Cornell Business Review Fall 2020

Cornell Business Review

Crisis Pr esents The CaseOpportunity: Finte ch for a Unifi ed South and the Coronav ir A Revisitin g the Ele merican Trade B us lo ctric Veh icle Bubb c le

Fall 2020

OBSERV ING THE FROM SI ART WOR X FEET A L WAY D

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The co to ada ronavirus has pt all who buto a new kind owed for the y in his o s million-do of consume market r; r lla online her pajamas, r paintings a the kind and sw t home makes aps ch ampag business dea ne for ls caffein e.

Letter from the Editor I am proud to present to you the 21st issue of the Cornell Business Review. Since our inception in the Fall of 2010, we have continued to evolve as a publication, growing in size, pushing the limits of our content, and improving our business connections along the way. You may be surprised to hear that, despite vastly different circumstances, our content process was very similar to years prior. We have always benefited from agile and responsive members. Consequently, the jump to a wholly online process was near-effortless.

The Editorial Team did a wonderful job ensuring that this year’s articles are diverse in content yet still relevant to our readers. This issue’s feature article highlights the impact of COVID-19 on the art world and includes an interview with Harry Hutchison, the Director of Aicon Gallery, and Natvar Bhavsar, an Indian-American artist based in New York City. Moreover, the Editorial Team continued to release weekly articles under our CBR Now weekly publication, with topics ranging from The Tesla Enigma to Why Patagonia Sells.

In addition to the amazing articles from our Editorial Team, the Business Team conducted an interview with Jane Jiang, a Cornell University alumnus now at Morgan Stanley, where she addresses global cybersecurity, fraud, and insider threats. The Business Team also held a raffle ticket fundraiser where the proceeds were donated to Project HOPE, a global healthcare organization that supports health workers with the training and tools they need to save lives. The Design Team has once again done an exceptional job at piecing the magazine together and creating visuals that engage our audience. Furthermore, the Design Team began developing a custom Cornell Business Review website, which will likely be online in 2021.

I have been a part of the Cornell Business Review since 2018, the Fall of my freshman year. As a result, CBR has played a significant role in my college career and it has been my absolute pleasure to further CBR’s development as Editor-in-Chief.

Serving on the Review’s executive board for the past two years has been one of the best and most rewarding experiences of my life. This past year has been hard on everyone, which is why I am especially thankful and proud of this semester’s work.

I am especially grateful for our executive board. I could not have asked for a better team to work with. I would like to thank our Managing Editor, Alexandre Taylor, who has done a phenomenal job leading and developing the talent of the Editorial Team. He will be our next Editor-in-Chief and I am more than confident that he will continue to improve the publication.

I would like to thank Julia Kim and Isha Janjikhel, our Business Managers, who are truly the glue of this organization. I am so proud of their efforts to make this organization not only a publication but also an organization that contributes to the community. I would like to thank Edward Guo, our Design Director, for the revitalizing creativity he has brought to our publication. Finally, I would like to thank our advisor Harry de Gorter and Cornell University for the opportunity and support to make this issue possible and a success.

Of course, while we wish we could have published this issue under different circumstances, I am extremely proud of the resilience and the diligence of our organization.

I hope you enjoy our work.

Best wishes, Meridien Mach

Editor-in-Chief Meridien Mach Managing Editor Alexandre Taylor Business Manager Isha Janjikhel Julia Kim Design Director Edward Guo Associate Editor Madison Kang Editor Ash Arumugam Rhea Bhammer Kyle Castellanos Wally Chang Srauss Cooper Davis Donley Megan Friscia Anya Gert Natalie Hughes Derek Kartalian Nadia Khan Raghav Madhukar Isabella Picillo Nicholas Weising Joyce Wu Business Lexi Ding Grace Kim Khuslen Khosbayar Mahima Kumbhat Jaclyn Liu Fermin Mendive Angela Shi Graphics Yoo Jin Bae Alexandra Kim Yejune Park Michelle Tang Layout Samantha Mulvey Talia Singer Michelle Ren Zhang Web Nicole Hu Helen Wang Rishik Zaparde Cover By Alexandra Kim

POLITICS & OPINION 4

Women in the Workplace and Coronavirus – A Five Year Setback?

ECONOMY & LAW 13

The Permanence of COVID-19: Inside Costco, Unilever, and Uber Isabella Picillo

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Nadia Khan

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How the CARES Act Failed to Rally Retail Americans are buying food and iPhones, not clothes Wally Chang

16 Amazon is Selling Diversity: Marketing BLM Ash Arumugam

FINANCE 8

Retiring the LIBOR and the Future of Reference Rates Raghav Madhukar

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Coronavirus, Deficits, and Marijuana Legalization: The Domino Effect Megan Friscia

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Davis Donley

Joyce Wu

ART

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The Case for a Unified South American Trade Bloc Kyle Castellanos

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Smart Cities: Convenience at the Expense of Privacy Derek Kartalian

Revisiting the Electric Vehicle Bubble

How Microsoft Will Win The Console War

Property and Paintings: The Privatization of Public Street Art Anya Gert

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BUSINESS

Observing the Art World from Six Feet Away

Crisis Presents Opportunity: Fintech and the Coronavirus

INTERVIEW

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Nick Weising

Rhea Bhammer

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Jane Jiang

Women in the Workplace and Coronavirus: A Five Year Steback?

Written By Nadia Khan

Years of work and millions of dollars devoted to gender equality in the workforce are disappearing into thin air. As pressures mount in the midst of COVID-19, working women are shouldering new burdens and making the difficult decision to quit their jobs. This turn for the worse in the hard-fought struggle for workplace gender equality is fueled by latent socio-economic inequalities that the pandemic has laid bare. As many as 2 million women report planning to leave the workforce. By some estimates, women would be set back half a decade.

care, retail, and restaurants. Additionally, the National Bureau of Economic Research reported another gendered disadvantage in pandemic employment –– women are underrepresented in the occupations best suited to the transition to telecommuting. This means that women’s employment is more vulnerable in the socially-distanced work environments.

The COVID crisis also exposed numerous defects in our nation’s socio-economic infrastructure that have made it nearly impossible for women to cope with the stresses of job and family life. Stunningly, women are There are also structural setbacks. Traditionally, eco- leaving the workforce at four times the rate of men. nomic downturns have been termed “mancessions,” In September alone, the Labor Department reported for their disproportionate impact on men’s employ- that 865,000 women aged 20 and older dropped out ment and wage rates. However, the pandemic ren- of the American workforce compared with 216,000 dered the opposite effect: women’s employment men in the same age group. dropped by 17.8% from February to June 2020, comNationwide school and daycare center closings have pared to 15.8% for men. The gender gap in hours generated childcare shortages, adversely impactworked is even larger: between February and May, ing mothers’ professional prospects, as the majority women’s average hours fell 27%, versus a drop of only of mothers say they are responsible for either all or 20% for men. While women constitute 47% of the US most domestic duties. Among married parents who labor force, they accounted for 54% of initial coronaboth work full time, mothers account for 40% more of virus-related job losses and still make up 49% of them. childcare responsibilities than fathers do. Forty percent of working women report spending an additional three or more hours a day on child care and home responsibilities than before the pandemic, while only 27% of fathers said the same.

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While women constitute 47% of the US labor force, they accouned for 54% of initial coronavirusrelated job losses and still make up 49% of them.

This decrease in female employment during the pandemic could be explained by the fact that women were hit the hardest, and earliest, by layoffs in the industries most devastated by the pandemic, like health-

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Cornell Business Review

These domestic burdens, disproportionately placed on mothers, widen the wage gap and reverse multimillion dollar corporate gender equality initiatives –– effects likely to extend into the foreseeable future. Considering these burdens, it is imperative to increase women’s access to childcare services for the nation’s full economic recovery. In 30% of households with children, all are under the age of six. Furthermore, 32% of the US workforce has a child under the age of 14 in their household, and two-thirds of these households do not include a stay-at-home adult to help out. If employers or the government subsidized the childcare resourc-

Cécile Gariépy / New York Times

senior-level positions can be attributed to the company’s heightened sensitivity to the obstacles women face climbing the corporate ladder. Since the onset of the pandemic, Bayer has been keeping close track of how many women are still seeking promotions.

The company also expanded employee benefits like childcare and homeschooling assistance. Bayer management have also taken an active role in helping women employees maintain work-life balance –- from not scheduling early meetings to awarding much-needed breaks.

“I still see women getting that next big job, and some have young children. So the good news is they are figuring it out, hopefully with our help,” says Bayer executive Lisa Safarian. As founder of the gender advocacy group Lean In, Rachel Thomas reminds us, “You may be struggling now, but if you don’t dig deep, if you don’t make major investments in supporting working parents in different ways, you will have lost years of hardearned progress.”

POLITICS & OPINION

If companies take heed of its female employees’ demands and translate them into actionable solutions, the reward is two-fold. Higher retention rates will mean that strides toward workplace gender inequality will not Another key driver is lack of social be undone, and any additional efforts support. The differential response to improve workplace equality will be to familial stress between men and built on a strong foundation. women in the workforce is startling: 20% of women reported considering And indeed, some companies have leaving work, compared to only 11% made attempts at damage control for of men. This rate rises to nearly 25% their female employees. More than for women with young children. Ad- half have increased paid leave, which ditionally, 15% of women have con- is an important first step considering sidered dialing back their responsi- many employees need time off but are bilities at work to better cope with a not financially stable enough to miss more demanding home environment. pay, and one third have added or expanded stipends to offset costs related With these two factors –– lack of to working from home. public infrastructure to serve working mothers and restrictive gender norms Pharmaceutical giant Bayer exempli–– it is no surprise that women are fies positive corporate intervention leaving the workforce at four times for female employees’ coronavirus-related stress. Bayer’s U.S. branches the rate of men. have increased female representation There is light at the end of the tunnel, in upper management ranks, from however: this crisis also revealed vast 28% in 2010, to 40% in 2020. Part of opportunities for corporate change. their success championing women in es working women need to ensure their children are taken care of, they would in turn enable women to dedicate more of their time and efforts towards their careers.

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Amazon is Selling Diversity: Marketing Black Lives Matter

A “Black Lives Matter” billboard is seen next to Madison Square Garden in New York.

Timothy Clary / AFP

Written By Ash Arumugan

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lack Lives Matter is not a novel crusade. It is the continuing fight for racial equality in the United States. This past summer was a turning point in the minds of many Americans, when Black death after Black death was publicized and politicized. Indeed, the Black Lives Matter movement experienced its biggest surge in support since its conception in response to the shooting of seventeen-year old Trayvon Martin. These past few months have been permeated with the shootings of unarmed Black Americans like George Floyd, Ahmaud Arbery, and Breonna Taylor and anti-racist demonstrations followings these tragic events. While death rates amongst unarmed Black people have not changed significantly over the years, the sudden surge in protests and anti-racist statements alludes to a social shift.

Not only are more individuals backing the movement, but corporations have been quick to endorse Black Lives Matter and the broader social issue of institutional racism. With this change in corporate support, the question arises as to “why now?”: why is it only now that businesses have decided to actively release anti-racist statements? What changed?

Cornell Business Review

Understanding the nuances between companies’ public statements and their actions requires acknowledgement of corporate cost-benefit analysis, the power of public opinion, and the internal racialized mechanisms within businesses. It is enough for executives to publish diversity and inclusion principles and post Black squares if it appears to appease the public eye. Due to this past summer’s stark racial climate and increasing polarization, corporations are capitalizing off the surge in social justice by curating aesthetic marketing campaigns. While trying to align themselves with the shifting culture, they have slyly avoided confronting the lack of pragmatic change in their own policies and practices.

Companies continuously grapple with the burden of social responsibility. They engage with social responsibility practices to give back to their communities and demonstrate objectives beyond monetary gain. This is an active change from Milton Friedman’s profit-centric theory of social responsibility popularized throughout the 20th century. In stark contrast, today’s companies often revise their company statements to include affirmations of racial equity.

of government in other ways, which contradicts their public statements about police brutality and racialization of the law.

Despite all the verbal and written commitments to diversity training and racial literacy programs, there is doubt that pragmatic change will occur within the walls of corporate America. Although companies are now using the words “black” and “race” instead of the uncontroversial term of “diversity,” and many companies are simply engaging in performative activism: activism that is illusory and enacted to further one’s social capital and avoid criticism.

Rekognition is part of an extremely successful branch of Amazon products called Amazon Web Services.

Forbes reports that AWS has supplied Amazon with 73% of its profits in the last quarter. Beyond that, the growth rate of AWS is exponential.

Although Rekognition is a small portion of AWS revenue, the company is nonetheless profiting off technology that puts people of color in potentially fatal situations. Amazon also continues to sell its Ring doorbells, which are used by hundreds of police departments to surveil Black and brown neighborhoods. Videos from these doorbells are also posted on Amazon’s Neighbors app, which is often used to profile and identify Black people in primarily white neighborhoods. Amazon acquired the app last year in a $1 billion deal. By continuing to sell its surveillance technology to over 1300 law enforcement agencies, Amazon furthers the targeting and stereotyping of Black Americans. Law-enforcement agencies are able to request footage from Ring owners and users with no probable cause, oversight, or judicial review. This footage can be utilized to identify, monitor, and target protestors. This is just another example of the internalized and hidden hypocrisy of Amazon: on one hand they are heralding #BlackLivesMatter and creating martyrs of the Black activists who are putting their lives on the line while also sneakily selling warrantless surveillance technology which could be used to arrest those same activists.

Amazon is notorious for this kind of behavior. Jeff Bezos made the executive decision to put a “Black Lives Matter” banner across Amazon’s home page this summer but continues to sell police departments surveillance technology. Indeed, racial anxieties surrounding people of color, specifically Black and Brown people, are exacerbated by Amazon’s actions.

Rekognition is a facial recognition software that is used in cities across America by countless police branches. The software has been proven faulty - it incorrectly matches people to photos and disproportionately misidentifies people of color. The ACLU conducted an experiment in 2018 using Rekognition and found that the software incorrectly identified 28 members of Congress as criminals, with a disproportionate effect on people with darker skin tones.

While people of color only make up 20% of Congress, they made up 40% of the incorrect matches. Due to the increasing push for police accountability, Amazon announced this past June that they would enact a one-year moratorium on sales of Rekognition to police forces. In other words, Amazon is suspending Rekognition sales until the software becomes more profitable. Even with this suspension, Amazon continues to partner with police departments at all levels

Corporations should examine how they actively perpetuate inequalities in hiring practices, pay gaps, and firm culture. While companies may draw attention to their hiring quotas, they do not reconcile that while the employment of Black people has increased, so has the racial pay gap.

Differences in how Black people are paid in comparison to Asian people and white people further contributes to the systemic issues of the racial wealth gap which permeates every aspect of American life. This is also contributed to by the gatekeeping that occurs in higher-paying industries, like tech and finance. Even if Black people do gain access into these companies, promotion rates are dismal. Looking at Amazon’s workforce data, where 26.5% of employees are Black (including warehouse workers and drivers), only 8.3% of warehouse managers are black. When compared to the demographic details regarding Asian and white employees, the racial gap stands out. Only 15.4% of Amazon employees identify as Asian as compared to 20.8% of managers.

These differences are exacerbated even more when examining the white employee breakdown: 34.7% of employees are white while 59.3% of all Amazon managers are white. Hiring Black employees is one step, but corporations also need to prioritize equal pay and promotion opportunities.

Despite the contradictions of corporate America, it is a small step in the right direction for them to address the issues of systemic racism through their amended mission statements, curated social media posts, and diversity dialogue. What is needed next is for companies to combat the internal problems that they have jurisdiction over to make their spaces less anti-black. Companies should divest their funds away from painting murals and instead funnel it into Black neighborhoods and communities; this would be a form of pragmatic change that would genuinely be a form of anti-racism. While there is a long road ahead of us before reaching parity in racial equality, hope should not be lost. Companies and corporate leaders should continually be pressured by Americans to change their policies, practices, and business models in order to further support Black Americans in White Corporatism.

POLITICS & OPINION

Nike is a prime example. The sportswear company famously incorporated NFL quarterback Colin Kaepernick into an ad scheme in 2018.

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Retiring the LIBOR and the Future of Reference Rates Written By Raghav Madhukar

Graphics By Alexandra Kim

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his article is not about the pandemic nor the all-pervading economic crisis. Neither is it about the tumultuous state of American politics. It’s about the most significant news you’ve never heard of. Yes, I’m talking about the LIBOR; more precisely, its retirement.

The London Interbank Offer Rate has long served as ‘The Undisputed Champion of Reference Rates’ in the international financial system. Today it is slated to be dethroned from its lofty perch after a much anticipated coup led by the Secured Overnight Funding Rate (SOFR).

LIBOR is the arithmetic mean of the overnight interest rates at which banks expect to be charged for borrowing funds from one another. It is calculated by the Intercontinental Exchange across five currencies with varying maturities spanning one day, one week, and one / three / six / twelve months. LIBOR therefore serves as a benchmark for short-term interest rates internationally. Besides being an indicator of financial sector stability, perhaps the single most important application of LIBOR is in pricing floating-rate bonds and derivatives – interest rate swaps, currency swaps, and collateralized debt obligations in particular. The global market for LIBOR-linked financial instruments is estimated to exceed a whopping $ 200 trillion.

With the scope and importance of the LIBOR established, why transition to a different reference rate?

Simply put, the problems with LIBOR can be distilled down to three key areas of concern: (1) the incorporation of credit risk, (2) the possibility and precedence of rate manipulation, and (3) a diminishing market for interbank debt.

Incorporation of Credit Risk

LIBOR is by design calculated as the average value of unsecured interbank lending rates. Therefore, its intrinsic value incorporates a credit risk premium, accounting for the possibility of default. Monetary authorities and market regulators around the world have

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Cornell Business Review

been advocating for a risk-free reference rate that is independent of such a credit risk premium. The Federal Reserve believes that such a rate would serve as a more appropriate reference for short-term rates. That said, the Market Participants Group (commissioned by the Financial Stability Board) also realizes the need for reference rates that account for bank credit risk – essentially a reformed LIBOR – to complement risk-free rates. A reformed LIBOR is proposed to be different in two ways. Firstly, it will be calculated across a larger universe of banks. Secondly, it will be based on a broader set of money market transactions, including commercial paper and certificate deposits.

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The global market for LIBOR-linked financial instruments is estimated to exceed a whopping $200 trillion.

Rate Manipulation

The second issue of manipulation stems from the “forward-looking” nature of LIBOR. As we established earlier, LIBOR is a survey-based rate which is arrived at by asking banks “at what rate would you borrow funds in the interbank market ?” Since the LIBOR is based on a bank’s expectations of its borrowing costs as opposed to recent transaction data, it opens up a window for manipulation. Banks have in the past falsely influenced LIBOR either with the intention of misrepresenting financial health or to profit from holdings in LIBOR-linked products.

LIBOR manipulation scandals have popped up in the news periodically since 2003. While several institutions – Barclays, Deutsche Bank, and Rabobank

– have been held accountable on different occasions, Tom Hayes, a former trader at UBS and Citigroup in Tokyo, Japan, is perhaps the most famous LIBOR manipulator. Hayes led an international ring of interest-rate traders who colluded to influence LIBOR values to cover their speculatory trading positions.

Hayes was the first person to be convicted of LIBOR-manipulation in 2015.

The Diminishing Interbank Market

The manipulation issue is exacerbated by another concern: the thinness of the underlying interbank lending market. There are very few transactions that take place per currency and tenor to support the LIBOR values being published. The size of the interbank lending market is less than $1 billion a day, while the LIBOR-dependent market exceeds $ 200 trillion. This imbalance between the underlying and the derived market size is concerning considering the ease of LIBOR manipulation outlined earlier. Moreover, unsecured interbank lending has persistently declined as banks are resorting to secured financing (as it avails borrowing banks lower rates and lending banks protection against defaults). Therefore, with the underlying market for LIBOR becoming less popular, it seems ever more prudent to replace LIBOR with a secured funding rate.

in unison to reprice derivative contracts to convert LIBOR-linked products to SOFR-linked ones. Additionally, SOFR values are bound to be lower than LIBOR as the former is based on secured lending.

As a result the current plan is to take into account the LIBOR-SOFR spread while renewing derivative contracts or floating-rate loans. Presently, this massive undertaking is being spearheaded by the Alternative Reference Rates Committee at the Federal Reserve in the US. The transition is expected to be completed towards the close of 2021. While the SOFR is the rate of choice in the US, other countries have chosen to approve similar replacements for LIBOR. The UK is adopting the Sterling Overnight Index Average (SONIA), while the ECB designed an equivalent Euro Overnight Index Average (EONIA).

As governments, regulators and investors prepare to oversee the transition from LIBOR to SOFR, it is imperative to acknowledge the scale of operations, volume of contracts, and the sheer logistics of coordination that will have gone towards this effort. The retiring of the LIBOR will be a momentous shift, and is undoubtedly one of the greatest reformations in global finance since the turn of century – perhaps seconded only by the Dodd-Frank Act.

A Better Alternative

Now that a suitable replacement is identified, only the hardest part remains – execution. The logistics of this transition are unsurprisingly challenging, as market participants, regulators, and bankers must work

FINANCE

On the 22​​of June 2017, the United States Federal Reserve announced that it had chosen to replace LIBOR with the Secured Overnight Funding Rate (SOFR).

SOFR is computed as the average rate at which investors offer overnight secured loans to banks, collateralized by bond assets. First, SOFR, as the name implies, is a secured funding rate. It is devoid of a credit risk premium, thereby giving it the status of a risk-free rate. Second, SOFR is ‘backward-looking’ in that it is computed using recent transaction data. This leaves no room for rate manipulation. Third, the size of the treasury repurchase (repo) market is estimated to be in the vicinity of $ 1 trillion per day, while the interbank equivalent falls short of $ 1 billion per day.

Thus, SOFR is better poised to serve as a reference for short-term rates as its underlying market is sizable with respect to that of present LIBOR-linked products.

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Revisiting the Electric Vehicle Bubble

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lobal electric vehicle market penetration is only 2.8% and countries are pledging to reduce fossil fuel usage over the next decade. Consumers are becoming more concerned about environmentalism, governments are instituting global emissions regulations, and companies are improving charging infrastructure and driving ranges. The market is reacting favorably—the EV stocks tracked by Barrons are up roughly 325% year to date. The International Energy Agency projects that EV adoption will reach 125 million cars by 2030, and some analysts predict that by 2027, electric vehicles of all types will make up 40% of global light-vehicle output.

While global EV sales increased by 65% from

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Cornell Business Review

2017 to 2018, EV sales have begun to slow. In 2019, year-over-year growth was just 9%. And in 2020, EV sales declined by 25% during the first quarter of 2020. Despite the inevitable future growth of EVs as fossil fuels are phased out over the next couple of decades, the lack of earnings, increasing competition, and the rich valuations of EV companies make them poor investments.

The NIO Inc. ES6 electric SUV stands on display at the Auto Shanghai 2019 show in Shanghai, China Qilai Shen / Getty Images

Written By Davis Donley

According to the United States Department Graphics By of Energy, the price of battery packs—the re- Michelle Tang chargeable system that stores an electric vehicle’s energy—has dropped 80% since 2008.

Currently, battery packs cost $150 to $200 per kilowatt-hour, and $100 per kilowatt-hour is

the price at which vehicles will be cheaper to propel with electricity than gasoline. A few years ago, industry experts expected 2025 would be the turning point for electric vehicles. However, technology is advancing faster than expected, and EVs could reach parity with gas-powered cars cost wise by 2023. Through government subsidies which can cut the price by $10,000 per car, purchase prices of EVs in Europe are already close to those of gas-powered cars. However, government incentives to own EVs in the U.S. are not as generous, which is why U.S. EV sales only account for 2% of all new car sales, while the market share is 5% in Europe.

China is quickly becoming the world’s largest market for electric vehicles, with Chinese companies like Nio and Li Auto capitalizing on new emissions regulations which will come into effect in China between 2020 and 2021. Shares of Nio have risen 2375% year to date—four times the gain of Tesla—as analysts have raised price targets due to the company doubling its October deliveries year-over-year.

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There is no denying EV market penetration will increase over the next decade, but that does not necessarily mean profits will increase because more competition leads to lower market share.

competitors. Less than two years ago, Tesla was fearful it may exhaust its cash reserves, but the company’s ability to sell half a million cars represents a monumental shift. Tesla’s 2020 quarter 3 sales of 145,036 vehicles marks a 40% increase year-over-year. Tesla’s four models are the only widely available electric cars that can drive more than 300 miles on a single charge, and Tesla recently unveiled a technology offering 50% more storage per pound at lower cost. At the moment, Tesla possesses a competitive advantage, but money is pouring into the EV industry as carmakers seek to become the next Tesla. The search for the next Tesla has created a bubble in equities like Workhorse, Nio, and Nikola stocks because many of these speculative EV stocks have no profits to justify their valuations.

“Another stock I’d avoid is a stock in a company that’s been touted as the next IBM, the next McDonald’s, the next Intel, or the next Disney, etc. In my experience, the next of something almost never is,” says renown investor Peter Lynch. People are simply paying for an idea, but most ideas cannot justify a massive valuation.

With a market capitalization higher than any automaker in the world and a 1000% stock price increase since its 2019 lows, Tesla is certainly the hottest stock in the United States. While Tesla’s stock increase may be euphoric, its robust earnings and sales growth are indicators this stock will climb further over the longterm. High growth and hot industries attract a very smart crowd that wants to get into the business.

Electric vehicle companies have been going public rapidly through Special-purpose acquisition companies (SPAC), which are “blank check” shell corporations designed to take companies public without going through the traditional IPO process. Unlike a conventional initial public offering which can take a year and a half, a SPAC merger takes just a couple of months. SPACs raise money from investors without having a detailed business plan and their sole purpose is to be bought by another business within two years.

If that doesn’t happen, the company folds and investors get their money back. Recently, Fisker agreed to merge with an acquisition company backed by Apollo Global Management and Nikola raised $15B when it went public through a SPAC. SPAC IPOs have seen resurgent interest since 2014 as $13.6bn was raised across 59 SPAC IPOs in 2019 in comparison to $1.8bn across 12 SPAC IPOs in 2014.

FINANCE

Nio’s lofty market capitalization of 60 billion is a sign of the market euphoria for EV stocks. Nio is still years away from producing a profit and its 2019 revenue was only 5% of Ford’s, yet Nio’s market capitalization dwarfs Ford’s by $ 60 billion to $33 billion. A quick survey of EV stocks’ financials paints a picture of extreme valuations and little revenues. For example, three popular EV stocks—Tesla, Workhorse, and Nio—have trailing P/E ratios of 1138, 15261, and -44 respectively. These P/E ratios show that investors are paying a premium for future earnings growth, but ev- The issue with dozens of EVs going public—someery EV besides Tesla is a long way from profitability. times without even a working prototype—is that there are more competing companies, leading to lowTesla established itself as the industry leader with er profits. A similar scenario occurred in the Dotcom four consecutive quarters of profitability and technolboom when disk drive manufacturing exploded and ogy which provides an economic moat compared to

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reduced profits. There is no denying EV market penetration will increase over the next decade, but that does not necessarily mean profits will increase because more competition tends to lead to lower market share.

As investors searched for the next Tesla, they wishfully turned to Nikola, a promising EV using hydrogen fuel cells rather than lithium batteries to power trucks. After achieving a sky-high valuation greater than both Ford and General Motors’s market cap with quarterly revenue of only $30,000, Nikola has been subject to investigation by the SEC. In a deceptive promotional video “Nikola One in Motion”, which showcased their 1000 HPtruck traveling down the highway, the truck was actually only rolling down a hill. Nikola’s former CEO and founder, Trevor Milton, also lied about reducing the cost of hydrogen by 81% relative to peers, when in fact, as acknowledged by the company’s statement in September, it has no hydrogen network. Further fraud was exhibited when Milton claimed on video that Nikola’s inverters were developed in-house. Nikola has since admitted this is not true.

Nikola should serve as a warning to investors that although hot EV stocks can go up fast beyond any justifiable value, there’s usually nothing but hope to support them, and they fall just as quickly.

With EVs going public by the dozens in hopes of challenging Tesla, investors have bought the stocks in fear of missing out. Why not put off buying the stock until the company has a proven record? Rather than buying into an EV company amidst tremendous excitement and a lack of product and revenue, patient investors will be rewarded. Investors are not missing out on a golden opportunity because they did not buy right away.

They should wait for the story to unfold and for the earnings to justify the price.

If an investor is bullish on EVs, they

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US Companies with the Largest Market Capizalization ($ Billion)

Stock Price Chances during the Pandemic for EV Companies

are better off investing in a proven, profitable EV like Tesla than speculating on a company with no product or revenue. It is crucial to recognize the difference between speculating and investing. In the case of electric vehicles, beware the longshots— companies with no proven record or revenue. Longshots are on the brink of solving the latest national problem and the solution is either very imaginative or impressively complicated.

Investors flocked to Nikola and their hydrogen fuel cells, but the technology for hydrogen fuel cells is still in development.

not make every EV a good investment. With competitors entering the field swiftly, and traditional gas-powered car manufacturers also working on EVs, the industry is becoming oversaturated. Tech stocks dropped massively in the early 2000s as they could not justify their rich valuations, and countless tech companies went out of business altogether. Over the next decade, a similar outcome may occur for electric vehicles as only the companies with competitive advantages who find their niche in the electric vehicle market will survive long-term. If an investor is bullish on electric vehicles long-term, rather Similarly to how the internet was the than looking for the next Tesla, either “next big thing” in the 90s, EVs will invest in Tesla or wait until other EVs likely grow to be an enormous market become proven market players. in the 2020s, but a large market does

How the CARES Act Failed to Rally Retail

Americans are buying food and iPhones, not clothes

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2020, nearly double the decrease of the next hardest hit industry: that of furniture and home furnishings. Even in July 2020, apparel sales were down 25% year-over-year. In response to the dire effects on the economy, the Coronavirus Aid, Relief and Economic Security Act (CARES), was passed by the US Government on March 27, 2020, releasing $300 billion in economic aid through the medium of stimulus checks to support jobless families and to boost faltering retail spending.

According to statements by CEOs of large retail firms such as Apple and Walmart, the stimulus checks distributed in late March did help sustain retail spending. Corie Barry of Best Buy stated that “like many other retailers, we saw sales benefit during the last three weeks of the quarter as customers

Retail stores across the nation brace for economic fallout of the COVID-19 pandemic Spencer Platt / Getty Images

Written By Wally Chang

ECONOMY & LAW

hen the American people hid away in their homes, stopped going to work, and stopped spending money, the American economy too, shrank back. United States GDP dropped 9.1% in Q2 2020, a drop of unprecedented proportions, job employment fell by 20.5 million jobs in April alone, and perhaps most interestingly and impactfully, total retail sales dramatically fell 14.7% from February 2020 to April 2020. Even with companies making dramatic changes to their financial structures in hopes of minimizing losses, the impacts of reduced spending in the retail industry were felt by nearly all outlets. The hardest hit retail sector was undoubtedly that of clothing and clothing accessories, with a decrease in sales of 50.5% from February 2020 to March

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undoubtedly chose to spend some of their government stimulus money.” However, other companies like Macy’s and L Brands did not disclose first quarter earnings from stimulus spending because their numbers were too low. Still other reports state that money from stimulus checks were saved or spent on essentials like food and rent rather than on boosting discretionary retail spending. These trends imply that, though stimulus checks might work in the short term, they fail to promote success in the long term for big box retailers, especially for those specializing in apparel.

The purpose of government stimulus checks is to increase spending by the general populace with the hope of providing economic stimulus. The amount released ($600 per month, or $1200 for a two-parent household), however, isn’t enough to stimulate spending by the average American family. According to GOBankingRates, a data research firm, the average American spends $164.55 a day, most of which on housing, groceries, and utilities.

Breaking it down further, one of the largest age groups likely to receive checks, Gen X, spent the most on housing and groceries. This implies that, one, the money released from stimulus checks was likely spent in under a week, and two, that the money was spent on buying essential goods and paying rent rather than purchasing retail and discretionary items.

The fact that stimulus checks were mostly spent quickly and on essential goods is further evidenced by data gathered by the US Census.

According to respondents to a Census survey, “About 80% ... reported using [stimulus funds] on food, and 77.9% on rent, mortgage and/or utilities, including gas, electricity, cable, internet and cellphone.” Evidently, the implementation of the CARES act did not have the beneficial impact on the retail industry that it had on the market for groceries and other necessities. These spending patterns are to be expected; to splurge on luxury items during a period of severe economic recession would be irresponsible for most families and individuals. Indeed, many US families are adding their stimulus checks to savings accounts instead of spending them.

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simple. Big box clothing retailers, such as Neiman Marcus and J. Crew, certainly were hurt by reduced retail spending, filing for bankruptcy in 2020. Stock from retail giant Macy’s is still down over 60% from its January 2019 numbers.

On the other hand, statements made by captains of the retail industry like Tim Cook, CEO of Apple, and Brian Cornell, CEO of Target, contradict reports made by clothing retailers and Census data. Cornell asserted that there was a “resurgence in sales of clothing, cosmetics, and other discretionary items,” as a result of the releases of checks and the boosting of discretionary spending.

In support of Cornell’s statements, Target’s financial documents note a 6% sales jump from March 2020 to April 2020, which coincides with the release of stimulus checks.

Reportedly, consumer spending at Target for electronics also rose 70% year-over-year.

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About 80%... reported using [stimulus funds] on food, and 77.9% on rent, mortgage and/ or utilities, including gas, electricity, cable, internet and cellphone.

Apple also reported higher sales of Macs and iPads due to increases in virtual learning platforms and working from home.

According to statements by Apple, iPad sales increased 31% from June 2019 to June 2020.

Other companies such as Best Buy, Lowes, and Home Depot also reported increases in consumption due to stimulus-related cash influxes.

However, these increases in “retail” spending do not necessarily indicate a comeback for Though these shifts in consumer spending retail as a whole. The common denominator appear to indicate that the retail sector was between Apple, Target, and Best Buy is their damaged as a whole, the reality is not so

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How the Pandemic Affected Retail Total Sales in March, April and May 2020 compared with the same period in 2019

sale of electronics. With the exception of Lowes and Home Depot, who saw increased sales due to purchases of DIY materials, Apple, Target, and Best Buy attribute their increases in revenue to the rising necessity of electronics for at-home productivity and education. Thus, though these companies may be broadly grouped into the “retail” sector, the spending at these stores was not discretionary: rather, it was an extension of necessities-based spending. True areas of discretionary retail spending such as clothing retail continues to suffer.

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In an industry with around 1.35 million jobs, and with a mean salary of about 18 dollars per hour, this loss is substantial to the American economy.

In this regard, the stimulus checks failed to heal a badly wounded retail industry.

Ultimately, releasing checks to families financially damaged by the coronavirus pandemic and expecting them to spend the money to stimulate areas such as the retail industry was naive. For a stimulus package to be effective in discretionary spending, the release of funds must be in greater quantity and over a longer period of time. Additionally, those who are receiving the money cannot be in a critical financial position. Instead, they must be well off enough to be able to spare discretionary income out of their regular budgets. As the US coronavirus case count continues to rise, one thing is certain: the retail industry is still in trouble.

ECONOMY & LAW

The CARES act was partially intended to save a faltering retail industry. Clothing companies like Neiman Marcus, J Crew, Lord & Taylor, and JC Penney, among others, were supposed to benefit from the injection of cash directly to consumers. The jobs they provided were supposed to be maintained, or at a minimum, the losses of said jobs were supposed to be mitigated by CARES-related spending.

Unfortunately, this target of the CARES act was missed by a wide margin. According to the US Bureau of Labor Statistics, from March 2020 to May 2020, there was a 69.3% loss of employment in the men’s clothing retail industry and a 64.8% loss in the women’s. In an industry with around 1.35 million jobs, and with a mean salary of about 18 dollars per hour, this loss is substantial to the American economy.

The US Census Bureau

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Coronavirus, Deficits, and Marijuana Legalization: The Domino Effect Written By Megan Friscia

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umerous states with legalized recreational marijuana and medicinal marijuana programs have recognized dispensaries as essential businesses, alongside grocery stores, pharmacies, police stations, and more during the wake of the coronavirus. Essential businesses are those which are eligible to remain open during a lockdown; though the Federal Department of Homeland Security outlined what essential businesses are, the choice of which businesses qualify as “essential” is ultimately a state issue.

The coronavirus pandemic, in part, led to the passage of proposals in favor of the legalization of recreational and medical marijuana. Arizona, Montana, New Jersey, and South Dakota all passed proposals (Proposition 207, Initiative 190, Public Question 1, and Amendment A, respectively) which legalized recreational marijuana. Mississippi passed a proposal (Initiative 65) which legalized medical marijuana.

Marijuana legalization, in the eyes of many citizens and lawmakers, has transitioned from an ethical question to a financial one.

The pandemic greatly decreased demand for services and retail goods, leading to mass unemployment. As a result, state tax revenues have also taken a hit. The Brookings Institute anticipates that state and local government revenues will decline by about 5% every year for the next three years. Statewide initiatives, including testing protocols to curb the virus, also call for funding; New Jersey is predicted to borrow $4.5 billion for coronavirus pandemic expenses within the next year alone. As a result, state economies entered a budget crisis and are in dire need of funding to mitigate their losses. Many of these states looked to marijuana legalization as a potential solution.

The argument for marijuana legalization on the basis of tax revenue generation is not a new one. The Democratic Party of

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Colorado promised to channel marijuana-associated tax revenues towards improvements in education during its 2013 proposition for recreational marijuana.

Across the country, similar arguments were made in November and are likely to continue as states grapple with widening budget gaps.

Group. “[Legalization] is coming to New York first... It’s going to take some time in Pennsylvania because the Republican-controlled House and Senate have been resistant to [legalization]...”

Indeed, Republicans in Pennsylvania’s legislature construe Wolf ’s plan as disingenuous—a bail-out for the Governor’s mismanaged pandemic response. Regardless of Wolf ’s personal intentions, Republicans in Pennsylvania are right to doubt the efficacy of legalization in solving budget problems. New Jersey’s budget shortfall is estimated to reach $5.7 billion, based on the Governor’s Budget Proposal from February, come 2021. The New Jersey Policy Perspective estimates legalization would generate $300 million in tax revenues annually. New Jersey’s legislative fiscal estimate puts that number at $126 million per year. In Connecticut, analysts estimate budget gaps of approximately $1$1.5 billion every year for the next three years. Estimates of marijuana revenues in Connecticut over the next five years sit between $692 and $740 million, with as little as $35 to $48 million in year one. In Pennsylvania, conservative estimates of $200 million in tax revenues from legalization would also fall far short of the state’s $1.8 billion deficit.

In Pennsylvania, despite opposition from the state’s Republican dominated legislature, Governor Tom Wolf (D) is pushing for legalization as an “economic boost,” the revenues of which will be used for small business grants and restorative justice programs. Connecticut, too, plans to legalize recreational marijuana by 2021. “We have to think regionally [in regards] to the pandemic, and we have to think regionally when it comes to marijuana as well.” says Connecticut Governor Ned Lamont (D). “[Connecticut] is surrounded by states — New Jersey and Massachusetts — where marijuana is already legal. [We] don’t need people driving back and forth across the border,” Lamont added. Certainly, states are legalizing for a variety of reasons.

However, state finances are at the center of every initiative. In Connecticut, 20% of poll participants who were “strongly opposed” or “somewhat opposed” to legalization would vote in favor of recreational use if it would “help with Connecticut’s fiscal Although legalization won’t solve state situation and resolve the budget deficit.” budget gaps in their entirety, they noneThe pandemic undoubtedly provided theless provide numerous fiscal and ethical impetus for legalization on a much larg- benefits. Legalization of recreational marier scale than anticipated. The recognition juana provides citizens a clear path towards of dispensaries by many states as essential promoting equity in their legal system.Tax businesses also signifies a shift in govern- revenues can be used to boost education mental perspective regarding recreational and drug rehabilitation programs, as well marijuna. As support for recreational use as help to minimize state budget gaps. For continues to grow nationwide, experts these reasons the United States is likely to anticipate a domino effect as neighbor- see a wave of state legalizations in the next ing states seek to capitalize on the asso- few years. Considering the severity of state ciated tax revenues. “I think [legalization] deficits, legalization is not the single-soluin New Jersey will expedite more states tion to weathering COVID-related budto have adult use,” says Joshua Horn, co- get gaps, but it is an important part of the chair of Fox Rothchild’s Cannabis Law puzzle.

The Case for a Unified South American Trade Bloc Written By Kyle Castellanos

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uring the post-war era, it became customary for developed countries to opt into regional free trade agreements. These intergovernmental treaties offered citizens lower priced and higher quality goods while extending governments more exportation opportunities, critical for most countries hoping to recover from the recession. Gradually, these countries began to adopt similar trade agreements and establish intergovernmental organizations which encouraged market specialization through regional free trade.

By the late 20th century, regions with high concentrations of developed nations founded and further developed these intergovernmental organizations. Some intergovernmental organizations, such as the European Union (EU) and the Association of Southeast Asian Nations (ASEAN) further expanded the scope of their respective organizations to include political, military, and educational cooperation, among many other programs. Other trade agreements such as the North American Free Trade Agreement (NAFTA) chose to focus solely on trade.

and a similar formation of an intergovernmental free trade area would especially benefit South America’s entrepreneurial development. Aside from the obvious goal of accelerating economic growth in the region, a primary impetus for the creation of AfCFTA was the intent to “increase continental integration and effectively resolve the continent’s issue of overlapping membership of [Regional Economic Communities],” two issues that South American nations currently struggle with.

Currently, Mercosur—a four-country common market—is the most prominent trade bloc in South America, with Argentina, Brazil, Paraguay, and Uruguay comprising its member states. Expanding Mercosur into a continental free trade area agreement would promote financial development, specifically within the technology sector due to the region’s relatively homogenous society, growing middle class, and incredible potential for investment and growth.

ECONOMY & LAW

From 1991 to 1999, Mercosur’s institutional structure galvanized trade within its member states with remarkable success, laying the groundwork for a conMore recently, developing nations—particularly in tinental free trade agreement that would incentivize the Global South—have followed this trend, either domestic entrepreneurship. In its first eight years, joining existing trade agreements or forming their “Mercosur’s total world trade went from 11% to alown. For instance, in 1989, leaders from Algeria, Lib- most 20%,” quantitatively the fourth largest economya, Mauritania, Morocco, and Tunisia established the ic bloc in the world. Intra-state trade also increased Arab Maghreb Union (AMU). Similarly, in 2018, 44 during this period, as total trade within Mercosur African nations signed the African Continental Free member states rose from $11 billion to $20 billion, Trade Agreement (AfCTFA), creating the “largest representing a change from 8.9% to over 25%. Befree trade area since the World Trade Organization fore the economic crises in Argentina and Brazil from (WTO) was established in 1995.” However, South 1999 to 2001, Mercosur member nations nearly triAmerican nations never realized their own compre- pled intra-state trade. If Mercosur nations could rehensive intergovernmental trade agreement, instead, vise, revitalize, and expand the current agreement to engaging in bilateral trade agreements and small- a continental free trade area with 13 total member er-scaled multilateral agreements within limited states, intra-state commerce would surge, surpassing nations. This lack of harmonized trade policies and total trade from 1991 to 1999. strategies in South America stunts the region’s potenA continental free trade agreement would specificaltial for economic growth. ly support the development of the technology sector South America’s economic concerns closely mirror in South America. Free trade across the entire South those of the African nations which formed AfCTFA, American continent would not only make a variety

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of higher quality products available at a lower price but also incentivize collaboration and the diffusion of ideas between member states. During Mercosur’s most successful period, member states began sharing culture and language, noting a correlation between the flow of trade and information. Cultural integration became evident as “samba and capoeira schools flourished in Argentina, Spanish language classes became increasingly popular in Brazil.” As the cost of trade went down, the flow of trade and information between Mercosur members flourished.

Entrepreneurial opportunities in the technology sector would also become more financially feasible while simultaneously opening several other markets for home-grown businesses to expand into. South America’s markets can support expanding businesses in the technology sector, as its middle class continues to grow and increase their purchasing power. Ted Sarandos, the head of programming for Netflix, noted the international success of “La Casa de Papel,” shot in Madrid, attributing its popularity to “‘pan-regional’ shows that attract viewers beyond their home bases.”

Latin America is Netflix’s third-largest worldwide market behind North America and Europe, with Brazil accounting for the second-largest number of subscribers worldwide.

Mercosur’s Member Countries A continental free trade area in South America would also allow for entrepreneurs to collaborate and utilize the continent’s vast and diverse consumer bases to establish global companies.

South America’s consumer base also functions as a great market to experiment with new projects and expansion. In 2018, Facebook launched the pilot project of their Facebook Dating experiment in Colombia, gauging how Facebook members in Bogotá and Medellín perceived and reacted to the service. Most entrepreneurial expansion attempts have been made by foreign companies, marking a clear

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Full Members Associate Members

Council on Foreign Relations

need to lower the financial barriers of entry for entrepreneurs within South America through the creation of a continental free trade area.

Capitalizing off of South America’s diverse consumer base and an extensive history of pilot projects, Mercosur’s continental expansion could bring about continuous and sustainable foreign investment in the long-term.

Despite its wide-ranging experiences with foreign corporations looking to expand their reach, most relations ended poorly, with local governments

frequently left trampled by global corporations with more connections and resources. Oftentimes foregoing ethical practices, these corporations take advantage of the lack of regulation in underdeveloped technology industries, severely disrupting the job market and, in some cases, even physical infrastructure.

In 2019, a Colombian court ordered American ride-calling app Uber to cease operations in the country following a series of complaints regarding the company’s violations of

Colombia’s competition rules. With over 2 million registered users, 88 thousand drivers, and, most notably, an ongoing taxi war amid crime-ridden cities like Bogota and Medellin, Uber’s exit from Colombia seriously threatened the nation’s economy. Although in June of 2020 Colombian authorities dismissed the allegations brought against Uber and reinstated their ability to operate within the nation, a clear lack of regulation and interregional cooperation with neighboring nations is at fault for unsuccessful relations with foreign corporations.

Mercosur also operates as a legislative body, deciding interregional policies on economic issues. Continental expansion of Mercosur would encourage sustainable foreign investment and provide effective regulation preventing foreign entities from exploiting local government. In 2017, the European Union Court of Justice cracked down on Uber’s expansion to Europe, ruling that it qualified as a transportation company rather than a digital app, and thus was subject to the same regulation as taxi companies. Although this ruling was certainly a blow to Uber in terms of potential profits, the company maintained operations in Europe and continued to challenge these claims in other courts, showing that foreign investment can be regulated and given opportunities to sustainably expand in the long-term.

A unified South American trade bloc with legislative functions allows countries to collaborate to overcome larger issues prevalent in the continent that cannot be solved alone. In 2004, the Structural Convergence Fund (FOCEM) was created as a branch within Mercosur, funding infrastructural development projects for member nations, in turn, supporting economic growth. A study by the Economic Commission for Latin America and the Caribbean found that each truck crossing borders within Mercosur countries could bear an extra cost of up to $273 due to infrastructural and organizational problems.

There are also several challenges evaluating the ex-

Another notable challenge to the successful implementation of a unified South American trade bloc is convincing all 12 independent countries to accept a continental expansion of Mercosur. Although most South American countries maintain amicable relations with Mercosur, non-member states enjoy their current relations with Mercosur, with most hesitant to independently join the trade bloc. Additionally, due to the complicated nature of interstate politics in South America and Mercosur’s “support for democracy as the legitimate system of rule and its encouragement to build citizenship and to respect human rights … in Latin America,” certain nations may not be welcomed as member states. In 2017, Mercosur member states voted to suspend Venezuela for its “rupture of the democratic order,” amid civil unrest and state retaliation, noting that “even if Venezuela meets all the requirements and agreements of Mercosur, if it has not re-established democracy, the country will remain suspended.”

Although many obstacles stand ahead of the successful implementation of Mercosur as a unified South American trade bloc, the region stands to benefit massively. Converging demographics in terms of consumer bases, growing purchasing power for members of the middle class, and the incredible potential for growth in the technology sector are all reasons for South American nations to adopt a continental free trade area. Continental adoption of Mercosur would resolve overlapping regional trade agreements, promote interstate trade amongst Mercosur members, and promote the expansion of businesses and ideas across borders. To compete with North American, European, and Asian markets, South American economies must evolve, and subsequently, converge through the continental adoption of Mercosur.

ECONOMY & LAW

This economic burden due to infrastructural issues may be even more costly for freight traveling across borders for countries that are not members of Mercosur. In August, Brazil pledged to strengthen ties with Mercosur member states in an attempt to create common goals and integrate infrastructural agendas. If Mercosur could be expanded into a continental trade bloc, FOCEM could receive the necessary funding and cooperative action to develop past transportation infrastructure and into communications infrastructure, power and energy infrastructure, water and waste management, and much more.

pansion of Mercosur into a continental free trade area agreement. Most notably, newly inducted member states would incur a loss of government revenue as free trade deals are established with all other members of Mercosur. However, no significant trade relations exist between Mercosur member states and other South American nations. Non-member states in South America have instead formed trade relations with China and Japan, utilizing trade routes through the Pacific Ocean. Many policy measures passed by Mercosur have taken into consideration South America’s relationship with China and Japan, both as trading partners and as markets for tourism. Thus, the initial loss of revenue can be overcome by harmonizing trade policies and through the increase in free trade between nations in a unified South American trade bloc.

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Smart Cities: Convenience at the Expense of Privacy Written By Derek Kartalian

Graphics By Yejune Park

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mart cities are no longer science fiction. The Internet of Things (IoT) allows technologies like household devices to communicate with each other through network connections. This system of connections is the core unifying concept of all smart devices, small or large, simple and complex. The most popular form of IoT devices are smart home technologies, such as Amazon’s Alexa or Google Home. While these gadgets seek to make everyday life at home more efficient, smart cities bring this level of technological efficiency and advancement to the planning and infrastructure of entire urban areas. The integration of IoT technology into city infrastructure can improve many aspects of society, such as waste management, lighting systems, traffic congestion, energy consumption, and

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building structural health.

There are currently smart technologies being implemented into cities across the U.S. In San Francisco, the city created a smart parking system which optimizes parking availability through a model called demand-responsive pricing. This new system incentivizes people to park in underutilized areas by making parking prices lower or higher, depending on the level of demand that day. Overall, the project seeks to make the use of space more efficient, as San Francisco becomes increasingly congested.

New York City implemented smart meters inside residences to track and record the use of power utilities.

These new meters have the goal of tailoring utilities

usage statistics to customers and adding new products that save energy to lower overall consumption and environmental impact. Focusing on data-driven analytics, customers can even compare their energy usage to similar residences and request guidance on how to optimize the use of utilities. The new smart meters grant the average resident the ability to take control of their energy use and fit their energy needs, all while decreasing their energy costs.

The failure to depersonalize data is a serious privacy breach as information profiles could be extended to daily physical activity.

Although smart city developments in the U.S. are nowhere near this intrusive, the possibility is there. After all, mass-data collection is already facilitated by the federal government and data collection is accelerating at a rate which legislation cannot keep up with.

Yet despite these possibilities, most of the data being collected and handled to operate smart city developments in the U.S. are not very personalized.

The benefits of efficiency and adaptability offered by these technologies outweigh the potential privacy concerns as long as these data remain anonymized. Regardless, American consumers show little regard for their personal privacy, the lack of which enables other data-driven services, such as social media, to be so personalized and popular. Indeed, it is unlikely that privacy concerns will prevent more IoT infrastructure from being implemented in cities across the country.

For the time being, it appears that Americans believe smart cities can be created in a system where users enjoy the benefits of data collection, all while keeping individual privacy in mind.

ECONOMY & LAW

While this problem persists with many online services as well as smart devices, the primary issue with smart cities is that there is no way to opt out of data collection. If the devices are built into the streets you walk on, the streets you drive on, and the buildings you live and work in, you cannot prevent companies or the government Incorporating sensors and artificial from obtaining your personal data in intelligence, the Surtrac system in the same way you can avoid an app Pittsburgh aims to make road trans- such as TikTok. portation more efficient and enviLike all data collection, this informaronmentally friendly. This technoltion can be used to uncover patterns ogy works by making traffic lights and connections that infer behavior. more responsive to real-time vehicle While the compilation of data is inflows. Green lights are longer on traftended to improve some aspect of life, fic-heavy sides of the road, cutting it can also expose information about down on jams and emissions from your daily life and activities. The smart idling vehicles. A notable part of parking system in San Francisco proSurtrac is that the technology is devides residents with more cost and centralized – meaning that it can be time efficient parking, at the cost of installed and deployed over a city’s tracking your location and travelling traffic grid over time. Surtrac claims habits. Smart utilities meters in New that when using their product, cities York can offer ways to make energy have seen a reduction of 25% in travel bills and carbon footprints smalltimes, 40% in time spent at intersecer, but show when you are home by tions, 30-40% fewer stops while drivproviding your usage statistics in 15 ing, and a 20% reduction in vehicle minute intervals. Finally, the sensors emissions. used to detect traffic congestion in Smart city improvements greatly im- Pittsburgh could cut down travel time prove efficiency, but their implemen- and frustration with intersections, but tation creates numerous issues and also scan license plates to forecast limitations. One of the most worry- transportation patterns. Convenience ing ethical problems with smart city comes at the expense of privacy. technology is that nearly all IoT techWhile many of these technologies nology collects personal data on users. are preliminary and in the beginning The acquisition of user information is phases of integration, areas outside of the foundation of IoT efficiency, as the United States have integrated IoT data is the foundation for personaltechnology into their cities at a much ized insights. The most dangerous faster rate. These advances in techpart of this data collection is the unnology provide some of the societal certainty surrounding how data is benefits they promise to deliver, such being used. In 2019, Ann Cavoukian, as efficiency and safety, but when takthe Director of Privacy for Alphabet’s en too far can create dystopian-like now discontinued Smart Sidewalk states devoid of privacy. project, resigned upon learning that data collected from residents would In China, facial recognition software not be de-identified at the source. is employed in tandem with camer-

as which cover nearly all urban areas.

The centralized facial recognition database contains data on almost every single Chinese citizen, with all activity monitored and logged. While this system acts as a comprehensive way to deter crime and other illegal activities, it has become a tool used to control daily behavior. China’s social credit system ascribes a social score to its citizens, and certain activities can either increase or decrease that score.

Any action in public deemed socially unacceptable can lead to a lowered score, and even public shaming. As a result of this extensive facial recognition system, no activity in society is private. Jaywalking across the street will result in your face being projected onto billboards. Chinese citizens can receive a notice if they are wearing sleeping clothes or pajamas in public.

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Crisis Presents Opportunity: Fintech and the Coronavirus Written By Nick Weising

Graphics By Alexandra Kim

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magine never withdrawing cash from an ATM or carrying a wallet ever again. Instead, you have immediate mobile access to your cards and bank account.

Your investment and insurance needs are all satisfied by apps. This image is not one of the far future but instead of the next couple years, and it is accelerating closer to the present thanks to the coronavirus.

The pandemic is seriously afflicting the already-strained American economy. A fifth of Americans were struggling financially before the coronavirus. Now, nearly 90% of American small businesses report a “moderate to severe” impact on operations and more than half of small business owners are worried about their job security.

Rampant unemployment is causing food insecurity as low-income families are forced to drastically cut grocery expenses to make ends meet. Those who are unable to cut food expenses often cannot pay rent, leading to current sky-high eviction rates. In the interest of public health, the Department of Health and Human Services issued a temporary order to stop evictions until January. However, Reuters reports that 60,000 evictions have already occurred, and when the protection is lifted, 8 million tenants will have to pay a collective $32 billion in back rent or face eviction. Although the stock market remained stable throughout the pandemic, its success is largely indicative of the Trump Administration’s corporate aid, which does little to nothing for the average American.

Indeed, America’s macroeconomic conditions are not as optimistic as the markets would suggest.

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Unemployment rose dramatically by 4.5 million in April and, while unemployment has trended downward since spring, it is abundantly clear that many past jobs will not return.

Due to social distancing measures and physical money’s ability to act as a vector of disease, the pandemic strengthened the shift toward digital banking and cashless payments. People are unlikely to go back to traditional means of holding and exchanging currency, as digital methods are more convenient for the consumer and cheaper for businesses. Despite the recession, payment processing platform Stripe raised $600 million in Series G funding in May. Other companies, like payments API startup Marqeta and cryptocurrency trading platform Coinbase, have recently announced intent to IPO. The general move toward cashless payments is wonderful news for fintech firms, whose business relies on online banking. In the United States, Fintech collaborated

BUSINESS

The coronavirus-induced recession even hurt the sexiest industry right now, financial technology, or “fintech.”

Fintech seeks to use technology to automate and improve financial services. However, loan defaults from small businesses, which comprise a significant portion of fintech loans, as well as limited access to capital, have forced several players to be bought by larger firms. This includes Morgan Stanley’s acquisition of the electronic trading platform E*TRADE and PayPal’s acquisition of the coupon-finding browser extension Honey. The result will be an industry consisting of a few larger, more stable companies. Meanwhile, fintech firms which manage to stay afloat must continue to absorb losses for the foreseeable future.

Both consumers and small businesses are less willing to spend, hence the vulnerability of smaller companies. Sequoia Capital, a venture capital fund, stated it will take at least a year to return to pre-pandemic investment levels.

This is significant in an industry notorious for startups.

Global fintech funding declined during the first half of this year, with $25.6 billion of total investment secured globally compared to $34 billion in comparable months.

Although financial technology firms are, like many other markets, affected by narrowing investment opportunities, fintech is nonetheless in a unique position to take advantage of the opportunities presented in a post-pandemic economy.

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with the federal government to distribute pandemic aid, integrating fintech in the US’s cash distribution network.

For instance, the Small Business Administration took months to distribute aid due to poor website integration.

Companies like PayPal, Fundbox, and Square Inc. were eager to assist and began distributing PPP loans. The United Kingdom, too, reached out to fintech firms like Starling and OakNorth to assist in issuing emergency loans.

competed by larger, institutional firms like CitiBank or Bank of America. Fintech firms have a lot to gain by partnering with established banks. Machine learning and algorithm development requires lots of data. More customers means more data which means better models.

Partnering with banks, therefore, would greatly improve fintech products and cement the firms within the American financial market.

There are other reasons why fintech is in a prime spot for expansion. Gig economy workers rely on fintech. The number of people who self-identify as working in the gig economy grew since the onset of the pandemic, most likely due to coronavirus-influenced layoffs. Upwork saw a 50% increase in freelancers on its site since the pandemic began. Instacart likewise saw a massive increase in drivers, hiring as many as 300,000 new contractors in a single month. IBISWorld estimates that the number of temporary employees will increase 1.8% by the end of 2020. Gig economy workers have unique tax, banking, and insurance needs which fintech firms are best equipped to handle. Some, like Hurdlr, streamline quarterly taxes for self-employed workers while others, like Chime, automate saving deposits to help build an emergency fund. Demand for more portable and virtual bank accounts and payment modalities are also emerging to cater toward those in the gig economy. Venmo and Zelle allow for mobile person-to-person payments.

Setting aside the ethics of payday loans, fintech firms can offer credit immediately, a necessity for those struggling to make ends meet.

The fintech firms which survive the current recession are perfectly situated to drum up business from eager clientele.

Small businesses also rely on fintech firms. Fintech companies have ramped up their lending to small businesses over the past five years, filling a void left by banks which backed away from the sector following heavy losses during the 2008 financial crisis. Eyal Shinar, Fundbox CEO, explains that credit providers have been suffering through Covid-19 because of increased delinquency.

Fundbox deploys technology which enables small business owners to receive loans without providing a credit score. For many small businesses, fintechs like Fundbox are the only way to get a loan. Aforementioned mergers and closures leave the fintech sector with fewer suppliers, but also with greatly increased demand.

It is difficult to predict whether the future of credit will swing toward banking or fintech. There is a real opportunity to rethink the financial services surrounding payment and credit. Although banks are competitors of fintech in many respects, the Federal Reserve seeks to develop a more efficient real-time electronic payment network, similar to Europe’s TARGET Instant Payment Settlement (TIPS) system. If fintech firms fail to partner with banks, they take the risk of being out-

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The realm of data analytics, more specifically the demand for consumer data, is perhaps the most valuable opportunity presented by the coronavirus. Fintech, due to robust investments in machine learning, data infrastructure, and predictive software, is well-suited for AI-based lending.

Underlying technologies such as blockchain and APIs also enable fintechs to rapidly develop their products and solve for digital use cases. APIs are producing payment ecosystems by connecting fintechs, banks, and financial networks. This includes the expansion and tracking of consumer credit, spending, and investment. As the economy recovers, demand will continue to grow for this data.

To cater to demand for consumer data, fintech firms can create a “financial health score” by compiling banking, credit card, savings, and other self-generated data. A financial health score would provide a more holistic view of one’s financial standing than the current credit score provides (though credit score would be a component of the aggregate score). Fintech firms are best equipped to build a financial health score given the data analysis capabilities and sheer amount of information available to them. Currently only one Chicago-based nonprofit is pursuing this; doing so would be a public good and potential moneymaker.

The financial technology industry will grow in the post-pandemic climate. The transition to a cashless society, the industry servicing the gig economy and the underbanked, and yet-untapped ventures including a financial health score all indicate that fintechs who survive the current pandemic have promising futures. As market forces draw the up-and-coming industry in competition with legacy banks, partnerships between fintech and institutional lenders will be crucial to fintech’s continued success.

The Permanence of COVID-19: Inside Costco, Unilever, and Uber Written By Isabella Picillo

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s of September 2018, nearly 100,000 establishments which temporarily shut down due to the coronavirus are now out of business.

Many of these establishments were small businesses which did not have the resources to stay afloat. However, large corporations, which do have the resources to remain open, have also struggled to respond to changes in consumer behavior, attitudes, and purchasing habits while complying with national, state, and local laws. Many of these changes caused by the coronavirus will likely remain as the pandemic abates.

Indeed, businesses must adapt, innovate, and even reinvent themselves in order to survive the effects of the pandemic.

Costco

Costco, which operates a chain of membership-only warehouse clubs, largely benefited from this shift toward spending on groceries and discretionary items.

Because consumers are buying more, the company is seeing food sell faster, reducing food costs due to spoilage. Consumers are also spending more on home-related items and items viewed as pandemic necessities, like cleaning supplies and toilet paper. However, Costoco’s wage expenses and sanitation costs have also risen. The company spent $300 million in wages and extra sanitation amid the coronavirus pandemic.

These costs are largely offset by double-digit revenue growth, which resulted in profit growth of $1.1 B to $1.39 B, a 20% increase.

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According to census data, the monthly grocery bill for the average American household in March 2020 was up by over 30% from the previous year.

To keep pace with the increased demand for e-commerce, Costco is placing considerable emphasis on developing its online shopping service. The wholesaler

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One major change is that consumers are increasing their spending on groceries while cutting back on dining out and discretionary spending. Part of the reason for this divide between spending on groceries and eating out was the result of mandatory restaurant closure in an attempt to stop the spread of the coronavirus. Many Americans redirected their spending away from eating out and toward groceries and other home-related items. According to census data, the monthly grocery bill for the average American household in March 2020 was up by over 30% yearover-year. As restaurants reopen, this divide between grocery spending and dining out will shrink but will likely not return to pre-pandemic levels. American consumers have also turned to online grocery services amid the pandemic. According to Brick Meets Click, US online sales of groceries for delivery and pickup reached $7.2 billion in June 2020, a 9% increase over May 2020. Americans will likely continue using online grocery services even as the pandemic abates since it aligns with the increasing demand for convenience,

a trend seen across multiple sectors such as the retail and healthcare industry.

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increased its grocery delivery options and partnered with Instacart, a grocery delivery service, to offer sameday delivery to shoppers near Costco locations. Costco saw e-commerce sales rise 93% year to date, a major change for a company built around drawing consumers into physical locations. Developing a strong e-commerce presence was crucial for Costco as many customers do not feel comfortable shopping in public places.

Costco can now better compete with Walmart, which offers online grocery shopping and, like Costco, generates more than half its revenues from groceries.

The coronavirus pandemic also showed that consumer loyalty may not be as strong as anticipated. For example, when consumers could not find their preferred product at their preferred retailer due to supply chain disruptions, many consumers changed their shopping habits by trying a different brand or shopping at a different retailer. For example, A McKinsey report found that more than 75% of consumers have tried new brands or places to shop or methods of shopping during the pandemic, citing availability, followed by better prices and promotions. The pandemic also led to a rise in conscious consumption, meaning that consumers are now more mindful of what they are buying and are consequently cutting back on discretionary purchases such as luxury goods, travel, and entertainment.

Unilever

Additionally, consumers are now holding brands and companies to a higher standard regarding how they treat both customers and employees.

For instance, consumers expect companies to prioritize their health and safety amid the pandemic. Employee conditions are also now under a microscope. Both workers and consumers have placed pressure on firms to make fast adjustments in-store practices to ensure both safe employee working conditions and shopper safety, commonly taking the form of protective equipment and temperature checks. For example, Walmart now requires customers to wear a mask, even when local laws do not demand so. Other companies, such as McDonalds, have faced scrutiny for a lack of coronavirus precautions. McDonald’s employees across the country went on a strike to call for greater coronavirus safety and higher pay, and five employees of four McDonald’s locations filed a class-action suit, alleging that the fast-food restaurant did not adhere to safety protocols. As a result of these actions, several McDonald’s locations were ordered to enforce mask wearing and social distancing.

It is likely that many of these changes to consumer behavior and brand standards will remain post-pandemic.

These changes align with larger, longterm trends that are being accelerated by the coronavirus pandemic. For example, the pandemic is accelerating the trend of increased focus on health, meaning that there is now a greater emphasis on companies to support a healthy lifestyle and prioritize the health of consumers, shoppers, and employees. It is also accelerating the trend of conscious consumption.

Since consumers are now more aware of their purchases, they will likely not raise their level of discretionary spending to pre-coronavirus levels.

Unilever, a multinational consumer goods company, in an effort to adapt to these changes in consumer behavior, is now prioritizing packaged food, surface cleaners, and personal hygiene product brands over products, like skincare, where demand has fallen. If this shift toward in-home consumption is permanent, it may prompt Uber Unilever to also reposition food Uber adopted a series of safety guidelines to ensure that its ride-hailing brands and personal care offerings.

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business is safe for both drivers and passengers. However, fewer rides have nonetheless impacted the company’s personal transportation revenues.

Uber’s ride hailing business lost $1.8 billion from May 2020 to July 2020 due to a decrease in demand for rides.

Rides were down by as much as 70% in cities hit hardest by the pandemic.

Uber also temporarily lost its London operating license in November of 2019, exacerbating the decline in revenues.

As a result, Uber shifted its focus to Uber Eats, which experienced much success in the past year. Gross booking in Uber Eats grew 113% year-overyear, and it is now more profitable than Uber’s ride-hailing business. In early July 2020, Uber announced that it had acquired Postmates, expanding its food delivery business. The company also launched an on-demand grocery delivery service in Latin America as part of its acquisition of Cornership.

It is crucial that companies adapt, innovate, and reinvent themselves, if they have not already, in order to survive the changes in consumer behaviors, attitudes, and purchasing habits caused by COVID-19. Yet innovation is about more than shortterm survival - it is also about longterm resilience and growth. The many changes in consumer behavior and spending will persist even after the pandemic abates. To stay profitable, retailers should further develop their online shopping services to meet the increasing demand for e-commerce.

Diversification into neighboring markets will also continue to be a key to long-term profits. In response to rising consumer consciousness, brands must reposition their products to present a health-oriented image. In short, although the coronavirus shifted global consumption habits, the world economy is as it always was: businesses must adapt to their market or face obsolescence.

How Microsoft Will Win The Console War Written By Joyce Wu

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ideo game console sales by August 2020, including the Nintendo Switch, the Xbox, and the PlayStation, were up by 37% year-overyear. It’s not hard to see why; as people are forced to stay home, in-home entertainment becomes more important. While the Nintendo Switch may have dominated the hype during the early quarantine period, traditional console gamers are gearing up for the biggest rivalry of the fall: the Xbox Series X versus the PlayStation 5.

On November 15th, 2013, Sony released the PlayStation 4, signaling the beginning of the new console generation. A week later, Microsoft jumped into the ring, releasing the all new Xbox One, officially declaring the beginning of the next generation’s console war.

After a few months, however, a clear winner was pulling ahead: the PlayStation. In the first few months of 2014, the PlayStation 4 was the top-selling console for three months in a row. Even as we fast forward to 2020, the PlayStation 4 momentum still rides strong, with PlayStation exclusives such as God of War, The Last of Us, and SpiderMan continuing to draw new players in.

Sony’s successful breakthrough during the previous generation can be primarily attributed to marketing factors. Releasing their console a week earlier than Microsoft’s was a key strategy to secure a first-mover advantage. Moreover, the PS4 was priced around 100$ cheaper than the Xbox One. In the video game market where value is prioritized, Sony’s strategic pricing is a major reason why the PS4 gained a lead over the Xbox.

play games. The results are obvious today - Sony has sold 109 million PS4s to Microsoft’s 47 million Xbox Ones.

However, video game consoles tend to have short lifespans of around six to seven years, meaning that we are due for a new generation of gaming rivalry. Obviously, though Sony pulled ahead in the past few years, Microsoft does not plan to back down any time soon.

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Microsoft’s overall product offering is poised to integrate more players into its gaming ecosystem, therefore boosting gaming revenues outside direct console sales.

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The next console war began on November 10th, 2020, with both the PlayStation 5 and the Xbox Series X releasing on the same day. Though the hype for the PlayStation still rides high, this time around, Microsoft is likely in a better position to take advantage of the entertainment industry’s market trends. While the PlayStation will likely break through in console sales, Microsoft’s overall product offering is poised But perhaps most important to Microsoft’s downfall to integrate more players into its gaming ecosystem, was the company’s poor marketing strategy during therefore boosting gaming revenues outside direct the promotion of the Xbox One. Microsoft chose to console sales. promote its new Xbox as a multimedia machine, one In regards to the presale period, though both conwhich combines gaming, traditional entertainment, soles have already sold out, the PS5 still continues to and communication. Unfortunately, Microsoft’s at- appear more popular. Despite a stumble when Sony tempt to capture a wide consumer base split the focus misinformed customers about the presale date, Sony of its product and lowered the perceived quality of reports that the presale performance for the PS5 alits console. Sony, on the other hand, pushed a sin- ready outpaced sales within the first 12 weeks of the gle message: a gaming machine made for gamers to PS4 launch. Current estimates place PS5 sales at

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about 1,500,000 units, with Xbox trailing at 1,400,000 units. Given that PS4 dominated sales months after its launch, Sony will likely continue to outperform Microsoft during these first rounds of sales.

However, outright console sales don’t tell the whole story. While Sony’s marketing strategy is very similar to its strategy with the PS4 7 years ago, relying on popular exclusive games and promoting a powerful gaming machine, Microsoft is continuing to pursue its vision of creating an entertainment ecosystem. But it seems that Microsoft learned not to spread itself too thin. This time, instead of a fragmented entertainment system, Microsoft narrowed the focus of its product offering to a gaming ecosystem with the ability to engage in media consumption, a slight but important difference. The successful launch of Microsoft’s gaming subscription system, the Xbox Game Pass, and the recent launch of their cloud video game streaming service, xCloud, reveals Microsoft’s strategy. For the Xbox Series X, Microsoft will instead seek to incorporate as many gamers into its subscription platforms as possible. After all, the Series X’s main appeal lies in the combination between the powerful console itself and its ability to play Microsoft’s vast library of games on its subscription service at higher qualities. Moreover, at the time of the console’s release, the Xbox Game Pass will include a wide variety of multimedia content, including EA play and a free Disney+ trial. Indeed, with many entertainment platforms switching over to a subscription model, Microsoft’s business model may prove to be its biggest advantage over Sony in this upcoming generation.

est developing sectors of the gaming market is mobile gaming. In 2019, Forbes reported that there are over 2.4 billion people play mobile games.

In today’s fast-paced environment, entertainment has become on-thego, so convenience and value is key in consumer decision making. With Microsoft’s recent moves to expand the appeal of the Xbox Game Pass, it is better suited to tap into the consumer base who want a more flexible gaming experience.

When comparing the business models of Microsoft and Sony, Microsoft is in a better position to take advantage of these market trends. For example, Microsoft’s recent acquisition of Bethesda, a popular game development company, capitalizes on the trend of gaming convenience and value as it bolsters the appeal of their subscription service. Microsoft has also announced that future Bethesda releases will be immediately available on their Xbox Game Pass subscription platform as well as available in stores. With Bethesda owning many iconic franchises such as Doom, Fallout, and The Elder Scrolls, the acquisition boosts the value of the Xbox Game Pass, a subscription which only costs a general user $9.99 per month.

Moreover, the price of video games

are rising due to general inflation and rising console specs. For example, while games have been typically priced at around $60 in the past, the upcoming NBA 2k21 game was announced to be priced at $70 instead.

These rising prices only make a subscription service all the more appealing, since it allows the consumer to access a wider library of games at a much lower immediate cost. As Microsoft capitalizes on these market trends and ramps up the appeal for its subscription service with the Bethesda acquisition, it is reasonable to assume that Microsoft’s ultimate goal is not console sales, but rather to create a gaming ecosystem for players that combines all possible consoles available to them, whether that be the Xbox Series X, the previous Xbox One, a PC, or even mobile. With the Xbox Game Pass and the xCloud streaming service, customers can not only play on their Series X, but are able to access gaming entertainment with whichever medium is most convenient to them. Given that the mobile gaming sector is the fastest growing sector of gaming, Microsoft’s goal to entrench a mobile platform within its own ecosystem will likely propel it to enter new markets and have a wider impact than Sony’s PS5.

As the gaming industry rapidly grows it also constantly changes.

Whereas gaming used to be seen as a niche business, the rise of eSports and platforms like Twitch have given video game enthusiasts a community, bringing them closer together PlayStation 5 (Left) and Xbox Series X (Right) on display than ever. Moreover, one of the fast- Max Pepper / CNN

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Property and Paintings: The Privatization of Public Street Art Written By Anya Gert

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he practice of graffiti within the urban landscape was first popularized in the United States in the 60s and 70s in cities like New York and Philadelphia. Traditionally, graffiti thrives in poor, urban areas where individuals, especially youths, strive to protest and self-identify, instilling a sense of belonging and power over their environment. Because these graffitists come with little social privilege, their neighborhood streets become a channel for frustration. During the 1970s New York deficit, black and Puerto Rican individuals were disproportionately affected by the city’s resulting urban reductions, and became the core of the city’s graffiti movement.

art and graffiti thrive, exacerbates the gentrification of urban neighborhoods. Through its resulting neighborhood gentrification and its absorption into the private sector, the evolution of graffiti into muralism, curated or not, becomes inherently detrimental to the marginalized communities that graffiti was originally created to represent and empower. As this process of commercializing street art continues, the artists are forced to follow, eventually becoming part of the cycle.

For example, when graffiti was born in New York in the 1970s, one of its core flourishing locations was within the Harlem community. Now, the area is severely gentrified; requests for new murals are frequent and building owners are using that to their Throughout the years, graffiti evolved into various advantage, knowing that these murals attract residents forms of public street art. While the movement from higher income brackets. started off with and continues to involve tagging— or painting a personal signature on a surface—the practice of painting murals was also popularized.

Most of these forms of street art, up until recently, were considered acts of illegal vandalism. However, in recent years, street murals on the surfaces of buildings, particularly in large cities, are now viewed as more “proper” art.

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Similarly, in Chelsea, New York, a building increased in price from $880,000 to $2,075,000 from 2011 to 2015 after Brazilian street artist Eduardo Kobra completed two murals on its surface.

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In fact, the medium has become so popular that property owners and real estate investors have begun to intentionally seek spaces with these newly desired murals. This kind of art increases foot traffic and crowd appeal: the buildings and general area become a sort of landmark, enabling the surrounding property to grow in value. Moreover, traditional investors are adapting to treat individual murals as if they have quantifiable value, like paintings do in the art market. Even outside the United States, in cities like London, This value is lumped into the price of the property, neighborhoods with larger quantities of public art are thus increasing its overall value. seeing greater relative increase in real estate prices. A However, the manner in which public art increases 2016 study by Warwick Business School traced Flickr property values, particularly in areas where street images of street art tagged with locations and London, ultimately finding that higher property-priced areas

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Visitors take photographs of the ‘replica separation barrier’ created by British street artist Banksy as it stands on display at the Palestine tourist stand at the World Travel Market at the Excel centre in London.

Reuters

were generally associated with more image tags. Both visually and graphically analyzing the relationship between quantities of street art and change in house prices over time, the study mapped the Inner London postcode districts to showcase both variables, ultimately plotting them against each other to demonstrate a positive correlation.

One prime example of putting a price on graffiti is seen with the Museum of Street Art in Queens, New York, also known as 5Pointz. The site embodies the transition from graffiti as we used to know it to the status quo, in which street art and real estate go hand in hand. The abandoned warehouse became a hub for New York graffiti artists in the early 2000s, protected by a pact between Gerald Wolkoff, the owner of the building, and Jonathan

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Cohen, a prominent graffiti artist, to allow graffitists to use the building to work on projects without having to worry about anti-graffiti laws. In 2013, the owner backed out and the building was nearly torn down and white-washed, until a court found him liable for $6.75 million in art damages.

While it was a win for artists to have the site preserved, the settlement ultimately indicated that the practice graffiti was for sale, and that the medium has become inextricably linked to real estate. Eventually, a Dutch hotel chain called CitizenM approached the artists who worked on 5Pointz, hoping to showcase their work in the form of a museum at their location on the Bowery. All of the artists agreed, despite the project’s relationship to a corporate client, an alliance that inherently undermines

the history and communities responsible for the creation of graffiti.

Marie-Cécile Flageul, the leader of the artists’ collective, mentioned that the opportunity was irresistible for the artists; it was virtually impossible to produce legal graffiti in New York at the time. In addition to supporting the 5Pointz artists, Flageul argued that the project also allowed this medium to be reproduced without contributing to displacement and gentrification.

While the situation at 5Pointz delineates the process of graffiti becoming more tightly associated with the private sector, a property in Miami called Wynwood Walls shows how public art increases the cost of living within a neighborhood.

Established in 2009 by the Goldman family, one of America’s wealthiest

billionaire real estate developers, Wynwood Walls is an outdoor graffiti and mural venue featuring artists from around the globe. While the establishment is known for transforming its area into a place active with nightlife, art galleries, and festivals, Wynwood Walls has played a major role in displacing the local Puerto Rican community.

have denounced Banksy as an overrated sell-out, since his work undermines the original premise of street art and graffiti. His pieces have even been extracted from buildings and gone for millions of dollars in auction, and the fact that criticism and illegal removal of his work won’t pull him out of hiding makes Banksy’s art even more desirable to the public.

Goldman Properties refers to its process of renovating neighborhoods as “gentlefication,” yet ironically, the development of Wynwood Walls has had the opposite effect. According to the Miami Herald, a property beside the Walls sold for $53.5 million in 2016, averaging $1,250 per square foot. Some developers aware of this trend have attempted to place some affordable units in the area, but nonetheless, not enough low-cost housing exists to counteract the rampant gentrification. Today’s street artists—ones employed by Goldman Properties as well other commercial ventures—are increasingly being asked to gentrify urban spaces and create a false sense of creative urban life and authenticity.

The patterns which have led to more graffiti and murals in urban environments, particularly ones associated with property owners or famous artists, also bring a new meaning to street art. This public art form has come to exist merely because it makes the public space more attractive, since urban aestheticism draws people in and improves local economies. In places like Los Angeles, even city governments have also begun to sanction public art. On the search for employment, money, and legal street art opportunities, artists follow the private companies and governments into an inevitable cycle. Ultimately, these urban tendencies undermine the original intent of graffiti—a medium filled with passion for representation and identity—and in some cases, through the process of gentrification, prove detrimental to the marginalized communities that graffiti was intended to represent.

Banksy’s anonymity and his global, mysteriouslyappearing pieces have allowed him to build a notoriety for himself: if one of his murals goes up somewhere overnight, it automatically becomes a landmark. Plenty of other street artists and art critics have denounced Banksy as an overrated sell-out, since his work undermines the original premise of street art and graffiti. His pieces have even been extracted from buildings and gone for millions of dollars in auction, and the fact that criticism and illegal removal of his work won’t pull him out of hiding makes Banksy’s art even more desirable to the public.

Compelled to follow the money, artists take on these projects and guide their art to produce marketable work. Some famous and desirable artists, like British street artist Banksy, contribute to the issue of privatization through the exclusive nature of their work.

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Yet it’s not solely the transition from traditional graffiti to muralism that changes the real estate market, but also the cyclical component of the market driving the type of street art produced.

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Banksy’s anonymity and his global, mysteriouslyappearing pieces have allowed him to build a notoriety for himself: if one of his murals goes up somewhere overnight, it automatically becomes a landmark. Plenty of other street artists and art critics

The patterns which have led to more graffiti and murals in urban environments, particularly ones associated with property owners or famous artists, also bring a new meaning to street art. This public art form has come to exist merely because it makes the public space more attractive, since urban aestheticism draws people in and improves local economies. In places like Los Angeles, even city governments have also begun to sanction public art. On the search for employment, money, and legal street art opportunities, artists follow the private companies and governments into an inevitable cycle. Ultimately, these urban tendencies undermine the original intent of graffiti—a medium filled with passion for representation and identity—and in some cases, through the process of gentrification, prove detrimental to the marginalized communities that graffiti was intended to represent.

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Observing the Art World from Six Feet Away

Visitors wearing PPE stand apart as they view paintings in the National Portrait Gallery, London, as it prepares to reopen following the easing of coronavirus lockdown restrictions across England.

Victoria Jones / PA

Written By Rhea Bhammer

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The art business changed dramatically overnight,” Harry Hutchison, director of Aicon Gallery, told Cornell Business Review. “First, we were in India. We were doing this big show at Bikaner House in Delhi, and around March 20, we realized that the Delhi airport was going to shut down. We had to make an instant decision about where to spend the lockdown, and whether or not we were going back to New York,” Hutchison explained. Aicon Gallery, an art gallery in New York that specializes in modern and contemporary non-Western art, temporarily ceased its operations during the months of April, May and June when the virus had been at its peak.

With prominent auction houses like Christie’s announcing their permanent closure of offices throughout the Americas, Europe and the Middle East, Aicon Gallery was one of the few art spaces that remained afloat, successfully navigating its way through unprece-

Cornell Business Review

dented times. Like all other industries, the art world has had little choice but to adapt to the ‘“new normal.” Participating in roughly ten international art fairs and pop-up events a year, Aicon Gallery had to undergo major changes in adapting to virtual showcasing instead. Our talk with Hutchison revealed insight into how galleries are operating, given the new circumstances: “One thing that Covid-19 did was take away all art fairs, which was a huge change for us.

We were supposed to go to Art Dubai after India, but then we found out that it had been cancelled — it looks as though it might be cancelled again in 2021, so there’s really a whole calendar year of lost art fairs which contributed to roughly 30% of our revenue. We lost that almost overnight. We’ve had to adapt and become a lot more virtual. We’ve done virtual exhibitions on our new website, and also on Kunstmatrix. The combination of those two

avenues, as well as the webinars that we do now, are how we’re coping.”

lot more tech-savvy and comfortable buying expensive goods online. “[We see] a lot of Silicon Valley guys, for example,” Hutchison observes.

Upon assuming that art sales had fallen due to the pandemic, Hutchison was quick to correct the presumption: “It’s actually the opposite. For one, people are spending much more time at home. They want their homes to look nicer, they have nothing much else to do than shop online. And so, actually,” Hutchison continues, “just last month, there were two works by V.S. Gaitonde, the Indian artist, that sold for $5 million each, which was a world record for Indian art. So world records are being set during the pandemic. And two, yes, the pandemic is a health crisis but it hasn’t affected the stock market as such. It’s as high as it was — actually, it’s a little bit higher — than before, so that’s where a lot of our clients still have their main holdings.”

As gallery exhibitions, auctions and art fairs have moved online, the art world has had to adapt to digitalization, which has not been without its own merits.

“It’s been great,” Hutchison remarked, “it’s taken a global pandemic to shake the industry and it means that we’ve all got to get a lot more tech-savvy, by default.” With e-commerce sales skyrocketing on online art platforms such as Artsy and Artnet amongst others, the virus is bringing much-needed refinement to the online buying experience. The art world is known for its opulent dinner parties and glamorous gallery events, which are a large part of its appeal to attracting art collectors and buyers.

The role of technology in facilitating art purchases is indisputable. Aicon gallery allows viewings by appointment, so that buyers can take a closer look at a piece of art. But when most of its clients are international buyers, how does a gallery go about previewing art during a pandemic? The solution lies in high-resolution images via e-mail, and simply, trust. “90% of our clients are from all over the world. Do they buy

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The coronavirus has allowed for the market to adapt to a new kind of consumer; the kind who buys million-dollar paintings at home in his or her pajamas, makes business deals online and swaps champagne for caffeine. In due time, the inheritors of trillions of dollars in wealth around the world will form a largely technologically-advanced generation with buying habits that are drastically different from older generations. In-line with millennial buying habits today and the ease of online shopping over the past decade, one can find art online and own it in a matter of seconds.

The vast majority of these news-age collectors are a

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art without being in the gallery to see it? Yes, because they trust us. One’s existing client base is always very important, and it’s always going to be the heart and soul of the drive for revenue.” We can therefore infer that most of those purchasing art during the pandemic are either new, millennial collectors or pre existing clients who have established trust with their gallery.

“Lots of clients have become used to buying art over technology over the past decade so it wasn’t a giant leap for them to be comfortable continuing to buy just from JPEGS. So, the gallery world has been able to survive a lot easier than the museum world, because the museum world depends on tickets and people and bodies, whereas the gallery world,” Hutchison continues “—that’s just not our business model. We don’t charge people to come to our exhibitions.”

The Met, the MoMA and the Hammer Museum are only a few examples of large institutions that have announced mass lay-offs. Despite a significant decrease in the number of people visiting galleries, galleries like Aicon have been able to survive. As stated

by Hutchison, people who come into galleries off the street rarely buy, and the real buyers usually come by appointment. “Having said that,” Hutchison added, “it’s important for us to put art out there for everyone to see.” In fact, Aicon gallery was recently reviewed by the New York Times last month, which Hutchison explained, “is usually a cue for the gallery to be packed,” but this time round, “you could hear a pin drop in the gallery.”

Given the cancelation of physical art fairs, a replace-

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ment has been found in virtual ‘viewing rooms,’ which still allow for art dealers and collectors to view works.

They are an adequate replacement, but its viability in the long term does pose as a concern. “The idea of art fairs is also to network, they’re not just about selling. It’s about meeting artists and becoming friends with different groups of curators. Selling is one aspect, but is by no means the be-all and end-all. The online viewing rooms, they’re obviously just the fairs. So it’s a replacement temporarily, but is not really a permanent solution.” Art fairs, then, also operate as networking events, where working the room is almost as important as selling works. But it’s not all bad news. Despite a calendar year of lost art festivals and revenue loss, costs for galleries have gone down as well. With the lack of travel, galleries no longer have exorbitant shipment costs to take the art to art fairs, resulting in considerable amounts of cost-cutting. Regardless of the changes the art world has gone through, many are optimistic that it will continue to sustain itself. People are buying art more now than ever, and have turned to investing in blue-chip art — an asset class in its own right. “I think we’ll get through it,” Hutchison muses.

“Art is about communication and connectivity. And now, it’s more important than ever to feel connected and bond with our various communities.” Whether the digital art world will take over the physical one, though, is difficult to say. Considering the nature of what is being purchased — art — the physical experience is quite important, particularly because of the social engagement involved within the purchasing process, which cannot be replicated virtually.

Pearls of Wisdom from Natvar Bhavsar Apart from economic implications and how the industry is faring from a business perspective, CBR found it valuable to interview an artist to view the pandemic through a producer’s eyes. Natvar Bhavsar is an Indian-American artist based in New York City, noted as an abstract expressionist and color field artist. Bhavsar’s paintings appear in more than 800 private and public collections, including the collections of the Boston Museum of Fine Arts, the Met, the Guggenheim, the Museum of Contemporary Art in Sydney and the Library of Congress, amongst others.

His works also feature in the private collections of the MoMA, and the Johnson Museum of Art at Cornell University. Bhavsar presented Sublime Light: On the cusp of the 1980s, a solo exhibition at Aicon Gallery from September to October (2020), carried out in ‘pandemic’ fashion; heavy social distancing and viewings by appointment. Through a series of questions, Natvar Bhavsar, in a conversational style as scintillating as his art, allows us to glean how the pandemic is affecting the most crucial people in the art world — the artists.

What do you see as the role of art in a time where the world has been ravaged by disease, and has experienced a flux of social movements?

In times of catastrophe, we cannot allow oppressors to have power through their destruction. We can and will build a more beautiful world. People will always dance, and people will always sing, and they will always write and paint despite all of these things. The role of art, therefore, is to create ripples, and stir emotions, and allow the world to have beauty in times that are filled with ugliness.

You recently had an art show exhibited at Aicon gallery. How was that experience for you?

The difficulty of having a show during this time is that the atrocities in the world today make it difficult to have any kind of celebration while so many around the world find themselves in mourning, but I suppose that revelation is a continuous need. I wish that people could come and enjoy it with me but I understand that that’s not possible at the moment.

In a way, it creates a hunger for seeing it presented in

Have you used the pandemic as inspiration for your art? What is art to you?

Well, I don’t work or create my ideas based on thoughts or outside influences. Creating art, for me, is more like walking in the wilderness, you’re drawn to something intuitively. You don’t end up obtaining what you are really seeking. You might go looking for berries, but then all you find is mushrooms. Art is similar, it is about exploration and the unknown.

I spend 18 hours a day in my studio, and the charge of that activity lets me get completely carried away in my artwork. Paintings are about color and energy.

I’m trying to present an experience, a story. Sharing a taste of the elements. For an artist, creating a work of art is like trying to present the universe on that piece of paper. With the first mark you make on it, you’re creating a journey without even realizing it. And once you make that mark, it draws you in and you intuitively know what to do.

“

People who paint are like poets, and the art is the prose, the story.

I come to the studio, there is a canvas and there are colors.

And I have so much to say.

I could go on painting for thousands of years.

ART

A lot of your work is renowned for its textures, colors, and overall physical experience. How do you feel about the way art is being presented online and through images?

the way it is meant to be. It’s like someone you know saying, ‘I went to this beautiful island, you have to go and see it,’ but you don’t have the money to buy the tickets, so you wait until you can. But that shouldn’t stop you from your desire to experience seeing pictures of it. And in this case, engage with it digitally.

One always wishes that horrendous inflictions like the coronavirus would not happen, but life continues, and the idea of participating in the flow of life is what’s essential. As long as the art continues to make ripples from wherever it is. It really feels like sitting in front of a vast lake and flipping a stone into the water, not knowing how far the ripples will go. I don’t know how many people will make the effort to go see the works, but that doesn’t mean that you should stop throwing that stone.

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Interview

Jane Jiang

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Jane Jiang works at Morgan Stanley in global cybersecurity, fraud, and insider threat risk. Previously, she was a cyber big data scientist and engineer in threat hunting at Citigroup. She holds a bachelor’s from Cornell University in civil engineering and a master’s from Stanford University in management science and engineering. She volunteers as an alumni mentor for both institutions and raises funds for Restore NYC, which works to end sex trafficking in New York and restore the independence and well-being of foreign-national survivors. Jane enjoys writing and writing music, lifting and running, and reading about anthropology, business, history, self-improvement, and theology.

Cornell Business Review

Q A

What does a typical work day look like for you? How has the coronavirus pandemic affected your day to day routine?

A typical work day involves responding to emails and instant messages for the first 10-30 minutes, attending and scheduling meetings, and lots of researching, reading, reflecting, and writing these days. I carve out 1-2 hour blocks of time for each “major” task for the day. I’ve turned off all desktop notifications (from email and instant messages) so that I can use my time more efficiently and less reactively.

For the first part of the pandemic, I worked out of my studio apartment and only went outside to get groceries, run, and volunteer a couple of times with homeless relief. In the second part, I’ve been commuting to the office, sometimes stopping by the gym to lift, visiting a grocery store, or getting home to work on hobbies or catch up with friends on the phone. Because New York has opened up a bit, I’ve been able to meet with people in small groups, though that could change at the drop of a hat.

Q A

Why did you decide to go into the function you are in –– cybersecurity, fraud, and insider threat risk?

A

Something I never expected before joining Morgan is that the Firm truly abides by its core values (do the right thing, put clients first, lead with exceptional ideas, commit to diversity & inclusion, and give back). We reference and act on these core values in daily conversation. Regardless of cultural and professional background, whenever I engage with a colleague, whether across divisions and/or continents, I encounter great people who abide by these core values.

Therefore, I feel a deep sense of joy whenever my colleagues and I reach out across divisions throughout our work. I have the honour of meeting and learning from so many hardworking, high-integrity people.

Q A

What has been the greatest challenge you’ve faced in your professional life?

If it’s a challenge of not knowing what to do, I generally wait overnight or multiple nights if there is time so that my brain can think slowly and thoroughly. Throughout this time, I research, reach out to experts, and journal with a blue ink pen to process and retain new information.

If it’s a person-related challenge, I speak to my manager or Managing Director who I trust 100%.

I reach out to former colleagues for general career advice.

For all major challenges, I tend to confide in close, high-integrity, emotionally mature friends (who all live in different time zones), have a journal ready, and sometimes pick up a relevant non-fiction book.

INTERVIEW

I originally entered the cybersecurity department at Citigroup via a referral because of my coding, data analysis, and math modeling background. I’ve stayed in this role because I appreciate the company culture and have grown significantly in the past two years -- leveraging my engineering and research skills while developing communication skills, and learning how people run big banks given our regulatory landscape -- all with the intent of pursuing a career in this industry long-term.

Q

What has been your favorite aspect of working in cybersecurity at Morgan Stanley thus far?

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Q

A

As someone with experience working in the technology side of financial institutions, what do you think are important technical and soft skills to have to succeed?

I will answer this question generally: Competency affects whether we can complete our tasks successfully. For example, being able to think critically and analytically will help when you don’t know what to do next. Like attempting a problem set or a prelim, we use analytical thinking to solve problems that we’ve never seen before. Fundamental frameworks help with competency as you switch industries and job functions, e.g. knowing the OSI layers and red/blue teaming in cybersecurity, statics and mechanics in civil engineering, the fundamental laws in physics, and the digital marketing landscape of publishers and suppliers in technology.

Communication affects whether we can work with others. The ability to read, write, listen, and speak, demonstrate empathy, and cultivate self-awareness are all components of how we interact with our colleagues.

Character affects how we work, e.g. whether we reward honesty and candidness, the way we word things, and when we consider how our actions will affect the Firm and others.

Jiang with fellow Cornell Theta Tau Alumni at The Belfry in New York City

Q A

What would be the biggest piece of advice you’d give a college student interested in entering the finance industry?

Because there are numerous different careers within the finance industry, I’ll answer this question by asking some general questions that you could consider as you decide on your first industry. To remove some pressure, perhaps try to think about your next 6-12 months rather than your entire lifetime.

Do you prefer to have a more structured role and set of responsibilities or do you want more flexibility?

What kind of skills are your strengths? What kind of skills do you want to cultivate?

What kind of atmosphere at the office do you prefer – more laidback or professional? How do you prefer to communicate when working with others?

How do you prefer to dress?

Jiang with her friends at Stanford University, where she attended for her master’s degree

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Cornell Business Review

Who will be the client or consumer of your work – someone in a different company, the same company, or the same department?

Q A

Q A

What Cornell experience has influenced your career the most?

I got really lucky because when I did poorly on a prelim in freshman year, my professor happened to be the type of professor who personally reached out to anyone who did that. In a short meeting, he reminded me that everyone at Cornell is intelligent enough to do the work.

You simply have to develop the right study skills and use your time wisely. I’ve been able to apply that confidence to all of my work since then. I don’t focus on whether I can do the work; with the caring support and advice of talented people around me, ability to research (learn new things), and time to reflect, work is generally almost always doable.

What was your transition from college to the industry and a full-time career?

I was the person who stayed back and didn’t go to the career fair my senior year. I focused entirely on graduate school applications, and entered and completed the qualifying exam (the first milestone in a PhD before completing the final dissertation) at my dream program in California. I had an incredible time and absolutely loved the experience, however I realised that I didn’t want to make a career out of academic research. This was valuable knowledge, and I quickly moved to New York and began to work in industry after struggling to find a job for about half a year.

A

Regardless of the ups and downs and chaos of life, every day we have is precious, and life is short. If we look back on today and we didn’t live it fully then it will have been lost. The only time we can enjoy is right now, because we can’t live in the past or the future. I like to focus on certain things that are still beautiful -- a sunset, a great song, prayer, writing, getting lots of sleep, etc. How you decide to navigate the world -- living fully -- is really up to you and your imagination.

Ed Helms playing Andy Bernard, in the US adaptation of The Office, said “I wish there was a way to know you’re in the good old days before you’ve actually left them.” Ed Helms, our Class of 2014 convocation speaker, told us that “those foolish diversions are the real nectar of life; don’t relegate them to the good ol’ days.” “Take them with you; keep creating good old days.”

INTERVIEW

Jiang at Cornell’s Physical Sciences Building with Cornell Cru in 2014

Q

In your role as an alumni mentor, what do you consider the most important things students should focus on as they navigate the world with the pandemic?

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Cornell Business Review