fortune--2020-12-23--PPP borrowers get the tax break the IRS tried to cancel

To the relief of millions of small-business owners, the new stimulus package includes a PPP (Paycheck Protection Program) tax break that Congress meant to include in the CARES Act but didn’t. Legislators of both parties love it. Treasury Secretary Steven Mnuchin doesn’t like it at all.
A coalition of some 500 national, regional, and state trade associations had urged Congress to include the tax break in the new bill in order to “prevent an avoidable catastrophe for millions of small businesses.” Without the fix, many of the 5 million PPP loan recipients would have faced a nasty surprise when they did their taxes next year.
For their loans to be forgiven, they had to spend the PPP money on payroll, mortgage interest, rent, and utilities—expenses that account for the vast majority of costs to keep a small business open. When any loan is forgiven, the IRS normally regards it as taxable income, but the CARES Act specified that would not be the case with PPP loans. Congress forgot to address another key issue, however: Would those operating expenses—the ones that small businesses had to pay in order for their loans to be forgiven—be tax-deductible as usual?
Many business owners assumed so. A little-noticed IRS statement in May, issued after many business owners had borrowed the money, said otherwise. Result: Small-business owners would discover that their taxes for the worst year they may have ever experienced would be much higher than they expected. Now the new stimulus package will spare them that pain, assuming President Trump signs it into law.
So why did Mnuchin oppose the fix? Because it enables loan recipients to “double dip,” he has said, and he’s correct. If a small-business owner receives, say, $100,000 of free money that is spent on deductible expenses, and then is allowed to deduct those expenses without having to report the $100,000 of income, it is indeed double dipping. That’s why even some progressive groups, including Americans for Tax Fairness, also opposed the new deductibility rule, which they argue will benefit some wealthy business owners who don’t need the help.
Nonetheless, the new deductibility rule is one of those rare ideas on which both parties broadly agree, supported by conservative Republican Sen. John Cornyn of Texas, liberal Democrat Sen. Ron Wyden of Oregon, and most of those in between. They understand that the rule is a gift to small business. And in light of the pandemic’s crushing economic damage—and the political heft of small business in every state and congressional district—that’s just fine with them.


fortune--2020-12-23--Trump’s pardons: How they’re granted and how they compare to other Presidents’ so far

Ripple says it will be sued by the SEC , in what the company calls a parting shot at the @ @

President Trump announced pardons for 15 people on Tuesday night. The recipients included former congressmen who had pleaded guilty to corruption and military contractors convicted of taking part in a massacre in Iraq. And on Wednesday, Trump announced a new batch of pardons, including ones for friends and loyalists.
Trump is widely expected to grant more pardons during his remaining 27 days in office, and these could include some very high-profile people such as former spy Edward Snowden or Trump’s children.
All of this raises questions about how Presidents hand out pardons in the first place, how you obtain one, and how Trump’s use of the power compares to other Presidents. Here is a plain English Q&A about the process:
Have all Presidents given out pardons?
Yes, the power is set out in the U.S. Constitution and is derived from the ancient right of English kings to issue clemency. Every President has used the pardon power. That includes George Washington, who issued the first U.S. pardons, to farmers who led an insurrection called the Whiskey Rebellion.
What exactly is a presidential pardon?
A pardon from the President means you’re forgiven for federal crimes you have committed or may have committed. The pardon doesn’t wipe out the record of the conviction, but it does eliminate any consequences that go with it—such as limits on voting or buying a gun.
The President can also issue commutations, which can reduce a prison sentence or cut it altogether. But commutations don’t wipe out the other consequences that go with a conviction.
It’s also important to note the President can’t pardon people for state crimes. This could be significant given that states like New York are reportedly conducting investigations into potentially illegal activity by Trump and his family.
How do you get a presidential pardon?
You ask for one. Traditionally, this means applying through a process overseen by the Department of Justice. But as law professor Randall Eliason notes in this excellent overview, President Trump has mostly ignored that formal process and just issued pardons based on his own whims.
How do Trump’s pardons compare to those issued by earlier Presidents?
So far, Trump stands out for how little he has exercised his clemency power—fewer than 100 times so far, and he is on pace to issue the lowest number of pardons or commutations since President McKinley at the turn of the 20th century. In contrast, this Pew study notes President Obama granted 212 pardons and 1,715 commutations, though that was over an eight-year period.
Trump’s clemency activity also stands out in that most of it has been in service of political cronies and those with whom he has a personal relationship. Past Presidents have mostly—though not entirely—used the pardon power to address systemic injustice, such as racist drug sentences, or to address broader political riffs in the country, such as President Carter’s decision to forgive those who left the U.S. to avoid military service in Vietnam.
Of course, Trump has plenty of time left to exercise his pardon power, so a true comparison will have to wait till he leaves office.
What are some of the most famous presidential pardons?
The most famous pardon came from President Ford, who issued a broad pardon to his predecessor, President Nixon. (Some note that Trump could resign in order to have Vice President Pence step into his role and do the same thing.)
Other noteworthy pardons include President Clinton’s decision to issue one to fugitive banker and political ally Mark Rich, and President Reagan’s decision to forgive New York Yankees owner George Steinbrenner for illegal political contributions. More recently, President Obama’s most famous act of clemency was to commute the sentence of Chelsea Manning, who leaked military secrets. USA Today has a list of these and other famous pardons.
This story has been updated to note the pardons announced on Wednesday.


fortune--2020-12-23--New COVID studies bring some holiday cheer for pregnant women

At first, Kate Elden’s choices when the coronavirus pandemic began made her stand out. She wore heavy personal protective equipment to work at a veterinary clinic, despite the worries of some of her colleagues that she would scare off clients. She decided against enrolling her toddler in preschool. And after a while, she decided to place her medical career on hold entirely, opting to “hunker down and play it safe,” as she told me over the phone, by essentially staying at home.
Looking back, Elden’s decisions may appear both responsible and prescient. But at the time, the veterinary physician knew something that her friends and professional acquaintances did not: She was pregnant in the age of COVID-19. The uncertainty that came with that was very real.
“We didn’t know the risks of preterm delivery, or what some of the longer-term effects of the virus might be,” said Elden, 35, who in October delivered a healthy son, her second. “It just wasn’t worth the risk of anything happening to my baby.”
Across the U.S., the prospect of being pregnant during a pandemic has wrought understandable stress. According to the Centers for Disease Control and Prevention, more than 47,000 cases of COVID-19 among pregnant women were reported by mid-December, with 58 deaths. The New York Times, meanwhile, noted preliminary data of a study indicating that 60% of pregnant women were experiencing enough nervousness and anxiety that it “impedes their everyday functioning.”
Stephanie Gaw, an assistant professor at UC–San Francisco, told me over the phone about another complicating factor among some of her patients: They’re not first-time moms. In addition to COVID concerns, these women also are dealing with other children in the home, perhaps tending to their educations, and trying to manage a pregnancy while often being fearful of making an in-office visit to their doctor. “It’s a really, really tough time for everyone right now,” Gaw said.
All the better, then, that recent studies have brought some good news for pregnant women during the pandemic. At a time in which it’s difficult to declare anything definitively, both the numbers and the emerging clinical guidance are encouraging.
The data so far suggests that pregnant women are not any more susceptible to COVID infection than nonpregnant women. Further, a meta-analysis of 9,000 pregnant women with COVID found that most experienced only a mild illness. Another study of 23,000 pregnant women who had symptomatic COVID-19 found that the absolute number of women at increased risk for having severe outcomes is low. And many pregnant women who are COVID-positive have no symptoms: One large systematic review found that 95% were asymptomatic at testing, and 59% remained asymptomatic at follow-up.
There are still areas of concern, of course. For example, we know from prior studies that pregnant women with COVID-19 have a higher risk of contracting more severe disease than women who are not pregnant. And as with the general population, pregnant women who have comorbidities, such as diabetes or obesity, appear to be at greater risk of severe illness. Black and Hispanic individuals, in particular, have a higher incidence of both developing COVID-19 and dying from it.
What about the babies themselves? Has there been an increase in either stillbirths or preterm deliveries, for example, perhaps owing to stress, lockdowns, or fewer prenatal visits? In a study conducted in England and published this week, researchers reported no evidence of an increase in fetal stillbirths either regionally or nationally during the pandemic versus the same time period last year. (The researchers did not separate out maternal COVID infection status.) This is certainly reassuring news for pregnant women, especially given that some women may be hesitant to access maternal health services with a virus raging within hospitals and clinics.
A second study carried out at two Philadelphia hospitals likewise did not find significant changes in either the rates of preterm births or stillbirths in a racially diverse group of patients.
Both studies are limited to a single health care system, and Gaw noted that the quality of each system has a marked impact on perinatal outcomes. “I think we still don’t know how much COVID itself can cause pregnancy loss, but it is still a very rare outcome,” she said. “The data is still very young.”
When limited to COVID-positive women, the numbers can look different. A systematic review of over 9,000 women in China, all of whom had COVID-19, found that around 30% of the women experienced preterm delivery—quite high compared with usual reported rates of between 5% and 18%. Research from prior virus outbreaks, like SARS and MERS, demonstrated similar percentages of pregnant patients experiencing preterm labor.
A recent study, performed in a racially diverse population of 252 COVID-positive pregnant women, found that viral infection during pregnancy was not associated with adverse outcomes. Importantly, no difference in preterm delivery rates was noted between pregnant women with and without COVID. The American College of Obstetricians and Gynecologists (ACOG) concludes that while more data is needed to understand outcomes for babies, the initial evidence shows preterm delivery and stillbirth rates in the U.S., as compared with periods pre-pandemic, “are unchanged.”
While a few well-documented cases have established that a COVID-positive mom can transmit the virus to her baby in the womb, Gaw said, “significant transmission is thankfully very, very rare.” In the previously mentioned review of approximately 9,000 women, five out of 338 newborns tested positive for COVID, suggesting that in utero transmission may have occurred. (Only three of the infants were tested on the first day of birth, so it is possible the other two may have acquired the virus subsequently.)
Now, should a COVID-positive mom be in the same room with her baby? Can she breastfeed safely? A new study from JAMA shows support for both of these options, as long as the woman is in good clinical condition and careful droplet and hygiene protocols are maintained.
In one of the largest studies to date, performed at six maternal centers in Italy, researchers found that of 62 babies born to COVID-positive mothers, there were no cases where a mother with mild or asymptomatic COVID infection transmitted the virus to her infant by rooming together or breastfeeding.
While the American Academy of Pediatrics initially recommended that mom and baby be separated to potentially protect the baby, the Italian study found only one instance where an infant developed COVID a week after being born. That infant had been rooming and breastfeeding with a mother who became seriously ill on day five postpartum, requiring ICU admission.
These encouraging results mirror those of a study of 120 infants cared for in three New York City hospitals, where mothers with COVID took safety precautions and roomed with their infants (who slept in closed isolettes), and the majority breastfed. None of the approximately 70% of infants who were tested five to seven days after birth were positive for the coronavirus; neither did any of the infants develop symptoms. Meanwhile, in a literature review of outcomes of infants born to infected mothers, researchers concluded that newborns “rarely acquire the disease or show adverse clinical outcomes.”
While viral RNA has been found in breast milk in a few instances, to date no evidence has been found that the coronavirus is capable of either replicating or being transmitted through breastfeeding. On the contrary, a small study of 15 lactating mothers who recovered from COVID found that their breast milk had antibodies to the SARS-CoV-2 spike protein.
Moreover, a growing body of evidence suggests possible transfer of these antibodies to babies from infected mothers. In two small studies from China and Singapore, researchers detected the presence of antibodies in infants born to women with the coronavirus. Further investigation is needed to determine whether it’s possible that previously infected, lactating mothers might be able to share protective immunity with their babies.
Should a pregnant woman get vaccinated? On this front, we don’t have safety data, but ACOG recommended this month that COVID-19 vaccines like Pfizer’s or Moderna’s “not be withheld from pregnant individuals who meet criteria for vaccination,” nor from those who are breastfeeding. The organization suggests that women make decisions in conjunction with their clinical care teams. (Vaccines have been given safely to pregnant and breastfeeding women for decades.)
Gaw said pregnant women “should definitely consider getting the vaccine. Based on what we know about the technology of the vaccine, the risk of anything bad happening is really, very, very low.”
Peter Bernstein, the maternal fetal medicine director at Montefiore Medical Center, said he counsels women to consider their own risk of becoming infected with COVID, as well as what risk factors they, and others close to them, have for experiencing severe complications from the virus. “How I would counsel a pregnant person who works in an emergency department would be very different from someone who lives alone and works from home,” Bernstein wrote in an email.
Understandably, pregnant women often are excluded from initial research trials for safety reasons, so evidence will continue to accumulate. So far, though, it’s good news overall for moms and babies. Most pregnant women will experience only a mild illness if they develop COVID, the majority will carry their baby to term and have a normal delivery, and it’s extremely unlikely that a baby will develop COVID in utero if mom does become infected. Moreover, mom and newborn can often room together, and mom may be able to breastfeed with appropriate precautions taken (like masking, practicing good hand hygiene, and distancing from the crib) if she is infected. These decisions should be made in conjunction with one’s health care provider.
For her part, Kate Elden said she remains “pretty cautious” with her 2-month-old son, and she made a choice—for an at-home birth with the help of a midwife—that not everyone will make, in part because her first pregnancy had been a relatively easy one.
“Care decisions need to be individualized,” she said. “For my family, I had to choose which regret would I rather live with: Would I regret being so safe that we didn’t get out and socialize, or would I regret getting coronavirus and having long-term effects from it? At the end of the day, all you have is your health, so my suggestion is to play it safe.”
It’s certainly a personal decision. Nicole Gats, a nurse, works shifts at Anne Arundel Medical Center in Annapolis. At 32 weeks pregnant, she continues to care for patients on a non-COVID medical floor, where she wears an N95 mask and face shield “because you never know,” she said in a phone interview. She often exercises outside in 20- to 30-degree weather, and has a go bag packed as she plans to deliver her child at Anne Arundel’s labor and delivery unit.
As with so much about this virus, more studies are needed to grow our knowledge base, better understand how to medically manage pregnant women with COVID-19, and best protect infant health. In the meantime, for those already pregnant (and almost certainly stressed about it), know this: The early evidence is encouraging. In a fearful year, that is perhaps the best gift you can receive.
Carolyn Barber has been an emergency department physician for 25 years. She is cofounder of the homeless work program Wheels of Change and author of the book Runaway Medicine: What You Don’t Know May Kill You, which was a top-ranked Amazon bestseller in health care administration.


fortune--2020-12-23--Pelosi urges Trump to press Republicans to back $2,000 stimulus checks

House Speaker Nancy Pelosi pledged swift action on new legislation boosting stimulus payments for individuals to $2,000, urging Republicans to join Democrats in meeting a last-minute demand from President Donald Trump that threw a historic pandemic relief package into doubt.
Pelosi highlighted in a letter to colleagues Wednesday that Republican leader Kevin McCarthy’s approval will be needed to proceed with a unanimous consent request to increase payments to $2,000, from the $600 that was part of the pandemic relief package Congress passed late Monday. Trump on Tuesday said the smaller amount wasn’t enough, and he cast doubt over whether he’d sign the $2.3 trillion spending bill.
“If the president truly wants to join us in $2,000 payments, he should call upon Leader McCarthy to agree to our unanimous consent request,” Pelosi said in a letter to House Democrats.
The speaker also said that Trump should sign the legislation passed Monday night, which provides $900 billion in pandemic relief and $1.4 trillion in regular federal funding through the end of the fiscal year. Trump would need to sign it by Dec. 28 to avert a lapse in government funding after midnight that day.
“The entire country knows that it is urgent for the president to sign this bill, both to provide the coronavirus relief and to keep government open,” Pelosi said in her letter.
The speaker plans to convene the House in a pro-forma session at 9 a.m. Thursday. There’s been no word from Senate Majority Leader Mitch McConnell—whose GOP conference had consistently demanded a smaller relief package before signing on to the $900 billion effort on Monday—on whether his chamber will move on the proposal.
A spokesperson for McConnell didn’t immediately respond to a request for comment.
Data, markets
Economic data on Wednesday underscored the need for help, with Americans’ incomes tumbling 1.1% in November—far worse than economists had anticipated, and the second straight drop. Initial filings for jobless claims held above 800,000 in the most recent week, more than quadruple where they were in late January.
Stocks largely shrugged off the news on the complications in Washington and on the economy. The S&P 500 Index was up 0.5% as of 12:13 p.m. in lighter-than-usual pre-holiday trading, halting a three-day slump.
Trump slammed Monday’s bill as a “disgrace” for not doing enough for Americans in need. The charge came less than 24 hours after Congress approved the legislation with overwhelmingly bipartisan votes. He also called for eliminating “wasteful and unnecessary items,” but he didn’t say whether he would veto the bill.
Just one House member could block the bill Pelosi plans for Thursday. She and her lieutenants would then need to decide whether they want to the bring it before the entire House for a roll-call vote. Most members left Washington earlier this week after passing the year-end package on Monday.
Boosting the payments for adults to $2,000, while leaving the payments for children at $600 would cost the federal government $482 billion, according to estimates from Kyle Pomerleau, an economist at the American Enterprise Institute. That’s roughly $318 billion more than the $164 billion in estimated payments in the current package, according to the Joint Committee on Taxation’s calculations.
GOP pressure
Trump’s move puts sudden pressure on congressional Republicans, most of whom resisted larger stimulus checks in an effort to hold the total cost of the pandemic package below $1 trillion. Democratic Senator Bob Casey said that while it’s good for Trump to support direct payments now, the president was absent during months of negotiations, when he should have been making those demands.
“Donald Trump’s going to have trouble with his own party,” Casey predicted in an interview. “It’s likely that that won’t happen because Republicans will vote against it—a lot of them didn’t want the $600. So that’s a nice sentiment for the president but where was he all these months, helping Democrats get that done? He was AWOL.”
Two of Trump’s most ardent supporters, Senators Lindsey Graham of South Carolina and Josh Hawley of Missouri, said the president’s bid to increase the payment amounts was the right move. Hawley had sought $1,200 checks before backing Monday’s legislation.
Graham suggested the expanded stimulus checks be twinned with a separate Trump priority—the repeal of a law protecting social media companies from liability for most of their user-generated content.
Defense bill
The president has separately threatened to veto a giant annual defense-spending bill, for several reasons including its lack of a provision to repeal these protections for social-media companies. Republicans and Democrats alike argued that such a measure needed to be considered separately from the National Defense Authorization Act.
Trump would need to follow through on his veto threat of the defense bill on Wednesday, or it automatically becomes law. Graham suggested that combining the repeal of the social-media measure with the $2,000 checks would persuade the president to sign both pending pieces of legislation. Pelosi hasn’t addressed his pitch.
“I have reason to believe this combination will lead to President Trump supporting the NDAA and COVID-19 omnibus bills,” Graham tweeted Tuesday.
GOP opposition to further deficit spending could make that idea unworkable, however. That then sets up the possibility for two vetoes by Trump, and the potential for overrides by the House and Senate during the final weeks of his presidency. Trump has vetoed several bills during his tenure, but Congress has yet to successfully override one.


fortune--2020-12-23--Pfizer to supply U.S. with 100 million more vaccine doses

Pfizer and partner BioNTech agreed to supply an additional 100 million doses of their COVID-19 vaccine to the U.S., as the country seeks to widen its immunization program and revive its economy.
The agreement brings the total number of doses to be delivered to the U.S. to 200 million, the companies said Wednesday in a statement. The drugmaker expects to deliver all the doses to U.S. vaccine and drug accelerator Operation Warp Speed by July 31.
Countries around the world are seeking supplies of vaccine they hope will allow the reopening of schools and businesses and the resumption of travel. The U.K. has also begun administering doses of the Pfizer-BioNTech shot, and European drug authorities cleared it for use on Monday.
The U.S. has been working to expand supplies of the front-runner vaccine, in light of the drugmakers’ commitments to other countries. Earlier this month, the U.S. exercised an option to buy 100 million additional vaccine doses from Moderna, doubling the number it has on order from that company to 200 million.
Like Pfizer and BioNTech’s vaccine, Moderna’s is a two-shot regimen based on new technology known as messenger RNA, but it doesn’t have to be stored at the same ultracold temperatures as the Pfizer-BioNTech shot.
In July, the U.S. had agreed to pay $1.95 billion for an initial 100 million doses from Pfizer, with an option to buy 500 million more. The U.S. will also pay $1.95 billion for the new order, according to the statement, and will provide the vaccine to Americans for free. The cost of administering the vaccines is being paid for by private insurance, government health-care programs and a Department of Health and Human Services program for the uninsured.
Pfizer shares gained 1.5% to $37.29 at 10:09 a.m. in New York on Wednesday.
U.S.-Pfizer negotiations
The U.S. and Pfizer had been in talks about delivery of another 100 million doses within the second quarter for weeks. Moncef Slaoui, the chief scientific adviser to Operation Warp Speed, said in an interview last week that Pfizer had asked the U.S. to use the Defense Production Act to help the drugmaker secure additional equipment and materials to meet that objective.
The deal follows reports that the government declined an offer to buy more doses earlier this year after Pfizer wouldn’t commit to a delivery date. Using the Defense Production Act could help get more doses to the American public faster, according to Slaoui.
The companies making vaccines for Operation Warp Speed use the same materials, Slaoui said, and the U.S. has been able to get priority access to supplies for drug companies that agreed to work with the government on research, development and manufacturing, he said.
The new deal could alter the dynamics between the U.S. government and Pfizer, which declined to take money from Operation Warp Speed to fund its vaccine research.
Pfizer “decided they didn’t want to take resources from the U.S. government,” Slaoui said. “If you ask the government to give you the Defense Production Act support, the government has, by definition under law, the ability to reach into whatever you’re manufacturing.”
Drug for deadliest cases
At the same time that the government is securing access to more vaccines, it is also looking to shore up the treatments it has available to people who fall ill with COVID-19.
The U.S. agreed to a deal Wednesday in which Merck will supply an experimental COVID drug that the company gained in its recent purchase of OncoImmune. The government will fund the development, production and distribution of the drug once it is cleared for use by the Food and Drug Administration, Merck said in a statement.
Merck will receive about $356 million for manufacturing and supply of 60,000 to 100,000 doses through the end of June, according to the statement. The therapy is designed to tamp down inflammation caused by virus-induced damage to human cells, an underlying cause of some complications, and is expected to be used for treatment of severely ill Covid patients.
Merck agreed in November to buy OncoImmune with an upfront payment of $425 million in cash.


fortune--2020-12-23--Nikola Motor loses another crucial deal, capping a catastrophic 2020

Nikola Motor, a would-be Tesla rival that has faced a string of humiliating disasters since entering public markets just over six months ago, announced another one this morning. Republic Services, a large waste management company, has canceled an order for 2,500 zero-emissions garbage trucks—a deal that Nikola at the time described as a “landmark.”
The announcement triggered the latest in a long series of bloody reckonings for Nikola investors. The stock had already slid from a peak of nearly $80 per share just after its Nasdaq debut in June to close at $16.83 on Dec. 22. The bad news sent it down another 9% by midmorning to just over $15 per share. Dan Ives, a Wedbush technology stock analyst, described the announcement as “another step backwards” for Nikola.
The Republic deal was first announced in August. Republic committed to an order of 2,500 refuse trucks based on the Nikola Tre truck platform, which will use either batteries or, in a version slated for 2023, a liquid hydrogen fuel cell. Nikola’s then-CEO, Trevor Milton, described the Republic deal at the time as a “game changer.”
Now, though, Nikola says, “after considerable collaboration and review, both companies determined that the combination of the various new technologies and design concepts would result in longer than expected development time, and unexpected costs. As a result, the program is being terminated, resulting in the cancellation of the previously announced vehicle order.”
It doesn’t take much reading between those lines to infer that Nikola may have overpromised what it was capable of. That would align with the company’s track record.
The August announcement projected that the Republic trucks would be road tested beginning in 2022. But Nikola completed only the first prototype of the long-promised Tre platform in November, meaning it would have to both perfect a brand-new truck and modify it for use as a refuse collector in just over a year.
And Nikola’s powertrain technology situation, as CNET’s Sean Szymkowski has pointed out, remains murky. The company has said the Tre’s powertrain is based on proprietary technology, but Nikola also says it will buy both fuel cell and battery powertrain technology from General Motors.
In the months since the Republic deal was announced, a long series of overstatements and alleged deceptions by Nikola and its cofounder Trevor Milton came home to roost. That began in September when a short-seller’s report claimed a number of deceptions by the company, some of which Nikola later acknowledged. Milton resigned as CEO, and the SEC has launched an inquiry into Nikola, including grand jury subpoenas. In November, a vital deal with GM was largely withdrawn. Nikola’s stock slid steadily during all of this.
The collapse is even more notable because it came in an investment and regulatory environment that has been incredibly bullish for electric vehicle startups. In September, California announced aggressive new rules requiring all passenger vehicles sold in the state to be zero-emission by 2035. Tesla, the obvious template for Nikola from the name on down, has been so successful it was added to the S&P 500 this week. Other EV startups that have delivered just as few vehicles as Nikola (that is, zero) have seen hot debuts and steady investor interest even as Nikola floundered.
It all adds up to a cautionary tale about the fine art of technology fundraising. Elon Musk showed that an ambitious vision can attract passionate adherents, even if you miss a deadline or five. But when faith is an unspoken pillar of your company’s investment thesis, the shadow of doubt can bring that passion to a swift end.


fortune--2020-12-23--U.S. home sales unexpectedly drop to lowest point since June

New-home sales in the U.S. tumbled to a five-month low, suggesting red-hot demand is cooling amid resurgent COVID-19 cases and other signs of a slowing economy.
Purchases of new single-family houses decreased 11% to a 841,000 annualized pace in November from a downwardly revised 945,000 rate in the prior month, government data showed Wednesday. The median projection in a Bloomberg survey of economists called for 995,000. The median selling price rose 2.2% from a year earlier to $335,300.
The data dim housing’s status a bit as a bright spot in an otherwise shaky economy, and the drop in sales may reflect a lack of available inventory as builders struggle to meet demand fueled by ultra-low mortgage rates. Affordability could also be playing a role, though a new $900 billion stimulus package, approved by Congress on Monday, may boost family finances and keep demand robust.
Shares of U.S. homebuilding companies fell after the report.
A report Tuesday showed that sales of previously owned homes also fell in November, as surging prices and a record-low supply constrain demand.
Wednesday’s report showed the number of properties sold for which construction hadn’t yet started decreased to a four-month low of 288,000 in November, while the number of homes for sale edged up to 286,000.
At the current sales pace, it would take 4.1 months to exhaust the supply, the highest since June.
The drop in sales was concentrated in the West and Midwest regions. The 59,000 pace in the Midwest was the smallest since early 2016, while the South and West each recorded their lowest totals since June.
The new-home sales report, released jointly by the Census Bureau and Department of Housing and Urban Development, tends to be volatile from month to month, often with significant revisions.


fortune--2020-12-23--DeepMind unveils new details of game-mastering A.I. it says may help in complex real-world environme

DeepMind unveils new details of game-mastering A.I. it says may help in complex real-world environments

London A.I. company DeepMind has published new details about an algorithm that can learn to play games at superhuman levels—even when it doesn’t start out knowing the rules of the game, an achievement that the company says is a big step toward creating A.I. systems that can deal with complicated and uncertain real-world situations.
The algorithm, which DeepMind calls MuZero, has learned to play chess, Go, and the Japanese strategy game Shogi, as well as a host of classic Atari video games at superhuman levels. Previously, DeepMind had created algorithms that could master each of these games, but not a single algorithm that could handle both the board games and the video games. Also, DeepMind’s previous algorithm for mastering the board games, AlphaZero, started out knowing the rules, while MuZero does not.
AlphaZero was itself a more general variant of AlphaGo, the Go-playing algorithm DeepMind famously demonstrated in 2016, defeating Lee Sedol, at the time the world’s top-ranked Go player, in a match in South Korea.
DeepMind, which is owned by Google parent Alphabet, first unveiled MuZero in 2019, but on Wednesday it published more information about the algorithm in a peer-reviewed paper in the prestigious scientific journal Nature.
MuZero works by constructing a model of how it thinks the game it is playing works and then using that model to plan the most beneficial actions in the game. It learns to improve both the model and its planned actions by playing the game over and over again. In the case of the two player games, MuZero learns by playing against previous versions of itself.
More important for real-world situations, the model that the algorithm creates of the rules of the game doesn’t have to be 100% accurate, or even complete. It just has to be useful enough that MuZero is able to make some progress in the game from which it can begin to improve.
“We are basically saying to the system, just go and make up your own internal fiction about how the world works,” David Silver, the DeepMind computer scientist who led the team that built MuZero, told Fortune. “As long as this internal fiction leads to something that actually matches reality when you come to use it, then we’re fine with it.”
In the Nature paper, DeepMind showed the importance of planning to the algorithm’s capability: The more time MuZero was given to plan, the better it performed. MuZero was many times more capable at Go—about the difference between a strong amateur and a strong professional player—when given 50 seconds to consider a move, compared with when it was given just one-tenth of a second.
This difference held even in the Atari games, where quick reaction times are often thought to matter more than strategic thinking. Here, more time allowed MuZero to game out what might happen in more possible scenarios. The researchers noted that the system achieved very good performance in a game like Ms. Pac-Man, even when it was only given enough time to explore six or seven possible moves, which was far too few to gain a complete understanding of all the possibilities.
While DeepMind has not tested MuZero on multiplayer games where hidden information plays an important role—such as poker or bridge—Silver said he suspects MuZero might be able to learn to play these games too, and that the company plans to explore this further. A.I. researchers from Carnegie Mellon University and Facebook have previously built A.I. systems capable of beating champion poker players. Bridge, which relies in part on communication, remains a challenge.
Silver said DeepMind is considering several real-world uses for MuZero. One of the most promising so far, Silver said, is video compression, where there are many different ways to compress a video signal, but no clear rules about which one is best for different kinds of video. He said that initial experiments with MuZero-like algorithms had shown it might be possible to achieve a 5% reduction in bandwidth over the best previous compression methods. Silver also said MuZero might be useful for building more capable robots and digital assistants as well as extending DeepMind’s recent breakthrough in predicting the structure of proteins, research that has so far not relied on the techniques the company pioneered in its games research.
Others, however, are already taking MuZero in very different directions. Last week, the U.S. Air Force revealed that it had used information about MuZero that DeepMind had made freely available to the public last year to help create an A.I. system that could autonomously control the radar of a U-2 spy plane. The Air Force tested the A.I. system, which it calls ARTUMu, on a U-2 Dragon Lady spy plane during a simulated missile strike in a training mission on Dec. 14. Stop Killer Robots, a campaign led by computer scientists, arms control experts and human rights activists, said the Air Force research was a dangerous step toward creating lethal autonomous weapons.
DeepMind told Fortune it had no role in the Air Force research and was unaware of it until seeing news reports about the training mission last week. DeepMind has previously pledged to avoid work on offensive weapons capabilities or A.I. that can identify and track targets and deploy weapons against them without a human making the final decision about striking those particular targets. More must-read tech coverage from Fortune : How hackers could undermine a successful vaccine rollout
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fortune--2020-12-23--Jobless claims fell in November, but consumer spending declined for the first time since April

U.S. consumer spending and incomes fell more than forecast in November and filings for unemployment benefits remained at elevated levels last week, the latest signs that the autumn’s surge in coronavirus cases is sapping the economic recovery.
Initial jobless claims in regular state programs dropped by 89,000 to 803,000 in the week ended Dec. 19, according to the Labor Department Wednesday, compared with the median projection of economists for 880,000. On an unadjusted basis, claims fell by about 73,000.
A separate Commerce Department report showed consumer spending, which accounts for a majority of the economy, dropped 0.4% last month—the first decline since April. Personal income decreased 1.1%, reflecting the winding down of several pandemic aid programs.
The data show a U.S. economy limping into year-end and suggest many Americans will struggle in coming months as coronavirus cases surge across the nation. More businesses also face closure or layoffs amid colder weather and less foot traffic.
Vaccine distribution offers hope on the horizon, and the fiscal stimulus package approved by Congress this week should offer some relief, though President Donald Trump’s remarks late Tuesday put the fate of the deal in question.
“The economy is still pretty soft,” said Scott Brown, chief economist at Raymond James Financial. “The level of jobless claims suggests there’s still labor-market weakness,” while on spending, “you see the pandemic’s impact on the season: There’s less seasonal shopping than usual, there’s less seasonal travel.”
Other reports Wednesday showed new home sales unexpectedly tumbled to a five-month low, while consumer sentiment and a proxy for business investment trailed forecasts.
U.S. stocks edged higher as investors appeared ready to look past the president’s comments to the promise of pandemic relief that will come sooner or later. Yields on 10-year Treasuries rose, while the dollar fell.
Benefit recipients
The Labor Department figures showed continuing claims, which roughly approximate the pool of total state benefit recipients, decreased by 170,000 to 5.34 million in the week ended Dec. 12. This figure doesn’t include the millions on federal pandemic aid programs, which are set to be extended under the new fiscal stimulus package.
Even with the drop in initial jobless claims, the level remains almost quadruple what it was before the pandemic, and the four-week average edged up to a two-month high. California and New York made up most of the drop on an unadjusted basis.
More than half of states reported a decline in initial claims, while Illinois, Virginia, and Pennsylvania experienced an increase in claims last week.
The decline in spending, which exceeded estimates in Bloomberg’s survey of economists, followed a downwardly revised 0.3% increase in October. Spending on goods fell 1%, driven by clothing, footwear and new motor vehicles. Services outlays slipped on decreases for food services and accommodations.
“We are losing momentum at a critical time,” Diane Swonk, chief economist at Grant Thornton in Chicago, said on Bloomberg Television. “Consumer spending is pulling back or slowing down at a time when we should be ramping up, and that’s because of the surge in COVID cases.”
Also Wednesday, data showed orders for U.S. durable goods rose in November by more than forecast. But a proxy measure for business investment—non-defense capital goods orders excluding aircraft—increased by 0.4%, less than the 0.6% estimate, following an upwardly revised 1.6% advance in October.
The weekly jobless claims report is usually released on Thursday, but was moved up because the federal government will be closed Dec. 24.


fortune--2020-12-24--Americans are on track to buy more gift cards this holiday season than ever before

Gift cards, the most mundane present you can buy someone, are giving U.S. retailers a much-needed cash infusion as they close out a rough year.
Americans are on course to buy more of them than ever before, with gift-card spending this holiday expected to rise 19% compared to last year, according to payment service Blackhawk Network. More than half of American shoppers say they’ll buy more cards this season than in previous years, with shoppers planning to purchase 10 cards on average—twice as many as last year. And with billions of dollars of gift cards left unredeemed annually, that boom in sales could translate to essentially free money for retailers in the midst of their most crucial quarter of the year.
The rise in sales comes as shoppers are shifting money away from travel and experiences during the coronavirus pandemic—plus a gift card travels easily through the mail during a socially distant holiday. A spike in sales bodes well for retailers, especially “nonessential” ones like Macy’s and Nordstrom that are still trying to claw back the sales they lost while their doors were shuttered earlier this year.
“I would expect this to be a very strong gift-card year,” said Steve Sadove, senior adviser for Mastercard and the former chief executive of Saks Inc. He said the shoppers who can afford it are willing to shell out cash. “What you’re seeing is resiliency in terms of the consumers out there.”
Gift cards provide many retailers immediate cash flow, a welcome boost during a disastrous year for the mall-based retail sector. Beyond the cash injection, gift cards also offer retailers useful customer data and can ultimately increase the total amount a customer spends with them, potentially giving the struggling sector a jumpstart as 2021 begins.
Each year, as much as $3 billion in cards go unused, languishing in wallets past the expiration date and never to be cashed in, according to a CBS News analysis of Mercator Advisory Group data. That’s particularly relevant at a time where dozens of retailers have gone bankrupt. Those that liquidated, such as Barneys New York, set redemption deadlines for outstanding cards. Miss the date, and that card becomes worthless to the customer. Mercator didn’t reply to a request for comment.
Even when customers use them, there’s often either a small balance left on gift cards that’s never redeemed, or they spend additional cash beyond the card balance to get the product they want. That extra spending will help offset this year’s lost impulse sales—those last-second purchases shoppers make while perusing racks and shelves in person that don’t materialize when filling an online cart.
“People rarely stick to the gift card limit,” said Gabriella Santaniello, founder of retail research firm A-Line Partners. “It’s beneficial in that way.”
Gift cards are a tried-and-true tactic that dates back to the ’90s, when Blockbuster Video became the first shop to roll out the method nationwide. They’re now sold by everyone from restaurants to designer fashion boutiques. Even sports-betting company DraftKings introduced a retail gift card this year, which it calls an industry first.
Still, not every consumer company will see gift-card growth. Starbucks warned that holiday gift card sales are being hit as fewer customers come into the cafes, even though digital sales are holding up.
“There will be some impact to our gift card sales this holiday season, which will likely have some knock-on effect to our fiscal second quarter,” Patrick Grismer, chief financial officer, said at the Wolfe Research Consumer Access Day earlier this month. “But I think it’s early to say whether that will be a material impact.”


fortune--2020-12-24--Even COVID can’t stop New York City’s sidewalk Christmas tree vendors

Every year, an army of friendly, woodsy-looking salespeople, many from Quebec, sell live Christmas trees on New York City sidewalks.
Street vendors are ubiquitous on the city’s landscape, but New Yorkers have a particular fondness for the Christmas tree migrants. For one month every winter, Christmas tree sellers become the glue cementing neighborhoods together. On the streets at most hours, they’re the first to say hello and the last to say goodnight; their presence creates a small-town ambiance in a city of 8.4 million people. At a time when disease is trapping New Yorkers inside, tree vendors remain a resilient force, keeping spirits high and connections intact.
Tree vendors descended on New York as early as 1851, when a tree sold for $1. Today, these salespeople enjoy special status. A 1938 city law decreed that “storekeepers and peddlers may sell and display coniferous trees during the month of December.” The so-called Coniferous Tree Exception was enacted following citizen protests against then-Mayor Fiorello LaGuardia’s “war on Christmas trees,” during which the reform-minded mayor banned selling trees on city streets without a permit, in an effort to clear the way for automotive traffic.
Since then, Christmas trees vendors have expanded throughout the five boroughs, with the densest concentration in Manhattan. Trucks from Quebec, Nova Scotia, Vermont, and North Carolina, working for large companies, deliver tens of thousands of trees to vendors around the city every night from Thanksgiving until Dec. 25; the vendors then remain onsite around the clock to sell the trees and protect them from theft.
Since permits are not required, it is a largely unregulated business. Sales and salaries are delivered in cash, under cover of darkness, and business secrets are closely guarded. Some sellers rent sidewalk space in front of any store that will offer it to them. Others participate in auctions operated by New York City Parks and Recreation, which offers five-year contracts for spaces in city parks that can cost anywhere from $1,000 a year in less desirable locations to $50,000 or more in SoHo Square on Sixth Avenue. The competition for spaces and customers creates conflicts between vendors. Stories about bidding wars, spying, fights, and even burning down tree stands are rampant.
Large companies—notably Evergreen, which operates a majority of New York City tree stands—are powerful, but individual vendors are the heart of New York’s Christmas tree business. Many come from Quebec, whether their trees do or not; they’re recruited by the tree companies because they are winter-hardy folks willing to camp out for a month, sleeping in their vans or their sales huts.
It’s a profitable job. A single tree stand can net between $7,000 and $30,000 in a month. It offers the adventure of weeks in the Big Apple. But the working conditions are harsh. Many stands are open 24 hours a day. And even if they aren’t, the trees must be protected from theft, more or less anchoring sellers to the stand day and night. If sellers have somewhere else to spend the night, they might load their unsold inventory onto a truck for the night, but they still must wait at the stand for the nightly shipment of trees and take care of after-hours deliveries to nearby apartment dwellers.
Mental stress compounds the hard, physical work. Vendors carry large amounts of cash over the border when they return home and fear detection when they pass through Canadian customs on their way back to Quebec. (For this reason, they shun media attention in New York.)
Selling Christmas trees requires marketing moxie. Vendors ensure that their tree stocks, carefully trimmed for symmetry, suit the surrounding neighborhood—smaller, less expensive trees for a block of modest walk-up apartment buildings, towering evergreens in an area with luxury apartments and businesses. The vendors themselves become part of the display. One West Village vendor dresses her American boyfriend in a faux-Quebecois lumberjack getup; in another part of the Village, a French-Canadian vendor with perfect English purposely thickens his accent to add to his paysan image.
One stereotype of Quebecers turns out to be true: They are extraordinarily good-natured and friendly, which helps vendors draw the same customers year after year. That cheerful presence also heightens the actual and perceived safety of the streets and residents’ sense of community.
That’s why so many local residents look out for them, bringing them coffee, sandwiches, and soup, especially in inclement weather. Stores allow vendors to use their restrooms. A resident may watch over a stand while the seller steps away. Sellers and homeless people often establish mutually beneficial relationships involving exchanges of food and protection.
This holiday season—the COVID Christmas—has been a strange one for New York and its Christmas tree vendors. Many sellers faced troubles getting to New York at all, with the U.S.-Canadian border closed to nonessential travel because of the pandemic. The ban does not include Christmas trees, but it does impact the people who sell them. Vendors from Quebec cannot cross the border legally, though some have crossed anyway. This year, fear of being detected by customs authorities is even more intense than usual.
New York City has borne more than its fair share of trauma in the past 20 years. But the most difficult moments have revealed both the city’s toughness and its sociable, almost small-town side. The latter is exemplified in a Christmas tree subculture that is as much a part of holidays in New York as adorned shop windows on Fifth Avenue.
Like Christmas, the vendors come every year. And in this pandemic year, particularly, they remain essential hubs of safe community contact, counteracting forced isolation. The annual ritual of welcoming tree vendors, buying trees, and carting them home in the cold should buck up New Yorkers as they celebrate the symbols—and substance—of their survivorship and goodwill.
LinDa Saphan is an artist and social anthropologist at the College of Mount Saint Vincent in the Riverdale area of the Bronx, N.Y. Kevin Cabrera is a 2018 graduate of the College of Mount Saint Vincent. This was written for Zócalo Public Square.


fortune--2020-12-24--What could happen if people skip the second dose of the COVID vaccine

Trump ’ s pardons : How they ’ re granted and how they compare to other Presidents ’ so far

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Success for the huge COVID-19 U.S. vaccination program now underway hinges on people getting two doses, separated by three to four weeks. But a recent study suggests that many people may fail to get their second injection, which is necessary to build maximum immunity.
The research, published Dec. 14, focused on a vaccine to prevent the viral skin condition known as shingles. It found that one in four Medicare patients missed getting their second dose within six months of their initial one.
Recipients of the two COVID-19 vaccines currently approved for use may be more likely to complete their immunizations than those in the study, for reasons including greater perceived health risk if they don’t. But the authors of the new study caution that many of the same barriers will be at work: not just patient negligence, but also poverty, age, and isolation.
A high number of incomplete vaccinations could make it harder to stem the coronavirus and end the pandemic, which is spreading out of control in most states. It could also lead to more deaths and hospitalizations than there otherwise would be.
To make matters worse, the study found that follow-up vaccination rates for the shingles were much lower for certain groups. Only 58% of Hispanic patients, 61% of Black patients, and 69% of Asian patients received a second dose. Meanwhile, only 64% of low-income patients and 66% of disabled patients returned for their second doses.
“This obviously has some troubling implications for the COVID vaccine,” says Juliette Cubanski, one of the study’s authors and deputy director for Medicare policy at KFF, formerly the Kaiser Family Foundation. “These groups are among the hardest hit in terms of getting seriously ill and dying from COVID.”
There are important differences between Shingrix, the shingles vaccine, and the coronavirus vaccines. Most obviously, while shingles can be extremely painful and even debilitating, it is rarely life-threatening. And with the coronavirus in the news every single day, there will be fewer chances for patients to simply forget their second dose.
Another factor that points to higher second-dose rates for the COVID vaccines is timing. Patients could wait up to six months for their second dose of Shingrix, but both COVID vaccines currently being administered—one from Moderna and another from Pfizer-BioNTech—require a second shot within three to four weeks. According to Cubanski, the longer Shingrix delay may have made it easier for patients to overlook their follow-up shot.
But other factors that prevented patients from getting their full course of Shingrix will still be in effect when it comes to the COVID vaccines.
One is the complex and often unpredictable payments that are inextricable from American health care. The Shingrix vaccine required an out-of-pocket copayment for each dose, which Cubanski says may have discouraged some people from getting a second one. By contrast, the coronavirus vaccine is expected to require no payment from U.S. recipients, even for the 29 million Americans without health insurance. But Cubanski worries that people may not realize that they can get immunized at no cost.
“People’s concern about having to pay something out of pocket might be an issue, even if there is no actual cost,” she says. “They might not be aware that the vaccine is actually free.”
Transportation will also likely be an issue. Disabled, low-income, or rural Americans in particular may have difficulty reaching a vaccination site not just once, but twice. Rural areas have some of America’s lowest influenza vaccination rates—as low as 25% in some cases—partly because of distance.
Finally, Cubanski is concerned that some coronavirus vaccine recipients will be discouraged from following through on their second dose after an adverse reaction to the first one. Though the reactions don’t appear to be common, both Pfizer and Moderna vaccines can cause mild muscle soreness, fatigue, or low fever.
“These side effects are a sign that the vaccine is working, and not a sign that you have been infected with the virus and now have the disease,” says Cubanski. “That’s an important message to get across.”
In fact, it is medically impossible for the Pfizer or Moderna vaccines to transmit the virus behind COVID-19. While some vaccines use weakened versions of the virus they protect against, the new COVID vaccines use a new technique to trigger immunity without using any viral material.
Meanwhile, there is no single system in the U.S. to ensure that patients get their second dose. That responsibility will fall on individual recipients and the various health providers administering the vaccine.
One major vaccination site is expected to be outpatient clinics, including those run by Walgreens and CVS. Walgreens says it will use a variety of techniques to ensure follow-up doses, including scheduling an appointment for a second dose when the first one is administered, and sending patients reminders via mail, email, and voicemail.
As with most aspects of the coronavirus pandemic, these challenges have implications beyond the individual who misses his or her second dose. Trial data indicates that a single dose of the Moderna or Pfizer vaccines provide significant protection from the coronavirus, but a second dose makes that protection much higher and likely longer-lasting. If enough people miss their second vaccine doses, it could take significantly longer to reach the population-wide immunity level needed to stop the virus from circulating and end the pandemic.


fortune--2020-12-24--The pandemic cramped Rent the Runway’s style—but here’s how the company is fashioning a comeback in

The pandemic cramped Rent the Runway’s style—but here’s how the company is fashioning a comeback in 2021

The pandemic has wreaked havoc on the fashion industry, and clothing rental service Rent the Runway has certainly felt the squeeze. Earlier in 2020, the New York City-based company significantly cut costs by instituting layoffs and shuttering its handful of brick-and-mortar stores, among other measures. That said, co-founder and CEO Jennifer Hyman has big hopes for a stronger-than-before comeback in 2021—and for different looks to become popular after a lengthy period in which people have been trapped inside wearing sweatpants and T-shirts. What’s more, she’s even more optimistic about Rent the Runway’s future now that the company has been forced to exist with much lower revenue. “What was great is that it [the pandemic] accelerated a movement towards being a much higher margin business, and it accelerated our path to full profitability,” Hyman told Fortune in a recent interview which took place over, what else, Zoom. “It brought a lot of the metrics that we were aiming to accomplish in 2023, into 2020 or 2021.”
Fortune spoke to Hyman about what the New Year holds for Rent the Runway and the broader fashion and retail industry—plus the future for female entrepreneurs such as herself.
This interview has been edited and condensed for clarity.
In what ways has COVID impacted your business, accelerated certain trends or forced you to do things differently?
We’d already seen that about 90% of the transactions in our retail stores were actually customers coming in and picking up their subscription order or dropping off their subscription order. So essentially 90% of the experiences were not about fashion discovery, they were about first-mile and last-mile delivery where the customer was wanting more frictionless shipping experience. So I would say that COVID accelerated the decision that we made to close our retail stores, but to expand our pick-up and drop-off physical footprint around the country.
Another thing that was in the works is changing our membership programs, from being all-you-can-eat to a pay-as-you-go kind of model. The goal has always been to create a more personalized subscription program, where people could flex up or flex down their usage based on what was going on in their life, and that would correspond to flexing up or down the price that they paid. Thank God that was in the works prior to the pandemic because, obviously, people have had less use cases for wearing clothes at all this year.
Also, I think that we have seen a dramatic change across the board, in commerce across all categories. In fashion, that change has been even more dramatic, because fashion was way more behind in terms of online penetration and other categories. The pandemic has accelerated adoption of online and discovery online, which is fantastic for us. It has also accelerated the fundamental vision and mission of Rent the Runway: To build a circular platform and a closet in the cloud. I think that coming out of the pandemic, which is one of the few times in recent history where the whole world is going through the same thing, at the same time, everyone in the world is going to be a much more conscious consumer in terms of how they think about health and sustainability, and how they think about the financial impact of their decisions. Our business has always been about buying less stuff in favor of being able to access whatever you wanted, having a wardrobe on rotation, but not having to accumulate dozens of items that you don’t need. Secondhand clothing is now completely normal.
You’ve mentioned that, from the beginning of the pandemic, you didn’t believe fashion would make a recovery until a vaccine was widely available. Are you confident that fashion will make a full comeback at any point, even then?
I think the back half of 2021 is going to be the best moment in time for the fashion industry that I’ve seen in my career. Fashion is about self-expression, it’s about showing up in the world as you want people to see you. And I think that in the back half of next year, when we’re able to celebrate, we’re able to take vacations, we’re able to go back into the office, people are going to want to show up in their own lives with passion. And as that corresponds to fashion, I think that people are going to be wearing bolder outfits, they’re going to care about being noticed. I have told our chief merchant that from May 1 [2021] onward, every single article of clothing that shows up on the Rent the Runway site, I want it to be an article of clothing that no one would have ever worn in 2020. If you would have worn the item during this year of COVID, it should not be part of Rent the Runway.
By the way, I don’t think that people are going to go back into the office five days a week, I think they might go back into the office two days a week or three days a week. But even with that, I think when they do show up to their lives in the office, they’re going to show up looking ready for their “boss” moment. On the other two or three days a week, when they’re sitting at home, they’re no longer going to be locked in their house. They could actually meet a colleague for lunch and go out and grab a coffee. So you’re not going to be working from your house in sweatpants and a T-shirt anymore. People are not going to be dressing like they did in 2020. Again, fashion is about self-expression. No one wants to be in the same state of mind in 2021 as we’ve been in 2020. We have to move forward.
On the topic of a return to the office: What could that look like for Rent the Runway?
Our own plan is to lean into flexibility. We’re only going to require our employees to come into the office two to three days a week. So we’re not leaning into fully remote, but we’re leaning into flexibility. And we think that’s a major change from how we’ve operated in the past.
We’ve seen how productive everyone is from anywhere. The reason why we do want people to come in two to three days a week, is because our business is so collaborative, it’s so much about community. I think that, fundamentally, people stay at companies where they have fun, and where they enjoy the people they work with. And when you go into a fully remote environment, and you don’t have the benefit of falling in love with your colleagues and the culture of that organization, your job is just a job. Think of the switching cost of moving from one company to another company [in a fully remote environment]—it’s just like shifting from one zoom screen to another.
If you were starting Rent the Runway today, during the pandemic, what would you have done differently? Would you have even started it in the midst of all of this?
When we launched Rent the Runway, it was in the middle of a recession. A recessionary environment is a great environment for Rent the Runway, but a pandemic is a terrible environment. Fashion is based on social interactions, whether those social interactions are happening at work, or they’re happening in your personal life. If you’re spending a day alone, you’re not really going to get dressed for the day. So I would say that while the pandemic is going to lead to an incredible amount of innovation for many different reasons, I think that innovation as it relates to fashion in particular, is not going to happen until we’re in a post-pandemic world.
Once we are there, if demand does increase pretty quickly because people are ready to go out and do the things that they really miss doing, do you feel confident that you can ramp back up in terms of staffing—when it comes to logistics and customer service and everything else?
Yes, yes. I mean, it is challenging. This is a bit of a hyperbole, but as challenging as it was to go from, like, 1000 to zero over the last nine months, it’s going to be 10 times more challenging to go from zero to 1000. What we’re seeing right now, if you call wedding venues, for instance, is that weddings are being booked five nights a week in the back half of 2021. I was just on a call with the CEO of a travel company and they said the amount of bookings that they have for the summer of 2021 is equivalent to what they had in 2018 and 2019 combined. People are ready to go on vacation again, they’re ready to go to restaurants, they’re ready to show up at a party, they’re ready to live. Our business thrives in those kinds of environments. When people are busy, they have a lot going on in their life. And Rent the Runway is a smart, efficient, amazing way to get dressed, to have variety in your wardrobe. So currently, every single area of the business is focused on May. I don’t actually even care what happens over January and February, which I think are going to be our two worst months since the beginning of the pandemic.
So we’re really focused on how do we show up in May. We have huge recovery plans in terms of marketing, operations, and customer service. I mean, to go from X number of shipments to what we think will be in a four-week period, potentially five or 10 times the number of shipments that we have today, ramping up to what might be 20 times by the end of the year. It is a ramp that that we’ve never had to do. In the past, growth was incremental, and you could plan for that. This is different. Because we don’t know the intensity of how the recovery will occur, we’re doing the best that we can. But it’s hard to scale any logistical infrastructure as quickly as what we believe this ramp might be.
Can you give an example of one of the steps you’re taking to better position you for that expected, fast ramp-up of demand?
One of the things we’ve done is we’ve fundamentally changed how we think about customer service, which is something that used to be difficult to ramp because we had a customer service team that was sitting in a physical location, working a specific shift. We found that during COVID, when our team went fully remote because they had to, our customer service scores actually rose to the highest levels that they’ve ever been in the last 11 years in the business. This happened during one of the most difficult times for the business. At a time where people are more likely to complain, we’ve had the highest customer service satisfaction that we’ve ever had. And that is because our customer service team is more productive, happier, and has a more flexible lifestyle. That also means we’ve been able to ramp up hiring now from anywhere and everywhere. We don’t have to just hire people that live in the Dallas area, or in the New York area, we can hire customer service talent from all over the country. So we are finding way more diverse talent pools, and therefore it’s enabled us to scale and ramp the team with much more speed than in the past.
I also want to ask you about what we’re seeing with investment dollars going to female entrepreneurs. There was a sizable decrease in this number in 2020. We are also seeing a lot of scrutiny of female founders. Does this concern you? Do you think this recipe can lead to a longer-term regression in funding going to female entrepreneurs?
The data here speaks for itself. Institutions, whether those institutions are venture capital firms or private equity firms, or even the media, have less confidence in women than they have in men. This is not just about female founders, it’s about us as a society having less confidence in women. When things get rough, we go to the default answer, which is a white man. We’re like, okay, there are more examples of white men being successful in the past, so let’s invest where we know that it’s going to be a winner. And what we consider to be more of a risky asset class, and women are certainly in that category, we move our investments away from those risky asset classes.
I wrote a piece that I posted on LinkedIn, about one of the most moving experiences in my entire career. So I sit on the I sit on two public boards, I sit on the board of Estee Lauder, and I sit on the board of Zalando, a $20 billion ecommerce business in Europe that sells fashion. It’s founded by three guys who are my age, and they founded it 11 years ago, just like I founded Rent the Runway 11 years ago. One of the founders, Rubin Ritter, decided to step down. He made a public statement that he had decided to spend more time with his family, which is totally normal. Everyone says that. But statement number two was, “I’ve spoken with my wife, and we have decided that her professional ambition should take priority in this next phase of our life.”
It basically indicated to the world that because of his enormous success over the last decade, that his wife has had to deprioritize her professional ambition, that she was inevitably the one in their home and in their family who was carrying more of the weight. This example is happening in every home in every couple across the world, where people get married. The person who is earning more naturally gets prioritized. It’s not that men are discriminating against their wives. It’s that we don’t have pay parity and because, even between the ages of 22 and 32, women are making less money in less senior positions. When that natural distribution of labor happens in your family, it is the rational decision to prioritize the person who earns more, which in 90% of the cases is going to be the man.
So the fact that this happened, that Rubin said publicly, “I want to prioritize my wife’s professional ambitions,” it was one of the most moving moments of my entire career. I started tearing up in a board meeting when I heard this, because if this was done with more frequency, it would actually be a lever that changed the situation from women. You know, it’s not the only lever. But it is something that we just have to say out loud. That’s an example of something really positive that I’ve seen.
Another positive thing is that, I think because of the pandemic, we’re going to see more women enter the C-suite and stay in the C-suite than ever before. So whereas this [COVID] has been devastating for women who are junior or mid-level in their career, for women at the top, the pandemic is the best thing that ever happened because of workplace flexibility. In a world where I am not expected to do as much business travel, because now a lot of those meetings can happen over zoom, and in a world where I only have to come into the office two or three days a week and I can prioritize working from home the other days of the week, this will naturally be an environment where women will be able to have more of that balance that they need and that they want. Because even women who are extremely successful still taking on more responsibility in their home life and in their family life. So I think that we’re going to see way more women able to have C-level jobs and be super successful in those jobs, because the requirements of what it takes to be a C-level executive is fundamentally changing.
One last question: Do you see any situation where you would dabble in brick and mortar again?
I think physical retail is a very inefficient thing to scale. I mean, even if we were in every city, around the country, a lot of our customers live in suburb. In rural areas, they don’t have access to the physical locations. So I just I think that while there might be a world in which we’re back into physical formats in the future, I think they’re going to take on different attributes, not just for Rent the Runway, but for everyone in commerce. A physical store truly has to offer a differentiated level of service experience.
So I’m not going to say, ”No, we’re never going to do that in the future.” But it would have to be so special and differentiated and something that we couldn’t offer online. I think that there are going to be very few of those examples across the board in any industry.


fortune--2020-12-24--‘We are struggling’: Unemployed Americans face a bleak Christmas

Last Christmas, Shanita Matthews cooked up a feast for her family of three: Roast chicken, barbecue spareribs, spinach, macaroni and cheese.
This year? They’ll stick with tuna fish and crackers, among the few items she can afford at the supermarket.
“We’re not really doing Christmas — I guess you can say it that way,” said Matthews, who lives in Suwanee, Georgia. “We are struggling. We are tired, and all I have is my faith.”
Like nearly 10 million other Americans, Matthews has been jobless since the viral pandemic ripped through the U.S. economy in March, triggering a devastating recession and widespread unemployment. Now, many months later, they face a holiday season they hardly could have foreseen a year ago: Too little money to buy gifts, cook large festive meals or pay all their bills.
Nearly 8 million people have sunk into poverty since June after having spent $1,200 checks that the government gave most Americans in the spring and a $600-a-week supplemental jobless benefit expired in July, according to research by Bruce Meyer at the University of Chicago and two other colleagues. And finding a job is getting even harder: Hiring in November slowed for a fifth straight month, with U.S. employers adding the fewest jobs since April.
Some relief may — potentially — be on the way. This week, Congress approved a $900 billion pandemic rescue package that includes a $300-a-week unemployment benefit, cash payments of up to $600 for most individuals and a renewal of extended jobless aid programs that are about to expire. On Tuesday night, though, President Donald Trump injected doubts about that urgently needed federal aid by attacking the rescue package as inadequate and suggesting that he might not sign it into law.
Help, in the meantime, can’t come soon enough for Matthews. With her bank balance now negative, she worries that her account could be closed if she doesn’t receive financial aid soon.
Matthews, 41, has been struggling with her finances since she had to shut down her wedding business in March, when ceremonies were canceled and any need for the centerpieces and flower arrangements she made suddenly evaporated. Matthews was denied unemployment aid by Georgia’s labor department. She doesn’t understand why and is appealing the decision. But the process is so slow that she’s waited months just to get a hearing.
Despite being a registered nurse, Matthews has been unable to land a job. She can work only late hours because she often needs to help her 6-year-old daughter, who must do virtual learning at home when virus cases spike at her school.
Matthews’ car was repossessed after she couldn’t keep up with payments. Most of what her husband earns goes to a $1,600 mortgage on their home. That leaves them with about $200 a month for groceries, utilities and a $50 internet bill — a necessity for her daughter’s schoolwork.
Matthews hopes that a relative can step in and buy a Christmas gift for her daughter.
“We want to be able to have food, water, heat,” she said. “Those are the things that we care about.”
Charities say they have been overwhelmed with requests for help, a sign many are in deep financial distress. The United Way expects the number of calls to the 211 hotline it funds to double from last year to 20 million calls, mostly from people needing help paying rent or electricity bills. Feeding America says many of the people showing up at food banks are first timers.
Out of desperation, Sheyontay Molton turned to Twitter for help after a series of events left her with no money to buy gifts for her four children.
Her children’s father lost his job this year. Molton, who is 28 and lives in San Antonio, Texas, had to temporarily stop working as a delivery driver for DoorDash after falling debris from a truck severely damaged her car in October. She used part of her rent money to repair it, leaving her behind on bills.
Having noticed on Twitter that social media influencers and celebrities were providing cash to some needy people, Molton created an account and tweeted about her situation. Someone sent her $200 through an app — money that she plans to use for groceries. Another couple on Twitter asked her to create an Amazon Wishlist and then bought her kids a doll, cars and other toys for Christmas.
Without the donations, Molton had planned to tell her young kids that Santa Claus couldn’t come because he was taking extra coronavirus precautions.
“Silly, I know,” she said, But “it would have bought me more time.”
The struggles of low-income workers and the unemployed are contributing to a weak holiday shopping season that will likely drag on the overall economy. Retail sales fell 1.1% in November, a month that is typically strong as gift-buying gets under way. Some economists expect retail sales to decline again this month, particularly as governments impose more business restrictions and rising coronavirus cases keep consumers away from stores and restaurants.
A scaled-back holiday is what Summer Kluytman has been envisioning. She had to tell her two teenage sons not to expect the kinds of Christmas gifts they’ve typical received in the past, like the $400 Oculus virtual reality headset that was under the tree last year.
Having lost two art teaching jobs, Kluytman had to go on food stamps to help pay for groceries. The salary of her husband, who works for a cable company, goes toward the rent for their home in St. Petersburg, Florida.
Kluytman is spending $100 on each son this Christmas for hoodies and other clothing, down from the $500 she spent on each last year. She plans to hold movie nights, where they’ll gather in the living room to catch a flick.
“I think that they’re cool with us spending time together as opposed to a bunch of stuff under the tree,” she said. “But it does break my heart a little bit.”


fortune--2020-12-24--Republicans shoot down $2,000 stimulus checks despite Trump’s demands

House Republicans shot down a Democratic bid on Thursday to pass President Donald Trump’s longshot, end-of-session demand for $2,000 direct payments to most Americans as he ponders whether to sign a long-overdue COVID-19 relief bill.
The made-for-TV clash came as the Democratic-controlled chamber convened for a pro forma session scheduled in anticipation of a smooth Washington landing for the massive, year-end legislative package, which folds together a $1.4 trillion governmentwide spending with the hard-fought COVID-19 package and dozens of unrelated but bipartisan bills.
Instead, Thursday’s unusual 12-minute House session instead morphed into unconvincing theater in response to Trump’s veto musings about the package, which was negotiated by Treasury Secretary Steven Mnuchin on Trump’s behalf. House Majority Leader Steny Hoyer, the No. 2 House Democrat, sought the unanimous approval of all House members to pass the bill, but GOP leader Kevin McCarthy, who was not present in the nearly-empty chamber, denied his approval and the effort fizzled.
If Trump were to follow through on his implied veto threat, delivered via video clip on Tuesday, the government would likely experience a brief, partial shutdown of the government starting on Dec. 29. It would also delay delivery of the $600 direct payments that the bill does contain.
The optics appear terrible for Republicans, who had lobbed praise at the hard-fought COVID-19 relief package, which passed on Monday by sweeping votes after the White House assured GOP leaders that Trump supported the bill.
The path forward, including efforts to avert a government shutdown or perhaps even pass a last-ditch extension of soon-to-expire jobless checks, remained unclear. Any shutdown would probably be brief, but nothing is certain.
“We’re not gonna let the government shut down, nor are we going to let the American people down,” Hoyer said. “There are continuing discussions going on between the speaker, and the secretary of the Treasury and the administration.”
Senate Republicans, led by Senate Majority Leader Mitch McConnell, have opposed larger $2,000 checks as too costly and poorly targeted. Democrats are supportive of the direct payments and now plan to vote on the $2,000 check proposal on Monday.
That measure would be lobbed to the GOP-controlled Senate, where it would likely die and create more Trump-related headaches for Georgia GOP Sens. Kelly Loeffler and David Perdue, who are fighting for their political lives — and for continued GOP control of the Senate — in a pair of Jan. 5 Georgia run-off elections.
Rather than take the victory of the sweeping aid package, among the biggest in history, Trump is lashing out at GOP leaders over the presidential election — for acknowledging Joe Biden as president-elect and rebuffing his campaign to dispute the Electoral College results when they are tallied in Congress on Jan. 6.
“It is Christmas Eve, but it is not a silent night. All is not calm. For too many, nothing is bright. And for too many, they are not sleeping peacefully,” said Rep. Debbie Dingell, D-Mich. “I did a town hall last night that had people crying, people terrified of what is going to happen.”
The president’s push to increase direct payments for most Americans from $600 to $2,000 for individuals and $4,000 for couples splits the party with a politically painful loyalty test.
Republican lawmakers traditionally balk at big spending and many never fully embraced Trump’s populist approach. Their political DNA tells them to oppose a costlier relief package. But now they’re being asked to stand with the president.
On a conference call Wednesday House Republican lawmakers complained that Trump threw them under the bus, according to one Republican on the private call and granted anonymity to discuss it. Most had voted for the package and they urged leaders to hit the cable news shows to explain its benefits, the person said.
Democrats were taking advantage of the Republican disarray to apply pressure for a priority. Jon Ossoff, Perdue’s Democratic opponent, tweeted simply on Tuesday night: “$2,000 checks now.”
The relief bill Trump is criticizing would establish a temporary $300 per week supplemental jobless benefit, along with a new round of subsidies for hard-hit businesses, restaurants and theaters and money for schools, health care providers and renters facing eviction.
Even though Treasury Secretary Steven Mnuchin represented the White House in negotiations, Trump assailed the bipartisan effort in a video he tweeted out Tuesday night, suggesting he may not sign the legislation.
Railing against a range of provisions in the broader government funding package, including foreign aid mainstays included each year, Trump called the bill a “disgrace.”
Trump did not specifically vow to use his veto power, and there may be enough support in Congress to override him if he does. But the consequences would be severe if Trump upends the legislation. It would mean no federal aid to struggling Americans and small businesses, and no additional resources to help with vaccine distribution. To top it off, because lawmakers linked the pandemic relief bill to an overarching funding measure, the government would shut down on Dec. 29.
The final text of the more than 5,000-page bill was still being prepared by Congress and was not expected to be sent to the White House for Trump’s signature before Thursday or Friday, an aide said.
That complicates the schedule ahead. If Trump vetoes the package, or allows it to expire with a “pocket veto” at the end of the year, Americans will go without massive amounts of COVID aid.
A resolution could be forced Monday. That’s when a stopgap funding bill Congress approved to keep the government funded while the paperwork was being compiled expires, risking a federal shutdown.
The House is already set to return Monday, and the Senate Tuesday, for a vote to override Trump’s veto of the must-pass defense bill. Democrats announced they will force a roll call vote to pass Trump’s proposal for $2,000 checks, as well as a temporary government funding measure to avert a shutdown, Hoyer said Thursday.
The push for bigger payments to Americans drew rare common cause between Trump and some of the most liberal members of Congress. Pelosi and Democrats said they fought for the higher stipends during protracted negotiations only to settle on the lower number when Republicans refused.
The Senate cleared the huge relief package by a 92-6 vote after the House approved it by 359-53. Those votes totals would be enough to override a veto should Trump decide to take that step.


fortune--2020-12-24--Vaccine rollout could boost the travel industry—and spell the end of deep discounts

The arrival of a coronavirus vaccine has the U.S. travel industry preparing for a rebound in demand following a historically terrible year. After months of deep discounts—with hotels offering lavish perks and airlines dangling fares such as $21 from New York to Florida—prices are set to make up at least part of the ground they lost.
Trip providers have slashed capacity, so any gains in bookings will tend to boost rates. And as vaccines take hold, they’re poised to unleash a torrent of pent-up vacation demand as people emerge from months of being cooped up at home. That’s leading to optimism within the industry for an upswing in the spring and summer, even as rates remain depressed and a recovery in business travel is a long way off.
“No one’s getting ready to pop open a bottle of champagne yet,” travel consultant Henry Harteveldt said of airlines and hotel groups he has polled. “But there is hope right now that summer 2021 will come in and be certainly not only much stronger than this year, but at or above 50% of where we were in 2019.”
Already, some affluent travelers have begun making reservations for blow-out vacations, said Jack Ezon, a managing partner of Embark Beyond, a travel agency catering to the super-rich. Clients have flooded the company with requests for big parties in Europe and the Caribbean, with some budgets topping $1 million.
“Anything on the Mediterranean is bumping,” he said. “Space is already tight and it would be wise to have something in your pocket by the end of January so you don’t get shut out.”
While it may soon be too late to score a luxurious suite on, say, Italy’s Amalfi Coast, prices for other types of travel have yet to reflect a potential surge in demand.
The pandemic has caused would-be vacationers to wait much closer to their travel dates before booking plane tickets or hotels, giving those businesses less visibility into their ability to boost rates. Any recovery in demand will need to be sustained before airlines consider raising prices, said Lacey Alicie, director of data analytics at Ailevon Pacific Aviation Consulting and a former revenue executive at American Airlines.
There are other reasons a recovery may not be swift. The depth of this year’s collapse has been unprecedented and risks abound, from vaccine distribution bottlenecks to virus mutations. And any rebound will only come after a brutal winter as COVID-19 continues to tear through the country. Early 2021 will bring “really rough months,” Southwest Airlines Chief Executive Officer Gary Kelly said recently.
“We expect next summer to be a lot better than this year but not normal,” Andrew Nocella, chief commercial officer for United Airlines Holdings Inc., said in an interview. “We think 2022 is probably the bigger year.”
The $900 billion relief bill Congress passed on Dec. 21 is slated to provide new funding to loan programs that have helped hotel owners stay afloat, but the industry remains in a precarious situation. STR, a lodging data firm, predicts that room rates will remain below 2019 levels until some time in 2023, with urban markets from New York to San Francisco taking longer to rebound.
“Our property owners, these people are struggling, a lot of folks are focused on needing cash,” said Michael Deitemeyer, CEO of Aimbridge Hospitality, the world’s largest third-party manager of hotels.
Still, vaccines are offering hope that Americans will rediscover their wanderlust and cast off the limitations of video chats and telephone calls. On the day that Pfizer’s shot was approved for use in the U.S., hotel bookings jumped to the largest daily number since the pandemic began in March, according to RateGain, which powers bookings for major hotel and online travel information providers.
United predicted Dec. 11 that third-quarter bookings would be only 40% below 2019 levels compared with 70% now. Delta Air Lines sees “a level of optimism” from the vaccines, said Joe Esposito, vice president for network planning.
“Six months, even three months ago, we didn’t know where the end was,” Esposito said. “Now we can at least see that in spring and summer there’s going to be pent-up demand for people to travel and get out because everybody has lost a year.”
Leisure leads
While it likely will be well into 2021 before shots are available to every adolescent and adult in the U.S., travel may rebound sooner once more vulnerable older people are vaccinated. With aging parents or grandparents inoculated, younger relatives may decide it’s safe to visit even if they haven’t been vaccinated themselves, said Savanthi Syth, an airline analyst at Raymond James Financial.
The recovery will be driven by leisure travelers, who generally pay lower rates than corporate road warriors or conference goers. But airlines, in particular, have become leaner companies, with the six largest U.S. carriers shedding nearly 84,000 jobs since January. The cuts mean fewer flights—and fares that are likely to be higher than in 2020 as vacationers gradually trickle back into airports.
It’s a similar story for cruise lines, most of which plan to resume operations in March, but with occupancies down as much as 50% on some itineraries. Cruise Lines International Association said the pandemic had cost the industry nearly 164,000 “direct and indirect” U.S. jobs and $8.6 billion in lost wages.
Cruise companies are planning a staggered return to the seas. Carnival, the world’s largest cruise company, is removing 18 ships from its fleet, permanently cutting capacity by 12%.
“We’re going to have limited capacity with pent-up demand,” Carnival CEO Arnold Donald said on the company’s most recent earnings conference call. “And I don’t think demand is going to be a big issue in the short term.”
When a travel executive feels more optimistic, it’s probably time to consider buying before the deals wane.