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● Crypto rules are coming 22 ● New ways to fight wildfires 46 ● Mysteries of the labor market 29

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August 9, 2021 ● DOUBLE ISSUE

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If you thought vaccinating adults was complicated... 40

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EXT. — KA MC HA TK A, R US SI A Duffer 1

A prisoner removes his hat and wipes his brow.

It’s JIM HOPPER. Duffer 2

Linda Gonzalez 3:15 PM Today

Soooo cute!

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DUG SONG Co-Founder & General Manager, Duo Security at Cisco

August 9, 2021

◀ Being White is “like having a skip pass at Disney World,” says Bo Ren, a former Facebook product manager. “I realized there is a bamboo ceiling, and I’d have to work 100 times harder.”

PHOTOGRAPH BY JINGYU LIN FOR BLOOMBERG BUSINESSWEEK

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FEATURES

40

Chicken Pox, Measles, Polio…Covid ?

Schools may need to consider a new vaccine mandate to protect kids 46

First Family of Firefighting

The Coulsons battle blazes with a fleet of high-tech planes and helicopters 52

Silicon Valley’s Majority Minority

Asian Americans face prejudice even in the tech paradise they helped build

◼ CONTENTS

◼ IN BRIEF ◼ OPINION ◼ AGENDA

Bloomberg Businessweek

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A Gulf hijacking ● Mediterranean fires ● Banks on a roll An inexcusable holdup at the FDA Aramco reports ● Rematch in Zambia ● So long, Explorer

August 9, 2021

◼ COVER TRAIL How the cover gets made ①

◼ REMARKS

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BUSINESS

TECHNOLOGY

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Will the Pentagon ever make its pivot to China?

12 14 15

Chinese influencers are really moving EVs A perfect day for tomato fish The pandemic renaissance at forsaken British beaches

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▼ The woman who led Facebook’s racial justice audit

“So this week we’re taking on a totally noncontroversial subject: kids and the Covid vaccine!”

“There’s nothing my daughter loves more than getting a needle.”

“Well, would she want to give us her opinion for the cover?”

“Doubtful, but she might want to model!”

“Great! Our rate is zero.”

“She doesn’t usually get out of bed for less than $10,000. But, as a favor to me, she’s decided to come out of baby-model retirement.” ②

20

What’s next for startups that are thriving during Covid?

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FINANCE

22 24 26

The SEC’s Gary Gensler has a plan for crypto How Harvard found Black and Latino investors Sound financial advice in 280 characters

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ECONOMICS

29 31

Where did all the workers go?

Xi reminds investors that China is a communist country

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POLITICS

34 36

Shoddy U.S. infrastructure hobbles business Things get worse in the most unequal nation on Earth

59 60 60 61 62 63 64 66 67

Fall culture preview The streamers unleash a torrent of new TV Opera, ballet, and theater premieres we’re excited about The Sopranos before The Sopranos Some musical acts you’ll have a hard time missing Finally, an Asian superhero will do battle in cinemas Broadway returns—but for how long?

Jon Stewart is back to take on his successors The handheld Playdate is lovably lo-fi

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An ultrafast attack on your nearby grocery

◼ PURSUITS

◼ LAST THING

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“Perfect!!! She’s captured almost every feeling around this subject. Got anything more … aggressively excited?”

“Oh, do I! It’s practically her default setting.”

Cover: Photograph by Jamie Chung for Bloomberg Businessweek

TECHNOLOGY: PHOTOGRAPH BY GREG KAHN FOR BLOOMBERG BUSINESSWEEK

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Introducing ATEM Mini Pro The compact television studio that lets you create presentation videos and live streams!

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Live Stream Training and Conferences

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ATEM Mini’s includes everything you need. All the buttons are positioned on the front panel so it’s very easy to learn. There are 4 HDMI video inputs for connecting cameras and computers, plus a USB output that looks like a webcam so you can connect to Zoom or Skype. ATEM Software Control for Mac and PC is also included, which allows access to more advanced “broadcast” features!

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○ Worldwide coronavirus cases now top

200m

and almost 4.3 million have died. Meanwhile, more than 4.2 billion vaccine doses have been given. Israel, among the most vaccinated nations, warned it may reimpose lockdowns as cases there climbed. It’s called on employers to switch to work-at-home and tightened travel restrictions.

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○ Tencent pledged to limit video game playtime for minors to one hour on weekdays and two on holidays.

The company is seeking to blunt criticism from Chinese authorities, who’ve decried gaming as “spiritual opium,” raising concerns in the industry about a possible crackdown.

○ North Korea’s Kim Jong Un appeared in public wearing a large bandage on the back of his head.

The sightings have stoked speculation about Kim’s health. Medical information about the reclusive leader, who is overweight and a smoker, is one of the most closely guarded secrets in the totalitarian regime.

○ Wildfires sweeping across Greece, Italy, and Turkey have killed at least eight people and left resorts, villages, and even the Acropolis (above) shrouded in smoke.

○ Tensions flared in the Persian Gulf following the suspected hijacking of a ship near Iran.

○ Krystsina Tsimanouskaya, a Belarusian sprinter, said she was pressured to leave the Tokyo Olympics halfway through for criticizing sporting officials back home. Fearing she might be sent to jail when she returned, the runner got a visa to go to Poland instead.

○ “I am inspired by all the brave women who came forward. More importantly, I believe them m.”

New York State Attorney General Letitia a James unveiled a report on Aug. 3 detailing allegations by 11 women who’ve accused Governor Andrew Cuomo of sexual harassment. Facing calls to resign, Cuomo maintained he’d been misunderstood.

By Benedikt Kammel

The Panama-flagged Asphalt Princess was briefly boarded by armed men on Aug. 3, marking the second incident on a vessel within a week in the waterways that carry many of the world’s oil exports.

○ Mexico filed suit in a U.S. court on Aug. 4 against Colt, Glock, Smith & Wesson, and other gunmakers. The civil suit argues that the companies “wreak havoc in Mexican society, by persistently supplying a torrent of guns to the drug cartels.” In 2019, 17,000 Mexicans were murdered with Americanmade firearms.

○ July was among the busiest months on record for global deals, with about

$550b

in transactions announced.

Among the biggest takeovers were Square’s $29 billion purchase of buynow-pay-later company Afterpay and Parker Hannifin’s $8.8 billion offer for U.K. aerospace specialist Meggitt.

○ Oscar-winning actor Reese Witherspoon sold a majority stake in her film studio, Hello Sunshine, valuing the business at about $900 million.

The company produced The Morning Show for Apple TV+ and Big Little Lies for HBO.

PARTHENON: MILOS BICANSKI/GETTY IMAGES. JAMES: DAVID DEE DELGADO/GETTY IMAGES. TSIMANOUSKAYA: GIUSEPPE CACACE/GETTY IMAGES. WITHERSPOON: MATT PETIT/GETTY IMAGES

IN BRIEF

Bloomberg Businessweek

◼ BLOOMBERG OPINION

ILLUSTRATION BY AISHA FRANZ

The FDA’s Senseless Lack of Urgency in Full Vaccine Licensing As calls for the U.S. Food and Drug Administration to fully approve Covid-19 vaccines grow louder, the agency itself has little to say. This is a mistake. The FDA insists it’s “working as quickly as possible” and has suggested that full approval may come for at least one vaccine by the end of summer.

The public is left wondering: What’s taking so long?

This isn’t just a minor nuisance. It undermines trust in the vaccines and damages the FDA’s most valuable asset, its credibility.

The drug regulators have good reason to insist on thoroughly reviewing many months of clinical trial data before fully licensing any medicine. The emergency use authorizations for the vaccines now administered in the U.S. were based on just two months of follow-up data; that was enough to be confident that the vaccines are safe, effective, and fit for use in response to a pressing need, but it required a faster analysis than the FDA requires for its normal approval process. To fully approve the vaccines, the FDA looks at more data and satisfies itself on a range of other issues, including developing detailed guidance on use.

This two-track system, allowing flexibility when circumstances demand it, makes sense. To many outside the agency, however, it seems contradictory. Late last year the FDA pronounced the mRNA vaccines safe and effective enough for emergency use; many months later, it hasn’t fully licensed them. So are the vaccines safe and effective or not?

That’s a reasonable question—and the agency has failed to answer it clearly.

With the delta variant of the coronavirus racing through the population and the pace of vaccination in the U.S. still too slow, many observers, including some infectious disease professionals, have accused the FDA of dragging its feet.

Without transparent communication from the agency itself, it’s impossible to know whether that charge is correct. On July 30 an agency official said it was making further efforts to speed its review, making one wonder why every effort hadn’t already been made. The FDA traditionally hasn’t explained its ongoing work in detail, but hesitancy over the Covid vaccines makes that reticence unacceptable.

The U.S. is again reporting more than 75,000 Covid cases a day, up from about 10,000 a month ago. Things are worse in states with lower rates of vaccination, and it’s increasingly urgent everywhere that businesses and institutions require their employees to be vaccinated.

If the FDA is in a position to affirm that six months’ worth of clinical trial data provides stronger confirmation that the shots work safely, it should do so, and announce that

August 9, 2021

the licenses will soon be forthcoming. It should also explain what further steps are involved and how long they’ll take.

This would reassure Americans that the shots are indeed safe and that anyone who hasn’t gotten one should go ahead without delay. It would assure businesses that requiring vaccinations for their employees right away is wise. And it would discourage states from forbidding vaccine mandates until the shots are fully approved.

One more thing: Right now, at a moment of exceptional stress, the FDA is hobbled by its lack of a permanent leader.

After more than six months in office, President Joe Biden has yet to make the appointment. The agency’s professionals are surely aware of the urgency on vaccines. They know it would be a mistake to bow to pressure by cutting corners.

Competently led, they can be more effective—and help restore public trust—simply by explaining what they’re doing. <BW> For more commentary, go to bloomberg.com/opinion

◼ AGENDA

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▶ Pumping a Profit Saudi Aramco reports second-quarter earnings on Aug. 9.

The world’s biggest energy company is set to follow the industry in seeing higher profits. Global demand for oil has rebounded from the depths of the pandemic. ▶ Zambia holds general elections on Aug. 12.

President Edgar Lungu is running for a second term, in a rematch with Hakainde Hichilema, who narrowly lost the previous vote.

▶ Berlin hosts a summit of world mayors to discuss urban development on Aug. 11.

The group includes leaders from Istanbul, Los Angeles, Seoul, Zurich, and other cities.

▶ Microsoft will start phasing out support for its once-popular Internet Explorer on Aug. 17, as it focuses resources instead on expanding the Edge browser.

▶ The Reserve Bank of New Zealand sets interest rates on Aug. 18.

The country has followed strict Covid restrictions, helping its economy weather fallout from the pandemic.

▶ Indonesian President Joko Widodo will deliver his national budget speech on Aug. 16. Hard hit by a recent flare-up of the coronavirus, the country has been forced to extend lockdowns.

▶ Head to Monterey, Calif., from Aug. 12-14 for Sotheby’s flagship car auction, which will feature a 1970 Porsche 917K valued at $16 million to $18 million that raced in Le Mans.

◼ REMARKS

8

● Reorienting the military to counter China is an urgent priority for the U.S.—but easier said than done ● By Peter Martin and Roxana Tiron President Joe Biden has pledged an era of “extreme competition” with the People’s Republic of China. For the U.S., that means being able to challenge Beijing for the commanding heights of global commerce, to shape the rules around trade and technology, and—if push comes to shove— to fight and win a war with the world’s second-largest economy. The question is how to steer the behemoth U.S. military, which has almost 2 million personnel across six branches, away from the Middle East and terrorism to focus on a new region and different threats, 20 years after the Sept. 11 attacks and the ensuing invasion of Afghanistan.

Secretary of Defense Lloyd Austin III has dubbed China “the pacing challenge”—military-industrial verbiage for the leading competitor. In June, Austin issued a directive aimed at reorienting the Department of Defense to better compete with Beijing. That echoed signals of a pivot under the past two presidential administrations.

Washington, however, is often better at articulating grand ambitions than following through on them. That’s especially true of the Pentagon, the world’s largest bureaucracy. The U.S. military’s priorities have been forged by two decades of warfare in the Middle East, and its spending habits are deeply entrenched in congressional politics. Even inside the building, officials warn of a “say/do gap” when it comes to taking on China. That gap persists, though Biden’s withdrawal of troops from Afghanistan may do more than the actions of his predecessors Barack Obama and Donald Trump to achieve a long-promised tilt toward Asia.

Concerned members of Congress are explicit about the problem. Representative Mike Gallagher, a Republican from Wisconsin and a member of the House Armed Services

BRENDAN SMIALOWSKI/AFP/GETTY IMAGES

Less Talk

◼ REMARKS

Bloomberg Businessweek

August 9, 2021

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More Pivot Committee, cites potential threats ranging from a Chinese invasion of Taiwan to China-made drones that the Pentagon keeps buying, despite fears of handing national security secrets to Beijing. “If we’re going to win the 21st century, the Pentagon is going to have to walk the walk and make the tough decisions needed to beat” the Chinese Communist Party, Gallagher says.

The U.S. military needs to focus its footprint and logistics in the Pacific and to invest in technologies meant to avoid disastrous ground wars and parry China’s incursions: cyber tools, artificial intelligence, satellites, microchips, and autonomous and hypersonic weapons. How well and how fast it can integrate nontraditional technologies “is going to determine whether the United States and its allies can shape the rules of the road in the future,” according to former Undersecretary of Defense for Policy Michèle Flournoy.

And those rules “are going to have a huge impact on the trading system, supply chains, and money flows,” not just the military, adds Flournoy, who served in the Obama and Clinton administrations.

The challenge becomes more pressing by the day. For two decades, Beijing has been working on anti-access missile capabilities that now threaten U.S. military supremacy in the Pacific. It’s making substantial progress on its third aircraft carrier and new missile silos in its western desert, and some reports suggest it has begun operating military flights from disputed islands in the South China Sea. In 2020, China’s warplanes made incursions into the southern part of Taiwan’s air defense identification zone on 87 days—more than in the previous five years combined. That number has already been surpassed this year.

Some branches of the military have proved more agile than others. The Marine Corps is completely divesting itself of tanks and prioritizing small, dispersed units capable of operating in Pacific island chains. “The Marines took the bull by the horns,” says Robert Work, former deputy secretary of defense under Obama. “They made a plan to compete with China and defeat China if it comes to it, and do it within the top line they were assigned—they would not ask for additional money. In my view, they’ve led the department

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in the way the new fiscal outlook should be approached.”

The Army, by contrast, faces a difficult challenge. After two decades of focusing on counterinsurgency and desert warfare, it must prove that a large ground force is relevant to the Indo-Pacific theater, where amphibious, air, and naval capabilities have traditionally taken precedence. Army planners are purchasing fewer Apache, Black Hawk, and Chinook helicopters in favor of advanced rotorcraft that can fly twice as fast and twice as far as its workhorse choppers, all with an eye on the vast expanses of the Pacific region.

The Air Force and Navy are more natural fits for the region, but they, too, have challenges: The Navy is struggling to maintain its fleet and has a poor track record when it comes to building new classes of ships such as the Ford-class carriers.

The Air Force, for its part, has been counting on the stealthy F-35 Joint Strike Fighter and a new refueling tanker, both of which have experienced significant delays, technology hiccups, and cost increases.

Then there’s the Department of Defense’s clearest constraint: money. The proposed budget for the year starting on Oct. 1 would be 1.6% more than the $704 billion enacted for this year—a decrease of about 0.4% in real terms adjusted for inflation. Austin has said he thinks the military budget is sufficient to meet the challenge of an “increasingly assertive” China, but Republicans have called it inadequate.

Going forward, money will get even tighter. “Current OMB projections on spending are 2% year-over-year increases through to 2026 and 1% a year after that. That doesn’t even cover inflation,” says Work.

This leaves the Pentagon with some tough choices. Its $5.1 billion Pacific Deterrence Initiative, created last year to ensure that proper resources were allocated to the region, has become emblematic of the department’s struggle to adapt.

Lawmakers from both sides of the aisle have said that the fund is merely double-counting weapons purchases that were already planned and that it doesn’t focus enough on missile defense, training with allies, and operations in the region.

▲ Kelly at a Senate Armed Services Committee hearing on March 25

August 9, 2021

Military procurement is set up to move slowly and conservatively to keep big, complex legacy programs such as buying aircraft carriers on schedule and on budget. That might not work so well going forward. “You spend usually years at the front end defining and setting in stone your requirements and then spend years in this cascading and sequential process,” says Flournoy. “If you look at many of the capabilities we’re talking about, whether it’s AI or software-enabled networks, these are emerging technologies that are developed through an agile development process with rapid development cycles.”

Besides belt-tightening and inertia inside the Pentagon, another roadblock is congressional priorities. Trade-offs perennially run into opposition in Congress, where lawmakers are beholden to weapons programs, no matter how old: They mean military bases, skilled manufacturing, and jobs in home districts.

Look at the history of the A-10 close-air support aircraft in Arizona. Senator Mark Kelly, a Democrat, is fighting to keep the planes from the graveyard, as his Republican predecessors Martha McSally and John McCain did. The A-10’s political stronghold is Tucson, where Davis-Monthan Air Force Base serves as the main training base for close-air support pilots. Any cuts to the fleet will have significant ripple effects on the local economy. Kelly, plus the state’s other Democratic senator, Kyrsten Sinema, and several other members of the Arizona delegation have introduced a resolution in the U.S. Senate and House declaring the A-10 “a critical component of America’s national security.”

Secretary Austin’s plans could also be upended by what his predecessor Donald Rumsfeld famously called the “unknown unknowns”—disruptive events that strike without warning. More than two decades ago, President George W. Bush dubbed China a “strategic competitor,” only to spend most of his presidency focused on wars across the greater Middle East. Now, as American troops leave Afghanistan, the reemergence of a terrorist threat from that country leaves open the possibility that the U.S. will be dragged back in.

Washington veterans have seen it all before. “There has been an attempt to pivot to the Pacific over several years, starting with President Obama. But the situation in Afghanistan, the situation in Iraq, now you have issues with Haiti—it’s difficult, practically, to quickly focus on the Pacific,” says Senator Jack Reed, a Rhode Island Democrat who chairs the Armed Services Committee. “They are moving,” he says of Biden’s Pentagon, “but I think they would themselves say that they can move faster.”

Others are more optimistic, pointing out that the U.S., unlike China, doesn’t need to go it alone. “Our focus cannot be, ‘OK, we have got to build a military so that we can win the coming war with China,’ ” says Representative Adam Smith of Washington, the Democratic chairman of the House Armed Services Committee. “Our focus needs to be how we build a regional set of partnerships to better deter China from the things we do not want them to do.” <BW>

ANDREW HARNIK/AP/BLOOMBERG

◼ REMARKS

Engage with the news you need, vision that matters and data that tracks progress at Bloomberg Equality.

Learn more:

Bloomberg.com/Equality

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B U S I N E S S

Edited by James E. Ellis, Anne Riley Moffat, and David Rocks

China’s EV Evangelists ● Forget makeup. Influencers are pitching electric cars in the No. 1 alternative fuel market Emma Meng, dressed in a pale pink Victoria’s Secret top, faces the selfie stick reflected in her bathroom mirror and ties her tresses back into a tousled ponytail. Young and fresh-faced, she may seem ready to offer a hairstyling tutorial or skincare review. Instead, she launches into a dissection of Tesla Inc.’s Battery Day, complete with an analysis of its 4680 power cell and the latest developments on nickel cathodes.

Meng, or EV Emma as she’s known to her 700,000 followers, is among the swelling ranks of Chinese influencers blogging, vlogging, and flogging cars in the world’s biggest electric vehicle market. The money is so good that some like Meng, who graduated from Cambridge University in 2013

August 9, 2021

and worked as a regional business developer in France, were able to ditch their corporate careers.

In the process they’re helping reshape the way automobiles are sold in a nation that was late to embrace personal car ownership but is driving full speed into cleaner, greener vehicles.

Consumers in Asia’s biggest economy are confronted with a veritable smorgasbord of choices when it comes to EVs, from SAIC-GM-Wuling Automobile Co.’s cute and compact Hongguang Mini, which starts at just $4,500, to Tesla’s fastselling Model Y crossover, which carries a sticker price of about $42,600, and Nio Inc.’s ES6 SUV, which tops out at more than $72,000.

Several automakers now have multiple newenergy vehicle brands, each targeted at a slightly different customer segment. Zhejiang Geely Holding Group Co. alone has Geometry, Polestar, Lynk & Co., and, most recently, Zeekr, an allelectric marque aimed at millennials.

EV adoption, meanwhile, is accelerating at a startling pace. China’s Passenger Car Association reported sales of new-energy vehicles of about 1 million in the first six months of 2021, prompting association Secretary General Cui Dongshu to describe the body’s full-year sales target of 2.4 million as “conservative.” The China Association of Automobile Manufacturers is forecasting sales of combustion and electric cars combined will

● Meng, known as EV Emma to her 700,000 followers, doles out advice that can generate big sales for electric-car makers

COURTESY EMMA MENG

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◼ BUSINESS

Bloomberg Businessweek

climb about 7%, to 27 million units, for the year.

With all the competing models, carmakers are increasingly using influencers to cut through the clutter. Their preferred messengers: mediasavvy young people who use social platforms to talk about and review EVs to legions of followers that stretch into the hundreds of thousands. That makes sense because, rather than dealing solely with a dealership, many EV buyers in China browse online, interact with an influencer, or perhaps go to a high-end mall to view the finished product in a boutique-like setting—all before visiting a dealer lot or ever getting behind a wheel.

So getting advice from a trusted influencer takes on added importance—and can be lucrative for the online talent. In June, Meng led a panel discussion for Great Wall Motor Co. about female customers and says she now makes more money from company on-site events than she does from her videos and blogs. Her main platforms for EV content are Weibo, China’s answer to Twitter, the Quora-style Zhihu, and video-sharing website Bilibili.

“It’s very common in China that the female of the family makes the final purchasing decision, and we’re also seeing a growing base of female drivers who tend to be more open to intelligent vehicles,” says Meng, a real-life car enthusiast who owns a Tesla Model S and has a Model S Plaid on order.

Although there aren’t any official figures on how many influencers are operating in China, their presence is obvious. At the Shanghai auto show in April, selfie sticks and ring lights were everywhere. And around half the journalists who turned up at a recent General Motors Co. media event in Shanghai weren’t employed by traditional news outlets.

“It’s one of the best ways to build a connection with the current and next generation of customers,” says a Geely spokesperson. Working with influencers the company has found “more efficient ways to directly communicate with target customers.”

As well as being paid directly by automakers for appearances and test drives, influencers make money by charging for social media posts, with the rates they can command typically linked to the number of followers they have. One said he earned 10,000 yuan ($1,550) for posting four shots from the Shanghai auto show. Occasionally, they’re given cars, or at least don’t have to pay full price, provided they blog regularly about the vehicle and share enough photos.

Influencers are so important in China’s car market that ByteDance Ltd., the media company that operates the short-video service known as Douyin in China and TikTok in the U.S., has launched a talent initiative within its Dcar auto information unit

to develop and market car-savvy online celebs.

“While influencers in the early days tended to come from professional media or industry backgrounds, now more young people are willing to generate content for the public,” says Dcar’s content operations director, Ji Chengcheng. “We want to help those who are willing to create and share.”

Besides grooming newbies, Dcar also facilitates the lending of cars from automakers for influencers to test-drive and review. Perhaps more important, it will direct traffic to the influencers’ car videos from the parent company’s popular video platforms. The newcomers may not be as polished, but they do have the ability to make an audience feel comfortable and “build better trust, which therefore can result in more car purchases,” Ji says.

Chang Yan, for example, is already an old hand at that at age 33. Having worked at a state-owned enterprise and as a freelance technology writer, he began translating and reposting English-language tweets relating to Tesla and Elon Musk in early 2019. During the pandemic, he decided to become an influencer full time, opening a studio in Beijing that now employs a team of six including a writer, a cameraman, a director, a business development director, and a social media manager.

One recent job took him to the plateaus surrounding Mount Everest, a 3,300-kilometer (2,050mile) trip from Chengdu in southwestern China.

Volkswagen AG contracted him to drive its allelectric ID.6 SUV along a remote stretch of China’s longest highway. As part of the deal, Chang posted a series of short videos documenting his experience of navigating an EV at high altitudes, where cooler temperatures hurt battery performance.

It wasn’t Chang’s first time on the route, which while isolated is now dotted with EV charging stations. (Tesla alone has 11 supercharging points along mountainous National Highway 318 from Chengdu to Tibet.) In June he made the same trip for Chinese EV maker Xpeng Inc., driving its P7 sedan.

Chang, who has more than 650,000 followers on Weibo, saw there was a gap as the industry shifts toward EVs. “On the one hand, there’s lots of information from Musk, from Chinese policymakers, from all the emerging electric vehicle companies, and on the other, automakers going through this transition are eager to communicate and even interact directly with existing and potential customers,” he says. “Traditional media can hardly meet the need, and that’s where we come in.” �John Liu and Chunying Zhang, with Tian Ying THE BOTTOM LINE More than 1 million new-energy vehicles were sold in China during the first half of 2021. One reason for the rapid acceptance: online influencers steering their followers toward EVs.

August 9, 2021

● China’s Passenger Car Association’s 2021 sales forecast for newenergy vehicles there

2.4m

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Tomato Fish Is the Catch of the Day

14

When a tuna marketing executive took a bite of the dehydrated tomato seasoned with olive oil, algae extract, spices, and soy sauce early last year, he was shook. “This is going to be a problem for us,” he said. At least that’s how Ida Speyer, co-founder and chief executive officer of Mimic Seafood, recalls it, designating it the highest praise she could’ve imagined for the delicate slice of tuna that—despite what the marketing executive’s taste buds indicated— contained no tuna at all.

The Madrid-based startup’s Tunato product, fabricated from a specialty tomato grown in southern Spain that resembles sliced sushi-grade tuna in shape and size, is part of a growing class of food innovations fighting for the last empty shelf in the booming plant-based protein market: seafood.

Faux fish, which Speyer concedes “maybe 5 or 10 years ago would have seemed too far out, too different, or only something for vegans,” is just a tiny fraction of the alternative protein market, dwarfed by the more mature faux meat and altdairy sectors. U.S. sales of plant-based seafood grew 23%, to $12 million, in 2020, compared with a traditional seafood market worth tens of billions of dollars, according to the Good Food Institute, an international nonprofit pushing for more sustainable proteins. But the sector is evolving quickly.

Investment in U.S. plant-based seafood hit $70 million in the first half of 2021, as much as in the past two years combined.

It’s still a minnow compared with the country’s plant-based meat market, which has ballooned to about $1.4 billion in 2020 sales as companies roll out alternative chicken nuggets and pork sausages to join the faux ground beef and burgers already in household fridges. Concerns about red-meat consumption, antibiotics in livestock, and climate change have enticed more global shoppers to go meatless, at least once a week, but fish, with its heart-healthy reputation, doesn’t have the bad rap. Still, fears of overfishing, heavy-metal consumption, and microplastics, fueled by documentaries such as Netflix’s controversial Seaspiracy, are priming the switch. The potential market could be huge: Beyond vegans and flexitarians, faux fish might also be a welcome addition to, say, a pregnant woman avoiding high-mercury swordfish

August 9, 2021

○ Plant-based seafood is gaining speed. But can it mirror the fake burger market of the last decade?

or a co onsumer with a shellfish allergy. And big corporrations have taken notice.

Mea at giant Tyson Foods Inc.’s venture arm bought a minority stake in New Wave Foods, a maker of plant-based shrimp, in 2019, almost two years b before Tyson released its first vegan hambu urger. In Thailand in March, Thai U Union Group PCL, which owns the Chicken of the Sea brand, introduced its plant-b based line OMG Meat, including crab ccakes and fish burgers, b with pllans for a vegan shrimp m later th his year.

Nestlé é SA’s nonfish tuna is available in of Europe, parts o while Swedish retailer I ea sells vegan egan caviar caviar, derived from kelp seaweed seaweed.

Thai Union, whose familiar tinned fish brands also include John West and King Oscar, began mulling plant-based products about three years ago to get ahead of concerns around sustainability. It rolled out its first vegan product—a flaked faux tuna made of soy, wheat, and pea protein that can be used in a traditional mayonnaise-based salad—in 2020. “We have the customers in our hands,” says Tunyawat Kasemsuwan, director of the company’s global innovation center, referring to the name recognition its brands already have. Thai Union is mainly targeting flexitarians, whose share in the population has been growing, and young consumers. “Gen Z will be the first movers, but there will be a ripple effect” on traditional seafood consumers, who tend to be older primarily because seafood is a premium-priced product, he says.

Most of the companies entering the nascent sector don’t have Thai Union’s global research and development, manufacturing, and distribution might, but the cottage industry is awash with experimentation. Breaded and fried products have had some of the quickest uptake. They include the Good Catch faux fish fillets and crab cakes recently added

○ Mimic Seafood’s Tunato nigiri

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to the menu at five Long John Silver’s locations in California and Georgia. Gathered Foods, maker of Good Catch, says it’s too soon to comment on the trial, but “if you create that availability,” says co-founder Chris Kerr, “consumers will show up.”

Breaded products are also proliferating in the faux meat market, with Impossible Foods Inc. and Beyond Meat Inc. introducing plant-based chicken products this year. It’s simpler to mimic ground and spiced meats like patties and sausages instead of whole-muscle cuts, including chicken breast and filet mignon. The faux fish industry is discovering the same. “It’s much easier to re-create a dense, juicy beef burger than a flaky, delicate fillet of fish,” says Jen Lamy, Boston-based senior manager of the Good Food Institute’s Sustainable Seafood Initiative.

French foodmaker Odontella SAS sells a plantbased smoked salmon made from algae and pea protein in specialty supermarkets across Europe.

The product is a long way from its origins as a 2007 experiment in co-founder Alain Guillou’s kitchen. It tastes very close to the real thing, though the price is heftier.

The key to price parity will be scaling up production and tapping more markets. “When that happens, you know the mega tipping point is here,” says David Yeung, founder and CEO of OmniFoods, a Hong Kong-based foodtech known for its vegan pork that’s been expanding into seafood. “I truly believe this is a matter of two to three years.”

Because seafood is rich in vitamins and minerals, which already makes it a healthy protein alternative to meat, vegan startups have to ensure the same nutrients end up in their plant-based replicas.

Algae like those in Odontella’s fake salmon also contain the omega-3 fatty acids in conventional fish.

OmniFoods uses a high-quality canola oil in its new seafood line for the same reason. Faux-fish makers also risk pushback from traditional fishing trade groups who don’t want vegan products labeled as “tuna” or “salmon,” mirroring the debate about whether faux animal products can be labeled meat across the U.S. If plant-based seafood maintains its growth rate, it can catch up with fake meat’s share of the conventional market within the next decade, the Good Food Institute’s Lamy says. The technology is “not quite there yet,” she says, but the sector’s making progress. “If you look even at just photos of products from now vs. three years ago, it’s totally a different game.”

Spain’s Mimic is banking on that. Although it halted distribution of its tomato-based tuna when Covid-19 lockdowns hit, it plans to resume sales

Plant-Based Alternatives Are Booming Food category

U.S. sales in 2020

Milk

$2.5b

Meat

$1.4b

Seafood

Change from 2019 20% 45

$12m

23

Prepared meals

$520m

Ice cream and frozen novelty

$435m

Creamer

$394m

Yogurt

$343m

Protein liquids and powders

$292m

Butter

$275m

Cheese

$270m

42

Tofu and tempeh

$175m

41

Baked goods and cookies

$152m

Ready-to-drink beverages

$137m

29 20 32 20 10 36

-1 12 DATA: GOOD FOOD INSTITUTE, SPINS

in several Spanish cities by the end of the year, eventually expanding into Denmark. The startup has visions of becoming “the Oatly of seafood,” giving the traditional protein market a run for its money as nut and oat milks did for cow’s milk.

“I think if the dairy industry had known 10 to 15 years ago what was coming, they would have prepared differently. The seafood industry can actually in a way benefit from what we have seen with dairy and beef, because the change will come,” Speyer says of her expectation that more consumers will move away from traditional seafood. “It’s going to be a party for the rest of us. But for some companies, this could be a real crisis.”

—Irina Anghel THE BOTTOM LINE The plant-based fish market is a drop in the bucket compared with that of faux meat, but it’s growing fast as consumers try to minimize their impact on the oceans.

When Morecambe Beats Mallorca ○ The second summer of Covid has offered a lifeline to forlorn British beach resorts

The English town of Morecambe, a hodgepodge of fish-and-chips shops, burger joints, and penny arcades lining a beachfront promenade, is far past its peak. On a summer Sunday in the 1950s, as many as 100,000 visitors from Manchester, Bradford, and beyond might have flocked to Europe’s largest

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the pandemic—occupy every vacant campsite, and enterprising farmers have ejected livestock from their fields to accommodate campers. “This is the busiest summer we’ve had in 25 years,” says Catherine Warrington, manager of a campground in the Lake District town of Kendal.

Of course, Britain’s weather remains a concern.

This summer has seen a heat wave with record temperatures that overwhelm visitors in lodgings where air conditioning is a rarity, followed by torrential rains that brought flash floods in some places. Both are far from the almost-guaranteed sunshine that holiday-makers have come to expect on their annual jaunts to Spain, Portugal, Italy, or Greece.

Still, the pandemic resurgence has sparked renewed optimism in the long-forgotten coastal towns. Margate, 70 miles east of London, is trying to reinvent itself as a boho destination combining high culture with retro-seaside kitsch. In the northeast, Scarborough aims to woo millennials with an ad campaign called “The Place Full of Surprises.”

And in Morecambe, local officials are hoping this summer’s boom will spur the national government to approve funding for the Eden Project North, a £125 million eco park where visitors will be able to wander through a half-dozen arena-size glass domes covering habitats such as rainforest, desert, and prairie. “We’re thinking big,” says Mark Prada, chairman of the Bay Tourism Association in Morecambe.

“If this comes off, we’re going to need to double the number of beds, and Morecambe will be back on the map for good.” �Christopher Jasper THE BOTTOM LINE With frequently updated regulations on Covid testing and quarantine confusing Britons, many have chosen to forgo travels abroad this summer and vacation in the U.K.

▲ On the beach in Cleethorpes

“I’ve driven past Morecambe on the motorway and thought of visiting, but the image of seaside towns is a bit grotty”

▼ Passengers on international flights at London airports in June 15m

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outdoor swimming pool, the Miss Great Britain beauty pageant, and two wooden piers stretching out into the Irish Sea. But the pool and pageant are long gone, the West End Pier succumbed to a vicious 1977 storm, and 14 years later the Central Pier—once dubbed the “Taj Mahal of the North”—was destroyed by fire. In recent decades, even 10,000 visitors was considered a roaring success as Britons have increasingly jetted off to sunny Mediterranean locales.

This summer, Morecambe is booming. Almost all of its 50 or so lodgings—from the four-star, art deco Midland on down to Victorian guesthouses that haven’t been updated since the ’70s—have had to dust off their “no vacancy” signs as occupancy has topped 95%. “I’ve driven past Morecambe on the motorway and thought of visiting, but the image of seaside towns is a bit grotty,” says Rob Knight, a retired civil servant who booked a stay with his wife after the pandemic scuttled plans to celebrate their 40th wedding anniversary on the Spanish island of Mallorca. “I’ve been pleasantly surprised.”

The story is the same from North Sea outposts such as Cleethorpes and Skegness—ranked last among 100 seaside resorts by consumer-ratings magazine Which?—to Blackpool on the west coast and Brighton on the English Channel. The British government has imposed confusing and frequently updated regulations on testing and quarantine for anyone returning from overseas, spurring many Britons to remain on their island this year. In June international passenger traffic at London airports, while more than twice as high as last year, remained 92% below 2019 levels, and a July poll

by Sykes Holiday Cottages found that two-thirds of residents planned to vacation in the U.K. this summer. So anyplace with a water view and an available bed is pulling in visitors desperate to simply get away from home after months of lockdowns.

“People are still frightened to go abroad because of the virus or are put off by the expense of tests and the constantly changing rules,” says Nigel Dibb, chairman of the Hull, Humber & East Yorkshire Hospitality Association. “Places that haven’t really been on the map are getting an uplift.”

The dowdy seaside towns are benefiting as trendier spots are overrun and owners push room rates into the stratosphere. In Cornwall, which has sandy beaches that rival those on the Mediterranean, prices for summer bookings had doubled by May, with the last few choice properties topping £3,000 ($4,180) a week. In the Lake District National Park, a center for hiking and water sports that’s home to seven Michelin-starred restaurants, an Airbnb search for a family of four for the week of Aug. 6 showed zero availability. RVs—a rarity before

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Edited by Joshua Brustein

Explaining Facebo Race Problem to Fac

● The company has been a challenge for Laura Murphy’s model of reform through corporate audits When she ran the Washington, D.C., office of the American Civil Liberties Union, Laura Murphy maintained relationships with people on all sides of polarizing issues. “You go into these diverse offices, and Laura was greeted like a friend, a colleague, and partner, whether it was Maxine Waters or Rand Paul or Mitch McConnell,” says Anthony Romero, executive director of the ACLU. “That’s her secret power.”

Murphy spent most of her career navigating politics and policy, but recently she’s taken her talent to the corporate world, moderating conflicts between companies and advocates who criticize their impact on racial and social justice. She’s emerged as a pioneer of the corporate civil rights audit, a new tool

for getting companies to confront their role in perpetuating racial disparities.

The idea behind the audits is simple: A company asks an expert to investigate the impact of its products, hiring practices, or policies on vulnerable populations, then releases the results publicly. “This is a time for serious engagement with the most important problems,” says Murphy, who’s president of her own firm, Laura Murphy & Associates. “Once you’ve agreed to address stakeholder concerns, and the auditors prioritize them for you, there isn’t a lot of wiggle room. You have to do it.”

Murphy’s highest-profile client to date, Facebook Inc., is testing that thesis. She spent two years auditing Facebook, and the company and its harshest critics both lauded her work. But in June, almost a year after her report, the civil rights group Color of Change launched a digital petition saying Facebook “still refuses to adopt the vast majority of recommendations” and demanding that it follow through.

Facebook’s critics can do little to force the issue.

While some may look at this and conclude that

PHOTOGRAPH BY GREG KAHN FOR BLOOMBERG BUSINESSWEEK. DATA: BLOOMBERG INTELLIGENCE

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racial audits are meaningless, activists are seeking to expand them. Over the last three months, both Alphabet Inc.’s Google and Amazon.com Inc. have faced new calls to conduct racial equity audits. The Service Employees International Union and the SOC Investment Group, which works with pension funds sponsored by unions on worker-friendly reforms, have backed shareholder proposals to audit at least eight financial institutions.

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, an SOC target, said during a congressional hearing in May that audits amounted to “bureaucracy and BS.” Other banks said audits were unnecessary, since they already donate money to organizations focused on vulnerable communities and make their antidiscrimination policies public, according to Tejal Patel, SOC’s corporate governance director.

A key to Murphy’s work is the credibility that comes from a lifetime of civil rights work. A Baltimore native, she was born into a family of activists. Her father, William, was a judge who

founded a law firm that worked on high-profile racial equity cases, and her mother, Madeline, was a prominent city activist and political candidate. Murphy jumped right into the family business, starting her career working for former Democratic Representatives Parren Mitchell and Shirley Chisholm, the first Black woman elected to Congress, before moving to the ACLU. Murphy’s work on corporate audits began in 2016. Vanita Gupta, then CEO of the Leadership Conference on Civil and Human Rights, told her that the short-term rental platform Airbnb Inc. was seeking a consultant on racial equity issues following a Harvard study that found hosts were less likely to accept guests with Black-sounding names. She agreed to work with the company.

Activists wanted Airbnb to stop showing photos of people requesting rooms, eliminating an opportunity for discrimination. Murphy presented their argument without endorsing it. Airbnb declined to remove guest photos at first but eventually did so.

“I don’t think the civil rights groups got everything that they asked for initially, but I think that they got a lot over time,” Murphy says.

Two years later, Facebook brought in Murphy to focus on issues relating to its content moderation.

From the start, there were signs of resistance. At first, Murphy worked with Facebook’s Washington office instead of its top leadership, effectively signaling to other offices that they didn’t have to prioritize her work. Facebook also didn’t immediately commit to making the results public, arguably threatening to defeat the whole purpose.

The company eventually put its chief operating officer, Sheryl Sandberg, in charge, which improved Murphy’s access. It also promised to release the audit results publicly—a decision Facebook didn’t announce until news broke that it had hired a publicrelations firm that urged reporters to look at connections between Color of Change and the billionaire financier George Soros.

During the audit process, Murphy moderated the conflict between Facebook and its critics. In late 2019, as advocates grew increasingly panicked about disinformation related to the upcoming census, CEO Mark Zuckerberg gave an address stressing the importance of free speech, an emphasis that carried an implicit rejection of putting a priority on combating misinformation. News leaked just before the speech that Zuckerberg had conferred with prominent conservatives about the issue in private, angering civil rights groups who hadn’t gotten their own face-to-face.

Murphy prevailed on Facebook’s executives to sit down with the groups. On Nov. 4, 2019,

August 9, 2021

▼ Shareholder proposals by selected topics among Russell 3000 members Diversity reporting Diversity on the board Racial issues, including audits

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Zuckerberg played host to a few leaders at Facebook’s main office, then had dinner with an expanded group at his home in Palo Alto.

Beforehand, Murphy coached each side on how to get the most out of the encounter. She warned Zuckerberg’s aides to take the civil rights leaders seriously, reminding them that they represented millions of Facebook users. She counseled the dinner guests—some of them longtime personal friends—to identify specific targets rather than turn the evening into an unstrategic airing of grievances.

At Facebook’s offices, activists pressed the company on posts suggesting that the census would share respondents’ data with immigration enforcement officials. Zuckerberg pushed back, according to two people familiar with the matter, floating a hypothetical scenario of an immigrant who expressed fears about exposing her citizenship status by participating in the census. Should she really be silenced?

The advocates called the argument a red herring.

The next month Facebook addressed their concerns by banning posts asserting that census participation could have law enforcement consequences.

Advocates praised the company—and Murphy— for the shift. Critics were less successful in changing Facebook’s hands-off stance on misleading speech from public officials. Throughout 2020, President Donald Trump used social media to question the legitimacy of mail-in balloting, laying the foundation for his rejection of the election results. Advocates argued he was violating Facebook’s policy against misrepresentations about the “methods for voting or voter registration.” Facebook disagreed.

Murphy released her audit in July 2020, calling out the company for enabling Trump’s behavior. In January, Facebook did suspend Trump from its platform after the Capitol riot. It also hired Roy Austin, a former U.S. Department of Justice official under President Barack Obama, to set up a team to oversee its civil rights policy. It now has eight members.

Murphy’s work made a big difference, according to Sandberg. “There were a bunch of things that Laura really believed [in] that we were able to do and able to do quickly,” she says. “There were some things that we were able to do more slowly. There were some things that didn’t work, but we were fine with her having a full and honest voice.”

Some civil rights groups say the company’s punishment of Trump is insufficient, arguing he should be permanently banned, and accuse it of taking a dangerously narrow approach to White nationalist and racist content. But even if an audit can’t force its recommendations, it can make change more likely over time, according to Jessica González, co-CEO of the media reform group Free Press. “The

value of the audit is a memorialization of what the challenges were at the moment,” she says. “That’s helpful as we figure out, What are the types of things we want to pressure Facebook on? What are the types of things we want to remedy through legislation?” �Naomi Nix

August 9, 2021

THE BOTTOM LINE Advocates are calling on more companies to conduct racial equity audits, which can shame them into real change—but have their limitations.

The Pandemic Turnabout Some startups underwent big overhauls to their business models to make it through Covid

A year and a half into the pandemic, many companies are beginning to grapple with the prospect of returning to some semblance of normality. Then there are the subset of companies that can’t go back, because they completely transformed themselves in 2020 to solve some kind of pandemic-related problem. These Covid-era startups now face the prospect of pivoting yet again, as the acute crisis fades, the delta variant looms, and the coronavirus-challenged world enters its next stage. Here are the stories of three of them. ① TABLE22 Early last year, Sam Bernstein’s 50-person startup had built what he thought was a solid business out of helping college students find rental housing. Then came Covid. “The business went to zero, with no line of sight” for how long it would last, says

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Bernstein. He cut his staff by 80% and emerged with the remaining team two months later as Table22, which helped restaurants sell cook-at-home kits, groceries and provisions, or specialized drinks.

Restaurants loved the predictable business and relatively fat profit margins, and Bernstein raised $7 million from venture investors in December.

As indoor dining returned, though, restaurants were suddenly awash in patrons eager to celebrate their ability to spend the evening in public. The eateries found themselves starved for employees to help facilitate the rush of new business. “Every restaurant we talk to is totally slammed,” says Bernstein, “and there’s a ton of pent-up demand.”

That’s left his customers stuck between trying to offer sit-down meals and keeping up their meal kit businesses. And although few clients have dropped Table22 entirely, that sometimes means the need for its services has shifted down.

Italian restaurant Frankies 457 Spuntino, a Brooklyn, N.Y., neighborhood favorite, for instance, had been selling elaborate kits through Table22 to accompany its cookbook—they included ingredients for a three-course dinner for four to six people, which had to be measured out in the kitchen ahead of time. For now, Frankies is scaling back to pasta kits, Bernstein says, as it juggles that business with serving people walking through the door.

run out of vans. So Curative hired private couriers.

Curative added vaccine distribution to its lineup of services in late 2020—and then the music stopped.

“Covid always surprises us,” Turner says. “It turned on a matter of days, from increasing 10% in volume every day to going down.” In January the company produced 5 million test kits, then ceased production, and only worked through that supply in July. “It’s like one minute you have the best product-market fit of all time, and then the next minute you have 7 million kits in a warehouse and nobody wants them,” says Turner. He says he isn’t concerned about finding a new direction, but in the meantime, Curative has downsized to about 4,500 workers.

“Covid always surprises us”

② CURATIVE Curative started in January 2020 with the goal of improving the health outcomes of patients with sepsis, the body’s extreme response to infection. But within weeks, the company’s managers set their sights on what seemed like a more urgent medical challenge: providing Covid-19 testing. The San Dimas, Calif.-based company jumped from seven employees to 7,000 workers within the next year.

“We ended up having to build whole mock-lab setups where we would do training and bring through cohorts of 50 at a time and train them for a week,” says Fred Turner, Curative’s chief executive officer.

Curative was quickly processing more tests than the lab software system it had bought from an outside vendor could handle. “We would have people sitting on the floor doing nothing because the software wasn’t working and we couldn’t scan in the sample,” says Turner. In response, Curative built its own software. When swab supplies were tight, it repurposed swabs meant for electronics manufacturing (they’re just as sterile). During a statewide deployment of 1 million test kits in nursing and group homes in Florida, Curative ran out of barcode scanners, and United Parcel Service, which was distributing its test kits, told the company it had

③ WELCOME Roberto Ortiz and his co-founders had started the Silicon Valley accelerator Y Combinator in January 2020 with a plan for a startup that helped restaurants manage wholesale purchases. Covid was already making the idea look shaky on a Sunday in early March 2020 when an employee heard a noise in the San Francisco Airbnb they were using as a temporary office. He walked onto the back patio and noticed the entire deck was in flames. Everyone grabbed their stuff and ran. No one was hurt, but when they returned and saw their just-printed business cards covered in ash on the dining room table, it felt clear: It was time to move on.

Ortiz and the team scattered across the U.S. and tried to figure out their next move over Zoom.

Eventually they decided to fix the problem staring them in the face: how to make virtual gatherings less excruciating.

Welcome, their platform, helps companies throw highly produced online gatherings. It was an easy sell last year, during the worst of the Covid lockdowns, but everyone knew it wouldn’t last. At this point, absolutely no one is excited about attending a Zoom conference. But remote work doesn’t seem to be going away, so Welcome is shifting its technology to handle internal meetings, corporate town halls, and orientations for remote or hybrid workforces.

The company tells customers it’s helping them foster a strong company culture even when they’re not together physically—it’s a need Ortiz knows about firsthand, given that he’s now living in Puerto Rico with his family, far from his colleagues. “We’ve been through battle and fires, but I never bought you a cup of coffee, or we never went for a walk-and-talk,” he says of his 60 employees. “There’s something missing that this doesn’t solve for.” —Ellen Huet THE BOTTOM LINE Small tech companies saved themselves by rapidly switching focus to remote event planning, restaurant deliveries, or Covid testing.

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The SEC Takes On Crypto ● Gary Gensler says the watchdog has power to protect investors in digital assets

Edited by Pat Regnier

It’s become a parlor game in Washington, on Wall Street, and in Silicon Valley to figure out where U.S. Securities and Exchange Commission Chair Gary Gensler stands on cryptocurrencies. Industry lobbyists tune in when he testifies before Congress.

Lawyers parse his speeches. Goldman Sachs Group Inc. wealth advisers recently boasted in a research report about looking for clues in 29 hours of the Blockchain and Money course he developed at the Massachusetts Institute of Technology. That’s an arduous but perhaps not novel undertaking, as videos of the classes have garnered millions of views online, something that amazes even Gensler.

In his first extensive interview about the digital money craze, Gensler signaled that his deep interest in the subject doesn’t mean he’s simpatico with the hands-off oversight approach that many enthusiasts would like to see. Policymakers have struggled with how to respond to the mostly unregulated $1.6 trillion market, which has seen explosive growth and wild price swings. Gensler is contemplating a robust oversight regime, centered on establishing safeguards for the millions of investors who’ve been stocking their portfolios with tokens. “While I’m neutral on the technology, even intrigued—I spent three years teaching it, leaning into it—I’m not neutral about investor protection,” Gensler says. “If somebody wants to speculate, that’s their choice, but we have a role as a nation to protect those investors against fraud.”

Gensler has asked Congress to pass a law that could give the agency the legal authority to monitor

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crypto exchanges, but he says the SEC’s powers are already broad. There’s been much discussion over the years about which kinds of digital assets are securities that fall under the SEC’s purview. Some don’t: Bitcoin acts like a currency, so it’s considered a commodity. But there are thousands of other coins, and Gensler says most are unregistered securities that must comply with SEC rules.

Broadly he noted that technology has sparked economic progress throughout human history, and he sees a similar boost from digital assets. That may come, however, only with strong and thoughtful regulation. He says the auto industry didn’t fully take off until governments laid out driving rules.

Speed limits and traffic lights provided public safety but also helped cars become mainstream.

“It’s only with bringing things inside—and sort of clearly within our public policy goals—that a technology has a chance of broader adoption,” he says.

Hester Peirce, a Republican commissioner on the SEC known for her advocacy of light-touch regulation of digital assets, says she’s eager to work with Gensler. “A lot people just want more clarity,” she says. “I come from a perspective that people should have the maximum freedom to engage in transactions they want to engage in voluntarily.

Society needs to have that discussion about what is the right regulatory framework.”

Gensler has pushed the agency’s staff members to take a look at an array of potential policy changes. He says there are at least seven SEC initiatives on crypto issues: initial coin offerings, trading venues, lending platforms, decentralized finance, stable value coins, custody, and exchange-traded and other coin funds. “I’ve asked the staff to use all of our authorities anywhere we can,” he says.

Gensler says he thinks regulating crypto exchanges is perhaps the easiest way for the government to get a quick handle on digital token trading.

But he’s also concerned about new ways people are getting into crypto, such as peer-to-peer lending on so-called decentralized finance, or DeFi, platforms.

If companies are advertising a specific interest-rate return on a crypto asset, Gensler says, that could bring the loans under SEC oversight. Platforms that pool digital assets could be seen as akin to mutual funds, potentially allowing the SEC to regulate them.

In comments on Aug. 3 at the Aspen Security Forum, Gensler signaled a possible pathway for approval of Bitcoin exchange-traded funds. He suggested an openness to one that would be subject to the agency’s strict mutual fund rules and that’s focused on Bitcoin futures, rather than the actual cryptocurrency. Many in the crypto world have been eagerly awaiting a decision on Bitcoin ETFs, because

they would provide an easy on-ramp for investors.

An ETF would invest in the cryptocurrency or related futures contracts and then trade its shares on the stock market. So far the SEC has balked at permitting such funds, citing concerns about the risk of fraud and manipulation in the Bitcoin market. Peirce says it’s “high time” the SEC approved a crypto ETF. In the Obama administration, Gensler was chair of the Commodity Futures Trading Commission (CFTC), where he was responsible for bringing federal oversight to the huge market for derivatives known as swaps after the financial crisis. Patrick McCarty, who teaches a class on cryptocurrencies at Georgetown University’s law school, says Gensler’s understanding of digital assets means he will give the industry a “fair hearing,” though he will probably disappoint many proponents. “When the crypto people say they want legal certainty, they don’t mean that—they want to be unregulated,” McCarty says. “That’s never been Gary’s point of view.”

Christine Trent Parker, who focuses on crypto assets as a law partner at Reed Smith in New York, says that though new SEC rules would bring more certainty to the industry, they also could divide the policing of the market more starkly—with the CFTC focused on markets linked to virtual currencies such as Bitcoin and the SEC handling much of the rest. “Right now the lines are fuzzy because we have speeches and enforcement and court orders,” instead of bright-line regulation, she says. “If the SEC has sort of a broad framework that pulls in all of the other digital assets, then you have this bifurcated marketplace.” Others have argued that token developers need some regulatory flexibility to encourage innovation.

Gensler also sits on the Treasury-led Financial Stability Oversight Council and the President’s Working Group on Financial Markets, which recently held a meeting on the impact of stablecoins. These are crypto tokens that are supposed to be backed by traditional currencies such as the U.S. dollar, and they’ve become a huge part of the crypto trading system. Regulators worry about what could happen if some stablecoin didn’t turn out to be worth what it was supposed to be—prompting an exodus similar to a run on a bank or a money-market fund.

Gensler’s views on the panels carry weight, people who follow the issue note, because unlike, say, the Treasury secretary or Federal Reserve chair, he has real crypto cred.

His understanding of blockchain and digital assets comes largely from the several years he spent at MIT. Along with creating the cryptocurrency course, he’s been a frequent guest at industry conferences—sometimes speaking

◀ Gensler says digital assets will benefit from strong and thoughtful regulation

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30 to 50 times a year—mixing with deep thinkers and entrepreneurs. He quotes writings of Satoshi Nakamoto, the pseudonymous creator of Bitcoin, from memory and knew some of the core developers of the digital currency.

The 63-year-old former Goldman Sachs partner traveled an unlikely path to becoming one of the government’s foremost cryptocurrency experts. It started in 2017, when as chief financial officer of Hillary Clinton’s failed presidential campaign he had the lonely job of closing up shop, paying off the final bills, and deciding what to do with the abandoned computers and office supplies. Like many of his shell-shocked former colleagues, Gensler was looking for something to do—and somewhere to sit out Donald Trump’s presidency.

The answer came from economist Simon

Johnson, an MIT professor who encouraged Gensler to come to Cambridge, Mass., and teach.

Looking to nurture a long-held interest in the intersection of technology and finance, Gensler jumped at the opportunity. Although he didn’t know much about digital tokens, he connected with people who were part of the university’s burgeoning Digital Currency Initiative and even audited a course in crypto programming. When he suggested MIT teach more about finance and digital money, he was given the job. Little did Gensler know that in a few years he’d have a chance to put his academic studies to real-world use. “Life sometimes is a bit of serendipity,” he says. —Robert Schmidt and Ben Bain

August 9, 2021

THE BOTTOM LINE In his last job as a regulator, Gensler helped bring the enormous swaps market under federal oversight. Now at the SEC, he says many cryptocoins fall under his purview.

Breaking the Charmed Circle Of White Wealth

○ Harvard told its real estate developer it needed to bring in Black and Latino investors

At the end of 2019, Rob Speyer, president and chief executive officer of the real estate company Tishman Speyer, was in the final stages of bidding for a highly coveted development deal with Harvard. The winner would build and manage a 2 million-square-foot life sciences research campus in Boston, next door to Harvard Business School, including labs, offices, retail, housing, and a hotel. As the deal neared closing, the school came to Speyer with a request: Would he be willing to set aside 5% of the equity in the project for Black and Latino investors? Speyer agreed and, that December, won the contract to build Harvard’s Enterprise Research Campus.

As he began looking for investors, Speyer quickly realized his network was almost entirely White. He would never get to 5% by going to the usual suspects.

It was, he says, a “mind-blowing revelation.” At 51, Speyer has been working for more than 25 years at the company his father, Jerry, co-founded, sharing the CEO job with his dad for seven years before taking over in 2015. Before Harvard, he says, no one had ever asked him to meet a requirement of this kind, and he’d never thought twice about it. “I didn’t understand that Black and brown investors weren’t getting access to investment opportunities that a White person of the same means would,” he says.

The federal government and state agencies

routinely put diversity and inclusion benchmarks into their contracts, but these standards typically focus on builders and tenants. It’s unusual for a private institution to make requirements for investors.

In doing so, Harvard was recognizing an important fact about how economic power and wealth are built in the U.S. There’s a kind of charmed circle of private investment opportunities—venture capital, some hedge funds, big real estate projects—that most people don’t have access to but which have the potential for higher returns than other assets. When the oldest university in the country goes out looking for money, it’s considered a privilege to be asked.

Under the terms of the contract, Tishman Speyer needed to raise at least $25 million from Black and Latino investors. The first phase of the project, which is in the approval process and expected to break ground next year, requires $1 billion in financing, half in debt and half in equity.

To find investors, Speyer turned to Angela Mwanza, a senior vice president for private wealth management at UBS Group AG, who suggested he speak with Rudy Cline-Thomas, founder of the investment firm Mastry Inc. Early last November, when much of New York City was still a ghost town, Speyer met Cline-Thomas for lunch at a restaurant in Rockefeller Center, which Speyer’s

○ Cline-Thomas

○ Lowry

PHOTOS: GETTY IMAGES (2). ILLUSTRATION BY DEREK ZHENG

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company owns. Cline-Thomas committed on the spot. “I saw the broader ramifications of it immediately,” he says. “I can’t even tell you that I had any hesitation.”

Although the investment was attractive—a life sciences campus in biotech hub Boston with Harvard as an anchor tenant is about as close to a sure thing as it gets—the real opportunity was the chance to join the network of people who serve as backers to America’s elite institutions. It was, as Cline-Thomas puts it, a chance to “kick the walls down.”

Cline-Thomas has made a name for himself as a go-between for professional athletes and venture capitalists in Silicon Valley. In the end he brought in 15 investors, including himself. Ten from his group are athletes—including Andre Drummond, Andre Iguodala, Kyle Lowry, and C.J. McCollum from the NBA and the NFL’s Trent Williams and Byron Jones.

All told, working with Mastry and other intermediaries as well as Harvard’s alumni network, Tishman Speyer got $30.8 million of the $500 million equity offering from a group of 157 Black and Latino investors—exceeding its commitment by more than 20%. “There’s a range of investors, from professional athletes to doctors and lawyers,” Speyer says. “So it’s an eclectic group.”

Williams, a San Francisco 49ers offensive tackle, who recently signed a six-year, $140 million contract, gets plenty of investment offers. But like most athletes with eye-popping contracts, he’s bombarded with offers to get in on car washes, restaurant chains, and other second- and third-tier businesses. “Big ups to Harvard for making it to where we can have the pathways and bringing us along,” Williams says.

The deal represents a “sea change,” says C.C. Melvin Ike, a senior principal at investment management company Blackstone Group Inc., who also joined Cline-Thomas. A 37-year-old son of Nigerian immigrants and a graduate of both Harvard’s business and law schools, Ike says he saw it as a responsibility to invest alongside the athletes and other Black professionals in the group, who also tend to lack access to the upper echelons of finance. “I have been living in a world where there’s no one that looks like me,” he says.

Access to high-power deals, he says, breeds familiarity with the inner workings of finance, which is then passed to future generations and spreads outward. For Lowry, a six-time All-Star for the Toronto Raptors who announced a move to the Miami Heat this offseason, this legacy building was a key part of the deal. “I come from North Philadelphia where there are a lot of children that grew up just like me,” says Lowry. “It’s superimportant because you have to be able to say, ‘You can do it, too.’ ”

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Jones, a cornerback for the Miami Dolphins, has particularly welcomed the education in real estate development; he plans to make it a second career. He spent much of the past offseason, he says, peppering Speyer and his team with questions big and small.

The goal now is to make Harvard’s rule a baseline for other elite institutions. “That’s where we want to get it to,” Cline-Thomas says, “where the folks that don’t do it will be frowned upon.” At Tishman Speyer, the plan is to build on its network of Black and Latino investors until benchmarks are no longer necessary. Investors in the Harvard deal, Speyer says, will be invited to join future offerings, and recruitment efforts will continue.

In June, shortly after the Wall Street Journal reported the news that NBA players were among those investing in the Harvard project, McCollum of the Portland Trail Blazers got a call from a friend who works in real estate. The friend began relating the details to McCollum, whose name hadn’t been mentioned in the article, and explaining what a great opportunity it was. “I know,” McCollum told him, laughing. “I got in.” �Ira Boudway THE BOTTOM LINE When Harvard inked a deal to develop a new research campus, it demanded that $25 million in equity come from Black and Latino investors. It brought in almost $31 million.

Bloomberg Businessweek

August 9, 2021

Beyond the Reddit of the Apes

whole new audience. “It was really encouraging in both good and bad ways,” she says of her Twitter experience. “You’re perpetually surrounded by this environment where not only do people have a lot more experience than you, but if you post something, you pretty much get immediate feedback if you were right or wrong.”

As Francus’s following exploded, she used the platform to promote her research blog. The finance world began to notice. She joined Moody’s Analytics in July. “Pre-Twitter, I would never, ever have interacted with or come across Lily,” says Infinite Loops co-host Jim O’Shaughnessy, a veteran money manager. “What I love about Twitter is that yes, there’s a lot of noise—and I think you have to be very aggressive in the way you curate— but there’s a lot of signal. And I see that signal emerging more and more.”

O’Shaughnessy, a self-described “old” at 61,

▼ Francus built an audience on Twitter for her quantitative analysis

● Social media is more than bros pushing meme stocks. Smart, fresh voices are out there

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When you think of the places where Internet culture mashes up with finance, you might imagine Reddit boards where bro-ish posters who call themselves “apes” gang up to push shares of AMC Entertainment Holdings Inc. to the moon.

Or YouTube personalities pumping crypto coins and get-rich-quick schemes. But there’s also a loose circle of posters on Twitter—affectionately known to its denizens as FinTwit—trading real ideas, along with plenty of jokes and esoteric memes, plus links to their Substack newsletters and TikTok skits.

FinTwit isn’t new, but it’s become required reading for anyone who wants to understand a market that’s increasingly influenced by what’s happening on social media. (That’s one reason many journalists, including this writer, spend perhaps a little too much time there.) Many of the posters work in finance, and it’s turning out to be a place where younger voices and women can build huge followings and further their careers.

Lily Francus, a former Ph.D. student turned quantitative researcher at Moody’s Analytics, joined Twitter in January to post intraday market predictions generated by her NOPE model.

That stands for the Net Options Price Effect, and it tracks movements related to something called delta hedging. If that’s a head scratcher to you, don’t worry—FinTwit can be a nerdy place.

But Francus’s model was hugely topical, thanks to what was happening over on Reddit.

The WallStreetBets crowd was piling into options on stocks such as GameStop Inc., which spurred a bullish feedback loop of sorts. NOPE helped explain what was going on. “More people started taking what I was saying seriously,” Francus says. “’Cause you know, when a 25-year-old is like, ‘Yeah, I developed an intraday trading model on the most competitive market in the world,’ most people were like, ‘Yeah, that’s adorable.’”

After GameStop, Francus was written up in the Financial Times and interviewed on Bloomberg Television and for the finance podcast Infinite Loops. Francus had earlier been active on Reddit and Discord, but moving to the bird app brought a

PHOTOGRAPH BY SASHA TIVETSKY FOR BLOOMBERG BUSINESSWEEK

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Bloomberg Businessweek

recently hired Bengaluru-based Vatsal Kaushik to work on the podcast, after following him on Twitter nine months earlier. O’Shaughnessy Asset Management associate Jamie Catherwood, who joined the firm in March 2019, was also found on the site. “One of the things I think is brilliant about Twitter is that it’s becoming a real-time résumé, a proof-of-work résumé,” O’Shaughnessy says.

That was the experience of Caitlin Cook, 23, who joined Onramp Invest, a crypto-asset platform for financial advisers, after crossing paths with Chief Executive Officer Tyrone Ross on Twitter. While exchanging messages, Cook asked to be kept in mind if Onramp was hiring. It was, and Cook landed a job as the firm’s head of community. She’s now vice president of operations for its Onramp Academy. “I’ve learned more on Twitter than most anywhere else probably, more than college,” Cook says. “But the networking part is the biggest for me.”

FinTwit, like Reddit, has its share of selfdescribed “s---posting” and “loss porn”—people bragging about how much money they’ve burned on foolhardy trades. Women and people of color often face harassment on Twitter, and FinTwit’s no exception. But the platform has some advantages. “It’s so much easier to find what you’re looking for, through hashtags, groups, lists,” says Callie Cox, senior investment strategist at Ally Invest.

“Twitter is also easier to curate what you’re looking for, because many accounts aren’t anonymous, and it incentivizes you to not be anonymous—you can get verified.”

That the majority of FinTwit users post under their real names helps create an atmosphere that’s less foul than other parts of the internet.

For the most part. “I think in general, there’s reduced toxic-ness from accounts that are nonanonymous, because you do have career risk, especially in finance, so people tend to play nicer,” Francus says.

But one of the most amusing and mysterious parts of FinTwit is the quality of its anonymous accounts. In addition to wildly popular meme accounts such as “Ramp Capital” and “Dr. Parik Patel, BA, CFA, ACCA Esq.”—which each command more than a quarter-million followers—is a population of pseudonymous accounts run by investing pros. They may be silenced by their company’s social media policies or worried about damaging their careers with a careless or perhaps too honest tweet.

“You really have a ton of alpha on the platform,” says Kyla Scanlon, a 24-year-old from Los Angeles with a growing FinTwit profile. (“Alpha”

is Wall Street jargon for the ability to beat the market.) “If you can pin it together, connect the dots on it, you’re like, ‘Oh my God, I can’t believe this little account is this big, big name in the space.’ If you look at the quality of their tweets, usually it’s just super top-notch. The best accounts are under 2,000 followers, probably.”

Scanlon, like Francus, experienced firsthand the flywheel effect Twitter can have on someone’s influence. A trader and finance blogger since college, she began posting short clips on TikTok explaining things like lumber shortages and decentralized finance. In late March she posted a 57-second video about the Archegos Capital blowup to Twitter, where it received more than 5,000 likes. She followed that up a week later with a video about a New Jersey deli with a $100 million market value, and she’s seen her number of followers balloon since.

In a recent video, Scanlon performs, with the skill of an improv star, a conversation among Federal Reserve Chair Jerome Powell, fund manager and Bitcoin evangelist Cathie Wood, Tesla Inc.’s Elon Musk, and Twitter CEO Jack Dorsey.

“Bitcoin is hedge against all the -flations,” says her version of Wood. “Inflation, deflation, stagflation.” (To anyone who follows Wood, that’s a pretty dead-on joke.) To play Dorsey, she ties her hair in front of her chin to mimic his wild beard.

It’s not just jokes. Promoting her work on Twitter helped bring eyeballs to Scanlon’s Substack newsletter, where she deconstructs financial topics in greater detail and sophistication than a one-minute video can allow. Those pieces include an analysis of the dollar-store business, an explainer on the reverse repo market, and a reflection on the role of meme culture in raising equity valuations.

But Scanlon’s success on Twitter and TikTok has brought a degree of unwanted attention as well, whether it be the man who direct-messages her with updates about his day or threats of stalkers. “Especially because I’m on there with my voice and my face, people think they know me a lot more than they do,” she says. “And because, of course, I’m out there being silly with my skits, people feel even more room, I think, to objectify me.”

But Twitter is undeniably a powerful tool, Scanlon says, and she makes a habit of only following people who provide in-depth analysis: “People who kind of take it seriously, but then they have fun with it, too.” �Katie Greifeld THE BOTTOM LINE Twitter, along with TikTok videos and Substack newsletters, is helping young people in finance find an audience for their ideas.

August 9, 2021

“The best accounts are under 2,000 followers” 27

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August 9, 2021

Mystery of the Missing Workers

ILLUSTRATION BY PATRICK EDELL

● The pandemic has accelerated the shrinkage of the U.S. labor force The U.S. economy is in the midst of an historic comeback. But it’s happening with the lowest rate of labor force participation in more than four decades and a record number of unfilled jobs. It leaves economists, policymakers, and investors wondering: Where have all the workers gone?

At the height of the pandemic more than 23 million Americans were unemployed. Since then about half of those have found work, but the labor market remains almost 7 million jobs short of where it was before the initial lockdowns. The government’s coming jobs report is expected to show that the U.S. added about 875,000 in July, the largest gain since August of last year. But that won’t do much to budge the labor force participation rate—a measure of the share of working-age Americans who are employed or looking for work—which has been stuck near its lowest level since the 1970s for almost a year.

There are temporary factors related to Covid-19 that are holding back the jobs recovery, such as enhanced federal unemployment benefits, reduced availability of child care, and worries about the highly infectious delta variant—though some of these will dissipate in the coming months.

When the dust settles, U.S. businesses and policymakers will have to grapple with longer-term shifts, including a shrinking population of workers and the adoption of technologies that are making some jobs redundant. Many of these trends predated the pandemic but have since sped up.

“Labor force participation has basically been falling monotonically—it’s pretty much been rotating around a downward trend for 30, 40 years.

That accelerated a lot during the pandemic,” says Marcus Casey, an associate professor of economics at the University of Illinois at Chicago.

Economists had already predicted that a shrinking labor pool would act as a permanent drag on economic growth—the “secular stagnation” that Larry Summers warned about before the pandemic—though a recent technologically assisted uptick in productivity will blunt some of the effects, provided it’s sustained.

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Edited by Cristina Lindblad

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The Covid crisis may end up paring back the size of the U.S. labor force further. Workers who are sidelined, whether by layoffs, disability, or school closures, may find it difficult or impossible to reenter the job market as their skills lapse. One troubling indicator: The number of Americans unemployed for at least a year reached 2.9 million in June, which is equal to about 29% of all the jobless.

“We lag all of our peers in labor force participation now, which is not where we want to be as a country,” Federal Reserve Chair Jerome Powell said at a Senate banking committee hearing on July 15.

“We need to work as a society to make sure people find their way back into the labor force even if they can’t find their way back into their old job.”

What follows is a deeper dive into the powerful forces reshaping the U.S. labor force.

gross domestic product in the years immediately following a recession. A 2012 paper published by the National Bureau of Economic Research found that 88% of the “routine”—or easily automated— jobs lost in the U.S. since the 1980s disappeared within 12 months of an economic slump.

A telltale sign this is happening again is that self-checkout registers, touchscreen kiosks, and menus displaying QR codes are becoming an ever more common sight at supermarkets, drugstore chains, and restaurants. Concerns about Covid contagion have incentivized businesses to ramp up investments in hardware and software that cut down on interactions between employees and customers. According to a research note from Oxford Economics, 45% of the 7 million jobs the U.S. was still missing as of June are vulnerable to automation, led by food service, retail sales, and manufacturing. “The technology was available 10, 15 years ago already, but it wasn’t adopted, and now it’s been adopted,” says Stefania Albanesi, an economics professor at the University of Pittsburgh. “It’s unlikely that we’ll just go back to how things were before.”

Powell issued the same warning in his remarks to senators last month. “We began hearing very early in the recovery period that companies were looking at ways to use technology more aggressively,” said the Fed chair. “You’ll see more technology and maybe fewer people.”

▼ U.S. labor force participation rate

● DEMOGRAPHICS The working-age population—defined as those age 15 to 64—declined in 2019 for the first time in decades, then again in 2020. Blame it on the boomers. While the oldest of Americans born between 1946 and 1964 reached retirement age a decade ago, members of the generation exited the workforce at a faster rate during the pandemic.

Boomer retirements more than doubled in 2020 from the previous year, according to an analysis from the Pew Research Center. Some quit work sooner than planned, taking advantage of surging stock prices and home values; others did so under duress, having lost jobs in the recession and facing little prospect of finding employment again. Powell has said early retirements are one reason companies are having trouble finding qualified workers.

“These are older workers. These are people who as a demographic really shaped the labor market as we know it,” says Hannah Grieser, marketing manager at labor market analytics firm Emsi Burning Glass. “They’re people with decades of knowledge, decades of experience, and we’re not seeing the up-and-coming generation that would be replacing them willing to work the same number of hours, willing to take the same job,” she says. “That’s going to have a really potentially detrimental effect on economic recovery if that high-production, high-capacity, highly experienced group of people is out.” ● AUTOMATION Economic downturns have a habit of accelerating profound changes in the workplace. The clearest evidence is that, since at least the 1990s, employment growth hasn’t kept up with growth in

● DRUG ADDICTION The pandemic has reversed hard-won progress in the fight against another epidemic that had been quietly ripping through the U.S. workforce since at least the mid-1990s. Drug overdose deaths jumped 30% in 2020, to a record 92,183, according to the Centers for Disease Control and Prevention; about three-quarters were a result of opioids.

Economic hardship, forced isolation, and interruptions to health and social services all contributed to the increase. Reverting to a trend that had seen opioid deaths begin to plateau in 2018 is vital.

The authors of a May 2018 research paper published by the Federal Reserve Bank of Cleveland estimated that prescription opioids accounted for 44% of the decrease in men’s labor force participation observed since 2001.

“We hear all the time from folks that you have people who are capable and apply, and when they get to the drug-screen portion, they don’t pass,” Beth Rhinehart, head of the Chamber of Commerce in Bristol, a city of 50,000 people that straddles the border between Tennessee and Virginia, said in May. The area once had plentiful jobs in agriculture, mining, and steel but now relies mostly on

66%

63

60 Q1 1970

Q2 2021

▼ Annual increase in retired baby boomers in the U.S. 3m

2

1

0 2012

2020

▼ U.S. manufacturing productivity vs. employment, change since 1970 Industrial production index Manufacturing payrolls

150%

75

0

-75 Q1 1970 Q2 2021

DATA: BUREAU OF LABOR STATISTICS; PEW RESEARCH CENTER ANALYSIS OF IPUMS DATA; FEDERAL RESERVE; CENTERS FOR DISEASE CONTROL AND PREVENTION

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Bloomberg Businessweek

August 9, 2021

tourism (Bristol calls itself the birthplace of country music). “It certainly does kick a lot of people out of a lot of jobs,” Rhinehart said. “Our businesses need warm bodies right now.”

Biden proposed more than $10 billion to combat the opioid epidemic in his fiscal 2022 budget, including funds for medical treatment and recovery programs.

In some parts of the country, parents of children who aren’t yet school-age face a discouraging new normal. “If the cost of child care is going to rise even faster than it had been before the pandemic, especially because you have a lot of families that relocated out of the cities and into suburban areas, I think that could play a big role in suppressing the willingness to jump back into the labor market for relatively low wages,” says Casey, the professor in Chicago. “You’re looking at your budget, saying: ‘Do we need to put $2,000 back on our balance sheet?’”

Senate Democrats have proposed a $3.5 trillion social spending package, which includes paid family leave and child-care investments, but its fate remains unclear. “If we continue to lack the kinds of care infrastructure that we desperately need to have robust participation in the workforce, then we shouldn’t be surprised if those numbers don’t increase at the level that they need to,” says Wendy Chun-Hoon, director of the Women’s Bureau at the U.S. Department of Labor. �Olivia Rockeman, with Katia Dmitrieva

▼ Deaths from opioid overdoses in the U.S.

● CHILD CARE Millions of parents left the labor market early in the pandemic when schools and day-care centers closed. Many returned as elementary schools reopened, and more are expected to go back to work in September after the summer break. But for women in particular, Covid has fundamentally shifted the balance between work and child care, perhaps in a lasting way. The rate of workforce participation for women in June was 56.2%, well below this century’s high-water mark of 60.3%. “Moms came home more than dads to take care of kids, and I think we’re going to see that some of those people that dropped out realized: ‘You know what?

This new way of life, we can get by like this,’ ” says Grieser of Emsi Burning Glass.

60k

40

20

0 2015

2020

THE BOTTOM LINE A turn for the worse in the opioid epidemic, the rising cost of child care, and a retirement boom all stand in the way of U.S. companies finding workers to fill open slots.

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The People’s Capitalism ● President Xi Jinping is putting entrepreneurs and investors on notice that ordinary Chinese come first

Xi Jinping smiled and hinted at a policy bombshell that would soon roil stock markets from Shanghai to New York.

It was mid-June, and the most powerful Chinese Communist Party leader since Mao Zedong was holding court at an after-school club for elementary students in Xining, a city on the Tibetan Plateau. Acknowledging the growing pressure on parents to spend money on expensive private tutoring for their children, President Xi promised to ease their burden. “We must not have out-ofschool tutors doing things in place of teachers,” he said. “Now the education departments are rectifying this.”

Although Xi’s comments went largely unnoticed by global investors at the time, the crackdown on tutoring companies that followed has become the starkest illustration yet of the Chinese president’s commitment to a sweeping new vision for the world’s second-largest economy—one in which investors’ interests are subordinate to ensuring social stability and national security.

For decades, even as they kept strict control over strategic sectors such as banking and oil, China’s leaders gave entrepreneurs and investors freedom to push the adoption of new technologies and open up fresh opportunities for growth. Deng Xiaoping set the tone in the mid-1980s when he said it was OK if some got rich first. Now, with growth slowing and relations with the U.S. increasingly hostile, authorities are emphasizing a different goal: shared prosperity. “This marks a watershed shift in China’s policy priorities,” says Liao Ming, the founder of Prospect Avenue Capital, a Beijing-based money manager. “The government is going after industries that are creating the most social discontent.”

Call it progressive authoritarianism. From gig economy workers struggling on meager pay, to parents contending with ever-rising housing prices and tuition fees, to small businesses battling tech monopolies, Xi is swinging the cudgel of state

including China Evergrande Group, and foreign venture capital firms that had hoped to take Chinese companies public in the U.S. The cardinal rule used to be that to make money in China it was necessary to align with the Communist Party’s priorities. The dawning realization is that finding common ground may be increasingly hard to do.

Companies and investors have been “behind the curve” when it comes to anticipating regulation in China, wrote Ren Yi, a Harvard-educated social media commentator known as Chairman Rabbit, in an online commentary that’s received more than 100,000 views.

Part of Xi’s motivation is desire for popular support before the once-in-a-decade leadership transition next year, when he’s expected to buck tradition and stay on as party chief for a third term. Growing discontent, including sporadic strikes among delivery workers, has rattled the stability-obsessed party.

Wearing the distinctive yellow shirt of Chinese delivery service Meituan, whose profits have boomed during the pandemic, a 22-year-old motorbike courier who asked to be identified only as Mr. Tang complains about the lack of medical insurance. “There’s nothing I can do about it if Meituan doesn’t pay for it,” he says. “The wealth gap between people in this society is too big.”

The downside for investors is that a bigger slice of the pie for China’s Mr. Tangs has to come at the expense of the owners of capital. Meituan lost as

▲ Xi’s visit to a school in Xining

FROM LEFT: LI XUEREN/XINHUA/GETTY IMAGES. CHINESE POSTERS/INTERNATIONAL INSTITUTE OF SOCIAL HISTORY

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power in support of the squeezed middle class.

While these challenges aren’t unique to China, the policy response has been.

Weeks after Xi’s school visit, the government said private education had been “hijacked by capital” and ordered tutoring companies to become nonprofits, accelerating a selloff that at its most extreme erased $1.5 trillion from Chinese stocks.

Combined with new requirements for data security reviews before overseas initial public offerings, directives for food delivery services to pay staff a living wage, and escalating curbs on the housing market, the tutoring crackdown has triggered a growing realization that the old rules of Chinese business no longer apply. Investors are left wondering which sector will be the next target for regulators.

China this year began a “new development phase,” according to Xi. It puts three objectives ahead of unfettered growth: national security, which includes control of data and greater self-reliance in technology; common prosperity, which aims to curb inequalities that have soared in recent decades; and stability, which means tamping down discontent among China’s middle class. If Xi executes on his vision—and that’s still a big “if”— stretched workers, stressed parents, and squeezed startups will benefit.

But so far the losers have been more visible: tech billionaires and their backers in the stock market, highly leveraged property companies

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much as $63 billion of market value after Beijing ordered it to improve worker protections last month.

Following the logic of a prison yard, Beijing signaled the start of the new era for entrepreneurs and investors by taking a swing at the biggest inmate: Alibaba Group Holding Ltd. founder Jack Ma. On Nov. 3 the IPO of Ant Group Co.—the finance arm of Ma’s empire, which was set to surpass Saudi Arabian Oil Co. as the biggest IPO of all time—was unceremoniously squashed.

The regulatory pace intensified after December, when a top economic planning meeting chaired

by Xi vowed to rein in the “disorderly expansion of capital,” suggesting the move against Alibaba was part of a wider campaign. At first, investors thought the phrase referred to anti monopoly efforts aimed at shrinking the power of tech giants, a narrative bolstered by the 18.2 billion-yuan ($2.8 billion) fine antimonopoly authorities slapped on Alibaba in April.

But developments in recent weeks suggest the slogan goes further. At the start of July, China’s cybersecurity regulator said tech companies with more than a million users would need to pass a review before listing overseas. Regulators made an example of DiDi Global Inc.—China’s answer to Uber Technologies Inc.—which had squeaked through a U.S. IPO just before the new regulations, removing it from app stores in the country and hammering its valuation.

Later that month, China’s top administrative body, the State Council, ordered companies teaching the school curriculum in the $100 billion afterschool tutoring sector to become nonprofits and banned them from pursuing IPOs or taking foreign capital. The semilegal variable interest entity (VIE) structure adopted by the likes of Alibaba to go public abroad was singled out for top-level criticism for the first time.

While investors in the tutoring sector—including major funds from Temasek Holdings Pte Ltd. to Warburg Pincus LLC—lamented the new rules, many Chinese parents welcomed them. In big cities more than half of households report feeling “under pressure” from tutoring costs, according to reports in local media. One of the hottest online terms in China this year has been “involution”: the idea that parents are trapped in an endless cycle of educational one-upmanship, with the result not meritocratic progress but social stagnation.

Liu Shu, a 39-year-old manager at an insurance company in Beijing, says she and her husband spend 200,000 yuan to 300,000 yuan each year on their 9-year-old son’s after-school classes in Chinese, English, math, and calligraphy. That’s more than

three times the average disposable income for residents of China’s capital. The educational rat race risks burning out kids and draining parents’ bank balances. And by deterring families from having more children, it adds to the demographic drag revealed in the country’s once-a-decade census earlier this year. “This is why I don’t want to have a second child,” Liu says. “I just really don’t have more energy, on top of the issue of money. To me, raising a kid is too much stress.”

China’s other moves are also grounded in the logic of progressive economics, pushing back against the power of monopolies to crush competitors, squeeze workers, and milk customers.

Regulators in Europe and the U.S. have been making tentative moves in the same direction, yet the political and economic philosophy that motivates Beijing’s actions is fundamentally foreign to most modern Western politicians. Communist rulers see the economy as something that can thrive through state planning, even if that overrides the rights of entrepreneurs and their backers.

The Chinese Communist Party is betting an economy that’s an export powerhouse and also boasts a 1.4 billion-strong consumer market will continue to exert a powerful gravitational pull on foreign money. They might be right. Foreign investment continues to flow into China, including through domestic bond and stock markets. And for all the talk of economic decoupling triggered by former President Donald Trump’s trade war, China’s exports to the U.S. keep rising.

Still, structural shifts in policy have a slowburn impact. The benefits of pro-market reforms culminating in China’s 2001 entry to the World Trade Organization played out over the best part of a decade before the 2008 financial crisis halted the export boom. The costs of Beijing’s new turn away from the market will also take time to show.

Heavy state intervention may damp the animal spirits that drive private investment and reverse an integration with the global economy that’s helped boost growth in the past four decades.

In the meantime, the Communist Party’s focus on common prosperity suggests investors will have to settle for a smaller share of the spoils.

—Tom Hancock and Tom Orlik, with Lulu Chen, Lin Zhu, Yinan Zhao, Eric Zhu, Abhishek Vishnoi, Jeffrey Hernandez, and Yujing Liu THE BOTTOM LINE After 40 years of allowing the market to play an expanding role in driving prosperity, China’s leaders have remembered something important: They’re Communists.

August 9, 2021

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A 1958 poster depicting Mao

5

Expect Delays One factory’s logistics show the cost to businesses of strained U.S. infrastructure

Edited by Amanda Kolson Hurley and David Rocks

Every vehicle that comes off the assembly line at Volvo Construction Equipment Corp. in central Pennsylvania is a test of America’s highways, rail lines, and ports. And too often they let the company down—slowing the influx of global supplies that feed its main U.S. production facility, which builds wheel loaders, soil compactors, and other industrial vehicles.

During a stretch in April and May, bad traffic on

nearby Interstate 81 delayed the arrival of steel plates from Georgia on three occasions. Such incidents send senior production controller Mike Middaugh to his computer to test alternative assembly schedules, given what parts the factory has on hand and what other deliveries might be accelerated.

“It’s very much a puzzle. You’ve got all these pieces,” Middaugh says. When he succeeds in rejiggering production, he can see the impact

ILLUSTRATION BY EMMA ERICKSON

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from his perch overlooking the factory floor.

Mechanical tuggers—a sort of powered cart—scutter around pulling vehicle frames off assembly lines as output is resequenced. It all takes time and adds costs, and that’s if the flow of parts can even accommodate a switch.

Sometimes, after hours of poring over spreadsheets and testing multiple alternative scenarios, Middaugh finds the only answer is to stop production. For an operation that relies on just-in-time deliveries of parts and materials, delays have at times halted the Volvo plant’s production for half or even a full day, according to the company, which is part of the Volvo Group.

At Volvo’s factory in Arvika, Sweden, which also makes wheel loaders, the company regularly schedules deliveries of German-made engines to arrive as little as one hour before the first engine in

the shipment is needed, says Gustavo Casagrandi, a vice president and general manager of Volvo’s Shippensburg, Pa., operations. “We could never do that here,” Casagrandi says.

The disruptions showcase why business leaders and local officials across the country are hoping President Joe Biden and Congress in the coming months can finally deliver a major infrastructure investment package, after years of political bickering in Washington that’s stymied previous attempts.

“It probably costs 5% to 10% of productivity,” Stephen Roy, president of Volvo CE’s North America region, says of infrastructure deficiencies. “We’re shutting the plant down. We’re idling the workforce.”

Biden, nicknamed Amtrak Joe for his long practice of commuting daily to Washington from Wilmington, Del., by train, has made upgrading national infrastructure a priority, highlighting the damage to American economic competitiveness from decades of underinvestment. The U.S. dedicates 1.6% of gross domestic product to infrastructure spending, compared with an average of 2.9% among European nations, 3% by Japan, and 6.1% by China, according to the Group of 20 Global Infrastructure Hub. The costs to productivity and corporate bottom lines have been clear: ● A quarter of U.S. bridges need significant repair or can’t handle current traffic, according to a 2018 report from the U.S. Department of Transportation. ● Traffic on interstates by tractor-trailers surged 31% per lane-mile of highway in the system from 2000 to 2019, according to TRIP, a transportation research group supported by insurance companies and businesses involved in improving or repairing transportation systems. ● Freight-truck delays increased 77% from 2000 to 2019 in the nation’s 494 urban areas, according to the Texas A&M Transportation Institute. ● The trucking industry sustains $74.5 billion in direct costs annually from delays on the national highway system, a 2018 report by the industry-funded American Transportation Research Institute showed. ● Fifty-four percent of senior executives at middle-market companies say infrastructure deficiencies directly hurt their businesses, according to an April survey for the U.S. Chamber of Commerce.

Volvo’s Shippensburg facility is just off I-81, a crucial freight artery that runs from Tennessee to Canada, largely along the Eastern Continental Divide. Part of the Eisenhower administration’s

August 9, 2021

◀ Sources of factory parts used by Volvo Construction Equipment Corp. in Pennsylvania ① Sweden Volvo’s axles, seals, and transmissions come by ship from Sweden.

Ships stop at four ports of call before Baltimore, and delays can compound. ② Mexico Electrical harnesses from Mexico used to travel on a route that goes through several major cities and were frequently held up.

Volvo has switched all shipments to air freight, which is more expensive. ③ Georgia Custom-fabricated steel plates used to make Volvo’s vehicle frames often get stuck in traffic on Interstate 81.

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historic highway-building program, I-81 was constructed in the 1950s and ’60s. With only two lanes in each direction in most parts, the road often gets clogged, and dangerously short entrance and exit ramps contribute to frequent major collisions.

These can snarl traffic for four hours or longer, according to Volvo.

The 233-mile segment of I-81 in Pennsylvania in 2019 averaged almost 11 accidents a week that shut down a travel lane, and almost one a week in which the lane was closed more than four hours, the state’s department of transportation says. Things are even worse in Virginia, home to the longest stretch of the highway: Its 325-mile section averaged more than 33 lane-closing accidents a week, according to that state’s transportation department.

wheel loader, a staple of the Shippensburg facility.

Engines come from Germany, transmissions from Sweden, and the counterweights providing equipment stability and lifting efficiency from China.

The main chassis harness is made in Arizona, the hydraulic motors and pumps in Iowa. And the custom-fabricated steel plates that the factory’s welders use to assemble the vehicle frames come from Rome, Ga. Components from each of 226 suppliers follow their own logistical paths. A thousand of them, from 17 countries, arrive via containers on ships at port cities including Baltimore, Charleston, S.C., and Los Angeles, then move overland. Almost half of domestically supplied parts come from more than 250 miles away. The logistics web was designed on the basis of just-in-time manufacturing, which aims to reduce waste and speed items through the factory, cutting costs.

For Middaugh, the production controller, the headaches don’t end with I-81. In June a shipment of fenders arrived at the Port of Baltimore five days late because of congestion a freighter had faced along its East Coast route. A separate shipment of hood covers came in four days late, for the same reason.

The nation’s 50 largest ports were handling 11% more cargo tonnage by 2019 than a decade earlier, according to the Transportation Department.

But investment in them hasn’t been sufficient, experts say. Shipping channels need to be widened and deepened, berths for ships expanded, taller cranes installed for larger modern ships, cargo storage space added, and road and rail connections to ports improved to speed the transfer of freight, says Cary Davis, senior government relations director and general counsel for the American Association of Port Authorities.

The bipartisan infrastructure package would “make up for a generation of deferred investment in our trade infrastructure,” Davis says. “The U.S. hasn’t done a good job of keeping up with the growth in freight, both import and export.”

Volvo is resorting to bigger stockpiles—all the more so because of the added supply chain glitches caused by the pandemic, which have plagued the broader economy. At the Shippensburg facility, forklifts recently cleared an employee break area on the factory floor to add another “buffer zone,” a place to temporarily store unfinished equipment when production is disrupted because components haven’t arrived in time.

It’s the most recent in a series of such moves. In late 2018, Volvo added three days to lead times for materials arriving in Baltimore because of growing

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Democratic Senator Mark Warner of Virginia, one of the negotiators on a bipartisan $550 billion, five-year infrastructure bill that’s been endorsed

by Biden, anticipates some of his state’s share of the funding would go to improvements in its section of I-81, says Rachel Cohen, his spokesperson. Alexis Campbell, press secretary for the Pennsylvania Department of Transportation, says the same applies for her state.

The package would push federal infrastructure spending to the highest level as a portion of GDP since the early 1980s, when the build-out of the interstate highway system was being completed and federal grant programs for local water systems were winding down, says Adie Tomer, a senior fellow at the Brookings Institution. “It really is historic in scale,” Tomer says. “We are going to be approaching New Deal-era investment at the federal level.”

But there’s no guarantee a bill gets passed by both chambers of Congress. Democrats are tying the bill to the fortunes of bigger, separate legislation to ramp up social spending, with that outcome uncertain.

It takes 1,574 parts to assemble a Volvo L90

August 9, 2021

◀ Volvo Construction Equipment’s assembly line in Shippensburg, Pa.

MICHAEL A. MCCOY/BLOOMBERG

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Bloomberg Businessweek

August 9, 2021

congestion at East Coast ports. In 2019 it doubled its inventory of steel plates, to a two-day supply, because of the increase in highway delays.

Out on I-81, along with the other interstates that Volvo’s supply chain relies on, setbacks can be exponential. Federal safety regulations limit truck drivers to 14 hours on duty, with 11 hours of driving, before a mandatory 10-hour rest period kicks in. That compounds the impact of unexpected traffic delays.

“On a weekly basis, I will get two or three emails where the driver is out of hours and has to hold for their rest period,” says Mike Thomas, head of the logistics supply chain for Volvo Construction Equipment.

Another headache for Middaugh. �Mike Dorning THE BOTTOM LINE Volvo's problems with late shipments underscore the need for investment in key roads and ports, as a $550 billion infrastructure bill moves through Congress.

Piling On the Misery In South Africa

● The bottom 50% of the population is worse off than at the end of apartheid

The trip from Pretoria to Mabopane starts on a six-lane highway lined with malls and office parks, passes verdant gated communities featuring pools and gardens, and ends in the dusty township north of South Africa’s capital where the trees, shops, and sumptuous homes make way for stark cinder block structures in dirt yards. Behind a barbed wire fence lies the Katekani Community Development Project, where Beauty Mokubung sits at a sewing machine, hoping for orders from local schools for uniforms to supplement her meager welfare payments.

The end of apartheid has done little to improve the lot of the 71-year-old, one of 18 million South Africans on welfare. Those people—about a third of the population—are reeling from the first true erosion in social payments in decades. As inflation ticks up, Mokubung’s government pension hasn’t kept pace, leaving her with just 1,890 rand ($132) a month to support herself and three grown, unemployed grandchildren, whose parents died of AIDS. “There’s electricity to buy, basic things like maize

meal and sugar,” says Mokubung. “It’s too little.”

As many countries pursue expansionary policies, South Africa—grappling with depleted coffers and the biggest economic contraction in a century—is dialing back one of the broadest social assistance systems in the developing world. Over the past two decades, pension payments have risen at an average of 5.4% annually, but this year the increase is just 1.6%, less than half the inflation rate. The National Treasury says it aims to shake the economy out of a decade of stagnation by reining in welfare payments and directing more resources to productive areas such as infrastructure.

The move risks widening one of the world’s starkest divides between haves and have-nots, where riots and looting in July highlighted the increasingly frayed social fabric. Ignited by the imprisonment of former President Jacob Zuma, the protests quickly became a litany of complaints, from record-high unemployment—almost 80% of 18- to 24-year-olds lack jobs— to the strain of repeated pandemic lockdowns.

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South Africa Reels and Scales Back Gross domestic product, year-over-year change

2009

Unemployment rate

Cost to service debt as share of GDP*

In Q2 2020, virus restrictions meant fewer people could look for jobs

2020

Actual

Welfare spending and consumer prices, year-over-year change

Estimate†

Old age welfare pension CPI

Estimate†

7%

34%

4%

0

28

2

4

-7

22

0

0

Q1 2009

Q1 2021

2009

2021

2009

8%

2021

*BY FISCAL YEARS ENDED ON MARCH 31. †NATIONAL TREASURY’S FORECAST IN FEBRUARY 2021. DATA: STATISTICS SOUTH AFRICA; NATIONAL TREASURY; BLOOMBERG

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Cape Town. “For the bottom two or three deciles of the population, the dominant source of income is not labor, it’s social grants. They’ve been left out of the South African growth story.”

The government says it has little choice. National debt is forecast to rise to about 89% of gross domestic product in 2026, and the budget deficit was 14% in the most recent fiscal year. The government aims to boost investment in sectors such as telecommunications and renewable energy while restoring the ailing finances of state companies. And that costs money. “Our approach has really been, how do we get growth back?” says Duncan Pieterse, head of economic policy at the National Treasury. “How does one strike the right balance between a very effective social support safety net and this very important priority to support job creation?”

Although the end of apartheid lifted many constraints on Black lives—like where to live and whom to love—and left South Africa with one of the world’s most progressive constitutions, that can’t be taken to the bank. “The money only lasts until the 10th of the month,” says Tebatso Matshukudu, an unemployed 28-year-old single mother who supports her two children and a sister. “Grants help us get by.”

So for welfare recipients like Matshukudu, Mokubung, and Alice Modukanela, a 60-year-old who sews at the Katekani center, the belt-tightening is hard to fathom. “We are doomed,” says Modukanela. �Anthony Sguazzin and Leah Wilson, with Rene Vollgraff and Prinesha Naidoo THE BOTTOM LINE South African pensions had been rising 5.4% annually, but this year’s increase is just 1.6%, threatening to widen one of the world’s biggest gaps between haves and have-nots.

▲ Mokubung (top), Matshukudu (left), and Modukanela

WALDO SWIEGERS/BLOOMBERG (3)

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Thousands of people descended on malls and warehouses in a frenzy of pilfering and unrest that left at least 337 dead.

More than a quarter-century after apartheid, South Africa is the globe’s most unequal nation, according to the World Bank. Presidents from Nelson Mandela on have expanded the welfare system and undertaken affirmative-action policies to create a substantial Black middle class and lift millions out of poverty.

But they haven’t narrowed an inequality gap aggravated by rampant corruption and ineffective spending on one of the world’s weakest education systems.

Since 1993, the last year under White rule, pretax income of the top 1% has grown by half, while for the bottom 50% it has shrunk by a third, according to the World Inequality Lab, and the wealthiest 3,500 South Africans have more assets than the poorest 27 million. Although Blacks have outnumbered Whites in the richest 10% since about 2014, three-quarters of South African households—almost all of them Black—have no savings in case of an emergency. “You have literally millions of people with no assets,” says Leo Czajka, a research fellow for the World Inequality Lab at the Université Catholique de Louvain in Belgium. “You have a shock like Covid, no income left for them to buy food.”

After the end of apartheid, with the economy expanding about 5% a year, the government largess was sustainable. But since the 2008 financial crisis, growth has stalled even as state payrolls have continued to swell and corruption has flourished.

The government estimates that 500 billion rand was stolen during Zuma’s tenure as state companies became vessels for ruling party patronage. The now-bankrupt national airline hasn’t posted a profit since 2011, and state power utility Eskom Holding SOC Ltd. amassed 400 billion rand in debt as the cost of new power plants busted budgets amid allegations of kickbacks.

Black economic empowerment programs, particularly in the crucial mining sector, created millionaires and billionaires such as current President Cyril Ramaphosa and his brother-in-law, Patrice Motsepe.

At the same time, the labor-intensive gold industry contracted, shedding tens of thousands of low-wage jobs. The number of welfare recipients has grown sixfold since 1998. Although racial inequality has declined, that shift was driven by the fortunes accumulated by the country’s wealthiest Black citizens. By 2019 the richest 10% of the population accounted for about 65% of income, more than in Brazil, India, or the U.S., according to the World Inequality Lab. “To cut back just doesn’t make any sense,” says Murray Leibbrandt, director of the Southern Africa Labour and Development Research Unit at the University of

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With delta surging and the U.S. child vaccination campaign lagging, it might be time to consider requiring Covid immunization in schools—as we do for many diseases that pose a less urgent threat

▲ Melissa and Cam O’Hara at home in Cary, N.C.

By Riley Griffin and Suzi Ring Photographs

by Peyton Sickles

axxed Yet? Bloomberg Businessweek

August 9, 2021

O

ne afternoon in May, Michael Joseph Smith, a pediatric More than 4 million children in the U.S. have tested positive infectious disease specialist, strides in baseball- for Covid, but the true number of infections is likely much patterned socks through a Duke University facility in higher, because kids are often asymptomatic and they’re Durham, N.C., to welcome Cameron O’Hara, a 14-year-old less likely to be tested. In recent months, as a growing numvaccine trial subject. Smith has been acting as co-principal ber of adults have been vaccinated, children have at times investigator at one of the sites that’s been testing the Pfizer- accounted for more than a third of confirmed weekly cases.

BioNTech vaccine in kids since last winter. O’Hara and his At least 44,000 kids, from newborns to 17-year-olds, have been mother have come to the office following the “unblinding” hospitalized since August, and about 350 have died, accordprocess—in which he’d learned, to his disappointment, that ing to the U.S. Centers for Disease Control and Prevention. he’s been getting a placebo—to get his first dose of the real Peter Marks, the director of the Center for Biologics thing. He crosses his sneakers and grips his mom’s hand as Evaluation and Research at the U.S. Food and Drug the needle goes into his arm.

Administration, says 350 deaths from Covid might not sound O’Hara is eager to return to the classroom this fall as a like many, but “when you think about childhood illnesses that high school freshman. He’s planning to celebrate his second are vaccine-preventable, that is a lot.” And as with adults, dose with a road trip to the Adirondacks to see his grandpar- Covid has taken a disproportionate toll on those from racial ents. “The first thing I’m going to do is give them a hug,” he and ethnic minorities and those with underlying health consays, bringing his mother to tears. ditions such as asthma, diabeO’Hara’s parents, both pharma- Vaccinations by Age Group, U.S. tes, and obesity. cists, encouraged his enrollment ◼ Fully vaccinated Guliz Erdem, a pediatric in the trial. He’s more enthusiasinfectious diseases physician at 0.3% tic about vaccination than many of Under 12 Nationwide Children’s Hospital his friends, some of whom fear nee- 12 to 17 in Columbus, Ohio, is frustrated 31.6% dles, some of whom carry youthful by what’s seemed, at times, to delusions of immortality. be widespread dismissal of the Smith worries that laissez-faire risk Covid poses to kids. She’s tended to MIS-C patients as attitudes about vaccinating ado- 18 and older young as 2 months old, who lescents could slow the U.S. pedi60.4% atric immunization campaign and appear in the emergency room even cost lives. Although Covid-19 with swollen hands, bloodshot eyes, and blue lips. She has taken its greatest toll on older describes the syndrome as a adults, over the past year he’s 12/2020 7/2021 seen infected children develop bomb that explodes in the body DATA: CDC, U.S. CENSUS, IPUMS USA. VACCINATIONS AS OF 7/27 fatigue, brain fog, and chest pain— and fragments the immune sysall symptoms of “long Covid.” And his hospital has treated tem. “At first we didn’t really believe this condition was real,” dozens of cases of multisystem inflammatory syndrome, she says. It was months before the CDC started counting or MIS-C, a sometimes deadly pediatric condition associ- cases, but from May 2020 to July 2021, the agency received ated with Covid. His concern has increased as the more- more than 4,100 reports of MIS-C, including 37 deaths, with transmissible delta variant has become the nation’s dominant most cases occurring in Black and Hispanic kids and those strain. “A lot of people think this is going way too fast,” he younger than 14. says of the clinical trial process. “It’s not. We’ve just removed The other major impetus behind vaccinating children, the bureaucratic red tape.” beyond their own health, is the contribution it could make Although pediatric studies moved quickly, the rollout of to ending the pandemic. Kids make up more than 25% of the shots to millions of kids age 12 to 17, who account for 7.5% of global population, which many scientists say makes them key the U.S. population, has lagged. Only 43% have received their to reaching the goal of herd immunity, estimated at protecfirst dose. That’s led the White House to call upon schools, tion for at least 70% of the population. (That number could community organizers, and even the Gen Z pop star Olivia be higher as variants continue to emerge.)

Rodrigo to double down on pitching the vaccine’s benefits The U.S. government campaign to immunize children before the school year starts. before the school year began in May, when an emergency

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use authorization (EUA) was granted for the shot produced

by Pfizer Inc. and its development partner, BioNTech SE. The companies ran their pediatric trial soon after the adult one, finding that their vaccine was 100% effective at preventing symptomatic Covid in 2,260 kids age 12 to 15 and that the subjects produced antibodies exceeding levels seen in vaccinated young adults, without exhibiting new or worrisome side effects. Moderna applied for U.S. clearance, after also seeing 100% efficacy in its trials for 12- to 17-year-olds, and has already received a green light from European regulators.

Novavax Inc. and Johnson & Johnson are currently testing their vaccines in adolescents. Early U.K. trials for the shot from AstraZeneca Plc have been delayed in the wake of rare blood clots found in adults who’d had the vaccine.

Pfizer has shifted to study even younger children, enlisting as many as 4,500 6-month- to 11-year-olds to get lower-dose shots in the U.S. and Europe, with initial data expected as early as September. At a White House briefing in May, Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said that by the first quarter of 2022, “we will have enough information regarding safety and immunogenicity to be able to vaccinate children of any age.” To prepare for that ▲ A vaccination event at moment, a Biden administra- Wheels Fun Park in Durham tion official told Bloomberg News, the U.S. government has purchased 65 million doses tailored to the under-12 cohort.

Ensuring that vaccines are ready for all children by yearend is “our best hedge against preventing a nasty variant of the future,” says William Gruber, Pfizer’s senior vice president for vaccine clinical research and development. “There will be a risk-benefit assessment as we see where the pandemic is at that particular time.”

The risk-benefit discussion promises to become even more pointed when Covid immunization expands to younger kids— and if schools begin to implement mandatory vaccination, as they already do for any number of diseases. Already, the rates for children are falling along red and blue lines, much as they have for adults. To help end the pandemic in the U.S., the Biden administration will have to keep trying to build confidence among hesitant parents, continue vaccinating older children, and speedily deploy shots for younger ones.

If the rollout succeeds, it could redefine the global approach to the fight against Covid.

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our and a half miles down the road from the Duke trial site, past a Biscuitville, a church, and a cemetery, three dozen teens stand in a line snaking around the exterior of

August 9, 2021

Hillside High School. Dressed in varsity jackets, graphic tees, and surgical masks, they’re joined by their parents, all beading with sweat in the 80-degree heat. The kids will, like Cam O’Hara, be among the first in the U.S. to be immunized against Covid.

A little after 10 a.m., 14-year-old John Osorio Vasquez and his 12-year-old brother, Diego, inch forward. Their mother, Maria, soon joins them inside, filling out consent forms with a toddler in tow. A speaker thumps with the heavy bass of Drake and Ariana Grande songs. The coronavirus, John and Diego say, is scarier than the shot.

They know from experience. Last summer, Covid tore through Durham’s sizable Latino community. The population accounted for 77% of cases in the county, and Maria, who’s originally from El Salvador, and John were among those who got sick. This summer will be different, John says after receiving the shot, an “I Got Vaccinated” button affixed to his shirt.

He has a job washing dishes at a local restaurant. He hopes being vaccinated will mean he won’t have to wear a mask.

Covid has been rebounding in the U.S., driven by delta, with weekly average cases roughly tripling since late May, and the surge has hit unvaccinated pockets of the South particularly hard. Less than half of North Carolina is fully vaccinated, and the figure for 12- to 17-year-olds is barely over a quarter.

Durham has been something of a bright spot. It’s a politically progressive enclave in the Research Triangle, a hub of three major medical schools (Duke, the University of North Carolina at Chapel Hill, and North Carolina State University in Raleigh) that have attracted biotech companies, and 56% of the county is fully immunized. According to the local public-health director, Rod Jenkins, families in Durham have been generally receptive to counter-Covid measures.

“My health director colleagues throughout the state have not fared as well,” Jenkins says. “Some got spat on, some got hate mail. They were driven out of their jobs or into retirement.” He’s worried that Durham is at risk because of its proximity to undervaccinated counties, particularly with the delta variant surging. The proportion of Covid patients who are younger than 18 recently hit a new peak.

On that hot May morning at Hillside High School, only half the expected number of kids turns up to get their shot, a trend that’s playing out across the South. It’s a worrying sign for the pediatric campaign, whose success or failure is being decided at the country’s more than 100,000 public and private schools. A CDC survey published in July found that parents of adolescents living in the Midwest or South are the least likely to plan for their child to receive the vaccine. At the same time, 13% of parents who reported being unwilling to get their kids immunized (and almost double the share of hesitant adolescents) suggested they could be swayed if their school system required it. As a result, educators have a debate on their hands: whether to implement mandates requiring Covid vaccinations, as they routinely do for measles, polio, and other diseases, or punt because of politics and let parents decide.

V

accine mandates, and fights over vaccine mandates, have been around for a long time. In 1855, Massachusetts became the first state to pass a law ordering schoolchildren to get the smallpox shot. Similar measures were put in place around the U.S. over the following years, in and out of classrooms. In a landmark 1905 case, the U.S. Supreme Court ruled that states have the authority to require vaccinations as necessary measures to protect public health and that individual freedoms weren’t “absolute.” The court also reaffirmed the right of states to exclude unvaccinated children from public schools.

Today all 50 states and the District of Columbia require children to be immunized against chickenpox, measles, polio, and whooping cough to attend school, though some allow exemptions for religious or other reasons. These mandates persist even though they’ve been so successful that the risk of contracting some of the illnesses they cover is now almost nonexistent: The last known U.S. case of polio dates to 1979, and measles was effectively eradicated in 2000. Measles has resurfaced somewhat in recent years, however, as antivaccine sentiment has gained ground.

With vaccine skepticism and misinformation spreading, the CDC has continued to stress the scientifically settled principle that school mandates are a critical public-health tool.

With Covid, though, the Biden administration has left that to others to debate. “These are local decisions for schools and communities to make,” says Sonya Bernstein, a senior policy adviser for the administration’s Covid response team.

No states have yet ventured to put such a policy in place.

Biden’s overseas counterparts initially moved more slowly on vaccinating kids. The U.K., for example, has been limiting its rollout of the Pfizer shot for children to only the most

▲ John and Diego Osorio Vasquez after being vaccinated at Hillside High School in Durham vulnerable 12- to 17-year-olds and those living with at-risk adults. But more than half of EU nations have started to vaccinate healthy children, and debates about mandates have begun. China has taken an aggressive approach, with its regulator granting emergency authorization for Sinovac Biotech Ltd. and Sinopharm Group Co. shots to be used in children as young as 3, even though trials are ongoing. Some Chinese provinces are vaccinating older kids this summer.

For most countries, the decision about whether to offer vaccines to kids is being driven by supply, especially in places where shots are still badly needed for adults. But the risk of new waves of infection driven by young people also matters.

“The longer that other countries delay vaccinating children,” says Paul Offit, an infectious disease specialist at the Children’s Hospital of Philadelphia and an adviser to the FDA, “the longer it will take to significantly slow the spread of this virus.” He notes that waiting gives the virus time to mutate into variants that can potentially evade existing vaccines.

School mandates could diminish the risk, but in the U.S. the most vehement opponents are already rallying. On Facebook, parent groups are circulating petitions, touting dubious or altogether false research and airing concerns that mRNA technology will harm their children. Some plead for more robust safety data, and others are convinced the vaccines cause autoimmune diseases or contain Russian microchips. These parents are mobilizing offline, too, joining town halls, press briefings, and even U.S. health agency panels to criticize the pediatric rollout. “If parents don’t have a say,

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if they’re pushed into a corner, they’re going to pull kids out of school,” says Jason Rego, a father in Florida who runs a Facebook group for parents opposing Covid vaccines.

The reluctance of states and school boards to implement a mandate traces in part to the emergency use authorizations.

“We’re in a bit of a legal vacuum,” says Sharon Masling, a partner in Washington, D.C., for the law firm Morgan Lewis, which is advising employers and administrators on the legal issues surrounding mandates. Without full licensure in place, Masling says, many are reluctant to test the waters on their own.

One of the few to suggest he’d require the shot was Austin Beutner, who, as superintendent of the Los Angeles Unified School District, said in January that vaccination would be necessary to return to the classroom. In an interview in May, he qualified his position. “We expect it will be required of children on campus in time,” said Beutner, who stepped down the following month. “Let’s not rush. Let’s let people get comfortable, build a coalition of the willing, and I think by the time fall rolls around, there will be more information.”

As the school year nears, public support for a mandate is growing. Researchers at Northeastern, Harvard, and other universities found that 61% of American adults are in favor of one, up from 54% in the winter. But a stark partisan gap remains, with Democrats’ support for a mandate doubling that of Republicans.

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report its trial data on those age 5 to 11 as soon as September, and on those age 2 to 4 shortly thereafter, potentially clearing the way for an EUA before the end of the year. Gruber, the Pfizer executive, estimates that data for the 6- to 24-month-old group will be ready as soon as October. The new trial results— which will be based on a dose one-third the size of that for adults for children age 5 to 11 and one-tenth for children under 5—will look different from previous ones. Because there are now fewer Covid cases in the U.S. than last winter, Pfizer likely won’t report efficacy data that compares cases among vaccinated participants against those in a placebo group.

Instead it will assess the immune response the shot prompts.

This method is often used to validate pediatric vaccines, but the absence of clear efficacy numbers along the lines the public has grown accustomed to for Covid vaccine trials will be one more new variable for parents to consider. Despite the long-term risks to younger children who get the disease, it hasn’t been seen in them in numbers suggesting as urgent a need to vaccinate them for their own health, for reasons that still aren’t properly understood. (Hypotheses include that the cells controlling blood-clotting are healthier and

he U.S. campaign for kids 12 and up will provide new information about the vaccines’ safety profile. That nearly 9 million 12- to 17-year-olds have completed their regimen has, for many, demonstrated the Pfizer shot’s safety. But some possible issues have surfaced that weren’t evident in the much smaller trial. In June, U.S. health advisers met to discuss a link between mRNA vaccines and myocarditis and pericarditis—inflammation of the heart muscle and its surrounding membrane, respectively. The CDC had noticed a spike in cases, particularly among male teenagers, with more than 1,200 counted at the time of the meeting. Its data showed there was only a 0.00126% chance that those 12 to 39 years old would develop either heart condition within 21 days of being administered their second dose, and most who develop the condition quickly recover after treatment and rest. The agency’s advisers noted that Covid-caused conditions such as MIS-C pose a greater threat. And with the delta variant “more readily impacting younger people,” as the CDC, the American Academy of Pediatrics, and other organizations said in a joint statement, that small risk shouldn’t deter families from heading to the clinic. In the U.K., by contrast, the heart risks informed its decision not to give the shot to healthy children yet.

The discussion will be even trickier when it ▲ Denise McKay with daughters Keaveia (left) and KaLea, comes to younger children. Pfizer is expected to as they prepare to get shots at Hillside High School

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“We don’t want to have a situation where kids have to vacate the classrooms”

therefore less susceptible to infection; that they have fewer of the receptor cells that allow the virus to gain entry; and that their immune systems are innately stronger.) It’s also not known at what age children might become more vulnerable.

“I don’t think that we know the accurate balance of benefit and harm from these vaccines in young children,” says H. Cody Meissner, a pediatric infectious disease expert at Tufts University School of Medicine and an FDA adviser. It’s important to compare the potential for adverse effects against the potential for Covid hospitalizations, he adds. “If it’s higher, then we’re causing more harm than we’re preventing.”

The more the argument for vaccinating younger children rests on getting to herd immunity, the more officials and scientists will have to consider the ethics involved. The question becomes, “Is it fair to vaccinate somebody and expose them to the very small risk of the vaccine if the benefit is predominantly for the population?” says Nigel Curtis, a pediatric infectious diseases physician and researcher at the University of Melbourne and Murdoch Children’s Research Institute.

“I’m just amazed by how people are so certain about what the right thing to do is.”

To quell concerns about safety, Meissner suggests the FDA first grant a full biologics license for the shot in younger kids, rather than an EUA, before expanding the rollout. Pfizer is likely to get full approval for those 16 and up as soon as this fall, but it will take longer to get it for those who are younger, as the FDA requires six months of safety data. Waiting could fundamentally change the rollout, however, helping sway parents worried about legitimate side effects and dispelling concerns, unfounded though they may be, about unapproved technology. It could also give officials cover to mandate vaccines in schools without quite so much fear of retribution.

Marks, the FDA director responsible for vaccines, says, “As we get down below age 12, we’re going to be looking even more critically at the safety data, so that we make sure that there we’re very convinced that the children are getting as much direct benefit as they possibly can.” To that end, U.S. regulators have asked Pfizer and Moderna to at least triple the size of the under-12 trials.

“The other worry,” Marks says, “is that it’s been a little while since we had a new Greek letter.”

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ith mandates not in place, U.S. middle and high schools continue to rely on local officials, health providers, and grassroots organizations to win over parents. They’ve focused on identifying families most at risk of the disease, who are often people of color. In South Los Angeles, Kedren Health is busing children to vaccine sites at schools and hosting clinics one organizer describes as a “High School Musical vax-style event” with celebrities. New Jersey’s Essex County held a free vaccine event at Turtle Back Zoo. Across the South, providers are following the lead of Fair Count, the organization Stacey Abrams founded in Georgia, which has been using canvassers typically focused on voter turnout to

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spread vaccine information.

Community organizers do sometimes encounter hesitancy. Diane Latiker, founder of Kids Off the Block, an outreach program for low-income children in Chicago, says she often hears Black families cite the infamous experiment in Tuskegee, Ala., in which Black men with syphilis were denied treatment without their knowledge for four decades. “They know about all the wrongdoing that their parents and grandparents have been through,” she says.

“So when it comes down to the vaccine, they’re not trusting.”

In considering the shot, people felt better when the outreach came from those “who not only look like them, but people who actually live in their community.”

Jenkins and his team in Durham have done meticulous geomapping, cross-referencing neighborhoods with the highest rates of social vulnerability and lowest vaccination rates to determine where to place pop-up clinics for teens. Then they make sure community organizers are running the show.

Hillside, a historically Black high school, was chosen as a site through this model, along with a fun park that has a go-kart track and a roller rink. The aim is to bring in not only kids but their parents, too. “How awkward would it be to see your kids vaccinated, with their TikToks and their school’s town halls, and you yourself not be, as a caretaker?” Jenkins asks.

If the vaccination campaign is a marathon, we’re at Mile 20, he says solemnly. It’s the toughest part of the race, especially with Covid cases and hospitalizations rising once more. Jenkins has a final sprint planned for the four days before kids return to the classroom: a back-to-school immunization event at Durham County Memorial Stadium. “I’m really weary,” he says. “We don’t want to have a situation where kids have to vacate the classrooms.”

For John Osorio Vasquez, the patchwork rollout means he won’t likely be able to forgo his mask in the classroom, as he’d hoped to at his summer job. Durham Public Schools currently require face coverings for students and staff, regardless of whether they’ve been vaccinated—an approach the CDC backed in late July. “Many of our families, teachers, and staff feel more secure with universal masking,” says DPS spokesman Chip Sudderth. No vaccine mandate is in the offing, at least for now, which means carrying on with the painstaking process of persuading everyone to get their shots.

But where adults are weary and wary, kids remain hopeful. John’s brother, Diego, already feels freer. His father has long promised to take him to El Salvador. John has been a handful of times, and it’s finally Diego’s turn. The country has recently faced a surge in cases, but with a shield of protection, Diego thinks his odds have improved. He grins. “It’s a good time to get my vaccine.” <BW>

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COULSON AVIATION’S SOUPED-UP FLEET OF HELICOPTERS AND PLANES H

▲ A CHINOOK DROPS ITS PAYLOAD IN CALABASAS, CALIF., IN NOVEMBER

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ELPS REIN IN BLAZES FROM CALIFORNIA TO CANBERRA

BY JEFF WISE

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he fire began shortly before dawn on Oct. 26, when a spark from a telecommunications line landed in the scrubby grass and sagebrush of Santiago Canyon. As the day grew hotter and the winds stronger, the blaze raged across hundreds of acres of eastern Orange County, Calif., filling the sky with smoke to the coast, 15 miles away. The fire intensified and spread west toward the residential neighborhoods of Irvine and Lake Forest; two firefighters were so severely burned they had to be induced into comas, ultimately spending months in the hospital. Brian Fennessy, the county fire chief, helped the police evacuate more than 75,000 residents and at times wielded an extinguisher to put out spot fires.

Southern California is the most technologically advanced area in the world for fighting wildfires. Fennessy could call on dozens of fire engines and more than 2,200 firefighters from Orange, Los Angeles, and Ventura counties. He had on hand a firefighting air force of about a dozen helicopters and planes. But the Santa Ana winds fanning the flames made it impossible for the fleet to fly.

Without the help of planes and helicopters, firefighters predicted that the Silverado Fire, as it came to be known, would roll over more than 2,000 homes within 24 hours.

Weeks earlier, Fennessy had signed a contract with Coulson Aviation Inc., an aerial firefighting company based in British Columbia. Coulson had recently outfitted a huge Boeing CH-47 Chinook helicopter with equipment that could drop 3,000 gallons of water or fireretardant chemicals—about 10 times what the more commonly used Bell 412 helicopter can unload—in a little more than two seconds. Unlike a fixed-wing firebomber such as a Boeing 747 or Lockheed C-130 Hercules, which can carry similar loads, a Chinook doesn’t have to return to an airport to refill. It can suck up water from a river or lake and shuttle back and forth to a fire, dramatically multiplying the tonnage it drops per hour. “Three thousand gallons is an amazing load of water

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dropping out of a tank,” Fennessy says.

To put it in perspective, that much water fills a 7-foot cube, weighs 12 tons, and carries enough momentum to seriously injure a person on the ground.

Coulson’s Chinook had another potential advantage: It could fight fire at night. The company had spent a decade working out how pilots could safely fly these copters low to the ground in darkness using night vision goggles.

It was time for a test. “The best time to fight fire is when the temperatures are down, the winds are down,” says Britt Coulson, who’s co-president and co-chief operating officer of the company with his brother, Foster. “At night you have no one else up in the air, and there’s much less smoke,” because the lower temperatures and higher humidity mean fires burn less intensely.

As evening set in on the 26th, the winds slackened in Santiago Canyon.

Mel Ceccanti, Coulson’s director of rotorcraft flight operations, was in the Chinook’s pilot seat, ready for it to make its nighttime debut. First, a police copter with “forward-looking infrared” imaging equipment—night vision gear that can see through smoke better than goggles—took off to assess the situation. At about 9 p.m., police radioed that conditions were good. Along with two Bells, the Chinook took off from the former U.S. Marine Corps Air Station El Toro, near Irvine, and headed for the blaze, which was approaching a housing development in Lake Forest. “I

▲ THE SILVERADO FIRE

remember seeing the houses and then seeing the fire and thinking, ‘We’re not going to keep it out of these houses,’” Ceccanti says. “The winds were still very high, and the fire was still spreading fast. I looked at my co-pilot and told him, ‘There’s three days’ worth of work here. This is not going to be good.’”

Coming in over the flames, Ceccanti could feel the helicopter bouncing in turbulence. He held down the drop switch, and a curtain of water fell from the Chinook’s belly. Turning 180 degrees, he headed to a nearby pond to refill. Over the next two hours, he repeated the trip 21 times, returning to the airport when he was low on fuel before heading out again. An hour later, the fire attack coordinator radioed Ceccanti to say he was done. The development was safe.

The next day’s winds were light enough that the rest of the firefighting squadron—aircraft belonging to the U.S. Forest Service, the California Department of Forestry and Fire Protection, Orange County, and the Coulsons—could join crews on the ground. In the end, no homes were lost in the Silverado Fire. The Los Angeles Times declared: The “Irvine fire was a recipe for disaster. It became a rare victory for firefighters in grim year.”

The Chinook made the difference.

“If it hadn’t been for that helicopter,” Fennessy says, “we’d have lost a number of these homes.”

Coulson Aviation has been busy

PREVIOUS SPREAD: MYUNG J. CHUN/LOS ANGELES TIMES/POLARIS. THIS SPREAD FROM LEFT: MARK RIGHTMIRE/ORANGE COUNTY REGISTER/ZUMA PRESS. PHOTOGRAPH BY ALANA PATERSON FOR BLOOMBERG BUSINESSWEEK

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since then. The 2020 fire season had barely sputtered out when the first wildfires started this year. In early May extreme drought conditions led the National Weather Service to declare a “red flag” wildfire warning across parts of Northern California. Soon after, a 1,300-acre blaze erupted in the Pacific Palisades neighborhood of Los Angeles.

Coulson was on hand with a C-130 and a Boeing 737; within a week, the fire had been 84% contained, and no buildings were destroyed.

By late July, 257% more acreage had burned in California than in the same period last year, and Governor Gavin Newsom had declared a state of emergency in five northern counties. About 90 large blazes in 12 states have burned roughly 1.8 million acres, according to the National Interagency Fire Center, including the Bootleg Fire in southern Oregon, the largest in the U.S. this year, and the Dixie Fire, California’s biggest in 2021, which has burned an area larger than New York City. Smoke from these fires and those in Canada has blanketed the continent in a haze, sending air quality alerts all the way to the East Coast.

Coulson is flying two C-130s, a 737, and five helicopters for the Forest Service as part of a national contract that’s included battling the Dixie Fire. Separately, it’s flying a “Quick Response Force” that includes two Chinooks and a Sikorsky S-61 in Los Angeles, Orange, and Ventura counties.

On July 9, one of Coulson’s Chinooks, flying with the support of LA County aircraft, unloaded 80,000 gallons of water in 32 drops from 2:30 a.m. to 4 a.m. while fighting the Tuna Fire in Malibu. “If that fire had hit the ridge, she was going into $10 million homes,” says Wayne Coulson, Britt and Foster’s father and the company’s chief executive officer. “It was a good kill.”

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n 1960, Cliff Coulson settled in Port Alberni on Vancouver Island. Back then, the family business was timber. Cliff had served on a tank crew with the Canadian Army in World War II and built on his experience working with

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▲ WAYNE COULSON WITH ONE OF THE MARTIN MARS

armored vehicles and road-building equipment in Normandy. He contracted with giant harvesters operating in the lush forests of British Columbia, providing the bulldozers, trucks, and other heavy machinery needed to cut down trees and haul them to sawmills. It was hard work and not that lucrative. When Cliff’s youngest son, Wayne, 17 years old at the time, joined the operation in 1978, it had about 15 employees.

Wildfires were on the company’s radar only because they could be financially ruinous. One day, Wayne was on a bulldozer pulling a log loader up a hill when the bulldozer threw a spark. Soon a blaze was raging. Wayne knew that a

consortium of local timber companies had bought a pair of Martin JRM Mars seaplanes, giant aircraft built in the ’40s that could drop 7,000 gallons of water at a time. “My dad always said, ‘Anytime you get a fire, phone the Mars,’” Wayne says. So he did. The family could’ve lost about $4 million worth of timber.

Instead, it was out a few hundred thousand dollars. He’d never forget the power of sheer volume.

In 1982, Cliff had a stroke, and Wayne started running the company.

He acquired sawmills, timber cutting rights, and, in 1987, an S-61 for extracting logs from remote mountainsides.

By the ’90s, the company was one

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of the biggest family-owned forestry companies on British Columbia’s coast, with more than 1,000 employees. The helicopter fleet grew to four. In the daylight-starved winters, they were rigged with “night sun” floodlights to illuminate the timber being extracted; in summer they were used to fight fires in Alaska, Washington, Oregon, and California, hauling hundreds of gallons of water in buckets slung from long lines.

The contracts with state and federal agencies were a relatively stable source of income at a time when timber was not. In the early 2000s the U.S. imposed an import tariff that devastated Canadian producers. “We went from a thousand employees down to 500,” Wayne says. “We had to reinvent ourselves.”

Coulson invested in technology and bolstered its fleet. An early focus was how to better carry water: Buckets slung from long lines can become dangerous

people running or trapped, to pick them up, because there was a fire line being pushed along at 40 to 50 miles an hour,” Wayne says. The company thought it could’ve limited the damage had it not had to pause operations at night.

the company also operates in Bolivia and Chile, and last year it won a contract in Indonesia. Typically, contracts specify a fixed rate to keep an aircraft on standby for a certain number of days and then an hourly rate when the aircraft is

“THREE THOUSAND GALLONS IS AN AMAZING projectiles if released prematurely. In 2004 the company modified an S-61 to carry water in an internal tank. This led to the development of Coulson’s retardant aerial delivery system, a tank apparatus for the C-130 that can drop as much as 4,000 gallons of water or retardant. It designed versions for the Chinook, as well as other copters and planes, and licensed the system to the U.S. Air Force.

In 2007, Coulson bought the Martin Mars planes. To guide them, the company acquired a Sikorsky S-76 helicopter to circle over fires and direct the fight. Coulson began converting C-130s and six 737s purchased from Southwest Airlines Co. as well as Chinook and Sikorsky UH-60 Black Hawks in a partnership with Unical Group, an aviation parts and maintenance business.

Figuring out how to fight fire at night became a priority after the 2009 “Black Saturday” fires in Australia’s state of Victoria, which burned more than 1 million acres and killed over 150 people. “They were sending the 61 ahead of the fire to see if they could see any

Operating in rough, unfamiliar terrain at low altitudes makes fighting fires tough enough; flying in the dark makes it that much harder. So pilots practiced using night vision goggles with accompanying helicopters designating drop points by laser. In 2016, after seven years of development, Coulson signed its first nighttime fire-suppression contract, with Victoria, limiting the arrangement to the smaller aircraft of its fleet.

Currently, more than 400 employees help operate three dozen aircraft on four continents. Since Australia’s fire season alternates with the Northern Hemisphere’s, business is year-round;

▲ THE HOLDING TANK INSIDE A 737

dispatched. (Southern California Edison is paying $18 million for a 150-day contract with the Quick Response Force, and county fire authorities are being billed $8,000 an hour for the Chinooks and $6,000 for the S-61.) To make sure equipment is in the right place, jets such as the 737 are flown internationally as needed.

But short-range craft like the Chinook have to be put on cargo ships or tucked inside a massive Antonov An-124 Ruslan heavy transport, a plane six times the size of a 737.

The investments have been financially risky. “We spent tens of millions of dollars without contracts,” Wayne says. But the bets have paid off. Higher sustained temperatures driven by climate change have led to drier weather, more fires—and more work. Coulson competes with mom and pop operations running a handful of crop-dustersized planes, as well as big companies such as Erickson Inc., which operates 20 Sikorsky S-64 Skycrane helicopters, and Columbia Helicopters Inc., whose fleet includes two dozen Chinooks. “There’s competitors that fly

CLOCKWISE FROM TOP LEFT: COURTESY COULSON GROUP (2). PHOTOGRAPH BY ALANA PATERSON FOR BLOOMBERG BUSINESSWEEK

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▲ A CHINOOK SIPHONING WATER IN ORANGE COUNTY, CALIF.

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big helicopters, and there’s competitors that fly big airplanes,” Wayne says, “but there’s no single competitor that flies big airplanes and helicopters. We’re the only one.”

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he Coulsons see California as a proving ground for how wildfires will be fought in the future. Their company’s first job in the state was in 2007, an historically bad wildfire season when officials needed the Martin Mars’s payload capability. In the years since, as the population has grown, homes have been built deeper into exurban areas, endangering more lives. “You have this interface between flammable vegetation and people’s homes, and that means they’re inherently at pretty high risk,” says Daniel Swain, a climate scientist at the Institute of the Environment & Sustainability at the University of California at Los Angeles.

By the time the Silverado Fire broke

▲ CLIFF COULSON WITH HIS WIFE, MAY, AND ORIGINAL EQUIPMENT

turboprop—manned by a pilot, an “air attack” supervisor, and a mission operator—provides more surveillance using a camera in its nose. That data updates the modeling and alerts firefighters to problem areas that could emerge in two, four, and six hours.

Coulson’s latest project is modifying four Cessna Citation jets that will get to a fire faster than the King Airs and have more advanced data-synthesizing capa-

a war. Battles never end: Rain brings growth that will become fuel, droughts make the fuel drier and prone to combust, and every place that burns will burn again. A month after the Silverado Fire, Santa Ana winds whipped another conflagration over the hillsides near its burn scar, destroying 31 structures and forcing 25,000 residents to evacuate. Orange County called in Coulson’s Chinook, and it dropped more than 90,000 gallons of water in one night.

And as in battle, there are casualties.

Last year one of Coulson’s C-130s was dispatched to a fire south of Canberra, Australia, along with a 737. The 737 descended into the fire first, hitting fierce winds. After dropping its retardant, the crew sent a message to the intelligence aircraft on the scene that conditions were “horrible down there.

Don’t send anybody, and we’re not going back.” Heeding that advice, the C-130 flew to a fire 36 miles to the east

G LOAD OF WATER DROPPING OUT OF A TANK” out, the state was already reeling from a season that included five of the six most devastating blazes in its history, including the North Complex fire, which killed 16 people and destroyed more than 2,000 homes. Cumulatively, wildfires killed 33 people in California last year, and the danger lingers. About 5,300 people live within 5 miles of the Dixie Fire, according to a New York Times wildfire tracker. The National Interagency Fire Center reported that as of Aug. 2 the blaze was about 30% contained.

To fight back, state authorities have adopted ideas from modern military planners. The emphasis is on gathering data, processing it quickly, and using it to direct resources. Coulson’s Chinook had help during the Silverado Fire: Southern California’s landscape is dotted with hundreds of sensors to monitor temperature and humidity, plus cameras mounted on hilltops as well as satellites to keep watch. The information is fed into a supercomputer at the University of California at San Diego that models risk. Once a blaze is detected, a Beechcraft Super King Air

bilities. “It’s bringing in a military-type platform into this civilian world,” Britt says. The company is working with UCSD to feed data about the drops into the supercomputer models so they update in real time. “Say you’ve got a prediction that the fire is going to come over the hill and burn 200 homes,” Wayne says. “Now we’ve got a CH-47 dropping 2,800 gallons on the head of the fire. We map the fire 30 minutes later and can see, ‘Hey, we’ve knocked the head out.’ Instead of being reactive, we can be proactive.”

The company is also developing a system that will allow intelligence-gathering aircraft to send data about optimal drop points directly to inbound tankers, whose bellies will automatically open and close based on the information.

The technology will calculate how many drops will be needed at the outset of a mission, eliminating the need for guesswork. “It’s more of a surgical strike,” Wayne says.

To a layperson, the Coulsons might sound like they’re reading aloud from a Tom Clancy novel. But there’s a reason for that. Fighting wildfires is like fighting

that was threatening a koala reserve.

But conditions there were little better.

The plane dropped retardant along the foot of a hill from an altitude of 190 feet.

As it finished, it entered a thick cloud of smoke. The pilot apparently became disoriented, and the plane crashed. All three men aboard were killed instantly.

Wayne, Britt, and Foster took a helicopter to the crash site as soon as they could.

“Everything was burning around us,” Wayne says.

As he sees it, opportunity lies not only in the scope of the catastrophes ahead, but also in their unpredictability. With the world experiencing unprecedented droughts and temperatures, the nature of wildfire control is changing in ways not yet fully understood. Dumping more water and retardant is part of the solution, but so is making sure it’s landing in the right place. “There’s an old saying in business: You can’t manage what you can’t measure,” Wayne says. “We need to build models for fighting wildfire, because it’s changing all the time.

And if we don’t change with it, it’s going to kick our ass.” <BW>

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In Silicon Valley, Asian American tech workers seem to have made it.

Why doesn’t it feel that way?

By Ellen Huet and Priya Anand

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CLOCKWISE FROM ABOVE: ZHU, PAO, BAHN, AND REN

The

Majority

Minority

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CLOCKWISE FROM TOP LEFT: PHOTOGRAPHS BY SIMRAH FARRUKH FOR BLOOMBERG BUSINESSWEEK (2); PHOTOGRAPH BY DAVID JAEWON OH FOR BLOOMBERG BUSINESSWEEK; PHOTOGRAPH BY JINGYU LIN FOR BLOOMBERG BUSINESSWEEK

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ilicon Valley executives sometimes seem to believe they are proprietors of a post-racial paradise. The industry’s corporate campuses abound with immigrants, its investors say they like to bet on underdogs, and its biggest companies preach the gospel of workplace inclusivity. “Diversity is a foundational value for us,” Sundar Pichai, chief executive officer of Alphabet Inc., said last year. “We probably have more resources invested in diversity now than at any point in our history as a company.”

The demographics of Alphabet and its peers, of course, tell a different story: Big tech companies employ few Black or Hispanic workers, and almost none in technical or executive roles. On the other hand, there’s some basis to see Silicon Valley as a beacon of progress in the representation of Asian Americans, who account for a quarter of the population in the Bay Area. Alphabet, DoorDash, and Zoom all have Asian American CEOs. Pichai, who’s originally from southern India, leads a company where more than 40% of the U.S. workforce is Asian. At Facebook Inc., the figure is even higher, and Asian employees slightly outnumber White ones.

And yet, even here—among workers who seem to have found significant success in the tech industry—the story is more complicated, and discouraging. Many Asian Americans in tech, especially women, face subtle yet ever-present discrimination.

It takes many forms: sexualized comments, assumptions based on stereotypes (“You must be great at programming!”), or performance reviews that seem to be more about identity than actual performance. The racism starts at the earliest stages of their careers and builds as they break into middle management.

It can be hard to escape even for those who become executives.

Making things more maddening for those who experience it is that anti-Asian racism is barely acknowledged. The message from tech companies is “we’re post-race,” says Eric Bahn, a partner at the venture capital firm Hustle Fund. But Bahn, who was born in Michigan to parents from South Korea, says that’s an incomplete story. “It looks awesome in the beginning,” he says. “But then there’s a wall you hit. It’s a bait and switch.”

Part of what makes it tricky for Asian Americans to put their finger on racism in tech is the identity itself feels hard to pin down (page 55). Some Asian American families have been in Silicon Valley for generations—even before the 1882 Chinese Exclusion Act, which banned Chinese immigrants and wasn’t repealed until 1943. Many more rode a wave of immigration after quotas were lifted in 1965. Others followed the creation of the H-1B program in 1990, which set aside visas for tech workers.

The differences in how various groups arrived in the U.S., and their education levels, partly explain why income inequality is greater among Asian Americans than any other racial or ethnic group, and why more than 30% of Asian Americans voted for the reelection of former President Donald Trump last November, even after he referred to Covid-19 as the “Chinese virus” and “kung flu.” The Bay Area is home to Asian billionaires, as well as Asian residents who collect recyclables on the street. And in the tech industry, the economic opportunities

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for Asian workers can vary greatly—particularly among immigrants who can be trapped in low-mobility, lower-wage jobs while on H-1B visas.

Over the course of several months of reporting on this issue, and drawing on more than a decade of experience as Asian American reporters covering Silicon Valley, we heard some common themes from Asian American tech workers.

What follows is a taxonomy of their experience, from the brand-new interns to those lucky enough to have made it to the Silicon Valley C-suite. It shows how far Asian Americans are from achieving full equality, and perhaps why equality for even less privileged groups has proved so elusive.

1. “LUCKY TO BE ASIAN” Philippa Chen was first drawn to the tech industry in college. Originally from Southeast Asia, she’d come to the U.S. to attend a liberal arts school in Massachusetts. She’d never been particularly interested in computers, but a lot of her friends were taking computer science classes, so she signed up. She loved it, jumping into caffeine-flooded, sleep-deprived hackathons where she tried to build apps from scratch.

Tech companies would often send people to these events to mentor students, and Chen, a pseudonym, was invariably impressed. In Silicon Valley, entry-level employees earned six-figure salaries and got to work in T-shirts. “There was this whole spirit of creativity,” she says. “I just need my laptop and an internet connection. I can build whatever I want.”

At first, working in the tech industry felt like a dream for Chen. She’s now employed by Facebook and spoke to Bloomberg Businessweek on the condition of anonymity because she was worried about potential retaliation. During her first internship, at Apple Inc., she began attending industry meetups and almost immediately heard racist comments.

“You’re so lucky to be Asian,” a man at a meetup told her.

“White men here will love to date you.”

Chen heard this offhand remark so often and from so many different people that she can’t remember who said it first. The offenders were often White, but sometimes they were Asian, too, which made the scenario all the more disappointing. “I wanted to make friends,” she says. “Stuff like this would come up for no reason.” At a subsequent job at a startup, a co-worker told her she was given opportunities to succeed only because “someone in leadership has an Asian fetish.” In a one-on-one meeting, a colleague complained that her accent was difficult to understand—even though she doesn’t have a discernible accent and is often mistaken for a Canadian. She didn’t speak up in meetings for weeks.

Chen, who’s in her mid-20s, has done well since. Her Facebook job is a plum gig—she makes around $125,000 per year—and she hopes it will be a springboard to something even better. She wants to build on her leadership and public speaking skills, but she’s already encountered skepticism. During performance reviews and other meetings, managers and colleagues have suggested she lacks “executive presence,” which seems like an odd thing to say to a junior employee who never has

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Bloomberg Businessweek

managed anyone. Chen can’t help but wonder if it’s about who she is and how she looks, which then could become a sort of self-fulfilling prophecy. “If I don’t have the opportunity to present ideas that our team works on, how can I gain public speaking experience?” she says. “Am I forever doomed to be in a position where people think I’m bad at public speaking?”

Chen is right to worry about her chances. Two recent studies show that Asian Americans are the least likely of all racial groups to break into leadership in tech companies, despite being strongly represented in the overall workforce.

At Facebook, where 46% of U.S. workers are Asian, only 26% are director-level or higher, though that number is up from 21% five years ago. “We take any allegations of discrimination or bias seriously and investigate every case,” says Sona IliffeMoon, a Facebook spokesperson. “We have made steady progress on our ambitious goals to increase representation of our workforce, including those in leadership positions, and recognize that we still have a ways to go.”

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2. “WE DON’T THINK YOU FIT THE PROFILE” A core element of the tech mythology is that very young, junior engineers can suddenly vault themselves into upper management by building something worthy—and that’s true to some extent at startups. But the big tech companies offer a different mode of professional development. Employees at Amazon.com, Facebook, and Google are issued a numbered level—starting at 1 and going to 12 or so—that corresponds to a pay range and set of responsibilities, and the track upward is highly regimented. Twice a year, employees undergo a competitive review process that ends with a few of them moving up a level; the rest stay put.

Although the process has a sheen of objectivity, the reviews themselves are unavoidably subjective, says Bo Ren, who has worked as a product manager at Facebook, Instagram, and Tumblr. Product managers, especially at larger companies, make substantial salaries and are often groomed for executive roles—if their reviews go well. But at Facebook, during the twice-a-year promotion cycle, Ren got vague feedback that seemed to be more about her identity than anything else.

“You’re not winning the respect of your engineers,” a manager told her once in a one-on-one meeting. He asked whether she could be viewed as credible, which seemed like an odd question because she had enough technical experience for the job. In addition to years of experience and a degree from the University of Southern California, where she got a full scholarship, she’d taught herself how to code. None of that seemed to matter: “We don’t think you fit the profile of a product manager,” the manager told her.

Ren could never figure out what that meant. She was already a product manager, and she could think of only one thing that made her different from most of her peers: She’s an Asian woman. Eventually she chose to leave Facebook. On her way out she asked her likely successor, a White man, if he needed help navigating the company. She says he told her, “I don’t really need to prepare that hard—the manager has my back.”

August 9, 2021

Ren was floored. She’d spent more than 100 hours preparing for the same interviews so she could prove she deserved the spot. Being White, she says, is “like having a skip pass at Disney World. I realized there is a bamboo ceiling, and I’d have to work 100 times harder.”

3. “THE OBEDIENT, SUBSERVIENT ASIAN” The term “bamboo ceiling,” which was popularized in a 2005 book by career coach Jane Hyun, may feel outdated and even racist—why, exactly, is the ceiling bamboo?—but it describes a real phenomenon. Asian Americans have a relatively easy time starting a career. But studies show that somewhere along the climb up the corporate ladder, they slip.

The bamboo ceiling doesn’t affect all Asian Americans the same way. Asian women seem to have it far worse than men, and Americans of East Asian descent seem at a greater disadvantage than those of South Asian descent. Academics have tried to figure out why, but it’s hard to diagnose something so intangible. One study from 2020 blamed a cultural mismatch in which East Asian values of humility and non-assertiveness were inaccurately interpreted by bosses as a lack of motivation or conviction.

The cruel twist is that the stereotypes that make entry-level Asian American workers attractive to hiring managers may be the same ones that block them from becoming leaders. Bahn, the early-stage investor, says that after arriving in Silicon Valley it was easy to forget about his racial identity. “You’re part of an even more welcomed, privileged class here,” he says. Now he sees how that can become a complacency trap. “The story that Silicon Valley tells is really clean: We don’t care what you look like, we care about your ideas—and to some degree, for Asians that’s true. But it feels like a rule is being set: What’s the bare minimum to keep us happy? A reasonable salary? The ability to buy a nice house in a good school district in Mountain View or Fremont? I see a big chunk of people in that range, and a lot fewer Asian leaders who break through and make it to the top.”

When those grasping at the top ranks have spoken up, it has sometimes made things worse. In 2012, Ellen Pao sued her bosses at the venture capital firm Kleiner Perkins for gender discrimination. At the time, her lawyers advised her to sue for just gender discrimination, not racial, as a legal strategy.

“I look back, and there are so many things that happened to me because of my race that I didn’t process,” she says now.

She lost the case in 2015. That year she also resigned from Reddit Inc., where she was interim CEO, and where users had revolted against her leadership, referring to her as “Chairman Pao,” with racist memes styled to look like Maoist propaganda.

“There’s a stereotype around the obedient, subservient Asian woman who wasn’t ever viewed as a leader,” she continues.

“It’s hard to unpack how much of that is gender-related and race-related, because it’s really a combination of both.”

Pao says she asked Reddit’s board if she could keep the CEO title without “interim” tacked on. She thought having the top job without caveats added to her title would make it easier to get buy-in from her employees. When she was turned

Different Experiences for Different Asian Americans The stereotype of Asian Americans—the fastestgrowing racial or ethnic group—as privileged and upwardly mobile is misleading. The reality is more complicated. Asian Americans have the highest level of economic inequality, according to data from the Pew Research Center, and there are huge differences among subgroups, which have important political and cultural implications.

Vietnamese Americans, for instance, tend to vote Republican; Indian Americans are staunch Democrats. �Minh-Anh Nguyen

Asian American and Pacific Islander populations by decade* 100% Hawaiian

Other Japanese

Korean Vietnamese

50

Filipino Indian Chinese 0 2019

1900 New legal permanent residents by country of birth

†

◼ Immediate relatives of citizens ◼ Family-sponsored ◼ Employment-based ◼ Refugees ◼ Other China

India

1998

Philippines

Vietnam

South Korea

Japan

80k

80k

80k

40k

24k

8k

40

40

40

20

12

4

0

0

0

0

0

0

2019

Chinese

Indian

Filipino

Vietnamese

Korean

Japanese

Top three metro areas by population

New York

770k

New York

649k

Los Angeles

421k

Los Angeles

Los Angeles

547k

Chicago

219k

San Francisco

251k

San Jose

San Francisco

493k

San Francisco

212k

New York

198k

Houston

308k

Los Angeles

308k

Honolulu

136k

132k

New York

201k

Los Angeles

131k

130k

Washington

New York

43k

82k

Most common industries ① Restaurants and food services

① Computer systems design

② Colleges and universities

② Hospitals

③ Computer systems design

③ Colleges and universities

① Hospitals ② Restaurants and food services ③ Nursing care facilities

① Nail salons and personal care

① Restaurants and food services

① Restaurants and food services

② Restaurants and food services

② Colleges and universities

② Elementary and secondary schools

③ Hospitals

③ Hospitals

③ Colleges and universities

Political identification ◼ Democrat ◼ Republican ◼ Independent or other party ◼ Don’t know or don’t think in terms of political parties 38% 38% 16%

54

46

25 16

28 16

38 29 27

51

51

27

23 15

16

*BEGINNING IN 2000, OTHER ALSO INCLUDES THOSE WHO REPORTED THEIR RACE AS ASIAN OR PACIFIC ISLANDER IN COMBINATION WITH OTHER RACE CATEGORIES. HAWAIIAN CATEGORY UNAVAILABLE 1940-60. KOREAN CATEGORY UNAVAILABLE 1900-10 AND 1950-60. VIETNAMESE CATEGORY UNAVAILABLE 1900-70. FILIPINO CATEGORY UNAVAILABLE 1900-10. INDIAN CATEGORY UNAVAILABLE 1900-10 AND 1950-70. †FOR YEARS IN WHICH ONLY A FEW PEOPLE IMMIGRATED UNDER CERTAIN VISA CATEGORIES, DATA HAVE BEEN WITHHELD AT THE CATEGORY LEVEL FOR PRIVACY. THOSE IMMIGRANTS ARE REPRESENTED HERE IN THE “OTHER” CATEGORY. 2008 FIGURES INCLUDE BOTH NORTH AND SOUTH KOREA. DATA: IPUMS USA, ASIAN AND PACIFIC ISLANDER AMERICAN VOTE, U.S. DEPARTMENT OF HOMELAND SECURITY

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Asian American Income Inequality

Change in population, 2001-19

Population 1m

● Decline ● Growth of 0-100%

500k

▲ Median income

● Growth of over 100% ● Not available

Adjusted for household size $80k White and Chinese

White and Indian

Indian

70

Taiwanese White and Japanese Japanese

60 White and Korean

Filipino

White and Vietnamese

Chinese and Vietnamese

White and Filipino

56

Chinese Indonesian

Korean

50 White and Native Hawaiian

White, Black, and Asian

Thai

Guamanian/ Chamorro Hawaiian Cambodian

40

Laotian

Pakistani

Vietnamese

Samoan Hmong Bangladeshi Nepalese

30

Burmese

20 5

6

7

8

9

10

11

12

13

14

15

▶ Inequality

Ratio of 90th percentile income to 10th percentile income

DATA: IPUMS USA

Bloomberg Businessweek

down, she didn’t dwell on it much. But looking back, she says that nagging feeling is there: Was there another reason?

4. “YOU STILL SEEM LIKE AN OUTSIDER” Some Asian Americans do make it to the top and stay there—including Microsoft’s Satya Nadella, Zoom’s Eric Yuan, and Google’s Pichai. But expectations for those who become CEO are still colored by the biases that affected them earlier in their careers, says Justin Zhu, co-founder of Iterable Inc., a marketing firm valued at about $2 billion. Zhu was born in Shanghai and immigrated to Toronto when he was 8. He moved to the U.S. for high school.

The Silicon Valley startup world is famously dressed down.

Mark Zuckerberg wore slide sandals in the early years of Facebook, and Sergey Brin went to meetings on rollerblades.

But after Zhu wore a T-shirt and shorts to a meeting with potential investors—essentially the startup founder uniform— he was told by an existing backer that the firm had passed because of his casual attire. He’d come to the meeting with his chief operating officer, a White man in a dress shirt. The investors complained that the COO looked more like a CEO than Zhu. “I felt rage, internally,” says Zhu. He had just shown the investors a presentation filled with the logos of Iterable’s customers. His appearance seemed to matter more than that.

Zhu served as CEO of Iterable until April, when he was fired by his board, which cited an incident in 2019 when Zhu had taken small amounts of LSD before a meeting. Zhu notes that many of his White peers were openly using psychedelic drugs—and had been celebrated for doing so. He suspects the real reason for his firing was that he’d recently become vocal about his identity. Earlier that spring, after a gut-wrenching stream of violence against Asian Americans, he told his board he was talking to a Bloomberg reporter about his experience as an Asian American CEO. He was fired just a few weeks later.

Zhu and his peers have been trading anecdotes. Venture capitalists, they’ve observed, seem to write fewer checks to founders with accents. Bahn, the early-stage investor, says he’s noticed the same pattern among the CEOs he backs. “My founders who have even any form of an accent have a far harder time fundraising than their Asian colleagues who don’t,” he says.

Margaret Chin, a sociology professor who studies the issue at Hunter College in New York, says Asian Americans in executive jobs at major companies often attribute their success to cultivating “trust.” To her, that suggests these executives are fighting what she calls the “forever foreigner” stereotype—the notion that Asian Americans have split loyalties to the U.S. and their ancestral home. It’s the same thinking that drove the U.S. to force Japanese Americans into internment camps, or that makes people ask American-born Asian people where they’re “really” from. “Even if you’re born here, or after so many generations, you still seem like an outsider,” Chin says.

I

n recent years, activists and policymakers have tried to address the inequities that Chin and others have identified, but even talking about the issue can be challenging. Julie

August 9, 2021

Zhang, an investor at Betaworks Ventures who moved from southeast China to Vancouver with her parents at age 4, says she was working with a tech industry group focused on diversity and inclusion and was shocked to learn that the group didn’t consider Asians underrepresented. “I was like, ‘Oh, I didn’t know I was not considered a minority,’ ” says Zhang. “I certainly feel like it in every other way.”

Government investigations into the question of whether tech companies discriminate against Asian Americans have led to divergent outcomes. In 2016 the U.S. Department of Labor found that Palantir Technologies Inc., the defense contractor and data mining firm, received more than 130 applications for a quality assurance engineer job. About 73% were from Asian people, yet the company hired just four Asian applicants and 17 non-Asian. The department filed suit, alleging discrimination. “The likelihood that this result occurred according to chance is approximately one in a billion,” a complaint read. A year later, Palantir agreed to pay a $1.66 million settlement but didn’t admit any liability. In February, Google paid $3.8 million to settle a Labor Department lawsuit that in part alleged it had discriminated against Asian applicants for software engineering jobs. But last year, Oracle Corp. prevailed in a similar suit.

Meanwhile, people have been attacking Asian Americans on the street. In March, a month or so before he was fired, Zhu helped start Stand With Asian Americans, a coalition of Asian American executives, and helped write a letter condemning the violence, which ran in the Wall Street Journal as a full-page ad. Prominent Asian American leaders, including Zoom’s Yuan and Yahoo co-founder Jerry Yang, signed it.

“We, the Asian American business leaders of America, are tired, angry and afraid—and not for the first time,” it read.

“We are tired of being treated as less than American, subject to harassment and now, every day, we read about another member of our community being physically attacked—simply for being Asian.”

Money is flowing in: A group that includes Yang and Brooklyn Nets owner Joe Tsai pledged $250 million in May to a newly formed Asian American Foundation, which will advocate for changes in policy and school curricula to support Asian Americans. It’ll be the biggest single philanthropic gift devoted to Asian Americans, but it still may not address the deeper problem. Focusing on only one racial group at a time can actually divide people further. “It’s an old wedge of White supremacy to have groups compete with each other,” says Pao, who’s a founder of Project Include, an organization that promotes inclusion in the tech industry.

Pao says the idea that diverse candidates are all in competition with one another hurts progress for all minorities.

In recent months, she says she’s seen a promising development: different minority groups speaking out more vocally in support of Asian Americans. “Systemic racism is preventing everybody from getting their fair chances to succeed,” she says. “There are more and more people realizing, if we are fighting for crumbs at the table, nobody wins.” <BW>

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With live theater and concerts roaring back asing e l e r s o i d u t s and up films t n e p f o s e t a sl s, and TV show

ed d w o t cr haw s o e m cas S h t e st b e. By Lu u j t igh cultur m s thi ver for fall e

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In partnership with Bloomberg Screentime

August 9, 2021 Edited by Chris Rovzar

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Businessweek.com

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Bloomberg Pursuits

August 9, 2021

screens. Keeping up with the latest ways we can distract ourselves often feels like a Sisyphean task: In 2019 alone, the TV industry released more than 1,000 new series.

The pandemic gave us all a brief reprieve from this onslaught, with a monthslong production shutdown limiting output. The networks lost access to their well of new content almost right away, while streaming services didn’t run into shortages until earlier this year. The total number of scripted shows released in the U.S. fell for the first time in at least a decade.

The slowdown was only temporary. Beginning on Sept. 19, the four major U.S. broadcast networks will premiere episodes of more than two dozen shows over the course of seven days.

They’ll include new seasons of The Voice, NCIS, and Dancing With the Stars, as well as a reboot of The Wonder Years and a spinoff of Dick Wolf’s FBI franchise.

Not to be outdone, Apple will release the season premiere of its lavish sci-fi series Foundation and new episodes of The Morning Show. FX will drop new episodes of Impeachment: American Crime Story, a retelling of the trial of Bill Clinton starring Clive Owen and Edie Falco as the president and his wife, while Hulu will offer the season finale of its Nicole Kidman drama, Nine Perfect Strangers.

Showtime will air new seasons of Billions and American Rust at the same time HBO offers fresh episodes of a docuseries about Nicki Minaj.

And that’s just a sampling.

Yet unlike last year, when Netflix could reach millions “We’re still very heavily back-weighted for this year,” of people stuck at home without anywhere to go, streamco-Chief Executive Officer Ted Sarandos says, pointing ing services will face a lot more competition. Movie stuto coming seasons of Money Heist, Sex dios, reluctant to return to theaters for Education, and Virgin River, as well as a more than a year, are flooding the mardeep lineup of new movies. ketplace with releases. In just a matter Roughly two years into the streamof weeks, viewers will be able to see a ing wars, this fall is shaping up to be the Spider-Man spinoff, another new Marvel busiest TV season on record. Apple Inc. movie, a prequel to The Sopranos, and the latest James Bond film. There will and Amazon.com Inc. are investing bilFIRE SHUT UP IN MY BONES be movie musicals, including Dear lions of dollars to compete with Netflix AT THE METROPOLITAN Evan Hansen and Everybody’s Talking and Walt Disney Co., while Peacock OPERA About Jamie, and family flicks like and Paramount+ are playing catch-up.

Kicking off the season, New Clifford the Big Red Dog and Disney’s Traditional networks are mostly back York’s Met will stage its first Encanto, which features original songs to their regular production schedules opera by a Black composer, Terence Blanchard, the as well.

by Lin-Manuel Miranda. prolific jazz musician who It was common before Covid-19 to Concert venues, shuttered since scored Black KkKLansman.

He refer to this era as Peak TV. Although the start of the pandemic, are scheduland librettist Kasi Lemmons human beings have never lacked for ing shows for every night of the week. based it on Charles M. Blow’s ways to entertain themselves, the sheer They’ve had no problem filling the calmemoir of that name. The plot volume of high-quality amusements at endar, since any act that released music follows baritone Will Liverman our disposal today makes the 1950s look in the past two years is eager to get on as Charles, as he navigates tour. “Everyone is fighting for dates like the Stone Age. Now, people can walk issues of race, violence, and community.

Opening night right now,” says John Meglen, co-CEO around with a supercomputer in their will be broadcast live in Times pocket that’s capable of transmitting of Concerts West.

Square.

Sept.

27-Oct. 23 TV shows, movies, video games, podFortunately for those people still hescasts, news articles, and GIFs. At home itant to venture out into crowds, they’ll they have multiple devices outfitted with have more to watch than ever before. <BW>

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Just wait until fall.

Opera’s Fiery Return

PREVIOUS PAGE: ROTUNDA: ERIN BAIANO. EILISH, STEWART, STALLION: GETTY IMAGES. COMPANY: BRINKHOFF/MOEGENBURG. MANY SAINTS OF NEWARK: COURTESY WARNER BROS. PICTURES AND NEW LINE CINEMA. FIRE SHUT UP IN MY BONES: ERIC WOOLSEY/OPERA THEATRE OF ST. LOUIS. SHANG-CHI: COURTESY MARVEL STUDIOS. SIX, MRS. DOUBTFIRE: JOAN MARCUS. NO TIME TO DIE: COURTESY MGM

After Netflix Inc. failed to add as many users as it had hoped in the first half of the year, its executives blamed its light slate of new shows. Then they mad e Wall Street (and its customers) a promise :

FALL CULTURE PREVIEW

Bloomberg Pursuits

Tony Soprano Lives

ILLUSTRATION BY CHLOE CUSHMAN

The prequel to the seminal gangster drama fleshes out how the man got made. By Felix Gillette Tony Soprano is back. He’s been spotted by multiple witnesses on the leafy streets of suburban New Jersey, sneaking cigarettes and hijacking a Mister Softee ice cream truck.

Try not to pass out from excitement.

On Oct. 1, The Many Saints of Newark, a feature-length prequel to The Sopranos, will make its debut in theaters.

Over the course of the original HBO series’ 86 episodes, Tony Soprano, played brilliantly by the late James Gandolfini, emerged as one of the most influential characters in the history of American television: a middle-aged, SUV-driving, jawbusting head of a New Jersey crime family who’s anxious about the future of his business and suffering from periodic panic attacks—often triggered by a proximity to red meat.

Tony was last seen alive on June 10, 2007, in The Sopranos’ series finale, sitting in a Jersey diner, munching on onion rings and listening to Journey on the jukebox when the camera cut to black silence midsong, midscene. The unresolved ending touched off howls of confusion from viewers who demanded to know what had just happened. Had Tony been whacked?

It didn’t help that David Chase, the show’s darkly humorous, gnomic creator, declined to spell things out any further.

With The Many Saints of Newark, HBO superfans have reason to be skeptical: When it comes to spinoffs and sequels, nobody would confuse HBO with the Marvel Cinematic Universe. From the cheesy Sex and the City movies, the embarrassing Entourage film, and the bewildering Deadwood feature, the network’s world-expanding potential has often fizzled.

Not this time. Over two action-packed hours, Chase and co-writer Lawrence Konner sketch out much of the Soprano

August 9, 2021

family roots in America. The movie begins in the titular city in 1967, where young Tony (William Ludwig) is a dough-faced little hellion who gets suspended from school for running a gambling ring.

With his father away in prison, he falls deeper under the spell of Dickie Moltisanti (Alessandro Nivola), a member of the DiMeo crime family who runs the local numbers racket.

As tensions rise between Newark’s Black and Italian residents, the Mafia’s hold on its illicit enterprises is tenuous. One night, Tony looks out his window, and his neighborhood is on fire.

Following the Newark riots, the Soprano family decamps to the suburbs, and the movie jumps forward to the 1970s.

Tony, now a teenager (played by Michael Gandolfini, son of James), is a linebacker on his high school football team. Things at home are rocky, and as he wavers between a future life as a “civilian” or one in crime, Tony turns to Dickie for guidance.

But Harold McBrayer (Leslie Odom Jr.), one of Moltisanti’s former employees, decides to seize control of Newark’s numbers racket, and a war erupts. Tony’s shot at a straight life gets caught THE OCEAN AT THE END up in the carnage.

OF THE LANE Chase also gives AT THE DUKE OF YORK’S some enter t aining THEATRE After selling out at London’s glimpses of favorNational Theatre, the play, ite Sopranos characadapted by Joel Horwood from ters, including Paulie Neil Gaiman’s novel of the same “Walnuts” Gualtieri name, will make its West End (Billy Magnussen), debut. Translating a fantasy Corrado “Junior” world, even one set in an Soprano (Corey Stoll), England of the not-so-distant past, is never easy. But with the and Silvio Dante ( John help of a wildly creative set, Magaro). Along the the play manages to be both way, they unleash magical and believable–and p l e n t y o f s n a ppy totally enchanting. Previews head-cracking among start on Oct. 23 the gangsters, their associates, wives, and girlfriends. Before it’s all over, there’s a surprising plot twist guaranteed to leave Sopranos Kremlinologists in a tizzy.

One of the movie’s ironies is that on the same day The Many Saints of Newark opens in theaters, it will also be available for free on the premium version of HBO Max—part of AT&T’s broader effort to lure more subscribers using Warner Bros. feature films as bait.

And yet for decades, throughout his successful career as a TV writer, Chase wanted nothing more than to leave the small screen and create movies that ticket-paying customers would experience communally in a hushed and darkened theater.

Now, AT&T has gone and jammed the return of the outsize Soprano clan back into home television sets. Just when Chase thought he was out of TV, they pulled him back in.

Stage Magic

61

Bloomberg Pursuits

Who Rules The Festival Circuit?

Five musical acts that will be everywhere this fall. By Lucas as Shaw

62

When Harry Styles saunters onstage at the MGM Grand G in Las Vegas on Sept. 4, it will be a performance 16 months m in the making. The One Direction singer-turned--soloartist planned to go on tour last year, but like thousands of other musicians, he was unable to.

Now, Styles is part of an unprecedented throngg heading back on the road all at once, a packed schedule combining c many big festivals that typically occur in the summer—including i l d the Governors Ball in New York and Bonnaroo in Manchester, Tenn.—plus shows in amphitheaters, indoor arenas, and clubs.

Advanced ticket sales are setting records even as the delta variant surges, a phenomenon industry executives predict will continue for the next two years, at least in countries where a majority of citizens are vaccinated. Coachella sold out for 2022 without even releasing a lineup.

If there’s any potential problem, it could ROTUNDA be that too many AT THE NEW YORK CITY performers want to get BALLET back in front of fans.

This work by Justin Peck, the “Every single night ballet’s resident choreographer there will be a great and artistic adviser, premiered show in every city in in 2020 just weeks before Covid the country,” says shut down the city. Now the 25-minute dance, set to music Rick Roskin, co-head commissioned by avant-garde of Creative Arttists composer Nico Muhly, is Agency’s contemback. Drawing on the lines porary musicc of Balanchine—Peck is a division, whose former City Ballet soloist—but clients include compellingly loose and relaxed, Lady Gaga. the choreography is meant to Here are evoke the camaraderie among dancers. Oct. 5-16 five acts you u won’t be abl e to ignore.

Ballet Unbuttoned

August 9, 2021

Hip-Hop Megan Thee Stallion wins the award for ubiquity this fall. The Houston rapper will play three festivals in one weekend— Bonnaroo on Sept. 3, Made in America in Philadelphia on Sept. 4, and BottleRock in Napa, Calif., on Sept. 5. After a brief trip to the U.K. for Parklife and the Wireless Festival, she’ll return to the U.S. for f fests in Milwaukkee, Las Vegas, Atlanta, Delaware, New York, Ausstin, and New Orleans—all before Novvember.

Although she isn’t going on a solo tour just yet, this run should help carry the momentum from r trio of Grammy Awards in March.

Pop Billie Eilish won’t mount a global tour to support her new album until 2022, but the 19-year-old pop prodigy is getting a head start. She’ll play two consecutive nights in Las Vegas, starting on Sept. 18, at the iHeartRadio festival, then will headline the Firefly festival in Dover, Del., before opening the first night of the Governors Ball on Sept. 24.

R&B Neeo-soul singer Leeon Bridges will crrisscross the country too promote his third bum, Gold-Diggers S Sound.

He’ll play four feestivals, including Raailbird in Lexington, Ky.,

and Milwaukee’s Summerfest, before embarking on a solo tour that ends with three nights at Suwannee Hulaween in Live Oak, Fla.

Country Jason Isbell released ed his latest album, Reuniions, in May 2020, two monnths — into the lockdown— and just in time forr a concert season that never was.

The country rocker is set to d, tour with his band the 400 Unit, for the next threee months, starting with shows in Salt Lake City and at Red Rocks in Colorado. He’ll play a series of smaller fests, including the Harvest Music Festival in Canada and Borderland in East Aurora, N.Y.

Rock Freshh off smashing her guitar on S Saturday Night Live, Phooebe Bridgers is ready to promote her 2020 album Punisher.

P The Los Angeles ssinger-songwriter ill play the first night of Pitchfork on o Sept. 10 in Chicagoo, then Firefly, the G Governors Ball, and Austin City Limits, with complementing dates in LA, Boston, Pittsburgh, and Detroit. And don’t forget about Dead & Company. This latest incarnation of the everlasting jam band—featuring John Mayer— will play more than two dozen shows across the U.S. this fall, including at Chicago’s Wrigley Field and the New Orleans Jazz & Heritage Festival, before wrapping up at the Hollywood Bowl in LA.

GETTY IMAGES (5)

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Bloomberg Pursuits

Liu as ShangChi, Marvel’s first Asian lead character

Marvel Calls On Asian Superheroes

COURTESY MARVEL STUDIOS

The comic book juggernaut is confident audiences want more action stars to look up to

By Kelly Gilblom Shang-Chi, a kung fu master with killer abs who gets his big-screen debut on Sept. 3, has a lot of battles to win. Walt Disney Co. is counting on Shang-Chi and the Legend of the Ten Rings, the latest installment in its record-breaking Marvel Cinematic Universe, to do for Asian actors what Black Panther and Captain Marvel did for their Black- and female-led casts: prove audiences of all kinds will turn out to see heroes who aren’t White dudes. Those films generated more than $1 billion each in global ticket sales, and Black Panther won three Oscars. Shang-Chi’s director, Destin Daniel Cretton, and much of the cast are of Asian descent.

At the same time, the film, playing exclusively in theaters, will test whether Covid-skittish fans will return to cinemas.

Studios have been holding back on releases and putting others up simultaneously on their streaming services to promote subscriptions, as Disney did in July with Black Widow. If ShangChi does well in theaters, it could prompt a shift in strategy.

There’s also the issue of name recognition—first for the protagonist, who starred in Marvel comics throughout the martial arts craze of the 1970s. (The series ended in 1983.) He’s made only occasional appearances since. And whereas many Marvel films have relied on big stars such as Robert Downey Jr.

Trouble Hits Broadway

and Scarlett Johansson, Shang-Chi is led by a relative unknown, TROUBLE IN MIND Canadian actor and AT THE AMERICAN AIRLINES THEATRE stuntman Simu Liu, Alice Childress became who plays a martial the first African-American artist coming to terms woman to win an Obie after with the schemes of his Trouble in Mind premiered in father, an international 1955. The play-within-a-play crime lord. follows the rehearsals for Still, one should an anti-lynching Broadway “never bet against production, following its Black characters as they endure the Marvel,” says Chris bigotry of their white director.

Fenton, a producDespite the play’s acclaim, it’s tion executive for never been seen on Broadway.

Disney’s Iron Man 3.

Stage star LaChanze will “They are the best in play Wiletta, the show’s lead. the business.”

Oct. 29-Jan. 9 Star power isn’t a problem in The Ete r n al s , a n o t h e r Marvel epic featuring actors with Asian roots, which hits theaters in November. Starring Angelina Jolie, Kit Harington, Kumail Nanjiani, Salma Hayek, and Gemma Chan, it was directed by Chinese filmmaker Chloé Zhao, whose Nomadland won three Oscars this year, including best picture and best director.

Hollywood has made some progress since offensive Asian caricatures were a staple in films like Breakfast at Tiffany’s (1961) and Sixteen Candles (1984). There’s still more to be made: Of the 1,300 top-grossing movies released from 2007 to 2019, only 5.9% of the characters with speaking roles were Asian, according to a study from the University of Southern California’s Annenberg School.

In a nod toward cultural sensitivity, Marvel changed the character of Shang-Chi’s father, played by Hong Kong film star Tony Leung Chiu-wai. In the comic books he was Fu Manchu, one of the most frequently portrayed, and some say racist, Asian villains; in the movie, he’s the Mandarin, another notorious Marvel bad guy. The move is also viewed as an effort to make the film more palatable to the Chinese government, which has yet to offer Shang-Chi or The Eternals a release date in China. The potential for Asian superheroes in that market is vast—Avengers: Endgame grossed $629 million there. Black Widow, which had its premiere in the U.S. on July 9, has also still not received a Chinese release date.

Hate crimes against Asians in the U.S. spiked during the pandemic, rising 164% in the first quarter of the year compared with 2020, according to the Center for the Study of Hate & Extremism. That makes Shang-Chi’s debut even more significant, says Elaine Chang, an associate professor of English and theater studies at Canada’s University of Guelph. “That we finally get a superhero who’s physically able to protect himself, it’s really powerful,” she says. “It’s very important for kids to have people they look up to who are like them.”

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Bloomberg Pursuits

August 9, 2021

Broadway Is Coming Back.

Can It Stay Open?

Even without the delta variant, New York theater faces daunting financial odds. By James Tarmy

64

After The Phantom of the Opera shut down along with the rest no, and that’s assuming the city and state don’t shut down of Broadway in March 2020, John Riddle was overcome with large gatherings first. relief. “We do shows eight times a week, and you never really And so, players across the industry are beginning to ask have a day off,” says the actor, who plays Raoul, one of the themselves how long they can stay open. “It’s very simple,” leads. “So for the first two weeks it was glorious.” says St. Martin. “The way we stay open during any other time, A year and a half later, the thrill has worn off. Riddle, who which is with most likely 75% of the seats or more being sold.” stayed in New York for much of the pandemic doing street Should ticket sales fall below those numbers, she says, performances, teaching classes on Zoom, and getting the odd Broadway marquees could quickly go dark. “If we open and outdoor gig, is set to return to rehearsals on Sept. 27 in antici- go for more than two weeks with low occupancy, the likelihood pation of Phantom’s reopening on Oct. 22. is that many shows would have to close, and most likely not be able to reopen,” But he’s begun to eye Covid-19-related cancellations in London and Australia St. Martin says. Several of the shows, she with concern. “Now that I have a return continues, have some buffer because they date, I’ve sort of based my life around it,” got Shuttered Venue Operators Grants, he says. “There’s a little thing in the back part of the $900 billion stimulus package of my mind that hopes the world gets it that was passed in 2020. “I know some of THE RED AND THE BLACK together for our health and safety, but our producers are putting some of that AT THE PARIS OPERA BALLET also to bring Broadway back.” money in reserve to keep the show open,” Former dancer Pierre The world has a long way to go. Covid she says. There’s also assistance from the Lacotte became famous as a cases are rising in almost every councity and state, in the form of the Empire choreographer for his ability to resurrect romantic ballets whose try that tracks them, and New York, State Musical and Theatrical Production steps had been thought lost to which for months had seen case numTax Credit Program, which provides paytime.

For this premiere, Lacotte bers trend downward, is grappling with roll tax breaks up to 25%, with a $3 milhas created a dance based on lion cap per show for the first year. But a series of troubling upswings in all five the Stendhal novel. Set to music no matter where the assistance is comboroughs. But a smattering of shows

by Jules Massenet, the narrative still plan to open in September, including from, “if you really don’t sell any tickfollows a provincial teen (played ing Hamilton, The Lion King, Wicked, and ets,” says Rent and Six producer Kevin on various nights by four of the Paris ballet’s stars) who McCollum, “you have to close and you Chicago. Dozens more are set to follow claws his way up the social through December. can’t use the grant.” ladder, then watches his gains “A week ago there was great optimism Every show attracts a different audidisappear.

Oct. 15-Nov. 4 ence, but the conventional wisdom, that by Sept. 14 we would be raring to St. Martin says, is that during a typigo,” says Charlotte St. Martin, president cal year, 65% of Broadway’s audience is of the Broadway League, the national trade organization for the industry, speaking in late July. “Now tourists, about 15% of them international. The remaining 35% I would say there’s cautious optimism, what with the delta vari- are from the tri-state area, the makeup of which can vary. “I ant and the many forms of communication coming out that think the last full season,” she says, “we had 20% New Yorkers there’ve been breakthrough cases” among vaccinated people. and 15% tri-state.” Tourism in 2021, however, is projected to be On July 30, Broadway announced that audiences and perform- down by about half from 2019’s figures. Making up those numers will be required to be vaccinated and that masks must be bers with only a domestic audience will be hard. worn for all performances. But uncertainty about the delta Some shows could fare better than others, but it’s not the variant could keep people out of crowded theaters, masks or ones you’d think. Institutions like The Lion King are “national

A New Dance Classic

FALL CULTURE PREVIEW

Bloomberg Pursuits

August 9, 2021

ILLUSTRATION BY RICHARD CHANCE

Mrs. Doubtfire, whose opening was delayed

by Covid, returns to the stage in October

and international brands,” says Eva Price, a multiple Tony Award-winning producer. Under normal circumstances, that wide acclaim would be a boon, with a steady flow of out-oftowners eagerly signing up to see a household name. But in a twist, these shows’ decades of success could hurt them. “In a show’s life span, its first year is almost always tri-state and local audiences,” Price says. “Just think about it: Thirty years later it’s not a bunch of New Yorkers going to Phantom, it’s tourists.”

In contrast, Price’s Jagged Little Pill, which is based on music from the 1995 Alanis Morissette album of the same name, ran for only three and a half months before Covid shut it down. As a result, Price isn’t counting on tourists to keep the show running when it returns to Broadway on Oct. 2.

“We feel that between the source material, and the awards, and the reviews, we have local audiences to make our way through,” she says. “And that’s the five boroughs as well as the tri-state area and Northeast Corridor.”

Even without the health and safety protocols necessary to make an audience feel safe, keeping a show open this fall will be very different than before. “Musicals historically outperform plays,” says Brian Moreland, the lead producer of Keenan Scott II’s highly anticipated play Thoughts of a Colored Man, which is set to open on Oct. 31. “They’re larger, you can get more people into the theater, and if there’s any type of language barrier, it’s OK to watch the singing and dancing.”

This fall, though, “musicals are at risk of suffering because of a lack of tourism, especially when you’re a long-running musical, where possibly you have exhausted the New York audience,” he continues. “Plays have the benefit of being

smaller and more on-brand of a time and place.” When that happens, he continues, “it can really appeal to the New Yorker or domestic traveler.”

As long as Broadway stays open, producers will get creative about selling tickets. “The business model of shows will get better and improved when the audience gets wider and more inclusive,” Price says. “I don’t know what other people’s strategies are, but I don’t think it’s about selling less seats, or having fewer shows. It’s about increasing accessibility and building beyond the obvious theatergoing audience—beyond the audience that can afford $150 a ticket.” That means hiring a marketing team that targets younger people, she says, and developing an audience “of different backgrounds and ethnicities and cultures and classes.”

The challenge for legacy productions, Price continues, is to “change the marketing so people know it’s for them, because the shows are that good.” That’s the thing, she says: Musicals like Phantom “have run for 20-plus years, not because they’re lucky, but because they’re astonishing feats of emotionality and creativity, and this is an opportunity for those shows to create new audiences.”

To date, things are looking good. Ticket sales across the board “have been brisk,” St. Martin says. “But we’re still a couple of months, even three or four months out. Brisk might not be enough.”

Phantom’s Riddle remains optimistic. “I have dates through at least January,” he says. “So right now I’m planning to show up eight times a week, and that’s how I’m approaching it until there’s nobody walking through the doors.” <BW>

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Bloomberg Pursuits

Jon Stewart Plays Catch-Up The comedian wades back into the political fray to compete against the hosts he inspired. By Gerry Smith

66

When Jon Stewart last hosted a TV show, Donald Trump was considered at best a presidential long shot, TikTok didn’t exist, Tucker Carlson didn’t have his own show on Fox News, and the competition among streaming services was in its infancy.

Now, six years after leaving The Daily Show, Stewart, 58, is returning to the talk-show circuit amid a political and media landscape that’s radically different from the one he left behind.

In September, Apple TV+ will begin airing The Problem With Jon Stewart. Each hourlong episode, according to Apple, will dig into a single issue—an approach that’s similar to the HBO program hosted by John Oliver, Stewart’s old colleague.

Stewart arrives at a crucial moment for the streamer. Many of its users are seeing their free yearlong trials end, ratcheting up pressure on the company to find new and compelling reasons for customers to shell out $4.99 a month. Since launching in November 2019, Apple TV+ has found a few hit shows, such as the comedy Ted Lasso, but its library is thin compared with those of Amazon Prime Video, Disney+, HBO Max, and Netflix. Stewart is one of several big stars to make programming deals with Apple TV+, including Idris Elba, Oprah Wi n f re y, a n d Malala Yousafzai.

Because Apple TV+ doesn’t make money selling ads, it’s less vulnerable to fluctuations in the ratings of any particular series than the commercial networks are. But streaming services have yet to create a talk show that matches the broad appeal of their predecessors in broadStewart’s students cast and cable. A Netflix proare now the teacher gram hosted by Chelsea

August 9, 2021

Handler ended in 2017 after two seasons; its Patriot Act With Hasan Minhaj, another Daily Show alum, was canceled last year. Sarah Silverman’s Hulu series I Love You, America was also axed after a short run.

Apple is hoping Stewart can not only bring in curious new subscribers but also retain them for the long haul. As with most streaming services, dissatisfied Apple TV+ customers can cancel easily at any time.

Since leaving The Daily Show, Stewart has kept a low profile, testifying before Congress about funding for Sept. 11 responders and occasionally appearing on the CBS late-night show hosted by pal Stephen Colbert. In 2015, Stewart signed a fouryear deal with HBO. But his first show, billed as an “animated parody of a cable news network,” died in development.

Last summer, Stewart directed Irresistible, a political satire starring Steve Carell, which premiered in the aftermath of George Floyd’s death during a fiercely contested presidential campaign amid a global pandemic. Stewart described the timing to the New York Times as “like showing up to a plane crash with a chocTHE BARBER OF SEVILLE olate bar.” The film got AT THE VIENNA mixed reviews.

STATE OPERA Since the tumult of In its 200 years of existence, 2020, the world has setGioachino Rossini’s comedic tled down slightly. Talk opera about a count who shows were forced to will stop at nothing to win shoot remotely during his beloved’s hand and the the pandemic without barber he enlists to help him has received hundreds, if not the usual buzz of a stuthousands, of treatments. This dio audience cheering new production by German them on—an awkdirector Herbert Fritsch will ward setup, which focus on the unquestioning Stewart may manage power of the nobility over its to avoid. And Team vassals. Sept. 28-Oct. 14 Trump, a neverending gift to comedians, has given way to the Biden presidency, which has proved less fertile ground for mockery.

Even so, Stewart should have no shortage of issues, whether the extreme weather caused by climate change or the rampant misinformation surrounding the Covid-19 vaccines.

On July 20, the day Amazon.com Inc. founder Jeff Bezos took a brief trip to space, Stewart posted a three-minute mock movie trailer on Twitter, giving a taste of what his show may look like. Bezos, played by Jason Alexander of Seinfeld fame, goes to space in a rocket shaped like a penis. There, he clashes with other phallic space vehicles staffed by rival billionaires Elon Musk (Adam Pally) and Richard Branson, who was played by a mop.

A Fresh Cut

GETTY IMAGES (4)

FALL CULTURE PREVIEW

THE ONE

Bloomb b rg Pursuits

August

2021

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The handheld Playdate cha arm ms with its simplicity Photograph y Victorr Prado Of all the game systems out there, none is quite like the Playdate ($179), a bright-yellow machine just slightly bigger than a deck of cards. Developed by app maker Panic Inc., in Portland, Ore., the minimalist device has a directional pad, a few buttons, and, in a game industry first, a crank. It’s used in Crran ankin’s Time Travel Adventure and other titl ti tlees to make the main robot character walk faster. The graphics are deliberately lo-fi, like on an old Nintendo Game Boy—evidence that they’re made by only a couple of people, as opposed to the hundreds or even thousands who create immersive worlds for the h Micrrosoft Xbox and Sony PlayStation.

TH COMPETITION THE N • Thhe Nintendo Switc t h ($$299) is still your tc best bet for a wel elll roo nde d d port rtab ablee gaming g system thanks to its trong g lineup, e such ass 2017’s The Legend off Zelda: Brreath of the Wild, one of the greattest games ever made.

• The Steam Deck (froom $399), out in December from developer and publis isher Valve Corp., will bring g portability to PC gaming, allowing userrs to play Half-Life, Dota, and many other seriess away from a coomputer.

• When it’s released inn October, the $199 Analogue Pocket will be able to play nowclassic Game Boy carrtridges on a sharp display that will makk them feel new again.

TH HE CASE A previeew ve version of thhe Playdate that we teste ted d came load ded with four games, includinng Loostt Your Marbles (pictured), a coolleectioon of minigames set in a small, quirrky tow own where you use the crank to turn the screen and solve a puzzle. The macchine will never replace your PC or coonsole, but it’s perfect for those who are loooking for a supplemental device that may also frequently surprise you. Once it’s set up, you’ll receive two new games for free every week for the next 12 weeks. Preord ders have begun, for shipment later this ye year. $179; play.date

The Grocery Delivery Race Gets Even Faster

By Alex Webb

ILLUSTRATION BY GEORGE WYLESOL

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In New York, London, and other big cities, a new breed of couriers with names such as Gorillas, Getir, and Gopuff is promising to have basic groceries—bananas, six-packs of beer, Doritos, and such—at your front door in as little as 10 minutes.

For venture capitalists on the prowl for businesses that might benefit from a lockdown, these ultrafast grocery deliveries were an obvious outlet. In 2021 alone, investors pumped $3 billion into 13 such startups—an eightfold increase in cash from the previous year, according to research from PitchBook Data Inc. Getir’s July valuation of $7.6 billion means it’s worth more than Macy’s Inc. or Nordstrom Inc. But can these companies, many of which are less than two years old, sustainably turn a profit? In search of an answer, Giles Thorne, an equity analyst at Jefferies Financial Group in London, and his team spent a week sitting outside a “dark store” operated by Getir. Unlike a delivery service such as Instacart, which sends its couriers into a nearby Walmart or Costco, rapid grocery deliveries come from locations the startups themselves operate—usually small warehouses located away from the high rents of Main Street.

Thorne, who’s done jaunts as an Uber Eats deliverer to understand that business better, counted how many couriers came and went over the course of a week. Just six months after opening in London, Getir was a lot more popular than he’d expected, averaging about 340 orders per day from one site.

That led him to estimate that each store could conservatively make from €3 million to €5 million ($3.6 million to $6 million) in annual sales. Because their rent is cheaper and each store serves a wider area than the classic neighborhood bodega, dark stores may be even more profitable. Thorne anticipates they could enjoy an effective profit that represents from 5% to 10% of sales. That would be a real challenge to convenience stores, whose profit margins are typically from 2% to 4%.

Of course, there’s a hitch. Those numbers assume a steady growth trajectory. As people return to offices and factories, they may order less online. What’s more, the current level of competition is unsustainable. London alone has a dozen rapid-delivery companies spending heavily on marketing. And the big supermarket chains, whose economies of scale mean they can charge less for groceries, are ginning up their own rival offerings. If they all decide ultrafast delivery is an attractive business, the ensuing price war will rapidly undermine the industry’s prospects.

All of this also points to a change in venture investment.

Gone is the penchant for consumer platforms such as Uber Technologies Inc. or Airbnb Inc. Those companies have low overheads and connect people to services in return for a commission. Flush with cash, VCs are increasingly looking at more capital-intensive businesses. All that money may be about to eat your local corner store’s lunch. <BW> �Webb is a correspondent for Bloomberg Quicktake

Bloomberg Businessweek (USPS 080 900) August 9, 2021 (ISSN 0007-7135) H Issue no. 4709 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 800-635-1200 or email: bwkcustserv@cdsfulfillment.com. Educational Permissions: Copyright Clearance Center at info@copyright.com. Printed in the U.S.A. CPPAP NUMBER 0414N68830

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