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● The FOMO economy 27 ● Florida’s Trump Coast 50 ● The trading card king 56

June 14, 2021

WHO NEEDS A MARGARITA?

How Jimmy Buffett built a parrot-headed business empire beyond his music — and brought Margaritaville to Manhattan 44

ADVE RTI S E M E NT

THE VALUE OF PARTNERSHIPS BETWEEN LONG-STANDING COMMERCE PROVIDERS & INNOVATIVE STARTUPS s venture capital pours billions into the supply chain and logistics industry, Ryder is at the forefront of the disruption, thanks to RyderVentures, the venture capital fund it launched in October 2020.

for trucks. It’s always interesting when the technology we use in our consumer life transitions to the business side.”

The company is committed to invest $50 million over the next five years in innovative companies, which includes several strategic investments the company has already made, says Ryder Executive Vice President & Chief Marketing Officer Karen Jones.

Ryder has also enjoyed recent success by partnering with several innovative technology companies to develop RyderShare™, its real-time collaboration logistics platform that provides visibility into shipments as they move through the supply chain. Shippers, carriers and service providers can use the platform to see where their goods are and get updated delivery estimates.

“Globally, there is an immense influx of talent, investment and, in turn, startups in this industry,” Jones says. “This means there’s going to be a lot of disruption for companies like ours and the industry as a whole. Our position as a company is to continue to lead the industry through generations of change, and that means we need be a part of this disruption, rather than just be a customer.”

Collaborating to improve supply chain transparency

Demand for RyderShare™ exploded during the Covidrelated supply chain disruptions over the past year, and Ryder is looking to make additional technology investments in that space.

Looking toward the future of logistics Providing benefits beyond capital RyderVentures-backed startups enjoy advantages that come with collaborating with a Fortune 500 company that has nearly 90 years of institutional knowledge. For example, innovative technologies can be piloted on Ryder’s fleet of over 235,000 commercial vehicles, or with the company’s 50,000 customers. That gives these startups the ability to accelerate production and scale quickly, making it much easier for them to bring viable products to market. “The startups have the tech, but they don’t have longerterm customers or a depth and breadth of experience in transportation logistics,” Jones says. “Integrating into our operations and environment is a really big benefit for a lot of these companies.”

While RyderVentures is focused on a few key areas: Asset Sharing, E-commerce, Next-Generation Vehicles, Automation, and Big Data, it’s also open to investments in other areas in the sector that are ripe for change. “While we’re laser focused on what’s impacting us today and tomorrow, we can’t have horse blinders on to what will impact us the day after tomorrow,” “Jones says. Ultimately, that’s an immense part of the value that RyderVentures delivers to us, giving us a new lens to evaluate the market as well as a differentiated tool to engage with it.” RyderVentures has made several investments since launch, with its first two in SmartHop, an AI-powered dispatch technology for small trucking companies, and Baton, a logistics platform that paves the way for autonomous commercial vehicles.

Bringing the sharing economy to trucking In 2018, Ryder launched COOP® by Ryder, an assetsharing platform that allows fleet owners to rent out idle vehicles to other businesses. COOP has created a new revenue stream for fleet owners, who earn money when other businesses rent their unused trucks, tractors and trailers using the COOP app. The startup has experienced 250% year-over-year growth and is now available in nine states throughout the country.

Looking ahead, Jones says she expects Ryder to continue to bring disruptive solutions to market, via both inhouse startups like COOP and collaborative projects like RyderShare™. And through the companies that are funded by RyderVentures.

“The growth of COOP has been a really exciting journey for us,” Jones says. “We think of it as Airbnb meets Match.com

“There’s a whole world of possibilities where we could create value for our customers,” she says.

These successes have proven the reward of collaboration in the space, and make the future even more exciting.

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EVER INNOVATING Investing in the future of supply chain logistics & transportation

In business, new companies, technologies, and innovation are the seeds that sprout growth for the future. These seeds need to be nurtured to branch out and make a strong impact in the industry. At Ryder, through our venture capital fund, RyderVentures, we’re creating an environment for these companies to grow. Together we will dramatically advance the industry with solutions linked to asset sharing, e-commerce fulﬁllment, next generation vehicles, data & analytics, and automation. Discover how Ryder can invest in your business at ryder.com/ryderventures.

SUPPLY CHAIN SOLUTIONS

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Schwab.com

June 14, 2021

◀ The 5 O’Clock Somewhere bar, License to Chill lounge, LandShark grill, Cheeseburgers in Paradise—you’ll find them all at Jimmy Buffett’s Times Square resort

PHOTOGRAPH BY AMY LOMBARD FOR BLOOMBERG BUSINESSWEEK

FEATURES

Margaritaville on the Hudson

In Times Square, that other Buffett builds on an empire created by one song

All Trump, All the Time

The courtiers at Mar-a-Lago reaffirm the ex-president’s hold on his party

Playing His Cards Right

Auctioneer Ken Goldin is making millions on sports memorabilia

◼ CONTENTS

◼ IN BRIEF ◼ OPINION ◼ AGENDA ◼ REMARKS

BUSINESS

TECHNOLOGY

FINANCE

ECONOMICS

POLITICS

Bloomberg Businessweek

6 8 8

Biogen ● Bezos in space ● Hot canola ● Sea snot To stop ransomware, take away the incentive NATO summit ● VivaTech ’21 ● New York’s mayoral race

The destructive diplomatic strategy China can’t shake

14 15 17 18

ESGers invaded Exxon’s board. It won’t end there A pop-up store that’s really light on its feet Famous? Seen better days? Authentic Brands wants you European pay-TV giant Sky spends big to stay relevant

21 22 25

REvil reveals how ransomware is contaminating tech When Biden and Putin meet, hacking will be on the menu The most cautious cryptocurrency company on Earth

27 29

Increasingly, the fear of missing out is driving markets This accounting watchdog just keeps tripping over itself

32 34

Sure looks like a housing bubble. But look again Climate change sends Central Americans northward

▼ Online sleuths are tracking down the Jan. 6 mob

June 14, 2021

◼ COVER TRAIL How the cover gets made ① “So this week we’re doing a story about Jimmy Buffett. He’s opening up a hotel in Times Square.” “Huh? Weird business venture for a billionaire.” “Not Warren Buffett. Jimmy Buffett.” “Doesn’t ring a bell.” “Parrots? Key West? Come Monday, it’ll be all right? Singer-songwriter?? Margaritaville?!?!” “Oooh, margs! Now you’re talking my language. Meet you there!” “Maybe let’s make a cover first?” “Right, right, of course. How about a bunch of parrots with Yankee caps on a taxi sipping margs with some pigeons on Broadway?” “Great! Let’s see it.” “I’ll need at least a marg or three to get my paints out.”

On Israel, young U.S. Jews diverge from their parents

40 42 43

After thrilling the U.K., Fevertree’s mixers shake up the U.S. Bloomage goes from cosmetics supplier to serious rival Mid-caps are well situated to ride a post-Covid rebound

◼ PURSUITS

63 65 66 67 68 70 71

Outdoor entertaining is back. Start grilling those skewers The best (booze-optional) lemonade you’ll ever make Out on the lawn, everyone’s in a game-playing mood From cans to boxes to fancy bottles, it’s raining rosé Ready to serve? This tableware is stylish and sturdy A cooler to hold the beers—and shatter the ears Party all night with the right outdoor light

◼ LAST THING

A bidding war erupts in the unlikeliest of sectors

SOLUTIONS/ BREAKAWAY

How to Contact Bloomberg Businessweek EDITORIAL 212 617-8120 ● AD SALES 212 617-2900, 731 Lexington Ave. New York, NY 10022 ● EMAIL bwreader@bloomberg.net ● FAX 212 617-9065 ● SUBSCRIPTION CUSTOMER SERVICE URL businessweekmag.com/service ● REPRINTS/PERMISSIONS 800 290-5460 x100 or email businessweekreprints@theygsgroup.com ● Letters to the Editor can be sent by email, fax, or regular mail. They should include the sender’s address, phone number(s), and email address if available. Connections with the subject of the letter should be disclosed. We reserve the right to edit for sense, style, and space ● Follow us on social media ▶ FACEBOOK facebook.com/ bloombergbusinessweek/ ▶TWITTER @BW ▶ INSTAGRAM @businessweek

Cover: Illustration by Bráulio Amado; photos: Getty Images (7); Shutterstock (5); Alamy (1)

POLITICS: PHOTOGRAPH BY CAYCE CLIFFORD FOR BLOOMBERG BUSINESSWEEK

“Looks like we’re going to Times Square.”

Every day Google secures 1.5 billion inboxes,

keeping your emails private to you. g.co/safety

○ Global coronavirus cases have exceeded 174.1 million, and almost 3.8 million have died. But more than

2.2b

vaccine doses have been administered. Governments are easing restrictions as infections fall: France will let vaccinated travelers from the EU enter without having to show a negative test.

○“You’re in a globa craps game where everybody is talking to each other and they’re having a blast.”

Ken Moelis, the CEO of his namesake investment bank, likened the memestock frenzy ripping through markets to gambling. People aren’t making an investment decision, he said, but an emotional one.

By Benedikt Kammel

○ President Joe Biden revoked Donald Trump’s bans on the Chinese-owned apps TikTok and WeChat.

He directed Commerce Secretary Gina Raimondo to evaluate apps from foreign adversaries and block those that pose a security risk.

○ Jeff Bezos says he’ll go into space in July when his company, Blue Origin, launches its ﬁrst passenger craft.

○ Parts of Turkey’s Sea of Marmara have been covered in that gray sludge known as sea snot. A marine mucilage, the layer is formed by water pollution, including untreated sewage from Istanbul and other nearby cities.

○ Ferrari hired an executive from chipmaker STMicroelectronics as its new CEO, highlighting technology’s rising role in the car industry. Benedetto Vigna starts in September, succeeding Louis Camilleri, who stepped down after a severe case of Covid-19.

○ Biogen scored a major scientiﬁc and ﬁnancial victory when the U.S. FDA approved its Alzheimer’s drug on June 7. Branded Aduhelm, it will cost

○ With searing heat in the Canadian Prairies and the U.S. Northern Plains raising supply concerns, the price of canola hit a record of

○ Socialist Pedro Castillo said he defeated Keiko Fujimori in Peru’s presidential election. As of June 9, Castillo was ahead in the tally by just 72,000 votes.

$56k

a year. The drug’s trial results were mixed, and an FDA panel of outside experts recommended against approval.

The Amazon.com founder and CEO wants to make the 11-minute trip to suborbital space, about 100 kilometers (62 miles) in the sky.

C$784.40

($649.60) a ton on June 8. The oilseed is widely used in food and cooking.

○ The London Metal Exchange canceled a plan to close the Ring—its open-cry trading ﬂoor. Proponents say the arcane shouting match among traders is still the best way to establish global benchmark prices.

GETTY IMAGES (3)

IN BRIEF

Bloomberg Businessweek

Every day Google checks 1 billion saved passwords,

3 compromised passwords

so if any of yours get hacked, we’ll let you know. g.co/safety

◼ BLOOMBERG OPINION

At least since Julius Caesar paid 50 talents to a band of Cilician pirates for his freedom, ransom has proved to be a popular and profitable criminal enterprise. In the digital age, it’s wreaking havoc far beyond its immediate victims. Ransomware attacks, in which gangs infiltrate a company’s computer systems and demand payment before unlocking their files, are surging. One on Colonial Pipeline Co. resulted in gas shortages last month along the East Coast. A similar infiltration caused the meat producer JBS SA to shut facilities in three countries (page 21). Even the operators of the Martha’s Vineyard ferry recently succumbed to digital extortion. These attacks impose serious costs. Last year victims paid out almost $350 million to ransomware groups, an increase of more than 300% from the previous year. As a recent report from the Ransomware Task Force, an industry research group, notes, these attacks are leading to “dangerous real-world consequences that far exceed the costs of the ransom payments.” Attacks on health-care systems alone may have cost $21 billion. Belatedly, the U.S. government is taking notice. President Joe Biden issued an executive order last month that attempted to ease information sharing, secure government supply chains, and bolster executive branch defenses. On June 3 the Justice Department announced an effort to prioritize ransomware prosecutions. These initiatives are welcome but not enough. An effective defense requires disrupting the extended criminal networks behind these attacks. Practitioners increasingly provide what they call “ransomware as a service,” in which sophisticated developers write malicious code, then rent or sell it to unskilled “affiliates” who initiate the attacks. This model works so well that about two-thirds of attacks now use it. To defeat this approach, the Justice Department needs to get more aggressive. Its recently formed Ransomware and Digital Extortion Task Force, which announced on June 7 that it had recovered much of the funds extorted from Colonial Pipeline, is a good start. It should dedicate a team of U.S. attorneys and FBI agents with technical backgrounds to longterm cybercrime investigations. Such a team would focus on prosecuting the high-level developers who write and sell malware, dismantling the infrastructure that enables their attacks, and disrupting the cryptocurrency exchanges that process the resulting payments. Kellen Dwyer, a former federal prosecutor, estimates the cost of such an effort— employing perhaps 10 prosecutors and 20 agents—would be as little as $5 million a year. Next, the U.S. needs to make clear that harboring ransomware gangs will no longer be tolerated. American diplomats could help by persuading more countries to ratify the Budapest

Convention, a treaty that establishes common standards for cybercrime probes. And the Treasury Department should put overseas crypto exchanges on notice that they’re expected to comply with anti-money-laundering and know-your-customer laws or they’ll be barred from the formal financial system. Finally, Congress can aid victims by establishing a fund to help them recover their systems if they’ve acted in good faith. To be eligible, companies should have to report any attack to the authorities, refuse to pay a ransom, demonstrate that they adhered to federal cybersecurity standards, and agree to invest in specified security improvements. Such restrictions should encourage better cyberdefenses while also cutting off the flow of funds that’s made ransomware so attractive. Caesar, by the way, tracked down his captors and crucified them. The U.S. needn’t go quite that far. It simply needs to ensure that the costs of ransomware attacks far exceed the benefits. <BW> For more commentary, go to bloomberg.com/opinion

◼ AGENDA

▶ United We Stand President Biden will work to assure NATO members he has their backs at its June 14 summit. The alliance aims to present a united front on challenges in Afghanistan, Russia, and elsewhere. ▶ China reports retail sales on June 16. While consumer spending has recovered this year, coronavirus lockdowns have returned in parts of the country.

▶ The E3 video game conference happens virtually on June 12-15. Nintendo will likely introduce some games designed to run on its more powerful Switch console.

▶ VivaTech, Europe’s biggest startup and tech event, takes place in Paris on June 16-19. Guest speakers include Facebook’s Mark Zuckerberg and Apple’s Tim Cook.

▶ Democratic mayoral candidates for New York hold a debate on June 16. Eric Adams, Andrew Yang, and Kathryn Garcia lead the crowded field.

▶ The U.S. Federal Reserve sets interest rates on June 16. Investors will look for indications that the era of ultracheap money will end sooner rather than later.

▶ Iran holds elections on June 18, amid renewed tensions with the West and delays on a new nuclear deal. Cleric Ebrahim Raisi is favored to win.

ILLUSTRATION BY FRAN CABALLERO

To Stop Ransomware Gangs, Cut Off Their Profits

June 14, 2021

Every day Google protects 4 billion devices,

alerting you if a site seems risky. g.co/safety

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◼ REMARKS

● Why the Wolf Warriors won’t change course ● By Peter Martin After China’s top diplomat, Yang Jiechi, lectured his U.S. counterparts on America’s moral failings, including police killings of Black citizens, during bilateral talks in March, national security adviser Jake Sullivan didn’t exactly argue with him. But he reminded Yang of what he called the “secret sauce” of U.S. governance: the ability to acknowledge and fix mistakes. “A confident country,” Sullivan said, “is able to look hard at its shortcomings and constantly seek to improve.” His implication, of course, was that at least in international relations China can seem unable to do the same. As the world’s most populous nation adopts a more aggressive posture, that view is becoming widely shared. China’s growing power has coincided with a drastic deterioration in public perceptions abroad. Surveys last year by the Pew Research Center found that, in 9 of 14 major economies, negative opinions of the country had reached their highest level since Pew began polling the question more than a decade ago. In the U.S., a full 73% of respondents reported a “very unfavorable” or “somewhat unfavorable” impression of China. Some of the causes are obvious. In recent years, China has faced a barrage of international criticism, targeting its apparent detention of more than 1 million Muslims in

“reeducation” camps, the crushing of dissent in Hong Kong, and its actions at the beginning of the coronavirus pandemic, among many other issues. Its industrial policy is another factor: Many workers in the north of England or the U.S. Midwest blame China, fairly or not, for the loss of their jobs. But increasingly, it’s China’s diplomats who are doing the most damage to how the country is viewed. Popularly known as “Wolf Warriors,” after a series of blockbuster movies that depicted Chinese heroes vanquishing foreign foes, they’ve picked fights everywhere from Brazil to Papua New Guinea. In March of last year, Zhao Lijian, a Foreign Ministry spokesman, prompted outrage in the U.S. when he repeatedly promoted an unsubstantiated—and absurd—theory about the origin of Covid-19, claiming it had been brought to Wuhan by visiting American athletes. In November, Australian Prime Minister Scott Morrison demanded an apology for a “repugnant” tweet by Zhao, who’d posted an illustration of an Australian soldier holding a knife to the throat of an Afghan child. In January the Chinese Embassy in Washington lost access to its Twitter account after the company said a post about Xinjiang, which claimed that efforts to “eradicate extremism” in the province meant women there were no longer “baby-making machines,” violated its policies. This assertive behavior is hardening attitudes on all sides of American politics, dashing hopes in Beijing that President Joe Biden would adopt a more conciliatory approach than his predecessor. Last month, Kurt Campbell, Biden’s top official for Asia policy, declared that the era of “engagement has come to an end” with China. Biden himself described President Xi Jinping on the campaign trail as a “thug” and

PHOTO ILLUSTRATION BY 731; PHOTOS: GETTY IMAGES (3)

China’s Dangerous Diplomacy

◼ REMARKS

Bloomberg Businessweek

has pledged an era of “extreme competition” with the other economic superpower. The story is similar across the developed world. Australia, Canada, and the U.K. are all adopting a firmer posture toward China, as are several major European Union countries. A long-sought investment deal with the EU—which would have deprived the Biden administration of a united front against Chinese economic practices and probably opened the door to a free-trade agreement—is unlikely to be ratified, in part because of Beijing’s imposition of sanctions on European lawmakers who criticize its actions in Xinjiang. Some members of China’s foreign policy elite see these worsening perceptions as a problem and have issued tentative warnings about the risks of continued diplomatic belligerence. But Xi’s government seems incapable of recalibrating, even as the Biden administration rebuilds alliances across Europe and Asia—in part by using discomfort with China’s heavy-handed tactics to bring countries back into the American fold. It’s tempting to view this inability to change course as an intrinsic feature of the top-down, authoritarian Chinese system. Certainly, individual officials often fear the consequences of owning up to mistakes. But in the past, China’s leaders have shown they can be flexible when necessary. In the 1950s they launched an international charm offensive to break the diplomatic isolation imposed after the Communist takeover. Later, after Western countries cut ties in the wake of the Tiananmen Square massacre, they embarked on a longterm campaign to improve the country’s reputation, peaking with the 2008 Olympics. But the current political environment in Beijing makes it difficult to imagine a meaningful change in strategy. A dramatic increase in self-confidence—or perhaps overconfidence, given China’s ongoing demographic, social, and environmental vulnerabilities—is a major part of the equation. It arguably began with the global financial crisis, which barely affected China while roiling the U.S. and Europe. The trend intensified after Xi rose to the top of the Communist Party in 2012, endorsing a more confrontational approach to foreign policy. By 2017 top Chinese leaders were pointing to “changes unseen in a century” in the international system, while Xi declared that China was “approaching the center of the world stage.” Paired with this sense of destiny is a growing belief that the West, and especially the U.S., has become weak, even decadent. Over the past two decades, China’s political class has watched in amazement as the U.S. fumbled the wars in Afghanistan and Iraq and let internal divisions bring Congress to a near-standstill. The country’s handling of the novel coronavirus, which it failed to contain until after more than 500,000 Americans had been killed, made the greatest impression. Last year, Xi told Party cadres that China’s response to the virus demonstrated the “remarkable advantages” of Communist leadership. Then there’s the character of Xi himself. The son of a high-ranking official who lost the favor of Mao Zedong, the Chinese leader has been a student of power struggles his

June 14, 2021

Share of Respondents With a Favorable Opinion of China Spring 2015 0%

Summer 2020 20

Australia South Korea France U.K. Canada U.S. Germany Japan DATA: PEW RESEARCH CENTER

entire life—intra-Party battles in which losing can mean imprisonment, not exile to a well-paid lobbying job. “Xi grew up in a world that is all about relative power, leverage, and loyalty,” says Evan Medeiros, a former adviser to Barack Obama who attended many of the former president’s meetings with Xi. “He’s someone who thinks in terms of hard power.” In the assessment of many Chinese officials, the international backlash against their government is simply evidence that the U.S. and its allies are determined to halt China’s rise. By criticizing its actions in Xinjiang and Hong Kong, they say, Western countries seek to deny China the same degree of security they expect for themselves. By hitting out at its industrial and environmental policies, this argument goes, they want to deprive China of the right to economic development that they enjoyed decades earlier. And by condemning its diplomatic practices, Western elites aim to “prevent us from fighting back,” Vice Minister of Foreign Affairs Le Yucheng said in a December speech. As global opposition builds, there are tentative signs that Xi realizes the country may have overstepped. In a recent meeting with senior officials, he urged them to keep “a grip on tone” when communicating with the outside world and to be “open and confident, but also modest and humble.” Yet among Beijing’s growing ranks of foreign policy hardliners, there’s a widespread belief that, assuming China’s power continues to grow and problems like a looming population decline don’t derail its economic progress, winning hearts and minds will cease to be particularly relevant. According to this view, it should be only a matter of time before even the U.S. accepts a world order in which China’s voice carries at least equal weight—and it will be pointless to oppose its territorial and economic ambitions or try to pressure it over human rights. “The U.S. needs to come to terms with the prospect and the eventual reality of a China whose economy is larger,” says Gao Zhikai, a former Chinese diplomat who served as translator to Deng Xiaoping. Once that occurs, “America will need to mellow its hostility toward China. Pragmatism and realism will gain the upper hand.” <BW> �Martin, a reporter at Bloomberg News in Washington, is the author of China’s Civilian Army: The Making of Wolf Warrior Diplomacy, published in the U.S. on June 10 by Oxford University Press.

B U S I N E S S

Edited by James E. Ellis

● The election of three dissident directors at the oil giant was a big win for ESG activists. Now for the hard part Chris James pulled off a feat that for years had eluded the Rockefeller family, giant pension funds, and money managers. In just six months—and after staking his own money—James’s tiny investment startup, Engine No. 1, won a victory over one of America’s most iconic companies. Its acrimonious six-month proxy battle against Exxon Mobil Corp., centered on its flagging performance and resistance to preparing for a low-carbon future, resulted in three dissident directors being elected to the company’s 12-member board. The victory not only stunned the oil world and corporate America at large, but it also marked a coming of age for socially conscious investors who’ve long pressed companies to improve their environmental policies, often with mixed results. Engine No. 1’s proxy campaign may usher in a new age for them. “It opens up a new strategy,” says Timothy Smith, director of ESG shareowner engagement at Boston Trust Walden Co., who’s been speaking with companies and filing shareholder resolutions for 50 years. “There’s never been a case of directors being unseated for ESG issues,” he says. A confluence of trends set the stage for Engine No. 1’s success: mounting societal concern about the warming planet, world leaders and corporations setting emissions targets, and Exxon’s poor recent performance. The heart of Engine No. 1’s argument was that Exxon’s failure to address climate change was damaging its finances and harming shareholders.

June 14, 2021

There was also already a groundswell in investor pressure. In the U.K., billionaire activist investor Chris Hohn had started a campaign pushing companies to produce plans to cut greenhouse-gas emissions and give shareholders a say on those efforts. And after facing criticism for its record on environmental issues, mammoth money manager BlackRock Inc., a top Exxon shareholder, said it would start voting against corporate directors whose companies fail to act on the climate. The shareholder vote held May 26 gave seats to three candidates Engine No. 1 supported. It was a shocking defeat for Exxon Chief Executive Officer Darren Woods, who is four and a half years into what’s already been a rocky tenure. His first task will be to convince the fossil-fuel skeptics in his own boardroom that the company should continue searching for untapped oil fields. Exxon has to find the equivalent of 1.4 billion barrels every 12 months just to offset what it pumps out of the ground every year. Operating on that gargantuan scale requires vast exploration programs that burn through billions of dollars for years on end, with no guarantee of success. For most of its history, Exxon was known for its unrivaled financial and operating acumen. But a series of blunders in the past 20 years—including illtimed forays by Woods’s predecessor into Russia and American shale gas—laid the groundwork for steep declines in cash flow and oil production. The crisis intensified with 2020’s twin perils: a global crude glut and a pandemic-driven slump in demand crushed oil prices. Exxon posted its first annual loss in at least 40 years, and the stock registered its worst annual performance since it merged with Mobil in 1999. Even as revenue plunged to less than half of what it was earlier in the decade, Woods pledged to protect the S&P 500 index’s third-

DATA: COMPILED BY BLOOMBERG, 2021 AS OF JUNE 9

Bloomberg Businessweek

◼ BUSINESS

largest dividend and borrowed heavily to fund it. Ballooning debt and bleak prospects for any imminent rebound gave activists an opening. But whether the three new board members Engine No. 1 proposed will be able to alter the company’s course remains to be seen. “We welcome the new directors and look forward to working with them,” Exxon spokesman Casey Norton says. But Felix Boudreault, managing partner at ESG researcher Sustainable Market Strategies, is skeptical that Exxon’s embrace will be a warm one. “They’ve shown so much resistance,” he says. “At best, they will do the bare minimum on climate.” Nonetheless, Engine No. 1’s victory has emboldened socially conscious investors, who for decades have been coaxing companies to improve their environmental and social practices. They typically talk with corporate managers and submit shareholder resolutions to be voted on at annual meetings. Matt Patsky, who’s done socially responsible investing for more than 30 years, sees Engine No. 1’s win as a way for him to up the ante by shaking up boardrooms. “We would consider doing this type of activism as part of a coalition of large investors,” says Patsky, CEO of Trillium Asset Management. “It’s opened up new opportunities for us. It’s a third tool.” Investors such as the California State Teachers’ Retirement System, Legal & General Investment Management, and the Rockefeller family spent years fruitlessly pressing Exxon to take action on global warming. CalSTRS, an early backer of Engine No. 1’s Exxon fight, says it may use other strategies with companies it’s already in talks with on ESG issues. LGIM, one of Europe’s largest money managers, which cut its stake in Exxon two years ago after failed talks on the climate, said it could throw its weight behind other investors who mount activist campaigns, as well. “More aggressive ESG tactics

Bloomberg Businessweek

are here to stay,” says John Hoeppner, head of its U.S. stewardship and sustainable investment unit. “Companies should expect more of this.” Engine No. 1’s campaign wasn’t focused on metrics like carbon dioxide levels or the planet’s temperature. The fund argued instead that Exxon had generated poor returns—and jeopardized its own dividend—through years of wasteful energy-project spending and rising debt. It was important to make that financial case to other investors, James says. “In many of these cases, shareholders who vote aren’t the loudest about these ESG issues. We are assessing the total value of a business, their impacts on stakeholders and shareholders.” Taking on one of the world’s biggest oil companies was a big risk for James, who spent at least $30 million on legal fees. Engine No. 1 had only a 0.02% stake in the $260 billion company. But his firm won backing from the three-largest U.S. money managers, which together own about a fifth of Exxon, and the three largest U.S. pension funds. James is now focusing on expanding his fledgling socially conscious business, including plans for an exchange-traded fund that will encourage changes at the companies it holds through proxy voting. He declined to comment on what his next targets might be. But a recent government filing shows Engine No. 1 had taken stakes in several companies including automaker General Motors Co., agribusiness Bunge Ltd., and manufacturer Deere & Co. before the end of March. All operate in high-carbonemitting industries, so the Exxon fight is likely not far from his mind. �Saijel Kishan and Joe Carroll THE BOTTOM LINE Exxon long resisted calls from climateconcerned investors. Its loss to a slate of activists could speed other ESG campaigns against poorly performing companies.

A Pop-Up Store Hits the Road ● Cuyana’s store-on-a-truck is a cost-effective way to quickly test locations and products

A new type of store is popping up at a California mall on June 10. It looks a lot like a regular shop, full of handbags, small leather goods, and jewelry. Oh, except it’ll be outside, and the floors, counters, and racks all fit on a flatbed truck, to be transported and remade anywhere—some assembly required.

June 14, 2021

▼ Board members elected in the U.S., 2020-21

33k

management candidates

40 dissidents

Bloomberg Businessweek

Cuyana, a San Francisco-based premium fashion label, is taking its traveling showroom on a summer road trip. The portable pop-up presents retailers and malls with a new way to sell goods, gather data, and try out locations without committing to a larger lease or paying repeatedly for major renovations. Just load the whole thing onto a truck and plop it down somewhere. “Retail’s not going away,” says Shilpa Shah, co-founder of Cuyana. “It just needs to be reinvented.” PopUp Republic, which helps brands create and market temporary locations, estimates the pop-up retail industry has grown to $10 billion in U.S. sales across numerous categories from fashion to tech. Retailers such as Amazon.com Inc. and Nike Inc. have tried out temporary locations, and Macy’s Inc. a few years ago began opening pop-up marketplaces in its own department stores. Brands around the world are getting more creative: Gucci rented a Milan apartment to show off its home decor, Pantone served pastries and coffee from a cafe in Monaco, and Lego opened an art gallery in London. But pop-ups are expensive and involve outfitting an entire storefront for just a few months, weeks, or days. Shah says those economics don’t always work. With a mobile shop, a company can test many locations with just one initial capital expenditure of about the cost of a single traditional store. The Cuyana shop’s first appearance will be at the Platform in Culver City, a boutique shopping center just west of downtown Los Angeles with trendy shops like Reformation, Monocle, and Broome Street General Store. From there, it will travel to four other malls in the area for monthlong stints that run through November. The company declined to share how much it spent on the store. Other retailers have attempted to create a movable feast. Matchesfashion.com turned a yacht into a floating boutique it sailed to hotels on the Italian coast. Brands such as Veuve Clicquot, Jenni Kayne, and Miansai have used Airstream trailers as makeshift shops, doing temporary business on a roadside or at a beach. The limitation is that these moving stores can’t be fully customized for the brand. Cuyana’s store was created in conjunction with Toyota Motor Corp., as part of the automaker’s Agile Space program, which seeks to find ways to reprovision underused space. In this case, the areas in question are shopping malls, which have struggled to find uses for idle square footage in an era of fewer visitors and higher vacancy rates. The pitch for mall operators is that they can take an area they’re not trying to rent long term—a few

parking spaces, a courtyard, or an empty atrium— and make some money off it. Mall owners need all the help they can get. The value of U.S. shopping centers has fallen an average 60% after appraisals in 2020, according to data compiled by Bloomberg. Retailers once known as cornerstones of the American mall are looking at a more free-standing future, with Bath & Body Works, Gap, Old Navy, and other stores shrinking their presence. Regional malls saw vacancy rates rise to a record 11.4% in the first quarter of 2021, according to Moody’s Analytics.

While Cuyana’s portable pop-up is only one shop, Shah says if it’s successful at gathering data to make better store location decisions, the company will develop more mobile stores as test balloons across major markets in the U.S., hopscotching from one metropolitan mall to the next in cities like Boston, Chicago, and San Francisco. Cuyana will track foot-traffic patterns, spending habits, and how other tenants nearby might influence its business to help it figure out whether longterm leases would make sense. The Cuyana pop-up takes up eight parking spaces and requires three days to install or dismantle. Toyota researchers say they can get that down to one day. “We believe that the platform for the use and provisioning of underused space will play a very critical role in solving society’s pressing problems,” says Baik Hoh, principal researcher at Toyota’s R&D lab in Mountain View, Calif. “And retailers had a problem.” �Kim Bhasin THE BOTTOM LINE A typical retail store can require months of construction and installation time. Cuyana’s portable pop-up takes up only eight parking spaces and can be set up in a few days.

June 14, 2021

▲ Cuyana’s mobile pop-up

SHOP: COURTESY CUYANA. SALTER: BENNETT RAGLIN/GETTY IMAGES. DATA: AUTHENTIC BRANDS

◼ BUSINESS

BUSINESS

Bloomberg Businessweek

June 14, 2021

What’s in a Name? Plenty ○ Jamie Salter’s Authentic Brands has snapped up aging celebrity and retailing monikers to ring up future proﬁts

Jamie Salter started Authentic Brands Group as a licensing business more than a decade ago, often scooping up intellectual property out of the detritus of bankrupt companies like Polaroid and Linens ’n Things. Today he’s buying not only brands but also entire retailers, adding to an empire built on the belief that a bruised but well-known name can still work wonders at the cash register. Authentic is one of a dwindling number of potential saviors for ailing and failed chains. Since last year, Chief Executive Officer Salter has added Brooks Brothers, Eddie Bauer, Forever 21, and Lucky Brand to an eclectic portfolio of more than 30 apparel, celebrity, and sports names that includes Juicy Couture, Sports Illustrated, and Barneys New York. The growth has Authentic considering an initial public offering as soon as this year. After the shakeout of the Great Recession, there were lots of potential buyers for troubled retailers, including private equity firms Sun Capital Partners and Golden Gate Capital. But would-be rescuers can no longer count on the steady cash flow the stalwarts of American malls once provided. Customers have gone elsewhere—to newer, often online-only brands, rental and secondhand clothing merchants, or nowhere at all, with sustainability-minded young people dialing back on clothing purchases. Nor is another prized asset—a retailer’s trove of real estate—the lure it was in the days when Eddie Lampert bought the Sears and Kmart chains. “Unless someone has some secret sauce, people are still nervous about retail,” says Christa Hart, senior managing director at FTI Consulting. “The path forward is not a typical private equity playbook” of streamlining expenses, installing new management, and making strategic investments. Retail’s problem, she says, “is the top line”—revenue. New York-based Authentic eventually created its model by teaming up with landlords. In 2016 it formed a joint venture with Simon Property Group and the predecessor of Brookfield Property Partners, the two biggest U.S. mall owners, to purchase bankrupt teen-clothing chain Aéropostale. Brookfield has since left the partnership, now known as Sparc Group, and last year started its own $5 billion “retail revitalization”

fund. Authentic and Simon each own half of Sparc. David Simon, CEO of Simon, has lauded the partnership to investors, calling it “a winning formula” and Authentic a “very good partner” on an earnings call last year. In an emailed statement, he said, “We look forward to continuing our proven track record of growing brand equity in collaboration with ABG.” There have been a host of potential targets. Since the Aéropostale deal, a wave of familiar names have filed for bankruptcy, including now-defunct merchants such as American Apparel, Gymboree, and Payless. But Sparc, which runs the retailers’ daily operations with its own management team, is choosy, says its CEO, Marc Miller. Sparc considers not only the profile of the brand—its store base, digital operations, and distribution—but also whether the brand provides a novel capability or expertise that can be extended to the other brands in the Sparc portfolio. With Nautica, the draw was wholesale distribution. It was luxury with Brooks Brothers, outdoor wear with Eddie Bauer, fast fashion with Forever 21, and denim with Lucky Brand. Because the joint venture owns so many retailers, Miller says, it can benefit from stronger supplier relationships and shared services, such as investments in 3D digital design to shorten manufacturing times. An $875 million investment by BlackRock’s private equity unit in 2019 helped Authentic pounce when the pandemic devastated retail. “We saw the acceleration of what we considered some great brands to be all of a sudden in a distressed situation,” Miller says. Salter, a 58-year-old Canadian, has spent his whole career in the brand business, beginning when he built up Wayler windsurfers and Kemper and Ride snowboards. He then made his way to the top of Hilco Consumer Capital, where he led deals in partnership with Gordon Brothers Group to purchase intellectual property from bankrupt companies. He started Authentic in 2010 with funding from private equity firm Leonard Green & Partners, buying niche brands like Tapout mixed martial arts and licensing rights to the names of celebrities including Muhammad Ali, Marilyn Monroe, and Elvis Presley. Salter declined a request for an interview, but in August he told Bloomberg News that operating stores is a key part of Authentic’s strategy

Authentic’s brands ○ Apparel and accessory brands ○ Celebrities ○ Other Above the Rim ○ Adrienne Vittadini ○ Aéropostale ○ Airwalk ○ Bandolino ○ Barneys New York ○ Brooks Brothers ○ Eddie Bauer ○ Elvis Presley ○ Forever 21 ○ Frederick’s of Hollywood ○ Frye ○ Greg Norman ○ Hart Schaffner Marx ○ Hervé Leger ○ Hickey Freeman ○ Jones New York ○ Judith Leiber ○ Juicy Couture ○ Julius Irving ○ Lucky Brand ○ Marilyn Monroe ○ Misook ○ Muhammad Ali ○ Nautica ○ Neil Lane ○ Nine West ○ Prince ○ Shaquille O’Neal ○ Sports Illustrated ○ Spyder ○ Tapout ○ Thalia Sodi ○ Thomasville ○ Tretorn ○ Vince Camuto ○ Vision Street Wear ○ Volcom ○

○ Salter

◼ BUSINESS

Bloomberg Businessweek

and enhances the rest of its business, including expanding the online sales that make up a quarter of its retail revenue. Authentic brings management expertise to a brand, not just cash, Salter said last year: “We’re the last men standing because we’re turnaround guys.” There’s plenty of reason for pessimism about mall-based retail. Thousands of stores were closing in the U.S. even before the pandemic, and hundreds of malls could follow. Retailers with a heavy presence in enclosed shopping centers, including Gap Inc. and the Kay and Zales chains, owned by Signet Jewelers Ltd., are shifting stores elsewhere. So it’s early days for Authentic and its partners, FTI’s Hart says. “This strategy is young,” she says. “It’s still in the proving stage.” Still, Salter’s branding conglomeration has fared better than other licensing companies. Iconix Brand Group, the owner of Danskin, London Fog, and Umbro, has been hobbled by debt. Without admitting wrongdoing, it settled a fraud probe in 2019 and has said it’s exploring strategic options. Sequential Brands Group, whose brands include Jessica Simpson and Ellen Tracy, has received multiple default waivers and is dealing with a U.S. Securities and Exchange Commission investigation into its accounting. Authentic and Sparc have begun purchasing healthy retailers, including Eddie Bauer and its 300 stores. But even though retail distress has slowed in the sector after last year’s blowups, Miller says, “the pipeline remains strong.” �Lauren Coleman-Lochner

worlds of make-believe, the massive facility has a mission that’s all too real: keeping Europe’s biggest pay-TV company relevant in the face of Netflix Inc.’s global barrage of bingeable content. Netflix doubled U.K. investment to $1 billion in 2020 and expects even more this year, when Sky (a unit of Comcast Corp. since 2018) will boost spending on original TV and film content by 50%, feeding an arms race for talent and production space. Netflix has practically taken over another major English facility, the historic Shepperton Studios, where owner Pinewood Group Ltd. plans to add 22 soundstages in the biggest-ever expansion of stage space in the U.K. Sky is fighting back by hiking annual spending on original content to £1 billion ($1.4 billion) by mid-decade—double the level in 2018—with half of its output to be made in-house rather than commissioned from third parties. It’s a response to the stagnation of Europe’s pay-TV industry, and a realization that Sky’s traditional supply of hit U.S. shows is coming under threat as giant media companies cut out distribution partners and take content directly to viewers via their own streaming platforms. The merger of AT&T Inc.’s WarnerMedia and Discovery Inc. announced in May underscores the danger to Sky. It could prompt Warner to accelerate the launch of its HBO Max streaming service in Europe. Until now, the companies needed each other—Sky was Warner’s bridge to many of its European viewers, and Warner was Sky’s source for Game of Thrones, Watchmen, and other major shows. Sky has been promoting the latest Warner titles, including the Friends reunion and Mare of Easttown with Kate Winslet, heavily on billboards and TV, proving they remain a pillar of its offerings. A content partnership with Warner’s HBO— which will expire in the middle of the decade—has helped make Warner the largest contributor to the 100 top-rated shows on Sky’s NOW streaming service, according to Ampere Analysis. The recent decline in Walt Disney Co. content available on Sky’s platforms illustrates what could happen when the Warner partnership lapses. In April, 173 Disney and Fox titles were available on NOW, down from 378 in January 2020, before the European launch of the Disney+ streaming service, data from Ampere show. Sky founder Rupert Murdoch built the company into Europe’s most successful broadcasting franchise by outbidding rivals on rights to top-flight soccer. That approach secured the viewers Sky needed to draw audiences to its other channels, but it was costly: The price of English Premier League soccer rights soared thirtyfold between 1992 and 2016.

THE BOTTOM LINE Authentic Brands has successfully bet on plenty of brands that others had given up for dead. But running the mall-based chains it’s bought could be a long-term challenge.

Is Streaming the ● As its content providers start online services, the broadcaster pivots to create its own shows

On a nondescript road on the northern outskirts of London, a TV and film factory the size of 17 soccer fields is under construction. But while the 14 soundproof hangars and sprawling post-production facilities of the Elstree studio complex are being tailor-made to let U.K. broadcaster Sky create

June 14, 2021

“A Netflix show made in Italy has to work around the world. A Sky show in Italy has to work in Italy”

▼ Number of first-run TV shows commissioned by Sky, by date announced 20

0 Q1 ’19

Q1 ’21

GOT: COURTESY HBO. FRIENDS: PAUL DRINKWATER/GETTY IMAGES. WATCHMEN: MARK HILL/HBO/GETTY IMAGES. MARE: MICHELE K. SHORT/HBO/ GETTY IMAGES. DATA: AMPERE ANALYSIS

◼ BUSINESS

Former Sky Chief Executive Officer Jeremy Darroch started to pull back from that soccerdominance-at-any-cost strategy in 2018, when a Premier League rights auction saw prices fall for the first time in 15 years. In late 2019, Sky lost German broadcast rights to the Champions League to billionaire Len Blavatnik’s streaming service DAZN. Then, on March 26, Blavatnik snapped up domestic rights to top-flight soccer in Italy, one of Sky’s biggest markets. Sky has been channeling some of the savings into producing its own entertainment programming. It announced 19 commissioned shows in the first quarter of 2021 alone, 76% of the total for all of 2019, according to Ampere. Sky plans to air 125 original films and shows in the U.K. this year, a 50% increase from 2020. It’s leaned toward big, flashy original programming as it tries to build on recent successes, such as its award-winning HBO co-production Chernobyl, Italian gangster drama Gomorrah, and Sky Germany’s Babylon Berlin. Bigname star projects have included the psychological thriller series The Third Day with Jude Law—the first show Sky has produced totally on its own—and This Sceptered Isle, with Kenneth Branagh playing British Prime Minister Boris Johnson grappling with the first wave of the coronavirus. Sky also wants its shows to be memorable: In the first five minutes of its glossy action-crime series Gangs of London, a man is dangled from the top of a skyscraper by his foot before being set on fire and sent hurtling to the ground. It was Sky’s most watched show last year. The wave of buzzy, star-studded output appears to be working: Nine of the 10 most popular shows on Sky last year were its own commissions instead of U.S. imports. Outgoing Sky Studios CEO Gary Davey says the new productions are designed to appeal to domestic viewers in its main markets: the U.K., Germany, and Italy. Netflix’s investments in countries from France to India to Mexico also have a strong local flavor, but the streaming giant needs to ensure that some of those shows become international hits. “A Netflix show made in Italy has to work around the world,” Davey says. “A Sky show in Italy has to work in Italy.” In January, Comcast Chairman Brian Roberts replaced Sky CEO Darroch with one of the media giant’s own executives, Dana Strong, and so far she’s stuck with the scripted-production drive at the expense of sports. While Sky’s business in Germany has struggled against the country’s free-to-air national broadcasters, the mass cable cord-cutting seen in the U.S. hasn’t hit European pay-TV providers to the same extent, partly because pay TV in Europe is a lot

Bloomberg Businessweek

June 14, 2021

cheaper. American consumers spend $80 to $150 for a TV and broadband cable package, compared to €30 to €45 ($37 to $55) in Europe, according to Richard Cooper at Ampere. Sky is still the unchallenged gatekeeper to 23.4 million households in Europe, forcing Netflix, Amazon, and Disney to strike deals to offer their streaming services via Sky’s set-top box, Sky Q. That gives Sky a rare window on user behavior across competing platforms and data on how viewers react to different story arcs. It also offers subscribers the convenience of a single home entertainment bill, making them less likely to drop Sky itself. As streaming services proliferate, “content is king, but the interface is queen,” says Francois Godard at Enders Analysis. The pandemic hit Sky’s advertising revenue, but it appears to be bouncing back, with Comcast’s European division reporting the strongest firstquarter net subscriber additions in six years. Still, the added competition from the Warner-Discovery marriage and Amazon’s pending purchase of Hollywood studio Metro Goldwyn Mayer could portend a world dominated by global streaming giants, with regional pay-TV services such as Sky becoming outliers. That could encourage Comcast’s Roberts to combine Sky with Comcast’s fast-growing Peacock on-demand platform. “How does Sky fit into Comcast’s global streaming strategy?” asks Ian Whittaker of Liberty Sky Advisors. “This was a question before the WarnerDiscovery deal, but it’s even more in focus now.” �Thomas Pfeiffer

▲ Sky has counted on being Europe’s source for Game of Thrones, Friends, Watchmen, Mare of Easttown, and other blockbusters

THE BOTTOM LINE European pay-TV giant Sky long relied on top-flight sports and big-budget U.S. TV series and films. The rise of global streaming services will force it to reinvent itself.

THIS CHANGES

EVERYTHING

The silicon revolution put a supercomputer in your hand. Gave you broadband at home. Now, it’s about to supercharge your driving experience.

SinanodeBattery.com © OneD Battery Sciences

Bloomberg Businessweek

June 14, 2021

†H3 ΔGE ΔGE T †H3 ºF ºF E C R@N$0MR@N$0M- H W4R∑ W4R∑ N

Hacking

● The hackers who paralyzed a major meat producer illustrate the new normal in cybercrime REvil, the Russian-linked group the FBI has said is responsible for the cyberattack on meat producer JBS SA, operates in the shadows but also in the open. It recruits affiliates online, advertises profitsharing schemes, and gives interviews on its techniques. “Audaciousness is part of their persona,” says Allan Liska, a senior threat analyst at cybersecurity company Recorded Future Inc. Even before the crippling attack on JBS, REvil had developed into one of the key users of ransomware, a type of cybercrime where perpetrators encrypt files on a computer system, rendering them unusable until the victim pays for a decryption key. Some ransomware groups also steal files, providing another avenue for extortion. Since 2017 the technique has overtaken other financially motivated cyberattacks, such as the plundering of personal information, largely because it’s more profitable, says Kelli Vanderlee, senior manager of analysis at Mandiant Threat Intelligence, part of FireEye Inc.

The result has been a wave of unsettling disruptions to institutions that haven’t been traditional targets for hackers. An attack on Colonial Pipeline Co. in May squeezed fuel supplies along the East Coast, and other recent hacks have targeted a hospital network and the police department in Washington, D.C. Victims have spanned the economy, but manufacturers seem to be among the most popular, according to Vanderlee. “There are likely several contributing factors, including the perception that manufacturers may be more likely to pay to prevent monetary losses from production downtime,” she says. REvil has lowered the barriers to making these attacks by pioneering a model known as ransomware-as-a-service, where it provides malware to others in exchange for a cut of the payments. It has advertised on hacking forums for partners, offering to help with technical infrastructure, negotiations over payment, and distribution of funds. “We have been working for several years, specifically five years in this field. We are interested in professionals,” wrote a member of the group in May 2019, according to the security news website KrebsOnSecurity. REvil also recently seeded an account to pay partners with $1 million

O L O G Y

Edited by Joshua Brustein and Andrew Martin

Bloomberg Businessweek

in Bitcoin in an attempt to give them confidence they’d get paid. REvil emerged from the GandCrab group, a ransomware-as-a-service outfit that announced it was closing shop in 2019, according to CrowdStrike Holdings Inc. It’s not clear if the operators of GandCrab simply rebranded themselves or if REvil’s operators bought—or stole—their code. Either way, by the time GandCrab signed off, REvil was already in operation, sometimes known by alternate names “Sodin” or “Sodinokibi.” REvil researches potential targets to ensure they have the means to pay. One thing it checks is whether victims carry insurance against cyberattacks, according to a REvil associate. Targeting companies that had cyberinsurance, he told the website the Record in March, was “one of the tastiest morsels.” In 2019 the group attacked several Louisiana election clerks a week before Election Day. In 2020 it attacked a law firm it claimed had once represented some of Donald Trump’s television enterprises. REvil also took credit for hacking the Taiwan-based hardware supplier Quanta Computer Inc. earlier this year, publishing secret blueprints for new Apple Inc. devices in the process. The group appears interested in cultivating the broader ransomware industry. Its members weigh in regularly on discussions about malware on hacker forums, and it maintains direct relationships with other ransomware groups including DarkSide, the hackers accused of carrying out the attack on Colonial Pipeline in May, says Jon DiMaggio, chief security strategist at Analyst1 in Reston, Va. When DarkSide’s site went down after the Colonial attack, REvil alerted the hacking community, says DiMaggio, who’s long studied Russian cybercriminal gangs. “They’re extremely involved,” he says. “They’re the kid in class who always has to raise his hand.” DiMaggio and other analysts have said that REvil hackers communicate largely in Russian and avoid targeting systems that use Cyrillic script, which is used by the languages of Eastern European and Slavic states. This seems to be a way to avoid alienating the Russian government, which U.S. officials accuse of giving hackers at least tacit approval to operate, making it extremely difficult for the U.S. to stop them without prompting a major geopolitical confrontation. For now at least, many targets REvil and its peers pursue are overmatched. The modern food industry relies on software to control such things as fertilizer and water use in crop fields and other facilities, says John Hoffman, a senior research

fellow at the Food Protection & Defense Institute at the University of Minnesota. There aren’t uniform cybersecurity standards or regulations, he says, and the use of outdated or customized software is common, increasing vulnerability. A cybersecurity consultant who works with a large U.S. meatpacker and asked not to be named in discussing such confidential matters says the state of security in the industry generally is “nonexistent.” A few years before REvil targeted JBS, the company rejected a plan to spend more on cybersecurity because it was too costly, three former employees told Bloomberg News. A company representative disputed their claims. Policymakers are debating what they should do to encourage or force companies to harden their defenses against nimble attackers. Commerce Secretary Gina Raimondo recently urged companies to remain vigilant, though she stopped short of advocating for requirements that companies secure their technologies in specific ways. Other officials have floated the idea of prohibiting companies from paying hackers, or at least requiring them to disclose when they’ve done so. On June 6, Energy Secretary Jennifer Granholm backed a possible ban on ransomware payments. “We need to send this strong message that paying a ransomware only exacerbates and accelerates this problem,” Granholm said. “You are encouraging the bad actors when that happens.” �Jamie Tarabay

June 14, 2021

▼ Average ransomware costs for small and midsize businesses ◼ Ransom amount ◼ All other related costs

$250k

125

0 2015

2019

THE BOTTOM LINE Ransomware has developed into the preferred cybercrime for many financially motivated hacking groups, and the attackers are far more sophisticated than their victims.

Pay Attention to the Man Behind the Curtain ● Vladimir Putin’s tolerance for criminal hackers will be on the agenda when he meets with President Biden on June 16

Early in his rise to the pinnacle of Russian cybercrime, Maksim Yakubets, leader of one of the most successful hacking syndicates in the world, was asked if he was worried about being arrested. “I don’t give a shit about K and FSB,” replied Yakubets, referring to Department K, Russia’s cyberpolice, and the FSB, the main successor to the Soviet KGB, according to a transcript of a

DATA: GALLAGHER

◼ TECHNOLOGY

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2014 web chat obtained by Scylla Intel, a threat intelligence firm. “My neighbor is the second man in the whole FSB.” In just the past three months, criminal hackers tied to Russia have used ransomware attacks to paralyze a key oil pipeline company and cripple one of the world’s largest meat producers. The neighborly relationships some of these hackers have with Vladimir Putin’s government make it extremely difficult for the U.S. to pursue them, an arrangement with clear appeal to the Russian president. “For Putin, it’s a proxy force,” says James Lewis, senior vice president at the Center for Strategic and International Studies in Washington. “The Kremlin has criminal ties that would just be shocking to any Western capital.” The Russian government has denied knowing about or being involved in ransomware attacks. President Joe Biden plans to push Putin on the issue when he meets with him on June 16, although he likely won’t be saying anything Putin hasn’t heard before. Russia’s top hackers occasionally assist intelligence agencies in spy operations in exchange for their protected status, according to national security experts and forensic evidence. The benefits of the arrangement outweigh any pressure from the U.S., according to Christopher Painter, former coordinator for cyber issues at the State Department under President Barack Obama. When it comes to hacking, Painter says, “we have not been good at shaping Russia’s behavior.” There isn’t an obvious fix. Some advocate joining with Europe to apply more political pressure by punishing key Russian industries. Former Secretary of Defense Leon Panetta said in a June 3 interview on Bloomberg Television that Biden should set clear red lines and consequences. He didn’t articulate specific actions that should be taken but mentioned the U.S.’s ability to carry out its own offensive cyber operations. Yakubets’s operation is a prime example of how the Russian government interacts with criminal

hackers. Around the same time he was boasting about his relationship with the FSB, researchers discovered that GameOver Zeus, a type of malware he and his gang had created, had been altered to conduct espionage. It was used to target classified documents in Turkey and Georgia, according to Mark Arena, founder of Intel 471, a cybersecurity firm that tracks Russia’s hackers. By 2018, Yakubets was in the process of obtaining an FSB license to work with Russian classified information, according to the U.S. Treasury Department, which has sanctioned him and his gang, Evil Corp. A $5 million reward by the U.S. for information leading to Yakubets’s arrest so far has had no effect. U.S. law enforcement officials say there’ve been times when Russia cooperated in campaigns to crack down on hacking. During the Obama administration, the Russian government helped identify the leader of a group that had breached Citibank networks to loot the accounts of its customers, according to Austin Berglas, who was assistant special agent for the FBI in charge of cyber investigations in the New York field office at the time. Russian agents even agreed to set up a wiretap on the hacker, Nikolay Nasenkov, before suddenly cutting off cooperation. Nasenkov was indicted in 2013, but, as far as Berglas knows, remains at large in Russia. The relationship went completely cold after Russian hackers interfered in the 2016 U.S. presidential election, forcing the FBI to shift gears. Agents focused more on sting operations aimed at arresting the hackers as they traveled or vacationed abroad. Russia’s foreign ministry criticized those arrests and extraditions to the U.S. as “abductions” and advised hackers to stay within the country’s borders. In a 2017 interview with the international press following the uproar over U.S. election meddling, Putin said: “Hackers are free people like artists. If artists get up in the morning feeling good, all they do all day is paint. The same goes for hackers. They got up today and read that something is going on internationally. If they are feeling patriotic they will start contributing, as they believe, to the justified fight against those speaking ill of Russia.” Meanwhile, top hackers such as Yakubets appear unconcerned that their criminal activities will land them in a jail cell. In 2017 he held a lavish wedding, costing more than $350,000, according to the U.K.’s National Crime Agency. His bride was the daughter of Eduard Bendersky, who owns several companies affiliated with the FSB. �Michael Riley, with Henry Meyer and Jake Rudnitsky THE BOTTOM LINE The Russian government has a working relationship with criminal hackers, and its refusal to give it up puts the U.S. in a bind.

June 14, 2021

▼ Value of cyberinsurance policies in force, U.S.-based insurers

$3b

0 2015

2019

DATA: NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS

◼ TECHNOLOGY

TECHNOLOGY

Bloomberg Businessweek

ILLUSTRATIONS BY MATIJA MEDVED. PERCOCO: COURTESY OF KRAKEN DIGITAL ASSET EXCHANGE

Because You Can Never Be Too Careful There’s an organization where children of employees have to sign nondisclosure agreements before attending company parties—the only exception is for kids who haven’t yet learned to write—and where a parent had to explain to his 8-year-old that she couldn’t exchange Pokémon with friends because the boss forbids her from connecting her Nintendo Switch to the internet. When he goes to work, that same father has to leave his made-toorder suit, luxury French watch, and classy leather shoes in the closet, donning a $9 Uniqlo T-shirt and jeans to blend in with the crowd near the office. This organization isn’t an underground criminal group or an intelligence agency—it’s Payward Inc., the San Francisco-based company established in 2011 to operate the cryptocurrency exchange Kraken, which investors now value at $10 billion. Nick Percoco, the company’s lushly bearded chief security officer, says ransomware attacks often start with cybercriminals digging up personal information about employees online and using it to tailor phishing emails containing malicious software. So he’s set out to install a company culture of vigilance—some would say paranoia—about guarding personal information. “Security has become part of our culture in a way that I don’t even have to say it much anymore,” says Percoco, a 25-year cybersecurity veteran. “I feel it.” Payward’s guiding principle is that a lax security mindset in one’s private life bleeds over to work. New employees spend two days in security classes, then three days setting up office PCs and passwords. Then there’s a week to go over a 70-item checklist of recommended personal security measures, including setting up hardware token login authentication for personal devices, installing alarms and surveillance cameras at home, and closing social networking accounts. After the initiation, employees are prohibited from using public USB charging ports, identifying themselves as Kraken workers, or sharing the location of their offices with family members. The devices of any employee who downloads unusually large chunks of data, gains access to suspicious websites, or uses a phone in unusual ways are immediately locked down, followed by a call seeking explanation.

June 14, 2021

○ A cryptocurrency company goes to extreme lengths to keep employees from undermining its security

So far, Percoco says, Payward’s cybersecurity defenses haven’t been breached, even though crypto trading platforms are an attractive target for hackers, and the company is regularly hit with hacking and phishing attacks. Masanori Kusunoki, a director of the Japan Virtual and Crypto Assets Exchange Association, sees Payward’s measures as extreme but sensible. “It is surprising that a company is successfully implementing such strong measures to all the employees, because people don’t like to spend that much energy on cybersecurity,” he says. Takeshi Chino, Payward’s Japan chief—and the one who has to commute in costume—can’t tell his wife the physical location of the office. He is one of the few executives the company has authorized to acknowledge publicly that he works at Payward, a privilege gained only after the security team audited all the information that could be gleaned about him by searching the public internet, dark web, and government records. Chino, 37, also supervised his then 6-year-old son as the boy signed his first NDA before attending a company event two years ago at an Italian restaurant. “I heard from people that Kraken is crazy about security before I joined, and yes, it is really intense about it from Day 1,” Chino says in a video chat, where his background is completely black except for the company logo. “But that’s what it takes.” —Takashi Mochizuku and Yuki Furukawa THE BOTTOM LINE Convinced that most security breaches start with compromised employees, Payward has nurtured a culture of extreme vigilance about how workers act in the office and at home.

○ Percoco

DON’T BOX YOURSELF IN.

Bloomberg Businessweek

June 14, 2021

HAVE FUN STAYING

POOR

F I N A N C E

PHOTO ILLUSTRATION BY 731; PHOTOS: GETTY IMAGES (2); SHUTTERSTOCK (3)

The FOMO Economy ● From AMC to Dogecoin to houses, buying seems driven as much by anxiety as by hope Billionaire trader and investor Stanley Druckenmiller bought Bitcoin after watching its price go up and feeling the fear of missing out, aka FOMO. “I felt like a moron,” he said in an interview with the online news site the Hustle in May. He cashed out part of his $20 million bet after prices soared—“my heart’s never been in it”—but described the stampede of money managers into the cryptocurrency as an elephant trying to fit through a keyhole.

Druckenmiller has felt the FOMO before. In 1999 he loaded up on $6 billion worth of tech stocks, only to lose $3 billion in six weeks. “I was just an emotional basket case, and I couldn’t help myself,” he said years later. This time around, he looks more like a bellwether for a broader kind of investor panic-buying in developed economies after a bruising pandemic year. We are all Stanley Druckenmillers now. It’s not just crypto: It’s stocks such as those of AMC Entertainment Holdings, GameStop, and Tesla that are beloved on Reddit and Twitter, and it’s the houses and condos being snapped up almost as soon as they list. The pressure to keep up with neighbors, friends, and social media meme lords who seem to be in the process of

Edited by Pat Regnier

Bloomberg Businessweek

becoming extremely wealthy—or, at least, talking about it—can feel unbearable. It’s only human, and, as Druckenmiller’s example shows, it’s not something only small investors and novices feel. Telecommunications companies overinvested like a thundering herd in the 1990s, and a lot of them went bust in unison as a result. In the early 2000s, few bankers were willing to tap the brakes on increasingly risky and baroque mortgage investments. Today, a new generation of stock traders has known market crashes only as short-lived dip-buying opportunities, leading to a record rise in brokerage account openings. Rock-bottom interest rates have fueled big profits on flipping real estate— some $66,000 on average per home, according to research firm Attom Data Solutions. People flush with pent-up savings after a year of lockdowns have more ways than ever to throw darts at the financial dartboard: zero-commission, zero-minimum trading apps; social media message boards; and exchange-traded funds you can hop in and out of as easily as stocks, including a few that explicitly play to the trend-chasing crowd with such tickers as BUZZ and, yes, FOMO. Cryptocurrencies too have low barriers to entry and trading, which may have helped them rise once they got moving. Those roller-coaster price charts can be consulted day or night and on weekends. Thanks to Twitter, WhatsApp, and YouTube you’re probably fewer degrees away from someone sitting on a meme-coin fortune than you are from Kevin Bacon. What makes the current wave of FOMO a broad economic phenomenon is that its ripple effects are so widespread. It’s one thing to observe market mania playing havoc with the real-world value of cinema chains and video game stores. But now the value of financial expertise is melting in the heat. Financial advisers are under pressure to talk about crypto with their clients and are “terrified” of looking dumb, as one told CNBC. Bankers who once strode into boardrooms and told executives how to run their business are now facing executives whose companies are going public at billion-dollar valuations without any revenue. David Chermont, head of international investorrelations consulting firm Inbound Capital, wrote in a client note that the market is in the grip of “equity populism.” Even among the political class, the rhetoric is one of a wave—similar to the discourse of investors who claim that if they don’t get on board, they’re NGMI (not gonna make it). U.K. Conservative politician Tom Tugendhat recently stood up in Parliament and warned his colleagues that the

dominance of Ethereum over Bitcoin was coming and that huge changes in innovation were afoot. Edmund Shing, chief investment officer at BNP Paribas Wealth Management, identifies several factors spurring interest in trading: central bank and government stimulus, $5.4 trillion of extra savings around the world compared with pre-pandemic spending patterns, and a generational wealth gap that makes any lottery ticket to riches look increasingly attractive relative to patient clock-punching until retirement. (Incidentally, actual lottery tickets have also grown in popularity.) The best handme-down wisdom for wannabe millionaires may be to knuckle down, study hard, work hard, and save with the power of compound interest. But millions of graduates have been hitting a job market cratered by Covid-19, and that’s on top of a $1 trillion increase in student debt in the U.S. since the financial crisis. It’s easy to see how celebrities and influencers touting crypto schemes and giveaways cut through. Even for the most levelheaded young people, it’s tempting to imagine that one great score on Bitcoin or stock options could wipe out a student loan, help start a business, or put a down payment on a home. Speaking of housing, the pressure to participate in this booming market strikes deep, as a roof over one’s head is the key to any retirement or economic security plan. Watching prices climb, people with little taste for speculation may nonetheless feel the urge to take on a bigger mortgage lest they be priced out of New York or London or a suburb within commuting distance of any thriving city. Many economists say that there’s no property bubble yet and that higher values reflect stimulus-boosted incomes and affordable borrowing rates (page 32). But the median price for a single-family home in the U.S. rose the most on record in the first quarter, according to the National Association of Realtors. One lesson of the last housing boom is that when buying becomes reflexive, and investors feel that the most dangerous move is not to buy, prices can quickly break free from fundamentals. The narratives about why we invest have economic power. The pandemic has accelerated a feeling of helplessness alongside technological disruption and euphoria at the possibility of huge returns—rather like the dot-com boom, when the internet was understood less in technological terms than as a powerful story. It was a “person-to-person contagion of thought” spread through rising stock market prices, according to economists George Akerlof and Robert Shiller. Another cause of FOMO right now is the lack of a strong competing narrative. Warning against risky short-term speculation and saying “it’ll all end

June 14, 2021

“I was just an emotional basket case, and I couldn’t help myself”

▼ Retail trading as a share of U.S. equity volume, estimated

20%

0 2010

2021

AS OF Q1

ILLUSTRATION BY GRAHAM ROUMIEU. DATA: BLOOMBERG INTELLIGENCE

◼ FINANCE

Bloomberg Businessweek

in tears” are widely derided as boomerisms. Partly because it seems out of touch with Generation Z’s economic reality, but also because asset prices keep bouncing back. Bitcoin’s rebound from a more than 80% decline in 2018 to a record high this year, along with property and stocks, is classic regret fuel for those who missed out. Index investing pioneer Jack Bogle always promoted boredom as a virtue: “If you’re in investing for excitement, you are a damn fool.” It says something that financial professionals are now gritting their teeth and dabbling in crypto rather than sticking to the get-rich-slow machine of the stock market. Speculative forces tend to move in hard-to-predict cycles that leave deep scars. Historian H.W. Brands described how the 19th century gold rush in California displaced a Protestant work ethic and agrarian ethos in favor of a get-rich-quick, something-for-nothing mentality. “El Dorado, not some Puritan city on the hill,” he wrote, became the American dream. It’s easy now to dismiss regulatory warnings against misleading advertising, investing frauds, and reckless crypto investing as puritanical and old-fashioned. But at some point we may wonder why people couldn’t see the flashing red lights. Until then it should at least be possible, without finger-wagging, to suggest that life loses something when it’s built around FOMO. A recent Bloomberg News story about an MIT cryptocurrency project pointed out that some alumni were sitting on life-changing gains from tokens that were handed out free to students seven years ago. Yet credit should surely go to the one graduate who claimed to feel no remorse from selling her Bitcoin early on: “It was free money … I got an MIT degree, which is the most important thing to me.” Why put those hit by crypto lightning on a pedestal? Some experts believe the cure for FOMO will be a rise in interest rates as inflation picks up. Schroders CIO Johanna Kyrklund reckons risky moonshot investments will be less enticing once safer ones such as bonds start to pay more. Referencing the boomerish Huey Lewis and the News song Hip to Be Square, she suggested in March that portfolio diversification, patience, and prudence—and not Bitcoin— would soon be back in vogue. But that’s cold comfort as long as brokerage balances keep getting passed around on Reddit and vaccine euphoria fades. If even Stanley Druckenmiller didn’t learn his FOMO lesson the first time around, what hope is there for the rest of us? �Lionel Laurent, a columnist for Bloomberg Opinion

Trouble at the ‘Cop of the Cops’

THE BOTTOM LINE Young people facing high housing costs, student debt, and a very weird job market may see investing as an escape route. But even old pros find moonshots hard to resist.

June 14, 2021

● The regulator that’s supposed to stop accounting fraud is getting overhauled—again

For a Washington regulator that pretty much nobody has heard of, the Public Company Accounting Oversight Board is suddenly getting a lot of attention—and for all the wrong reasons. On June 4 the U.S. Securities and Exchange Commission, which oversees the board, fired Chair William Duhnke. The move came after several weeks of progressives and investor advocates calling for a change of leadership. The PCAOB has a vital role: policing the auditing firms that sign off on companies’ books. Ultimately, its job is to stop frauds like those that caused the collapse of Enron and WorldCom. But since Congress created the PCAOB in 2002, it’s brought few big cases. 29

Although Duhnke is in the spotlight now, the PCAOB has a history of dysfunction that precedes him. Its first chair quit before the organization even found office space, after it turned out he sat on the audit committee of a company under investigation for securities fraud. Years later the board was rocked by a pair of scandals. One hasn’t been previously reported: In 2016 a board member quietly left after his affair with a staff member was discovered by an employee—who then tried to use the information to blackmail the PCAOB. A bigger bombshell came in 2018, when the U.S. Department of Justice unveiled charges against

Bloomberg Businessweek

three former PCAOB employees who allegedly helped the Big Four accounting firm KPMG cheat on the watchdog’s inspections. Duhnke’s appointment was part of an effort to start over. A new five-member board slate, including him as chair, was put forward in late 2017 by then-SEC head Jay Clayton, an appointee of former President Donald Trump. It was unanimously supported, including by the one Democrat then on the SEC. But Duhnke’s critics say he followed the Trump administration’s deregulatory playbook, cutting the PCAOB’s inspection budget as enforcement cases fell by about half. And he was dogged by internal strife and complaints about his management. “Yes, the PCAOB needed to get cleaned up,” says Lynn Turner, a former SEC chief accountant. “But it’s not getting cleaned up, it’s getting worse.” The PCAOB is a nonprofit corporation funded mainly by a special fee public companies have to pay. The chair makes $673,000 a year, and the other four board members earn $547,000—high salaries that are supposed to attract leaders with the skills to keep an eye on some of the world’s most sophisticated accountants. “The PCAOB is the cop of the cops,” says Jeff Hauser, who runs the Revolving Door Project and wrote a letter with 10 other liberal groups on May 13 calling for new SEC Chair Gary Gensler to fire the entire board. In a May 25 letter also asking Gensler to act, Senators Elizabeth Warren and Bernie Sanders said the PCAOB has long been “a troubled agency,” contending that under Trump things got even worse. They said it’s been led by “partisan cronies with a deregulatory agenda and little relevant experience.” The senators urged the SEC chair to move quickly, saying that as the stock market continues its torrid rise, more small investors are vulnerable to fraud. Duhnke’s critics say that besides cutting the inspections budget, he did away with an outside investor advisory panel and took more than a year to fill top jobs such as enforcement director. Although he had no experience with accounting, he spent 20 years as an aide to powerful Republican Senator Richard Shelby of Alabama. (By law, only two board members can be certified public accountants.) Duhnke’s moves to impose what he’s called “cultural changes” inside the PCAOB caused their own turmoil. He fired more than 20 senior officials. His defenders say he acted with the unanimous support of the other board members on all major personnel decisions, and getting consensus was a reason hiring was slow. The overall budget, they say, hasn’t shrunk since he took over. “We made quite a few changes when the new board arrived, and those changes definitely rocked

the boat,” Duhnke said shortly before his removal. “My goal with each and every change is to leave the PCAOB in a much stronger place.” He added that the board’s preliminary 2020 inspection results of the largest audit firms show the greatest improvement in audit quality in the past decade. The PCAOB board hasn’t been immune from tension. At a meeting in October 2019, then-board member Jay Brown and Duhnke got into a heated argument sparked by a news leak. According to three people who were briefed on the dust-up after it happened but asked to remain anonymous to discuss an internal squabble, Duhnke whizzed an empty soda can toward Brown. (He was near a trash can, which may have been the intended target.) Then, as Brown tried to leave, Duhnke physically blocked him from the door. Shaken up after the confrontation, Brown discussed with an SEC official the possibility of reporting Duhnke to the police. Reached for comment, Brown said that this description of events was “not correct” but that he wouldn’t respond further. According to some of the people, Brown spoke to Clayton about the episode, prompting an investigation by the SEC’s inspector general. Duhnke says the probe found no basis for the allegations, which he calls “absurd.” A 2019 whistleblower letter purporting to be from a group of current and former employees laid out the firing spree and described renovations where Duhnke ordered his office suite walled off from the rest of the staff. More recently, a wrongful termination suit filed in March by Sue Lee, chief administrative officer, accused Duhnke of targeting Democratic workers and using anti-Chinese slurs in reference to the Covid-19 pandemic. Duhnke denied the allegations and filed a counterclaim, contending Lee billed the board for personal travel and improperly expensed items, including a pair of AirPods. Lee, in her court response, said that the AirPods were provided for work use and returned and that all her travel was approved by the PCAOB. The firing of Duhnke was signed off on by a vote of the five-member SEC, which has three Democrats and two Republicans. Democratic Commissioner Allison Herren Lee is married to Brown, the former PCAOB board member. The SEC didn’t say how each commissioner voted, but the two Republicans issued a statement blasting “the hasty and truncated decision-making process.” The SEC made current board member Duane DesParte the acting chair but added that it would seek candidates to fill all five PCAOB seats. —Robert Schmidt and Ben Bain THE BOTTOM LINE In its almost two decades, the PCAOB has been hobbled by everything from a blackmail plot to a fraud scandal to a complaint over a thrown soda can. It’s brought few big cases.

June 14, 2021

○ Duhnke

DUHNKE: AP PHOTO

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Edited by Cristina Lindblad

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June 14, 2021

The Housing Market Is on Fire But don’t panic. Even with prices soaring, there’s little evidence we’re headed into a crisis The parallels are hard to ignore: the record prices, the bidding wars, the subdivisions that fill up as soon as they’re built, the resourceful buyer who clinched a deal by dropping off cupcakes that matched the home’s interior paint colors. Today’s real estate market feels a lot like the bubble market circa 2006. “The numbers don’t make sense. How do you make a rational offer on a house when you have irrational people in the game?” asks James Carmer, a software engineer who’s toured more than 100 houses in Austin. So are we staring at another housing bubble? One hopes not, because when the last one burst, it triggered a global financial crisis and what at the time was the deepest economic downturn since the Great Depression. For most Americans, a home is their most valuable asset—as well as the collateral for a pile of debt. If housing goes down, so does the economy. “Real estate is suddenly pretty bubbly in almost every interesting market in the world,” said bearish investor Jeremy Grantham at a recent Morningstar Inc. investment

conference in Sydney. “Eventually there’ll be a day of reckoning.” To figure out whether U.S. housing is due for a correction requires digging into a hundred factors, from the rate of household formation to the output of lumber mills. And it’s unclear in which direction those signals are pointing. There’s one very big difference between then and now, though: Mortgage loans are much harder to get. An index of mortgage credit availability reached almost 870 in June 2006. This March it was just 125. Lenders have raised lending standards even beyond the requirements of the Dodd-Frank Act of 2010, which was passed in response to the financial crisis. Loans are smaller in proportion to house values and borrowers’ income. Borrowers’ average credit scores are higher. And you can’t bluff your way into homeownership with a no-doc or low-doc loan—i.e., one that allows you to attest to your creditworthiness without providing full documentation. The upshot is that while house prices could

U.S. home prices are rising faster than they did in the runup to the housing bust ①. The biggest reason is that builders haven’t kept up with soaring demand ②, so home inventories are tight ③. But low mortgage rates have helped with affordability ④. Plus, lending standards are high ⑤.

Change in house price index 4/2002 to 4/2007 3/2016 to 3/2021 40%

① 20

0 Month 1

Month 61

DATA: FEDERAL HOUSING FINANCE AGENCY, JOHN BURNS REAL ESTATE CONSULTING, NATIONAL ASSOCIATION OF REALTORS, U.S. CENSUS BUREAU, MORTGAGE BANKERS ASSOCIATION

◼ ECONOMICS

Bloomberg Businessweek

flatten in the next few years, the conditions for another crash are absent. Rather than over-easy credit, the main factors in the current price runup are tight supply and strong demand, both of which are likely to continue. Right now, the biggest threat to the housing market is a sharp increase in the current ultralow mortgage rates, which have moderated the impact of rising home prices. It’s not an imminent risk, though. The Federal Reserve has bought almost $1 trillion in mortgage-backed securities to keep mortgage rates down since resuming its purchases in March 2020 and doesn’t plan to stop anytime soon. The Mortgage Bankers Association predicts the rate on the average 30-year fixed-rate mortgage will rise from 3.1% this quarter to 3.5% at the end of 2021 and 4.2% at the end of 2022. (The rate averaged 6.4% in 2006.) Also on the plus side, only about 0.1% of mortgage loans issued this year carry adjustable rates, compared with about 60% in the bubble years. So homeowners today won’t be shaken out of their homes by rising rates. Soaring home prices may not be as destabilizing to the financial system as they were in the last bubble, but they do contribute to rising inequality by boosting the wealth of homeowners at the expense of renters. CoreLogic Inc., a data provider, estimates that homeowners’ equity in mortgaged homes increased 16%, or $1.5 trillion, last year alone. It says only 2.8% of people owed more on their mortgages than the homes were worth at yearend, down from 26% who had negative equity in late 2009. That makes the market less fragile. Most people who can’t make payments— say, because of a job loss—can sell at a profit and avoid foreclosure.

On the outside looking in are renters like Carmer, 35, and his wife, Betsy Herrington, 38, a teacher. Their top priority is a nice backyard for their 3-year-old daughter, Chloe. But they keep getting outbid. According to Redfin Corp., the online brokerage they’re working with, 72 houses in metro Austin have sold for $300,000 or more above their asking price in 2021 alone. Herrington says Chloe is sick of the hunt. “She cannot handle going to another house. She says, ‘We’re not going to look at a house, Mommy?’ ” There are conflicting signs as to whether the past year’s runup in prices is losing momentum. The Mortgage Bankers Association’s index of applications for mortgages to purchase a home (as opposed to refinancing) fell to 269.6 in the week of June 4, down from 342.8 in the week of April 16. Downturns in mortgage applications usually presage downturns in purchases of existing homes a month or two later, says Michael Fratantoni, the association’s senior vice president for research. On May 19 the group predicted that median sales prices of new and previously owned homes will be slightly lower in the fourth quarter of 2021 than in the current quarter. The National Association of Realtors’ index of pending home sales, a forward-looking indicator, fell 4.4% in April and is down 19% from its August 2020 peak. “In the last couple of weeks, things have slowed down a little bit. It feels like we’re reaching the peak in terms of how competitive the housing market has gotten,” says Daryl Fairweather, Redfin’s chief economist. “People are kind of burnt out,” she says. “This summer we won’t see things be as absurd as things were in the first half of the year.” Then again, the rally may still have some running room because the market remains

New

◼ Q1 2002 to Q1 2007

Existing

◀ Tightening supply 0.4

0.5

Expanding ▶ supply 0.6

◼ 4/2016 to 4/2021 12

More affordable ▲ 200

150

◼ 6/2016 to 12/2020 800

④

0.7

③

1980s

1990s

2000s

◼ 6/2004 to 6/2007

◼ Q1 2016 to Q1 2021

◼ 4/2002 to 4/2007

“How do you make a rational offer on a house when you have irrational people in the game?”

Mortgage credit availability index, semiannual

Housing affordability index

Months’ supply of homes for sale

Ratio of construction starts to adult population growth

June 14, 2021

400

⑤

②

2010s

0 1/1999

4/2021

100 Q1 1999

Q1 2021

0 6/2004

12/2020

Bloomberg Businessweek

drum-tight. There were only 2.4 months’ worth of previously owned homes for sale in April at the then-current sales pace. The low in the bubble years was 3.6 months (though one reason for the decline is information technology that enables faster turnover). Edward Pinto, a resident fellow at the American Enterprise Institute, predicts that prices will rise by as much as 18% annually through July, and that in 2022 prices will rise about 10%. “I think we’re going to see quite a bit more price appreciation,” says John Burns, chief executive officer of John Burns Real Estate Consulting, without giving a number. That, he says, “will make the market even riskier.” One reason to expect things won’t loosen up right away is that the tightness has been years in the making. Having overbuilt in the 2000s, chastened homebuilders underbuilt in the 2010s, according to a calculation by Burns of the number of housing units added per additional adult in the U.S. population. And now millennials, the largest generation, are reaching their peak homebuying years at a time when starter homes are in the shortest supply. On June 7, Bank of America Merrill Lynch estimated that only 65,000 starter homes were completed in 2020, less than a fifth the number built annually in the late 1970s and early ’80s. Investors who want to buy and rent out homes for the cash flow are an additional stress on the market because they reduce the supply of existing homes available for purchase. Since 2019, housing demand has been driven “almost equally” by investors and homeowners, Burns estimates. The pandemic has also left its imprint on the housing market. High lumber prices because of last year’s mill shutdowns have added almost $36,000 to the price of a new home, according to the National Association of Home Builders. There’s definitely speculative froth in today’s market. An April survey of consumers by the University of Michigan found that the average expectation for house price increases over the next year was 3.5%, the highest since the question began to be asked in 2007. If house prices flattened or fell, some shoppers would undoubtedly hold off to see if they could get a better deal, exacerbating the downturn. On the other hand, conservative mortgage underwriting limits the risk of cascading defaults. Houses are expensive, all right, but this doesn’t look like a dangerous bubble. �Peter Coy

A Climate To Fear

THE BOTTOM LINE Home prices are rising at an even faster pace than in the lead-up to the last housing crisis, but by some key measures there’s less risk of a blow-out.

June 14, 2021

● Central America’s subsistence farmers are fleeing increasingly severe droughts and storms

José Mario Antonio Milla can remember a time when he could count on the rain. In La Laguna, a hamlet of about 60 families in western Honduras, showers used to start at the end of April and continue through November. In a good year, farmers in the area could harvest as much as 8 tons of corn— enough to feed their kin, with some left over to sell. “That was in the old days, 15 or 20 years ago. No one harvests those quantities anymore,” he says, adding that it’s already June and not a drop has fallen on his 2 acres. Several of Milla’s neighbors and relatives have quit trying to wring a living off the land and have moved to the cities, while others hired coyotes to smuggle them into the U.S. The so-called Northern Triangle is plagued by chronic violence, corrupt governments, and a lack of economic opportunities—factors that send more than 300,000 El Salvadorans, Guatemalans, and Hondurans fleeing their countries each year, according to estimates by academics at the University of Texas at Austin. Farmers, who in some of these nations make up almost one-third of the population, are battling another menace: extreme weather. Central America is among the most vulnerable regions on the planet to climate change, despite producing less than 1% of global carbon emissions, according to the World Bank. Residents of the Northern Triangle have endured five drought years over the past decade. In 2018 alone, a dry spell caused crop losses for at least 2.2 million people, according to the Food and Agriculture Organization of the United Nations (FAO). Most of them were subsistence farmers with no crop insurance who were growing corn and beans. Last year’s Hurricanes Eta and Iota destroyed homes, crops, and roads, affecting 8 million people across Central America. Additionally, infections such as leaf rust, exacerbated by climate change, are increasingly killing coffee crops, one of the region’s top exports. “These consecutive years of extreme drought are really driving poverty and food insecurity in the region and pushing families to abandon agriculture and to migrate to survive,” says MarieSoleil Turmel, a soil scientist with Catholic Relief Services, which works with farmers in the area. “Whole communities are being wiped out.”

▼ Share of population suffering from crisislevel* food insecurity or worse Honduras

31%

Guatemala 23

El Salvador 10

FRANCESCA VOLPI; *TYPICALLY DENOTES HIGH OR ABOVE-USUAL ACUTE MALNUTRITION. DATA: GLOBAL NETWORK AGAINST FOOD CRISES

◼ ECONOMICS

The devastation has left millions in need of food assistance. In Honduras, 31% of the population is experiencing crisis levels of food insecurity, as is 23% in Guatemala and 10% in El Salvador, according to the UN’s global report on food crises. Flooding caused by Eta and Iota, which hit two weeks apart, destroyed Vicenta De León’s entire corn patch in Chajul, Guatemala, and killed her chickens, turkeys, pigs, and a horse. Several dozen homes were washed away in the town of 45,000 people, she says. While de León is trying to rebuild, some of her neighbors have left altogether, possibly en route to the U.S. “There is no harvest this year because we lost everything,” she says. De León and her husband now work odd jobs around town to support their six children but have been forced to cut back portions at meal times. “We’re doing everything we can to make money, but it’s not enough,” she says. The Biden administration has pledged $4 billion over four years to help tackle the root causes of migration from Central America, including the climate crisis. In April, Vice President Kamala Harris also announced $310 million in humanitarian assistance for the countries in the region. “One of the areas of focus for us is the issue of hunger, hurricanes, pandemic, and what these acute factors have caused in terms of the reason for the migration that we are seeing,” Harris said on June 7 during a visit to Guatemala. “They are leaving not because they want to, but because they have no resources.” Since the start of the year, U.S. authorities have apprehended or denied entry to more than 200,000 Central Americans at the southern U.S.

border, expelling many of them to Mexico. A study published in April by the Inter-American Development Bank, the Universidad de los Andes, and the University of Colorado Denver found migration from El Salvador rose after a severe drought in 2014-15, with more households reporting they had family members in the U.S. The International Organization for Migration (IOM) has also found a positive correlation between hurricanes and migration to the U.S. from the region. While some weather events are unavoidable, investing in mitigation like building stronger infrastructure, planting more resilient crops, and diversifying economies so towns are less dependent on climate-sensitive jobs could help soften the blow, according to Pablo Escribano, IOM’s regional specialist on migration, the environment, and climate change. Still, “the projections are for more intense and more frequent hurricanes, and some areas of Central America will see drought conditions increase. The situation is very challenging.” Back in La Laguna, Milla can at least count on the $100 his two sisters living in Pennsylvania send every few months. He says he wants to keep farming as long as he can, and is experimenting with different irrigation methods and fertilizers to increase crop yields. He would consider moving to the U.S. if he’s able to secure a visa and working permits. “It’s hard to make extra money here to survive, so that’s why people leave,” he says. “Everyone here lives off their harvests, and that depends on the rain.” �Michael McDonald THE BOTTOM LINE As much as one-third of the population of the Northern Triangle is experiencing crisis levels of food insecurity as climate change slashes crop yields.

▲ Working the fields in Honduras

SEDITION HUNTERS

● Amateur sleuths pore over photos and videos online to ID Capitol rioters

Edited by Amanda Kolson Hurley

As he watched footage of the Jan. 6 siege of the U.S. Capitol, Chris Sigurdson, an out-of-work actor in Canada, found himself drawn to a disturbing image: a man in an olive sweatshirt spraying chemicals at the police. On the man’s face, Sigurdson says, was a look of “demented glee.” Sigurdson, 58, had been growing obsessed with the riot, spending 40 hours a week combing through photographs and videos. He noticed a resemblance between the man in the sweatshirt and

a rioter who bragged about attacking police officers in a different video recorded at a hotel in Virginia. When he looked closely, he could see that they were the same person, carrying the same backpack. Sigurdson posted his findings on Twitter at the end of January. Two weeks later, the FBI arrested Daniel Ray Caldwell of The Colony, Texas. An affidavit cited Sigurdson’s tweet as evidence. (Caldwell has pleaded not guilty to the seven federal crimes he’s charged with.)

PHOTOGRAPH BY CAYCE CLIFFORD FOR BLOOMBERG BUSINESSWEEK

P O L I T I C S

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Bloomberg Businessweek

June 14, 2021

The arrest was an early triumph for the growing community of self-proclaimed sedition hunters—a motley assortment of internet sleuths who’ve spent hundreds of hours analyzing the reams of footage that emerged from the insurrection. Over the past few months, the sleuths have coalesced into an expansive network that shares and cross-references videos and social media posts, dissecting the material on Twitter or in private group chats on platforms such as Discord. “Every person brings a piece of the puzzle together,” Sigurdson says. “People are only able to really hone in on somebody based on the work that everyone else is doing.” Senate Republicans recently blocked a bill in Congress to create an independent Sept. 11-style commission to investigate the riot, making it increasingly unlikely that the U.S. government will ever produce a comprehensive and impartial accounting of the attack. On the internet, however, ordinary people are conducting investigations of their own, bolstering the FBI’s official inquiry while raising concerns that untrained vigilantes might broadcast the personal information of innocent people. Five months on from Jan. 6, the authorities have brought charges against more than 400 rioters, often using the traditional tools of law enforcement, such as search warrants and confidential informants. But they’ve also relied on the crowdsourcing efforts of sedition hunters. In the days after the riot, the FBI saw a 750% increase in daily calls and electronic tips to its main hotline. The bureau still receives twice the normal volume of

alerts. Such tips have proved helpful in “dozens of cases,” says Samantha Shero, an FBI spokesperson. “The public has provided tremendous assistance to this investigation, and we are asking for continued help to identify other individuals.” Despite the hundreds of arrests, there remain significant unanswered questions about the riot, from the extent to which Donald Trump’s allies aided the protesters to the level of coordination among farright groups. Those mysteries have helped turn sedition hunting from a crowdsourcing project into a kind of internet subculture. Amateur historians of the John F. Kennedy assassination could rewind the Zapruder film only so many times; Capitol riot obsessives have a seemingly infinite amount of footage to examine. Websites have popped up with titles like January 6 Evidence or Sedition Hunters, featuring research tools assembled by the sleuths: a gallery of hundreds of rioters, each identified by a hashtag such as #Tweedledumb or #camocrazyeyes; a map connecting videos of the siege to specific locations around the Capitol; and a set of links to annotated videos. Many sedition hunters share their best information with FBI agents or investigative journalists. But as with previous online crowdsourcing initiatives, the effort has had some high-profile misfires. A retired Chicago firefighter was falsely accused of participating in the riot after footage surfaced showing a lookalike hitting police with a fire extinguisher. So was the actor and martial artist Chuck Norris. Even accurate identifications can set a dangerous precedent and may embolden far-right groups to employ similar tactics against their own targets, says Oren Segal, vice president of the AntiDefamation League’s Center on Extremism. “As soon as you put someone’s personal information out there, you just don’t know what’s going to happen,” Segal says. “When you do it publicly, there’s just a lot more that can go wrong.” Still, the online sleuths appear to have learned from past mistakes, like Reddit users’ misidentification of a suspect in the Boston Marathon bombing in 2013. Several Twitter accounts that have helped mobilize Jan. 6 research efforts explicitly warn their followers to avoid naming suspects, urging them to report personal information to the FBI. Most sedition hunters contacted by Bloomberg Businessweek were reluctant to speak on the record for fear of retaliation from internet trolls. One expressed concern that the “layers between those we work on and the former administration are paper thin.” Another declined to be interviewed but offered to provide the names of rioters who haven’t been arrested.

▼ An affidavit filed in connection with the case against Caldwell, which cites a tweet by Sigurdson

◀ Two people wanted by the FBI for separate incidents of assaulting a federal officer on Jan. 6

Bloomberg Businessweek

Many of the sleuths have treated the project as a full-time job, creating infrastructure to help fellow investigators sort through the footage. A sedition hunter in California built a facial recognition database that the community has used to identify rioters. Such tactics have sparked concern among civil liberties advocates, who argue that the proliferation of facial recognition technology has eroded privacy. The database’s creator, who works in the health-care industry, defended the tool, saying it simply automated the time-consuming process of cross-referencing Jan. 6 images. He used the technology to identify Taylor Johnatakis, a podcaster from Washington state who was later charged for his role in the siege. ( Johnatakis pleaded not guilty.) The creator says he felt a civic obligation to alert the FBI but took no joy in Johnatakis’s arrest: “I hope the justice system is forgiving.” The sleuths’ stated motivations range from righteous outrage to a nerdy fascination with the technical challenges of identifying suspects. “We want these people brought to justice,” says Forrest Rogers, a German American business consultant who helps run a sedition-hunting group called Deep State Dogs. “And we don’t want a random sampling of them, a token group.” Sigurdson says his interest stemmed from a combination of curiosity and pandemicinduced boredom. “I don’t think anger would’ve sustained me through this whole process,” he says. “It’s more of a deep quest for comprehension.” For some, watching all that riot footage has exacted a mental toll. Several sedition hunters noted that the audio is especially disturbing—an angry cacophony of screaming and swearing. At a certain point, Rogers turned down the volume on the videos and started listening to classical music. He’s discussed the issue of burnout with others in the community. “You see them drop off for a month,” he says. “And we’d DM each other, and they’d say, ‘I have to take a break, it was doing my head in.’ ” Another sedition hunter, a stay-at-home mom in the Pacific Northwest, annotated almost 100 hours of video, which she compiled in a spreadsheet that’s been widely shared. Like Rogers, she usually keeps the video on mute. But the images are searing. After watching all the footage, she says, she’s formed a three-dimensional map of the Capitol in her mind, built around images of violence and mayhem. She’s never seen the complex in person. “I do want to visit,” she says, “and maybe purge some of those images from my head.” �David Yaffe-Bellany

Young U.S. Jews Shift on Israel

THE BOTTOM LINE A rogue network of sedition hunters coalesced online after Jan. 6. Its efforts have led to arrests but raised concerns about false identifications and risks to privacy.

June 14, 2021

● Millennial and Gen Z progressives question American support of Israeli policies, a point of tension for the Democratic Party

Childhood friends Elise Goldin and Emma Furman grew up in Evanston, Ill., in homes where supporting Israel was seen as a bedrock of American Jewish life. While both say they cherish the Jewish values ingrained in them by Passover Seders and temple services, now, in their early 30s, they’re sharply critical of Israeli policies. “When I look at Israel, I see a different set of laws for Jews and non-Jews, different policing, different court systems,” says Goldin, who works as a community organizer in Brooklyn, N.Y. “I find that extremely oppressive.” The two women are part of a shift among Jewish liberals—71% of U.S. Jews identify as Democrats— and Democratic voters more broadly. Baby boomers have tended to view Israel as an embattled country struggling to survive in a hostile region. And while that’s still the prevailing view among centrist Democrats and Republicans, a growing number of progressive younger Democrats see Israel as a military power mistreating a dispossessed population. A Pew Research Center survey of American Jews conducted in 2019 and 2020 and released in May reflects the generational divide: About 37% of Jews under 30 said the U.S. is too supportive of Israel, compared with only 16% of Jews 65 and older. Likewise, while two-thirds of Jews age 65 and older said they were “somewhat” or “very” attached to Israel, just under half of those age 18 to 29 did. “For my generation, Israel was the David,”

Jewish Americans on Israel Share of U.S. Jewish adults who … 18-29

30-49

50-64

65+ 40%

… say they have some or a lot in common with Jews in Israel … feel somewhat or very attached to Israel … say the level of U.S. support of Israel is about right SURVEY CONDUCTED NOV. 19, 2019 TO JUNE 3, 2020. DATA: PEW RESEARCH CENTER

PHOTOGRAPH BY YAEL MALKA FOR BLOOMBERG BUSINESSEEK

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says 59-year-old Jeremy Ben-Ami, the president of J Street, a liberal lobbying group that describes itself as “pro-Israel and pro-peace.” To some young people today, says Ben-Ami, Israel looks more like the Goliath. Part of the shift has to do with what’s happening in the U.S., especially the Black Lives Matter movement. “The left wing is getting more engaged in a whole set of issues and seeing it through a lens of racial justice, and they apply that lens to what’s going on in Palestine,” Ben-Ami says. When fighting broke out last month between Israel and Hamas militants in Gaza, President Joe Biden followed the traditional U.S. playbook by declining to criticize Israel and affirming its right to defend itself. That didn’t satisfy some lawmakers in his own party. “If the Biden admin can’t stand up to an ally, who can it stand up to?” Representative Alexandria Ocasio-Cortez of New York tweeted on May 15. The next day, Senator Jon Ossoff of Georgia—who’s 34 and Jewish—led a group of 28 Democrat senators in calling for an immediate cease-fire. Still, Biden’s stance toward the U.S.’s longtime ally is broadly popular. About 58% of voters, including 76% of Democrats, agree with how he’s handled U.S.Israeli relations, according to a May Harvard-Harris poll. The same poll asked voters whether their views were closer to Biden’s (that Israel “has a right to defend itself against rocket attacks”) or OcasioCortez and Vermont Senator Bernie Sanders’s (that Israel is an “apartheid state”). Three-quarters of Democrats said their opinion was closer to Biden’s. Chris Murphy of Connecticut was among the senators who called for a cease-fire. In an interview, he challenged the idea that Democrats are moving left on the issue. “The Democratic Party’s position on Israel, which is better for Israel, hasn’t changed,” Murphy says. “What has changed is the Republican position. Republicans have shifted on Israel. They no longer support two states.” Palestinian Authority President Mahmoud Abbas rejected former President Donald Trump’s 2020 peace proposal, saying that it offered his people a “Swiss cheese” state because the plan would have allowed Israel to retain every Jewish settlement in the West Bank, thereby shattering Palestinian territorial contiguity. Jewish Americans have become politically polarized, the Pew survey found. Despite the group’s strong Democratic leanings overall, Orthodox Jews gave Trump high marks for his handling of policy toward Israel, and 75% of Orthodox respondents said they were Republicans or leaned Republican, compared with 57% in 2013.

Shachar Binyamin, a 29-year-old Jewish Republican in New York City, says it’s a mistake for American liberals to see the Israel-Palestinian conflict through the prism of domestic issues like Black Lives Matter. “They don’t appreciate that the universal values that have been established in America don’t apply yet in the Middle East, where gay people are persecuted and democratic movements are crushed,” he says. But for Goldin, the debate over Israel is interwoven with her broader views on the sort of world she wants to fight for. It’s about tikkun olam, Goldin says, a Hebrew concept that liberal Jews loosely translate into “repairing the world.” Her friend Furman, a writer in Athens, Ga., says she started becoming more critical of Israel in college. Her views solidified after a trip to the West Bank, where she witnessed the checkpoints that Palestinians must negotiate to move around. “The word ‘apartheid’ used to seem radical to me, but now it feels like an accurate description,” she says. Such views have led to painful talks with her parents. “We’ve had some conversations, but they always end up in a fight, so we mostly don’t talk about it,” she says. �David Wainer and Gregory Korte THE BOTTOM LINE While younger American Jews are more willing to question U.S. backing of Israel, most of the public and three-fourths of Democrats support Biden’s approach.

▲ Goldin

S O L U T I O N S

Breakaway

Fever Pitch A British tonic maker aims to conquer the U.S. with its premium mixers

June 14, 2021 Edited by Rebecca Penty and David Rocks

The trip Tim Warrillow took in 2004 was epic: He flew from London to Nairobi, then hopped a flight to Kigali, then another to Kamembe. From there, he persuaded a taxi driver to take him through rural Rwanda and across the Congolese border. Along the way, he paid off militias armed with rocket launchers and gangs

wielding nail-studded boards. Almost 24 hours after leaving his home in west London, he got to his destination, a cinchona plantation in eastern Congo. What was he after? Tree bark. The bark from the cinchona tree contains quinine, the bitter chemical compound in tonic water that balances the citrus from lemons

PHOTOGRAPH BY SHAWN MICHAEL JONES FOR BLOOMBERG BUSINESSWEEK. DATA: COMPILED BY BLOOMBERG

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Bloomberg Businessweek

and limes. As interest in artisanal gin surged, Warrillow had dreamed of creating a lineup of premium mixers. He sought an opportunity to displace giants such as Schweppes, which had sat atop the tonic business for decades, and he saw real quinine from Congo as key to standing out. The fact that most low-end tonic was—and still is—flavored with artificial quinine was perplexing to Warrillow. “When you stop and think that three-quarters of that gin and tonic, at least in the U.K., is tonic, why aren’t more people interested in the tonic water?” says Warrillow, 46, co-founder and chief executive officer of Fevertree Drinks Plc, which today owns Britain’s top brand for tonic. Since its 2005 launch in the U.K., Fevertree has employed a combination of natural ingredients, sleek packaging, and deft marketing to overtake rivals. The purveyor of mixers branded Fever-Tree is betting a similar playbook—with a twist—will let it replicate its U.K. success in the U.S., the world’s largest spirits market, where a burgeoning cocktail culture has opened the door. In the U.K., Fevertree made its debut espousing similar values as the makers of craft liquor. “Spirits were talking about provenance, quality, and flavor, and the mixer category was really quietly focusing on cost engineering and manufacturing efficiency,” Warrillow says. The company spent years working to establish the brand, win over bartenders, and build out the distribution, and it steadily took over store shelves and bar fridges. Copycat efforts such as Schweppes’s 1783 premium tonic have failed to gain traction, and rivals including Double Dutch and Fentiman have remained much smaller. Fever-Tree has become the mixer of choice in about 40% of gin and tonics in the U.K., according to figures from data tracker Nielsen. Schweppes, in second place, is mixed in about a third of them. Fevertree’s U.K. revenue soared to more than £130 million ($183 million) in 2019, from £1.7 million in 2009, as it expanded beyond tonic into other mixers. Fevertree, with a current market value of about £3 billion, saw a sharp drop in sales on its home turf during the pandemic, which upended its business with bars and restaurants. Even before the coronavirus outbreak, the company’s sales growth in the U.K. was starting to level off, prompting it to turn its focus to the other 80 countries where its mixers have a presence—particularly the U.S., where it puts the premium spirits market at about 11 times the size of the U.K.’s. “So many great quality spirits are destroyed by poor quality mixers, and the opportunity to transform every drinking experience in North America was just irresistible,” says Charles Gibb, previously the head of Belvedere vodka, who joined Fevertree in 2017 to run its North American business. Fevertree is aiming to benefit from a growing preference for mixed drinks in America. A broader shift in the liquor industry also helps: After steadily luring drinkers away from beer and wine in the

June 14, 2021

past decade by playing up the craftsmanship and lower calorie count of their products, makers of hard alcohol such as Jim Beam are promoting the notion that such liquids are improved when cut and mellowed with mixers. Fevertree’s initial foray into the U.S. was bumpy, mainly because its products were too expensive. It’s had to lower its prices to 3 to 4 times the mainstream price—what it calls an “affordable premium” price—from 6 Fevertree revenue to 7 times. The comU.K. Other Europe pany entered the U.S. in U.S. Rest of the world 2007 and has gradually expanded the business, £240m securing a national distribution agreement and partnerships with Delta 120 Air Lines, MGM, and Wynn Resorts. Fever-Tree has recently overtaken 0 Canada Dry to become the second-largest brand 2020 2011 of tonic water there, after Schweppes. The fastest-growing spirits sales in the U.S. are tequila, cognac, and bourbon and other domestic whiskeys, so Fevertree has adapted its product line of sodas and mixers to suit. Its Madagascan Cola and Smoky Ginger Ale are challenging the likes of Coca-Cola Co. and Canada Dry, albeit from a very low base. Sales of its two most recent entrants—a sparkling grapefruit soda and a lime and yuzu mixer, which were promoted alongside popular tequila brands such as Herradura and Milagro to make palomas and margaritas on Cinco de Mayo—helped the company’s U.S. sales, excluding bars and restaurants, soar 38% in the first quarter from the same period a year earlier. The scale of the U.S. market is part of why U.K. investor Royal London Asset Management is a shareholder, says senior fund manager Craig Yeaman. “If we look at where Fevertree can get to in the U.S., that’s the great unknown, but it’s not inconceivable that Fevertree could grow to at least five times its current size,” he says. As drinking venues reopen, Gibb is seeking to unseat “the biggest competitor to us there—that horrible soda gun.” He says the passionate work of distillers is routinely being destroyed when, for example, a gin is mixed with an industrial tonic that unceremoniously travels through the same hosepipe thousands of times a night. “No bartender really wants to be spraying drinks with a gun.” �Thomas Buckley

THE BOTTOM LINE Fevertree is betting it can replicate its U.K. success in the world’s largest spirits market, where a burgeoning cocktail culture beckons.

Bloomberg Businessweek

Where HA Is No Laughing Matter

Zhao Yan built most of her $11 billion fortune selling cosmetics giants a chemical they can’t live without. Now she hopes to become even wealthier by going directly to the masses with the compound—hyaluronic acid, or HA— in her own line of skin-care products. “We can compete with the top brands in the world,” says Zhao, 54, chair of Bloomage Biotechnology Corp., which makes about half the global supply of HA. While the human body naturally produces the compound, cosmetology pros say an extra dollop a day can do wonders for skin tone, texture, and firmness. For years, the likes of L’Oréal, Estée Lauder, and Shiseido have used HA in moisturizers that can cost $100 or more for a tiny jar, but recently the stuff has started popping up all over the place. Allure magazine’s Readers’ Choice Awards for 2021 included Laneige lip balm, Wander Beauty face mask, and Neutrogena face serum—all infused with HA. Harper’s Bazaar in February called it “the ingredient you’re seeing everywhere.” A month later, Elle’s U.K. edition told readers HA “holds the key to smooth, flawless and hydrated skin.” Bloomage, which has developed special fermenters to bring down the cost of manufacturing HA, makes hundreds of variations used in skin creams, medications, and more. The company is now moving beyond its behind-thescenes role and selling branded goods, first in China and soon in Europe and the U.S. In 2017, Bloomage acquired Revitacare, a French company that researches and produces HA-based compounds. And Bloomage is redoubling efforts to market its in-house skin-care brand, Biohyalux, which offers HA creams, masks, and gels for as much as 60% less than competing products from global producers. “We have strong technology to support innovation, and we know how to talk to our customers,” Zhao says. Boosted by soaring demand for HA, Bloomage Bloomage has brought down the cost of producing HA

June 14, 2021

China’s Bloomage got cosmetics makers hooked on hyaluronic acid. Now it’s competing with them

has become a top performer among midsize Chinese companies. After founding an investment firm in 1989, Zhao in 2001 began working with a biotechnology startup that soon changed its name to Bloomage. Since the company’s 2019 listing in Shanghai, its shares have more than quintupled as investors seek to capture a growing piece of China’s $30 billion medical cosmetology market. Last year Bloomage earned 623 million yuan ($97 million) on revenue of 2.6 billion yuan, up 40% from 2019. Social media influencer Austin Li featured Bloomage in his “Hot Chinese Brands” series, and half of the company’s revenue last year came from skin-care products, up from just over 10% in 2017. Bloomage will benefit as Chinese consumers, who once reflexively chose foreign products, shift their allegiance to local alternatives, says Amy Jin, beauty analyst at researcher Mintel. “Consumers are now willing to look into the technologies you have even if you aren’t an established global brand,” she says. Zhao plans to expand the market by pitching HA for consumer goods far beyond skin creams. Last year, Bloomage introduced it as a lubricant in noncosmetic products such as condoms, and during the pandemic it developed HA-laced sanitizers to soothe hands chapped from obsessive scrubbing. After China approved HA as a food ingredient in January, Bloomage launched bottled water and chewy candies infused with the compound, and it’s exploring other ideas including yogurt and probiotics— though some question the scientific rationale for using HA in so many places. Gabriel Chiu, a plastic surgeon in Beverly Hills, says that while HA is “the gold standard” in treatments doctors inject into the skin, he sees little value for it as a food ingredient. “When you’re ingesting something, it’s going to be broken down by your stomach acid,” Chiu says. Zhao disagrees, citing research she says proves oral use can spur the body to secrete more of the compound. And she says that after ingestion, some HA molecules make their way to various organs where they can ease inflammation and keep the skin moist. Her goal is to continue discovering ways to utilize the stuff—and to keep giving consumers more reasons to spend money on Bloomage’s offerings. “We’re a leader in showing the world how to use HA,” Zhao says. “With our technology and innovation, we’re creating products that really work.” �Daniela Wei, Claire Che, and Bruce Einhorn

THE BOTTOM LINE Since Bloomage’s 2019 IPO, its shares have more than quintupled as investors seek to get a piece of China’s $30 billion medical cosmetology market.

PHOTO: QILAL SHEN/BLOOMBERG. INDIVIDUAL STOCK CHARTS ARE WEEKLY ON MONDAYS. DATA: COMPILED BY BLOOMBERG

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Stocks

A Happy Medium

After global markets plummeted in March 2020, stocks took off on a 15-month rally that pushed many shares to new heights. At first the recovery was led by so-called stay-at-home stocks—companies that benefited from millions of people sitting on the couch all day. More recently, investors have shifted their focus to businesses poised for a rebound in a reopening economy. Midsize companies, it turns out, are key constituents of both groups. �Bailey Lipschultz

Why Mid-Caps?

The S&P MidCap 400 index has outpaced the S&P 500 by about 35 percentage points since the market bottom. Change in index value since March 23, 2020 S&P MidCap 400

S&P 500 120%

0 3/23/20

6/7/21

Among the 331 members of the S&P MidCap 400 that break out foreign and domestic sales, 60% of revenue is from the U.S., compared with a little more than half for the much bigger companies that make up the S&P 500. The global reach of larger companies means they haven’t benefited as much from optimism about U.S. economic growth. And they’re more exposed to disruptions in international supply chains and increased antitrust activities in some jurisdictions. Mid-cap companies, with their U.S. focus, have raised their full-year revenue guidance more than at any time since at least 2017.

Here are six stocks that have soared since the market’s nadir last spring, along with the share of their revenue that came from the U.S. in their last fiscal year. Scientific Games ▲920%

3/23/20

Dick’s Sporting Goods ▲472%

Williams-Sonoma ▲356%

Toll Brothers ▲352%

Six Flags Entertainment ▲324%

AutoNation ▲257%

When gyms and yoga studios shut their doors, Americans snapped up weights, stationary bikes, and gear for golfing, hiking, and cycling. With 851 stores across the U.S., Dick’s benefited from this pandemic-inspired home health boom.

What to do when you’re stuck at home 24/7? Redecorate, of course. As consumers eased the lockdown blues by installing kitchen cabinets, hot tubs, and backyard grills, they juiced the shares of this homefurnishings retailer.

The luxury U.S. homebuilder has seen record orders amid a housing crunch that’s sent real estate prices climbing faster than they have since the financial crisis. That surge means Toll Brothers is making money despite rising costs for materials such as lumber and concrete.

The theme park operator dropped almost 80% in the market collapse, but its roller coaster has come roaring back as investors expect big crowds this summer. After a couple of rough years, though, Six Flags stock remains 30% below its 2018 peak.

The largest U.S. auto retailer, with hundreds of stores in 18 states, has benefited as prices for used cars soar. Supply problems have slowed production of new vehicles just as consumers are returning to showrooms.

94%

100%

6/7/21

This Las Vegas maker of slot machines and digital gambling games was left holding a losing hand after the Strip locked down. But it also produces instant lottery games such as the $1 scratch-off tickets consumers turned to when they were told to stay at home. 67%

100%

94%

100%

Revenue from the U.S.

What’s Next?

With its relatively successful vaccination drive, the U.S. is reopening faster than most places. This progress is sparking optimism on Wall Street that the U.S. economy will outpace its global rivals—which should play to the strengths of midsize companies. “I’d expect mid- and small-caps to outperform large-caps because they’re more exposed to U.S. growth,” says Callie Cox, senior investment strategist for Ally Invest. “With the market sputtering, mid-caps benefit because investors have to juggle a better U.S. economic outlook with uncertainty about inflation.”

and the new best worst attraction in Times Square By Austin Carr Photograph by Amy Lombard

Bloomberg Businessweek

Down the street from the Red Lobster and the shuttered Broadway theaters, a large model of Jimmy Buffett’s seaplane, Hemisphere Dancer, was being uncrated inside his brand-new 32-story hotel. It was 14 weeks before the grand opening of the Margaritaville Resort Times Square, and there was much to do: Lumber and scaffolding were everywhere, and walls of hand-painted palm trees were being touched up. Many of the 234 guest bathrooms were still waiting for their whaletail faucets. “Ahoy!” shouted a masked worker rolling a giant compass toward the lobby where, hiding under a tarp, was a 32-foot replica of the Statue of Liberty, hoisting a margarita to the blue skies ahead. The development, which cost almost $370 million and will have taken more than three years to complete when it opens in July, is a treasure map of Buffett brands. Up the lobby escalators, tourists and curious locals will find the 5 O’Clock Somewhere bar and the License to Chill cocktail lounge. A Margaritaville restaurant, garnished in tikis and surfboards, will serve Cheeseburgers in Paradise, and, by the heated outdoor pool, bartenders at the LandShark grill will be pouring LandShark Lagers, the beer Buffett brews with Anheuser-Busch InBev SA. Even those who aren’t fanatics of Buffett’s music probably have some vague sense of the Margaritaville lifestyle, which refers to both the hit song—No. 1 on Billboard’s Easy Listening chart in 1977—and its steelpan-inflected vibe, synonymous with slightly baked Floridians searching for that lost shaker of salt. That this mindset also happens to be the antithesis of the pandemic lifestyle is why Buffett is so excited about the project, even after a year of quarantine-related delays. “On the island of Manhattan, as we’re coming out of the pandemic, this is a lucky charm that says it’s time to go back out and have fun again,” Buffett says. “When you can’t go out and soothe the savage beast, you got problems.” In the 24 years since Buffett founded Margaritaville Enterprises LLC, the company that manages his brand and intellectual property, he’s offered Parrotheads, as his disciples are known, as well as the Parrot-curious, an ever-increasing menu of savage-beast-soothing options. There are luxury resorts, retirement villages, $500 daiquiri makers, Growing Older But Not Up pickleball paddles, lime-wedge-shaped pool floats, salad dressings, casinos, water parks, RV camps, and, where legal, a line of cannabis goods developed with an heir of the Wrigley’s gum fortune. (The Surfin’ in a Hurricane vape pen goes for $35 and can “bring sunshine to your stormy day with significant euphoric effects.”) It may sound counterintuitive for a 74-year-old crooner whose songs include Too Drunk to Karaoke and Math Suks, but the branding bacchanalia puts Buffett at the cutting edge of so-called experiential marketing. The buzzy trend is all about trying to get consumers not merely to shop or admire a brand, but to swig a double shot of it. It’s why Mark Wahlberg is pushing into burger joints and fitness franchises, why Krispy Kreme’s new “immersive” retail experience features a doughnut-glaze waterfall, and why you can now literally order breakfast at Tiffany’s.

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And why not—especially in 2021? After the interminable tedium of stay-at-home orders, in-person attractions, even ones that seem extremely kitschy, have an undeniable appeal. Margaritaville is moving ahead with new developments everywhere from San Diego and Palm Springs to Nassau and Belize, even as a string of other properties have suffered or closed down during the pandemic. The Times Square location, though, is by far the most ambitious. Buffett has always viewed Manhattan as the toughest nut to crack, or perhaps—per his 1973 classic, Peanut Butter Conspiracy—the toughest Jif jar to swipe. He found this true, first as a musician struggling to win gigs early in his career and now as a marketing tycoon betting his beachy cachet will captivate in one of the world’s largest cities. The risk reminds him of what an actor friend once told him: “If you don’t take New York, Buffett, you ain’t shit.” The headquarters of Margaritaville Enterprises sits in an office park in Orlando, just across the street from the twisting waterslides of the Universal Studios theme park. Inside, a few dozen employees, with titles such as director of atmosphere, sit at cubicles messy with products they’re testing for possible inclusion in the Buffett empire, such as branded hotel ice buckets. Pictures of the man himself are everywhere, but Buffett leaves day-to-day operations to Chief Executive Officer John Cohlan, who calls Margaritaville a “real ecosystem” that he estimates was facilitating $1.5 billion in annual sales prior to Covid-19. (The company declines to share actual revenue figures.) Although its brand appears on countless products and hotels, the company doesn’t actually sell or own much besides its intellectual property. The New York real estate firm Soho Properties, for example, oversaw financing and construction of the Times Square resort. The business model, as Cohlan explains it, involves searching out hospitality ventures and consumer goods to Buffettize, enforcing strict design and quality standards, training staff, and earning fees licensing the brand. Buffett takes a single-digit percentage in royalties on portions of partner revenue, which means every Margaritaville hotel suite booked and every “Fins Up Mon’” T-shirt sold. “Same business model as Marriott and Hilton,” Cohlan says. The company got started in the late 1990s, after Cohlan, who was senior vice president of finance at the investment firm that owned Arby’s and Long John Silver’s restaurants, moved to Palm Beach for work. Buffett was spending a lot of time in South Florida, surfing and deep-sea fishing, when not on tour. Cohlan met Jane Buffett through mutual friends, who introduced him to her husband, Jimmy. They hit it off. Later, at one of Buffett’s sold-out shows, an idea bonked Cohlan over the head like a tequila bottle. “I said to myself, ‘Wow, this could really be a brand. Forget Arby’s.’ ” In fact, Buffett was already intensely aware of the branding power of Margaritaville, having previously fought the Mexican-food chain Chi-Chi’s for the rights to the name. He had dabbled in T-shirt shops and a few eateries, and an

up-and-coming beer called Corona even sponsored his concerts. But Cohlan had larger plans, and the pair entered a formal partnership in 1997. The next year, Buffett released his autobiography, A Pirate Looks at Fifty, a salty travelogue of his Caribbean fishing jaunts and seaplane expeditions. The book references the time he and U2’s Bono flew to Negril, Jamaica, for jerk chicken and, after safely landing, were shot at by local police, who thought Buffett’s taxiing twin-propeller Hemisphere Dancer was smuggling drugs. (Nobody was hurt. The incident inspired his song Jamaica Mistaica.) Ironically, much of the book depicts Buffett avoiding corporate tourist traps and bemoaning how, as he puts it, “Taco Bells and Burger Kings permeate the lower latitudes.” Yet he also wrote of the big money in packaging these experiences in an authentic way. Cohlan’s first significant opening, a Margaritaville restaurant at the Universal CityWalk retail plaza in Orlando, came in 1999. Executives say Universal had originally wanted a basketball-themed restaurant with Shaquille O’Neal, but after the big man left the Orlando Magic, Margaritaville took over all 20,000 square feet and helped Universal erect a tropical, nachos-heavy shrine to Buffett, with music videos playing on a loop, an apparel shop, and a volcano that reaches to the ceiling, erupting periodically with margarita mix. After eruptions, it makes a booming burp sound effect. Cohlan says the spot did $18 million in sales during its inaugural year, a bounty that’s only risen. Locations mentioned Jimmy Buffett’s The original Hemisphere Dancer, its bul- on 1985 greatest hits let holes mended, is docked outside, as album if Buffett might swing by and take some Margaritaville lucky customers “treetop flyin’ movin’ property* west along the coast.” Antigua Buzzards Bay The aughts brought more outposts in Las Vegas and Myrtle Beach, S.C., a California SiriusXM radio station, a line of frozen Cincinnati shrimp, and LandShark, which supDisneyland England planted his Corona sponsorship. Chris L.A. Blackwell, the Island Records founder and hotelier who was with Buffett and Mexico Bono when the mistaica was made in Miami Montana Jamaica, struggles to explain how Buffett Montserrat so successfully sold out without ruinNashville ing his image. Bono probably couldn’t New York City get away with hawking $5.32 Calypso Paris Coconut Shrimp with Mango Chutney San Diego Dippin’ Sauce at Walmart. “No, but San Francisco Jimmy is a fisherman,” Blackwell says. “He just loves the sea. He has such width San Juan airport Three Mile Island in so many different areas.” Trinidad Perhaps its these far-ranging tastes Yukon Territory that have allowed Margaritaville to veer upmarket for its Frozen Concoction Maker, which is basically the iPhone of adult beverage mixers. Alejandro Pena, who led the new venture group at Jarden Consumer Solutions, which licensed and built the product

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line, says “loud red, yellow, and green colors” spoiled initial prototypes, before his team shifted to a premium design. With stainless steel trim, the “Bali” version features a shaved-ice reservoir and, according to Pena, an “extensively tested” algorithm to mix the ideal margarita, daiquiri, or piña colada. Buffett remembers telling the team that the blenders “had to be as durable as an outboard motor, particularly the Mercury KG-7Q Super 10 Hurricane that I used to race hydroplanes.” The base model starts at $180. “We came to market at a price point 10x the average blender price, and there were a lot of naysayers,” Pena says. “Sales were off the charts.” Buffett’s transition into upscale hospitality took off with his move into resorts, where consumers could live the Margaritaville lifestyle in a manner beyond tchotchkes and frozen food. A Florida developer licensed the brand to introduce a $50 million oceanfront hotel at Pensacola in 2010, which promised “barefoot elegance.” Five years later, another developer opened Margaritaville’s current flagship, a 369-room resort in Hollywood Beach, not far from Fort Lauderdale, which real estate investment firm KSL Capital Partners LLC bought for $190 million in 2018. The $400-plus-a-night property, which is pretty much the opposite of a burping volcano in Orlando, features an 11,000-square-foot spa, a surfing simulator, and eight bars and restaurants, including JWB Prime Steak & Seafood, where Buffett has dined with the pop star Pitbull. It’s not all posh—the gift shop sells $39 “Trespassers Will Be Offered a Shot” signs— but it’s remarkably well designed. Sacred Jimmy lyrics (“it’s a fine line between Saturday night and Sunday morning”) adorn hallway walls, and the lobby boasts a Jeff Koons-style sculpture of a flip-flop. “I could argue that’s our Mickey Mouse,” Cohlan says of the giant blue sandal. Other companies have attempted to sell a laid-back lifestyle, but Cohlan is dismissive, noting that Andaz, Hyatt Hotels Corp.’s luxury brand, was invented in a boardroom, whereas Buffett’s joie de vivre was cultivated over decades of actual, or at least lyricized, rum-soaked island adventures. (A Hyatt spokesman responds that “the brand was developed in response to extensive global consumer research,” noting that Andaz means “personal style” in Hindi.) Cohlan says Airbnb Inc.’s experiential potential is constrained because it only “stands for the idea that you’re living in somebody else’s place.” Ditto for retailers manufacturing inauthentic attractions to boost foot traffic. “People know Sperry, but if they sold Sperry coffee, you’d say, ‘No! Sperry is a sneaker,’” Cohlan says, sipping a cup of coffee from the nearby Margaritaville roastery. The scope of Margaritaville’s ecosystem is evident everywhere in Florida. Dispensaries around the state sell Buffett’s Coral Reefer THC. There are Margaritaville vacation cottages and an associated water park in Kissimmee. At the $1 billion Latitude Margaritaville retirement village in Daytona Beach, Terry Bradshaw-lookalikes zoom around in souped-up golf carts, including one shaped like a cheeseburger. This

PHOTO: DEVIN CHRISTOPHER. *INCLUDES RESTAURANTS, BARS, HOTELS, AND OTHER PROPERTIES. SOME PROPERTIES ARE PLANNED. DATA: JIMMYBUFFETT.COM, MARGARITAVILLE.COM

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not doing cemeteries,” he says. “We stop at some point.” This flywheel has become a key selling point for business ventures. Esther Newberg, co-head of publishing at talent agency ICM Partners, recalls Cohlan pitching her on a Margaritaville recipe guide that would feature Buffett’s favorite margarita along with other Jimmy-approved meals and cocktails. “I said to John, ‘I really don’t do cookbooks,’ ” she remembers. “And he said, ‘But this cookbook will be in all our hotels. It’ll be everywhere!’ ” Another key part of the company’s process is ensuring that business partners abide by its aesthetics. Pat McBride, founder of its longtime design firm, Vermont-based McBride Co., says he avoids any generic design that might “look like a prop at Six Flags,” and instead focuses on crafting elements that Cohlan and Buffett demonstrate the universal Parrothead greeting inhabit-the-brand relentlessness isn’t limited to Buffett of make the experience feel like the real deal. The leather stools course. Not far from Margaritaville HQ in Orlando is Ford’s at JWB Prime, for example, feature stitched rum labels from Garage, a burgeoning restaurant chain featuring the auto- abandoned island distilleries. “If those chairs didn’t have that maker’s branding, where onion rings are served on oil fun- stitching, I guarantee it wouldn’t feel the same,” McBride says. nels and grease rags are given out instead of napkins. Joe Ginel, Margaritaville’s atmosphere director, says that Not all concepts, though, are winners. As Cohlan recalls: this subtle science includes the settings for resort Wi-Fi “A very serious guy, who owns a lot of dental offices, called passwords (for instance, “spongecake”) to nailing the music me up and said, ‘Why should it be so painful to go to the playlists at each destination. “For every four songs, there’s dentist? How about Margaritaville Dental? There could be always a Jimmy song,” Ginel says, describing the general forpalm trees in the waiting room.’ ” That was an obvious no, mula. “In Orlando, for every three songs, you get two backCohlan says. Margaritaville electric toothto-back Jimmys. If you go to Key West, we flip the script: It’s a lot of Jimmy.” brushes, on the other hand, were a yes. “Take a vacation from your old manual toothbrush,” as HSN put it, offering a set In the spring of 2020, construction in Times Square was halted by state order, of three for $39.95. Considering how many ventures the and Margaritaville hotels around the globe company has slapped Jimmy’s name on, soon closed temporarily. Darby Campbell, what’s the process for deciding which a real estate developer who’d opened an ones to greenlight? Chief Investment $85 million Buffett hotel just five months Officer Evan Laskin describes the brand’s corporate compass earlier in downtown Nashville, saw $1.5 million in bookings as an Amazon.com-esque “flywheel”—Jeff Bezos’ idea that evaporate immediately. He laid off almost his entire staff of 118 investing in different divisions will eventually create organi- employees and ceased taking reservations. “We actually went zational momentum—and shows off a printed copy. The chart so far as to drain the pool,” he says. “It was brutal.” wouldn’t exactly impress Bezos. It’s a list of Margaritaville’s Hotels in Grand Cayman and Vicksburg, Miss., shut down for various business categories—consumer products, dining, lodg- good. But Cohlan says Margaritaville’s revenue dropped only ing, media—arranged in a circle. Squint hard, though, and the 30% in 2020, buoyed by soaring sales of daiquiri makers and Margaritaville flywheel does conjure up a life cycle of brand branded bicycles, as well as purchases of $300,000 Latitude consumption, especially as it targets younger audiences that retirement homes, which doubled during the pandemic. are less familiar with Buffett’s lyrics. LandShark beer, which Meanwhile, the company pushed ahead with 25 developments, consumers may not realize is related to the singer, might hook including a boutique hotel chain called Compass. twentysomethings to LandShark restaurants, which in turn The pandemic wasn’t the first time the company had might eventually reel them to the brand’s backyard products hit choppy waters. A humdrum Cheeseburger in Paradise (coolers, lawn chairs, a $900 constructible Surf Shack Bar restaurant chain changed owners several times before Buffett kit), hotels, and, as they get older, perhaps Margaritaville’s severed his association in 2012, leading to a slow demise. (A vacation and retirement homes. Laskin says he was even Margaritaville spokesperson says the brand has reclaimed the once pitched on building Margaritaville Graveyards. “I’m trademark and will be introducing a food-delivery concept

under that name in Chicago.) In 2014, a 68,000-square-foot Margaritaville casino shut down in Biloxi, Miss., partly because it had no attached hotel and was in a bad location, the company says. Margaritaville later opened a waterfront resort in Biloxi that’s operating today. Members of the rock band Kiss are taking over branding for the old gambling venue, which sat empty for years. A number of lawsuits have chased Margaritaville’s developers over the years. Executives chalk up the stumbles to the unforgiving real estate business. “There’s always lawsuits,” says Laskin, the investment chief. The disputes serve as a constant reminder that Buffett’s team has to be evervigilant with whom they jump in a hammock, because it’s Buffett’s reputation that’s harmed if anything goes wrong. “When someone has a bad experience, they don’t say, ‘Those KSL guys gave me a bad experience,’ ” says Cohlan, referring to the owners of the Hollywood Beach resort. “They say, ‘Those Margaritaville guys gave me a bad experience.’ ” The shuttered Grand Cayman resort apparently turned into one of these bad trips. In July 2020, the Cayman Compass, a local paper, reported that the property owners

Soothing the savage beast in Times Square

were being sued for more than $1 million in unpaid debts. Two investors involved, who asked not to be named because of ongoing legal issues, say the construction was shoddy and that promised attractions such as a big waterslide never materialized. Even the iconic flip-flop statue, they add, showed up months after the hotel first opened. (It’s since been removed from the entranceway and now sits, among

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discarded junk, in a nearby parking lot.) Cohlan says the resort fell below Margaritaville’s hospitality standards and that they were forced to “de-brand” it. The owners couldn’t be reached for comment. Despite its island associations, the Margaritaville brand performed better in the mountains during the pandemic. Campbell owns two other Margaritaville hotels near the Dollywood resort in Tennessee, a water park in Georgia, and several tree-lined RV camps. He says revenue at his outdoorsy properties in Tennessee shot up significantly in 2020

from the previous year. The Nashville hotel has also since reopened and is fully booked on most weekends. For now, Campbell says, “it’s really the bachelorettes and the party people coming in Thursday through Sunday.” But, he mentions that weekday traffic seems to be returning, and the Oates half of the pop-duo Hall & Oates recently stopped by for an interview at the lobby’s Margaritaville radio studio. Golfer John Daly dropped in another time too. “We had a little pool party,” he says. During quarantine, Buffett mostly hid out at his Malibu home. In a Zoom interview in late April, he appears before a virtual background of a sandbar under the username Bob Marlin. “One of my many pseudonyms,” he says, grinning.

PHOTOGRAPHS BY AMY LOMBARD FOR BLOOMBERG BUSINESSWEEK

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He spent the pandemic surfing and making two albums, comparing the self-isolation to the sea voyages he used to charter from Newport to Bermuda and the Virgin Islands. “Inevitably, you’d be hungover, something would break, a storm would come, and suddenly you’d have this thought, What am I doing out here?” Buffett says. “Then you’d just have to take yourself aside and go, Hey. Settle in.” With the storm finally passing, at least in the U.S., Buffett says he’s preparing to head to New York for a media event ahead of the Times Square grand opening. He’d had bad luck during his last journey there. His 2018 Broadway musical, Escape to Margaritaville, closed quickly after blistering reviews. (“If you’re not drunk or a Parrothead,” wrote the New York Times, “you’re in trouble.”) But he seems optimistic and has been reading The Island at the Center of the World, a history of the Dutch takeover of Manhattan. He says all his “time on the water” will help “make the island of Manhattan behave like the island of St. Barts.” In many ways, the Manhattan hotel symbolizes Margaritaville’s post-Parrothead ethos—and its inevitable post-Jimmy future. After all, the pirate is now looking at 75.

“It’s legacy time for me,” he says. Visitors to Buffett’s newer properties will see fewer and fewer photos and videos of the white-goateed performer, and Laskin makes a point of clarifying that Jimmy’s weed venture is completely separate from Margaritaville Enterprises. When a PR minder was out of earshot during one property visit, a resort manager whispered that Cohlan didn’t want him even talking about Buffett during our interview: “He said, ‘Stay off the Jimmy subject!’ ” (Cohlan doesn’t recall saying this and adds, “We love talking about Jimmy.”) Buffett is, as you’d expect, a lot more chill than the businesspeople who manage his affairs, but he is aware that the brand has taken on a life of its own. He doesn’t really drink margaritas that often anyway these days. “I’m not a big pot smoker, but I like to get a little buzzed every now and then, of course,” he says. He again compares the situation to life at sea, where you need a good crew to stay the course. “How much further can you go with this? I don’t know. I’m pretty happy with where we are right now. Do I want to start an airline? No.” Warren Buffett, an old friend (though not a relation) who announced his succession plans for Berkshire Hathaway Inc. in May, thinks that Margaritaville only has upside, so long as Jimmy is involved—or at least is perceived to be. “I don’t think he could sell the name to some guy on Wall Street,” Warren says, chuckling. “It’s not like Howard Johnson’s, or various businesses that were identified with an individual and they institutionalized it. Jimmy is the institution.” The good thing, Warren quickly adds, is that Jimmy will keep going well into his 80s and 90s, like Warren himself. That means decades of additional consumers experiencing the Margaritaville lifestyle. “Jimmy doesn’t need a revolving group of fans,” Warren says. “He basically just accumulates them, and he doesn’t lose them. Except when they get old and die.” <BW> �With Olivia Carville

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The former presiden s rategic ategic retreat to -a-Lago has helped turn Florida Florid o a new home base ba e for Republicans

June 14, 2021

By hua ua Green P otogr hs by Bryan Cer

ince he left Washington W in turmoil in January, Donald Tru ump has spent the bulk of his brief, ccontentious postup in what Karl presidency holed u Rove calls his “Fortrress of Solitude”— vate club in Palm Mar-a-Lago, his priv Beach. It’s an odd sort of isolation: Although he’s largely y cut off from the outside world, Trump p is hardly alone. Tossed from the White House, banished from Facebook and Twitter, Trump has never seemed more distant from public consciousness. But while he can’t broadcast out, those same platforms offer a surprisingly intimate glimpse into his new life, thanks to the prolific posting of the club’s guests. At every moment of his day, Trump is bathed in adulation. When he enters the dining room, people stand and applaud. When he returns from golf, he’s met with squeals and selfie requests. When he leaves Mar-a-Lago, he often encounters flag-waving throngs organized by Willy Guardiola, a former professional harmonica player and anti-abortion activist who runs weekly pro-Trump rallies in Palm Beach. “Give me four hours and I can pull together 500 people,” Guardiola says. Trump recently invited the self-proclaimed “biggest Trump supporter in the country” for a private consultation at his club. In this gilded Biosphere, Trump encounters no one who isn’t vocally gratified by his presence. When he speaks extemporaneously, so many guests post footage that you can watch the same weird scene unfold from multiple vantage points, like the Japanese film Rashomon. Trump seems so comfortable, the journalist and Instagram sleuth Ashley Feinberg has noted, that he’s taken to wearing the same outfit for days on end. Blue slacks, white golf shirt, and red MAGA cap are to the former president what the black Mao suit is to his old frenemy Kim Jong Un. Club members say his new lifestyle agrees with him. “Presidents when they finish always look so much older,” says Thomas Peterffy, the billionaire founder of Interactive Brokers LLC, who lives three doors down from Mar-a-Lago.

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“Not tru ue for Trump.” He’ll sho ow up to anything. weeks, Trump has In recent w o engagement parpopped into services. ties and memorial m ago member who A Mar-a-La ended a club gathrecently atte eceased friend was ering for a de surprised whe en Trump sauntered in to deliverr remarks and then hung around, apparently enjoying himself. This insular feedback loop, amplified by the worshipful validation he gets for doing Newsmax or OAN TV hits, doesn’t appear likely to diminish as he settles into his New Jersey golf club for the summer and prepares to resume his trademark rallies. “Donald Trump needs the adulation of the crowd the way you or I need oxygen to breathe,” says Michael Cohen, his estranged former lawyer. By all accounts, Trump’s life after the White House doesn’t resemble that of a typical ex-president so much as a foreign monarch cast into exile—like Napoleon at Elba, but with golf and a bigger buffet. When Trump left Washington, people wondered whether he’d maintain his iron grip on the Republican Party or dwindle into colorful insignificance, like Sarah Palin. Now we know: Trump isn’t dwindling. As shown by the defenestration of Representative Liz Cheney, the blocking of a Jan. 6 commission in Congress, and the wave of new voter restrictions Republicans across the country are pushing in the name of “election integrity,” Trump’s grip is stronger than ever. He’s used it to force elected Republicans to bend to his warped version of reality. Anyone who refuses risks banishment. As a recent trip to Florida revealed, every segment of the party—activists, donors, ex-staffers, local pols—has come to accommodate and, to one degree or another, depend on this reality. Together, these party actors form a power structure that extends and reinforces Trump’s primacy, even as he faces the looming threat (real, not fake) of indictment in New York’s criminal investigation of his business empire. If Trump feels entitled to dominate the GOP as if he were still president, it may be because so many of

the same people still surround him and treat him as if he is. Instead of moving beyond Trump, much of the party moved to Florida to join him. ome components of Trump World were already waiting for him there. Just south of Mar-a-Lago in Boca Raton, Newsmax, the tiny right-wing cable channel that blew past Fox News in the race to tout Trump’s election conspiracies—earning a defamation suit from a Dominion Voting Systems employee (dropped after Newsmax apologized)—pumps out a steady stream of Trump-friendly propaganda. In Fort Lauderdale, his ex-campaign manager Brad Parscale’s new firm, Campaign Nucleus, services Trump’s political operations. Parscale, who retreated to Florida after Trump fired him from the reelection campaign, suggested that his old boss establish permanent residency with a pitch that went beyond golf and sunshine. “You’ve got a great governor who’s friendly to conservatives, a fair conservative judicial system, low taxes, and great airports,” Parscale says. When Trump ventured south, a stream of family members (literal and figurative) followed. Ivanka Trump and Jared Kushner bought a $32 million waterfront lot in Miami from the Latin crooner Julio Iglesias and enrolled their kids at a nearby Jewish day school. Donald Trump Jr. and his girlfriend, Kimberly Guilfoyle, bought a $9.7 million mansion in Jupiter, Fla. In December, Sean Hannity sold his penthouse not far from former House speaker—and Trump critic—John Boehner’s place along the Gulf of Mexico and bought a $5.3 million seaside home two miles from Mar-a-Lago, symbolically swapping the Boehner Coast for the Trump Coast. Hannity’s Fox News colleague Neil Cavuto joined him, buying a $7.5 million place nearby. “Think about how utterly bizarre that is,” says Eddie Vale, a Democratic strategist. “It’s like if Rachel Maddow and the Pod Save America guys all bought condos in Chicago because they wanted to be close to Barack Obama.” For Republicans, going to Florida

TRUMP: MIREK TOWSKI/GETTY IMAGES

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June 14, 2021

carries added delight because it lets them do something almost as thrilling as being close to Trump: own the libs. Every person interviewed for this story mentioned, without prompting, how well the “Free State of Florida” has fared in flouting Covid-19 restrictions under its Trump-endorsed Republican governor, Ron DeSantis. “You’ve got no masks, no lockdowns, good restaurants, and great beaches,” says Andy Surabian, a former Trump official. “Trump being there is a cherry on top.” Because the state mostl remained open during the crisis, it became a haven Republica s seeking to A Memorial Day b in nearby Jupit r

ne of the new arrivals is Hogan Gidley, a former White House spokesman. “It’s the amenities, the beaches, the weather, the open spaces,” he says, peering through his Oakleys as he spins Florida’s emergence as the center of the GOP universe. “It’s also a lot of people converging on this state with deep pockets and a deep concern for the future of the country.” Tanned and shirtless, wearing an Ole Miss baseball cap flipped backward, Gidley is sipping a $16 virgin berry spritzer at the poolside bar at the Breakers, the luxury Palm Beach resort. Like so many professional Republicans,

t parade

gather and raise money. This activity was helped along by the procession of supplicants, led by House Minority Leader Kevin McCarthy, arriving at Mar-a-Lago to bend the knee and try to curry favor with the boss. The stampede grew larger when the Conservative Political Action Conference, traditionally held outside Washington, moved to Orlando in February, drawing many of the 2024 Republican presidential hopefuls, top consultants, and big donors. Whether they were setting up residency like Trump, riding out the winter in the sun, or just swinging through for a business trip, just about every Republican punched a ticket to Florida. “It’s crazy,” says Sean Spicer, the former White House press secretary. “It’s a full-on migration.”

he’s on message because he has to be. He’s one of many Trump staffers who hasn’t fallen far from the tree. He’s come to Florida, from his home in D.C., to sweet-talk donors at a conservative gathering in Naples—on the other side of the state—about his new nonprofit, the Voter Protection Alliance, which aims to advance the Trumpian cause of “going into states and making sure the legislature is protecting every legally cast vote.” But he’s detoured through Palm Beach, taking up temporary residence in the beach-side home of a local socialite, because if you’re a made man in the land of Trump, well, why wouldn’t you? Veterans of Trump’s White House have had a famously hard time landing the kind of high-powered corporate gigs at places like Amazon, McDonald’s, and

Uber that awaited top officials from the previous administration. Many struggle to get any private-sector job at all, especially after the Capitol insurrection. Some, like former cabinet secretary Ben Carson and senior adviser Stephen Miller, have joined Gidley in starting their own organizations, falling back on their chief credential and remaining tightly locked in Trump’s orbit. In this way, Trump functions as his own economy, providing livelihoods for his former aides. In exchange, they trumpet his gospel of stolen elections and Democratic conspiracies. “They have nowhere else to go, these people,” says Sam Nunberg, an early Trump campaign aide who’s been fully deprogrammed and left politics a few years ago. “What else are they going to do?” Traveling among the Florida Trumpers, however, it’s apparent money isn’t the only draw. A powerful psychological gratification comes with living free of censure among one’s own kind— with being celebrated for the very thing that makes you toxic in bluer environs. Palm Beach offers a Trump-friendly social circuit from morning till night: brunch at Le Bilboquet or Ta-boo; a late lunch, perhaps with a prospective donor, at the Breakers; dinner and selfies on the Mar-a-Lago patio; watermelon martinis at Buccan and more late-night fun at the Colony Hotel. You’re in for an especially good time if, like Gidley, you spent a lot of time on TV talking up Trump, and if—again like Gidley—your affect is “amiable Southerner” rather than, say, “bullet-headed nativist.” When he isn’t wooing Florida grandees or touting Trump on Fox News, Gidley has been modeling designer loafers on Instagram with ex-Queer Eye host Carson Kressley and showing up in double-breasted Ralph Lauren suits on the arm of local socialites in Palm Beach magazines (sample headline: “Party Animals Return to Palm Beach to Support Peggy Adams Animal Rescue League”). Along the Trump Coast, his credentials guarantee a certain celebrity. As ComicCon does for actors past their prime, South Florida offers hardcore Trump fans a way to indulge their nostalgia

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and fawn over their favorite characters from the extended Trump Universe. Even bit players are big attractions. Gidley was looking forward to his next gig as a celebrity guest at a Memorial Day Trump boat parade in Jupiter. Spicer, who now hosts a Newsmax show, has the most Florida-appropriate take on the Republican exodus to what might be called Greater Mar-a-Lago. “It’s like Disney World—that’s just one ride at the amusement park,” says Spicer, a regular visitor. “I can shoot the show in Boca, go to see the president, go to a fundraiser, and do eight other things while I’m down there. There’s a lot of attractions.” Gidley says that’s a big reason Florida’s appeal has endured. “A lot of locals tell me the season has extended quite a bit because of Trump bringing a spotlight to Palm Beach,” he says. “People are still here, networking and extending their projects.” He grins. “And you never take your line out of the water while the fish are still biting.” 54

rump’s dominance of the GOP isn’t driven only by opportunistic tourists and transplants. He’s embedded himself deep into the fabric of local politics, in South Florida and elsewhere. Republicans have grown to depend on him, as much in his post-presidency as when he lived in the White House. Joe Budd’s awakening came even before Trump was the Republican nominee. It was March 15, 2016, and Budd, a Palm Beach County state committeeman, watched in awe as Trump smoked two of Florida’s favorite sons, Senator Marco Rubio and ex-Governor Jeb Bush, to win the state’s presidential primary. It wasn’t the victory that most impressed Budd. It was the charge Trump put into Florida voters—turnout in Palm Beach County shot up 52%

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over 2012. Budd, a Boca Raton financial planner, decided he couldn’t risk letting this electricity fizzle. He joined the Trump campaign, then started Club 45 USA, an outfit designed to keep Trump’s fans involved in local politics and “support future endeavors of Donald Trump!” as its website puts it. “It all stemmed from that primary,” says Budd. “I’m thinking, ‘Who are these 52%, and how do I keep them engaged?’” The answer to those questions turned out to be “Trump fans” and “Donald Trump.” So long as he was driving the national political drama, Republican voters stayed involved and engaged, even when Trump wasn’t on the ballot. His endorsement of DeSantis sealed the Florida governor’s race in 2018. And of course, he steamrolled Joe Biden in Florida last November, winning the state by almost 400,000 votes. But in March, something happened that jarred Budd and other local Republican leaders. Palm Beach County held its municipal elections—and this time, practically nobody showed up. “It was alarming,” Budd says. “People just didn’t go out and vote.” Budd thinks he knows why. “There was no draw,” he says. “They were discouraged that there was obviously nothing [on the ballot] to do with the president.” He suspects that the postJan. 6 hangover and the intraparty bickering over Cheney’s leadership post in the House further dampened Republican enthusiasm. One of the changes Budd has witnessed in local politics over the past several years is the gradual eclipse by the Trump faction of the power centers that once made up Florida’s Republican coalition. “Back in 2016, Jeb Bush, Marco Rubio, and even Rick Scott would have all had presidential aspirations and repr sented three different wings of

“It’s like Disney rld—tha ld—tha ’s s just one ride at the amusement pa I an n shoot the show in Boca, g to o ee t president, resident, go to a fundraiser, and i htt oth things hings while I’m down there. her ’s a lot of at actions”

the party,” he says. But all were pale pastels compared to Trump’s bold color. “Suddenly, there’s a fourth wing and it’s wrested full control of the party, relegating Jeb Bush Republicans to the past.” That same dynamic is unfolding in Republican circles across the country. In Texas, Jeb Bush’s son, George P. Bush, just launched a campaign for attorney general. But being a scion of the Bush family is no longer a winning credential, even in the home of the Bush dynasty. To broadcast his allegiance to the new order, the younger Bush performed a remarkable act of abasement, producing beer koozies that depict him shaking hands with Trump and feature this quote: “‘This is the only Bush that likes me! This is the Bush that got it right. I like him.’—DONALD J. TRUMP.” Budd’s suspicion about what ails his party and how to fix it gained credence shortly after the disappointing municipal elections, when Club 45—now devoted to reelecting DeSantis next year—started up again. He booked a Trump-friendly roster of speakers, including conservative provocateur James O’Keefe and General Michael Flynn, Trump’s national security adviser, who recently made headlines for suggesting the U.S. military should stage a coup. The crowds came rushing back. “Flynn tickets sold out in 15 minutes,” he says. To Budd, the lesson is clear: The party needs Trump and there’s no two ways about it. His experience in Palm Beach backs up South Carolina GOP Senator Lindsey Graham’s assertion, “If you tried to run him out of the party, he’d take half the party with him.” he enduring hope of Republicans who loathe Trump and wish to move on is that the party’s major donors, whose support of Trump was always instrumental, will finally shut him out of power now that he’s gone from the White House. When Republicans have this fantasy, they’re imagining donors like Thomas Peterffy, the Interactive Brokers founder and Palm Beach resident. “I did not support Trump until he became the Republican nominee,” says

r. a n d Kimb e nJ

Peterffy. “I didn’t vote for him in the primaries. I am actually not a Trump fan at all. I hope he won’t run again.” Peterffy, 76, may sound like a #NeverTrumper. In fact, he’s the furthest thing from it—he donated $250,000 to Trump’s reelection effort. Over an al fresco lunch of cold asparagus soup at the Trump World hot spot Le Bilboquet, Peterffy, an émigré from socialist Hungary who amassed a $22 billion fortune, laid out the cold logic of his thinking. “Ideologically,” he says, “I am very committed to antisocialism, anticollectivism, because I grew up with it. I understand what it is and what it inevitably leads to, and I will do whatever I can to try to get this country to not end up there.” In 2012, when President Obama was running for reelection, Peterffy spent $10 million on ads he narrated himself warning that Obama was a socialist menace. In 2016 the specter of Hillary Clinton was enough to tilt him, reluctantly, toward Trump. In business, as in politics, Peterffy’s operating mode is a kind of hyperrational efficiency. Despite his distaste for Trump, he’s a member of Mar-a-Lago: “I live three houses away. It’s very convenient for business lunches. Certainly, the people who are more refined go to other clubs.” Peterffy has a tragic view of the Republican Party (“completely adrift”), which makes the threat he perceives in Biden and the Democrats all the more scary. In May, driven partly by the prospect of runaway inflation, Interactive Brokers began offering spot gold futures, including the ability for customers to take physical delivery of their gold positions. “It was my idea,” Peterffy says. He thinks the spending binges under Trump and Biden will “absolutely” lead to Weimar-level inflation that will drive investors to gold. That’s enough for Peterffy to wave off

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what others view as a far graver threat to the country’s well-being: Trump’s refusal to concede the election and the violence that flowed from that stance. “Was there a little speck of hope in him that the crowd at the Capitol would hand him back the presidency? That’s possible,” he says. “But I do not believe that he premeditated the whole thing. If somebody told me that he did, I would be stunned and would be very, very upset. But I don’t think he did. I think it was spontaneous.” Nor does he believe Trump is dangerous. “He’s more childish than dangerous,” Peterffy says, with a laugh. “He’s going to kick me out of Mara-Lago, heh, heh!” Most Republicans have a favorite candidate they’re hoping runs for president in 2024. For many, it isn’t Trump, because they don’t believe he can win. Peterffy is eyeing DeSantis, Mike Pompeo, and Tucker Carlson (“That would be interesting, no?”). But he accepts Trump’s high-profile role for the same reason that Budd, Gidley, and so many Republicans do: He believes it’s necessary for Republicans to regain power. “I think [Republicans] believe that for ’22, it is important Trump be active because he can bring in a lot of voters,” he says. “What they’re trying to do is elect a sufficient number of Republicans to get the House back.” In this view, Trump—like a business lunch at a tacky club—is a practical necessity. Peterffy-the-ideologist can rationalize the party’s indulgence of Trump as a bulwark against socialism. But Peterffy-the-Mar-a-Lago-member has an up-close view of the guy, and, well, it gives him pause. “It’s such a screwy thing, because Trump can also screw it all up,” he points out. “We lost the Georgia [Senate] elections because he wasn’t down there to campaign.” And that’s the catch. Trump is a uniquely unreliable ally, whose main

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source of power isn’t that he can attract a majority coalition to a GOP that’s lost the popular vote in seven of the last eight presidential elections; it’s that, on a whim, he can deny them the voters who have turned out, and will need to do so again for Republicans to reclaim power. For all Republicans’ certainty about his instrumental value next year, no one has a convincing story about how the party will choose a successor and gracefully usher Trump from center stage once his usefulness has expired. The thinking is that it’ll just … happen. “He’s so relaxed and having a great time,” says Budd. “He’s doing what somebody of his age and success probably should be doing at this stage of life: enjoying himself, playing some golf. I think falling into that role is something he’s going to find satisfying. To be the kingmaker, but not have to be the king, I think is going to be OK with him.” Even Guardiola, Trump’s flag marshal, has a roving eye: “A ticket of DeSantis and Tim Scott would be unbeatable.” Peterffy, too, has no answer for how Republicans can rid themselves of Trump before 2024. “I am most hopeful that he is going to give up his hold on the party,” he says. That is, voluntarily. Saying it out loud underscores just how implausible it is. Trump is endlessly feted and indulged by all who surround him. He’s vanquished his rivals. In Republican circles, he’s more powerful than ever. If they win next year, he’ll get the credit—and the attention that comes with it. Would Trump, at that point, choose to quietly recede? Or would he do exactly the opposite? Peterffy ponders this for a moment. He frowns. Finally, he puts down his spoon and throws up his hands. “I have to admit, there is rationality to that view,” he says with a deep sigh and a chuckle. “I just really don’t like it!”

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June 14, 2021

GOLDIN KEN GOLDIN ARRIVED AT HIS OFFICE jumped $500,000 in two minutes. AUCTIONS in Runnemede, N.J., at about 8:30 p.m. on March 6 and ordered But 10 minutes before the auction was SALES a Philly cheesesteak with pizza sauce from Luigi’s restaurant. scheduled to close, customers started $90m Goldin is a former triathlete and normally a health freak, calling to say they couldn’t place bids. but he’s also superstitious, and the pizza steak—no onions, Goldin went live on Instagram to blame extra sauce on the side—had brought him luck recently. In SimpleAuctionSite. com, his tech pro60 November his company, Goldin Auctions, sold $16 million vider, vowing never to use it again. (Chief worth of sports memorabilia, a personal record at the time. Executive Officer Bob Freedman says In January he booked $36 million, more than he’d done in his company, which supplies more than 30 all of 2019. 150 businesses with auction software, was For March, Goldin had a bigger number in mind: $40 mil- hacked. “We’ve hired a security firm,” lion. Thousands of potential buyers had started placing bids he says. Goldin still uses the platform.) 0 that week on more than 2,000 items, including a bat used The site was back online about 30 minby Cal Ripken Jr., sneakers signed by Michael Jordan, and utes later, and by the time the extended Q1 ’19 Q2 ’21 THROUGH MAY at least five trading cards Goldin thought could earn more bidding session closed just before midthan $1 million each, including rookie cards featuring LeBron night, Goldin had sold $41 million in cards and memorabilia. James, Kobe Bryant, and Roberto Clemente. The Bryant card went for $1.75 million, the highest sum of the On auction day, Goldin speaks with only a handful of buy- evening. “My little company running on 2002 software is oneers and sellers, serving for those VIPs as part financial adviser, quarter the size of EBay,” he said on Instagram at about 1 a.m., part therapist. He sets expectations for sale prices, counsels referring to the volume of his sports memorabilia sales. In a on when to bid and hold, and calms nerves as prices esca- late May auction, Goldin surpassed $50 million in sales, putlate. One buyer, who agreed to be identified by only his first ting the company at $200 million for the year and on pace for name, Spencer, wanted to discuss three cards: the Bryant, the $500 million. It keeps 20%. Clemente, and a 1952 Mickey Mantle. Spencer started buying Goldin, who’s 55, has been buying and selling cards since 1978, from Goldin two years ago, initially spending $40,000. Now when he traded some electric racetrack cars for his friend’s collection of about 5,000 baseball cards, including ones featuring 58 he’s up to about $3.5 million. “You’re going to make sure I get Hank Aaron, Willie Mays, and Nolan Ryan. Over the next foursomething?” Spencer asked. Goldin assured him he would. Spencer landed the Mantle, though he was outbid for plus decades, Goldin became the hobby’s most vocal ambasthe biggest prize of the night, Bryant’s 1996 Topps Chrome sador, appearing on HSN, QVC, CNBC, and any other station Refractor card, which shows the former Los Angeles Lakers that would let him talk up the industry. He started his auction star driving to the basket, surrounded by chrome edges that house in 2012, and today he streams live on Instagram at least refract the colors of the rainbow. Bryant’s cards have long once a week for up to an hour, opening packs from a full box been among the sport’s most coveted, of cards—a “break,” in industry terms— Goldin with a stack of cards because of his Hall of Fame career, while taking questions with his son, at his office in New Jersey Paul, who’s 7. but their prices have soared since his untimely death last year. This one As they stream from their home, was especially valuable: It had been Paul identifies the rookie cards of graded 10 out of 10 by professional promising young stars. Goldin interauthenticators, one of only two of jects to grab certain players, show that particular card to achieve that them to the camera, and place them rating. Cards are graded on how prisin protective plastic sleeves. In the tine their corners, surfaces, and edges past year, his following on Instagram are, and how perfectly the photo is has increased from about 1,000 centered. Scratches, stains, or anyto more than 38,000. Pro athletes thing else affecting the overall “eye including Cleveland Indians reliever appeal” lower the rating. Bryan Shaw and Philadelphia 76ers Bidding on Goldin’s live aucguard Seth Curry have joined the tion site had started at $250,000 streams to discuss the market; Curry and passed $1 million before he even invited Goldin to a game. In took a bite of his pizza steak. Soon February, Goldin opened a box of a bidding war erupted. Someone Pokémon cards with YouTube star offered $1.26 million. Moments Logan Paul. “We have something the later, a rival bid $1.36 million. The hobby has never had before,” Goldin first person countered with $1.5 milsays. “All of a sudden, we’re cool.” lion. The value of the card had The sports memorabilia industry

*ALTHOUGH JORDAN WASN’T A FIRST-YEAR PLAYER IN 1986, THE INDUSTRY CONSIDERS THIS HIS ROOKIE CARD. CARDS: COURTESY GOLDIN AUCTIONS. DATA: GOLDIN AUCTIONS

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WHAT’S A MICHAEL JORDAN ROOKIE CARD WORTH?

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That depends on the condition is on track to see almost $10 billion in sales with cards—70,000 in all—for $70. Goldin spent as assessed by a company this year, most of which will come from tradmonths sorting the collection, keeping the best such as Professional Sports Authenticator Inc., which ing cards. Just as investors with too much time cards for himself and setting aside the rest to analyzes cards for defects and sell so he could buy more. He took out an ad and cash on their hands during the pandemic assigns grades from 1 to 10 (10 being the best). Here are have bought cryptocurrencies, nonfungible in a new publication called Sports Collectors Goldin’s estimated values at tokens (NFTs), music rights, and other alternaDigest. He had no idea what his cards were auction for 1986 Fleer Michael Jordan rookie* cards, along with tive assets, they’re funneling cash into cards. worth, but he figured it was more than $70. his sharp-eyed explanations for Goldin and his father, Paul, didn’t want to Card sales on the site StockX, which started the ratings. ——L.S. as a sneaker exchange, are up 4,000% in the be collectors. They wanted to start a business. past year, and the eight biggest card sales ever Their idea was to sign players to exclusive autoGRADE: 1 (POOR) have happened in the past 12 months, according graph contracts, paying them a fee and reselling $2,500-$3,000 to the Action Network, a sports media company. signed cards at a markup. They founded Score Several businesses, such as Rally Rd., now let Board Inc. and got legends like Mantle, Mays, investors buy fractional shares of a card or coland Joe DiMaggio on their roster. Goldin later tarlectible. Professional Sports Authenticator Inc., geted young players as they came out of college. a company in Santa Ana, Calif., that’s been gradIn the early ’80s, manufacturers such as Donruss ing top cards since 1991, is overwhelmed with joined Topps in the market. Card stores opened requests and has stopped taking on most new across the U.S., with conventions offering even business to work through the backlog. more opportunities for buyers and sellers to conThe boom is being driven not by balding nect. “The 1980s took what was otherwise a niche, collectors obsessed with the localized business into a nationwide industry,” It has serious defects, baseball stars of their youth, says Joe Orlando, CEO of Collectors Universe Inc., including major but by younger fans around which owns Professional Sports Authenticator, the creasing and border damage. the world interested in sports grading firm. The Goldins took Score Board pubthey grew up with, such as lic in 1987, and it did $1 million in sales that year. GRADE: 2 (GOOD) That figure grew to $20 million by 1989, thanks basketball and soccer. They’re paying for proven $3,000-$3,400 in part to TV appearances in stars like Bryant—and betting on players’ futures It has corner wear at prices that fluctuate depending on how they which Goldin and athletes and two creases— played that night. would hawk signed photos, one in the upper right corner by “Fleer Of course, as soon as people can regularly interbats, and cards. Premier,” the other in act with friends and family in person, they may That year, Upper Deck Co. the middle, crossing Jordan’s jersey. realize there are better uses for their money than issued its first line. The company’s high-gloss cards were a piece of cardboard. “I don’t know where the ceiling is anymore,” says Bill Simmons, the popular printed on thick paper stock, had holopodcaster and collector, whose media company, grams, and cost $1 a pack—more than douthe Ringer, devotes a show to the hobby. “The ble what Topps cards cost. Upper Deck’s card for rookie phenom Ken Griffey Jr. “was the first market is so out of whack, it’s not worth it to buy card expensive in the moment for a player who cards right now. Demand is too high.” hadn’t done anything,” says Simmons, who, like Goldin, has started doing breaks with his son on IN 1951, TOPPS CO. STARTED GRADE: 3 using baseball cards to sell its Bazooka gum. The Instagram. “What we didn’t realize was Upper (VERY GOOD) next year, a company executive named Sy Berger Deck was cranking out an incredible amount of $3,300-$4,200 designed a set that included player biographies inventory. There were a kajillion out there.” and statistics. They were so popular that Topps Score Board’s sales peaked at more than $100 milrefashioned itself from a candy maker to a tradlion in 1994, when Goldin was a regular on Don ing card company. est’s nightly sports memorabilia show on the Shop The average customer in the next few decades at Home Network. (The infomercial-like was a kid like Goldin. Growing up in South Jersey broadcast was parodied during the ’70s, he worshipped the Philadelphia by Will Ferrell, playing It doesn’t have creases, Phillies, in particular third baseman Mike Schmidt West, on Saturday Night but you can see multiple light scratches and pitcher Steve Carlton, now both Hall of Famers. Live. “Kirk Cameron just under “Fleer” and by Goldin would go to his local pharmacy to buy called, and he even can’t the basket. Plus there’s fraying on all four new packs and compare them with friends. When get through,” the comedian corners and scuffing he was about 13, he and his dad went to a flea says in a sketch.) In one latealong the edges. market and bought six or seven trash bags filled night call-in appearance,

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Goldin promoted his “All Sports Plus” box, a collection of cards that went for $99.95. He called it “the greatest trading card product in the history of mankind.” As the decade neared its end, the oversupply issue got out of hand, with manufacturers combining to produce more than 100 different rookie cards for some players. The period became known in the hobby as the “junk wax” era—early baseball card wrappers were made of wax—because the supply had so devalued the product. Goldin left the company in 1997 but continued to sell collectibles. By the next year, the market had contracted enough that Score Board was in bankruptcy. Pinnacle Brands, which owned several top trading card lines, filed the same year; Fleer joined them a few years later. Goldin continued his appearances on QVC and HSN, but interest dwindled. “It went from me going on the air and selling myself every couple weeks to less and less business,” he says. For the The centering is much next few years, he handled better, 45% left, 55% right. No creasing. marketing for baseball superThe issues here are agent Scott Boras. the chipping along the upper border of the T h e G r e a t Re c e s s i o n card and some fraying renewed interest in alternaon all corners. tive assets, and Goldin saw an opportunity. But the usedcar salesman vibe of his TV spots had made him an outcast in the staid auction world, where Heritage Auctions scored the top vintage cards. “When talking to bigger auction houses, they’d laugh about it and think of him as that guy from TV,” says Ryan Schinman, an avid card collector who invested in Goldin Auctions in 2014. S c h i n m a n , c o - f o u n d e r o f M ay f l o w e r Entertainment, which books music acts for corporate events, says he was attracted to Goldin’s passion. Goldin often messages buyers at 1 a.m. to talk about new cards he’s procured, and he sometimes stays up until 4 sorting through collections to see what he wants to buy. “I tend to partner with people who have that kind of work ethic, where they don’t know how to turn it Here’s where people off,” Schinman says. argue. One person can Their team secured see minor imperfections and see an 8. There are a handful of great cards a couple “print”—or white—dots: upper left, in those years, but they in the red and the photo; struggled to get sellers to bottom right, in the blue. In a perfect card, see the company as a topyou want the corners tier forum. In 2016, Goldin totally red. There’s some hosted the Great American fraying in the upper right and bottom right. Trading Card Auction. A friend approached him

June 14, 2021

GRADE: 4 (VERY GOOD–EXCELLENT) $3,700-$4,800

about selling an Upper Deck LeBron James rookie card at the event, but he was wary; for his entire career, most serious c o l l e c t o r s h ad o n ly wanted cards featuring baseball players from before 1960 who were assured a spot in the sport’s pantheon. He thought he’d get less than $100,000 for the James card. He got $312,000. Over the next couple of years, Goldin studied the contemporary market. It has evolved since the ’90s: The four main sports leagues—MLB, the NBA, the NFL, and the NHL—now have exclusive contracts with companies such as Topps, Upper Deck, and Panini to limit supply and avoid a second junk wax era. New cards are available at $3 to $5 a pack, but risk takers can spend as much as $5,000 on special edition packs that are more likely to have rare cards. Goldin has scored some valuable collections. One, known in the industry as the “Puerto Rico Find,” was valued at $20 million thanks to its rare Upper Deck basketball cards from 2003-08. Last August he sold a rookie card for Los Angeles Angels outfielder Mike Trout from cardmaker Bowman for $3.9 million, then a record for a single card. A month later, he sold a Panini A nice-looking card— National Treasures rookie just a touch of fraying on the corners. But if card of Milwaukee Bucks star you look carefully, you Giannis Antetokounmpo for see the photo is a little out of focus. Compare $1.9 million, a new high at it to the 5 or the 7. the time for a basketball sale. “We made ourselves the go-to guys right when everything took off,” Schinman says. “If you had a modern card, you were foolish to go anywhere else.” a The surface wear is minimal. You can’t see any creasing. I don’t see any scratches except a light one above “Fleer.” But the centering is off; 80% of the bordering is on the right.

GRADE: 5 (EXCELLENT) $4,500-$5,500

GRADE: 6 (EXCELLENT–MINT) $5,000-$6,000

GRADE: 7 (NEAR MINT) $7,500-$8,200

THIS YEAR, A ONE-OF-A-KIND card featuring NBA star Luka Doncic sold for $4.6 million in a private deal that Goldin wasn’t a part of. Doncic is a promising young star; he won Rookie of the Year in 2019 and guided the Dallas Mavericks to the playoffs this season and last. But no one’s writing the inscription for his Hall of Fame plaque just yet, making the sale a Rorschach test for how buyers feel about the industry’s future. Brandon Steiner, who runs sports memorabilia marketplace CollectibleXchange, lived through the boom and bust of the ’90s and sees the Doncic sale as evidence of an overheated market. “In a few years the bubble will break, and it will be a black eye for the industry,” says Steiner, who has

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June 14, 2021

CARDS: COURTESY GOLDIN AUCTIONS

Risk takers can spend as much as $5,000 on special edition packs that are more likely to have rare cards

60,000 pieces for purchase on his site and runs a separate company that helps athletes sell merch directly to fans. For Goldin, the Doncic sale is reason for optimism. Millennials and Gen Zers who grew up in the ’90s and 2000s are more interested in Bryant and James than in old baseball players. And though rare baseball cards still fetch the highest prices—a Honus Wagner with a grade of just 2 sold for $3.75 million at Goldin’s May auction— basketball and football are the fastest-growing markets, and soccer isn’t far behind. At the same May auction, a Michael Jordan card sold for $2.1 million and a Tom Brady card went for $522,750. One featuring 21-year-old point guard Ja Morant sold for more than $55,000 the day after he and the Memphis Grizzlies knocked the Golden State Warriors out of the playoffs. Morant isn’t Jordan—who is?—but watching that money turn into, say, $500,000 is part of the fun. Goldin also dipped into the The centering is NFT market at the auction, probably 45%-55%, left to right. There’s a reselling more than three white dot in the blue to dozen TopShots—live NBA the left of “Bulls.” Minor hints of wear on the highlights authenticated bottom left corner. on the blockchain. They included a James dunk, a Kevin Durant three-pointer, and a Steph Curry assist, with one set of clips going for almost $48,000. “The kids want to wake up and look up box scores and see how their players did,” says Nat Turner, a prominent 35-year-old collector who invested in Goldin Auctions. Turner, who sold his health-care company for $1.9 billion in 2018, owns tens of thousands of cards, including 2,000 Jordans. He buys daily on EBay, the largest marketplace for the hobby, and he’s paid more than $400,000 for a card after someone messaged him on Instagram. (He won’t name the player.) His activity has made him a celebrity in the industry. He gets up to 100 DMs a night from people looking to talk about cards, he says, many of them strangers. This year, Turner and New York Mets owner Steve Cohen, the hedge fund billionaire, led an investment group that acquired Collectors Universe for $853 million.

GRADE: 8 (NEAR MINT–MINT) $11,600-$12,000

GRADE: 9 (MINT) $36,000-$40,000

GRADE: 10 $480,000 (GEM MINT)

Investors are betting there are more diehards out there. In February, Goldin sold a majority stake in his company for $40 million to investors led by the Chernin Group, run by media mogul Peter Chernin. The deal also attracted athletes (Durant, You’re close to 50-50 centering, side to Dwyane Wade), YouTubers side. I see just a (Paul), podcasters (Simmons), touch of wear on the corners. and billionaire NBA owners (Mark Cuban). Ross Hoffman, a former vice president for partnerships at Twitter, took ver as CEO. He’ll oversee day-to-day operations, the construction of a new bidding platform, and the building of a central repository for sales data, which will open up the market to the international buyers who are just coming online. Goldin is now executive chairman and cheerleader-in-chief. In the meantime, his investors want to capitalize on his social media popularity. Chernin Entertainment is pitching an unscripted TV show set in the world of trading cards that will be produced by former ESPN executive Connor Schell and Pawn Stars producer Brent Montgomery. Goldin has regaled potential buyers of the show with his stories. Last month he got a call from a potential client who said he had an ungraded collection from the ’50s and ’60s with multiple Mickey Mantle rookie cards. Goldin drove five hours from his home to Sag Harbor, N.Y., to inspect it. He found binders filled with every Topps baseball card produced between This has four perfectly 1958 and 1983. Most were sharp corners, though some might say the in excellent condition, and bottom left isn’t he estimated the collection absolutely sharp. Image is in focus. was worth bet ween What’s nice about $7 million and $10 million. this card is it’s almost 50-50 centered left to He remembers a time, right and top to bottom. not too long ago, when Well-centered cards go for the most. When he wouldn’t have been I grew up, it wasn’t anyone’s first call. Now important, but now it is. If this was graded things are different. “I’m five times, three out of getting all my deals ’cause five it would be a 10, two out of five it would I’m Ken Goldin,” he says. be a 9. “It’s so freaking weird.” <BW>

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Start brushing up on your cooking-for-a-crowd skills this summer and reach for one of the handiest tools in a griller’s arsenal By Kate Krader Photograph by Heami

yu Wag

S U I T S

Hariss a shr

with onion

imp wit hp

ep pe r

FOOD STYLIST: MAGGIE RUGGIERO

Zu c c h i n i w i t h ta h i n i

OUTDOOR ENTERTAINING

June 14, 2021 Edited by Chris Rovzar Businessweek.com

Bloomberg Pursuits

Skewers check multiple important boxes when it comes to partying: They don’t take much time to prepare, they’re easy to cook, and perhaps best of all, they don’t require a fork. They also lend themselves to a universe of treatments and savory ingredients. A cut of tenderloin or rib-eye can undergo a fiery transformation just as well as a meaty mushroom or chunk of eggplant. One trick chefs agree on is to make sure each item on the skewer—whether it’s meat, vegetables, or both—is around the same size and similar density, so they cook evenly. Haphazardly threading multiple kinds of food onto a skewer may make for a colorful picture, but it’s a classic culinary faux pas. Another mistake? Serving a sad, unadorned square of meat on a stick. Skewers need some kind of flourish, something special to make you want to grab another. A drizzle of pungent sauce, such as zhoug, the spicy green Middle Eastern condiment, powerfully accents food cooked over fire, from zucchini to shrimp. Even dishes that haven’t been grilled can be elevated by the skewer treatment, speared and transformed into fun finger food with a sprinkle of seasonings or a sauce with a kick. Ayesha Nurdjaja, chef and partner at the modern Mediterranean restaurant Shuka in New York, applauds the overall simplicity and broad appeal of skewered foods. “You don’t have to worry about taking temperatures,” she says. As a general formula, she advises to “cook the food of choice over high heat for three minutes, quick turn for another three minutes”—and voilà—“your skewers are done,” she proclaims. “A stir fry on a stick.” Her can’t-fail veggie recipe is below, along with three other crowd-pleasers from top chefs across the country.

ZUCCHINI WITH TAHINI From Ayesha Nurdjaja, chefpartner, Shuka, New York Serves about 8 1 cup tahini 4 Tbsp olive oil, divided 1 garlic clove, grated on a microplane 1 lemon 2 tomatoes, grated on a box grater’s medium holes ½ tsp oregano ½ tsp sea salt 3 medium zucchini, ends trimmed, cut in half crosswise 1 cup olive tapenade 1 cup zhoug (a fiery green cilantro sauce) In a bowl, combine tahini, 2 Tbsp oil, garlic, and juice from ½ lemon. Add a little water to thin the sauce so it’s pourable. In another bowl,

combine tomatoes, 2 Tbsp oil, oregano, and salt. Heat a grill or broiler. Stand a zucchini half on a cutting board, wider side down. Slice each half into three or four ½-inch-thick planks. Thread two skewers—one from either side for easy flipping— through each zucchini plank. Grill or broil over medium high heat for about 3 minutes per side until nicely charred and just tender. Squeeze remaining lemon over zucchini and drizzle with tahini sauce, tapenade, and zhoug. Sprinkle with seasoned tomatoes. WAGYU WITH MOSTARDA From Sarah Grueneberg, chefowner, Monteverde, Chicago Serves about 6 2 tsp juniper berries 2 tsp fennel seeds

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2 tsp black peppercorns 2 tsp coriander seeds 2 Tbsp dark brown sugar (packed) 4 tsp salt 2 lb wagyu sirloin or other tender beef, cut into 1½-inch cubes 6 Tbsp fruit preserves, preferably rhubarb or peach 2 Tbsp Dijon mustard 6-8 spring onions, cut into 1½-inch sticks

a smooth dressing. Transfer to a medium bowl and add lemon zest and oregano. Add shrimp and toss until wellcoated. Refrigerate overnight or up to 24 hours. Heat a grill or broiler. Skewer shrimp with peppers or onions. Grill or broil over high heat for 2 to 3 minutes per side until cooked through and lightly charred. Serve with lemon wedges.

In a small skillet, toast the juniper, fennel seeds, peppercorns, and coriander seeds over medium heat until fragrant. Let cool slightly, then grind in a spice grinder or mortar to a fine powder. Transfer to a bowl; stir in sugar and salt. Lightly coat wagyu with spice rub and let stand for 30 minutes. Heat a grill or broiler. In a bowl, whisk together fruit preserves and mustard to make fruit mostarda; set aside. Make the skewers, starting with a stick of spring onion, then a wagyu cube. Continue until ending with a piece of onion. Grill or broil over high heat for 2 minutes per side for medium rare. Serve skewers with mostarda.

Harissa spice In a spice grinder or mortar, combine 1 Tbsp dried urfa chile peppers or dried chipotle, 1½ tsp cumin seeds, 1½ tsp coriander seeds, 1½ tsp caraway seeds, 1½ tsp black peppercorns, 1 Tbsp sweet paprika, and ½ tsp powdered garlic. Blend to a fine powder. Discard any large pieces.

HARISSA SHRIMP From Ian Fleischmann, chef, Strawberry Moon, Miami Serves about 6 ⅔ cup olive oil 2 Tbsp harissa spice (recipe follows) 1 large garlic clove, chopped 1½ Tbsp fresh lemon juice 1½ tsp kosher salt ⅓ cup chopped fresh oregano 2 lb shelled large shrimp, head and tail on Grated zest of 2 lemons, plus 1 lemon, cut into wedges, for serving Mini sweet peppers Cipollini onions, trimmed and peeled In a small blender, combine oil, harissa spice, garlic, lemon juice, and salt and process into

FRIED CHICKEN From Cyed Adraincem, executive chef, Katana Kitten, New York Serves about 6–8 1 cup soy sauce ½ cup sake 1 Tbsp grated ginger 2 garlic cloves, grated Freshly ground black pepper, to taste 2 lb boneless chicken thighs, cut into chunks Vegetable oil, for frying Potato starch, for dusting Good-quality sweet-and-sour sauce, such as Kikkoman In a medium bowl, combine soy sauce, sake, ginger, garlic, and black pepper. Add chicken and stir to coat. Marinate for at least 30 minutes and up to 6 hours. In a medium skillet, heat 1 inch oil to 350F. Spread potato starch in a shallow bowl. Working in batches, lightly coat chicken with starch. Fry in hot oil, making sure not to crowd the pan. Transfer to paper towels to drain. Thread hot fried chicken on small skewers and drizzle with sweet-and-sour sauce. Serve with more sauce.

OPPOSITE PAGE: FOOD STYLIST: MAGGIE RUGGIERO

OUTDOOR ENTERTAINING

DOOR ENTERTAIN NING

GINGER-MINT LEMONADE From Angela Kent, Gitano Garden of Love, New York M kes 8 servings Ma 15 m mint leaves 1¾ cups honey-ginger syrup (recipe follows) 1¼ cups fresh lemon juice 2½ cups club soda Mint sprigs and fresh lemon wheels, for garnish Gently smack mint between palms to release fragrance, then place in bottom of a large pitcher (at least 9 cups). Scoop ice cubes on top of mint, then use s a long-handled spoon to reach thrrough the cubes and tap on the mintt. Pour in honey-ginger syrup and lemoon juice and finish with club soda. Floatt mint sprigs and fresh lemon wheels in pitchher for garnish. Too maake alcoholic, add in 2 cups vodka, b urbo bo mezcal, or tequila before the club soda. Orr serve DIY bottles on the side. Honey-ginger syrup Ma es about 2 cups 1½ cu s oney 1 cup p er p chhopped fresh ginger In a medium saucepan, combine ingredients and bring to a boil. Reduce heat and simmer until slightly thickened into a syrup. Remove from heat, strain into a jar, and cool completely. Keeps, refrigerated, for up to two weeks.

Kick oﬀ a summer of get-togethers with a supremely adaptable lemonade that will lift taste buds—and moods—in an instant By Kara Newman Photograph by Heami Lee A versatile, booze-optional punch is the best way to keep guests refreshed without all that last-minute measuring and stirring. “People like to share,” says Angela Kent, beverage manager at New York’s Gitano Garden of Love. For hosts, batching also saves time and effort. “It’s better to serve in a large-format style than to make individual drinks for guests,” Kent continues. This ginger-mint lemonade is one of the most popular nonalcoholic options served at the lush outdoor space. “The ginger has a nice lifting effect on the palate,” she says, “and then the mint comes in.” Plus, it mixes well with a range of spirits, such as vodka, bourbon, mezcal, or tequila, for those who choose to partake.

KENT’S PRO TIPS • Start at the bottom Tamping down the mint into the bottom of the pitcher creates a layer under the ice that adds minty flavor while also preventing the leaves from floating up—at least until the ice melts. • Double down on ice cubes Use chilled ingredients and relatively dense ice, such as 2-by-2inch cubes made in silicone molds. “Not crushed ice,” she warns, because it melts too quickly and leaves a watered-down drink.

• Spice it up Float in some jalapeño slices. “The heat will disperse into the drink over time,” she says. • Choose your own lemonade adventure The ginger can be replaced with any fruit, Kent says— watermelon, mango, or raspberry. “If you want a puree instead of fresh fruit, swap out both ginger and honey,” she says. The mint can also be switched up for another herb, such as basil or cilantro. Out of lemons? You can use limes instead.

OUTDOOR ENTERTAINING

Bloomberg Pursuits

June 14, 2021

Six luxe lawn games that are anything but child’s play. By Kathryn O’Shea-Evans Grass is always greener when you get out and enjoy it, a fact gambolers of yore sensed as clearly as morning dew underfoot. At the Biltmore in Asheville, N.C., “lawn games were taken into account from the very beginning,” says the house museum’s associate curator, Lauren Henry. Frederick Law Olmsted’s original plans for the grounds that served as George Washington Vanderbilt’s Gilded Age retreat “included two courts for lawn tennis” and a bowling green on the south terrace.

Today, with the frolicsome post-lockdown vibe, lawn games such as croquet, bocce, and ladder toss are resurgent. “In the days since we opened for the 2021 season on May 15, we’ve noticed almost every single one of our guests partake in at least one of these activities with their families and friends,” says Caitlyn Pyzdrowski, sales and catering manager at Maine’s Chebeague Island Inn. Here, a few of our favorites to employ on your own plot.

STRIKE SKITTLE SET Try a posher version of lawn bowling with this Hermès skittle set in ash wood and the brand’s bridle leather. It’s lavish (and made in France) but hardy enough for outdoor bowling with “The Dude” from The Big Lebowski. $2,425; hermes.com

LADDER GOLF DUO Take a break from climbing the corporate rungs with this acacia wood pair of ladders in an all-business color palette of black and white. Some call the game “cowboy golf,” but here, there’s no pressure for a hole-in-one. $279; potterybarn.com

BOCCE OCCE PACK Fun fact: This sport was deemed so uproariously fun in the 14th century that only the nobility could play, lest lesser mortals forget their duties. This procrastination set has eight resin balls and a jack (target) tucked into a birch case. $348; serenaandlily.com

TUMBLING MBLING TOWER GAME Jenga—the tumbledown legend introduced at the 1983 London Toy Fair—has led to lots of lookalikes, including this Brobdingnagian set hewn of New Zealand pine. A canvas carrier makes it picnic-ready, too. $150; crateandbarrel.com

VINTAGE CROQUET SET You could opt for a mass-market set, but an antique version “hits different,” to use the parlance of the internet. This one by John Jaques & Son, which popularized the sport in 19th century England, has the heft of history. $3,033; 1stdibs.com

KATAHDIN TAHDIN BEAN TOSS Don’t call this game cornhole unless you want to sound as if you’re back in college. But even those players without fraternity bros will feel like a kid again throwing these square bags. Helpfully, the classic L.L. Bean logo lends an air of maturity. $199; llbean.com

THIS PAGE: COURTESY COMPANIES. OPPOSITE PAGE: ILLUSTRATION BY MARIA CHIMISHKYAN

CRITIC

Bloomberg Pursuits

CANNED 2020 Broc Cellars Love Rosé This light, zingy, almost chuggable rosé is made from foot-stomped organic grapes, mostly valdiguié, by California natural-wine maker Chris Brockway. $10 for 375 milliliters NEW, FROM AN OLD MASTER 2020 the Pale by Sacha Lichine The mastermind behind Provence blockbuster Whispering Angel entices yet again. This good-value, aperitif-style rosé with a screw cap also features a fun, New Yorker-inspired label. $16

Rosé remains an unstoppable force— in sales, styles, and flair. By Elin McCoy You can’t escape rosé this year. But why would you want to? The wines are now in cans, boxes, and fancy glass bottles that look as if they hold perfume. Some have bubbles; most don’t. Others come as ready-to-drink spritzers or seltzers or no-alcohol pink wines infused with hemp. Oh, and they’re made of grape varieties that span aglianico to zinfandel. In other words, rosé has become a mood, and most of us are ready for some joie de vivre after this year. According to drinks market analysis company IWSR, rosé wine sales volume in the U.S. has grown 118% from 2015 to 2020, from a little more than 6.6 million to about 14.4 million cases. Online retailer wine.com lists more than 350 different labels. Rosé prosecco has been such a huge hit that Italian wineries are predicting a shortage. Vintners and celebrities alike are jumping into the rosé-making game. Snoop Dogg introduced his bold, fruity Snoop Cali Rosé under the 19 Crimes label for $12. In April, NBA player CJ McCollum’s first Heritage 91 pinot noir rosé, made by Oregon’s Adelsheim Vineyard, sold out in three hours. Still, Provence remains rosé’s spiritual home and the world’s go-to spot for reliably pale examples with subtle aromas and that mineral tang that makes them ideal with food. In the past two years, at least six Bordeaux château owners, as well as French luxury company LVMH, have snapped up estates there. Chanel’s Wertheimer brothers now have two. Here are 10 new rosé wines worth drinking.

BOXED 2020 Ryme Cellars Bag in Box Rosé Most box wine is just plonk, but not this pale, high-acid rosé with aromas of strawberries and pink grapefruit, made by a Sonoma winery from aglianico grapes. The box holds the equivalent of four bottles. $73 NO-SMOKE NAPA 2020 Realm Cellars La Fe Smoke taint from 2020’s destructive wildfires prevented some Napa winemakers from making their usual cabernets. To avoid this fate, cult cab Realm Cellars harvested estate grapes early to create its first floral-scented, complex rosé. But you have to sign up for a membership to get it. $60 BORDEAUX CHATEAUOWNED 2020 Château La Mascaronne Côtes de Provence Rosé Michel Reybier, owner of Cos d’Estournel, purchased this certified organic estate not far from Brad Pitt and Angelina Jolie’s Château Miraval last summer. The wines are ultrapale and mineral in style, with savory fruit and enough heft for food. $30

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FEEL GOOD 2020 Raen Winery the Monarch Challenge Rosé Because of the use of insect-killing chemicals, the monarch butterfly population has declined 90%. Concerned brothers Carlo and Dante Mondavi (yes, of the Napa Mondavis) are donating all the proceeds from this crisp, savory Sonoma pinot noir rosé to help farmers eliminate pesticides. $30 OLD VINE 2020 Malene Old Vine Rosé of Grenache Pink specialist Malene Wines in Edna Valley produces three savory, Provence-style examples with mouthwatering acidity. My favorite is this one, which came out two years ago and is made from vines almost 50 years old. It’s available at the tasting room and to wine club members (just sign up), but the widely available regular bottling at $22 is good, too. $35 BLACK-OWNED 2019 La Fête du Rosé Donae Burston released this rich, cherry-scented wine from a St-Tropez vineyard in 2019. It’s been such a success that Constellation Brands Inc. invested in the venture last month. $72 for a threebottle set LUXURY 2019 Domaines Ott Etoile One of Provence’s stars produced this silky, seductive, delicate, and complex pink wine last summer. This is its top cuvée, a blend of the best terroirs from three estates. $200 BIODYNAMIC 2020 Rosato di Ampeleia Acclaimed natural winemaker Elisabetta Foradori and friends founded this project on the Tuscan coast. The second vintage of their rosato is coral-colored, refreshing, tart, and tangy. $27

Bloomberg Pursuits

Shatterproof tableware and glasses can be dull and uninspired, but not these. Embrace the more festive mood sweeping the U.S. By Kristen Shirley Photograph by Janelle Jones

People are ready to party. At least, that’s what event designer extraordinaire Rebecca Gardner, the founder of new e-commerce site Houses & Parties, has seen so far this year. When considering a theme, “everyone wants bold and unabashed color,” she says. “They want to hug and kiss and drink so much Champagne that they leave their shoes in the bushes. I think color is an extension of that. I personally have never been to a party with a neutral color palette that made me want to dance on the table.” If your hosting skills are rusty, follow Gardner’s tips for stress-free entertaining. She makes a detailed itinerary, so there are no last-minute trips to the grocery store or forgotten dishes, even putting Post-its on her serving pieces to identify which food goes in what. In general, it’s easiest to serve salads and cold entrées, which eliminates the rush of trying to finish cooking everything at the same time. “I think that’s a real relief for the nervous hostess, and she or he should embrace summer as their season, because it’s the most kicked-back entertaining of all.”

BOWLS AND TUMBLERS Italian company Fratelli Guzzini SpA is renowned for design— it has glasses in New York’s Museum of Modern Art. But it’s also deeply committed to sustainability. Its Tierra bowl (1) and tumblers (26) are made from 100% post-consumer recycled plastic; every set of glasses saves 27 bottles (1.5-liter) from landfills. Bowls in the Twist collection (11, 22) have white exteriors and brilliantly colored interiors, but they’re also 100% recyclable and made from 50% recycled plastic. From $12 (bowls), $35 for a set of six (tumblers); fratelliguzzini.com

GLASSWARE Founded in 1961, Blomus GmbH uses a unique production technique for its FUUM stemware (2, 9) so it’s more break-resistant. The German company creates the goblet and stem from one piece of crystal instead of fusing them, then colors them with a water-based, organic material that’s food-safe and scratchresistant. The water carafe (6) and tumbler (19), both also made from one piece, can round out your dinner party ensemble. $74 for a set of four (wine glasses), $42 (carafe), $46 for a set of four (tumblers); blomus.us

PITCHER Product designer Sophie Lou Jacobsen, in Brooklyn, N.Y., adds a touch of whimsy to each of her pieces using borosilicate glass, a material that first made its name in Pyrex’s glass bakeware. It’s temperature-resistant to hot and cold liquids and noted for being thin but strong. The Wave pitcher (3) has curved handles in a contrasting color. $215; sophieloujacobsen.com HIGHBALL GLASSES Bormioli Rocco specializes in chic glassware to suit every occasion. It makes its Rock Bar collection (4, 13, 27) from tempered glass, which can be four times as break-resistant as regular glass. The classic design, seen at trattorias across Italy, comes in several different sizes. $20 for a set of six (tall), $24 for a set of six (short); bormiolirocco.com SNACK BOWLS Nashi Home hails from Australia, so it’s only natural that it excels at elegant pieces that can withstand the elements. Its black-and-white Luxe collection (5, 28) mixes solid and marbled pieces handcrafted from resin, an ultradurable material. $38 (black), $31 (white); nashihome.com TRAY AND PLATES Enamel tableware has come a long way from its days as a camping must-have. Kapka was founded by three young Turkish women who wanted to create a modern company that embraces color and vibrant prints. The Flow Fest small tray (7) has scattered sprinkles on a bright blue background, and the A Little Color plate (14) and large tray (21) come in yellow, turquoise, and blue. $25 (small tray), $24 (plate), $35 (large tray); infavorof.com TRIVETS AND SERVING BOWLS You’ll never have to search for your salad servers with the Uno bowl (8) from London design company Joseph

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Joseph. Resting on the lip of the bowl, they’re always at the ready and won’t get knocked over when passing around the table. The Spot-On silicone trivets (12) protect surfaces from hot dishes. The DoubleDish serving bowl (15) neatly nestles two bowls together, solving the pesky problem of where to put olive pits. $45 (salad bowl), $10 for a set of two (trivets), $15 (serving bowl); us.josephjoseph.com SERVING DISHES Make a bold statement with Thomas Fuchs’s 1/2 & 1/2 collection of melamine bowls (10), trays (18), and plates (23). They’re nonbreakable, and everything stacks, so you can save on precious storage space. $48 for a set of four (bowls, plates), $47 (tray); thomasfuchscreative.com ICE BUCKET Cassigoli upgrades a classic ice bucket (16) as only the Italians can by hand-wrapping it in luxurious calf leather. A stainless steel cover prevents ice from melting on even the hottest days. $560; artemest.com FLATWARE Mepra’s Fantasia utensils (17, 25) display a rainbow of colors—28 different shades and counting. Made of sturdy stainless steel and brightly colored resin attached with an ultrasonic welding process, they will last a lifetime. $52 each (serving spoon and fork), $66 for a set of four (flatware); theluxuryartmepra.com TABLECLOTH Designed by Ankara, a linen company in South Africa, this tablecloth (20) fits an 8-footlong folding table perfectly, touching the ground on all sides to hide the legs, and features a modern interpretation of an African print. Gardner’s carved Majestic Boxwood flatware (24) completes the look. $218 (tablecloth), $490 (flatware set); housesandparties.com

PROP STYLIST: ALLISON RITCHIE

OUTDOOR ENTERTAINING

Bloomberg Pursuits

June 14, 2021

3 6 1

7 69

14 9

11 13 15

THE ONE

What started as a trade show stunt—“the world’s loudest cooler”—is now a reality. The $900 Shivr-55 cooler from marine audio specialist Wet Sounds Inc. in Houston combines two of the best things about a summer party: earsplitting music and ice-cold drinks. The 55-liter roto-molded cooler is big enough for 48 cans, give or take, and has a splash-proof, bashproof, 200-watt Bluetooth soundbar embedded in it.

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THE COMPETITION • Seismic Audio’s $400 SC48WS has two 4.5-inch, built-in Bluetooth speakers that can play as long as four hours on a single charge. The ice in the 48-quart container will last a lot longer—as many as 10 days. • At 17.75 quarts, the $150 Coolbox is comparatively compact. Built into the front is a pair of 20-watt

marine-grade speakers and a water-resistant compartment to stash a phone or another streaming device. • Since 2007, Ice Chest Radios near New Orleans has operated on the premise that with a little ingenuity, any cooler can be wired for sound. Options include a 600-watt, 125-quart Yeti with four 8-inch speakers for $2,000.

June 14, 2021

THE CASE The Shivr-55 showcases a modified version of Wet Sounds’ Stealth-6 Ultra HD soundbar, which was designed to be used on boats and ATVs. With four full-range, 3-inch drivers and a pair of 1-inch titanium tweeters on the front, this boombox disguised as an ice chest produces a sound meant to carry clearly outdoors.

But consider yourself warned: The device clocks in at 40 pounds empty, but presumably, if you’ve got a cooler full of drinks and a bangin’ sound system, you’ll have enough new friends to help move the thing. Its 10 amp-hour battery can keep the music pumping for more than eight hours. How long the drinks last is up to you. $900; wetsounds.com

A heavyweight cooler contender gives summer a refreshing soundtrack Photograph by Gabriela Herman

OPPOSITE PAGE: COURTESY TWINKLY

The Shivr weighs 40 pounds empty and can fit 48 cans or 10 bottles of wine

OUTDOOR ENTERTAINING

Bloomberg Pursuits

June 14, 2021

Artemide La Linea’s flexible light tubes can be installed out of sight

Outdoor lighting is one of the trickiest elements to get right at night. By Mark Ellwood This year we’ve never wanted it more: to make every lazy summer night outdoors last as long as possible. The best way to prolong an open-air evening, of course, is with some artfully placed lighting. So how to achieve that elegantly casual, thrown-together yet deliberate ambience? First, before installing anything, consider the entire area you hope to illuminate. “Lighting draws people’s attention to what you want them to see, vs. what you don’t,” says Sebastian Dostmann, whose company, Sebass Events & Entertainment in Greenwich, Conn., specializes in high-end alfresco functions. “An abundance of candles in the middle of a dinner table draws the eye away from the barbecue or hose reel.” Think layers, too, and mix brighter spotlights with twinkly, softer string lights. Highlighting the edge of a property will make even small spaces seem larger, says Kevin Toukoumidis of design studio Dspace in Chicago. “By far the biggest mistake most people make is overlighting your project,” he says. “You can always add more.” Ask an electrician to wire the switches for all outdoor lights inside the back door. Outdoor lights come in many forms, whether table lanterns or perimeter lights, but bistro strands are the trickiest to master. They work best when strung along some kind of support, whether wreathed through a pergola or clipped to steel tension wires. Lighting designer Seth Bernstein has worked on everything from Saturday Night Live to the ice skating rink at New York’s Bryant Park. “Connections are the weak point, so wrap them all in electrical tape,” he says. Measure the space you’re aiming to festoon, and order 50% extra in length to allow for a “nice swag,” or hanging dip. “Go for a zigzag when you string them, with posts 8 to 12 feet apart, and make an overhead Z between them” for the best combination of efficiency and flair. Skip solar options, the experts say: Many give off a harsher, blue-white light that’s neither flattering nor cozy. Note, too, that candles produce the warmest, most natural glow of all and so will clash with the artificial feel of most solar-powered lights. We asked our experts to suggest the best high-end outdoor lighting, from bistro strings to stylish portable lanterns.

TWINKLY STRINGS It started out focusing on Christmas trees, but this Italian company now offers a range of smartphone-programmable lights that can shine in your choice of color patterns (rainbows for Pride?) or even sync with a playlist. Gimmickry aside, these are durable, affordable, and versatile. From $120; twinkly.com FRONTGATE METEOR LIGHTS Weeping willow-style garlands such as these create a visually dramatic display. Each set includes two 3-foot strands and one 4-foot strand puffed out with LEDs that can cycle through a variety of multicolor effects. $299; frontgate.com ARTEMIDE LA LINEA A collaboration with witty Danish starchitect Bjarke Ingels, these recently released flexible tube lights are temperatureresistant and can be draped or affixed to produce a soft, consistent glow. $2,070 for 2.5 meters (8.2 feet). $3,565 for 5 meters; artemide.com

FLOS IN VITRO This Philippe Starck-designed range inserts a hidden LED surface at the bottom of a classic lantern. Instead of using a conventional bulb, the glassand-aluminum cages seem to generate a soft glow from thin air. From $1,795; usa.flos.com VIBIA BAMBOO OUTDOOR FLOOR LAMPS These light poles by the Spanish design company look like leaning reeds sprouting from the ground. Designed to illuminate pathways and open spaces, the spires come in a natural palette of khaki and rust colors. $9,000 for a cluster of three; vibia.com CRATE & BARREL EDISON BULBS String as many as three of these 20-foot lengths together to decorate a small outdoor area. Many bistro lights space bulbs 2 feet apart, but this vintagelooking set clusters them together with only 12 inches between each to give off more light than traditional strands. $45; crateandbarrel.com

With Bloomberg Opinion

A Food Fight Breaks Out In the M&A Market By Brooke Sutherland

ILLUSTRATION BY GEORGE WYLESOL

Welbilt Inc. isn’t a household name, but most Americans have likely eaten a meal produced with its equipment at some point in their lifetime. The company makes griddles, soda dispensers, cold-brew taps, ice machines, and the technology that keeps salad bars chilled and buffets warm. Its customers include convenience stores, fast-food chains, hotels, and restaurants. And now Welbilt, based in New Port Richey, Fla., is at the center of a bidding war. Ali Group, a closely held maker of gelato dispensers, coffee machines, and doughnut fryers, is attempting to wrest control of Welbilt from rival Middleby Corp. The interloper confirmed on May 28 that it had offered to acquire Welbilt for $23 a share in cash, or $4.6 billion including the assumption of debt. The deal Welbilt agreed to with Middleby in April is made up of stock and valued at about $21 a share based on recent prices. Food service isn’t the sexiest of businesses. A digital and automation revolution in the behind-the-scenes aspects of the dining experience had long been talked about, but it never seemed to gain traction as restaurants dealt with menu innovations, drive-thrus, and other priorities. Then the pandemic happened. The ability to monitor equipment and inventory digitally took on new meaning, as did the opportunity to track ordering trends and use the data to try to get a grip on how demand was shifting. The need for automation has become only more pressing as restaurants compete

with the rest of the economy to rehire workers. Demand for modular setups and ghost kitchens—food-service locations with no on-site dining—has also increased as more restaurants pivot toward delivery options. March marked the busiest month for orders in the Americas since Welbilt spun off from Manitowoc Co. in 2016, according to its most recent earnings update. To take full advantage of these trends, food-equipment makers need to invest in innovation and offer a wide array of products. The large debt load Welbilt inherited from its former parent company “really limited our ability to pursue a growth agenda,” Chief Executive Officer William Johnson said on a call in April to discuss the Middleby deal. “We feel that we’re stronger together addressing those changes in the marketplace.” Middleby is standing firm for now, arguing its offer is better than Ali’s: It’s further along in seeking regulatory approval, and the stock component would allow Welbilt shareholders to benefit from future growth opportunities. The valuation is already getting expensive, though, and matching Ali’s all-cash offer would strain Middleby’s balance sheet, Saree Boroditsky, an analyst with Jefferies, wrote in a report. Ali also has the benefit of not having to answer to public shareholders. But Middleby does have some room to increase its offer and likely will have to sweeten the terms if it wants to win this takeover battle. <BW> �Sutherland is a columnist for Bloomberg Opinion

Bloomberg Businessweek (USPS 080 900) June 14, 2021 (ISSN 0007-7135) H Issue no. 4702 Published weekly, except one week in February, April, May, June, July, August, September, October and November by Bloomberg L.P. Periodicals postage paid at New York, N.Y., and at additional mailing offices. Executive, Editorial, Circulation, and Advertising Offices: Bloomberg Businessweek, 731 Lexington Avenue, New York, NY 10022. POSTMASTER: Send address changes to Bloomberg Businessweek, P.O. Box 37528, Boone, IA 50037-0528. Canada Post Publication Mail Agreement Number 41989020. Return undeliverable Canadian addresses to DHL Global Mail, 355 Admiral Blvd., Unit 4, Mississauga, ON L5T 2N1. Email: contactus@bloombergsupport.com. QST#1008327064. Registered for GST as Bloomberg L .P. GST #12829 9898 RT0001. Copyright 2021 Bloomberg L .P. All rights reserved. Title registered in the U.S. Patent Office. Single Copy Sales: Call 800 298-9867 or email: busweek@nrmsinc.com. Educational Permissions: Copyright Clearance Center at info@copyright.com. Printed in the U.S.A. CPPAP NUMBER 0414N68830

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