fortune--2020-01-28--The A.I. in your workplace

The A.I. in your workplace

This is the web version of raceAhead, Fortune’s daily newsletter on race, culture, and inclusive leadership. To get it delivered daily to your inbox, sign up here.
In her first feature for Fortune, my colleague Maria Aspan tackles the strange new world of A.I. in hiring and human resources, by far one of the hottest new ideas to hit talent management in ages. It seems like a perfect fit, at first: The tech aims to do everything from helping hiring managers pluck the ideal candidate from a digital stack of 20,000 resumes to identifying valuable employees before they jump ship, to finding the next big corporate star.
And it’s everywhere. From her story:
In a 2018 Deloitte survey, 32% of business and technology executives said they were deploying A.I. for “workforce management.” That share is almost certainly higher today—and it’s spreading to encompass some of the world’s largest companies.
As a job seeker, you might have your application vetted by a Mya Systems chatbot at L’Oréal or PepsiCo. You could respond to an A.I.-crafted job posting vetted by Textio, perhaps at ExpediaGroup or ViacomCBS. You could be asked to play Pymetrics games not only at Kraft Heinz but also at Unilever or JPMorgan Chase. You could record one of the automated HireVue video interviews used by Hilton and Delta Air Lines.
Your relationship with A.I. may extend past the job offer too. Once hired, you might find yourself filling out employee-engagement surveys designed by Microsoft’s LinkedIn, where your answers could help set your manager’s performance targets. Your employer could tap you for promotion opportunities identified by Workday’s A.I. If you work at an Amazon warehouse and miss your productivity goals, in-house systems could recommend that you be fired. On the other hand, if you work at IBM and plan to quit, in-house systems might guess your plans and warn your managers that they should try to make you happy.
So, what could go wrong?
“This was the central question I asked everyone for the piece,” Aspan tells raceAhead. “Not just how do you think about unconscious bias in A.I., but how do you make sure your technology is eliminating it?”
And therein lies the rub. “Everyone, of course, said they were thinking about it, and most say they’re checking for discriminatory results or disparate impact through internal or external audits of their A.I. systems,” she says. But as her story points out, these self-audits have no external teeth, the technology is unregulated, and it’s functionally too late—A.I. in HR is out there, at scale.
From a mitigation perspective, system makers can make certain accommodations.
Pymetrics, a startup that offers cognitive and behavioral tests, has modified versions of its games for job candidates with color blindness, ADHD, and dyslexia. But A.I. systems can’t mitigate what it doesn’t know to look for.
Quoted in the piece is Ifeoma Ajunwa, an assistant professor at Cornell who studies automation in hiring. She offers as an example a hiring algorithm designed to scan resumes and reject any with unexplained gaps in employment. “That seems like a pretty straightforward way to make sure you’re getting a committed workforce,” she told Aspan, but “you’re going to exclude formerly incarcerated people, possibly veterans, and women who had to take a break for childcare or eldercare.”
Please read and share with your executive team—think of it as a creative way to earn a coffee meeting with your Chief Talent Officer! And if you’d like to hear Aspan’s formidable voice on the subject, check out her recent interview on raceAhead’s favorite radio show, Career Mix with Torin Ellis on Sirius XM Urban View, Channel 126.
Ellen McGirt
@ellmcgirt
Ellen.McGirt@fortune.com
On Point
D.C. police used to handcuff children under 12 This is the big takeaway from one of a series of rule changes being implemented in the District, developed in response to two separate incidents in which police officers chased down and handcuffed two boys, 9 and 10 respectively. The detention of the boys, who had done nothing wrong, caused a public outcry. From now on, the D.C. police will no longer handcuff young suspects unless the child or the public is in imminent danger. “We just want to handle our juveniles in the most professional way,” Police Chief Peter Newsham said in an interview. “You have to have an understanding that these kids aren’t fully developed emotionally and mentally.”
Washington Post
The Supreme Court allows Trump administration expanded plan to deny green cards to immigrants likely to need government benefits It’s a dicey legal issue that has been working its way up the lower courts. The Department of Homeland Security announced in August that it would expand the definition of immigrants who were likely to become “public charges” who would need government assistance to stay in the country. In the past, the definition included people who qualified for cash benefits only; the new standard includes people who would qualify for Medicaid, SNAP, and federal housing assistance. The court voted 5-4 in favor, with Justices Breyer, Ginsburg, Kagan, and Sotomayor saying they would have left a lower court ruling in place that's exploring the pending legal challenge.
NBC News
The American Dirt mess in a cáscara de nuez David Bowles, a Chicano writer and translator, is one of many people who been critical of American Dirt, a tone-deaf and deeply polarizing novel about a Mexican bookseller inexplicably being targeted by a drug cartel kingpin… but that’s not important now. What matters is that the book has been roundly derided by the Mexican and Mexican Americans its supposed to celebrate as insulting, inaccurate, and riddled with stereotypes. Which points to the actual problem, says Bowles. “The manuscript was acquired by Flatiron Books for seven figures in a nine-way bidding war. Hailed as a modern-day The Grapes of Wrath by the writer Don Winslow, it was heavily promoted for a year, poised to be the book on the immigrant crisis,” he says. And then Oprah got into the mix. “Much of the problem lies with the publishing industry,” he says, and then he breaks it toda la calle abajo, she said, proving Google translate isn’t as helpful as you think it is.
New York Times Opinion
On Background
We are what we remember Do you know what happened at Shockoe Creek? Or where Gabriel, the unsuccessful but undeterred, enslaved blacksmith was left after he was hanged there for organizing a revolt? That anyone, other than local folk, do know is thanks to Brent Leggs, the director of the African American Cultural Heritage Action Fund at the National Trust for Historic Preservation, who declared Richmond, Virginia’s Shockoe Bottom, the center of Richmond’s robust slave district, one of the country’s most endangered historic places. It had all been lost to development. Shockoe Creek is still in limbo but emblematic: “Of the more than ninety-five thousand entries on the National Register of Historic Places—the list of sites deemed worthy of preservation by the federal government—only two per cent focus on the experiences of black Americans.”
New Yorker
Hip-hop muzak? Well, no, not exactly. But Slate’s Tre Johnson takes us on a journey—of food, music, post-Katrina New Orleans, his family’s brand of Blackness, and his daily life—to tell a poignant tale of cognitive dissonance via audio gentrification. Specifically, the prevalence of hip-hop as the communal soundtrack to spaces and places where Black people aren’t fully welcome. “Now that hip-hop is no longer seen as a threat, the way it was when I was growing up in the ’80s and ’90s, it’s become the default ambiance in the kinds of high-end spaces that include few Black people,” he says, places with elegant white waiters, fancy boutiques, and upscale gyms. Knowing that Black and American culture are double-helixed together “makes it all the more painful to find myself in mostly white spaces with their Black soundtracks,” he says.“The music’s been recycled for consumption, with little care for the context of this consumption. Embracing Black music is not the same as embracing Black people.”
Slate
Behold: A new media company focusing on women, policy, and politics The 19th* (the asterisk is not a typo) is the brainchild of Emily Ramshaw, former editor-in-chief of Texas Tribune and colleague and former ProPublica staffer Amanda Zamora, and is being launched with $5 million in funding from people like Craigslist founder Craig Newmark and activist/philanthropist Kathryn Murdoch. “This isn’t the day’s news but pink. This is unique, original coverage about the roles of gender in politics and policy,” said Ramshaw, who is CEO of the nonprofit. “We are not doing turn-of-the-screw reporting, but rather what that turn of the screw means for different parts of the women’s electorate.” Best of all, their inaugural reporter is raceAhead cousin Errin Haines, who previously covered race and ethnicity for the Associated Press. Check out 19thnews.org for more (and to check out the job openings).
Washington Post
Quote
“By far the greatest danger of Artificial Intelligence is that people conclude too early that they understand it.”
—Eliezer Yudkowsky, co-founder and research fellow at the Machine Intelligence Research Institute


fortune--2020-01-28--Facebook’s board for ruling on questionable content takes shape. Here’s what you need to know

New York Times reporter writing a bin Salman book was targeted with NSO Group spyware , report says

Facebook has appointed the chief administrator of a new independent board that will make the controversial decisions about whether user posts violate its social network’s rules and should be removed.
The appointment on Tuesday, along with the release of details about how the board will operate, provides new insight into how Facebook plans to police its site. But it also raises new questions about the company’s campaign against hateful content, misinformation, and violence, which many politicians criticize as inadequate and inconsistent.
In 2018, Facebook CEO Mark Zuckerberg announced plans for the independent oversight and suggested that it should be staffed by outside experts. It would serve as an appeals court for users whose content had been removed by Facebook employees and who want an additional review.
Here are four key topics about the board that Facebook addressed on Tuesday.
The board’s new boss
Facebook has appointed Thomas Hughes, formerly executive director of Article 19, a British media-rights organization, to lead the board’s administration. Previously, Hughes was at International Media Support, a Denmark-based nonprofit that works to protect journalism worldwide, in addition to the United Nations, the European Commission, and the Organization for Security and Cooperation in Europe.
Hughes, who started on the job a week ago, was Hughes was among 70 people who in 2018 signed a letter to Facebook asking it to consider the global implications that are attached to the removal of content on its platform.
“When content is removed in error there are consequences to global freedom of expression,” Hughes read from the letter during a call on Tuesday. “The statement remains as true and important now if not more so than it was a year ago.”
Trying to create independence
In an effort to create some independence from Facebook, the new board’s staff will be employed by Oversight Board LLC. That entity’s new director will hire, lead, and oversee the board’s work independent of Facebook’s executives.
While the organization is intended to operate independently of Facebook, it is ultimately financially dependent on the company, which, last year, committed $130 million to its funding over the next six years.
In a nod to transparency, Facebook said that the board’s decisions will be published online and in its annual reports. Those reports are expected to include how and when Facebook implemented the board’s decisions along with any comments from the company about the decision.
A lengthy appeals process
The board has 90 days to decide individual cases, after which Facebook has seven days to implement them. That means that content determined to be unfairly removed, or kept up, may not be reinstated for nearly 100 days.
However, Facebook said this is merely a maximum amount of time, and that most cases are expected to move faster. Facebook says it also has the ability to expedite “urgent” cases for immediate consideration.
Facebook said the 90 days gives it time to alert the user involved that it’s removing content as well as give the user time to file an appeal. It also allows for time to translate posts, if necessary, before a review and for the board to conduct research.
Details about the oversight board
Facebook expects the trust that backs up the board to employ 30 to 40 people in the U.S. and U.K. Meanwhile, the oversight board will comprise up to 40 part-time board members as well as rely on a “vast network” of academics and experts.
Board members, who will have the be approved by trustees from the Oversight Board LLC, will serve three-year terms of up to two terms. Once board members are added, they can only be removed if they violate a code of conduct or step down. They will not be removed based on their content decisions, according to Facebook.
Board members will be announced in the “coming months,” Facebook said.


fortune--2020-01-28--The coronavirus problem could be solved with design thinking

This is the web version of Business x Design, a newsletter on the power of design. Sign up here to get it in your inbox.
A central premise of this newsletter is that design is about more than creating beautiful objects. We’ve embraced the broad notion of design that includes “design thinking,” the use of empathy, brainstorming, prototyping, testing, and other techniques to solve practical problems in areas not traditionally associated with design.
One of those areas is health care. I’m pondering design thinking’s potential contribution to that sector because I write from Hong Kong, where the entire city is convulsed by the prospect of a respiratory pandemic originating from the central-Chinese metropolis of Wuhan. At the time of writing, known cases of a mysterious new coronavirus have jumped to 4,515—a 60 percent increase from just 24 hours ago at time of writing. More than 100 people in China have died; the virus has now spread from Wuhan to over a dozen countries, including the United States.
China’s government has imposed a travel ban on Wuhan and 16 other cities in Hubei province. The restriction seeks to create a cordon sanitaire around 50 million people, and might be the most ambitious lockdown in the history of civilization. It may also be too late. The mayor of Wuhan acknowledged that just before the ban, five million of Wuhan’s 11 million residents left the city, most returning to rural villages to celebrate the Chinese New Year.
In combating the Wuhan virus, scientists, doctors, and nurses form the first line of defense. As Annie Sparrow notes in this excellent Foreign Policy essay, experts are still grappling with basic questions about the virus: Where did it start? How lethal is it? How does it spread? And how long will it take to develop a vaccine?
As answers materialize, designers and design thinkers can play a vital role. Among the areas where they might help:
Visualizing data: In a Fast Company article, journalist Stephanie Evergreen says graphic designers can save lives by helping scientists and public health officials communicate information about the geography of the disease, how it spreads, and how to stop it.
Rethinking China’s health care system: China does not have enough hospitals, and the ones it has are bureaucratic, inefficient, and poorly organized. Videos circulating on China’s social media shows scenes of chaos and squalor inside Wuhan’s hospitals. The government has ordered construction companies to work round the clock to build a six-acre, 1,000-bed emergency hospital for coronavirus patients within the next week. But will facilities thrown up with such haste still function properly, and minimize the risk of contagion?
Cleaning up China’s wet markets: Many of the early victims of coronavirus worked in or visited one of Wuhan’s largest wet markets, where a wide array of wildlife species—bats, civet cats, snakes, live wolf pups—were sold as food. Experts say that close contact with these creatures can accelerate the mutations that spawn viruses capable of jumping to humans. Chinese authorities imposed a temporary nationwide ban on the trade of wild animals and quarantined all wildlife breeding centers. Designers may not be able to change a country’s dietary preferences. But they could address the infrastructure around wet market hygiene.
Design thinking’s methods aren’t widely understood in China. Beijing tends to prefer solutions that involve top-down edict and central control rather than “empathy” and “ideation.” The Wuhan outbreak, and China’s struggle to contain it, demonstrates the need for a different approach.
More design news below.
Clay Chandler
@ClayChandler
Clay.Chandler@Fortune.com
VISION, EMPATHY, SCALE
This edition of Business x Design was curated by Margaret Rhodes.
Robert F. Bukaty—AP Images
Street smart. How does a town become a smart city? Chattanooga invested in fast public Wi-Fi. Toronto is considering a proposal for a connected, sensor-laden waterfront district, from Alphabet’s Sidewalk Labs. Portland, Maine is taking another tack. The historic fishing town is opening a research institute focused on artificial intelligence and machine learning. If you build it, the thinking goes, talent, patents, and jobs will come. [The New York Times]
New life, new perspective. “Birth is a design problem,” says Kim Holden, SHoP architect-turned-doula. Beyond the physiology of pregnancy, expectant women also have to navigate a healthcare and hospital system that wasn’t designed specifically for them. Holden, the founder of Doula x Design birth services, is applying architectural thinking to the birthing experience, and espousing the “positive ripple effect” of supporting women. [Madame Architect]
Drive slow. A Dallas ride-share company wants to take on Uber and Lyft by building and then leveraging an intangible, yet crucial, feature: trust. Alto offers its drivers better pay and benefits, and promises passengers safer, vetted rides. (Plus customized touches like curated playlists.) In exchange, users pay more and wait longer for rides to arrive. That’s a tough sell. But in the wake of reports and lawsuits detailing sexual assaults happening in Uber and Lyft rides, trust is a service more consumers might want to pay for. [Texas Monthly]
“Does This Bother You?” Tinder is training machine learning models to detect offensive interactions in its app. AI is capable of flagging toxic language (check out this case study on filtering comments, from Alphabet’s Jigsaw), but because flirting is a context sport, Tinder is taking a more nuanced approach by asking users if select messages are welcome or not. The upshot: a redesigned interface that makes it easier for users (especially women) to report bad behavior. [Wired]
IN CASE YOU MISSED IT
Apple’s new golden child—services—is in the earnings spotlight. Here’s why by Don Reisinger
WeWork’s other cofounder has a plan to save the company. It’s the opposite of what Adam Neumann envisioned. By Polina Marinova
The future of sustainable air travel: How airlines (and you) can fly more efficiently by Danielle Bernabe
Berlin’s ‘ghost’ airport might finally open—billions over budget and 8 years late by Steven Perlberg
Melinda Gates has big plans for Chicago by Emma Hinchliffe
DISCUSSION
Homesteaders are always out there, growing their own lettuce and eating by solar-powered light. But every now and again, a magazine story spotlights a reincarnated version of living off the land. This month, The New York Times Style Magazine published a tour of an off-the-grid, intentional living community in Missouri. Journalist Mike Mariani describes them as “a modern descendant of the utopian colonies and communes of centuries past.”
If you’re reading this, you’re probably on a computer. In turn, that tech-free way of life might come off as impossibly niche. It is—and yet, intentional living communities are on the rise among the millennial demographic: Mariani reports that between 2010 and 2016, these collectives doubled in number, with about 100,000 people living in each one. Many of the new residents are in their 20s and 30s, and say they’re pursuing a life with fewer corporate influences, and more meaningful, tangible social connections.
Over at The New Republic, a deep dive into the “degrowth” movement captures another kind of self-sufficient living, this one aimed at decelerating economic expansion. Proponents of degrowth suggest replacing electricity with human energy, and disavow using raw materials or buying consumer goods. Degrowthers believe this strategy, if adopted at scale, could stave off climate disaster. Inspired by the Amish, it’s also a prototype for another way of life. From journalist Aaron Timms:
“ In public, degrowthers often emphasize that they do not advocate a return to the past. Their writing says something subtly different: not exactly that we should regress to the Neolithic or live like hunter-gatherers or the Yaka pygmies of northern Congo, but that we should be inspired by their examples … against the religion of the economy degrowthers erect their own cult of premodernism.”
We live in times of breakneck speed, both in the spread of information and the development of new services and consumer goods. It’s easy to see why some people want to slow down and redesign the systems that underpin daily life. Most people won’t chase this particular dream, and plenty can’t afford the time, headspace, or money to even think about it. But it would be interesting to see how the thinking behind intentional living and degrowth could apply elsewhere. People want to step outside the stream; that desire exists in ways big (entire communes) and small (deleting Facebook from your phone), and it’s worth a closer look.


fortune--2020-01-28--Trump unveils Middle East peace plan that calls for a Palestinian state

President Donald Trump unveiled his long-awaited Middle East peace plan Tuesday, calling for the creation of a State of Palestine with its capital in portions of east Jerusalem, saying it is a “win-win” opportunity for both Israel and the Palestinians.
The plan calls for the creation of a State of Palestine with its capital in portions of east Jerusalem, ending speculation as to whether his administration, in preparing a proposal without input from Palestinian leaders, would abandon a “two-state resolution” to the conflict.
Trump, releasing the plan before a pro-Israel audience at the White House with Prime Minister Benjamin Netanyahu by his side, acknowledged that he has done a lot for Israel, but he said he wanted the deal to be a “great deal for the Palestinians.” Trump said the deal is a “historic opportunity” for Palestinians to achieve an independent state of their own.
The plan more than doubles the territory currently under Palestinian control, although it also recognizes Israeli sovereignty over major settlement blocs in the West Bank, something to which the Palestinians will almost certainly object. The Palestinians have already rejected the proposal, accusing Trump of being biased in favor of Israel as he has adopted policies that bolster Israel at their expense.
The plan does call for a four-year freeze in new Israeli settlement construction, during which time details of a comprehensive agreement would be negotiated. However, it was not immediately clear if the freeze could be extended if a final deal is not concluded in the four years.
The 50-page political outline goes further in concessions to the Palestinians than many analysts had believed was likely. However, it would require them to accept conditions they have been previously unwilling to consider, such as accepting West Bank settlements. It builds on a 30-page economic plan for the West Bank and Gaza that was unveiled last June and which the Palestinians have also rejected,
Under the terms of the “peace vision” that Trump’s son-in-law and senior adviser Jared Kushner has been working on for nearly three years, the future Palestinian state would consist of the West Bank and Gaza, connected by a combination of above-ground roads and tunnels.
Netanyahu and his main political challenger in March elections, Benny Gantz, had signed off on the plan.
The White House event came as Trump’s impeachment trial continues in the Senate and Israel’s parliament had planned a hearing to discuss Netanyahu’s request for immunity from criminal corruption charges. Netanyahu withdrew that request hours before the proceedings were to begin, but Israel’s parliament, the Knesset, is still expected to meet. The body had been likely to vote against immunity, dealing Netanyahu a blow.
In the run-up to the March 2 election, Netanyahu had called for annexing parts of the West Bank and imposing Israeli sovereignty on all its settlements there. Israel captured the West Bank in the 1967 Mideast war, and the Jordan Valley in particular is considered a vital security asset.
Security responsibility for the Jordan Valley would remain in Israel’s hands for the foreseeable future but could be scaled back as the nascent Palestinian state builds its capacity, under the terms of the plan, which says that statehood will be contingent on the Palestinians meeting international governance criteria.
U.S. officials, speaking on condition of anonymity ahead of the plan’s release, said they expected negative responses from the Palestinians, as well as Turkey and Iran, but were hopeful that Jordan and Egypt, the only two Arab nations to have peace treaties with Israel, would not reject it outright. The officials said they expected Gulf Arab states like Saudi Arabia, the United Arab Emirates and others to cautiously welcome the plan.
The reaction of Jordan, which would retain its responsibilities over Jerusalem’s al-Aqsa Mosque under the plan, will be particularly significant, according to the officials, who said Kushner and others were reaching out to Arab leaders ahead of the rollout.
The Palestinians see the West Bank as the heartland of a future independent state and east Jerusalem as their capital. Most of the international community supports their position, but Trump has reversed decades of U.S. foreign policy by siding more blatantly with Israel. The centerpiece of his strategy was recognizing Jerusalem as Israel’s capital and moving the American Embassy there. He’s also closed Palestinian diplomatic offices in Washington and cut funding to Palestinian aid programs.
Those policies have proven popular among Trump’s evangelical and pro-Israel supporters and could give him a much-needed boost from his base as he gears up for a reelection battle this year.
But the Palestinians refuse to even speak to Trump and they called on support from Arab leaders. The Palestinian leadership also has encouraged protests in the West Bank, raising fears that the announcement in Washington could spark a new round of violence. Ahead of the announcement, the Israeli military said it was reinforcing infantry troops along the Jordan Valley.


fortune--2020-01-28--Facing big emissions fines, Volkswagen sees a remedy in car-sharing

Volkswagen hopes to avoid gargantuan EU fines potentially running into the billions in part by foisting expensive electric vehicles onto one reliable customer that won’t balk at the price: itself.
The world’s largest automotive group plans a major rollout of WeShare—a car-sharing program born in Berlin—to an additional seven European cities this year including Paris, Madrid and Milan. VW estimates the market in Germany could grow 16% annually to 3.84 million users alone come 2022.
The numbers aren’t all that big, but what makes VW’s scheme so important is that all 8,400 cars planned for the car-sharing platform would run exclusively on batteries. Company officials see “zero-emission” carsharing fleets as a somewhat easy sell to smog-battling municipal authorities who nonetheless have to approve hundreds of new cars potentially clogging up city centers and occupying valuable parking places.
It also means these EVs could help Volkswagen stay within new EU-wide carbon caps that went into effect this month, and avoid those big penalties. Under the EV car-sharing plan, it would count the shared cars as new vehicle registrations.
“You need to find clever ways like this to get these vehicles registered for CO2 purposes, so it’s an interesting idea,” said Stefan Bratzel, Director of Germany’s Center of Automotive Management. “Not to mention the more people that see electric cars on the road, the more it boosts acceptance of the technology over time.”
Strictest emissions rules anywhere
To meet a new EU law, Volkswagen needs to reduce its European fleet emissions to roughly 100 grams per kilometer this year, and to 95 g/km in 2021—at least on paper, the most stringent such legislation to be found anywhere. The latter corresponds to a fuel-efficiency rating of 4 liters of gasoline per 100 km, or roughly 57.5 miles per gallon.
In 2018, the latest year for which VW has published figures, its European fleet emitted 123 g/km. Under the current emissions system it would stand to pay over 8 billion euros every year in fines were it to take no action. The trend hasn’t been helpful either. Emissions have been rising, not falling, since 2016 as an industry-wide slump in diesels shifted demand toward more carbon-intensive gasoline cars.
Volkswagen’s answer has been to shift to EVs. But battery-powered cars still comprise less than 2% of the European market even after sales doubled during the first nine months of last year.
Uptake of the technology closely correlates with higher wealth. According to the European auto industry association ACEA, more than 80% of EV demand is concentrated in just six countries, all with some of the highest GDP per capita.
The Netherlands alone accounts for a quarter of all charging points in the EU at 37,000 versus just 125 for Romania, despite the latter being nearly six times larger in area.
A major concern among carmakers is therefore whether enough customers will want to drive out of showrooms in an EV due to the substantially higher price tag, limited range and patchy charging infrastructure. One key side benefit of VW’s plan is it might spark greater interest in the environmentally friendly powertrain, in which it has invested billions.
“In a way you can think of carsharing as a paid test drive, and if you can combine that with customers getting behind the wheel of an EV, then you kill two birds with one stone,” Bratzel told Fortune. After all, the target demographics of carsharing users overlap heavily with those of EV buyers—young, urban and digitally-savvy.
In a survey published last week, McKinsey found that consumers respond best to an EV’s driving performance such as instant acceleration. The consultancy firm recommends carsharing as a tool to expose a reluctant public to the advantages of the technology. “The first test drive in an electric car is for many a real a-ha! moment,” argued associate partner Patrick Schaufuss in the study.
The economics of car-sharing
Trying to meet CO2 targets by inflating carsharing fleets does have its downside. Unlike ride hailing, it’s an asset-heavy business requiring considerable startup capital, one prone to substantial losses as operators chase growth.
As long as a vehicle sits dormant waiting for a fare rather than productively earning money for the owner, it just accumulates depreciation charges. As a result, carmakers have been reluctant to publish the full set of financials.
Months before VW launched its Berlin pilot last June, close rivals Daimler and BMW combined their carsharing fleets last February into one encompassing unit with over 20,000 cars serving four million customers in 30 metropolitan areas.
By joining forces, the duo hoped to save costs while expanding the business. But results thus far have disappointed. Come March, their fleets in London, Brussels and Florence will cease to operate, and the two will exit North America entirely. As a result of this retrenchment, Daimler reported last week that cumulative write-downs on its 50 percent stake in their umbrella joint venture Your Now stood at 600 million euros already, and said it was open to new investors.
Perhaps that is why Volkswagen is taking a cautious approach. Volkswagen told Fortune that it had abandoned plans to hike the price it charges for Berliners who opt to use its carsharing program WeShare by half, to 29 cents per minute. Around three-quarters of the 50,000 users that have registered are considered active, but that only means they’ve used the service once in the past three months.
“Initially carsharing is a real money pit of course, and I don’t believe it will be a profitable business in the coming years. But it’s a simple calculation for automakers,” explains CAM’s Bratzel. As long as VW’s running costs for each EV sold to their carsharing fleet are lower than potential fines, then the equation works.
If that fails, there’s another substantial customer group that VW could call upon for help. “If need be, it can also get its own employees to lease these cars as well,” he said.
More must-read stories from Fortune:
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—Why it’s time for a futures market in health care
—Retailers reuse and recycle their way to increased growth
—3 things investors can bank on in the uncertain 2020s
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fortune--2020-01-28--How Bank of America’s CEO Brian Moynihan orchestrated one of the biggest comebacks in banking histor

How Bank of America’s CEO Brian Moynihan orchestrated one of the biggest comebacks in banking history

To call the situation dire would be an understatement.
It was a Friday in mid-August 2011, and Brian Moynihan and his top two lieutenants were sharing a late dinner at Press, a wine-and-sushi bar a couple of blocks from Bank of America’s headquarters in Charlotte. Moynihan, who had been at the helm of the 94-year-old institution for just 20 months, had cut a Florida vacation short to try to address the crisis, which seemed to be mounting by the day. Some analysts predicted the mortgage mess inherited from BofA’s newly acquired Merrill Lynch and Countrywide subsidiaries was bad enough to sink the whole enterprise. BofA had just gotten sued for $10 billion by AIG for losses it claimed on “fraudulent” mortgages packaged by Countrywide, Merrill, and BofA. Fed Chairman Ben Bernanke had just announced that because the economy looked far weaker than he’d predicted months before, the Fed intended hold interest rates low for an extended period. BofA shares had fallen to $7, half their value from the start of 2011.
Without a drastic move, the relentless drumbeat of bad news could sap BofA’s strong core businesses, sending its capital to dangerously low levels. U.S. regulators were carefully monitoring the situation.
At the table were Mike Lyons, now chief of corporate and institutional banking at PNC Financial Services Group, and Bruce Thompson, then BofA’s CFO. “We were all getting on the phone trying to reassure high-net-worth customers who were pulling their money out at Merrill Lynch,” recalls Lyons. “Big producers in the investment bank, who couldn’t assess whether the mortgage carnage would sink their employer, said they were leaving.”
The trio’s arguments weren’t working. As Moynihan tells Fortune, “We had sufficient capital and earnings power to get through the crisis, but it was all about perception.” The efforts to reassure their own nervous investment bankers and big corporate borrowers that they were “building tangible common equity,” according to Lyons, were overwhelmed by all the negative publicity about mortgage losses. “We thought we were doing the right thing,” recalls Lyons, “but it was hard to get people to believe us.”
The three had no good options. Issuing new shares was a no-go because, as Lyons says, “If you issue equity when you’re in trouble, the market always thinks you’ll need to issue more.” And they rejected selling branches because that course would weaken the core retail franchise essential to a revival. “We had to show the world a source of capital, not because we needed it, but to get the negative attention off of us,” says Moynihan.
What they desperately needed, the group decided, was a ringing vote of confidence from the outside––not from an oil sheikh or Russian oligarch, but a top investor who commanded widespread respect on Wall Street, and who could see through the fog to perceive BofA’s true value. But who would take that risk?
The group left Press still searching for a rescue plan. Shortly after, on Monday, Aug. 22, Moynihan got a call.
It was Warren Buffett.
“Buffett said, ‘I’ve got an idea,’” Moynihan recalls, then proposed purchasing $5 billion in BofA preferred shares. Famously, Moynihan told Buffett, “We don’t need it,” to which Buffett riposted, “If you needed it, I wouldn’t be making the offer.” The wonder, says Lyons, is that Buffett went public with the same arguments Moynihan had been advancing, stating that BofA harbored a powerful retail franchise with big earnings potential, and that bank was “well led” by Moynihan. “We no longer had to make our case about the intricacies of tangible common equity,” says Lyons. “The world’s best investor, who really understood the risk-return equation, was making the case for us. It was as if Buffett was listening in on our conversation at Press.” Immediately after BofA announced Buffett’s investment later that week, the outflow at Merrill stopped, and investment banking stars mainly ceased threatening to depart.
“Everybody thought his situation was almost hopeless,” Buffett tells me in a recent phone interview. “Perception does turn into reality. You could tell customers and investors that you had great Basel reserves of 15%, and they’d still line up to pull out their money if they lost confidence.” For the Oracle of Omaha, a pivotal Moynihan decision was resisting pressure to bankrupt its Countrywide subsidiary: “I remember Wall Streeters urging that action. It was such a cesspool that people felt cleaning it up would be prohibitive. It was a tough decision—he knew he’d be writing big checks—but he chose to work his way through Countrywide’s problems instead.”
It was the right decision. Buffett’s Berkshire Hathaway made over $20 billion in capital gains and dividends on its BofA stock and now ranks as the largest shareholder at around 11%. “BofA goes back to the early 1900s and has an amazing history,” he says. “Brian has restored its former glory. And I’m very happy.”
Put simply, Moynihan––despite a number of false moves along the way––has orchestrated the single most outstanding comeback from the financial crisis. “Where are all the naysayers now?” says Ken Langone, the former Home Depot chairman who holds a big position in BofA. “I make my decisions 90% on who the leader is and 10% on the numbers. And like Buffett, I bet on Brian.”
Indeed today the view looks very different from Moynihan’s office on the 50th floor of the Bank of America Tower in Midtown Manhattan. Looking down from the office wall is a portrait of Winston Churchill, a figure Moynihan loves to read about and a fellow bulldog who battled his way through dark days. “They have similar personalities,” notes a former colleague. Speaking to Fortune on his 10th anniversary as CEO, Moynihan spoke on topics ranging from how leadership in technology is central to his growth strategy, to his commitment to raising minimum pay for employees, to what he sees as a strong possibility that BofA could double its market share in consumer deposits as well as his strategy for getting there.
Bank of America vs. JPMorgan
One measure of Moynihan’s success is how well he’s performed versus the other two consumer banking giants, JPMorgan Chase and Wells Fargo. He’s gained on the industry’s longtime superstar, Jamie Dimon’s JPMorgan, and surpassed the franchise recently deemed far superior, Wells Fargo. Five years ago, BofA earned $14.5 billion, 41% less than JPMorgan’s $24.4 billion. BofA is closing in fast. This year, it recorded net income of $29 billion, trailing JPMorgan by 20%. In 2015, BofA’s market cap trailed Wells’ by over $100 billion. Today, BofA not only outearns Wells—which has been bedeviled by the fallout from its aggressive sales culture—but the former’s valuation is more than $100 billion higher, at $325 billion.
Investors overlooked Moynihan’s capabilities for two reasons. First, because of a banking legend who overshadowed his early accomplishments, and second, because Moynihan is the antithesis of a showman. In 1993, Terry Murray, the flamboyant CEO of Fleet Financial, in Providence, hired Moynihan, then his M&A attorney, to spearhead what would become one of the great expansion campaigns in banking history. Over the next decade, Fleet bought most of the major banks in New England, culminating with the purchase of venerable BankBoston in 1999 to create FleetBoston. Throughout the run, the two operated as a team, similar to the pairing of Sandy Weill and Jamie Dimon, where Murray, like Weill, set the big vision, and Moynihan filled the Dimon role by tackling the hands-on integration work. “He’d not only negotiate the deal and hammer down the price, he’d oversee all the post-merger work to align computer systems and trim the headcount,” Murray tells Fortune. “He could accomplish in seven or eight months what the management at other acquirers would take years to do.”
His tactics at times took a circuitous route that mystified onlookers. When the Justice Department required that Fleet sell 280 branches in New England, Moynihan shunned interest from strong buyers such as Chase and RBS Citizens. His plan: keep powerful players out of Fleet’s home market. So he landed the weakest buyer he could find, Sovereign Bank. The new Sovereign customers quickly returned to FleetBoston.
“His stamina was extraordinary,” says Lyons, who in his early twenties worked with Moynihan at Fleet. “He’d leave the office at 6:30, and on the way out tell me, ‘Come to my house at nine, and bring your laptop.’ Then we’d work for a couple more hours and start again at around 7 a.m. His mind was always working nonstop.”
After BofA bought FleetBoston in 2004, Moynihan cycled through a number of roles, including a successful stint in 2007 and 2008 reviving the investment bank from big trading losses. When the huge deficits at newly acquired Merrill Lynch shook the entire bank, Moynihan won the CEO job by delivering his manifesto to the board in the form of a one-page summary of his strategy. In late 2009, the board, dominated by FleetBoston veterans who’d watched Moynihan in action for years, named him to rescue what was probably the most reviled enterprise by customers, regulators, and investors in America.
Quickly Moynihan pledged to sell a patchwork of enterprises purchased by his predecessor, Ken Lewis. All told, Moynihan exited no fewer than 14 far-flung holdings, from a stake in China Construction Bank to credit card purveyor MBNA. He refocused on the core consumer franchises, notably the branch network that blanketed the nation, and harvested a gigantic pool of deposits that formed an ultra-low-cost source of loans while also ceasing to chase new customers with credit card promotions. Instead, the new strategy centered, as it does today, on serving existing clients who, as their wealth grows, will expand from opening checking accounts to taking out home loans and building an investment portfolio at Merrill Lynch.
Smoothing banking’s cycles
For Moynihan, the problem with big banks was that they regularly squandered the big money they made in flush times by chasing high-risk business that backfired in downturns. Moynihan pledged to smooth those cycles by adopting a low-risk model that still incorporated steady growth. The idea wasn’t to hugely outpace the economy––that goal was fatal, he warned––but to expand revenues around one point faster than national income by gradually taking market share through superior service, and adding more loans and brokerage accounts as regular customers became more affluent. The model didn’t require big capital spending on branches, for example. Moynihan argued that B of A already had far too many. Instead, the bank would cultivate fresh technology, where dollops of capital could generate outsize improvements in both service and efficiency.
Early on, Moynihan made a lot of big mistakes. In 2011, BofA flunked its first Federal Reserve “stress test” in a highly embarrassing setback. That year, Moynihan imposed hefty credit card fees that unleashed a barrage of criticism from consumer groups and prompted President Obama to bash the initiative as “a bad business practice.” In a submission to the Fed requesting approval for its plan to buy back shares and boost its dividend, BofA committed a $4 billion accounting error that inflated its reported capital. The Fed forced BofA to suspend the long-promised reward to shareholders, and the gaffe made what appeared to be a new and improved BofA look like the same old screwup.
Moynihan just kept going. “Whether everyone is down on him, or everyone is praising him, he’s completely unaffected,” declares Lyons. “He puts his head down and advances with an intensity I’ve never seen before.”
Indeed, while his predecessor, Ken Lewis, often went to a restaurant in Charlotte’s Bank of America tower after work, Moynihan always preferred going to Press a few blocks away because he considered it more private––which apparently was his own faulty perception. Many fellow diners crowding into Press were BofA employees, or lawyers and consultants who depended on the bank. Lyons remembers that when they were plotting to save BofA during the crisis, all around them BofA staffers kept staring at Moynihan, wondering if they’d get fired next week. “It’s typical of Brian,” says Lyons, “that he was totally oblivious. He used to say, ‘I love Press because nobody knows me here.’”
Even as Moynihan shrank branches and headcount, he kept BofA growing. “I was worried that he’d just keep shrinking the bank,” says John McDonald of Autonomous Research. “His genius was coupling risk reduction and downsizing with a responsible growth mantra.” McDonald credits Moynihan with using digitization not just for the common purpose of reducing costs, but to make the consumer experience simpler and more satisfying, and hence furnish more mortgages, car loans, investment portfolios, and credit card credit to its increasingly affluent customers.
The best test of the Moynihan model is how it works in a low–interest rate environment that reduces the “net interest margins.” NIM forms the bulwark of banking profits. It’s the margin between the rates banks collect on their loans, and what they pay depositors on checking and savings accounts. After rising in 2018, rates contracted sharply in the past year, once again pressuring NIM. Yet BofA still managed brisk growth. “On average the individual loans are less profitable, so we have to overcome that by making higher volumes of loans, and keeping expenses basically flat,” says Moynihan.
A big contributor to the CEO’s twin goals of boosting growth and capping expenses is BofA’s digital innovation. “They’re doing just as much as JPMorgan but don’t get as much credit for it,” says McDonald. BofA now has 10 million subscribers for its Erica mobile phone app, which enables customers to check FICO scores, dispute bills, and deposit checks on their handheld devices. Processing a check deposited by iPhone costs 5¢, versus $5 at a branch. A program called Preferred Rewards operates a bit like frequent-flier miles. By adding a home loan or increasing checking balances, a customer can get lower rates on their credit card or car loans. In the fourth quarter of 2019, BofA received 45% of its applications for consumer mortgages online, while 61% of folks seeking auto loans filed via the digital portal.
Moynihan’s secret: Operating leverage
These strategies converge to generate what Moynihan prizes most: operating leverage. That results from growing revenues consistently faster than expenses, so that earnings expand at relatively rapid rates––even though sales simply track Moynihan’s goal of slightly outpacing the overall economy. So how’s it working? Let’s examine BofA’s consumer business, its biggest sector. Last year, it grew consumer deposits by 5% and loans by 7%, and revenues increased less, by 2.6% or $969 million (to $38.6 billion), because of compression in NIM. But because operating expenses actually dropped, almost 90% of that revenue increase flowed to net earnings. That raised the consumer divisions net profits by 7% to $13 billion. Strong operating leverage across the bank, coupled with the repurchase of 9% of stock outstanding, raised earnings per share by 12%.
Buffett particularly admires Moynihan’s iron grip on costs. “At the same time he’s growing deposits, loans, and revenues, he’s been holding costs steady at around $53 billion,” Buffett tells Fortune, adding that the combination has generated cash flows enabling Moynihan to repurchase huge numbers of shares. “On a conference call a few months ago,” says Buffett, “he was asked if he could give a target for total expenses. He said that he wouldn’t give a target because [that would set a minimum, and] he didn’t want anyone to keep resting on their laurels. That’s Brian.”
Doubling consumer deposits: The blueprint
Shortly after our interview in Manhattan, Moynihan surprised industry onlookers by disclosing the epic goal of doubling BofA’s consumer deposits, now an industry-leading $720 billion. That target looks so ambitious that it invites obvious questions: Would getting there mean shifting to the kind of aggressive sales culture that’s the antithesis of Moynihan’s longtime strategy?
“Doubling consumer deposits is our target,” Moynihan explains to me, speaking by phone from a restaurant after a hectic day at the World Economic Forum in Davos. “But we don’t have a timetable for getting there.” He notes that banks that hold 10% or more of the nation’s deposits are banned from making acquisitions that would surpass that regulatory cap. “But there is no constraint on our size as long as we grow organically,” he says. “Our market share is currently somewhere between 12% and 15%. In many industries such as autos and soft drinks, the industry leaders have market shares of over 40%.”
Naturally, a huge boost in deposits translates to a big expansion in mortgages, home-equity lines, and credit card and auto loans. But B of A won’t get there by shouldering heavier risk, avows the CEO. “We will only take on customers that meet our credit standards,” he says. Though he didn’t expressly state that the blueprint has three main components, Moynihan highlighted a trio of initiatives designed to grow faster than the overall market by taking bigger slices of the growing pie than its competitors. The first is expanding into new markets. Five years ago, says Moynihan, BofA wasn’t even present in seven of America’s 30 largest cities. Since then, he’s planted branches in Denver, Minneapolis, Indianapolis, Pittsburgh, Cincinnati, and Columbus, and will soon fill the map by opening in Lexington, Ky.
Second, many of BofA’s 66 million customers have, say, their primary checking accounts with the bank, but credit cards or home loans with competitors. BofA aims to win that business through its strategy of providing extra benefits––via the Premium Rewards program––based on the dollars clients send its way. At the same time, the more share-of-wallet BofA can win from its younger customers who don’t yet have a home loan or auto loan, the bigger its share of the overall market will become. “Only two-thirds of our customers who meet our credit standards have credit cards with us,” says Moynihan. “In mortgages, it’s just four in 10, up from two in 10 several years ago. That trend will continue. We have plenty of room to grow in all consumer categories.”
Third, Moynihan believes that the winning model is not the Internet-only option, but what he calls BofA’s “high-tech, high-touch” offering that gives customers the full panoply of options from getting a car loan online to talking to a financial adviser at your local branch. The proof, he says, is that BofA is already deploying its digital platform to gain share by growing its mobile phone users, for example, from 16 million to almost 30 million over the past five years. For Moynihan, the best evidence that his bank can hit that lofty target is the current trajectory. “We’ve been consistently growing deposits 6% to 7% a year, or $30 billion on an annual basis, faster than the overall market,” he says. It’s not about making big forecasts, he adds, rather it’s “grinding away” at the strategy that’s winning right now.
The ‘r’ word
Back in his office, as swirling fog cloaks and then unveils spectacular views of lower Manhattan, I ask Moynihan if at age 60 he’s thinking of retiring. “No,” he answers. “We’re off to a nice start. We’re setting our own destiny.” When I relay this to Buffett, he shoots back, “When you mention the word ‘retirement’ in connection to Moynihan, I panic. Moynihan and retirement should never be in the same sentence. If he does retire someday, I hope he comes to work for Berkshire Hathaway.”
For a CEO who’s such a hawk on expenses, it’s perhaps surprising that Moynihan keeps returning to a favorite theme, sharing BofA’s success with his 208,000 “teammates.” He capped our discussion by emphasizing his pride in just having raised the minimum wage for his employees, from $17 to $20 an hour, and the number is bigger in high-cost-of-living cities. “We believe we make the kind of money where teammates should have a good standard of living,” he says.
Count on Moynihan to shun the victory lap, and keep on charging.
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fortune--2020-01-28--Boeing earnings preview: Will its new CEO plot a course correction?

New Boeing CEO David Calhoun has a fine line to walk during his debut with financial analysts Wednesday, when the aerospace giant announces its earnings results for 2019. It was a year of tragedy and public pummeling for Boeing, after two 737 MAX crashes revealed a fatal flaw in the company’s newest jetliner to enter service. Regulators around the world grounded the single-aisle airplane in March.
Calhoun, who took the helm Jan. 13, is expected to announce more than $10 billion in new charges resulting from the two crashes—one in October 2018 and one in March—that killed 346 people, analysts tell Fortune. At least one expert expects more than $15 billion in new charges.
Prioritizing safety and getting the MAX back in service likely will be key themes in Wednesday’s report, which is released before the market opens, they say.
Boeing is also expected to announce Wednesday that it is taking on debt to shore up its finances and maintain a dividend. They do not expect the company to resume stock buybacks, which it suspended in December 2018.
But Calhoun is not an outsider riding to Boeing’s rescue. A Boeing board member since 2009, Calhoun backed a leadership culture that, critics say, put finances ahead of engineering. During a press conference last week, he denied Boeing has an institutional culture problem, instead saying the problem is “microcultures,” as well as procedural.
Analysts say they do not expect Calhoun to strike a new tone on the call with analysts and investors, held at 10:30 a.m. Eastern time. “He needs to address Boeing’s cultural issues and prioritize engineering,” says Richard Aboulafia, vice president of the Teal Group.
Candor is key, the Boeing watchers add. Calhoun’s predecessor, Dennis Muilenburg, was done in by a lack of candor, a rigid, wooden public persona, and overly optimistic projections for recertifying the MAX.
“Calhoun has to lay out all the puts and takes, so investors and analysts can accurately assess” Boeing’s near term future, says Ken Herbert, an aerospace analyst with Canaccord Genuity. “He needs to reestablish credibility on the MAX’s return to service and 737 production,” which the company suspended last month, Herbert adds.
One of Calhoun’s first moves as CEO was to push out the company’s projection for recertification to June, a four month bump. He told reporters last week that production should resume “a few months before the of middle of the year.”
In the meantime, analysts and investors need to hear how the company is making sure suppliers can weather the production pause, Herbert says. One of Boeing’s biggest suppliers, Spirit Aerosystems, already announced more than 2,000 worker layoffs.
Calhoun also needs to indicate sooner rather than later how the company plans to respond to Airbus’ widely successful A321neo, which has a commanding lead in orders for long range and large single-aisle jetliners, Herbert says.
Calhoun said last week he has ordered a new study for a cleansheet midmarket airplane. At the same time, he said his focus is the MAX, and new products are on the back burner.
“We’re going to do a little less visioning, and a little less long-term planning, and a little less all that stuff,” he said. “We’re just going to get back down to restoring trust with one another, trust with our customers, and trust with our regulator.”
Right now, though, that short term priority is at odds with long term development of a new airplane program, Robert Spingarn, an aerospace analyst with Credit Suisse, tells Fortune.
Deferring an all new single aisle airplane hurts the company’s long-term prospects, but pouring money into developing a cleansheet jetliner while Boeing bleeds cash on the MAX crisis could hobble the company’s near term outlook.
“This, layered in with broader cultural issues at the company, execution missteps at (Boeing Defense, Space and Security), 777X (entry into service) risk, and other items keep us firmly on the sidelines,” Spingarn wrote in a recent research note.
The 777X had its first flight Saturday, one of the few positive headlines for Boeing since March. However, problems with the General Electric engine has delayed the mini-jumbo’s development.
“It’s not the 777X that is going to support the company for the next three to four years,” says Michel Merluzeau, a principal with AirInsightResearch.
Demand for very large aircraft has softened, and is not expected by either Boeing or analysts to return for another few years. Up until a few years ago, the 777 line had been a major cash cow for Boeing Commercial Airplanes, which brings about 60% of the company’s revenue.
Boeing Commercial Airplanes’ other revenue MVPs—the 737 and 787 Dreamliner—face downward pressure in the next few years. Even after production resumes, the 737 line isn’t expected to get back to 57 aircraft a month before 2021. The company plans to cut 787 production from 14 aircraft a month to 12. It is considering a further step down, according to news reports.
Wednesday may be a key date in Calhoun’s debut tour, but with the MAX crisis far from over, Boeing facing revenue constraints, and a gaping hole in the company’s product lineup, difficult questions for the new CEO are just beginning.
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fortune--2020-01-28--Hackers had a banner year in 2019

Hackers had a banner year in 2019

Hackers were working a lot harder in 2019, but they weren’t as productive as they were the year before.
A new report from the Identity Theft Resource Center finds that there were 1,473 data breaches last year, a 17% increase over 2018’s 1,257. The total number of sensitive records exposed, though was down 65%.
That discrepancy can be tied to a single 2018 hack: the breach of Marriott that exposed 383 million records.
“The increase in the number of data breaches during 2019, while not surprising, is a serious issue,” said Eva Velasquez, president and CEO of the Identity Theft Resource Center. “The 2019 reporting year sees a return to the pattern of the ever-increasing number of breaches and volume of records exposed.”
While hacking is the most common form of data breaches (covering 39% of those that occurred in 2019 and 81% of the sensitive records that were exposed), it’s not the only way data gets out. “Unauthorized access,” a blanket term that doesn’t clarify exactly how the breach took place, was responsible for 36.5% of breaches.
Since 2005, there have been more than 10,000 data breaches that were publicly announced. That milestone was crossed last summer, says the Center.
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fortune--2020-01-28--Americans should avoid travel to China during outbreak, CDC says

The U.S. Centers for Disease Control and Prevention advised travelers to avoid all non-essential trips to China as governments, companies and international health organizations rushed to contain a SARS-like coronavirus that has claimed more than 100 lives.
The agency, which is spearheading the U.S. effort to contain the virus, said that while the risk to the American public is considered low, the precautions are necessary to stop its spread.
“While it’s possible that some person-to-person spread with this virus may be detected in the United States, the goal of the ongoing U.S. public health response is to contain this outbreak and prevent sustained spread in this country,” the CDC said in a statement Tuesday.
The warning follows an advisory Monday by the State Department that Americans should reconsider travel to China.
Hong Kong earlier announced restrictions on travel from mainland China. It will close some border checkpoints and restrict flights, trains and ferries from the mainland, Chief Executive Carrie Lam said Tuesday. The Chinese government is also suspending visas for visitors to the territory, she said.
The new measures mark a step change in efforts to contain the virus, after China effectively locked down about 50 million people in Wuhan and Hubei province, the epicenter of the outbreak. The latest moves are aimed at protecting an Asian financial hub that was already reeling from months of anti-Beijing protests.
“We have to start with the source,” Lam said at a press conference, wearing a surgical mask. “This should greatly reduce visitors from China.”
Other disruptions to global businesses, travel and the world’s second-largest economy are growing. China has extended the Lunar New Year break, while companies ranging from Starbucks Corp. to Japanese retailer Uniqlo are shutting sites.
The spread of the illness has reignited concerns over global growth. Stocks continued a selloff in Asia, though European shares stabilized and U.S. futures edged higher. China’s markets remained closed for the holiday.
The new Hong Kong travel restrictions, which take effect at midnight Thursday and follow China’s suspension of package tours, come as the death toll in China reached 106 and the number of confirmed cases soared 65% to 4,515. Lower numbers of infections have been reported throughout Asia as well as in the U.S., France and Canada.
Germany confirmed its first case on Tuesday, a 33-year-old man in Bavaria who was one of the first to fall ill with the virus without having traveled to China. Instead, he became infected after a visit from a Chinese colleague, officials said.
As global anxiety over the outbreak grows, World Health Organization Director-General Tedros Adhanom Ghebreyesus visited Beijing to meet with government officials.
“We can see the speed and scale with which you are really hitting the virus hard,” Tedros said. “This is something we appreciate and also respect you for what you are doing.”
Public anger has grown over China’s response as the virus’s spread threatens a fragile economy after Beijing and Washington reached agreement on a phase one trade deal. The restrictions on travel will hurt tourism and consumption, while the extended holiday will hold back industrial production just as factories would normally be restarting.
Global corporations are urging employees in the region — or those who have recently returned from China — to work from home. Nissan Motor Co. and other automakers plan to evacuate workers from the hardest-hit areas, while Carnival Corp. and Royal Caribbean Cruises Ltd. have suspended voyages leaving China.
The U.S. and other nations — including France, Japan, South Korea and Australia — were negotiating with China to arrange flights to evacuate diplomats, personnel and citizens.
Though the WHO has stopped short of recommending such repatriations, the U.S. State Department has raised its travel alert to the second-highest of four levels, saying citizens should reconsider travel to China while avoiding the area near Wuhan. The U.S., where five cases of the virus have been confirmed, may also expand travel screening at its borders.
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fortune--2020-01-28--‘In the Dark’ podcast host Madeleine Baran on Curtis Flowers’ release, season three, and funding inv

‘In the Dark’ podcast host Madeleine Baran on Curtis Flowers’ release, season three, and funding investigative journalism

On Dec. 16, 2019, Curtis Flowers was released on bail after spending 23 years imprisoned for a quadruple murder in Winona, Miss., a crime for which he was tried and convicted six separate times. The judge ruled that the evidence against Flowers—whose conviction was overturned by the U.S. Supreme Court over questions of racial bias in jury selection for his sixth trial—wasn’t strong enough to keep him in jail while the state mulled trying him for the seventh time, with a key revelation coming from the podcast In the Dark.
In court that day, the defense played a segment from a 2018 episode of the APM Reports series in which the state’s star witness, Odell Hallmon, told APM’s Samara Freemark that his testimony about Flowers’ confessing to the murders while they were incarcerated together was “a bunch of lies.” Hallmon’s claim, which he said he made in return for favors from the district attorney, was the only piece of direct, not circumstantial, evidence the prosecution had—the key to convincing a jury to send Flowers to death row.
Having the podcast become part of the hearing that got Flowers out of jail that day was a surreal moment for host and lead reporter Madeleine Baran, who was seated in the court’s jury box alongside other reporters.
“We’re so much in work mode, recording audio, so the magnitude of what transpired did not sink in in that moment,” Baran tells Fortune. “I’m not surprised that the defense would want to use the fact that the state’s star witness recanted in a taped interview with us. If the facts had been different, I’m sure the state would have used some of it. I mean, to hear your own voice being played back at you when you’re in the courtroom, that’s strange.”
Hundreds of spectators line up to hear arguments before sunrise at the Supreme Court in Washington, D.C. in the Flowers vs. Mississippi case on March 20, 2019. Greg Kahn—APM Reports
Afterward, Baran and producer Natalie Jablonski went to the Flowers house for Curtis’s welcome home party and got to talk briefly with the man of the hour. “What was striking was just how normal that gathering was,” Baran says.
“We had been over to that family’s house so many times in the course of our reporting, and it really could have been any other gathering there. It wasn’t like it was some crazy party and everyone was so excited. It was you’re walking into business as usual at the Flowers house. There was [Curtis’s father] Archie Flowers sitting at the table eating some fish, some people in the other room talking, some music is on the background, just normal. But here’s Curtis in the middle of this. It all speaks to just how close that family is. In so many cases when someone goes to prison, regardless of whether they did it or not, it’s really hard to maintain connections to your family.”
Flowers’ release and the subsequent recusal of district attorney Doug Evans, who prosecuted all six of the trials, are the latest developments in the second season of In the Dark, which Baran and her team started reporting on in 2017. After the first season, in which they examined the kidnapping and murder of 11-year-old Minnesota boy Jacob Wetterling and the subsequent failures of law enforcement to find his killer for over 25 years, they received a tip about Flowers’ case and decided to report on it as a means of exploring the power of prosecutors in the United States.
Assistant district attorney Adam Hopper, sent in place of his boss, district attorney Doug Evans, opposes Flowers’ release. Hunter Hart for APM Reports
The team moved to Winona and spent a year talking to everyone they possibly could—family members, witnesses, police officers, lawyers, and acquaintances—while scanning around 100,000 pages of legal documents and analyzing data about race and jury selection in Mississippi. The goal was never to exonerate Flowers, Baran says, just to report the story, examine prosecutorial misconduct, and, hopefully, figure out how one person could be tried six times for the same crime. The case going to the Supreme Court and Flowers’ release were possible outcomes, they knew, but certainly not ones they expected so soon.
“Our plan was always to continue to report on it if it got reversed and there was a seventh trial,” says Baran. “When I pictured it in my mind, I guess I pictured the possibility that in 10 years we would still be reporting on this case somehow, just knowing that whenever there is an attempt at an appeal, especially in a case with a serious crime such as quadruple murder, these things take a long time. The fact that he has actually passed through all of those hurdles to the point where he’s out on bail with a conviction overturned is pretty remarkable.”
What’s also remarkable is the fact that, in an era when newsrooms and budgets are being slashed, Baran and her team were given the resources to do this kind of work. In the Dark is produced by American Public Media, which is second only to NPR in U.S. broadcasting public radio stations, meaning that a large portion of its funding comes from donations. “I can say that yes, it is costly to do this,” Baran says, pointing out that they have a five-person team plus an editor, data reporter, and digital team who spend “substantial parts of their year” working on In the Dark. She says it’s important that the podcast includes moments that chronicle the “knocking on doors, scanning documents, and going into semi-abandoned locations looking for files” so the supporters know where their money is going.
“I’m very fortunate to work for a company that has the resources and the commitment to fund this work…You’ve got to be finding out things that powerful people don’t want you to find out and delivering that information to the public. Listeners get that. People want this type of work,” she says. “I would hope that people see the opportunities that podcasting has for serious investigative work, not just because of our reporting. It’s an interesting opportunity to get an audience interested in important stories, complicated stories.”
“In the Dark” host Madeleine Baran and producer Natalie Jablonski interview Flowers’ lead attorney McDuff and Flowers’ sisters, Priscilla Ward and Charita Baskin, far left. Hunter Hart for APM Reports
There will, of course, be more In the Dark, with a third season in the works now. The topic has yet to be announced, so all Baran can say is, “All of our stories will involve a central question. They all involve powerful people engaged in wrongdoing that is significant and harms people.” With Flowers released, a Peabody Award for season one, over 60 million downloads of In the Dark, and story tips from all over the country, Baran says she feels “an expectation that the work will be compelling. And I’m grateful for that expectation because I think it’s born out of a lot of hard work by everyone on the team.”
In the meantime, she’s also prepared to cover any updates in Flowers’ case and hopes to interview him soon, once he’s settled down.
“He left Mississippi the morning after he got out on bail. By all accounts, he’s doing well,” she says. “He celebrated Christmas with his family. It’s kind of hard for any of us to imagine what it would be like to be locked up for 23 years and all of a sudden be out. I mean, just thinking about really basic things that we take for granted: going outside, being in nature, waking up whenever you want, getting to decide what kind of shirt to wear—all of those things are absent when you’re in prison. I don’t know what that would be like. When he came out of jail, he didn’t seem to have a kind of edge to him that you might expect. There didn’t seem to be any bitterness. I’d be curious to talk to him more about what that time in prison looked like for him and how he feels like he changed as a result of it.”
Correction, January 28, 2020: An earlier version of this story misstated that Odell Hallmon spoke with Baran. It has been updated to clarify that he spoke with Samara Freemark.
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fortune--2020-01-28--Electric scooter startup Bird flies high with new funding, acquisition

This article originally ran in Term Sheet, Fortune’s newsletter about deals and dealmakers. Sign up here.
Electric scooter company Bird has added even more capital to its war chest and acquired a small micro-mobility player in Europe.
Three months ago, Bird announced $275 million in Series D funding led by CDPQ and Sequoia Capital. Now, it’s adding another $75 million, bringing the size of the round to $350 million.
It also acquired a rival called Circ, a Berlin-based scooter rental startup that had reportedly been struggling since late last year. It underwent layoffs and has done some restructuring in hopes of “becoming unit economic profitable” in 2020, according to TechCrunch. The company was trying to raise another round of funding, prompting the acquisition talks with Bird.
Thanks to the deal, Bird will add more than 300 employees to its European operations and further its expansion on the continent. A representative for Bird told Term Sheet that the company is “still working through” what the expansion plans entail, but it will use its fresh funding to “continue on its path to profitability and ongoing vehicle research and development.”
“Investors today are looking for financially disciplined companies with a clear path to profitability,” said Bird CEO Travis VanderZanden in a news release. “More than 12 months ago we shifted our focus from growth to profitability which put us in a position to deliver the strongest unit economics and longest-lasting custom-designed vehicles of any micro-mobility company today.”
Profitability is a hot topic these days. I recently wrote about scooter startup Lime’s plans to lay off 14% of its staff — approximately 100 people — as it pulled out of a dozen markets in the U.S. and abroad. At the time, co-founder and CEO Brad Bao said, “Part of realizing our vision to transform urban mobility is achieving financial independence; that is why we have shifted our primary focus to profitability.”
Because the scooter economy has largely been fueled by fast growth, fierce competition, and unsustainable business models, profitability has typically been left on the backburner. In the past, venture capital firms that fund “unicorns” have had a much higher tolerance for forgoing profitability for growth, but as more and more of these unicorns trot to the public markets, the sentiment has begun to change.
When asked why Bird has decided to shift its focus from growth to profitability, the Bird representative pointed me to this quote from VanderZanden: “Gone are the days when top line growth was the leading KPI for emerging companies. Positive unit economics is the new goal line.”
Ain’t that the truth. For all the “pivoting to profitability” talk going on in Silicon Valley, it’s refreshing to see that companies are finally starting to take it seriously.
THE MELINDA GATES PLEDGE: In October, Melinda Gates pledged $1 billion toward expanding women’s power and influence in the next decade. Now, she’s taking steps to make good on that pledge. She plans to invest $50 million in creating more tech opportunities for women across three “inclusive tech hubs” in Chicago and two other yet-to-be-named cities over the next five years.
When I interviewed Gates for 5 Qs With a Dealmaker, she said, “Ultimately, if we want more innovation and better products, we’ve got to put more money behind women and minorities. That wasn’t happening, so I decided to step in and see what I could do to help a little bit.”
I’m very curious to see how her dollars translate into societal change.
Read more at Fortune.
Polina Marinova
Twitter: @polina_marinova
Email: polina.marinova@fortune.com
VENTURE DEALS
- ActiveCampaign, a Chicago-based provider of email marketing solutions, raised $100 million in Series B funding. Susquehanna Growth Equity led the round, and was joined by investors including Silversmith Capital Partners.
- Frontify, a Switzerland-based brand management platform, raised $22.3 million in Series B funding. EQT Ventures fund led the round, and was joined by investors including Blossom Capital, Datartis Ventures and Thomas Dübendorfer, Tenderloin Ventures, and Myke Näf.
- Persona, a San Francisco-based identity verification startup, raised $17.5 million in Series A funding. Investors include Coatue and First Round Capital.
- SuperAwesome, a U.K.-based operator of a kidtech platform, raised $17 million in funding. Investors include M12, Mayfair Equity, Hoxton Ventures, and Ibis.
- Wheel, an Austin-based digital health company, raised $13.9 million in Series A funding. CRV led the round, and was joined by investors including Tusk Venture Partners and Silverton Partners.
- P2 Science Inc., a Woodbridge, Conn.-based renewable chemistry company, raised $12 million in Series C funding. HG Ventures and Chanel led the round, and were joined by investors including Xeraya Capital, BASF Venture Capital, Elm Street Ventures, Connecticut Innovations and Ironwood Capital Connecticut.
- AppOmni, a San Francisco-based provider of a Software-as-a-Service security and management platform, raised $10 million in Series A funding. ClearSky led the round, and was joined by investors including Inner Loop Capital, Costanoa Ventures, Silicon Valley Data Capital, and Twilio’s COO George Hu.
- AdmitHub, a Boston-based developer of a conversational AI platform, raised $7.5 million in funding. Investors include Salesforce Ventures, the Google Assistant Investments program, University Ventures, Reach Capital, Relay Ventures, and Rethink.
- Knox Financial, a Boston-based investment property ownership platform, raised $3 million in seed funding. Greycroft led the round, and was joined by investors including Pillar VC.
- NexTravel, a New York-based business travel platform, raised $2.4 million in Series A funding. Investors include Pipeline Angels and Quest Ventures.
PRIVATE EQUITY DEALS
- Mercer Global Advisors, Inc, a portfolio company of Oak Hill Capital and Genstar Capital, acquired First Ohio Planning, a Columbus-based wealth management firm. Financial terms weren't disclosed.


fortune--2020-01-28--Melinda Gates has big plans for Chicago

Melinda Gates has big plans for Chicago

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! MacKenzie Bezos ditches some of her Amazon stock, Prince Andrew won’t cooperate with the FBI, and Melinda Gates shares the details on a new investment. Have a fantastic Tuesday.
– Melinda’s vision takes shape. When Melinda Gates announced last year that she would commit $1 billion to achieving gender equality, we wondered what exactly that kind of investment would look like.
This morning, Fortune’s Maria Aspan has the details on one of Gates’ first projects. The billionaire philanthropist will invest $50 million to build “inclusive tech hubs” in Chicago and two other yet-to-be-named cities.
Call it the next Silicon Valley—but, hopefully, with a level of inclusivity rarely found in the original.
“As the tech industry continues to expand beyond Silicon Valley to other areas across the country, we have the opportunity to reimagine what the sector could look like,” Gates wrote in a LinkedIn post. “If these emerging tech hubs are supported to prioritize women’s representation and inclusion as they grow, they will be better positioned to tap into the full range of local talent, while also helping create a blueprint for closing the industry’s gender gap nationwide.”
As part of the effort, Gates’ firm Pivotal Ventures will work to increase the percentages of women who graduate with computing degrees and who get hired into (and retained/promoted at) tech jobs and increase the amount of venture capital invested in startups with at least one female founder.
The project fits within Gates’ three priorities for her pledge: dismantling the barriers to women’s professional advancement; fast-tracking women in “sectors with outsized impact on our society,” including technology, media, and public office; and mobilizing to create external pressure on companies and organizations in need of reform.
Read more about Gates’ venture here. As part of the $1 billion commitment, she has already made investments of undisclosed amounts in an accelerator focused on elder care and in a fund focused on creating more opportunities for American women to run for office. We’ll have to watch and see where the other $950 or so million goes.
Emma Hinchliffe
emma.hinchliffe@fortune.com
@_emmahinchliffe
ALSO IN THE HEADLINES
- Share-ing the wealth. After her divorce, MacKenzie Bezos signed the Giving Pledge, promising to donate more than half of her $37 billion fortune. According to recent regulatory filings, she's already reduced her Amazon stock by $400 million, retaining 19.5 million shares in the company—although it's not clear if she transferred, sold, or gave away the shares. Bloomberg
- A complex legacy. In the Broadsheet's sister newsletter raceAhead, Fortune's Ellen McGirt grapples with the loss of Kobe Bryant and his daughter Gianna, as well as with the complex nature of grief for a public figure of his stature. Ellen also wrestles with the 2003 sexual assault allegation against Bryant (he settled out of court). "He had become a role model of a different type, a symbol of outsized Black achievement at a time when it still feels necessary to claim credentials like his for the community," she writes, "but for some, his legacy is more painful." Fortune
- A split decision. A 5-4 Supreme Court decision yesterday allowed the Trump Administration to proceed with a rule making it easier to deny immigrants admission to the United States based on low income and expectations that they would use public assistance programs. All of the court's liberal justices, including Ruth Bader Ginsburg, Sonia Sotomayor, and Elena Kagan, voted against the decision, although none expanded on their reasoning. New York Solicitor General Barbara Underwood said that the administration's definition of a "public charge" is "a stark departure from a more-than-century-long consensus." Wall Street Journal
IN CASE YOU MISSED IT
- Not-so-princely behavior. The FBI has asked to interview Prince Andrew for its continued investigation into Jeffrey Epstein. But the prince has offered "zero cooperation" with the bureau, a U.S. attorney said. When he stepped down from public royal duties as a result of his friendship with the late convicted sex offender, Andrew at the time said, "Of course, I am willing to help any appropriate law enforcement agency with their investigations, if required." New York Times
- Surprise return. When Away co-founder Steph Korey decided to return to her role as CEO—after stepping back in the wake of a Verge report into her management style, her team of executives at the luggage company was caught off guard. Employees found out about the news through a New York Times article announcing her return, and HR chief Erin Grau resigned as a result. An Away spokesperson declined to comment in this piece. Recode
- Marital spat. Louise Linton disagreed with her husband, Treasury Secretary Steve Mnuchin, who had said that activist Greta Thunberg should "go and study economics in college" before calling for divestment from fossil fuels. Linton posted on Instagram, writing "I stand with Greta on this issue," but later deleted the post. NBC News
ON MY RADAR
The woman shaking up the diamond industry The New Yorker
It's time for black women to take off the corporate mask Zora
Toni Morrison's profound and unrelenting vision The New Yorker
PARTING WORDS
"They say it’s better to take action and ask permission later."
-The Goop Lab executive producer Shauna Minoprio on getting Netflix to agree to show women's vulvas on screen during the episode "The Pleasure Is Ours"