fortune--2020-09-25--Alphabet to fund $310 million diversity initiative to settle sexual misconduct lawsuit from sharehol

Alphabet to fund $310 million diversity initiative to settle sexual misconduct lawsuit from shareholders

Google parent Alphabet has agreed to commit $310 million to diversity, equity, and inclusion initiatives as part of a settlement for a series of sexual harassment and misconduct lawsuits filed against some of the company’s officers and directors.
As part of the settlement, filed on Friday in California Superior Court, Alphabet will establish a diversity, equity, and inclusion advisory council featuring outside experts, which include retired judge and Harvard Law School professor Nancy Gertner and former member of the Equal Employment Opportunity Commission Fred Alvarez, as well as company executives including CEO Sundar Pichai and Google chief legal officer Kent Walker. The settlement also ends Alphabet’s mandatory arbitration for harassment, discrimination, and retaliation-related disputes between employees or contractors and the company. It limits Google’s use of nondisclosure agreements and ensures that the recommended consequences for misconduct are equal across business units.
“This settlement will not only change and improve the culture at Google, but it will set the standard for culture change at tech companies throughout Silicon Valley,” Ann Ravel, an attorney from Renne Public Law Group who led parts of the settlement negotiation, said in a release.
“Recent years have involved a lot of introspection and work to make sure we’re providing a safe and inclusive workplace for every employee,” said Google vice president of people operations Eileen Naughton in a blog post Friday. “That doesn’t stop here and you’ll receive reports on our progress as we move forward.”
A Google employee holds a sign during a walkout to protest how the tech giant handled sexual misconduct at Jackson Square Park in New York on Nov. 1, 2018. Now, in September 2020, parent company Alphabet has announced a $310 million commitment to diversity, equity, and inclusion initiatives. Peter Foley—Bloomberg/Getty Images
The settlement represents one of the largest public commitments to diversity and inclusion efforts by a tech company and follows numerous complaints from employees about sexual harassment and misconduct. Android creator Andy Rubin and Alphabet’s top lawyer David Drummond, both of whom stepped down from the company with little consequence, are among executives who have been accused of inappropriate behavior at the company. And in 2018 the issue hit a new boiling point when 20,000 Google workers staged a walkout to protest the company’s mismanagement of employee complaints.
The multimillion-dollar settlement stems from a complaint, which later was combined with four other lawsuits, filed in January last year by Alphabet shareholders Northern California Pipe Trades Pension Plan and Teamsters Local 272 Labor Management Pension Fund. The complaint claims that Alphabet and its leadership breached fiduciary duty and created a “culture of concealment” that led to the coverup of a “long-standing pattern of sexual harassment and discrimination by high-powered male executives” as well as a “serious data breach” related to Google+.
Amid the company’s “brogrammer” culture that harassed and discriminated against women, Alphabet offered high-profile executives accused of misconduct “wasteful exit packages worth millions” while the company’s leadership hid the reasons for their departures, the lawsuit claims. Rubin, for example, was paid $90 million to leave the company. The lawsuit also says 48 cases of sexual harassment had been reported over the previous two years, including 13 that implicated senior managers or executives.
Julie Goldsmith Reiser, partner at Cohen Milstein Sellers & Toll who helped lead the settlement negotiation, said the settlement “fundamentally alters Alphabet’s workplace policies” and gives the company the chance to lead the industry in workplace equity.


fortune--2020-09-25--Census must continue for another month, judge says

Congress and Trump to restart stimulus negotiations as $ 300 unemployment benefit expires

A federal judge has stopped the 2020 census from finishing at month’s end and suspended a year-end deadline for delivering the numbers needed to decide how many seats each state gets in Congress.
The preliminary injunction granted by U.S. District Judge Lucy Koh in California late Thursday allows the once-a-decade head count of every U.S. resident to continue through the end of October.
Koh said the shortened schedule ordered by President Donald Trump’s administration likely would produce inaccurate results that would last a decade.
The judge sided with civil rights groups and local governments that sued the U.S. Census Bureau and the U.S. Department of Commerce, which oversees the statistical agency, arguing that minorities and others in hard-to-count communities would be missed if the counting ends this month.
In granting the preliminary injunction, the judge said the plaintiffs were likely to succeed at a trial. Despite concerns raised by top Census Bureau officials about the shortened schedule, the Trump administration failed to consider its duty to produce an accurate head count and neglected to adequately explain a reason for it, she said.
Koh said inaccuracies produced from a shortened schedule would affect the distribution of federal funding and political representation over the next 10 years. The census is used to determine how $1.5 trillion in federal spending is distributed each year and how many congressional seats each state gets.
Before the coronavirus pandemic hit in March, around the same time the census started for most U.S. residents, the bureau had planned to complete the 2020 census by the end of July.
In April, in response to the pandemic, it extended the deadline to the end of October. Then, in late July or early August, the deadline changed once again to the end of September after the Republican-controlled Senate failed to take up a request from the Census Bureau to extend the Dec. 31 deadline for turning over the numbers used for deciding how many congressional seats each state gets.
Attorneys for the Census Bureau had argued that the census must finish by the end of September to meet the Dec. 31 deadline and have enough time for crunching the numbers used for deciding how many congressional seats each state gets, in a process known as apportionment. But Koh said that argument “runs counter to the facts.”
“Those facts show not only that the Bureau could not meet the statutory deadline, but also that the Bureau had received pressure from the Commerce Department to cease seeking an extension of the deadline,” she wrote.
Koh’s preliminary injunction suspended that end-of-the-year deadline, giving Census Bureau statisticians time to crunch the numbers for apportionment from the start of November until the end of next April, for the time being.
Previously, the Census Bureau had only half that time for data processing, from the start of October until the end of December.
The San Jose, California-based judge earlier this month issued a temporary restraining order prohibiting the Census Bureau from winding down field operations until she ruled.
Attorneys for the Census Bureau and the Department of Commerce had said during the hearing they would likely appeal if the judge ruled against them. The Commerce Department didn’t respond to an email inquiry early Friday.
The civil rights groups and local governments alleged that the decision to shorten the schedule was made to accommodate a directive from Trump that tried to exclude people in the country illegally from the apportionment numbers. A three-judge panel in New York blocked Trump’s directive, saying it was unlawful. The Trump administration is appealing to the Supreme Court.
Commerce Secretary Wilbur Ross directed the Census Bureau to come up with a shortened plan, despite concerns raised by top bureau leaders who worried in internal communications that cutting a month off would produce a count with “fatal data quality flaws,” Koh’s order said.
The bureau was facing a shortfall in census takers after large numbers reported for training but then dropped out.
An email from Tim Olson, associate director for field operations, to his colleagues called it “ludicrous” to believe a full count could be completed before Oct. 31 and that anyone thinking the apportionment numbers would be turned in by Dec. 31 “has either a mental deficiency or a political motivation.”
Koh’s decision ensures that hard-to-count communities won’t be overlooked and produce an incomplete count, said attorneys for the plaintiffs after the ruling.
“As the court recognized, the Census Bureau has itself repeatedly recognized that a full, fair, and accurate count takes time, especially when faced with a historic pandemic,” said Melissa Sherry, the lead plaintiff’s attorney. “Every day that the 2020 Census count continues, and Census operations appropriately continue, will help ensure the accuracy and completeness of this once-in-a-decade tally.”


fortune--2020-09-25--Costco sees firsthand how COVID is costing businesses way more than planned

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Costco Wholesale has been one of the big retail winners in the COVID crisis, but those gains aren’t coming without some pain.
The warehouse chain’s shares were down 3% on Friday after it reported $281 million in COVID-related expenses, notably on sanitizing its stores and giving its employees bonuses, an amount nearly three times what Costco had told investors to expect in June.
“Of course $281 million is over $100 million, and quite a bit larger,” Costco finance chief Richard Galanti conceded to investors on a conference call.
Costco’s revenues rose 12.4% to $53.38 billion in the quarter ended Aug. 30, way more than what Wall Street expected. The big sales surge came from a combination of e-commerce sales increasing by 90.6% and more spending per physical trip, as the company said shopper visits had held steady.
Much of that per trip increase came from big ticket items.
“As people are spending less on travel, air and hotel and dining out, they seem to have redirected some of those dollars to categories like lawn and garden, furniture and mattresses, exercise equipment, bicycles, housewares, cookware, and the like,” Galanti said.
Two of Costco’s big rivals, Kroger and Amazon.com, have received sharp criticism for stopping so-called ‘hazard pay’ for their workers.
In contrast, Galanti said Costco’s continued success is contingent on keeping stores and staff safe, so the company will extend its $2 per hour premium on wages for at least another eight weeks.


fortune--2020-09-25--To ethically tackle COVID-19, Big Pharma needs an overhaul

In April, as doctors, nurses, and caregivers worldwide struggled to save tens of thousands of people severely sickened with a novel and fast-moving virus, researchers for the California-based pharmaceutical company Gilead Sciences provided a much-needed glimmer of hope.
Trial results for a new drug, remdesivir, showed huge promise, indicating that the drug cuts down recovery time for patients hospitalized with COVID-19 and giving medical providers a vision of a lifesaving treatment option.
But as soon as news of this taxpayer-funded drug spread around the globe, politics and profits dictated who would have access to it first. The U.S. government purchased the initial supply of the drug—leaving sick patients around the globe without access. And now Gilead is facing a wave of criticism for the high price point it set for the treatment.
As new COVID-19 vaccines and treatments are developed, countries’ purchasing power, and not their need for health care resources, will dictate distribution. This is how our pharmaceutical research and development system works—and it leaves millions around the world without access to essential medicines they need to survive.
It doesn’t have to be this way. We need to radically restructure the incentives for pharmaceutical R&D by de-linking companies’ profits from sales volume, tying them to net health benefits instead—getting drugs where they are needed most.
Governments simply should not grant companies exclusive licenses, also known as patents, on new medicines, but should instead tie rewards for new research and development to their health impact.
Patents are limited-term monopolies that let companies charge whatever they want for their technologies. The profit maximizing price is not the most equitable. Especially when there is great inequality, companies make the most money by charging high prices only the richest can afford, taking advantage of the fact that generic companies cannot provide access to essential medicines for millions at a lower price until the patent expires.
Fortunately, there are steps that both policymakers and pharmaceutical executives can and should be taking now to increase global health impact.
Sharing the benefits of R&D
Countries can join patent pools encouraging companies to share patents to advance R&D. Companies can also join these pools voluntarily and officials can incorporate incentives for patent-sharing by offering rewards based on the health impact of the resulting products.
To date, 172 countries have endorsed the WHO’s COVID-19 Technology Access Pool—a promising step in the right direction. But many rich and innovative countries are still not on the list, and only 10 patent-holding companies have signed agreements with the Medicines Patent Pool—a meager number that shows the overwhelming pull of profit at the expense of global health.
Pharmaceutical companies’ rewards can be tied to health impact in other ways. International prizes that reward new interventions based on health impact are one possibility. Or consider orphan-drug designation, which gives companies tax breaks and lucrative priority review for medicines of their choice for developing drugs for medical conditions that are rare in the U.S. Orphan-drug designation and other tax breaks can be tied to health impact too.
Some good measures of global health impact exist to support these proposals. For instance, it is possible to evaluate impact across diseases and interventions by examining the need for, access to, and effectiveness of treatment—though researchers need to expand evaluation mechanisms to include coronavirus interventions as they are developed.
When companies cannot expect to make much from the development of products that primarily benefit the poor, they may make more money from patent pools, prizes, and tax incentives tied to health impact rather than sales.
No one should profit from a pandemic. Yet the pharmaceutical industry is amongst the most lucrative. Although companies argue that such great profits are necessary to support research and development, they do not make their R&D costs transparent, and critics charge that they include overinflated and unethical marketing costs in the data they do provide.
At a minimum, companies must substantiate the claim that their profits are justified in order for society to continue to offer them patent protections that contribute to inequitable access.
In the context of a fast-moving and devastating pandemic, policymakers have made some strides in prioritizing public health over profits.
But now is the time to think bigger—reforming rather than repealing the broken orphan-drug tax credits, mandating patent pools, and tying major rewards for pharmaceutical innovation to health impact. Together we can encourage pharmaceutical companies to make morally responsible decisions.
The threat of compulsory licensing can help. In past health crises, even the U.S. has issued such licenses to let generic companies produce patented medicines. Litigation to get companies to allow compulsory licensing (which is legal under World Trade Organization agreements), and collective action can also make a difference. In the early 2000s, after 40 pharmaceutical companies sued the South African government for importing HIV medicines without permission from the patent holder, public pressure forced them to withdraw the lawsuit.
If these steps aren’t taken—if profit wins—pharmaceutical companies will continue to deprive millions of people of access to new technologies, by setting high prices and lobbying to increase patent protections. The U.S. already agreed to pay $1.2 billion for early access to a COVID-19 vaccine under development in the U.K. and is acquiring rights to several other vaccines, too. Other rich countries are likewise trying to corner the market for their populations.
But diseases do not care about borders nor profits, and even the best vaccines cannot prevent every infection. If everyone does not have access to a COVID-19 vaccine, the pandemic will continue to circle the globe—leaving us all exposed.
Nicole Hassoun is a visiting scholar at the Mario Einaudi Center for International Studies at Cornell University, professor at Binghamton University, and author of Global Health Impact: Extending Access to Essential Medicines.


fortune--2020-09-25--Spotify’s Daniel Ek wants to give €1 billion to Europe’s tech startups. It won’t help

Daniel Ek, the founder and chief executive of Spotify, announced that he plans to invest 1 billion euros of his own money over the next decade into Europe’s fledgling technology startups.
Ek is himself the exception that proves the rule about European tech: a founder who built a consumer technology brand from startup into a global heavyweight with 300 million active monthly users, a public listing on the New York Stock Exchange, and a market valuation of $43 billion.
Precious few European tech companies ever make it on the global stage. The whole continent has just one technology company valued at over $100 billion—venerable enterprise software firm SAP. In recent years, Europe has produced a growing number of venture capital–backed companies with valuations north of $1 billion: There were a total of 99 last year, according to a report from venture capital firm Atomico, compared to fewer than 50 just two years earlier.
But the truth remains that Europe continues to badly lag the U.S. and Asia in its ability to produce independent technology companies with global impact. In 2019 in the U.S., 78 venture-backed startups crossed the $1 billion valuation threshold in just that 12 months alone. It is still true that many of Europe’s most promising tech companies wind up being acquired by U.S. or Asian technology giants or moving their headquarters to the U.S. to have better access to both investors and customers.
“If you compare Europe versus the U.S., we’re still, by an order of two or three, underfunding for each and every stage in Europe compared to American [venture capital] companies,” Ek said, speaking at the technology conference Slush earlier this week.
He said that too many European entrepreneurs leave Europe for the U.S. because they don’t feel valued. And he said that Europe needed to build more “super-companies” that “raise the bar and can act as an inspiration.”
Ek certainly has the diagnosis right: Europe does badly trail the U.S. in venture funding. In 2019, a record $37.7 billion in venture capital funding was invested in European companies, according to data compiled by the research and financial data firm PitchBook. But that pales next to the $130 billion VC funds poured into U.S. companies.
The problem is Ek’s solution—committing €1 billion ($1.2 billion) of his own wealth to promising technology companies—won’t fix the problem. First of all, it’s just not that much money. Over a decade, it’s just $116 million annually, and even if Ek’s example inspires a dozen other billionaires to make similar pledges, it still hardly closes a $90 billion funding gap.
Not all money is the same
What Europe really needs to catch up with the U.S. is institutional money. While wealthy individuals and family offices have played a greater role as limited partners in venture funds in recent decades, the vast majority of venture capital funding in the U.S. comes from pension funds and philanthropic and university endowments. Just one giant pension fund in the U.S.—the California Employee Retirement System (Calpers)—had about $550 million committed to venture capital at the end of 2019, according to the Venture Capital Journal.
Meanwhile, in Europe, many pension funds, especially government-affiliated ones, have been prohibited from investing in venture capital because it was seen as too high-risk. This is starting to change. About 62% of European pension funds have built a private equity investing program of some kind, and they currently make up about 30% of the funds committed to European private equity. But that compares to north of 50% in the U.S.
The need for pensions to start backing venture capital is even more acute in Europe because another big investor in U.S. venture funds—university and philanthropic endowments—is almost completely absent in Europe, where these institutions are largely publicly funded without significant private endowments to fall back on.
In some ways, if you want to know why Europe continues to lag the U.S. in venture capital, the answer is simple: socialism. The legacy of having a much more socialistic form of capitalism is that many institutions that are privately funded in the U.S., such as universities, are primarily state-funded in Europe. And Europe likes it that way. But it may mean Europe will perpetually struggle to close the venture capital gap with the U.S.
European governments have tried to make up for some of the shortfall by directly backing venture capital funds through the European Union–backed European Investment Fund. But the EIF is too underpowered—in 2020 it committed less than $12 billion in total— and its mandate to support small and growing companies across all 27 member states of the EU has led it to spread this funding so widely that its potential impact has been muted.
Startup bugs
Then there’s the other problem that Ek put his finger on: European founders’ lack of “inspiration.” In some ways, that problem is fixing itself because of people like Ek. Whereas once young European graduates aspired to nothing more than nice cushy jobs in a big, established corporations with five weeks of vacation a year and the prospect of early, pensioned retirement, many have now been bitten by the startup bug. It isn’t hard these days to find young entrepreneurs in Europe who want to grow big companies and become rich like Ek himself has.
But it’s not a given that that kind of ambition produces world-beating technology giants. What European founders seem to lack, to quote former U.S. President George H.W. Bush, is “the vision thing.”
It’s rare to find a European entrepreneur who speaks of their company in the messianic, “change the world” language that’s commonplace among their brethren (and they are mostly bros) in Silicon Valley. About the best you get from Europe’s founders is a promise to radically transform a particular industry. But higher consciousness through software, saving souls one download at a time—Europe doesn’t do that.
But without that kind of vision it’s hard to see Europe producing a rival to Google, Apple, or Facebook anytime soon.
Capital can be fixed. Culture is another matter.


fortune--2020-09-25--What to watch this weekend on Amazon Prime, Netflix, and more

Between traditional television, video-on-demand releases, and a growing number of streaming services, it can be hard to keep up with what one should watch week to week. Fortune is here to help you keep track of new releases as well as the occasional older title worth checking out. Take a look at this weekend’s notable arrivals, a couple you may have missed earlier in the week, and what else is coming soon:
Amazon Prime Video
John Cusack stars in “Utopia” on Amazon Prime. Elizabeth Morris—Amazon
Utopia: The eight-part series from showrunner and writer Gillian Flynn (Gone Girl) debuts Sept. 25 and includes actors like John Cusack and Rainn Wilson in its cast. And things get a little meta as Flynn points out to The Hollywood Reporter: “Editing a show that has a plotline about a pandemic while a pandemic is breaking is extraordinarily surreal.”
Netflix
“The Great British Baking Show” is coming back to Netflix. Netflix
The Great British Baking Show: Bake Off fans, rejoice! The new season of the baking competition returns to Netflix on a weekly basis Sept. 25, with each episode debuting just a few days after it airs in the U.K.
Apple TV+
Niv Sultan in “Tehran” on Apple TV+. Apple TV+
Tehran: The first three episodes of the eight-episode espionage thriller, focused on an undercover Mossad agent, arrive on Apple TV+ Sept. 25.
Peacock
The Amber Ruffin Show: Amber Ruffin, a writer for Late Night With Seth Meyers—who has also appeared in her own segments—is stepping into the spotlight with her own series, which arrives on the NBCUniversal streamer Sept. 25.
On TV
Chris Rock stars in the new season of “Fargo” on FX.
A Wilderness of Error, a five-part documentary series based on a book by filmmaker and writer Errol Morris, premieres Sept. 25 at 8 p.m. ET on FX.
Dateline sees its 29th season premiere on NBC at 10 p.m. ET.
Two-part series The Comey Rule, which dramatizes events surrounding the 2016 election and is somewhat based on former FBI director James Comey’s book, airs on Showtime Sept. 27 and Sept. 28 at 9 p.m. ET. Read Fortune’s interview with Jeff Daniels, who stars as Comey, here.
Fox’s Sunday night animation block kicks into high gear with the premieres of The Simpsons, Bless the Harts, Bob’s Burgers, and Family Guy—in that order—starting at 8 p.m. ET.
After coronavirus-related production issues further delayed the long-anticipated fourth season of Fargo, the series returns Sept. 27 at 9 p.m. on FX before becoming available via FX on Hulu the following day. Chris Rock, Jason Schwartzman, and Ben Whishaw are among this season’s stars.


fortune--2020-09-25--Spotify CEO Daniel Ek pledges over $1 billion of his personal wealth to “moonshots”

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Spotify co-founder and CEO Daniel Ek is pledging to invest the equivalent of a megafund’s worth of European “moonshots.”
During a virtual talk Thursday hosted by event organizer Slush, Ek said he would invest €1 billion ($1.2 billion) of his own personal resources over the next decade in those startups.
“I will do so by funding so-called moonshots, focusing on the deep technology necessary to make a significant positive dent, and work with scientists, entrepreneurs, investors and governments to do so,” he said, adding that he plans to invest in health care, education, machine learning, biotechnology, material sciences, and energy.
Based on the most recently available figures, Ek’s holding in Spotify (which likely accounts for the majority of his wealth) is currently valued at $3.6 billion. Making a $1 billion pledge is not only huge compared to median fund sizes in Europe (€128.4 million or $149 million), but also in contrast to his wealth.
“We created some of the world’s best known and most beloved brands. Yet in my opinion the notion of the European dream still seems elusive,” Ek said. “Europe is more than ready to have more big companies of its own—more companies like Spotify, Klarna, Zalando, Adyen, to name a few.”
Venture capitalists have turned a fresh eye on Europe. In 2019, dealmaking in the region hit a record $33 billion while the U.S. market slowed slightly. And even in the pandemic, venture activity in 2020 is on track to match, if not beat, that of 2019, according to PitchBook.
SPEAKING OF SPOTIFY… Spotify and game maker Epic have joined with other app developers to form a coalition aimed at pressuring Apple to make changes to its marketplace. They’re demanding that developers are not made to pay “unfair, unreasonable, or discriminatory fees.” Read more.
Lucinda Shen
Twitter: @shenlucinda
Email: lucinda.shen@fortune.com
VENTURE DEALS
- Goat Group, an online marketplace for sneakers, raised $100 million in Series E funding. D1 Capital Partners led the round and values the firm at $1.75 billion.
- NUVIA, a Santa Clara, Calif.-based silicon design companies for processors, raised $240 million in Series B funding. Mithril Capital led the round.
- Within3, a Lakewood, Oh.-based platform for life science collaboration and communication, raised $100 million. Insight Partners led the round and was joined by investors including Silversmith Capital Partners.
- Petal, a New York-based credit card fintech, raised $55 million in Series C funding. Valar Ventures led the round and was joined by investors including Rosecliff Ventures, Afore Capital, RiverPark Ventures, Great Oaks Venture Capital, GR Capital, Nelstone Ventures, Abstract Ventures, Ride Ventures, The Gramercy Fund, Adventure Collective, Starta Ventures, and NFL star Kelvin Beachum.
- ShareChat, an Indian social network, raised $40 million. Investors included Pawan Munjal ( CEO and chairman of Hero MotoCorp), Ajay Shridhar Shriram (chairman of DCM Shriram), Twitter, SAIF Partners, Lightspeed Ventures and India Quotient. Read more.
- Ripjar, a British data intelligence company, raised $36.8 million (£28 million) in Series B funding. Long Ridge Equity Partners led the round.
- Whitebox, a Baltimore-based ecommerce company, raised $18 million in Series B funding. Noro-Moseley Partners led the round and was joined by investors including TDF Ventures and TCP Venture Capital’s Propel Baltimore Fund. Read more.
- Silo, a San Francisco-based platform for supply chains in the perishable food system, raised $9 million in Series A funding. Andreessen Horowitz led the round and was joined by investors including Initialized Capital and Haystack Ventures.
- BookClub, a Salt Lake City-based platform for author-led book clubs, raised $6 million in seed funding. Maveron led the round and was joined by investors including GSV Ventures, Signal Peak Ventures, and Pelion Venture Partners.
- Nori, a Seattle-based startup developing a marketplace for carbon removals, raised $4 million. Placeholder led the round and was joined by investors including North Island Ventures, and Tenacious Ventures.
- ArenaCX, a Raleigh-based customer service marketplace, raised $2 million in seed funding. Sovereign’s Capital led the round.
- Rephrase.ai, a Bangalore-based synthetic media production platform, raised $1.5 million in seed funding. LightSpeed Ventures and AV8 Ventures led the round.
PRIVATE EQUITY
- CVC Capital Partners is preparing to potentially sell PKP Energetyka, a Polish utility company, for 1.8 billion euros ($2.1 billion), per Reuters citing sources. Read more.
- Caisse de dépôt et placement du Québec acquired a minority stake in Colisée Group, a Paris-based nursing home sector operator. Financial terms weren't disclosed.
- Vector Capital invested in Patron Technology, a Wexford, Penn.-based event technology platform. Financial terms weren't disclosed.
- Polaris Partners invested in ARInsights, a Sunny Isle Beach, Fla.-based provider of data to the analyst relations industry. Financial terms weren't disclosed.
- TA Associates and Francisco Partners invested in Edifecs, a Bellevue, Wash.-based maker of healthcare tech. Financial terms weren't disclosed.
OTHERS
- E.W. Scripps agreed to acquire ION Media, a broadcaster, for $2.7 billion.
- Allianz and Athora Holding are in advanced talks to buy insurer Aviva's (LON: AV) French operations in a deal valued between 2 and 3 billion euros ($2.3-$3.5 billion). Read more.
- E Source acquired Excergy, a Denver-based utilities consultancy and provider of system implementation services, from Align Capital Partners. Financial terms weren't disclosed.
- UnitedHealth Group is in advanced talks to acquire DivvyDose, an Illinois-based online pharmacy startup, for about $300 million. Read more.
- Airship acquired ReplyBuy, a Scottsdale, Ariz.-based business that completes payments over messaging. Financial terms weren't disclosed.
EXITS
- Apple acquired Scout FM, a maker of a popular podcast, as it goes up against Spotify. Read more.
- Epic Games acquired SuperAwesome, a London-based platform seeking to make platforms safer for kids, from Mayfair Equity Partners. Financial terms weren't disclosed.
IPOs
- Deliveroo, a U.K.-based food delivery service, is exploring an IPO, per Bloomberg. Amazon backs the firm. Read more.
- Yihai Kerry Arawana, the Chinese business of Singapore agribusiness Wilmar International, plans to raise 13.9 billion yuan ($2.06 billion) in an IPO. Read more.
- Hygo Energy Transition, a Bermuda-based provider of liquefied natural gas solutions in Brazil, postponed its $450 million IPO. Read more.
- VIA optronics, a German provider of display and touch solutions, raised $94 million in an offering of 6.3 million ADSs priced at $15 apiece. Read more.
SPACS
- ChargePoint, an electric vehicle charging network, will go public via merger with Switchback Energy Acquisition, a SPAC, valuing it at $2.4 billion.
- FinTech Acquisition IV, a blank check company aiming to acquire a fintech business, raised $200 million. Managers of the Bancorp back the firm. Read more.
F+FS
- Giant Ventures launched with plans to invest $1 billion over the next decade.
- GGV Capital is in talks to raise $2 billion across three new funds focused on tech investments in the U.S. and China, per the WSJ. Read more.


fortune--2020-09-25--Believe it or not, the house drone is not Amazon’s most interesting new feature

This is the web version of Data Sheet, Fortune’s daily newsletter on the top tech news. To get it delivered daily to your in-box, sign up here.
I don’t care if Monday’s blue
Tuesday’s grey and Wednesday too
Thursday, I don’t care about you
It’s Friday, I’m in love
The news of late has ranged from dreary and depressing to downright alarming. But let’s finish the week on a positive: Our consumer technology is bursting with innovation.
Folding phones, cloud gaming, health sensors, mirrorless cameras, streaming video, lightning-fast wireless, electric cars—all have made great strides of late. And we can finally rearrange the home screen on the iPhone!
Thinking back, Data Sheet could have crafted a great Bingo card with those themes for Amazon’s new product event on Thursday. Gaming, streaming, health, wireless, and cameras all came up, and they even checked another box I almost overlooked: drones.
Did you catch the video of that one? The new Ring Always Home Cam is a $250 flying drone for your house that shoots live video and sends it to your phone. It can work with the Ring home security system to investigate the scene of a possible break-in, as it does in the promo video, or you could use it just to spy on your pets (or teenagers left home alone for the weekend…hmm). It flies along a preset path and makes a loud buzzing noise while filming to avoid catching anyone unawares. Some found it rather Orwellian, but it’s also clearly the future, combining machine smarts, sensors, and cloud connectivity. It’s the first IoB device—the Internet of Buzzing.
There were also new Echo smart speakers (spherical this year), new eero Wi-Fi routers (up to Wi-Fi 6 now), and new features for Alexa (Zoom compatibility!). My colleague Jonathan Vanian has a couple of his highlights and CNET has an even more detailed exploration of what was announced, if you are an Amazon maximalist.
But buried beneath all the headlines was one important development worth pondering further. Amazon’s new cloud gaming service, Luna, will work on Macs, PCs, the Fire TV box, and iOS, with Android “coming soon.”
Wait, iOS? Hasn’t Apple rejected Microsoft’s xCloud app and left Google and Nvidia no path of entry for their cloud gaming offerings?
Amazon found another way onto iPhones and iPads. Instead of developing an app, which would have to be approved by Apple, Amazon’s game service will run inside the phone’s web browser. If you remember all the way back to the introduction of the iPhone, this was Steve Jobs’ original vision for how outside companies could make apps for the otherwise locked-down device (“a very sweet solution,” he called it).
Could this loophole open the floodgates to all the other cloud gaming services and more? We’ll have to wait and see how well Amazon’s service actually performs via the browser. At least to start, it looks like Amazon’s offerings include fewer cutting-edge games than some of its rivals, perhaps due to performance concerns. And most developers rejected Jobs’ “sweet solution” because web apps miss out on many features of the iPhone that native apps can use, leading Apple to develop the now-controversial app store in the first place.
But if the Amazon team has cracked the code, even more innovations could come to our phones. And that’s pretty sweet. Have a good weekend.
Aaron Pressman
@ampressman
aaron.pressman@fortune.com
NEWSWORTHY
Didn't inhale. In testimony that won't help Facebook, former director of monetization Tim Kendall says the company followed the strategy of the smoking industry in trying to get users hooked. "We took a page from Big Tobacco's playbook, working to make our offering addictive at the outset," Kendall told the House Consumer Protection and Commerce Subcommittee on Thursday. Senate Republicans are also after Big Tech. They plan to vote next week on subpoenaing the CEOs of Facebook, Google, and Twitter. Meanwhile, Facebook held a press conference to announce it had uncovered Russian disinformation networks and booted them off the platform.
Melting under pressure. Social media firm Hootsuite is cancelling a contract with the U.S. Immigration and Customs Enforcement agency after employees and users criticized the move earlier this week.
Retrofitting. It's becoming more and more clear to me as I continue testing the Apple Watch Series 6 that the best new feature in this year's lineup is the Solo Loop band, which is kind of sad. But Apple's sizing guidelines have been a little off. Now the company is issuing new instructions on how to measure your wrist before ordering and accepting band returns without requiring customers to also return their just-purchased watch too. In other Apple news, leading app developers including Epic Games, Spotify, and Match Group created a new group to pressure the iPhone maker to improve its terms. The Coalition for App Fairness says platform owners like Apple and Google must "provide consumers with equitable choice."
The little one stops to tie his shoe. Jack Ma's mobile payments titan, Ant Group, debuted a blockchain-based sales platform that generates smart contracts between buyers and sellers. The move comes just ahead of Ant's initial public offering in Hong Kong and Shanghai, which is expected to raise $35 billion, the most in IPO history.
Paper chase. Some legal updates: The European Union is appealing the ruling that let Apple and Ireland off the hook for $15 billion of taxes. And a federal judge said the Trump administration must defend its order to ban TikTok today or he would likely set it aside temporarily.
Silence of the Glambs. Maybe the universe was trying to tell us something. Most Google services went offline last night for a short while.
FOOD FOR THOUGHT
The passage of time has seemed more than a little uneven in this crazy year. Why is that? Quanta Magazine staff writer Jordana Cepelewicz reviews some of the latest science about our changing perceptions of time.
Last month in Nature Neuroscience, a trio of researchers at the Weizmann Institute of Science in Israel presented some important new insights into what stretches and compresses our experience of time. They found evidence for a long-suspected connection between time perception and the mechanism that helps us learn through rewards and punishments. They also demonstrated that the perception of time is wedded to our brain’s constantly updated expectations about what will happen next.
“Everyone knows the saying that ‘time flies when you’re having fun,’” said Sam Gershman, a cognitive neuroscientist at Harvard University who was not involved in the study. “But the full story might be more nuanced: Time flies when you’re having more fun than you expected.”
FOR YOUR WEEKEND READING PLEASURE
A few great long reads I came across this week:
The Cheating Scandal That Ripped the Poker World Apart (Wired)
Mike Postle was on an epic winning streak at a California casino. Veronica Brill thought he had to be playing dirty. Let the chips fall where they may.
My stolen credit card details were used 4,500 miles away. I tried to find out how it happened (TechRepublic)
When cybersecurity reporter Danny Palmer found his card was apparently used on another continent, he set out to discover more.
Magic Leap Tried to Create an Alternate Reality. Its Founder Was Already in One (Bloomberg Businessweek)
The augmented reality startup was undone by profligate spending and its own hype. Investors finally lost patience when the pandemic struck.
Sharon Stone's Done with Monkey Business—Mostly (Town & Country)
The leading lady has never bought into the idea that a movie star can't speak her mind.
IN CASE YOU MISSED IT
Can Disney+ dethrone Netflix? By Lance Lambert
Mark Cuban wants every American to get a $1,000 stimulus check every 2 weeks through November By Lee Clifford
From Airbnb to Peloton, these pandemic-era strategy pivots may stick By Anne Sraders
Holiday season hiring at Target, Walmart shows shifting focus to e-commerce By Phil Wahba
To meet net zero emissions targets, China—and the rest of the world—needs these technologies By Katherine Dunn
Corporate leaders strive to make allyship a real thing at work By Rey Mashayekhi
(Some of these stories require a subscription to access. Thank you for supporting our journalism.)
BEFORE YOU GO
About 30 years ago, Boston Globe film critic Ty Burr took a walk with his mom around her house and recorded their conversation on a cassette tape. Burr's mom, Marjorie Tice, died in 2005, but recently Burr pulled out the cassette and listened to the chat. He's written a moving story about the experience and he has some advice for all of us that I will definitely follow with my parents soon.
Also, did I mention that you should watch the Netflix documentary My Octopus Teacher yet? I did? Well, have you watched it yet?


fortune--2020-09-25--The Queen of England’s banker, Coutts, places a massive bet on Brexit deal

The private bank to Queen Elizabeth II is moving millions of dollars in a bet there will be a Brexit deal that defies widespread market skepticism.
Coutts & Co. has moved its U.S. stock holdings to an exchange-traded fund that would benefit from a rally in the pound if the U.K. government defies the odds to secure a new trading relationship with the European Union.
The firm said it was responsible for most of the $350 million outflow from the London-listed Lyxor S&P 500 ETF over the past week that was then invested into a sterling-hedged version of the same fund.
The allocation would outperform if the currency rebounds against the dollar after falling 4.6% in September, on track for the worst monthly slide since October 2016.
“We think the pessimism over the U.K. is overdone,” said Alan Higgins, chief investment officer at Coutts with about £30 billion ($38 billion) in assets overall. “Based on game theory, we think there’s a deal to be done between the U.K. and Europe. Markets will be surprised, and that will result in higher sterling.”
Sentiment toward U.K. assets is tumbling anew. Domestic stocks are on track for a 5.2% decline this month, the worst since the March rout. The EU has stood firmly against Prime Minister Boris Johnson’s bid to rewrite parts of the withdrawal agreement, setting the stage for a chaotic exit next year.
Coutts, a unit of Natwest Group, is using the Lyxor ETF to give U.K. private clients exposure to U.S. stocks without taking currency risk. The money manager is replicating a similar strategy using derivatives in its multi-asset funds. Modest interest-rate differentials across the Atlantic also mean it’s relatively cheap to hedge against currency swings.
Even if a Brexit agreement remains unresolved, Higgins still sees merit behind the sterling-hedged S&P 500 position. A protracted period of dollar weakness and a low bar for the pound to rebound from its post-referendum quagmire would boost the ETF investing strategy.
“The bias is for the dollar to go down against all currencies,” he said. “Even if sterling is in a bad place, there’s an upward bias on sterling.”


fortune--2020-09-25--Erin Brockovich has given up on the federal government saving the environment

In the public’s mind, Erin Brockovich is Julia Roberts, a movie star in her prime: scrappy, busty, and working to save her neighbors in Hinkley, Calif., from evil corporations who deny their part in heavily contaminating water sources. For two decades, our image of who this woman is has been directed by Steven Soderbergh into a neat, 130-minute story with a happy ending.
It’s the same way many view the 2014 Flint water crisis. This time the story played out in the media, with news producers at the helm instead of a Palme d’Or–winning director. The water was bad, lead-tainted, we heard. Then-President Barack Obama went to Flint. He drank the water on camera, and we moved on. A neat news cycle, maybe with a happy ending? That part was unclear, but the problem had been highlighted, and it was easy to trust that it was now being taken care of. Except that it wasn’t: Six years later, problems are still arising.
That’s what the real Erin Brockovich, now 60, wants you to know. Federal oversight, by the Environmental Protection Agency and the Department of the Interior, she says, isn’t going to fix America’s environmental problems. Outdated rules like 1974’s Safe Drinking Water Act aren’t effective. The national attention span does not last long enough to see a true problem through. When the cameras turned off and news anchors left their posts on the Gulf Coast after 2010’s Deepwater Horizon oil spill, residents were left to fend for themselves. No superhero in sight.
In her latest book, Superman’s Not Coming: Our National Water Crisis and What We the People Can Do About It, Brockovich argues that the only way to institute real change and protect American waterways is through prolonged grassroots and community-based action.
“This is what I learned on the ground with the people: that whether we got too comfortable or complacent, we thought that whoever it may be or whatever it may be would come and fix this,” she told Fortune. “It’s been a process for us to slowly wake up. We need to look to ourselves to rise up.”
The following conversation has been lightly edited.
It’s been six years since the Flint water crisis came to national attention. How does something this big fizzle away with no concrete action?
Erin Brockovich: I’d start with what I learned when the film came out (Erin Brockovich, 2000). There’s a big sensational moment, and things quiet down, but the emails still come in. Hinkley wasn’t one place; there are Hinkleys everywhere. I’ve felt really frustrated out there with some of the media: They’re going to get a sound bite, and then when this is no longer headline sensational news, these people are still left with this. And then Flint happened. It was a very unnerving moment for everybody because we think these agencies are here to protect us. But where were they? Flint was a moment, but it goes away because the news cycle changes.
The rest of us don’t want to think it could happen to us, even though it could. We think that there are still agencies in place to protect us, and over many years policies were written and designed in ways for us not to find out that they aren’t.
Let’s talk about those lead and copper rules in Flint. The rule states that you only have to test for lead once every four years and that you can average the samples. That means they’re going to miss a lot of data sets. You have to reform these antiquated environmental policies, and our current administration isn’t a fan of environmental protections. Water is one of those massive things, like infrastructure, where the cost is so extreme that people push stuff aside or assume that someone else will fix it, but they won’t. It’s up to us.
Do you think oversight agencies have become too politicized to take long term, meaningful action?
We can blame anybody and everybody over the course of 50 years for what went wrong, but that’s not going to get us anywhere. We just need to recognize that it doesn’t matter because the problems are already here, and we need to figure out what our solution is moving forward. I find that companies don’t always like the solution because they think it hurts their finances, but nothing could be further from the truth. We need to rebuild our infrastructure and put people back to work. These are the things that made America great that are now in deep peril. We need to just cut through the bullcrap. Water pollution is here, and I don’t care what side of the aisle you fall on. We must come together on one simple issue that makes or breaks every one of us.
There seem to be two ideas here: One is that we need the federal government to act quickly and on a large scale and perhaps partner with corporations and the other is…
You don’t. You can do it at a local level.
Right. I was going to say that the other idea is that it’s unlikely that will happen in the near future and so there are things that can be done within local communities to protect the environment and waterways. Do you view these as a stopgap measure?
No, it has to be done locally. I think what happens is that at the federal level the umbrella is so big that it would be impossible for them to get anything done without the involvement of the people and the local city council.
I encourage people to go to their city council meetings. We’ve seen the power of people showing up in numbers to those meetings. Sometimes these municipalities might not know what’s going on, and they have a lot of power to reform or change rules. Let’s fix the problems at ground zero. Every municipality in America should do that. You can solve the issue nationally, but at a local level, in your own backyard, [you can act] instead of waiting for someone to come do it.
So what should people do?
Just make the decision: It’s my water; it’s my backyard. Get involved and decide to learn about it. Just make a phone call. It’s that simple.
Look at Poughkeepsie, N.Y. The people there noticed a change in their water quality, and they called. It turns out there was an ammonia feed going into the tap water, and when they turned it off, the phone stopped ringing. They turned the feed back on, and people started calling again to say, “What’s going on?”
There’s a change happening. That’s one of the very first acts that you can take that you may feel is little, but it’s not. You have to be involved, and you have to be proactive. If you think something’s wrong, say something. Because when you do, you learn something, and knowledge is power. You take one small act, but it’s contagious. It’s very empowering.
Is this an easy thing for communities that have large minority populations to do? Are they as heard or listened to?
Environmental racism has been here for a long time; a lot of socioeconomic factors come into play.
Even in Hinkley, what always stood out in my mind was people saying, “You’re not a doctor. You’re not a lawyer. You’re not a scientist. You’re running around in a short skirt. Why should anybody believe you?”
I didn’t think I had to be any of those to be human. There’s this suppression that happens in these communities where people are told that what they’re seeing and experiencing isn’t real, and it’s very frustrating. Eventually people get exhausted, and they think that this is just their lot in life. You’ve got to connect with those people who are at ground zero and know what they’re saying is really happening. They just want to live their lives; they’re not making up crazy stories. There’s a gigantic disconnect between our leaders and what’s happening. But in all of these counties there is that one person—you are out there. Call your municipality 15 times a day. Call us. We’ll get the media involved and put the spotlight on them.
With movements across the country to defund the police, many Americans are now realizing how essential their city councils are and how much their local government can do to impact their everyday life.
Absolutely, and you do see groups realizing that you can make great change at a local level. It is a matter of us getting to the city council because sometimes they don’t know, and we need to show up and tell them. Imagine if every community at every city council level did that. You would initiate a change in your own backyard, and let it spread across the nation.
You’ve been at this for so long, and it seems like a never ending battle. How do you avoid feeling burned out? How do you stay positive?
We all are living in a crazy world, and in order to not spin out with it, you’ve got to stop and reboot. You can’t continue to be motivated if you can’t breathe. I allow myself to get frustrated, to cry, to say, “Peace out. Don’t bother me.” I stop picking up my phone calls and don’t feel guilty that I dropped out for a few days. I forgive myself for not being able to be superwoman.
A few years ago I had a moment where I thought I couldn’t do this anymore. I didn’t know how I was going to make progress, and it felt too big. But then my first grandchild was born, and it reinvigorated me to fight for a better environment. It’s a no-brainer for me. It’s not science; it’s just a real basic simple fact: This planet is our home. We owe it to our home and our planet where we reside to be reinvigorated. She’s tired, and maybe we should pick up the torch a little.
So when you’re tired, be tired. It’s okay. We aren’t perfect. We do get tired; we’re all feeling exhausted. Allow that to happen, and then get out there and start working again tomorrow.


fortune--2020-09-25--‘You can’t self-proclaim it:’ How to be an action-driven ally

This is the web version of the Broadsheet, Fortune’s daily newsletter for and about the world’s most powerful women. To get it delivered daily to your in-box, sign up here.
Good morning, Broadsheet readers! The 15% Pledge is a mixed blessing, Lizzo covers Vogue, and we get a refresher on allyship. Have a wonderful weekend.
– Action-driven allyship. After the grand jury decision this week to not bring charges against police officers for Breonna Taylor’s killing and the pain it inflicted on so many in the Black community, it’s a good time to reflect on what it means to be an ally in the fight for racial justice and equality.
We got a course in allyship yesterday as Fortune‘s Most Powerful Women Summit 2020 kicked off with a few special sessions ahead of the full virtual program next week. In short, we learned that allyship is all about action.
“Being a good ally is about taking concrete steps to turn your good intentions into actions,” Carin Taylor, chief diversity officer at Workday, told the virtual panel that was moderated by Fortune‘s Ellen McGirt. Allyship, Taylor said, is about “taking a stand for those who may have a smaller voice” in a given organization and “driving equity for everyone.”
At Microsoft, the “allyship journey” is about developing more self-awareness and and positive habits, said Lindsay-Rae McIntyre, corporate vice president and chief diversity officer at the tech giant. It’s important to recognize allyship as “a behavior,” McIntyre said, and “something we work on every day” in the workplace.
Barbara Whye, chief diversity and inclusion officer and corporate vice president of social impact at Intel, said that the chipmaker has tried to “make sure every team inside Intel has an ally who can ensure peoples’ ideas are being heard, and that there’s a safe environment for people.”
And she shared a piece of advice that really brought the message home, especially in the age of social media campaigns and hashtags: “It’s best if other people call you an ally—you can’t self-proclaim it. You’re deemed an ally by others, based on your actions and words.”
Claire Zillman
claire.zillman@fortune.com
@clairezillman
Today’s Broadsheet was curated by Emma Hinchliffe.
ALSO IN THE HEADLINES
- Pros and cons. The 15% Pledge, started by Aurora James, urges retailers to stock Black-owned products on their shelves. But those deals can be a mixed bag for these small Black-owned businesses. Founders sometimes have to hand over as much as a 50% to 60% cut of their sales to be sold on retail shelves. Bloomberg
- Double leave for dads. France now has one of Europe's most generous paternity leave offerings. The country doubled its parental leave for fathers from 14 to 28 days—and new dads will be required to take at least a week off after their children are born. New York Times
- Good as hell. Vogue has a true star on its cover this month: Lizzo. The singer is profiled by poet and writer Claudia Rankine: Vogue
- Out of mind. House Speaker Nancy Pelosi is profiled by Elle, and she tells the magazine that running Congress is what's on her mind—not the occupant of the White House. "I don’t even think about him, to tell you the truth,” she says. “This is the most conversation I’ve had about him, certainly all day.” Elle
MOVERS AND SHAKERS: Annie Young-Scrivner is set to step down as CEO of Godiva. Fnatic named Soraya Sobh head of talent management. At Age of Learning, Mia Rondinella is now chief strategy officer; Amy Castillo is VP of brand growth; Lacy Plache is VP of data and analytics; and Cristine Reynaert is deputy general counsel.
IN CASE YOU MISSED IT
- Pivot power. In another MPW Summit special session, we heard from three executives who have led their companies—or conventions—through extraordinary pivots over the last few months: Airbnb's Catherine Powell, Peloton's Dara Treseder, and Stephanie Cutter, who planned the 2020 Democratic National Convention. Fortune
- Unequal outcomes. It's time for health care providers and public health efforts to "face up to ... and tackle" the unequal health outcomes experienced by white people and people of color—especially Black people, says Rhonda Mims, regional VP of community affairs at Centene Corporation. At the third MPW Summit session, she joined other leaders in health care for a discussion about medical racism. Fortune
- HBCU recruiting. If companies don’t recruit from historically Black colleges and universities, they’re missing out on promising employees, writes South Carolina State University business school dean Barbara L. Adams in a Fortune op-ed. Fortune
- Stress less. COVID showed why we need to make financial literacy a national priority, writes Carrie Schwab-Pomerantz, president of the Charles Schwab Foundation and SVP at Charles Schwab & Co. Financial literacy, she argues, would help with the financial stress so many families are facing. Fortune
ON MY RADAR
Young women take a frontline role in Thailand’s protests New York Times
Gillian Flynn takes her paranoia to television New York Times
Everyone's getting tired of viral tweets about men MEL Magazine
PARTING WORDS
"Those are the necessary ingredients in running for office: perseverance, grit, and authenticity."
-Sarah McBride, expected to become the first transgender state senator, on the qualities that make LGBTQ people especially prepared to run for office


fortune--2020-09-26--FTC commissioner: Is antitrust the next stakeholder capitalism battleground?

Down a stunning 23 % , London ’ s once mighty FTSE is trading like an emerging-market stock exchange

The 50th anniversary of Milton Friedman’s seminal New York Times Magazine article, “The Social Responsibility of Business Is to Increase Its Profits,” brought with it renewed calls for corporate America to embrace “stakeholder capitalism,” echoing recent talk from politicians and business leaders alike. Legislative efforts to replace more than a century of American state corporate law with European-style codetermination—enabling workers, suppliers, customers, activists, government, and others who do not own companies to run them—remain stalled. Studies suggest corporate America is not shifting course.
Some stakeholder capitalists are now looking to accomplish their ends using another tool: antitrust. That’s not what antitrust is for, and it’s a bad idea.
Antitrust law protects competition. For decades, courts, enforcers, scholars, and practitioners have focused on what effect a merger or other business practice would have on Americans buying or selling the products or services at issue. Of late, however, a network of activists, pundits, and academics are trying to repurpose antitrust not only as a mechanism for achieving these consumer welfare ends, but also for combating the power of large corporations generally.
They claim that this will, in turn, remedy a host of problems in the American economy, and society. Supply-chain issues for medical devices needed to address COVID-19? Antitrust. Inadequate consumer data privacy? Antitrust. Labor gaining too little from economic growth? Antitrust. Systemic racism? Antitrust. Democracy in shambles? Again, antitrust.
For those who believe antitrust can and should protect so much, it makes sense to get into the business of corporate governance and to direct corporations to protect so many stakeholders. So, some reformers have called to replace the “consumer welfare” standard with “effective competition,” using antitrust to “protect” market participants throughout the supply chain, including workers. Others propose that enforcers seek “stakeholder remedies,” such as changes to corporate governance, as part of antitrust enforcement.
Need to clear that merger? Fork over a few board seats to this union, or negotiate with that cartel of suppliers—and you’re good to go. While some corporate governance arrangements have always raised antitrust concerns—for example, trusts, or managers sitting on the boards of competitors—this is new ground for antitrust and corporate law.
The stakeholder approach would use antitrust to accomplish what shareholders did not sign up for, what many officers and directors have not seen fit to implement, and what state capitols and Congress have failed to legislate. It’s a dramatic change without a democratic mandate, shareholder or otherwise. And it’s a bad idea for other reasons as well.
First, while the goals of stakeholder capitalism—such as fairer wages, lesser income inequality, and smaller carbon footprint—are laudable, they are not, in and of themselves, the stuff of antitrust.
When proponents of stakeholder remedies call on antitrust to escape the “confines of the ‘competition primacy’ paradigm that assumes more competition is better,” they make clear that competition isn’t what they seek. Antitrust protects competition, which surely serves the goals of stakeholder capitalism sometimes, but even healthy competition doesn’t always produce what is best for all stakeholders. A competitive car industry, for example, may still produce pollution. (That’s why we have regulation.) In the last two years, my agency has taken action on a bipartisan basis to preserve competition in opioid pharmaceuticals, coal production, casinos, and e-cigarettes.
Competition doesn’t always benefit shareholders—who are stakeholders, too—either, as it can mean fewer profits to share. Staying the hand of antitrust might, conversely, benefit some stakeholders—think higher wages for a monopolist’s employees or more profits to invest in local philanthropy.
Second, the laundry list of stakeholders in a given company—shareholders, customers, suppliers, employees, local communities, the planet—can have diverging interests. A merger that involves closing a factory, for example, may be good for the planet and for shareholders, but bad for workers. Which stakeholders should antitrust enforcers back? Stakeholder capitalism provides no answer; and the absence of a rule reduces clarity, inhibiting all stakeholders from making plans.
Third, as critics of stakeholder capitalism note, all of this often boils down to empowering another group—management. Focusing on shareholders keeps management, who may not be best equipped to make societal choices, working for those who own the corporation, with a clear metric for success and failure. But he who serves two masters serves none. The more stakeholders management is accountable to, the less accountable it is: a bad result both for shareholders and stakeholders.
Finally, making antitrust enforcers the arbiters of disputes over how to manage corporations invites political meddling and corruption. The Watergate tapes exposed President Nixon’s interference on behalf of a Republican National Committee donor in a Justice Department antitrust case. That scandal led Congress to require that a federal judge approve antitrust settlements by the department. That same administration also reportedly threatened television networks with antitrust suits to extract positive coverage. The more that favored constituencies can—or think they can—get through antitrust, the more meddlesome and corrupt the process will become.
The debate about stakeholder capitalism will continue. So too will the debate over antitrust. But asking antitrust, which protects competition, to reorient corporations away from their shareholders is a bad idea: for consumers, for corporations, for shareholders, for competition, and, yes, for stakeholders.
Noah Joshua Phillips is commissioner of the Federal Trade Commission.


fortune--2020-09-26--Big Tech is suffering from ‘mean reversion.’ And the downdraft isn’t over yet

No force in financial markets is as powerful and predictable as “mean reversion,” the tendency of stock and bond prices that are extraordinarily high or low versus history to return to their long-term norms. The big drop we’re now seeing in tech shares looks like a classic case in point, as economic gravity takes charge, pulling high-flying prices closer to where they’ve traditionally hovered relative to earnings. We’re hearing sundry explanations for the fall—”a second lockdown is on the way,” “chances for new stimulus are fading,” or “the trade war with China is endangering Big Tech”—but the one that makes the most sense is most basic: mean reversion that comes and goes, but always comes again.
In a previous story, this reporter studied the amazing trajectory of the 10 highest market-cap technology companies in the Nasdaq 100, a group I dubbed “StarTech.” I treated StarTech as one big company. Since StarTech’s record close on Sept. 2, its valuation has cratered from $10.47 trillion to $8.76 trillion, shedding 16.4% or $1.7 trillion, equivalent to one-eighth more than Microsoft’s current market cap.
The fall is so substantial that you’d think we might be nearing bargain territory. More likely, mean reversion has just begun, and it has a long way to go. That’s because StarTech hasn’t come close to retracing the giant spike that took its shares from moderately priced to outrageously expensive. Amazingly, that moonshot began less than a year ago, in the fall of 2019. On Sept. 30 of last year, StarTech comprised the following members in descending order of valuation: Microsoft, Apple, Amazon, Alphabet, Facebook, Intel, Cisco, Adobe, PayPal, and Tesla (which bills itself, and gets valued, as a tech pioneer). Since the Nasdaq counts Alphabet’s A and B shares separately, StarTech actually encompasses not 10 but 11 members.
At the time, StarTech’s market cap stood at $5.822 trillion, and its combined GAAP, four-quarter trailing net earnings were $224 billion. So its price/earnings multiple was 26, a big increase from its level of 19 in 2015, but in line with its average over the previous half-decade. From Sept. 30, 2019, to Sept. 2 of this year, Intel and Cisco left the group, replaced by Netflix and Nvidia—a significant shift since the prior pair’s profits were a lot higher relative to their valuations than for the newcomers.
Over that period of just 11 months, StarTech’s valuation soared to that nearly $10.5 trillion peak, a jump of 80%. But earnings didn’t keep pace. In fact, StarTech’s profits dropped by 6% to $210 billion. The combination of the explosion in prices and slide in earnings doubled the multiple from 26 to 50. In less than a year, Apple’s P/E went from 19 to 40, and Microsoft’s from 29 to just over 40.
In the past three weeks, the 16% retreat still leaves StarTech’s valuation of $8.76 trillion 50% above its level a year ago. Its multiple, what investors are paying for each dollar in earnings, remains highly elevated at 41.7. That’s half again its mid-to-high 20s norm since 2015.
What will investors reap if StarTech’s P/E falls to its average of 28 of the mid-to-late 2010s? Today, its dividend yield is a puny .32%. We’ll assume that StarTech spends half of its total earnings on share repurchases, Big Tech’s long-favored vehicle for rewarding shareholders, increasing EPS each year by 1.5%. So dividends and buybacks would deliver total returns of 1.8% combined. We’ll also make the incredibly optimistic forecast that overall profits rise by 10% a year, well above the average for the past half-decade.
In that scenario, StarTech’s profits would swell from $210 to $338 billion by the fall of 2025. At our future, normalized P/E of 28, its market cap would be $9.5 trillion, just 8% above today’s $8.8 trillion. So investors would be getting annual gains of 1.8% from buybacks and dividends and 1.6% from growth in overall profits, for a total of 3.4%. That example illustrates the strong pull of mean reversion. The fall in the multiple to normal levels works against the 10% gains in profits, leaving meager, low-single-digit returns.
Keep in mind that overall profits are highly unlikely to expand at anything approaching 10% in the years to come as Big Tech keeps pouring cash into buybacks over big investments in growing their businesses. So zero or negative returns are more probable. Big Tech could rebound to new highs, of course.
But in the end, mean reversion will win. It always does.


fortune--2020-09-26--Down a stunning 23%, London’s once mighty FTSE is trading like an emerging-market stock exchange

Country A is home to one of the oldest stock exchanges in the world where the rule of law is rock solid, and investors are afforded rigorous protections.
Country B is essentially a petrol state that ranks low on various financial freedom indexes. Its relatively recent transition to a market-based economy has been bumpy, and its embrace of democratic processes and norms has been widely criticized by human rights groups. Country B’s President, for example, recently changed the constitution to extend his rule by decades and is widely suspected of routinely poisoning his political foes.
And yet to investors, the two countries are widely indistinguishable. They’re both seen as a lousy place to sink your spare cash.
You’ve probably guessed Country B is Russia. And Country A? That’s the United Kingdom.
Investors who are long U.K. equities watched incredulously in March as their portfolios sank precipitously and have watched with just as much surprise as it’s failed to recover to the levels of its European peers.
Down roughly 23% year to date, the once mighty FTSE 100 is underperforming just about every major European exchange and is miles behind the major U.S. indexes.
In fact, you have to head to emerging markets to find a comparable performance match. The FTSE 100 (negative 23.1%) sits between Brazil (-16%) and Chile’s Santiago IPSA (-26%) in YTD performance for 2020.
But Dewi John, head of research, United Kingdom & Ireland, at Refinitiv Lipper, sees troubling parallels with another index—that of the MSCI Russia.
“The FTSE 100 performance’s closest match is to MSCI Russia, an .83 correlation, which is tight,” he notes.
He shared this stock chart, which shows the London and Moscow shares in near lockstep since the start of the year. Note: The FTSE 100 index is in orange; the MSCI Russia index is in purple.
The matchup astounded John, adding that the two countries, as investment options, couldn’t be any more different.
Russian stocks are more volatile, the Moscow exchange “more illiquid, and the breadth of stocks is more shallow,” he said. Roughly 50% of Moscow-listed companies are energy companies, which as a global asset class has been one of the worst performers since the start of the COVID-19 outbreak.
Meanwhile, “the U.K. is home to one of the largest, most liquid exchanges. It has incredible breadth and has a really strong rule of law. Investors’ protection is regarded as one of the highest in the world. You certainly wouldn’t say the same thing about Russia.”
Where Moscow is strong in energy, London is strongly weighted to financials and health care. Financials have been a dud this year, but health care stocks are well off their March lows.
The one area where the two exchanges are woefully similar: They are both light on high-growth tech stocks.
All-time low
Investing in emerging markets, such as the BRIC countries, can bring huge returns if timed correctly. The risk is higher, of course, but so too is the potential return.
Few market pros sees such an EM-style return coming from British stocks. In fact, they see just the opposite.
Judging by this year’s performance, the FTSE has a risk-off cloud hanging over it. Earlier this month, the FTSE hit an all-time low against the MSCI World, a humiliating underachievement for an economy that not long ago was seen as an engine of the European economy. That distinction today goes to Germany. In fact, the blue-chip Dax had been outperforming all three major U.S. indexes over the past month.
Down-on-their-luck U.K. equities, meanwhile, are attracting few outside bidders. According to Goldman Sachs, investors pulled a combined $645 million out of U.K. stocks over the past four weeks, ending Sept. 16. Where did they put their money? In continental European and U.S. equities, for starters.
“We see the U.K. as a value trap,” Seema Shah, chief strategist at Principal Global Investors, told Bloomberg. “Valuations might be attractive, but fundamentals are not.”
U.K. stocks are clearly at a disadvantage to other value plays. Investors see in them a triple whammy of risks: the uncertainty of a pandemic, a double-dip recession, and, on the horizon, a calamitous divorce with its European trading partners.
All of it points to trouble ahead for the U.K. economy and for U.K. stocks. “Uncertainties linked to the pandemic, as well as the difficult ongoing U.K.-EU trade talks and the threat of a disorderly hard exit from the EU single market on 31 December 2020, point to a challenging year end for the U.K.,” wrote Berenberg Bank senior economist Kallum Pickering in an investor note today. “In the worst-case scenario, a second nationwide lockdown, combined with a messy exit from the single market, could tip the U.K. economy back into recession. We view this as a tail risk, not as our base case.”
As economists and analysts up the odds of a Brexit break from Europe sans trade deal, the worse U.K. assets perform. The pound sterling, another proxy for investor demand, has lost more than 5% of its value against the dollar this month as COVID and Brexit fears intensify.
Meanwhile Downing Street politicians continue to dial up the volume on their pledge of “getting Brexit done, and hang the consequences.”
At the same time, investors have already pulled off a Brexit of their own.
“The U.K. government is speaking in a bullish fashion. Markets don’t seem to agree,” says John of Refinitiv Lipper.


fortune--2020-09-26--Magic Leap tried to create an alternate reality. Its founder was already in one

Magic Leap tried to create an alternate reality .
Its founder was already in one

Reality finally set in for Rony Abovitz in May. The augmented reality headset that had been under development for nine years inside his company, Magic Leap, had been a colossal flop. In a tearful address over video conference, Abovitz told employees that he would resign.
Abovitz, whose infectious optimism helped Magic Leap secure total investments of about $3.5 billion, didn’t stay down long. Just as his replacement, Peggy Johnson, was taking over, he tweeted that he was “working in stealth mode on something new:-).” The cryptic message was accompanied by a change to Abovitz’s Twitter bio referencing something called Project Phoenix. Abovitz, one could assume, is the mythical bird. That makes Magic Leap the ashes.
Magic Leap once burned bright. Many high-profile investors made the pilgrimage to a swampy, downtrodden suburb of Miami, where they became convinced Abovitz was building a kind of Apple for computers strapped to people’s faces. Private demonstrations of the technology, which made it appear as though digital objects viewed through the headset existed in the physical world, helped procure capital from China’s Alibaba Group Holding Ltd., AT&T Inc., Google and the chipmaker Qualcomm Inc. Magic Leap’s plan was to squeeze the technology down into a consumer device, construct a factory to manufacture it at scale, design an operating system, video games and films and spark the creation of a vast new content industry.
Doing it all, in Abovitz’s eyes, was the only way to outrun the corporate giants who also wanted to own the future. “It’s like if we were a coffee company, and we would have acquired a mountain and the soil and created the coffee bean in the particular climate and then made the roaster and controlled all the parameters,” Abovitz told Bloomberg at Magic Leap’s headquarters in Plantation, Florida, in 2018. “If you look at the best computing products, at the history of them, people that had hardware and software integration and understand the entire consumer experience, they built the best overall products.” He elaborated in a separate interview: “This is like Apple in 1978.”
At its peak—a peak that predated any public evidence of an actual product—technologists raved about Magic Leap’s potential. Shortly before he was appointed CEO of Google, Sundar Pichai joined Magic Leap’s board in 2014 and declared the product would “revolutionize the way people communicate, purchase, learn, share and play.” Pichai quietly withdrew from the board in 2018 and installed a Google subordinate in his place.
After Magic Leap’s $2,300 headset bombed, the startup narrowed its focus to professional applications, tried unsuccessfully to sell the company and fired more than half of its staff. Investors wrote down their stakes by an average of about 94% over a 12-month period ending in June, a steeper decline than WeWork, according to data collected by Zanbato, a research firm that tracks institutional investors.
The new CEO, Johnson, is trying to revive the business through partnerships. Magic Leap is engaged in discussions with Amazon.com about packaging the headsets with Amazon’s cloud services, according to three people familiar with the talks. The conversations are at an early stage and may not result in a deal. A spokeswoman for Magic Leap declined to comment, and Amazon didn’t respond to request for comment.
Abovitz responded to an interview request with a message consisting entirely of link to a research report, which estimates long-term growth in the augmented reality market. His spokesman later clarified that there would be no interview and referred subsequent questions to Magic Leap, which declined to comment. People familiar with Abovitz’s next project said it centers on building entertainment content for smartphones and augmented reality devices, including Magic Leap.
The co-founder’s departure came as little surprise to those who worked with him. Interviews with over two dozen people familiar with Magic Leap’s operations, including current and former employees, investors and business partners, suggest Abovitz’s world-building aspirations had become increasingly disconnected from the company’s reality. When employees found they would be unable to deliver on Abovitz’s vision, Magic Leap went from being one of the most intriguing tech startups outside of Silicon Valley to a parable about believing one’s own hype. The company’s failings reflect a broader struggle within the industry to commercialize a technology with so much promise. The question for Magic Leap is what parts of Abovitz’s dream, if any, can be salvaged.
Magic Leap was always Rony Abovitz. Cherubic and curly haired, Abovitz evokes a mix of Apple’s Steve Wozniak and Gene Wilder from Charlie and the Chocolate Factory. He spent his early childhood in the eastern suburbs of Cleveland before his extended family moved en masse to Florida in his adolescence. Abovitz studied biomedical engineering, drew cartoons and threw javelin at the University of Miami.
After college, Abovitz co-founded a medical robotics company named Mako Surgical Corp. in 2004 and helped take the company public in 2008. Two years later, he stepped down as chief technical officer and into the amorphous role of chief visionary officer. By Abovitz’s own account, he was drifting, daydreaming in the evenings and looking for something else to do. As a thought experiment, he began building a fictional universe called Hour Blue and soon saw it as a business opportunity. At first, Abovitz envisioned some sort of media venture, a film, perhaps, or a game. Then he became fixated on building one aspect of his fantasy world—augmented reality headsets—for people back on Earth.
Intrigue spread through the tech industry in the years after Magic Leap’s founding in 2011. Abovitz liked to keep it weird: A TEDx Talk in 2012 titled “the synthesis of imagination” consisted entirely of Abovitz wordlessly dancing around in a spacesuit alongside several people in furry monster outfits. Another video showed a life-size whale splashing through a school gymnasium. Investors flew from the Bay Area to Florida and signed strict non-disclosure agreements so they could strap on unwieldy prototypes. Then they wrote big checks and raved coyly about how they now understood the future of computing.
Abovitz drew people in with a nerdy charm and naked ambition, said people who worked with him. He alternates between bursts of inspiration and intense dissections of medical research or sci-fi movie plots in hard-to-follow monologues that many people find captivating.Magic Leap recruited at technical conferences by handing out cards that read, “Wizards Wanted,” and the staff was peppered with physicists, game developers, supply chain experts and at least one legendary science fiction novelist, Neal Stephenson. “It was a grand vision,” said Khizer Khaderi, a California-based ophthalmologist and entrepreneur who Abovitz recruited in 2014 as an adviser.
As a leader, though, Abovitz was divisive. He often pitted Magic Leap teams against one another, sending them to develop competing versions of similar ideas and then let the projects fall into stasis instead of choosing a winner, according to the accounts of over a half-dozen former colleagues, who requested anonymity to avoid alienating Abovitz or the historically litigious Magic Leap, which has filed several suits alleging trade secret theft. Abovitz had the final say on all matters but had little patience for details, they said. The company settled into a kind of paralysis, unable to either deliver on or dial back its ambitions.
Spencer Lindsay, an early employee, described his time at Magic Leap as complete chaos but expressed appreciation for Abovitz’s vision. “He was so kind to geeks and a believer in magic,” he said. Lindsay was fired in 2017 due to what he said were conflicting instructions about what his job was supposed to be. In the end, Lindsay felt Abovitz wasn’t equipped to run a company the size of Magic Leap. “Rony really believes in this and tried his hardest,” Lindsay said. “When it came to making concessions to reality, he didn’t have that ability.”
In September 2018, Abovitz invited two Bloomberg reporters to Florida to see the Magic Leap factory. The companycommands a massive building in a drained stretch of the Everglades in Plantation, a town that gets its name from a failed attempt to plant rice fields in the early 20th century. The first stop was Abovitz’s office, a glass-walled room on the second floor. His interior design style could be defined as hobby-shop chic. There were models of spaceships on the coffee table, sketches of ray guns on white boards and shelves stacked high with action figures, sci-fi books and other knickknacks, including a half-dozen R2D2s from Star Wars, a Willy Wonka lunchbox and a photograph of an Apple I computer signed by Steve Jobs.
Abovitz, as he does, quickly slipped into fantasy when describing his management style. “A lot of tech startups, it’s like the Spider-Man movie, and everyone talks about Spider-Man. Everyone in my company knows that my goal is to distribute Magic Leap, to be more like an Avengers team.” When asked whether he had succeeded, Abovitz shrugged. “I actually think turning yourself into Spider-Man is kind of cool,” he said.
The primary purpose of the tour was to show off Magic Leap’s manufacturing facility, located a floor below Abovitz’s office in the part of the building he referred to as “little Shenzhen.” Any piece of consumer gadgetry is made up of many components from an array of manufacturers. The main processor in the Magic Leap 1 headset, for instance, is made by Nvidia Corp., and the chip that manages the device’s cameras comes from Intel Corp.
Abovitz insisted that Magic Leap make one component itself: the lenses used to enable the headset’s augmented reality features. Each lens, known as a diffractive waveguide, is etched with tiny grooves that redirect light across the surface before being steered into a wearer’s eye. Because the lenses are transparent, users can see both the physical world and the digital images the headset creates. Existing technology had limitations, and Abovitz thought Magic Leap could make some breakthroughs in secret.
He also really wanted to build a factory. His previous company, Mako, had its own production facility, and Abovitz saw it as critical to helping him understand how best to push the technology forward. (He’d also discovered that showing surgeons around a factory floor bustling with robots was an effective way to win their business.) In consumer electronics, though, components are typically the domain of specialty manufacturers, many of which are in Asia. Some of Magic Leap’s executives and investors questioned the wisdom of an expensive undertaking to make parts that could be purchased elsewhere, according to two people with knowledge of those discussions.
Abovitz went ahead anyway. He mined the staff of Tessera, an optics business in North Carolina, to build a manufacturing team. The first key recruit was Paul Greco, a soft-spoken engineer with a taste for loud Hawaiian shirts. Greco had spent 16 years at Motorola, where he helped run a smartphone production facility in Plantation. At Greco’s suggestion, Magic Leap moved into the old Motorola building. He then set out to gut and renovate the ground floor to establish an operation every bit as utilitarian as the rest of the office was whimsical.
Greco led a tour of the production lines, where workers in clean-room bunny suits operated machinery. At the time, he was preoccupied with adding a second assembly line that would be nearly autonomous, he said. “Rony loves it, because essentially we’re going to have the robots, like little R2D2s, that are literally going to move the materials around,” Greco said.
Magic Leap designed a supply chain fit for a multinational corporation. The lenses and other materials were built in Florida and shipped to Guadalajara, Mexico, where a partner assembled the headsets and sent them back to the U.S.
Abovitz ran Magic Leap as though it was already a serious rival to companies like Apple, which wasn’t always the cheapest or most effective approach. “I’m not sure why there wasn’t anybody who said you can’t build this out, and you can’t turn all this stuff on at this stage,” said an early Magic Leap investor.
Like many investors, this one had initially been won over by a dazzling demo, only to watch things go wrong, not just technically but culturally. For those on the inside, Abovitz’s vision had become a sort of blindfold to common business sense. “Everyone was so bought in, they’d drunk the Kool-Aid together. Nobody stopped to say, ‘This product sucks,’” the investor said. “The first time I put on the real one, it was just like, ‘Oh shit. You guys did not deliver on your promise.’”
As Abovitz was publicly declaring he would crush the Big Tech companies, he maintained a backchannel with nearly all of them, just in case. The CEOs of Apple, Facebook Inc. and Google each journeyed to Florida for discussions about a potential acquisition in 2016, according to the technology news site the Information. The talks with Apple progressed far enough that Abovitz flew to Cupertino, California, to meet with the company’s senior leadership, said a person familiar with the trip. Abovitz named the sale talks Project Batman.
Silicon Valley has long been seduced by the idea of augmented reality and has struggled nearly as long to make the technology useful. When Google’s attempt, Glass, flopped, it steered the product toward medical professionals. Microsoft Corp.’s HoloLens was an impressive gaming machine but unaffordable to most. Now it’s mostly targeted at businesses. Apple’s work on a product that combines augmented and virtual reality, code-named N301, has been ongoing since at least 2015, with more than 1,000 engineers dedicated to the project. Progress has been halting.
Magic Leap executives consistently bristled at reports of the company’s profligacy over the years, saying rivals were actually spending more but obscuring their projects deep within massive balance sheets. Still, Abovitz never figured out how to distill the magic produced by the enormous prototypes into a viable product, former employees said.
The headset Magic Leap released two years ago was based on a different technique, and its limitations were evident immediately. A narrow field of view meant that digital images had to be small or risk appearing cut off, and the headsets couldn’t be used reliably outdoors.The company found tricks to compensate. In one demo billed as a huge dinosaur wandering around an office, it created the effect by situating the creature at the far end of an open hallway so it would fit in the display.
The Magic Leap 1, with its steampunk-inspired design, did offer glimpses of potential. One app allowed people to drop small digital creatures around a room, where they’d adorably bump into the legs of coffee tables and fall off chairs. (They disappeared completely if you weren’t looking directly at them, then suddenly reappeared when turning your head back.) These gimmicks wore off quickly, though. Despite having spent heavily on content and touting collaborations with CNN, the National Basketball Association and Walt Disney Co.’s Lucasfilm, there wasn’t much to do with the device.
Experts in augmented reality hardware were underwhelmed, too. Palmer Luckey, the co-founder of Facebook’s virtual reality headset Oculus VR, dissected Magic Leap’s device and determined it was “the same technology everyone else has been using for years.”
Even engineers who used to work at Magic Leap questioned whether the company’s signature lenses will ever be fit for a consumer device because they use too much power and absorb too much light to operate outside of controlled environments.
As Magic Leap floundered, it began to re-examine its options. The company’s senior leadership seriously considered multiple acquisition offers late last year, according to people with knowledge of the deliberations. It decided to raise more capital instead.
The cash spigot that had been flowing to startups throughout Magic Leap’s lifetime slowed to a trickle this year when the coronavirus pandemic struck. Investors balked at Magic Leap’s requests for more money, angering Abovitz, who had said privately that he didn’t sell the company last year because investors assured him of their support, according to a person familiar with his thinking at the time. Magic Leap made another attempt to sell itself this spring and then resorted to layoffs. In his departing address to employees in May, Abovitz largely blamed the coronavirus, an assertion that rang false to some people in the audience, according to a person in attendance.
Somehow Apple, which doesn’t even sell a headset today, has emerged as the company most likely to own the mass market when it releases one as soon as 2022. For businesses, Microsoft is the clear leader.
That leaves Magic Leap and its new CEO in an awkward spot. If Abovitz was a visionary with trouble staying grounded, Johnson was there to execute. With two decades of experience at Qualcomm, Johnson was one of Satya Nadella’s first big hires after he was named Microsoft CEO in 2014. Johnson helped Microsoft repair relationships with companies like Salesforce.com Inc. and Samsung Electronics Co., which had frayed in the Steve Ballmer era.
Johnson started her job at Magic Leap last month and had to wait weeks before getting into the office due to the pandemic. She declined an interview request, and Magic Leap didn’t provide anyone else for an interview. She will likely focus on medical and industrial applications for the product, which have proven to be the only realistic near-term markets for augmented reality.
She’s also focused on making Magic Leap more competitive with the HoloLens, a $3,500 headset that Microsoft sells to manufacturing and medical institutions and that critics say is technically superior to what Magic Leap offers. The startup has a handful of corporate customers signed on, and Johnson’s first task is to close other deals in the works, including the one with Amazon, according to people familiar with the plans.
Some of the people who left or were dismissed by Magic Leap this year have landed at Apple and Facebook. Even several current employees acknowledge Magic Leap will never fulfill the goals Abovitz so convincingly pitched. Abovitz offered a different message on the day he resigned: “We have created a new field. A new medium,” he said. “And together we have defined the future of computing.” It’ll be up to someone else to make that future a reality.


fortune--2020-09-26--What pullback? Investors say these stocks have the most upside

After the late March passage of the CARES Act, stocks went on a tear even as the economy plummeted. But that run is over: The S&P 500 Index has declined nearly 10% since its peak at 3,580 points on Sept. 2.
Is this just a temporary setback, after a spring and summer of huge gains, or the start of a bigger pullback? Where can investors still find upside—and what stocks are they avoiding?
To find out, Fortune and Civis Analytics joined up to survey 1,180 U.S. investors between Sept. 11 and 14.* When we last surveyed investors, the week of March 23, we found that they were planning to buy the dip. Then the S&P 500 climbed 47%.
Now it looks like investors are getting more bearish. Only 28% of investors see the S&P 500 finishing the year above 3,000 points, and a meager 7% see it over 3,500 points. Meanwhile, 61% are worried stocks are overpriced.