rusty. “It’s a perishable skill,” says Nolan. “Once you’ve passed your exam, you’re never tested on it again.” And many younger mariners have never operated in a GPS-free world.
Nolan isn’t alone in bringing old-school methods back into the curriculum. In 2015, the U.S. Naval Academy resumed teaching celestial navigation to all incoming officers. The academy attributed the decision in part to the rise of cyberthreats that could impede electronic navigation. The class of 2017 was the first in at least 15 years to graduate with core training in the discipline.
Navigating by the stars is far less accurate than GPS, and far more time-consuming. But these basic seafaring skills may soon be tested more frequently than ever before in the GPS era. Nolan says his wife, Kellee, a commander in the Coast Guard, teaches her subordinates a timeless rule of thumb. “Look out the window, look at the chart, and look at the GPS,” he says. “In that order.”
Every year, more dead zones
GPS outages have gradually grown more prevalent over the past four years; many have occurred near global conflict zones.
February 2016: Black Sea ports
Hundreds of ships report seeing their GPS locations suddenly migrate dozens of miles inland. A report by U.S. researchers later links many of the incidents to visits to Russian-annexed Crimea by President Vladimir Putin and other senior Russian officials.
March–April 2016: South Korea
A six-day outage near the North Korean border affects more than 1,000 planes and 700 ships.
Late 2017–present: Suez Canal
Persistent GPS outages plague the Egyptian shipping artery. Potential causes include an insurgency in the nearby Sinai Peninsula and illegal fishing operations.
Fall 2017 and Fall 2018: Russian-Scandinavian frontier
Finnish and Norwegian authorities complain about jamming and spoofing of GPS signals near their borders with Russia during NATO military exercises in the region. Russian officials deny responsibility.
January 2018–September 2019: Cyprus and the “East Med”
Sporadic outages across the eastern Mediterranean, concentrated around Cyprus and near Lebanon and Israel. Cypriot and U.S. investigators link the disruption to military activity in Syria.
June–July 2019: Israel
Weeks of disruptions are reported by pilots taking off and landing at Tel Aviv’s Ben Gurion airport. An Israeli official publicly blames Russia; a Russian official calls the charge “fake news.”
A version of this article appears in the February 2020 issue of Fortune with the headline “When GPS Gets Lost.”
More must-read stories from Fortune:
—The World’s Most Admired Companies in 2020
—A.I. in China: TikTok is just the beginning
—China braces for a deadly new virus as millions travel for Lunar New Year
—CEOs more pessimistic about global economy than they’ve been in 8 years
—U.S. brands think they understand China’s market, but they don’t
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fortune--2020-01-22--How Idaho became caviar country

How Idaho became caviar country

In December, chef Eric Wupperman decided to offer caviar as part of a special seafood night at his restaurant in Leadville, Colorado. He considered sturgeon eggs from up-and-coming producers in Italy and Belgium before opting for an even newer upstart in the caviar market—a supplier from the state of Idaho.
The idea of a small town restaurant serving American caviar would have been inconceivable twenty-five years ago, when the delicacy was synonymous with white tie snobbery, and imported from Russia and Iran. In recent years, however, the caviar market has been thoroughly upended by geopolitical and conservation concerns. Those factors, along with millennials’ more adventurous palates, has helped create an opportunity for American fish farmers.
“I used to have Russian people coming to my backdoor with suitcases full of caviar but that doesn’t happen any more,” says Rod Mitchell, who owns Maine-based caviar purveyor Browne Trading.
Mitchell says famed caviar harvested from wild beluga surgeon in the Caspian sea has all but disappeared from American shores as a result of environmental degradation and tighter enforcement of a 1973 treaty barring the trading of endangered goods. He recalls other caviar brokers going to jail for violating import laws and falsifying origin documents.
Other countries, relying on farmed sturgeon, have since filled the void. The most prominent of these is Israel, whose Galilee Caviar appears on menus of swanky restaurants like the Left Bank in Aspen and Daniel in New York City.
“I like it because it’s very consistent, the texture is very nice, and it has a nice pop and nutty flavor,” says Jean-François Bruel, the executive chef of Daniel, where patrons can pay $375 for “caviar service” that consists of a 2-ounce tin with crunchy accoutrements.
American caviar producers are still relatively new to the game. Sturgeon farmers in California’s Sacramento Valley began producing the first high-end American fare in the 1990s, and those in states like North Carolina and Florida soon followed suit. Today, purveyors point to Idaho’s Snake River White Sturgeon brand, which produces limited but highly sought after eggs, as top of the line.
“Idaho is far and away the best and if you have time to visit their facility you’d understand why,” says Dale Sherrow of Seattle Caviar Co.
Meanwhile, at the lower end of the market, fishermen in Kentucky have been hauling a cousin of the sturgeon known as the paddlefish out of the Ohio river to produce tens of thousands of pounds of so-called spoonbill caviar. Mitchell of Browne Trading describes the Kentucky fare as passable but says it falls short when it comes to the 3 Ts—taste, tone, and texture—he uses to evaluate caviar. “It looks like shoe polish,” he says.
Despite the surge in American caviar production, the nascent industry has faced headwinds in recent years as a result in a glut of production from China, which has driven down prices around the globe. In late 2018, imported caviar in the U.S., half of which came from China, sold for around $275 a kilogram, a 50% drop from 2012, according to U.N. statistics.
U.S. producers have responded by emphasizing the quality and provenance of their caviar, including their clean water sources and lack of preservatives. They have also received help from 25% tariffs imposed on Chinese caviar as part of the ongoing trade war.
But even as prices come under pressure, the U.S. caviar industry is being buoyed by increased consumption. In recent years, specks of caviar are increasingly appearing on sushi rolls and on brunch dishes. “Millennials are interested in caviar as part of exploring cuisine. It’s being used by home chefs and as a part of meal kits. Our biggest sales increase has been for home delivery,” says Mitchell.
Younger gourmands, it seems, are embracing the delicacy not just as a status symbol, but because they actually like the way it tastes.
A version of this article appears in the February 2020 issue of Fortune.
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—What goes into the production of a new Girl Scout cookie brand
—The magic of the wedding industry’s most exclusive conference
—Just in time for Dry January: No-alcohol whiskey and gin alternatives—The best travel destinations for every season of 2020
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fortune--2020-01-22--How this ‘Two Popes’ and ‘It’ producer is improving diversity in Hollywood while others just pay lip

How this ‘Two Popes’ and ‘It’ producer is improving diversity in Hollywood while others just pay lip service

Why the global markets seem immune to the coronavirus contagion

When Dan Lin started as a creative executive at Warner Bros. in the late ’90s, diversity was not a priority at most studios.
Back then, Lin was one of three minorities in the film production group at the junior executive level, developing movies that WB top brass would consider for green-lighting.
He noticed that any time Jet Li, Ang Lee, or Jackie Chan came in for a meeting, his bosses encouraged Lin to join them.
The young executive, who is fluent in Mandarin and English, grabbed the opportunity to witness the decision-making process with studio execs and prominent filmmakers, and he used his language skills to help translate conversations.
Today, Lin is the most prolific and successful Asian-American producer in Hollywood, and diversity is front and center at his production company, Rideback.
Lin’s producing credits include the Lego Movie and It franchises, and his films have grossed more than $5 billion in worldwide box office. Lin recently helmed hits such as Disney’s live-action Aladdin and Oscar-nominated The Two Popes for Netflix. And he’s not slowing down. Current projects include Lethal Weapon 5 and a sequel to Aladdin.
Last year, Lin teamed up with MRC, the studio behind House of Cards and films such as Ted and Baby Driver, to create the Rideback TV Incubator, a paid residency program for mid-career TV writers from underrepresented backgrounds. Participants are paired with volunteer mentors and develop shows to pitch at cable networks and streaming services.
“This is not a charity,” Lin says. “Hollywood is a business.” He adds that the incubator will create eight shows that will be produced by Rideback and receive financial and studio support from MRC.
“We want to prove this is a new way to do business. Diversity is a good driver for profit and brings fresh perspectives to the Golden Age of Television,” he says.
Albert Cheng, COO and cohead of television at Amazon Studios, praised Lin’s approach: “Dan has broken a lot of barriers because he works hard, is focused, and has genuine humility, openness, and a desire to build and lead.”
The desire to succeed while helping others along the way was ingrained in Lin from childhood. The producer, who was born in Taiwan, immigrated to the U.S. with his parents when he was a year old.
“My way of learning about American culture was through watching movies and TV,” Lin says. “Our family and I came as immigrants, and many people helped us along the way. So when we were blessed with opportunities, we wanted to circle back to bring others along.”
After getting a BS in economics from the Wharton School in 1994, Lin worked as a management consultant before joining Universal Studios. Returning to school, he got his MBA from Harvard and eventually became senior vice president of production for Warner Bros. Pictures.
“Asians are taught to respect authority and to defer to others,” says Lin, 46. “I had to push myself to speak up in meetings and adjust to corporate America, because if I waited to speak, I would never be heard. I watched those who were successful and emulated them.”
In 2007 he left to form his own production company with an exclusive feature deal at Warner Bros. A few years later, the married father of two took his young family to a dude ranch in Montana, where he heard stories about the Old West. He was struck by conversations about how powerful community and commitment to others can be.
“The ethos of Rideback Ranch, the creative campus we’ve built here, comes from that,” Lin explains. “When a cowboy falls off his horse, you ride back to help him up. Studios emphasize quarterly earnings. Here we’re a community for artists. We collaborate and celebrate people’s wins, and we support them when they fail.”
Rideback Ranch, located in L.A.’s Historic Filipinotown, houses Lin’s production company, the Warner Animation Group, David Ayer’s Cedar Park Entertainment, Margot Robbie’s Lucky Chap Entertainment, and others. They also volunteer for community projects in the neighborhood with Rideback.
Lin’s diversity initiatives are numerous: Rideback employees work with fifth-graders at Union Avenue Elementary, which serves a mostly immigrant student population in Historic Filipinotown, teaching them how to write screenplays as part of a citywide Young Storytellers program.
Along with filmmaker Ava DuVernay and Los Angeles Mayor Eric Garcetti, Lin launched the Evolve Entertainment Fund to open doors into the entertainment industry for underrepresented college students through paid internships and mentoring.
And this year, Lin plans to expand the Rideback Collective, a collaborative screenwriter program, by providing financing for up to 10 writers to develop their projects, which Rideback would then produce.
The future of successful storytelling, he says, is a world in which Hollywood power brokers no longer say that diversity should be a priority for business reasons. Instead, success will mean routinely hiring filmmakers and TV show creators who are diverse.
As for Lin, “I’m not waiting for the future. I’m doing it.”
Dan Lin’s best advice
Move your company offices to a diverse neighborhood. We moved our offices from Hollywood to Historic Filipinotown because we wanted to work in an area that was more ethnically diverse, representing a richer array of cultures and backgrounds. We employ neighborhood residents and look for people who have different life experiences than we do.
Selected works
Warner Bros. Pictures/Everett Collection
The Lego Movie (2014)
Budget: $60 M.
Global gross: $468 M.
Warner Bros. Pictures/Everett Collection
It (2017)
Budget: $35 M.
Global gross: $702 M.
COURTESY OF WALT DISNEY
Aladdin (2019)
Budget: $183 M.
Global gross: $1.05 B
PETER MOUNTAIN/NETFLIX
The Two Popes (2019)
For Netflix.
Four Golden Globe nominations.
A version of this article appears in the February 2020 issue of Fortune with the headline “Riding for Representation.”
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—Parasite director Bong Joon Ho dissects his tale of two families
Follow Fortune on Flipboard to stay up-to-date on the latest news and analysis.


fortune--2020-01-22--China tech’s venture capital boom is going cold

Venture capital firms in China are operating under a climate of increasing uncertainty. The U.S. and China’s partial trade agreement has not assuaged fears of a tech war and a growing political rift between the two countries, and China’s economic growth rate sunk to an almost 30-year low in 2019.
Venture capital investment—fueled by China’s half-decade venture capital boom—fell globally in 2019, from $302 billion in 2018 to $258 billion, and the number of deals also declined. The volume of U.S. venture capital investment in China peaked at $17.4 billion in 2018. A Rhodium Group report estimated it would fall to $4 billion in 2019.
Chinese tech startups have been hit especially hard. Venture investment in tech startups in China dropped 51.5% year-on-year in the fourth quarter of 2019, according to the China Academy of Information and Communications Technology, a government-backed research institute. And of the $6.84 billion invested in China’s tech startups in the fourth quarter, more than half went to a single company, the data center operator Tenglong Holding Group.
Looking further afield
As VC funding begins to slow, some investors are steering clear of high-risk deals in China and looking towards emerging tech startup markets in Southeast Asia.
David Chang, managing partner at Mindworks Ventures, a Hong Kong-based VC firm that invests in early-stage tech startups in Asia, says Washington’s blacklisting of Chinese tech companies “turns off a lot of investors” in the U.S. who want to invest in firms that could later list on U.S. stock markets.
“Having the trade war turning into a technology war automatically creates a lot of tension [around] technology investment into China,” Chang says. He expects that VC fund investment, reassured by the phase one trade deal, will improve in 2020, but will not return to 2018 levels.
Mindworks’ portfolio includes startups in mainland China and across Asia, including Thailand and Singapore.
“Southeast Asia is becoming a very hot market,” Chang says, adding that U.S.-based investors may reroute funding to Southeast Asian tech startups, especially as the U.S.-China tech war progresses.
Outside the impact of global politics, the dynamics of China’s tech startup landscape are changing.
“I would say there is a focus back on less risky investments,” Chang says, compared to a few years ago, when startups with high burn rates were raking in VC funding. “Now I don’t think these stories will be repeating itself as investors really demand [gross profit margins].”
The notorious collapse of China’s bike-sharing industry, which featured startups with eager investors and unsustainable high growth, in late 2018, was one such wake up call.
Now, as the country’s birth rate hits an almost 60-year low, threatening economic growth, many investors are turning to safer bets and funding larger, more stable companies over smaller, higher-risk startups.
Herbie Fu, partner at Hong Kong-based, fintech-focused VC fund T3 Labs, says VCs in China are “a lot more cautious” now compared to the investment environment five to eight years ago.
Fu adds that consumer-facing tech startups benefited from China’s large population and low internet penetration rate, which is starting to slow, and says investors are turning to companies that work on “frontier tech” and business-to-business transactions.
As many as 336 Chinese startups had to cease operations in 2019, including several unicorns, companies valued at over $1 billion.
More must-read stories from Fortune:
—The World’s Most Admired Companies in 2020
—A.I. in China: TikTok is just the beginning
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fortune--2020-01-22--Davos discusses the climate emergency

Davos discusses the climate emergency

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning from Davos.
Climate change has a prominence in discussions at this year’s World Economic Forum that it hasn’t had since before the Great Recession. That’s not just because of the presence of young Greta Thunberg. Many of the CEOs gathered here—admittedly, a self-selected group—say the issue has moved up their priority list, in part because of the youth movement and pressure from employees, and also because it is beginning to have a direct effect on financial calculations.
Among those making the argument is BlackRock CEO Larry Fink, whose recent letter committed the giant money manager to putting environmental sustainability at the core of its investment decisions. “It’s very clear, we in the capital markets, we bring risks forward,” he said here. “We don’t wait until the risk is in front of us.” Microsoft CEO Satya Nadella also is spreading the message. His company made a pre-Davos pledge to eliminate its carbon footprint by 2030. Nadella will speak at the CEO dinner Fortune is hosting on Thursday.
(Microsoft, by the way, came in at number three on Fortune’s new list of the World’s Most Admired companies, and Nadella was cited as the “most underrated” CEO.)
Starbucks CEO Kevin Johnson also announced a bold environmental agenda yesterday, committing in a letter to a 50% reduction in carbon emissions, a 50% reduction in water withdrawal, and a 50% reduction in waste sent to landfills over the next 10 years. While such commitments can often be difficult to measure and monitor, KPMG CEO Lynne Doughtie told Fortune the trend toward making them is accelerating.
I spent some time yesterday with Svein Tore Holsether, the CEO of Norwegian-based fertilizer company Yara, which earned a past spot on Fortune’s Change the World list for its effort to improve agriculture in the developing world. He believes agriculture has an important role to play in the climate debate because it can not only reduce emissions, but also take carbon out of the atmosphere. “I am optimistic we are on the right track,” he told me, saying there is a new seriousness among companies on the issue, driven by pressure from their employees as well as by the prevalence of extreme weather events and the fires in Australia. “Inaction now will challenge our license to operate.”
The only discordant note on this topic in Davos came from President Trump, who in his speech here yesterday derided “the perennial prophets of doom and their predictions of the apocalypse.”
More news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
Bezos hack
Jeff Bezos's phone was allegedly hacked by Saudi Crown Prince Mohammed bin Salman a couple years back, according to a digital forensic analysis that found evidence of spyware being implanted via a video file sent to the Amazon boss from MBS's personal WhatsApp account. All this preceded the Saudi killing of Jamal Khashoggi, a journalist for Bezos's Washington Post—and the subsequent release of messages that exposed Bezos's extramarital relationship with Lauren Sanchez. Guardian
737 MAX
Boeing now says it only expects regulators to clear the 737 MAX for takeoff again somewhere around the middle of the year, at the earliest. The shift is reportedly characteristic of new CEO David Calhoun's new approach to estimating timescales, after his predecessor Dennis Muilenburg rubbed customers and regulators the wrong way by being overly optimistic. Wall Street Journal
Jaguar Land Rover
In more bad news for the U.K. auto sector, Jaguar Land Rover is cutting hundreds of jobs at its factory near Liverpool. JLR claims the move has nothing to do with Brexit, though unions have been quick to argue that the sector will remain in the doldrums until the government "ensures that there is long-term frictionless trade and no tariffs with the European Union along with meaningful investment in the infrastructure to ensure the success of electric vehicles." Liverpool Echo
Coronavirus Spread
The U.S. has its first case of the potentially deadly coronavirus that recently emerged in China, in the form of a man who travelled from Wuhan to Seattle last week before displaying symptoms. In China, there are now 440 confirmed cases and the death toll stands at nine, though the man who took it to the U.S. is apparently not very sick. Politico
Brainstorm A.I.
If you’re interested to learn how some of the biggest, most influential companies are strategizing about artificial intelligence, come to Fortune’s Brainstorm A.I. conference in Boston on April 27-28, 2020. A.I. is a game-changing technology that promises to revolutionize business, but it can be confusing and mysterious to executives. The savviest leaders know how to cut through the deluge of A.I. buzzwords and reap the technology’s benefits.
Attendees of this invite-only confab can take part in cutting-edge conversations with top corporate execs, leading A.I. thinkers, and power players. Among them: United States Chief Technology Officer Michael Kratsios; Accenture CEO Julie Sweet; Land O’Lakes CEO Beth Ford; Siemens U.S. CEO Barbara Humpton; Royal Philips NV CEO Frans van Houten; Landing AI founder and CEO Andrew Ng; Robust.AI founder and CEO Gary Marcus; and top machine learning experts from Bank of America, Dow, Verizon, Slack, Zoom, Pinterest, Lyft, and MIT. You can request an invitation here.
AROUND THE WATER COOLER
U.S. money
London's Blossom Capital has just raised $185 million to invest in early-stage startups. As Fortune's Jeremy Kahn notes, the move—which comes less than a year after Blossom raised $85 million for its first fund—shows how U.S. money continues to flow into Europe's startup scene. Fortune
Green business
Germany's Greens have moved from the political fringes to a position where they might plausibly take power, and that shift has also meant a greater willingness to engage with business. As the Financial Times reports, the Greens are these days open to ideas from industry about how to best tackle the climate emergency. FT
Online privacy
The U.K.'s privacy watchdog has issued a new "Age Appropriate Design Code" for social media sites, streaming services, Internet-connected toys and online games that might be used by children. The code of conduct will probably from next year be enforceable with large fines for breaches. BBC
Fender bender
The iconic guitar-maker Fender has been fined a record-breaking (for the U.K.) $5.9 million for forcing online retailers to sell its wares at or above a minimum price. The Competition and Markets Authority issued the penalty today, months after hitting keyboard and piano giant Casio with a $4.8 million fine for similar behavior. CMA
This edition of CEO Daily was edited by David Meyer.
THE FUTURE OF FORTUNE IS HERE
In 1930, Fortune published its first-ever issue, featuring the goddess Fortuna and her wheel on the cover. This year, on our 90th anniversary, we’re celebrating with a new Fortune. Here’s what’s in store for you:


fortune--2020-01-22--WeWork’s other cofounder has a plan to save the company. It’s the opposite of what Adam Neumann envi

WeWork’s other cofounder has a plan to save the company. It’s the opposite of what Adam Neumann envisioned.

In the days following the dramatic ouster of WeWork’s flamboyant cofounder Adam Neumann last fall, the entire company was plunged into chaos. There were reports of employees skipping work in hopes of nabbing a severance package, all-hands meetings at which sweeping changes were announced, and mass layoffs that resulted in more than 2,000 people losing their jobs.
But one WeWork employee was head-down at his desk. Working out of a glass office at WeWork’s Chelsea location, sources say he continued coming in every day. “From the moment that Adam stepped down through that whole period of leadership change, the only executive who was present in the office was Miguel,” says a senior employee who worked on the executive floor. “He wasn’t talking to the public and the press…but at least he was showing his face.”
The executive was Miguel McKelvey, also known as WeWork’s other founder. From the time McKelvey and Neumann met in 2007 and together developed the idea for a world-changing workspace that would spread across the globe, Neumann was the face of the company, and McKelvey was a quiet, behind-the-scenes presence. He was helping open new WeWork locations, design the look and feel of the workspaces, and serve as a sounding board for employees inside the company.
But with Neumann out of the picture, Fortune has learned, McKelvey has spent the past several months helping devise a plan that couldn’t be more different from Neumann’s growth-at-all-costs big ideas. McKelvey’s plan to save WeWork? Slow down.
“Growth was one of our biggest focuses in the past, and I don’t think we were as focused as we should’ve been on making our product as great as it can be,” McKelvey said in an interview with Fortune. “A big benefit to slowing down a little bit is that we’re going to focus on [the product] more.”
For a company whose IPO prospectus stressed fast growth, aggressive spending, and spiraling losses, this is a particularly surprising turn. Even more unusual is that McKelvey, who has kept a low profile for more than a decade, is suddenly quite involved in the company’s financial future.
“Just being honest, I was not deeply involved in the financial modeling,” McKelvey said. “There are things I didn’t understand in the past because it wasn’t my role, and I have jumped in a lot more recently.”
In October, WeWork released a 50-page presentation outlining some of the changes it planned to make in the next 90 days. One of the key principles says the company will focus on “the core WeWork desk business, prioritize disciplined growth with profitability, and right-size our operations.” It has since divested several businesses and dramatically reduced its workforce. It appears that WeWork wants to return to its roots and areas of focus that were important before 2017, the year that SoftBank agreed to pump $4.4 billion into the business. (SoftBank declined to comment for this story.)
As a trained architect, McKelvey had previously taken on more of a creative director role and focused on carrying out architecture, design, and construction activities on behalf of WeWork. But people who knew him struggled to define what his official job as “WeWork’s chief culture officer” encompassed.
Worse, the culture McKelvey was in charge of cultivating came under scrutiny when allegations surfaced that Neumann was “flying high” after he brought marijuana on a private jet across international borders. Once Neumann’s troubling behavior and general lifestyle of excess came to light, he was ousted from the chief executive role, and the company’s valuation plummeted to $8 billion.
In some ways, that now seems a distant memory. But today the question for McKelvey is, can he save what was right about WeWork’s culture?
Being ‘next to’ the center of attention
McKelvey undoubtedly understands the meaning of “community” more than your average corporate dweller: He grew up with a single mother on a commune in Eugene, Ore. He was a talented basketball player in high school, where on the court he found something that was missing from his home life: a sense of accountability.
In a 2016 Fortune interview, the WeWork cofounder described himself as “a wild kid” who was bumbling around the basketball court. “I remember Coach Stepp as the most strict disciplinarian I’ve ever come across,” he said. “I didn’t grow up with my father, so I never had someone telling me to keep in line.”
He went on to play basketball and study architecture at the University of Oregon. After college, he started his own company called “English, baby!”—a social network for people learning English as a second language. But he decided he wanted to change directions. After five years, he moved to New York to take a job at a small architecture firm. His experience there led him to meet Neumann at a coworker’s apartment where the duo hit it off and McKelvey persuaded him to share an office space together in Brooklyn.
That’s how WeWork was born: The duo figured out there was a need to create a shared workspace for freelancers and other entrepreneurially minded folks who were looking for an inspiring space to work.
McKelvey could see immediately that he and Neumann were “completely different people,” he said in a 2017 How I Built This podcast episode. “[He has] more of a brashness that I don’t think I have,” he said. “Well, I like to be next to the center of attention. I like the idea of it, I just don’t want to be it.”
Lacking discipline
Interestingly that theme of discipline, or lack thereof, that permeated McKelvey’s high school basketball career would appear again—this time in his professional life.
As McKelvey and Neumann built WeWork into a global real estate behemoth, McKelvey focused on the architecture and design of each coworking space that opened its doors. Neumann was the money-raiser, and he focused his time on speaking with potential investors and securing billions of dollars in capital for the venture.
Inside the office, McKelvey, who is 6-foot-8, was well liked, and people referred to him as a “gentle giant.” “Adam got a lot of undue attention, but the things that people loved about WeWork—and still do—are because of Miguel,” says one former WeWork employee who worked closely with McKelvey for several years. “I think Adam completely took advantage of him and his kindness.”
As WeWork’s profile began to rise, so did Neumann’s. He spoke with journalists, participated in cover stories, and gave impassioned speeches to stir up excitement for WeWork’s upcoming initial public offering. If Neumann was too busy to attend a speaking engagement, McKelvey took his place.
In a way, McKelvey was Neumann’s perfect foil, says Brian O’Kelley, a serial tech entrepreneur who has known McKelvey since they played basketball together in high school. “[McKelvey] was sort of the mature, self-confident, stable partner.”
With an eye for designing communal creative spaces, McKelvey was instrumental in fostering a culture of inclusion and collaboration. He reportedly hosted bimonthly fireside chats during which he shared his views on topics like how to “build resilience” or “creating space to ask for and receive.”
But that culture of resilience began to unravel weeks before the company was meant to go public. “Partying has long been a feature of his work life, heavy on the tequila,” read a revealing September Wall Street Journal story about Neumann. It went on to outline Neumann’s “unusual exuberance and excess” in his leadership style.
Meanwhile, people raised eyebrows at the company’s business model, governance practices, and sky-high valuation. Postponing the IPO and promising governance changes, however, did not seem to be enough to assuage investors.
Which is why on Sept. 24, Neumann announced he would step down as CEO and continue as a nonexecutive chairman of the board. In a statement, he said: “While our business has never been stronger, in recent weeks, the scrutiny directed toward me has become a significant distraction, and I have decided that it is in the best interest of the company to step down as chief executive.”
Who’s to blame?
Quickly, WeWork’s Artie Minson and Sebastian Gunningham were named co-CEOs of the company, and they moved to call off the IPO. And suddenly, McKelvey resurfaced. He addressed WeWork’s employees with a “rally the troops”-type email. “I want to take a moment to thank all of you for your commitment, particularly these last few weeks,” he wrote. “It’s been a challenging period, and it takes fortitude to continue to believe.”
Sources tell Fortune that during the Neumann era, McKelvey did not address the staff about the general direction of the business nor the happenings behind closed doors, because that was very clearly Neumann’s job. Several former executives said they largely attribute the fault to Neumann, opining that even if McKelvey had spoken up, it’s unlikely Neumann would have listened.
As an industry observer, O’Kelley says it’s not fair to point the finger at an individual. What happened at WeWork, he says, was a system-wide cultural failure.
“Success is a moment,” he said. “WeWork was an incredibly successful company, until it wasn’t. I think all of Adam’s shenanigans were a huge mistake. It was a massive distraction for the entire company. If it was clean—just a well-run company with a CEO who wasn’t self-dealing—we would be much more forgiving.”
Today, Neumann is out with an exit package that could be worth more than $1 billion; a flurry of top executives have departed; and more than 2,400 employees have been laid off.
Yet McKelvey is still there. “I am here because I believe deeply that our work matters and that we will continue to be successful as long as we persist in moving forward with positivity,” McKelvey wrote in the staff-wide email. He doubled down in a LinkedIn post from Dec. 19, saying he’s “incredibly energized” and that WeWork is one of his “key priorities.”
Former employees believe that though SoftBank executive Marcelo Claure is now running the business, McKelvey could have an important role to play when it comes to rehabilitating employee morale. Another source is of the opinion that the new management — Claure and WeWork’s next CEO — will use McKelvey “as a transition totem to get people comfortable.”
“The leadership team has spent hours and hours and hours to ensure that we have a plan that we’ll be able to succeed with,” McKelvey said. “I’m here, I want to be involved, and I want to be part of our future.”
And then, he was off to his next meeting at WeWork’s headquarters. Ironically, the formerly free-spirited, jet-setting cofounder who traveled the world to help expand WeWork’s reach is now stuck in conference rooms, crunching the numbers to see what’s feasible, rather than world-changing.
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fortune--2020-01-22--Saudi crown prince implicated in hacking of Amazon CEO Jeff Bezos’s phone

Jeff Bezos’s mobile phone was hacked following an exchange between the Amazon.com Inc. chief executive officer and Saudi Prince Mohammed bin Salman on WhatsApp, according to two people familiar with an analysis of the breach.
While a message from the prince to Bezos in mid-2018 that preceded the hack appeared benign, investigators found digital evidence suggesting it contained code that ultimately led to the breach of the billionaire’s phone, said one of the people, who asked not to be identified because the probe isn’t public. A forensic analysis showed with moderately high confidence that a WhatsApp account used by bin Salman was involved, another person said.
The Guardian newspaper reported earlier Tuesday that an analysis had found that the theft of data from Bezos’s phone in 2018 started with an infected video file sent from bin Salman’s personal account. The Financial Times, which confirmed elements of the Guardian’s account of the hack, said the analysis was conducted by global business advisory firm FTI Consulting. A representative of the firm declined to comment, saying: “We do not comment on, confirm or deny client engagements or potential engagements.”
The revelation of new details about a security breach that affected the world’s richest man comes about a year after the surprise announcement that Bezos and his wife, MacKenzie, would divorce after 25 years of marriage. The National Enquirer subsequently disclosed an extramarital affair between Bezos and Lauren Sanchez, a former television anchor, in a series of reports that relied, in part, on intimate text messages sent by Bezos.
Bezos subsequently published an extraordinary blog post accusing the tabloid of threatening to publish more embarrassing text messages and photos unless he publicly affirmed that there was no political motivation or outside force behind the tabloid’s coverage.
Gavin de Becker, a security consultant for Bezos, later said he believed the Saudi Arabian government had accessed Bezos’s phone before the Enquirer exposed the affair. He didn’t provide any direct evidence to back up his claims, which he said came from “our investigators and several experts.” De Becker cited the Enquirer’s business relationship with the Saudis, as well as tough coverage of the murder of a critic of the Saudi regime by the Bezos-owned Washington Post, as reasons why bin Salman might seek to harm the Amazon founder. The newspaper reported last year that the Central Intelligence Agency linked the crown prince to the 2018 murder of Post columnist Jamal Khashoggi.
Recent media reports that suggest the Kingdom is behind a hacking of Mr. Jeff Bezos' phone are absurd. We call for an investigation on these claims so that we can have all the facts out. — Saudi Embassy (@SaudiEmbassyUSA) January 22, 2020
De Becker declined to comment on the Guardian report Tuesday beyond the lengthy statement last year, which was posted on the news site The Daily Beast.
The Saudi embassy, in a tweet, attacked the reports as “absurd” and called for an investigation “so that we can have all the facts out.”
In an interview with Bloomberg TV, Saudi Finance Minister Mohammed Al-Jadaan referenced the statement made by the Saudi Embassy but declined to comment further.
A spokeswoman for WhatsApp declined to comment.
tomorrow (wednesday) @AgnesCallamard & I will be releasing a public statement on this in which we address these very serious hacking allegations. https://t.co/X9NBrrwFnF — David Kaye (@davidakaye) January 21, 2020
A United Nations investigation, led by UN Special Rapporteurs Agnes Callamard and David Kaye, is set to be released Wednesday and is expected to confirm that Bezos’s mobile phone was hacked using a WhatsApp message from bin Salman, the Washington Post reported late Tuesday.
It’s uncertain whether the alleged hack of Bezos’s phone accessed any sensitive Amazon corporate information. The company hasn’t commented on the matter in the nine months since de Becker’s accusation. Company representatives didn’t return messages seeking comment on Tuesday.
“It’s unclear whether his phone had more, privileged access to information from his companies,” said Bastien Bobe, an analyst at cybersecurity firm Lookout. “That would not be in line with security practices and risk mitigation at companies though. But technically it would be feasible for that technology to access the data.”
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