fortune--2020-09-21--How to make A.I. smarter

How to make A.I. smarter

The electronic spreadsheet has been around for about 50 years. An ingenious invention originally meant to digitize bookkeeping, the software has enabled researchers and businesspeople to input infinite rows and columns of disparate data and then analyze the information with the aid of a computer. It is such standard fare today that schoolchildren are as likely to use free spreadsheet programs as financial analysts are to manage budgets.
What spreadsheets cannot do is think. That’s the preserve of newer, more powerful types of software called neural networks, complex artificial intelligence programs designed to mimic the computational processes of the human brain. And for reasons unique to the development of neural networks in recent years, images—rather than so-called structured data, columns and rows of text and numbers, for example—have been the preoccupation of top A.I. researchers. In other words, powerful computers can sift through millions of photos of cats to understand minute feline characteristics. But the same software struggles to intuit fields in a humble spreadsheet.
This has been deeply frustrating to data scientists in fields like medical research, finance, and operations, where structured data is the coin of the realm. The problem, researchers say, is one of emphasis as well as capabilities. “Most of data we deal with is structured, or we have imposed some kind of structure on it,” says Bayan Bruss, an applied machine learning researcher at the financial firm Capital One. “There’s this big gap between the advances in deep learning and the data that we have. A lot of what we do is try to close that gap.”
Illustration by Lena Vargas
Fledgling projects at a handful of companies are trying to bridge the divide. At biotech powerhouse Genentech, for example, data scientists recently spent months building a spreadsheet with the health records and genomic data of 55,000 cancer patients. The fields contain nuggets such as age, cholesterol levels, and heart rates, as well as more sophisticated attributes like molecular profiles and genetic abnormalities. Genentech’s plan is to feed this information into a neural network that can map a patient’s health attributes. The hoped-for outcome is a breakthrough drug that is potentially unique to each patient.
The problem is that researchers are just now beginning to teach neural networks how to consume structured data like the spreadsheets Genentech is building. “The majority of our data is structured data, whether it’s from clinical trials or electronic health records,” says Ryan Copping, global head of analytics for personalized health care data science at Genentech. If computer networks can analyze and make their own realizations about similarities among patient profiles, he says, “then you could start looking at outcomes and thinking about which patients we can target with which therapies. That’s the unmet need.”
The opportunities extend far beyond health care. Research firm IDC estimates the commercial sector will generate 5.8 zettabytes of productivity data—sales forecasts, customer data, and the like—this year. A zettabyte of information corresponds roughly to the number of grains of sand on all the world’s beaches. A lot, in other words, says John Rydning, head of IDC’s Global DataSphere program, which measures the amount of data created each year.
5.8 zettabytes
That’s the amount of productivity data that research firm IDC predicts will be created this year, presenting an opportunity for A.I. to crunch that information. A zettabyte is roughly equivalent to the number of grains of sand on all the world’s beaches.
This means that businesses of all types, if they can corral the data into a form neural networks can learn from, have a lucrative opportunity. Even slight improvements in predictive capabilities can lead to enormous financial gains, says Athina Kanioura, chief strategy and transformation officer for food giant PepsiCo. “The additional level of accuracy translates to millions of dollars,” she says.
The challenge, then, is getting researchers to work with the kind of data that can be most helpful to business. “The deep networks that are so cool can really do amazing things for our cars and for understanding sentiment from tweets online,” says Peter Bailis, a Stanford professor and also CEO of a Silicon Valley startup called Sisu Data that builds analytical tools for businesses. “But they don’t help us with understanding things like risk or customer satisfaction if our data is stored in tables.” In terms any businessperson can relate to, the question remains: Can A.I. conquer its Excel problem?
Progress in promoting business applications for neural networks rests on getting the programs to understand words as well as they have been able to analyze images. For that, researchers have turned to a technique called word2vec. (The “vec” stands for vector, the type of analytical unit best understood by a neural network.) Word2vec, invented in 2013 by a team of Google researchers and published as an open-source software project, helps computers map the relationships among certain words. It has led to more powerful language systems that recognize, for example, that the word “car” is more closely related to automakers like BMW or Nissan than a food company like Kraft Heinz.
The computational magic of word2vec is its ability to discover those correlations by converting words into a string of numbers that neural networks can understand. Over time, as a neural network is trained on additional text, it groups words according to numerical scores measuring how frequently the words appear near each other. Compared with older so-called natural language processing technologies, these newer systems improve on the pattern recognition attributes typically associated with human thought.
From this computer-assisted word-association game comes an ability to make sense of what is stored in the rows and columns, for instance, of a spreadsheet. This process creates a type of Morse code for a neural network: If the program comes across a sales spreadsheet with a column indicating “days,” it can learn with enough data that certain holidays could impact sales during a particular season without being explicitly told to do so. “It’s kind of the core idea,” says Rachel Thomas, director of the University of San Francisco’s Center for Applied Data Ethics and cofounder of an educational nonprofit called Fast.ai. “Neural networks are providing this infinitely flexible architecture for learning by modeling a particular shape of patterns.”
Former Uber engineer Rachel Thomas cofounded the educational nonprofit Fast.ai and an ethics focused think tank in San Francisco. She explains A.I. to businesspeople and scientists alike. Gabriela Hasbun
The investment world alone is rife with opportunities for analyzing words. At Goldman Sachs, a team of researchers trained a neural network to look for words associated with intra-family home transfers. Such noncommercial transactions likely won’t describe the true value of a house, and teaching a software program to factor them out can improve the bank’s analysis. “So we trained a neural network so it learns to pay less attention to a transaction that has that label,” says Charles Elkan, a longtime professor of computer science at the University of California at San Diego who until recently led machine learning projects for Goldman.
Sophisticated word association is also invaluable for logistics operators. The San Francisco grocery-delivery startup Instacart uses a variant of word2vec to teach its algorithms to anticipate customer preferences, particularly when requested items are unavailable. The program converts the words for supermarket inventory items into numerical data so neural networks can process them. The network then groups items together so it can understand, for example, that trail mix has more in common with dried fruit or nuts than it does with coffee. The result is a time and money saver, says Sharath Rao, a machine learning director for Instacart. “Otherwise you would have to think of all the possible pairs and keep a [manual] table,” he says.
For all the momentum behind using deep learning on structured data, hurdles remain. For one, the idea is so new that there’s no tried-and-true way to evaluate how good these techniques are compared with more conventional statistical methods. “It’s a bit of an open question right now,” says Even Oldridge, a data scientist for Nvidia, which makes chips that power A.I. software.
Indeed, given the expense of training neural networks, older data analytics methods may be sufficient for companies that don’t have the right A.I. expertise in-house. “I’m a firm believer that for every company, there isn’t a magic solution that can solve every problem,” says A.I. expert Kanioura, the PepsiCo executive. This is in fact behind the pitch that cloud-services giants Amazon, Microsoft, and Google make: Buy A.I. services from us rather than making large expenditures on talent for potentially incremental returns.
It’s the core idea. Neural networks are providing this infinitely flexible architecture for learning by modeling a particular shape of patterns. Rachel Thomas, cofounder, Fast.ai
And as with any project where humans aim to teach computers how to “think,” the biases of the living organisms threaten the project. Deep learning systems are only as good as the data they are trained on, and too much or too little of a certain data point can skew the software’s predictions. Genentech’s data set, for instance, has clinical data on cancer patients dating back 15 years. However, the genomic testing data it uses in its spreadsheet is eight years old, meaning that patient data from before then isn’t as comparable as researchers might like. “If we don’t understand these data sets, we could build models that are totally unreliable,” says Genentech’s Copping.
Still, the potential value of supercharging the analysis of all those spreadsheet fields is nothing less than being able to “predict how long a patient can survive” with a certain treatment, says Copping. Not bad for a bunch of rows and columns.
A handful of corporations are teaching neural networks to work with the kind of structured data that already exists within their walls. A few examples:
Genentech
The biotech pioneer has built a spreadsheet with complex health data from routine records to genomic profiles—from tens of thousands of patients. The stakes are high: If artificial intelligence can properly analyze the data, the result could be medical treatments targeting the disease of iindividual patients.
Goldman Sachs
A.I. presents untold opportunities for investors. The bank hired a machine learning professor to build a tool to teach networks to ignore phrases that could complicate a financial analysis. Example: “Intra-family transfers” likely don’t reflect the accurate value of a home. Teaching a network to find them can improve the model.
Instacart
The grocery-delivery startup has an understandable data set in the inventory of supermarket items its workers pick for customers. The company is teaching its algorithms to do sophisticated word association like matching trail mix with nuts and dried fruit—in order to offer customers alternatives when their choices are out of stock.
A version of this article appears in the October 2020 issue of Fortune with the headline “What makes artificial intelligence look dumb.”


fortune--2020-09-21--The Trump administration’s TikTok policy is incoherent

When Bill Gates thinks we ’ ll have a COVID-19 vaccine—and why that won ’ t be the end of @ @

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People in China know how to read web sites and use email services banned in the country. They use a technology called a virtual private network, which masks their location. It’s a fact of life in China, one of the many understood digital annoyances for a Westerner traveling there, among bringing a wiped laptop and “burner” mobile phone on the assumption some arm of Chinese cybersecurity will steal your data. (In 2017, when Fortune journalists traveled to Guangzhou for the Fortune Global Forum, an event celebrating international commerce in China, our IT department issued us loaner laptops and phones. This is common practice for big American businesses.)
It caught my eye, then, over the weekend, when The New York Times quoted a Chinese national living in the United States who says she’ll continue to use threatened-to-be-banned WeChat, come what may, but that she’ll likely use a VPN to do so.
Think about that for a moment. The U.S. will force Internet users to use the same tactics as those used to go around Chinese censors because the U.S. is adopting Chinese principles of blocking apps it doesn’t like. (A federal judge over the weekend temporarily stayed the Trump administration’s arbitrary ban against WeChat.)
At the risk of repeating myself, it is an upside-down world. The U.S. is copying Chinese Internet policies. In forcing a sale of TikTok that isn’t a sale at all, the U.S. president is shifting a commercial contract from one American company, Google, to another, Oracle. The Wall Street Journal’s editorial board rightly labels this “corporate cronyism that will damage the U.S. government’s credibility and reputation for free-market rules.”
Meantime, the caudillo’s favored businesspeople promise 25,000 new jobs “over time,” a number undoubtedly snatched from midair. It calls to mind a promise from Alibaba’s Jack Ma that his e-commerce company would create a million U.S. jobs—a figure that never was serious and belatedly was retracted.
The Trump administration picks winners and losers. The world’s leading democracy abandons free markets and due process, not for national security reasons but for show. And craven businesspeople cower lest they upset the man behind the curtain.
***
Fortune’s 2020 Change the World list, our sixth, stresses the important point that no business succeeds alone. Collaboration among companies, even among rivals, shapes many of the inspiring stories in this package—in a Scandinavian effort to make “green” steel, in the campaign to close America’s racial wealth gap, and, above all, in the worldwide race for a COVID-19 vaccine. In the face of unprecedented collective challenges, only cooperation can move the needle.
Adam Lashinsky
@adamlashinsky
adam.lashinsky@fortune.com
This edition of Data Sheet was curated by Aaron Pressman.
NEWSWORTHY
Time is a flat circle. It's just a problem with a few Internet startups. It's just Bear Stearns. Forgive my echoes of investment bubbles past, but controversial Nikola Motor chairman and founder Trevor Milton is out of the company this morning, less than two weeks after Hindenburg Research accused the company of being a gigantic fraud. Fellow board member Stephen Girsky, who was vice chair of GM, takes over for Milton. Shares of Nikola started trading at $65 via a SPAC merger in June and have declined pretty steadily since. They plunged another 30% to around $24 in pre-market trading on Monday.
I hear Bitcoin bells are ringing. Online bank Chime raised almost $500 million in new venture capital backing from the likes of Coatue and Tiger Global in a deal that pushed its private value to $14.5 billion. That's higher than Robinhood's $11.2 billion value, putting Chime at the top of the fintech charts. And crypto startup Kraken got a type of bank charter, as a special-purpose depository institution, from Wyoming in order to connect directly to the federal payments system.
Lethal virtual weapon. German authorities opened a homicide investigation related to a ransomware attack that struck a hospital in Düsseldorf. A 78-year-old woman died after being forced to transfer from the medical facility while its computers were attacked. Still, the attack may not be to blame for the death, says Johns Hopkins professor Thomas Rid. "The causality is not clear," Rid tells Fortune. "Whether the patient would have died without the ransomware incident first, we just don't know." Elsewhere on the police blotter, a grand jury indicted six people for bribing Amazon employees to boost and tank the rankings of items from various third-party sellers.
Onward and upward. On the stock market, Unity Software's debut went well, as the company's new shares trading under the symbol "U" gained 31% on Friday. And Microsoft is paying $7.5 billion in cash for another video game developer, ZeniMax, which owns some major franchises including The Elder Scrolls, Quake, and Fallout.
Let's make a deal. Leading streaming box provider Roku struck a deal with Comcast's NBCUniversal to carry the new Peacock ad-supported video service. Still, consumers can't fully rejoice yet. Peacock still has no deal with Amazon for its Fire platform and AT&T's HBO Max isn't on Roku or Fire.
Out of the frame. Researchers discovered that Twitter's algorithm for displaying cropped pictures of faces may favor those of white people over Black people. Twitter says it is investigating.
FOOD FOR THOUGHT
With another election season nearing its climax, we're all on the lookout for misinformation and fake stories amplified by virality. In an essay for The Atlantic, Renée DiResta, technical research manager at the Stanford Internet Observatory, worries that new A.I. apps will make the problem even worse.
Amid the arms race surrounding AI-generated content, users and internet companies will give up on trying to judge authenticity tweet by tweet and article by article. Instead, the identity of the account attached to the comment, or person attached to the byline, will become a critical signal toward gauging legitimacy. Many users will want to know that what they’re reading or seeing is tied to a real person—not an AI-generated persona. Already, the internet has divided into more and less sanitized spaces: Sites such as 4chan exist for internet users who want unfettered anonymous forums, but the majority of internet users prefer more moderated platforms. The proliferation of machine-generated messaging will enhance the appeal of internet communities in which all participants must validate their identity, or at least their physical existence, in some way. Political debate may migrate to entirely new speech platforms—or carved-out sections of existing platforms such as Twitter or Facebook—that prioritize the postings of users with verified identities or validated pseudonyms.
IN CASE YOU MISSED IT
With Trump’s WeChat ban approaching, here are several alternatives By Robert Hackett
Self-driving cars will hit the Indianapolis Motor Speedway in a landmark A.I. race By Jonathan Vanian
Inside the weird new world of social ‘forex’ trading—where you sign up friends, and some report risky red flags for investors By Brooke Henderson
How data helped keep Red Bull’s F1 team on track during the pandemic By Jeremy Kahn
The activist employee hasn’t gone away By Geoff Colvin
Why I’m giving up my board seat to make room for someone from an underrepresented community By Tim Disney
Black founders have unique talents. We need to make sure they get to use them By Erica B. Smith-Goetz
(Some of these stories require a subscription to access. Thank you for supporting our journalism.)
BEFORE YOU GO
It's not quite the 50th anniversary of Robert Pirsig's amazing travel and philosophy novel Zen and the Art of Motorcycle Maintenance, but it's the 46th. And current events have made the book as relevant as ever. This morning, I recommend starting with a shorter read. Smithsonian Magazine has a great essay about the book's lens on technology and Big Tech. Plus, cool photos from the Smithsonian's collection of Pirsig's manuscript and his motorcycle maintenance tool box. It's Monday–let's get out there and fix things!
Aaron Pressman
@ampressman
aaron.pressman@fortune.com


fortune--2020-09-21--Why online voting will have to wait

Why online voting will have to wait

As the U.S. frets about counting mail-in ballots in November, some say there’s an easier way to hold an election: voting by smartphone app. After all, Americans already use their phones to order lunch, do their banking, and crown reality-show winners from the comfort of their couches. Why not extend this convenience to real elections?
The idea is not a new one. In Estonia, voters have been casting ballots online for more than a decade while West Virginia has let overseas military personnel vote with an app. But despite such innovations, most Americans still vote much like their great-grandparents did—marking ballots and then stuffing them into a box. Many people believe it’s time for the U.S. elections to enter the 21st century.
“The U.S. is living with a voting system designed 200 years ago,” says Aggelos Kiayias, a cybersecurity professor at the University of Edinburgh.
A number of tech companies are eager to help bring U.S. elections into the smartphone era. Voatz and Democracy Live, for instance, have built app-based voting tools they claim can thwart hackers and make sure voters are who they say they are.
Brad Brooks, CEO of OneLogin, a startup that helps the likes of Uber and Airbnb verify the identity of employees, is among those who say the time for online voting is now. The first step, he says, would be for states to create voter IDs using biometric technology like fingerprints and face scans—tech that OneLogin uses in its own operations. He notes the federal government has already adopted such a system for its Global Entry program, which lets travelers pass through airport security more quickly. “If companies and governments are already using this technology to verify identities and give access to information, it’s a no-brainer to use it in the voting process,” Brooks says.
The U.S. is living with a voting system designed 200 years ago. Aggelos Kiayias, cybersecurity professor, the University of Edinburgh.
But election and security experts agree that Americans won’t be voting Estonia-style anytime soon. Any tech upgrade will instead be incremental, they say, and online elections, if they ever happen, are decades away.
One reason is that, unlike a tiny Baltic country, the U.S. is enormous, and its elections are controlled by a patchwork of state and local governments. This would make implementing a national Internet voting system a daunting legal and logistical challenge. Even a basic national voting ID card, used by many countries to ensure the identity of voters, is, for many politicians, a nonstarter.
Furthermore, some voting-tech vendors have spotty track records, making election officials wary of moving too quickly. Who can forget the Iowa caucus in February, when a little-known firm called Shadow built an app for Iowa’s Democratic Party to report vote counts? The app failed spectacularly, resulting in an election-night fiasco and a weeks-long delay before the vote count was certified.
Liz Howard, an attorney with the nonpartisan Brennan Center for Justice who worked as a senior election official in Virginia, has her own horror story to tell. Amid an equipment failure during one election, she tried to get help by calling the vendor responsible—only to have the company hang up on her.
But of all the stumbling blocks to app-based voting, perhaps none is bigger than security. Online ballots would be an irresistible target for state-sponsored hackers, especially those from Russia, which has repeatedly tried to infiltrate U.S. election systems, and in some cases has succeeded. Invariably, voting-tech companies claim their systems are secure. But U.S. election officials have so far balked at putting those promises to the test on a large scale.
Instead, many states have been slowly upgrading their voting technology, without much fanfare. Poll workers in a number of places now use iPads and laptops rather than paper records to check voters against registration lists—speeding up the time required to cast a ballot. Likewise, Travis County, Texas, and Washington, D.C., are creating online dashboards that voters can check from home to see wait times at polling locations, so they can avoid long lines.
Of all the companies creating technology specifically for elections, Microsoft is likely the biggest. Earlier this year during local elections in Wisconsin, it tested software that encrypts ballots after voters mark them electronically or when poll workers scan paper versions. The process prevents tampering while also providing poll workers with a backup vote tally. “Humans are horrible at counting things,” says Tom Burt, the vice president who leads Microsoft’s nascent initiative to supply free election tools.
Microsoft’s technology also provides voters with a code on a piece of paper that they can later use online to verify whether their ballot has been counted and not altered. It’s a step further than elsewhere, such as in San Francisco, where voters can merely check whether their ballots have been received.
As with most things, the adoption of election tech ultimately hinges on funding. Recently, the federal government provided grants to cities and states to upgrade their systems. The awards, however, were insufficient to pay for major projects. One reason for the lack of money is that political will to invest in voting infrastructure typically evaporates after voters go to the polls.
Meanwhile, election-tech makers face their own financial constraints. To make the big improvements necessary for online voting to become feasible, they need cash for research and development. But because the market for their products is relatively small and purchases are sporadic, those vendors generally spend little on innovation.
The upshot is that much like flying cars, a vote-for-President app is likely to be something Americans talk about for decades but may never see.
Digital democracy
A handful of places have tried online voting. Here’s how it turned out.
Estonia
The Baltic country debuted online elections starting in 2005. Today around 30% of the country’s 1.3 million citizens use the Internet to vote.
West Virginia
In 2018 the state’s overseas military members were able to use phones and tablets to vote in the midterm election; 144 troops in 31 countries actually cast ballots online.
Switzerland
After testing online voting at the local level, the country proposed taking it nationwide. But after researchers discovered a vulnerability that could alter ballot results, officials canceled those plans in 2019.
A version of this article appears in the October 2020 issue of Fortune.


fortune--2020-09-21--Allbirds is stepping up for the planet—by treading lightly on it

They came in search of nematodes, tiny worms that cycle nutrients through soil. They dug their hands into thatches of reedy grass on a sunny hillside on the South Island of New Zealand, turning over the earth, peering at what lived below. To an outsider, it looked like dirt: brown, crumbly, messy earth. To four employees of Allbirds, the six-year-old San Francisco footwear startup famous for its fuzzy woolen sneaker, it looked like an opportunity: life-affirming, environmentally pleasing proof that the materials that go into Allbirds shoes don’t hurt the planet in the process.
More than 6,000 pink-nosed merino sheep roam the 2,500 rolling acres that constitute Glenaan Station, a century-old farm two hours north of Christchurch. Through the normal course of being sheep, these animals spew methane into the atmosphere, trapping heat. Yet thanks to those small worms, the soil on this antipodean ranch sucks up carbon dioxide while growing grass to feed the sheep that produce the wool that adorn the feet of hipsters a world away.
This means everything to Allbirds, whose very identity is wrapped up in the eco-friendly compact it makes with its consumers. “Farmers get a bad rap for contributing carbon and other greenhouse gases to the atmosphere,” says Hana Kajimura, the sneaker company’s head of sustainability, who was visiting to check one of Allbirds’ sources of wool. “But this farm is doing so much to draw down carbon at the same time,” she adds. “We want to make sure that we’re looking at the whole picture. Not just what’s being emitted but also what’s being stored.”
FIELD OF DREAMS The comfy wool for Allbirds’ sneaker-slippers comes from merino sheep, like these beasts on the South Island of New Zealand. Courtesy of Allbirds
From its start, Allbirds tapped into the then-emerging trend of environmental sustainability as a commercial and marketing attribute. Instead of planet-killing plastic, it made shoes with natural materials. Climate crusader Leonardo DiCaprio liked his Allbirds so much he invested in the company, which has raised more than $77 million to date. (Institutional investors include heavyweight funds T. Rowe Price, Fidelity, and Tiger Global, and the company, which is privately held, is actively raising more money.) The signature Allbirds hybrid slipper-shoe, an out-of-nowhere addition to the “athleisure” fashion movement, quickly caught on with casually clad professionals, particularly in Silicon Valley.
With 21 retail stores and 2019 sales estimated at $200 million, Allbirds is a full-fledged member of the purpose-driven corporate set. It has spawned a legion of copycat shoes, and rather than litigating, Allbirds makes life easy for imitators. Last year cofounder Joseph Zwillinger wrote an open letter urging rivals to “please steal our approach to sustainability” and offered to send the recipe for Allbirds’ plant-based soles to anyone who asked. As of January, 20 brands intended to release products made according to the Allbirds not-secret sauce, the company says.
Allbirds is a full-fledged member of the purpose-driven corporate set.
Indeed, kindness to the planet is one of Allbirds’ biggest selling points. In April it slapped a carbon footprint label on everything it sells. It claims to use 7.1 kilograms of carbon to manufacture a wool sneaker, compared with an industry average of 12.5 kilograms. Around the same time, Allbirds jumped into the field for “performance” running shoes with the Dasher. It is made from merino wool and other materials that could double as the recipe for some kind of health tonic: eucalyptus, sugarcane, and castor bean oil.
It’s a tall order to go up against Nike and other athletic-apparel incumbents, especially with a nearly all-natural shoe. Allbirds figures that sticking with its best advantage—its good-for-the-planet sheen—represents its best chance of not getting left in the mud.
Regenerative agriculture dates back at least to biblical times, when the ancients practiced rudimentary crop rotation by letting their fields lie fallow in order to keep the soil rich with nutrients. The term, however, has more recent roots in media and marketing: Magazine publisher Bob Rodale talked in 1989 about the virtues of “regeneration” as opposed to mere sustainability.
As climate change concerns have surged, regenerative agriculture has been touted as a way to sequester carbon from the atmosphere. “Soil is a huge carbon sink,” says John Brakenridge, CEO of New Zealand Merino, the agency that sources wool for Allbirds. This means that soil absorbs carbon, mitigating its impact. “Done right, this can be a big part of the solution to what we’re facing in global warming.”
7.1 kilograms The amount OF CARBON THAT GOES INTO MAKING AN ALLBIRDS SNEAKER, COMPARED WITH AN INDUSTRY AVERAGE OF 12.5 KILOGRAMS
One morning in March, I meet Brakenridge and the Allbirds team in downtown Christchurch, before heading up north. In between farm visits, Allbirds has spent the past week participating in a conference with other clothing brands, such as North Face and the activewear label Icebreaker, about regenerative agriculture. Collaboration is the order of the day. Says Jad Finck, Allbirds’ vice president of innovation and sustainability: “Nothing’s going to happen if we’re all siloed.” On a whiteboard, someone has written prompts (“How might we reward growers?” “How might we start a movement?”) and maxims (“The market can act faster than policy”). A poster titled “Carbon & Environmental Claims: How to Tell the Story” includes a cartoon of a buzzing smartphone and various words in speech bubbles: “social responsibility,” “wellness,” “traceability,” “ethical.” There’s a merino wool surfboard in the lobby, a merino wool bed in a mock bedroom, and a merino wool yoga mat on the merino wool carpeted floor.
This combination of earnest environmentalism and aggressive marketing is as much the Allbirds recipe as the makeup of its shoes. “You’ve seen the world coalesce around a global problem,” says Tim Brown, the other Allbirds founder, when we speak over Zoom later in the year. “It’s a problem that doesn’t know borders. It’s not too hard to draw a bow to the next crisis looming around the climate and the environment.”
LEADING THE WAY Allbirds cofounders Joseph Zwillinger (far left) and Tim Brown, photographed in San Francisco. Jason Henry
But do people care enough about the environment to buy running shoes made of wool rather than a standard pair of Nikes? Or to spend $95 on a pair of classic Allbirds when Amazon sells a nearly identical-looking version for $29.99? In fact, a certain segment of people do. “Millennials tell us that they are very concerned about how products are made, where they’re made, whether they’re made ethically, and that they’re willing to pay more money for those that are,” says Matt Powell, a senior sports industry adviser at NPD Group, a market research firm. “Pre-COVID-19, the consumer wanted to align with brands that expressed their values. And I think that’s even more true now.”
The pandemic and subsequent stay-at-home orders did force Allbirds to adapt. It closed its headquarters and most of its retail stores. “We’ve always had a profitable business, but we amassed a rainy-day fund,” says Zwillinger. Nearly all the stores have since reopened; the company managed to avoid laying off any of its 450 employees; and Allbirds even returned a Paycheck Protection Program loan it had received. “Frankly, we were very eligible for it,” says Zwillinger, but notes the company nevertheless felt a moral obligation to free up funds for businesses less flush with venture money than Allbirds.
$200 million ALLBIRDS 2019 REVENUE, UP FROM $150 MILLION THE YEAR BEFORE
None of which is to say Allbirds is above capitalizing on a perilous moment in the marketplace. It is now focused on its running shoe, the Dasher. Skeptics doubt the company can successfully muscle into a market dominated by the likes of Nike and established specialty brands including Asics, New Balance, and Brooks. “I don’t know why anybody would get into the running shoe space in 2020,” says Jeff Dengate, senior test editor of Runner’s World magazine. “It’s a very competitive market.”
Then again, so was the everyday sneaker market before Allbirds came around. The company says the Dasher’s launch produced its third-best single-day sales ever, with the two better days having come in the holiday season. “It feels weird to say you’re lucky in a time like this,” says Zwillinger, a former biotech engineer who hosted a dinner for Brown, a former professional soccer player, and then became his cofounder. “But we kind of got lucky: Running’s not canceled.” Allbirds started by selling strictly online, but now about half its stores are outside the U.S., including in Chengdu, Amsterdam, Berlin, and Tokyo. Says Brown, “It felt like the world needed this particular product, more than ever, in this moment.”
Back at Glenaan Station in New Zealand, Allbirds’ place in the market relative to more well known brands takes a back seat to the fact that its patronage allows the shepherd who supplies its wool to make impressive capital improvements to his farm. Paul Ensor, a fourth-generation rancher, recently spent more than $100,000 to fence off from grazing cattle a “wee stream” of the glacial river that runs along his acreage. I ask how the stream benefits his wool production. Ensor blinks at me, confused. “It just runs out to sea,” he says. “For the ecosystem. We look at it as an asset for biodiversity, for water health.”
But even in these fairy-tale rolling hills, there are realists. Not far from Glenaan Station is Castle Hill Station, a farm owned by Jos and Catherine Van de Klundert, who emigrated from the Netherlands to New Zealand in 1984. (“More space,” explains Catherine.) The wool from their 3,000 merino sheep also gets spun into Allbirds, though Catherine’s never put on a pair herself. “Are they comfortable?” she asks. “I could have ordered them online, but I’m from a generation that doesn’t really like to do that.”
$77 million THE AMOUNT OF VENTURE CAPITAL THE SIX-YEAR-OLD COMPANY HAS RAISED, FROM INVESTORS INCLUDING T. ROWE PRICE AND FIDELITY. IT IS SAID TO BE SEEKING MORE
“The thing about merino,” Jos says, looking out over the couple’s 8,000 acres, “is that it’s more or less marketing. There’s a certain part of the public that can afford it, and those sort of people want to know where the product is coming from. The story behind the wool has nearly the same value as the product itself.”
For Allbirds to win in the marketplace, it will need consumers to take that story and run with it.
A version of this article appears in the October 2020 issue of Fortune with the headline “A shoe with no footprint.”


fortune--2020-09-21--Ruth Bader Ginsburg fought for women’s basic rights. It’s a legacy just as powerful as her record on

Ruth Bader Ginsburg fought for women’s basic rights. It’s a legacy just as powerful as her record on the Supreme Court

This is the web version of The Broadsheet, a daily newsletter for and about the world’s most powerful women. Sign up to get it delivered free to your inbox.
Good morning, Broadsheet readers! Zendaya makes history at the Emmys, the TikTok deal moves ahead, and we mourn Supreme Court Justice Ruth Bader Ginsburg. Have a reflective Monday.
– RIP, RBG. If you’ve been feeling down—or worse—since Friday night, I don’t blame you. The passing of Supreme Court Justice Ruth Bader Ginsburg left many of us bereft—whether because of the loss of a legal titan or worry about what her departure from the bench means for the future of the Court.
This morning, I’d like to stay focused on the woman herself (read on below for more on the political implications of Ginsburg’s death). For some of us, it’s hard to remember a time when the Supreme Court justice wasn’t the Notorious RBG, a pop culture icon known as much for the style of her dissents (and their accompanying collars) as for the content of her legal decisions.
But decades before she earned the moniker as a leading voice on cases ranging from voting rights to abortion rights to equal pay, Ginsburg was doing the work in her own slow, deliberate manner. At the American Civil Liberties Union’s Women’s Rights Project, Ginsburg slowly chipped away case by case at ways American law treated women and men differently.
Allow me to quickly list a few of the rights women and men hold thanks to Ginsburg’s revolutionary legal strategy targeting sex discrimination as it affected both genders: the ability for a woman to secure a mortgage without a man, a widower’s right to receive Social Security benefits from his late wife, the right for a woman to have a credit card independent of a man, a military husband’s ability to be his wife’s dependent, and so many more. By showing how sex discrimination hurt everyone, Ginsburg changed public and legal opinion on the issue. Years before she served on the Supreme Court, Ginsburg won five out of the six cases she argued there.
Ginsburg’s legendary work ethic—from taking her husband’s courses in law school as he was treated for cancer to the workout routine she kept up until just a few months ago—has been well-documented, from news coverage to the 2018 film On the Basis of Sex, chronicling the lawyer’s early career. Earlier this year, the TV series Mrs. America included a quick nod to “Ruth,” a shy, whip-smart lawyer who sat quietly next to the flashier feminists of the 1970s.
It’s admittedly hard to separate the meaning of the death of such a towering figure from the political context surrounding it. But as you pull out your credit card today to make a purchase, pay your mortgage, or get your next paycheck, think of the fundamental rights the justice secured for women in American law. It’s a legacy just as powerful as the one she leaves on the nation’s highest court.
Emma Hinchliffe
emma.hinchliffe@fortune.com
@_emmahinchliffe
ALSO IN THE HEADLINES
- Supreme Court seat. After the death of Justice Ruth Bader Ginsburg, a fight looms over her seat; Republicans say they are aiming to fill the opening—despite having blocked President Obama's Supreme Court appointment in the last year of his term. President Trump has said he plans to nominate a woman to the spot, and leading candidates include Amy Coney Barrett, a judge chosen by Trump for the U.S. Court of Appeals seventh circuit, and Barbara Lagoa, a Trump appointee to the 11th circuit.
- Ch-ch-ch-changes. Fortune's Change the World list is out today, featuring businesses that are doing well by doing good. Honorees include the pharmaceutical companies racing for a COVID-19 vaccine—one of those is Emma Walmsley's GlaxoSmithKline—and Grab, the ride-sharing startup cofounded by Tan Hooi Ling, for its technology connecting Southeast Asia's food vendors with customers during lockdowns. Fortune
- TV's big night. At the stay-at-home Emmys last night, Catherine O'Hara won her first acting Emmy for her role on Schitt's Creek, and Zendaya made history by becoming the youngest winner for best lead actress in a drama for her role in Euphoria. New York Times
- Ran out the clock. President Trump approved the proposed Oracle-TikTok deal, making the tech giant led by CEO Safra Catz the "trusted technology partner" of the shortform video app led by interim CEO Vanessa Pappas. The deal now involves $5 billion to be given to a Trump-approved "education fund"—rather than a cash payment to the U.S. government, as Trump originally demanded—although that donation is only required if certain conditions are met. Fortune
MOVERS AND SHAKERS: Former Okta chief customer officer Krista Anderson-Copperman joins the board of directors at Drift.
IN CASE YOU MISSED IT
- Global view. Friday was the first-ever International Equal Pay Day, a date set by the UN to mark the 23% global gender pay gap. Katica Roy, CEO of the pay equity platform Pipeline, writes for Fortune about the importance of stakeholder capitalism in closing the wage gap. Fortune
- No way, NDAs. Have non-disclosure agreements gone too far? In this piece, Ariella Steinhorn, founder of the storytelling firm Lioness, with employment attorney Vincent White argues that an overhaul is in order to invalidate NDAs when used to silence employees from speaking out about workplace discrimination or sexual harassment. Fortune
- Special skills. Erica B. Smith-Goetz, a recent Stanford Graduate School of Business alumna, conducted research about the particular skills Black startup founders have. She found common threads among these founders, from persistence developed from a lifetime of obstacles to especially strong self-awareness created by frequently navigating white spaces. Fortune
ON MY RADAR
Fed Cup to be renamed Billie Jean King Cup BBC
Queen Elizabeth II strips Harvey Weinstein of his honorary award Fortune
Apollo’s Stephanie Drescher on running a global investment firm from her living room Fortune
PARTING WORDS
"That's the dissenter's hope: that they are writing not for today, but for tomorrow."
-Supreme Court Justice Ruth Bader Ginsburg


fortune--2020-09-21--Ford, just admit it: You’re a truckmaker now

Ford Motor Co. prides itself on thinking big. The 117-year-old icon’s long-running strategy centers on preserving its status as a universal nameplate serving all the world’s major geographies and offering a wide array of vehicles from subcompacts to luxury SUVs, in a variety of flavors soon to widely encompass electric.
But it’s a company that’s sliding: After posting $7.4 billion in profit in 2015, Ford’s earnings barely broke even last year, and that was before COVID-19 and its subsequent lockdowns took a sledgehammer to its North American profitability. In the second quarter of this year the company lost nearly $1 billion in the region. Jim Hackett was ousted as CEO shortly after, and a new round of buyouts was announced.
New CEO James Farley, who was promoted from chief of operations, has a monumental challenge on his hands but also has everything he needs to make Ford a success, if he’s willing to make some hard choices around product and strategy.
Ford’s production lines returned to full capacity in June after three months of lockdown. CHARLOTTE SMITH—FORD MOTOR CO.
So what should Ford look like in 2021 and beyond? Fortune spoke to analysts and industry experts and studied Ford’s public filings to assemble a plausible blueprint for its revival.
Farley has a rare opening to seize the moment. The pandemic’s onslaught makes investors a lot more tolerant of tough decisions that cause short-term pain but build on what makes money, shelves losers, and jettisons lofty ambitions. This is a crisis Ford can’t afford to waste.
Junk more unprofitable models in North America
For years, North America has been Ford’s only consistently profitable market. “But margins there have been falling, and are well below where they need to be,” says Stephen Brown, an analyst with Fitch Ratings. The big problem is a cost base that jumped $8.3 billion from 2016 to the end of last year, outpacing sales increases of just $5.5 billion; that combination shrank margins from over 10% to just 6.7%. In mid-2018, Ford announced an $11 billion worldwide restructuring plan aimed at securing bigger, better deals with suppliers, automating production by adding fleets of robots, rightsizing its workforce, and phasing out nearly all traditional passenger cars in North America.
Last year, Ford sold an astounding 897,000 F-series trucks, led by the F-150, America’s bestselling vehicle. Ford Motor Co.
But the company will see greater wins by winnowing the portfolio to three high-margin franchises, two of which are growing fast.
The first, and by far the biggest, is the F-series pickup. Last year, Ford sold an astounding 897,000 F-series trucks, led by the F-150, America’s bestselling vehicle. The much-hyped electric F-series, which could be unveiled as soon as next year, is going to be a make-or-break addition to a line that constitutes 40% of Ford’s total domestic sales.
The second category encompasses “commercial vehicles” or CVs, its Transit-brand vans used by businesses from couriers to carpenters, as well as boxy passenger versions that are the successors to the old Econoline models. Like the F-series, they boast double-digit margins according to Wall Street analysts.
New CEO James Farley has a rare opening to seize the moment. This is a crisis Ford can’t afford to waste.
The third category, SUVs, are a tougher call. Last year, Ford sold 831,000 in the category including the Escape and Explorer in the U.S., but its sales and market share are dropping, the latter falling from 12% in 2015 to just under 10% in 2019.
Still, SUVs are a promising business stateside. They’re generally high-priced, lucrative products, and even if they don’t grow much, can remain so. That’s because key models share the “body on frame” architecture and are produced on the same platforms as the trucks that Ford manufactures in gigantic volumes, lowering unit costs. The new Bronco SUV shares the same chassis, and many other parts, with Ford’s second pickup brand, the Ranger, and is being made alongside its cousin in Wayne, Mich. The Expedition, its largest SUV, and the high-end Lincoln Navigator use the same underpinnings as the F-150. By contrast, two of the smaller models, the EcoSport and Escape, employ a different system called “unibody,” and hence don’t offer the same economies. “Ford should phase out the EcoSport and Escape, which are low-margin anyway,” says Jon Gabrielsen, an industry consultant. Put simply, Ford can prosper if it speeds faster on the same route by shedding the marginal SUVs and hitting the brakes on costs.
In Europe, get out of sedans and go all-in with vans
Ford’s biggest problems lie overseas. If the automaker could simply sell its foreign operations to a rival at no gain, its road to success would be far shorter and straighter. Ford should leave South America as quickly as possible. Its operation there, serving mainly Brazil and Argentina, hasn’t earned its cost of capital in decades.
In Europe, where GM wisely withdrew via a sale to Peugeot in 2017, Ford is pledging to downsize its line of low-margin, high-volume passenger vehicles and invest heavily in growing its star performers, commercial and passenger vans. This doesn’t go far enough.
Ford should focus on dominating the van market. The company is the market-share leader in commercial vehicles in Europe at 15.1%. Sales are growing, hitting over 264,000 vehicles last year, and according to industry experts, its Transits are generating double-digit margins.
Achieving large-scale production is crucial to keeping its lead in vans. A new joint venture with Volkswagen should help a lot. VW has pledged to source commercial vans in Europe and a pickup based on the Ranger for all markets engineered and manufactured by Ford.
But in shrinking its passenger vehicle lineup, Ford will no longer benefit from scale in engineering and purchasing, and thus won’t be able to keep costs competitive. It needs to get out of this segment entirely.
The picture for SUVs is cloudier. Last year, Ford sold just under 300,000 SUVs in the U.K. and on the Continent, largely manufactured in the region. Unlike the situation in sedans, Ford is designing and making large volumes of the same SUVs in the U.S., some sharing platforms with its F-150s. So Ford would achieve economies by continuing to manufacture and sell the most popular models in Europe.
Scale back China ambitions and play to your strengths
Just five years ago, Ford was on a roll in China, holding an almost 5% market share and generating $765 million in pretax profits on $10.7 billion in sales. (Earlier figures are for the Asia-Pacific region, heavily dominated by China.) A stunning free fall ensued, erasing all earnings by 2019 and sending revenues plunging 35%, to $7.0 billion. Fortunes improved in the first half of 2020 with the introduction of new versions of the Ford Escape and Lincoln Corsair SUVs. But its market share is still just 2.5%, and it faces obstacles similar to those in Europe: A heavy dependence on low-margin passenger cars, and the challenge of achieving volumes big enough to compete on sedans and SUVs.
Though Ford doesn’t disclose the exact breakdown, Fortune estimates that of the 159,000 vehicles that Ford sold in China in Q2, roughly half were sedans, led by the midsize Focus and compact Escort, and SUVs. As in Europe, China is moving rapidly to EVs. Undaunted, Ford is pledging to introduce 30 new models over the next three years, 10 in all-electric versions. But China has over 400 domestic producers vying for that market. And EVs for now are far less profitable than conventional vehicles, because battery costs remain elevated, while volumes remain too low.
That doesn’t mean that Ford should abandon China. Rather, it should once again play to its strengths. Its light commercial vehicles are big hits in China, just as in Europe. Ford should transform itself into a specialty manufacturer concentrating on vans and small pickups. Its growing output in the U.S. and Europe, including in new EVs, will help provide the scale essential to winning in the world’s largest auto market. It’s also starting with fat margins in those vans and pickups, which should ease the transition to EVs.
As sales shrink, costs need to keep pace
A New Ford that’s resized and profitable might be two-thirds as big as the current model, meaning that sales would shrink from $156 billion last year to around $100 billion. But that template can work only if Ford crunches overhead. Since it would be shifting to a mix of much higher-margin products, the automaker wouldn’t need to lower costs quite as fast as sales to become far more profitable. But the transition would still be brutal. Entire engineering and sales teams behind axed models would have to go en masse.
Ford has a core of great products that are being diluted by trying to do too much in too many places. A daring plan for downsizing would mean the end of the global empire of old, but it could ensure that the blue oval survives on what Ford does best.
Ford Motor Co.
The new Bronco is an example of everything Ford is doing right
Shared platform
The engineering platform, chassis, and several parts for the Bronco are shared with Ford’s new Ranger pickup truck, which has already proved to be a hit seller.
Bankable nostalgia
Ford isn’t afraid to look to the past and trade on nostalgia—take the Ford GT and its entire Mustang line for evidence.But with the Bronco that nostalgia is paired with a practicalvehicle, and one that will appeal to younger drivers.
Genuine performance
The Bronco is going right up against the proven off-roadcredentials of the Jeep Wrangler, and only by beating the Wrangler will it succeed in the market. The released specs show Ford is taking this fight very seriously.
A version of this article appears in the October 2020 issue of Fortune.


fortune--2020-09-21--The activist employee hasn’t gone away

The activist employee hasn’t gone away

As the election approaches, the building trend of employee activism against employers seems to be taking a benign turn—but don’t imagine that America’s employers and workers are now united in peace and love. While high-profile employee walkouts and protests have faded in the pandemic era, a new kind of friction, with higher stakes, is on the way. The election’s outcome will strongly influence how it plays out.
The largest employee protests have shocked many. Last year some 3,000 Amazon employees walked out in opposition to the company’s climate policy, and hundreds of Wayfair workers walked out to protest the company’s sale of furniture to U.S. immigrant detention centers. In 2018 an estimated 20,000 Google employees marched to protest the company’s generous severance payment to an executive accused of sexual misconduct. Such large-scale employee revolts over issues unrelated to pay, benefits, or working conditions were unprecedented. Something truly new was happening in the workplace.
Temporary factors have tamped down the activism so far this year. It’s hard to organize attention-grabbing walkouts when everyone is working from home. In addition, intense social activism in the form of massive nationwide protests over racial inequities and police behavior have largely outweighed complaints against individual companies.
Google employees stage a walkout on November 1, 2018, in New York, over sexual harassment. BRYAN R. SMITHAFP via Getty Images
At least for the moment, hundreds of companies have also found a welcome way to unite employee activism with corporate purpose. They’re offering incentives for employees to vote and facilitate voting (see sidebar). Workers and employers are likely relieved to be collaborating on what they agree is good for the country.
Such amity is only a lull, however, as these two groups work out the terms of a new relationship. “Employee activism has become normalized,” says Leslie Gaines-Ross, who recently left the Weber Shandwick communications firm after 14 years there researching corporate reputation and, more recently, employee activism. “It’s now permissible to take sides on social and political issues. Everyone is taking sides—CEOs, coaches, Nobel Prize winners. It’s normal today.”
Still, it’s one thing to take sides, another to carry placards down the street denouncing your employer for behavior that doesn’t affect your paycheck or safety. Recent research from the University of Southern California finds that most companies aren’t prepared for such baffling behavior. In a survey of public relations executives, most said their companies have no policies on employee activism, and most don’t even know whether their companies support employee involvement in activist activities.
Today’s employee activism is explained in part by the psyche of millennials, for whom such seemingly bizarre behavior doesn’t seem bizarre at all. They’re just as aware as their elders that it risks getting them fired, says 2019 research from Weber Shandwick. They just don’t care as much.
The reason is that, on average, millennials much more than previous generations value working for a company with a noble mission, recognized for making a positive impact on society. Research from Deloitte finds that 80% of them say they’d be more motivated working for such a company. Because so many of them feel that way, working for one of those companies gives them prestige among their peers.
Result: For millennials especially—and increasingly for workers of all ages—an employer’s behavior in the larger world is part of the employee’s working conditions. It isn’t irrelevant. It’s the kind of thing for which workers go on strike.
That fact has been noticed by organizations that help workers go on strike, labor unions. Employee activists “see the value of collective action. It makes their voices more powerful,” says Elizabeth Shuler, secretary-treasurer of the AFL-CIO. When an Amazon activist group, Amazon Employees for Climate Justice, held an online conference in April, a key speaker was AFL-CIO president Richard Trumka, the most powerful person in U.S. labor.
Organizers of the walkouts at Amazon and Google have conferred with officials of various unions—which group initially approached the other is not clear—and have met with other employees about potentially unionizing. Google executives have met with IRI Consultants, one of the many firms that advise companies on how to prevent unionization, and the company fired some of the activists for violating corporate policies. (Firing someone for advocating unionization is illegal.)
Amazon has also fired employee activists, a move that CEO Jeff Bezos defended at the company’s annual meeting in May. “We support every employee’s right to criticize their employer’s working conditions,” he said, “but that also doesn’t mean that they’re allowed to not follow internal policies.”
The almost entirely nonunionized big tech firms are far from the only ones with activist employees, but they are the most prominent. For them especially, employee activism could evolve into a fight over unionization. “The tech industry is the next frontier for the labor movement,” says the AFL-CIO’s Shuler. In January the Communications Workers of America launched the Campaign to Organize Digital Employees (CODE). Its initial targets are the video game makers.
Success for the established unions is not assured. While a Biden victory in November would strengthen their position enormously, many tech workers and millennials are leery of unions as relics of a bygone age. And some successful companies—think of Nike and Patagonia—have embraced employee activism and even led it, to their benefit. What seems certain is that such activism will continue to grow, bumping up uncomfortably against the hard realities of running a business.
Time to Vote wants employers to pay its workers for time they spend voting and volunteering on Election Day. It’s had an astonishing effect on poll worker recruitment. COURTESY LEVI STRAUSS & CO
Big business for the civic good
Time to Vote wants employers to pay their workers for time they spend voting and volunteering on Election Day. It’s had an astonishing effect on poll worker recruitment.
It’s a striking new phenomenon in this election year: More than 900 companies are offering to pay employees for the time they spend voting in November, and in many cases for staffing polling places. The catalyst is Time to Vote, a nonpartisan, business-backed nonprofit formed in 2018 by Levi Strauss, Patagonia, PayPal, and other major corporations. In this year’s combustible political atmosphere, its uncontroversial purpose has struck a chord. It also alleviates a COVID-19 problem: Many poll workers are elderly and shouldn’t spend a long day interacting with thousands of strangers. Time to Vote set a goal of recruiting 250,000 poll workers this year. By early September it had recruited 350,000.
A version of this article appears in the October 2020 issue of Fortune.


fortune--2020-09-21--The world’s biggest hedge fund is working from tents in the forest during the COVID pandemic

Ray Dalio founded his hedge fund Bridgewater Associates upon the principle he calls “radical transparency.” Yet the firm had perhaps never practiced the concept quite so literally until this spring, when they applied it to their very own walls: Indeed, for more than four months, Bridgewater has operated an office outdoors.
Out among the pine trees across from Bridgewater Associates’ headquarters in Westport, Conn., sit as many as 50 employees who help manage the $140 billion in assets of the world’s largest hedge fund. They moved out there in May, lugging monitors and other equipment into the woods as the coronavirus made traditional trading floors hazardous.
Bridgewater has plans for catastrophes—it prohibits its senior executives from taking the same plane or bus and even from mingling all together during bad flu seasons—and readies at least four locations, including a remote emergency site, so that it could still execute trades in the event of a natural disaster or cyberattack. But those backup offices had their own problem during the pandemic: They were all indoors. “We’re sitting outside—that’s never been a part of our plans,” says Nir Bar Dea, cohead of Bridgewater’s investment engine.
Tracking the coronavirus, Bridgewater had shut its offices to all but essential staff at the end of February. But a couple of months later, missing in-person teamwork, it sought to reopen them. Staffers immediately realized they could not collaborate inside. “I was like, we got to take the masks off,” recalls Bar Dea. The multitude of requisite safety protocols were “more stressful than calming,” he adds. “The move outside just flipped that completely.”
Bridgewater’s famous Monday morning meetings now include 25 people congregated under the main tent, plus more than 100 others on Zoom; here, founder Ray Dalio can be seen joining the call, in the upper right corner. Courtesy of Bridgewater Associate
While everyone on campus takes COVID-19 tests twice a week, masks are not required out in the woods, where furniture is spaced well apart and a safe distance can be maintained. The firm’s team quickly assembled open-sided tents as shelter from the elements, upgraded the Wi-Fi, and procured additional kayaks for socially-distanced recreation. Bridgewater’s famous three-hour Monday morning “What’s Going On In the World” meeting now includes 25 people congregated under the main meeting tent, plus more than 100 others Zooming in on the large screen mounted to its side. In the background is a thicket of tall pines, their needles forming a reddish carpet beneath.
If the bucolic scene has some of the look of a campground, it also has much of the feel. Bridgewater staff have learned to protect their chairs from falling tree sap, and replaced their screens and webcams with weather-resistant versions after the original ones failed within a couple of weeks of outdoor exposure. The firm even solved for its new feathered neighbors’ chirping on video calls, deploying noise-canceling software Krisp—which also helps those with kids and barking dogs at home. (“I hear a lot of birds; you don’t hear any of them,” Bar Dea explains via Zoom, in a t-shirt and bare feet, having kicked off his flip flops.)
Birds’ chirping and other animal noises interfered with Bridgewater’s video calls, so the firm added special localized speakers, shown here, along with noise-canceling software Krisp. Courtesy of Bridgewater Associate
And Bridgewater strategically located its tented workstations to avoid hikers on nearby trails accidentally stumbling upon them. “We’re also a hedge fund where people are trying to find out what we’re doing,” says Hadley Haslegrave, Bridgewater’s real estate manager. “You have to think about security too, which is much easier when you’re in a building than when you’re outside of the building.”
Another pro tip for woodland working she recommends: “Wear sunscreen every day, no matter what.”
New England climes are fickle—Bridgewater temporarily closed the site during an August hurricane—but the team plan to work out there as long as they can, whether in parkas and hats—until the end of October, they estimate. “Comfort doesn’t have to be it feels like indoors; you could have other positive aspects to being outside,” Bar Dea adds. (They draw the line at snow, and are already planning to take the setup inside for the winter—though it may necessitate overnight stretches: “Think the NBA bubble in Disney,” he says.)
Bridgewater employees working out of its Westport, Conn. offices have fallen into an unofficial routine: Conversations go outside, Excel work inside. New challenges include “tree problems.” Courtesy of Bridgewater Associate
After all, productivity metrics for the investment engine have improved since the move al fresco; the group intends to use the woodsy workspace next summer too, regardless of whether COVID still lingers.
They just may have to put up with an occasional interruption: Soon after market close one day in early September, an old oak tree crashed down steps from the big tent. “We’ve had a lot of tree problems lately,” adds Haslegrave. Luckily, it only hit the parking lot.
A version of this article appears in the October 2020 issue of Fortune with the headline “A hedge (fund) in the forest.”


fortune--2020-09-21--How institutional investors are driving a new gold rush

On Aug. 6 the price of gold hit a new record high of $2,067 per ounce. Even after sliding back under $2,000, gold was still up 28% as of early September. And over the past five years, the price of the precious metal has soared 75%. The recent surge has been driven by investors seeking a safe haven amid the economic chaos of the pandemic. While cash-strapped consumers have purchased less gold jewelry in 2020, the shortfall has been offset by institutional demand. Through August, the holdings of gold-backed exchange-traded funds grew by 938 metric tons, or some $51 billion, according to the World Gold Council. Meanwhile, global mining production—slowed by COVID-19 lockdowns—fell by 5% in the first half of 2020 versus 2019. Here’s a graphic breakdown of where gold is mined around the world.
A version of this article appears in the October 2020 issue of Fortune with the headline “Investors spark a new gold rush.”


fortune--2020-09-21--Woman suspected of sending poison-laced letter to the White House arrested

A woman suspected of sending an envelope containing the poison ricin, which was addressed to White House, has been arrested at the New York-Canada border, three law enforcement officials told The Associated Press.
The letter had been intercepted earlier this week before it reached the White House. The woman was taken into custody by U.S. Customs and Border Protection officers at the Peace Bridge border crossing near Buffalo and is expected to face federal charges, the officials said Sunday. Her name was not immediately released.
The letter addressed to the White House appeared to have originated in Canada, the Royal Canadian Mounted Police have said. It was intercepted at a government facility that screens mail addressed to the White House and President Donald Trump and a preliminary investigation indicated it tested positive for ricin, according to the officials.
The officials were not authorized to discuss the ongoing investigation publicly and spoke on condition of anonymity.
There have been several prior instances in which U.S. officials have been targeted with ricin sent through the mail.
A Navy veteran was arrested in 2018 and confessed to sending envelopes to Trump and members of his administration that contained the substance from which ricin is derived. The letters were intercepted, and no one was hurt.
In 2014, a Mississippi man was sentenced to 25 years in prison after sending letters dusted with ricin to President Barack Obama and other officials.


fortune--2020-09-21--When Bill Gates thinks we’ll have a COVID-19 vaccine—and why that won’t be the end of the pandemic

The Microsoft cofounder and cochair of the Bill & Melinda Gates Foundation is spending much of his prodigious fortune¹ trying to change the world—by tackling the diseases that hurt the poorest of the poor. But this year, a generation’s worth of progress is being threatened by a once-in a-century pandemic. Can an all-in bet on science and innovation set us back on course?
This edited Q&A has been condensed for space and clarity.
Pandemic vs. progress
Since 2017, the Bill & Melinda Gates Foundation has issued an annual scorecard, called the Goalkeepers Report, on how we’re doing in the fight against global poverty and disease. In the latest assessment, you began with words I’m guessing you’ve never uttered before: “This progress has now stopped.”
Gates: Yes, the United Nations developed these goals for humanity, which are about basic needs: getting rid of extreme poverty, providing access to education and health care. And so that creates a framework for us to do a report card every year and try to highlight the countries that are doing things well—we call them exemplars—so that we can get others to adopt best practices. The visibility of gradual progress is very low: Since 2000, we’ve cut childhood death rates in half, for example, but the progress is mostly invisible to people.
This year’s report, however, is quite a contrast. Due to the direct effects of the pandemic, in terms of the deaths it has caused, but also due to its gigantic indirect effects on fragile health systems in the developing countries, we’ve regressed. So routine immunization rates, which we’ve worked to raise to 84% over the last 25 years, are down 14 percentage points in the past year. The pandemic has pushed almost 37 million more people into extreme poverty—until 2020, that number had been going down every year for two decades.² So the call here is to say, “Hey, we’ve got to bring this pandemic to an end.” And then we have to work to catch up and get back to where we were at the start of 2020 on things like vaccination and education, so that we can resume that positive trajectory.
One opportunity for optimism, perhaps, is what seems to be a new wave of collaboration among companies in the wake of COVID-19. Is this new sense of shared purpose in the private sector real?
Well, the pharma industry is certainly stepping up to play their role. A lot of the big companies are agreeing to put their best people on both therapeutics and vaccines, so that’s pretty spectacular. And that’s why we have six vaccine constructs [methods of building vaccine], each of which could possibly be through an FDA Phase III clinical trial and receive an emergency-use license by early next year. The likelihood is that at least two, three, or four of those will probably prove to be both safe and efficacious. Then we’ll be faced with the challenge of scaling up manufacturing to a completely unheard-of level. The form of cooperation that’s never been done before is having a company that did not invent the vaccine provide its factories so that they can scale up that manufacture. Serum Institute of India, for example, has deals with AstraZeneca and [Maryland-based vaccine maker] Novavax. So we’re facilitating those pairings because the Indian manufacturers are much higher volume. They’ve got 5,000-liter tanks and huge built-in extra capacity.
New therapies
The Gates Foundation has also invested heavily in possible medicines to treat COVID-19. What progress are you seeing there?
So far, in the way of therapeutics, there’s dexamethasone [a steroid hormone first approved by the FDA in 1958], which is the only treatment that has significant impact. Even [Gilead Sciences’ antiviral agent] remdesivir, right now, is still showing pretty modest results. But there’s a pipeline of things being tested, including a number of monoclonal antibodies [lab-produced proteins that act like human antibodies, homing in on specific targets], which have the best chance of having fairly dramatic outcomes.³ We don’t know for sure, but the cure rates could be very high, like 70% or 80%. Some of that data will start being published in the next month or two. The Gates Foundation reserved capacity at a factory owned by Fujifilm to manufacture an antibody product. We have to provide them with the thing by sometime in October, so we’re scrambling. If the antibodies don’t work out or if we don’t have the right ones, then we’ll lose some of that money. But that’s fine, because the potential impact of having that capacity, which is significant, would let us get it out to developing countries without having just the rich countries take all that capacity just for their usage.
People’s attitudes towards masks and the vaccine, will, in a concrete way, help determine how quickly we bring this pandemic to an end. Bill Gates
The Gates Foundation—in a similar vein as BARDA, the U.S. government’s Biomedical Advanced Research and Development Authority—de-risks a lot of the riskier investments that private companies make for the common good. How else can governments encourage innovation on the more revolutionary fronts of science and medicine?
The U.S. is exemplary in this. We’ve got $42 billion a year of NIH money that often lays the research foundation for understanding the biology so that the product innovation can go on and companies can then develop medicines based on that biology. There is all sorts of friction about what drug prices should be, which is a big, complex topic, but the U.S. system—in terms of creating high-paying jobs and leading companies here and in getting the availability of new medicines to the U.S. very quickly—that’s working pretty well.
You mentioned drug pricing. Can these COVID-19 vaccines and medicines be made cheaply enough that the world can afford them?
I have a regular discussion with the pharma CEOs. Their response to the pandemic and this great work that pharma people are doing has reminded many of their capacities and how they can be helpful to the world—as opposed to the industry being viewed as kind of selfish and uncooperative. In the last big, big health crisis we had, when the HIV epidemic came along, the industry didn’t have a willingness initially to do tiered pricing, to get the drugs out to the developing countries [at prices they could afford], and they ended up in a lawsuit with former South African President Nelson Mandela.⁴ Eventually, they did the right thing. And that’s why I think the commitment today by some of these companies to put resources into the vaccine manufacture, and to do it on a nonprofit basis, is pretty valuable.⁵
Trust in science
It’s hard enough producing enough safe and effective vaccines against COVID-19. Persuading billions of people to take them may be harder yet.
The issue is just basic trust—how do people think about vaccines? With all the conspiracy theories out there, you know, we’ve got a challenge with that—not just in the developing countries, but everywhere. The most extreme example was where the polio vaccine was said to be a plot to sterilize women in Nigeria in 2003. And sadly, that led to cases spreading to a dozen countries where the disease had been eliminated.⁶ That was a huge setback. But there we got the trusted religious leaders to get the message out and give the vaccine to their children, and so, eventually, we overcame that. Today, people’s attitudes towards masks and the vaccine, will, in a concrete way, help determine how quickly we bring this pandemic to an end.
Speaking of conspiracy theories, there was an insane one floating on social media about you—that you had somehow created this pandemic. You’re arguably the best-known champion of public health on the planet. How do you get past that sort of crazy?
Well, it’s a new phenomenon. So I can’t say I have some great solution or expertise. And even though it’s so extreme—you could almost say it’s humorous—it is potentially a real problem, particularly when you have some people turning it into a political thing and even talking about taking violent action. So, I’m just learning about this. And, I’m certainly surprised that the organization that’s done more to save lives with vaccines is now being treated as though our goals are kind of the opposite.
The likelihood is that at least two, three, or four [vaccines] will probably prove to be both safe and efficacious. Bill Gates
Strangely, this is happening at a time when vaccine science in general seems to be advancing at breakneck speed. Can the race to create COVID vaccines help us develop one against, say, malaria?
We actually have a concrete project with Moderna to do a malaria vaccine construct using the messenger RNA platform [a method also being used for some COVID vaccine candidates]. That is somewhat interrupted by the pandemic, but it is an approach that we funded. We started backing these mRNA vaccines almost a decade ago. They are very promising and could be used potentially for HIV and tuberculosis as well.
Billionaire bromance
The legendary investor Warren Buffett, who just turned 90, has entrusted much of his own fortune to your foundation.⁷ What have you learned from him in your long friendship?
I’m talking to Warren actually more regularly this year than at any time during our friendship, which is almost 30 years now. And it’s because of his ability to look at what’s going on in the world and be fascinated and surprised. He and I sit and marvel over the unexpected things that are going on in many frameworks: political, macroeconomic, and in the world at large. He knows so much more about business, and he sees so much. Talking about, “Okay, are people buying furniture this year?” And the answer is yes, actually it’s at higher levels than last year. And going through each of his businesses—where has he seen the demand, and why he thinks that is? Or talking about an Austrian 100-year bond selling at 88 basis points⁸ and what that means. He hears a little bit from me on the digital realm, or about some of this health-related innovation, particularly related to the pandemic. But, you know, we never run out of things to talk about. He just brings such a sophisticated framework—and he always has this humility that goes with it, which makes it so much fun because he’s having fun. He’s also very careful about what he claims to know. You know, I’d rather talk to him about business and the economy than anyone else.
You’re known for clearing time on your calendar for “Think Weeks,” where you hole up in a cabin, read books, and ponder the world. Why is this so essential?
Adult life is so easy to fill up with activities. The ability to step back and read deeply or think deeply or write up thoughts is largely missing. And so I work hard on my schedule to make sure I’m not filling it up with too many things. It’s been a little bit easier with no travel this year. So I think of myself as a student where I need almost like a reading period to consolidate my knowledge. It was particularly challenging when I was CEO of Microsoft. Eventually, I got to two weeks a year that I was setting aside. Since I retired from Microsoft in 2008, I don’t have to do it necessarily as one block, a week at a time, but I do set aside lots of days, and then I say, “Did I write the memo that I intended to write?” The act of writing—when you try to explain it to someone else—is where you really are forced to think things through and not be sloppy in your thinking.
Between the lines
(1) Black check: Since 1994, the Bill & Melinda Gates -Foundation has awarded $54.8 billion in grants (through Q4 2019).
(2) Projected change in people earning less than $1.90 per day (intl. poverty line):
2018: -1.2%
2019: -1.5%
2020: +7.1%
Source: Gates Foundation
(3) Fast lane for meds: In March, the Gates Foundation partnered with the U.K. foundation Wellcome and Mastercard in a COVID-19 Therapeutics Accelerator designed to speed up—and scale up—the development of treatments.
(4) PR nightmare: In 1998, 39 multinational drugmakers sued the South African government (and Mandela, its former President) for circumventing patent protections on exorbitantly priced medicines for HIV/AIDS. The pharma companies would ultimately lose their legal battle—and much of their reputation.
(5) Rich and poor alike: AstraZeneca and Johnson & Johnson have promised to deliver vaccine on a nonprofit basis through the pandemic. More than 170 nations have signed on to a GAVI-led compact called the COVAX Facility, whose aim is to ensure that vaccines are distributed equitably around the world.
Death averted, compared with a no-vaccine scenario:
When a vaccine is distributed to high-income countries first: 33%
When a vaccine is distributed to countries according to their population size: 61%
Source: Gates Foundation
(6) Ending a scourge: The Gates Foundation has committed $5.5 billion to the global polio eradication effort.
(7) Give it away now: In addition to committing 10 million shares of Berkshire Hathaway stock (in annual payments) to the Gates Foundation, Buffett joined with Bill and Melinda to launch the “Giving Pledge,” an effort to encourage fellow billionaires to commit to giving the majority of their wealth to philanthropy.
(8) Long-lasting bond: In June, the Austrian government issued more than $2 billion worth of “century bonds,” yielding just 0.88%. One hundred years may seem like a long time to wait for little gain—but with much of the world looking for safety, this auction was oversubscribed.
A version of this article appears in the October 2020 issue of Fortune with the headline “The Conversation: Bill Gates.”


fortune--2020-09-21--As short-sellers and SEC investigators close in, Nikola founder Trevor Milton steps down. Shares bom

As short-sellers and SEC investigators close in, Nikola founder Trevor Milton steps down. Shares bomb

Nikola Corp., the electric-vehicle startup that recently partnered with General Motors Co., said its founder stepped down as executive chairman, coming just days after the company was reported to be the focus of investigations by U.S. regulators following a highly critical short-seller report.
Trevor Milton, the social-media-savvy public face of the startup he founded in 2014, was replaced by board member Stephen Girsky, whose title will be chairman, Nikola said in a statement late Sunday. Shares of Phoenix-based Nikola plunged 33% at one point in U.S. pre-market trading.
Nikola has found itself in the crosshairs of short seller Hindenburg Research, which said Sept. 10 that Nikola deceived investors about its business prospects — claims that are now the subject of investigations by the U.S. Securities and Exchange Commission and, reportedly, the Department of Justice. On Sunday night, Milton said he planned to defend himself against “false allegations” in a statement issued via Twitter.
“Nikola is truly in my blood and always will be, and the focus should be on the company and its world-changing mission, not me,” Milton was cited as saying in Nikola’s statement. “So I made the difficult decision to approach the board and step aside.”
Nikola has faced a turbulent period in the aftermath of a short-lived share rally following GM’s surprise decision earlier this month to take a $2 billion stake and manufacture its new pickup truck. The Detroit-based automaker got a cash-free 11% equity position in its smaller partner in a bid to scale up and fast-track its own vehicle electrification efforts.
Girsky, 58, is a former vice chairman of GM who helped lead the carmaker out of bankruptcy.
Short Seller ‘Hit’
Nikola’s shares have roller-coastered since the company went public on June 4 in a reverse merger, with Girsky’s blank-check company VectoIQ. At one point, they soared so high the startup’s market value exceeded Ford Motor Co. After the third day of trading, Milton—who owns 35% of the company, based on regulatory filings—was worth $9 billion, making him the world’s 188th richest person, according to the Bloomberg Billionaires Index. His net worth was valued at $4 billion before Monday’s stock plunge.
The stock tumbled then after Hindenburg Research questioned the validity of Nikola’s claims about its electric-vehicle technology, accusing Nikola of being “an intricate fraud built on dozens of lies.” That drew the attention of financial regulators.
Milton countered, calling Hindenburg’s report a “hit job” in a tweet. He promised in a subsequent tweet to provide a detailed response to what he said were “one sided false claims.” He also posted videos on Instagram, including one laden with expletives, dismissing Hindenburg’s accusations.
While Nikola officially pushed back on Sept. 14, some of the company’s responses were more counterarguments than rebuttals.
I will be cheering from the sidelines with you. Your greatest fan. pic.twitter.com/IaYfZedYhK — Trevor Milton (@nikolatrevor) September 21, 2020
he short-seller’s allegations aren’t the first time questions have been raised about Nikola. In June, Bloomberg reported that Milton exaggerated the capabilities of the company’s debut truck, Nikola One — purportedly a fuel-cell vehicle it never produced or brought to market. The company has denied making misleading statements.
Confusing Message
Milton, like Tesla Inc. Chief Executive Officer Elon Musk, has relied on social media to promote his company. In February, he introduced the Badger truck via a tweet, calling it “the most advanced electric & hydrogen pickup, designed to take down the Ford Raptor.” On June 8 he tweeted that Nikola would start taking Badger reservations later in the month for “the most bad a– zero emission truck.” Potential buyers paid deposits as high as $5,000 — without even seeing a prototype of a vehicle that won’t go on sale until 2022.
Investors have sometimes struggled to keep up with Milton’s messages, especially given the evolving list of projects Nikola is pursuing: battery-electric big rigs in Europe, fuel-cell-powered semis in the U.S., an electric pickup to be built by GM, becoming the preeminent supplier of hydrogen for fleets of vehicles and vague proposals to enter the market for high-performance sports cars.
“It’s a bit confusing trying to follow Trevor on his various social-media outlets about the timing and cadence of communication of the different variables that you’re talking about,” Jeff Osborne, a Cowen & Co. analyst, told executives during Nikola’s first earnings call on Aug. 4.
Nikola has had a co-development agreement with Germany’s Robert Bosch GmbH since 2017 to develop key components like fuel cells, motors and battery packs. It plans to build a battery electric semi-truck with CNH Industrial NV’s Iveco at a facility in Ulm, Germany, by the end of next year. A fuel-cell semi truck is planned for 2023 which will be built at Nikola’s factory in Coolidge, Arizona. GM will provide the fuel cells and battery packs.


fortune--2020-09-22--Who will control the new TikTok? A key question threatens the deal Trump ‘blessed’

This past weekend saw a flurry of activity in the ongoing saga to sell the U.S. operations of TikTok, the video-streaming app that the Trump administration has threatened to ban if it’s not sold to a U.S. entity. Now, the tentative weekend agreement to save the app from a U.S. ban appears to be hanging by a thread.
On Saturday, U.S. President Donald Trump said he had given his “blessing” to a deal between TikTok’s Chinese parent company, ByteDance, and two U.S. corporations: technology firm Oracle and retail giant Walmart. The deal would reportedly not be an outright sale, but would rather make Oracle and Walmart strategic partners of ByteDance, with Oracle acting as steward of TikTok’s American user data.
In the deal, Oracle and Walmart would reportedly purchase 12.5% and 7.5% stakes, respectively, in TikTok Global, a new ByteDance subsidiary with a value as high as $60 billion that ByteDance plans to take public in the next 12 months.
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Interim TikTok CEO Vanessa Pappas declared in a video on Sunday: “We’re here to stay.”
“We are pleased that the proposal by TikTok, Oracle, and Walmart will resolve the security concerns of the U.S. administration and settle questions around TikTok’s future in the U.S.,” a TikTok spokesperson told Fortune on Monday. “We’re thrilled that we will be able to continue serving our amazingly diverse and creative community.”
In a joint Sunday statement, Oracle and Walmart called it a “landmark deal” that would create 25,000 new jobs in the U.S. The statement also said that Americans will hold four of the five spots on TikTok Global’s board of directors, which may include Walmart’s chief executive Doug McMillon and ByteDance CEO Zhang Yiming.
But suddenly, the prospect of a deal turned sour.
On Monday, Trump backtracked from his initial “blessing” of the deal owing to concerns that ByteDance would retain control over TikTok Global.
And on Tuesday, Chinese state media sources said the Chinese government would reject any attempts to diminish ByteDance’s control over TikTok Global.
At the moment, the two sides of the deal—the Trump administration, Oracle, and Walmart on one hand; Beijing and ByteDance on the other—are at loggerheads over whether the new TikTok Global will be majority Chinese- or American-owned, and that sticking point is threatening to derail what, just a day ago, seemed like a done deal.
The initial proposal “seemed like a clear win for Beijing,” says Brock Silvers, former chief investment officer at Adamas Asset Management in Hong Kong, but the U.S.’s new concerns over TikTok Global’s control, access to TikTok’s algorithm, and an education program touted by President Trump threaten to derail the tentative agreement.
“The deal could go either way,” Silvers says. “The odds of a renegotiation or rejection have increased over the last day or two.”
U.S. snags
Over the weekend, Oracle claimed that the TikTok deal would see American shareholders control about 53% of TikTok Global’s shares, because U.S. firms like Sequoia, General Atlantic, and Tiger Management control 40% of ByteDance, TikTok’s parent.
On Monday, Oracle executive vice president Ken Glueck doubled down on Oracle’s position, saying in a statement to reporters that once Oracle and Walmart invest in TikTok Global, the new company’s shares “will be distributed to their owners,” which will leave “Americans” as “the majority.” ByteDance, he said, “will have no ownership in TikTok Global.”
On Monday, ByteDance published an article on the Chinese website Toutiao aimed at dispelling the “rumor” that TikTok Global would be controlled by American investors. ByteDance said on Monday that it would retain an 80% stake in TikTok Global and maintain its control of the technologies and algorithms that power the app.
The deal came under further threat when Trump told Fox News on Monday that U.S. regulators may not approve a deal that didn’t meet Oracle’s standards for U.S. ownership.
“[Oracle is] going to own the controlling interest. Everything is going to be moved into a cloud done by Oracle…and it’s going to be totally controlled by Oracle,” Trump said. “If we find that they don’t have total control, then we’re not going to approve the deal.”
Jeffrey Towson, a private equity investor, said Oracle’s claim that U.S. investors would have a majority stake in TikTok Global is “technically true, but patently false.” Towson said it doesn’t matter if American investors own 40% of ByteDance; that stake doesn’t give them control over how ByteDance—or TikTok Global by proxy—would operate. As ByteDance’s minority owners, they would not be guaranteed a say in ByteDance’s decision-making, he said.
As of now, it remains unclear whether Oracle and ByteDance have agreed to a structure that would cede more of TikTok Global’s potential shares to American ownership. On Tuesday, ByteDance said it had no further comment regarding its negotiations with Oracle.
But Trump’s new demand on Monday that TikTok Global be fully controlled by U.S. investors suggests that the weekend deal didn’t ensure that.
Another, perhaps more minor, area of disagreement emerged on Monday when ByteDance said it was unaware of an agreement that Trump touted that would see the companies involved in the deal contribute to a $5 billion “education” fund.
At a Saturday campaign rally, and in a call with top executives from Walmart and Oracle the same day, Trump raised the idea of including the fund as part of the deal. He told supporters at the rally that he’d asked the leaders of the companies involved to put “$5 billion into a fund for education, so we can educate people as to the real history of our country.” He added, “That’s their contribution that I’ve been asking for.”
ByteDance denied it had agreed to Trump’s education fund, and responded by saying it was “committed to investing in the education field” and plans to “launch online classroom projects based on A.I. and video technology for students around the world.”
Towson says that the deal proposed this past weekend still makes ByteDance the final decision-maker in terms of how TikTok Global content is moderated and whether or not, for example, political advertising is allowed on the platform. Right now, Towson says, the fact that TikTok’s editor-in-chief “appears to be ByteDance” may still present problems for U.S. regulators.
The China wild card
There is also no guarantee that the Chinese government will sign off on a deal.
In August, the Chinese government introduced restrictions on Chinese companies’ exporting artificial-intelligence technology, meaning that Chinese regulators will likely have to review the deal following approval in the U.S.
Lindsay Gorman, fellow for emerging technologies at the German Marshall Fund of the United States, says that Beijing would likely approve a deal that provided ByteDance with majority ownership of TikTok Global and control over the algorithm that powers the app.
The ability of ByteDance to retain control of TikTok would be a “big win for Beijing,” Gorman said. “Especially if it quiets national concerns among U.S. policymakers.”
Now, with the U.S. government pushing for more control over TikTok Global on Monday, China’s approval may be on shakier ground.
On Monday, China’s foreign ministry spokesperson Wang Wenbin said at a press conference that China would not comment on whether it would approve a potential deal between ByteDance, Oracle, and Walmart. In response to the question, he said China urges the U.S. to “respect the principles of market economy and fair competition” and to “stop politicizing normal trade and economic cooperation.”
Hu Xijin, the editor of the pro-Beijing tabloid the Global Times, suggested that Beijing’s approval of the deal is far from certain. As a top news editor in China, Hu claims to have access to high-level Chinese government sources, but he has a mixed record in predicting China’s official responses to U.S. actions.
“Based on what I know, Beijing won’t approve current agreement between ByteDance, TikTok’s parent company, and Oracle, Walmart, because the agreement would endanger China’s national security, interests, and dignity,” Hu Xijin tweeted on Monday evening Beijing time, as reports emerged that U.S. authorities were pushing for more control over TikTok Global.
As of now, the only thing that appears clear is that the TikTok saga isn’t yet over.