● Business’s GOP dilemma 6

● Big Tech vs. MAGA 12

’s
● A better way to test for Covid 44

January 18, 2021

Favo

How long will Elon Musk’s

romance with Beijing last? 32
 January 18, 2021

◀ The Infinity BiologiX

Covid saliva lab in
Oakdale, Minn.

1
PHOTOGRAPH BY ACKERMAN + GRUBER FOR BLOOMBERG BUSINESSWEEK

FEATURES 32 Elon Loves China, and China Loves Elon

Beijing has given Tesla special treatment. How long can the good times last?

38 Word Up
Spotify reshaped the music business. Now it wants to do the same for podcasts

44 Minnesota Nice (and Smart)

With free, at-home saliva testing, the state is raising the bar
 ◼ CONTENTS Bloomberg Businessweek January 18, 2021

◼ IN BRIEF 4 Impeachment 2.0 ● Couche-Tard goes shopping in France ◼ COVER TRAIL

◼ OPINION 5 Gina Raimondo will be an excellent commerce secretary How the cover
◼ AGENDA 5 Netflix roars ● The ECB sets rates ● Inauguration Day gets made

①
“We’re doing a story
◼ REMARKS 6 Business: Sour on Trump but not yet sweet on Biden about Tesla in China.
The two have developed
something of a mutual
BUSINESS 8 Nikola could be the future of trucking (or not)
1 10 Occidental cleans the air—to pump more oil
affection for each other.”

“My good sir, they seem

positively besotted!”
TECHNOLOGY 12 The insurrection will not be tweeted
2 14 Amazon pulls the plug on Parler
“Besotted?”

“Sorry, I binged
15 From hunting ISIS to tracking right-wing extremists Bridgerton this
weekend.”

FINANCE 16 Someday soon, Wall Street may run through Miami

3 18 ▼ In Seattle, a landlord and her tenants struggle to get by

“I do love seeing this

sensitive side of you,
but maybe something
a bit less bromance, a
bit more …”

“Cybertruck?”
2
“Yeah!”

“So keep the bro, lose

the ’mance?”

“Right, not so much

20 The NYSE fumbles on Chinese stocks Bridgerton as Fast &
Furious. And remember:
‘It don’t matter if you
ECONOMICS 22 Just what happens when everyone calls in sick?
4 23 The trade war numbers don’t lie: China won
win by an inch or a mile.
Winning’s winning.’”

“Is that Vin Diesel or

POLITICS 28 The filibuster killed the Senate Elon Musk?”
5

FINANCE: PHOTOGRAPH BY DAVID JAEWON OH FOR BLOOMBERG BUSINESSWEEK. XI AND MUSK: GETTY IMAGES (2)
30 Josh Hawley goes from wunderkind to pariah in one day
30 A closer look at Israel’s big lead on Covid vaccinations

◼ PURSUITS 51 The negative side of accentuating the positive

54 WFH is hard. Make working out from home a blast
56 Time to show your skin a little love—2020 was rough
58 The “Peloton of boxing”: Contender or palooka?
59 Be your own barista, no training required

◼ LAST THING 60 In China, Gen Z finally learns to chill

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 Bloomberg Businessweek By Benedikt Kammel
 IN BRIEF
○ Global coronavirus cases ○ The U.S. House
have surpassed
impeached ○ “We know that
92.1m
and almost 2 million have
President Trump
for his role in the
the president of the
died. Worldwide, only about
30 million people have been
Jan. 6 assault on
the Capitol by his
United States incited
vaccinated. Chancellor
Angela Merkel warned that
supporters. this insur
Germany’s strict lockdown—
initiated in late 2020—could
continue for 10 more On Jan. 13, 10 Republicans joined all
222 Democrats in the vote, which
weeks to contain the virus’s made Trump the only U.S. president to
aggressive resurgence. be impeached twice. It now moves
to the Senate, where more than a
dozen Republicans have signaled they House Speaker Nancy Pelosi before
might vote to convict. the House impeachment vote

○ Bitcoin slid as much as ○ Twitter

26%
on Jan. 10-11 in its biggest
permanently
suspended about
70,000 accounts
two-day decline since
March. The cryptocurrency dedicated to
sharing right-

PELOSI: TOM WILLIAMS/GETTY IMAGES. CAPITOL: SARAH SILBIGER/BLOOMBERG. NETANYAHU: FLORIAN GAERTNER/GETTY IMAGES. ADELSON: MANDEL NGAN/GETTY IMAGES
4 had more than quadrupled
in value over the past year. wing conspiracy
theories.

The social media company is cracking

down to enforce its civic integrity
policy—including a permanent ban on
President Trump—in the wake of the ○ With the FBI and Washington police investigating further plots to attack the
Capitol riot.  12 Capitol, the National Guard deployed troops to protect Congress.

○ Israeli Prime Minister ○ Alimentation ○ Turkish Islamic ○ Billionaire Sheldon

Benjamin televangelist Adnan Oktar Adelson, the
Netanyahu Couche-Tard was sentenced to founder of casino
approved said it’s exploring operator Las Vegas
the construction of
800 housing units in
Jewish settlements in the
a purchase of
Carrefour.
1,075
years in prison on Jan. 11.
Sands, died on Jan. 11. The
cause was complications
from non-Hodgkin
West Bank. The expansion He was found guilty of lymphoma. Adelson, one of
in the Israeli-occupied running a decades-old the most prominent Trump
territory threatens to cult whose members supporters, was 87.
complicate relations with were accused of sexual
Joe Biden’s administration. assault, blackmail, money
laundering, espionage,
Couche-Tard, a Canadian and other crimes.
convenience-store giant that owns
the Circle K chain, is looking to
expand in Europe. Carrefour has been
valued at about $20 billion. The biggest
private employer in France, it has
about 320,000 workers worldwide.
 ◼ BLOOMBERG OPINION January 18, 2021

Why This Governor recognizes the importance of pursuing economic success

while taking steps to broaden opportunity. That’s an

Is a Great Choice for

agenda for the pragmatic pro-enterprise administration
that our nation needs, and that Biden—with this and other

Commerce Secretary selections—is positioning himself to lead.

Raimondo makes her own case persuasively. In Rhode
Island she put the ideas to work: “We have to find our way
to a capitalism where, if you work full time, you’re not poor;
● By Michael R. Bloomberg you have health care and housing; and your kids can go to
a public school that’s decent. If we can get ourselves to that
place, capitalism will be sustained.”
President-elect Joe Biden Well said—and good for Biden for making a great
has made a number of excel- choice and refusing to bow to pressure from those who are
lent selections for his cabi- more hostile to the private sector. Raimondo’s Commerce
net, including three members Department can be the leading edge of a strategy to put
who recently led city halls: the U.S. back on the right track. <BW> For more commentary, go
Mart y Walsh for L abor, to bloomberg.com/opinion
Marcia Fudge for Housing and
Urban Development, and Pete
Buttigieg for Transportation. ◼ AGENDA
It speaks to how import-
ant mayors have become
in the work of governing
the country—especially as Raimondo
Washington has abdicated its responsibilities for so many
years—and also to how effective mayors have been at mak- 5
ing progress even without much federal help.
But it’s not just mayors. One of Biden’s picks, Gina
Raimondo for commerce secretary, is especially encour-
aging. The role doesn’t have the highest profile in the cab-
inet, but it’s one of the most important economic jobs in
Washington. The Department of Commerce exerts great
influence on an array of federal economic policies, with a
reach that exceeds even that of Treasury.
The department guides policy and directs federal
resources on issues ranging across foreign trade, indus-
trial development, technological innovation, and climate
▶ A Lucrative Lockdown
change. A competent and forceful head of the agency has Netflix reports fourth-quarter earnings on Jan. 19.
the platform and the money to make a real difference in the With people staying home worldwide, streaming movies
country’s economic prospects. Raimondo, a pro-business and shows has been a huge business, though Disney
Democrat who has experience in both the public and private has aggressively encroached on Netflix’s turf.
sectors, and who sees economic vitality as an instrument
ILLUSTRATION BY CRISTINA SPANÒ. RAIMONDO: KEVIN LAMARQUE/REUTERS

of broad-based and shared prosperity, fits the bill perfectly. ▶ Joe Biden will be ▶ The European Central ▶ Bank of America and
inaugurated as the 46th Bank discloses its rate Goldman Sachs report
As a successful governor of Rhode Island, she set demand- U.S. president on Jan. 20. decision at a virtual fourth-quarter earnings
ing goals and made real progress—based on a three-part Security is on high alert news conference with on Jan. 19, followed
after a mob attacked President Christine by Morgan Stanley on
strategy of fiscal control, spending on education and infra- the Capitol seeking to Lagarde on Jan. 21. The Jan. 20. Expect strong
structure, and tireless efforts to attract private investment. stop the certification of deposit rate is likely to returns from investment
his election. remain at –0.5%. banking and trading.
She led the state through a politically challenging restruc-
turing of its pension system. That didn’t always endear her
to opponents, but she had the courage to make tough and ▶ China reports ▶ European leaders ▶ The U.S. Senate
fourth-quarter GDP, gather on Jan. 18-19 Committee on Armed
fair decisions that will benefit workers and taxpayers over industrial production, for a summit to discuss Services will hold a
the long run. and retail sales on items including the confirmation hearing
Jan. 18, providing an region’s vaccination on Jan. 19 for Lloyd
Under her leadership, Rhode Island brought dozens insight into the rebound efforts and relations J. Austin III, Biden’s
of large employers to the state and created thousands of of the world’s second- with the U.S. under the choice to be the next
largest economy. Biden administration. secretary of defense.
high-paying jobs. By picking her, Biden is showing that he
 ◼ REMARKS

Which Is the Party

6
Of Business Now?
is in flaming ruins after the Jan. 6 invasion of the Capitol by his
● American companies feel forsaken
supporters. Jay Timmons, president of the National Association
by a GOP still in Trump’s thrall of Manufacturers, said in a written statement that day that the
storming of Congress to stop certification of the presidential
election was “seditious,” adding that Vice President Pence
● By Peter Coy
“should seriously consider” working with the Cabinet to invoke
the 25th Amendment, which provides for removal of the presi-
Big Business is in a tight spot. Rebellious Trump loyalists dent in case of incapacitation.
have amped up their influence over the Republican Party, “There is no place for demagogues in our democracy,”
which business has traditionally leaned on for support. wrote the U.S. Chamber of Commerce. In a statement, the
Meanwhile, although President-elect Joe Biden is a moder- Business Roundtable called “reprehensible” allegations by
ate, the Democratic Party’s platform is the most left-leaning Trump and his supporters that the election was stolen.
it’s been in decades. “From a business standpoint we’re con- Individual companies also broke decisively with Trump.
cerned about the growing ranks of populist viewpoints in the Twitter Inc. permanently suspended his account—his favorite
Republican Party and the growing ranks of progressive and channel of communication—and Facebook Inc. blocked him
socialist viewpoints in the Democratic Party,” says Neil Bradley, at least until his term ends. Marriott International, Verizon
executive vice president and chief policy officer of the U.S. Communications, Dow, Blue Cross Blue Shield Association,
Chamber of Commerce. Morgan Stanley, and Comcast, among others, announced
So big companies and business groups such as the Chamber they’ll pause donations to lawmakers who voted against cer-
are playing a delicate game. They’re distancing themselves tifying Biden. “Even John F. Kennedy had a better relationship
from Trump as fast as they can and hoping that his grip on the with the business community even though he called them ‘a
party will loosen once he leaves office. They’re also searching bunch of SOBs,’ ” says Jeffrey Sonnenfeld, a professor at Yale
for ways to work with Democrats, who for the first time since School of Management, referring to a fight between JFK and
ILLUSTRATION BY 731

the 2009-10 congressional term will control the White House U.S. Steel.
and both houses of Congress. The cynical take is that Big Business gathered courage to
The bridge between Big Business and Trump, never solid, oppose Trump only when he was heading out the door, but
◼ REMARKS Bloomberg Businessweek January 18, 2021

that’s not the case. Chief executive officers had challenged Opportunistic Giving
Trump before on multiple issues ranging from auto emis- Share of business PAC donations going to Democrats
sions to immigration and race. The first big rupture came ◼ Democrats control the Senate ◼ Democrats control the House
when White nationalists and other extremists rallied in
Charlottesville, Va., in August 2017. A White supremacist 50%

crashed his car into a crowd of counterprotesters, killing a

woman and injuring more than a dozen people. Trump was
silent for two days before saying, “you had some very bad peo-
ple in that group, but you also had people that were very fine
people, on both sides.” The president was forced to dissolve a 25

pair of high-level advisory councils in the following days after

big-name CEOs including General Electric’s Jeffrey Immelt and
JPMorgan Chase’s Jamie Dimon dropped out in protest.
That was just the start. Ford Motor Co. was one of five car-
makers that infuriated Trump by siding with California in its 0

attempt to go beyond federal standards for reducing auto tail- 1999- 2019-
pipe emissions of greenhouse gases. Exxon Mobil, BP, and 2000 2020
DATA: CENTER FOR RESPONSIVE POLITICS
Shell tried to stop the Trump administration from rolling back
Obama administration rules on methane releases from oil and such as Democratic Representative Josh Gottheimer of New
gas projects. General Electric, Microsoft, Verizon and other Jersey and Republican Senator Susan Collins of Maine. In the
companies filed court briefs opposing Trump’s attempt to end latest election cycle the Chamber gave $152,000 to Democrats,
affirmative action in admissions at Harvard. more than it had over the previous 28 years, vs $483,500 to
Big Business fought the Trump administration’s restrictions Republicans. It also endorsed 23 embattled House Democrats.
on the issuance of H-1B visas for skilled workers. When the Private equity, oil and gas, and real estate companies also
president resisted strengthening controls on gun sales in 2018 tilted toward Democrats more than in past elections. As the
after a massacre at a high school in Parkland, Fla., Walmart Inc. chart shows, business PACs tend to give more generously to 7
and Dick’s Sporting Goods Inc. stopped selling guns to custom- Democrats when they control Congress, so the coming two
ers under 21 and restricted ammunition sales. And numerous years should be good for Dems.
business organizations opposed Trump’s tariffs on aluminum, The upside scenario for Big Business is that Biden will
steel, and other products, which incited retaliatory duties from be more effective than Trump in getting the pandemic
China and other trading partners. “Trade works. Tariffs don’t,” under control and won’t want—or be politically able—to
the U.S. Chamber of Commerce said. push through big tax increases or other measures inimical
True, business wasn’t always oppositional. The Tax Cuts to business. Stocks, which are tied to expectations for eco-
and Jobs Act of 2017, which slashed the corporate income tax nomic growth and corporate profits, rose on Jan. 6 when it
rate, was widely popular, as was some of the deregulation. became clear that Democrats won control of the Senate in
And in 2019 Trump managed to bring some business bigwigs the Georgia runoff races.
back into his tent, forming an advisory group on workforce Nevertheless, business is likely to pivot back to the GOP
policy co-chaired by Ivanka Trump and including CEOs Tim quickly if the party shakes off Trump’s influence. Republican
Cook of Apple, Julie Sweet of Accenture, Al Kelly of Visa, and energy consultant and former Trump White House adviser
Doug McMillon of Walmart. It remained intact until after Mike McKenna plays down the significance of companies’
the election, probably because Trump mostly left it in his pledges to pause campaign contributions. “Very few contri-
daughter’s hands. butions happen in the first few months of an election cycle”
On the whole, though, Trump steered the Republican and company PACs “are not really that important” anyway,
Party in a populist direction, tapping into a disaffected part he says.
of America that dislikes business elites almost as much as “If business is thirsty for less regulation and a lower cor-
political, academic, and media elites. And even after the porate tax burden, I think they’ll find ways to overcome any
rampage at the Capitol, which he incited, he remains his shock and awe they felt on Jan. 6,” says Princeton University
party’s most powerful force. Two days after the violent take- history professor Julian Zelizer, who’s studied the Republican
over, the Republican National Committee reelected Trump Party. Says Scott Reed, a GOP strategist who used to work
allies Ronna McDaniel as chairwoman and Tommy Hicks as for the Chamber: “Once Trump moves on, the Republican
co-chairman. leaders have a chance to do a real reset—not to alienate the
Bradley says the Chamber of Commerce is worried that the Trump supporters, but to recreate a new paradigm of the
fringes of both parties are pulling the centrists apart, so two Republican Party being about growth and opportunity.”
years ago it changed its method for grading lawmakers to take That, anyway, is what Big Business leaders are hoping for. <BW>
cooperation across the aisle into account—honoring people �With Mark  Niquette, Jennifer A. Dlouhy, and Bill Allison
 Bloomberg Businessweek January 18, 2021

B The Electric Truck

U That Couldn’t
S
I
N
E
S
8

S
Believe it or not, the truly hard stuff is still ahead:
● In the past six months, Nikola
building a real business selling large fuel cell trucks
has faced an SEC probe, lost that turn hydrogen into electricity. Milton may be
partners, and seen its shares tank gone, but the SEC’s attention has had a chilling
effect on Nikola’s efforts to forge partnerships that
would help develop its business faster. GM in late
Clean-energy startup Nikola Corp. had a tough November said it wouldn’t take a $2 billion equity
year even by 2020 standards. The once high-flying stake and open its vast purchasing and manufactur-
alternative-fuel vehicle maker started life as a pub- ing resources to speed the upstart’s trucks to market,
lic company with a short seller levying fraud alle- deciding instead to just sell Nikola its hydrogen fuel
gations against founder Trevor Milton, who denied cell system. The government probe also played a role
the claims but then resigned after the Securities and in scaring off BP Plc, which would have helped the
Exchange Commission took interest. That collapsed startup build a network of hydrogen filling stations.
a deal to build trucks with General Motors Co. and That network is a big piece in Nikola’s future
Edited by
resulted in the indefinite postponement of Nikola’s ambitions. The company plans to boost its prof-
James E. Ellis much-ballyhooed Badger electric pickup truck. its selling hydrogen to the fleet customers who’d
  BUSINESS Bloomberg Businessweek January 18, 2021

also buy its hydrogen-powered semis. Without the and will publicly announce when appropriate,” says  EVs’ forecast share
of U.S. heavy-duty
cash and resources of BP or another major energy spokeswoman Nicole Rose. commercial vehicle sales
company—and with its own share price falling more Russell has started building Nikola’s in-house
than 75% off its high last June—Nikola faces the expertise in hydrogen and energy distribution. 2020
daunting task of building that network on its own. He’s hired Erik Mason from BP, where he was man-
The company declined to comment on the status of aging director for structured products, accord- 0.7%
its relationship with BP, or of the SEC investigation’s ing to people familiar with the matter. Mason has
impact on its ability to attract partners. brought along several other executives from BP’s
Without a partner, Nikola will need to dig deep hydrogen power operations, the people say. And in
to fund its hydrogen fueling station expansion. It December, Nikola promoted Pablo Koziner to presi-
has $900 million in cash, but a lot of that will be dent of its energy and commercial business. He and 2040
needed for continued development of the elec- Mason will start laying the foundation to build their
tric and hydrogen semitrucks it plans to sell and own hydrogen network. 25.2%
to finish building factories in Ulm, Germany, and Nikola’s goal is to build 700 fueling stations
in Phoenix, where the company is based. “A lot of across North America by 2028. The hydrogen
potential partners seem to be getting gun-shy,” says would be produced on site at each location. That
Sam Abuelsamid, principal research analyst at tech fuel will then be bundled with sales of the trucks
researcher Guidehouse Insights. “The drop in stock as part of a seven-year or 700,000-mile lease. That
price will make it a challenge to raise capital, which would give Nikola recurring revenue and much
they will need to do.” better margins than it could get just from building
Delays have already cost the company business. trucks. The company also plans to provide its fleet
Nikola and sanitation heavyweight Republic Services customers with service and maintenance for the
Inc. had announced last August what they described trucks, which promise a zero-emission way to ship
as a binding contract under which Republic would heavy freight and go farther than EVs currently can.
buy as many as 5,000 battery-electric garbage Nikola says its trucks would have a range of up to
trucks—worth $3 billion in revenue, Milton said at 750 miles. But even with that, its sales will be limited 9
the time. But the order for an initial 2,500 vehicles by the routes where it can build hydrogen stations.
was terminated in December because of longer-than- The plan is to build them in places where fleet cus- ○ Russell

expected development time and unforeseen costs. tomers plan to drive and then add locations as it sells
Failing to secure a partner for the fueling net- more trucks. Since there are only about 120 hydro-
work isn’t the end of Nikola, but it could push gen filling stations in the U.S., Nikola may have to
back the timeline for Chief Executive Officer Mark build its truck business the same way Tesla grew its
Russell, who said in November he wanted a hydro- charging network—over many years and after raising
gen fueling station deal signed by the end of 2020. billions to develop cars and infrastructure.
BP was put off by the SEC probe into possible exag- As the truck business unfolds, Nikola’s plan is
geration of Nikola’s claims about its technology, to raise more equity or borrow money once it hits
including a video that purported to show one of its certain benchmarks in development of the trucks.
trucks driving along a road when the vehicle was But it’s already missed its late-2020 timetable to
actually just rolling down a hill without any help announce a hydrogen fueling station deal, and
from its own power plant. (The company said in it may have to pick up the pace to get back on
September that while the truck shown did have a
gearbox and batteries, Nikola “ultimately decided
PHOTOS: COURTESY NIKOLA MOTOR COMPANY (2). DATA: BLOOMBERGNEF

not to invest additional resources into completing

the process to make the Nikola One drive on its own
propulsion.”) But the energy company also wanted
a deal heavily weighted in its favor, with a big cut
of the profits, say people familiar with the matter.
BP declined to comment.
A partnership could still come with another
energy company, and Nikola is getting calls, accord-
ing to people familiar with the company, but
Nikola worries that the SEC’s interest will drag on—
especially with a change in administration slowing
 The Badger pickup
things down—and it can’t afford to wait, the people has been postponed
say. “We continue to explore options with partners indefinitely
 ◼ BUSINESS Bloomberg Businessweek January 18, 2021

track on plans to break ground on its first com-

mercial hydrogen station in the second quarter
of 2021 and start producing its battery-electric
Tre semi in Germany by yearend. It also plans to
build its fuel cell semis at its Arizona plant by 2023.
Management knows it has to prove that Nikola has
momentum to get more cash, the people familiar
with the matter said.
That’s where a bigger partnership with GM would
have come in handy. Nikola still has deals in place
with GM and Germany’s Robert Bosch to buy fuel
cells, which create energy by stripping electricity
from hydrogen. And the company is working with
Iveco, a truck brand owned by Case New Holland
NV, to build the big rigs. But its original deal with
GM gave the Detroit auto giant an 11% stake and
provided for more collaboration both on the fuel
cell truck and on the Badger electric pickup, while But to cover the cost of operating the plant, ▲ Artist’s rendering of
Occidental’s DAC plant
giving Nikola access to GM’s engineering exper- Occidental will initially use much of the CO2 to
tise and global supply chain. Now that deal is gone, push out lucrative oil from underground reservoirs,
and the Badger has been put off indefinitely, with thereby replacing one pollutant with another. The
the company refunding customers’ deposits. How facility, expected to cost hundreds of millions of
soon Nikola can jump-start its business—and jus- dollars, will also need support from tax credits and
tify its $6.5 billion valuation—is an open question. outside investors to be financially viable.
�David Welch and Edward Ludlow The climate crisis has increasingly found its
10 way to the boardrooms of the world’s largest oil
THE BOTTOM LINE Six months ago, Nikola was a highflier among
the crush of alternative-fuel vehicle makers. Now its shares have
companies, which many environmentalists say are
fallen more than 75% and its future is clouded. to blame not only for pumping emissions into the
air but also for spreading misinformation on the
consequences of doing so. Some, such as BP Plc,
have responded by plowing money into renew-
able energy. Others, such as Exxon Mobil Corp.,
Occidental Goes are doubling down on fossil fuels.
Occidental wants to take a different approach
Green to Produce and become a “carbon management company,” says
Chief Executive Officer Vicki Hollub. “We are not
More Oil afraid of the transition out of oil and gas, because
we’re a part of that transition. I do believe that in
15 to 20 years, more of our income will be from car-
● It wants to strip CO2 from the air, then use bon management than from oil and gas.”
some to dislodge crude from underground rock Climate scientists have long considered car-
bon capture as essential in meeting climate goals,
but high costs have slowed adoption of the pro-
Deep in the Permian Basin, America’s biggest oil- cess. Efforts have been limited to siphoning off
field, Occidental Petroleum Corp. plans to build a concentrated streams of CO2 from industrial facil-
facility that it believes could change the way the ities and burying them underground at two dozen
world thinks about fossil-fuel emissions. The globe’s plants around the world. Occidental’s plant, which
first large-scale direct air capture (DAC) plant will it aims to have operating by 2023, changes the
remove carbon dioxide from the atmosphere and model because it takes CO2 directly from the air,
COURTESY CARBON ENGINEERING

pump it deep underground, where it will remain for allowing the facility to be built anywhere.
millions of years. The process would essentially be The plant will be designed to capture as much
the reverse of what oil and gas companies do today. as 1 million tons of carbon dioxide a year, equiva-
The goal is to lower emissions of the primary green- lent to the emissions from about 215,000 cars, or
house gas responsible for global warming—and one a quarter of what a coal power plant produces.
day even produce a carbon-negative barrel of oil. DAC works by sifting air through chemicals
◼ BUSINESS Bloomberg Businessweek January 18, 2021

that can selectively pull out CO2, like iron filings technology more affordable. Advocates for DAC
to a magnet. Since CO2 makes up only 0.04% of counter that, just as solar and wind power have
the atmosphere, a huge amount of air has to be fil- benefited from credits, other emissions-cutting
tered to capture it in large quantities. It can cost technologies should.
as much as $600 to capture each ton of CO2 with Even with the prospect of extra crude and tax
some DAC methods. credits, finding the money to build DAC plants
Occidental is betting the technology will will be no easy task. Occidental is one of the most “We are not
become cheaper as more DAC plants are built, highly indebted U.S. oil producers after buying afraid of the
allowing engineers to learn how to optimize the Anadarko Petroleum Corp. for $37 billion in 2019, transition out
hundreds of tiny steps required to make the com- before the pandemic crashed the price of crude. of oil and gas,
plex projects work more efficiently. Such green The company has been forced to cut its dividend because we’re
energy cost reductions previously occurred with to almost zero, sell billions of dollars of assets, and a part of that
solar panels and wind turbines. slash spending to the point that its crude produc- transition”
The company will license the DAC technology tion may fall this year.
from Carbon Engineering, a Canadian startup that That’s why Hollub is adamant that Occidental
counts Occidental, Chevron Corp., and Bill Gates doesn’t use all its own money on the green proj-
among its investors. “It’s not a technology that’s ect. Instead, the plant will be funded through
a trial-and-error type of thing; you know it will 1PointFive, which is owned by the company’s
work,” Hollub says. “We need to just get it to scale.” venture arm, Oxy Low Carbon Ventures, and

Direct air capture Air Emissions from oil

refinement and use
The process makes oil
production potentially
carbon-neutral by
removing CO2 from the Chemically
Crude oil
atmosphere, then using separated CO2
it to free underground oil 11

Injected and stored during

enhanced oil production

DATA: CARBON ENGINEERING

If DAC becomes substantially cheaper than it private equity firm Rusheen Capital Management
is now, it could be revolutionary. To drive down LLC. The venture plans to attract outside inves-
costs, Occidental wants to use the CO2 it captures tors, benefiting from the boom in environmental
in its enhanced oil recovery business, where the investing and the growing number of compa-
gas is pumped into older wells to infiltrate rock nies trying to lower their carbon footprint. It’s
and acts like soap to release crude. Being able to already gotten a stake from United Airlines
build an air capture plant close to its extensive Holdings Inc. “Carbon Engineering captures car-
Permian operations would eliminate the costly bon dioxide, Occidental buries it underground,
need of transporting CO2 to its enhanced recov- and 1PointFive does project finance,” says Steve
ery wells. Oldham, CEO of Carbon Engineering, about how
The technology is key to helping Occidental the three organizations will work together to build
achieve its goal of becoming carbon-neutral DAC plants.
by 2050. And it will lower the cost of its enhanced If governments around the world take climate
oil recovery business and provide returns similar targets seriously, models estimate that the world
to those at its lucrative Permian operations. will need to bury as much as 10 billion tons of
Although the net effect will be cleaner crude, CO2 underground annually by 2050. That’s about
and perhaps even carbon-negative (when more a quarter of current global emissions. And the
carbon is put in the ground than will be pro- industry that does that job could by then rake in
duced when the oil it helped extract is burned), $1.4 trillion in annual revenue, equal to what the
it’s still a hard sell to environmentalists, who entire global oil and gas industry takes in today.
blame the climate crisis in large part on oil com- �Kevin Crowley and Akshat Rathi, with Alix Steel
panies that sowed doubt about the science. Some
THE BOTTOM LINE With reliance on fossil fuels under assault,
climate activists also question the U.S. govern- Occidental Petroleum is betting on tech that could help it get more
ment’s allowance of tax credits for making the than half its revenue from carbon management within two decades.
 Bloomberg Businessweek January 18, 2021

Extremism
Online Social Media Hits Mute
After the Capitol Riot
T ● Facebook and Twitter can removing him permanently from Facebook could
be,” Media Matters wrote.

E
block the president, but his But even if Trump does disappear from the
supporters will move on internet—or U.S. political life—his impact on social
media is unlikely to dissipate so easily. Experts
say his vast network of supporters will be ener-

C The tweet on Jan. 8 that ultimately pushed gized by the bans. “It does make him a martyr,”
Twitter Inc. to ban its most high-profile user didn’t says Marc-André Argentino, a researcher and noted
look much different from thousands of others observer of QAnon, a pro-Trump conspiracy move-
Donald Trump had sent during his presidency. ment based on the conviction that the president

H Two days earlier the social network had removed

a video rant in which he repeated baseless claims
of election fraud and told armed rioters in the
U.S. Capitol that he loved them. Using Twitter to tell
is fighting an international cabal of sex traffickers
who dominate world politics. Twitter’s ban has
confirmed for QAnon followers that tech platforms
are part of this conspiracy of elites, Argentino says.

12
N the 75 million “American Patriots” who made up his
political base that they would “have a GIANT VOICE
long into the future” was mild by comparison.
But Twitter had warned Trump that another rule
Their communities may have relied on mainstream
social media services to form, but they’re less vul-
nerable to crackdowns now that they already exist.
The last year of intensifying debate about the

O
violation would lead to a ban. So after a presidency parameters of speech on mainstream social media
spent using the network to move markets, promote platforms has given rise to new ones for conserva-
conspiracy theories, and threaten war, Trump’s vio- tive speech. TV networks that provide willing audi-
lation on Jan. 8 of the company’s “Glorification of ences for Trump’s surrogates and so-called alt-tech

L
Violence” policy was the final straw. Over a 48-hour platforms have been falling over themselves to pro-
stretch he was also blocked or suspended from vide a home for the extended “Make America Great
almost every major social media channel—including Again” community. Trump has “a whole team of
Facebook, Instagram, and Snapchat—and kept from demi-media sycophants who are catering to his

O
using the e-commerce platform Shopify to sell his audience,” tweeted Renee DiResta, a research man-
signature red hats and other merchandise. ager at the Stanford Internet Observatory, shortly
The efforts were designed to limit the rhetoric after the company banned the president.
that had inspired a mob to mount a violent attempt The social network Parler emerged in 2020 as

G to overturn the results of November’s presidential the prime destination for right-wing users who
election. Twitter said the way Trump’s followers felt alienated by Facebook and Twitter, and it rode
interpreted his messages was as important as the their anger to become the most downloaded app
wording itself, citing plans percolating online for in Apple Inc.’s store immediately after Facebook

Y them to commit more violence in the near future. and Twitter suspended Trump. Then Apple and
There’s some evidence that shutting down Google suspended Parler from their app stores, and
ILLUSTRATION BY DANIEL ZENDER. DATA: SHAREABLEE

Trump had an immediate effect on internet life. Amazon Web Services said it would no longer pro-
Media Matters, the liberal-leaning media advocacy vide technical infrastructure, forcing Parler to shut
group, found that interactions with right-leaning down at least temporarily. All of the companies
pages dropped in the aftermath of Facebook Inc.’s cited Parler’s inability or unwillingness to remove
temporary ban. Right- and left-leaning posts drew posts calling for or glorifying violence. Parler has
roughly equal amounts of engagement after the sued AWS, accusing it of acting anti-competitively.
ban, the group found, reversing a long trend of With Parler down, QAnon groups on Gab,
Edited by
right-wing content outperforming other politi- another social network that caters to the far right,
Joshua Brustein cal content. “This data shows what the impact of saw a surge in membership, with the largest group
◼ TECHNOLOGY Bloomberg Businessweek January 18, 2021

growing by more than 50,000 members, according need to threaten mainstream social media. But the ▼ Politicians and
journalists with the
to Argentino. A channel on Telegram, the messag- eleventh-hour crackdown on Trump may weaken largest loss of Twitter
ing app, dedicated to “Parler refugees” had more the internet giants in another way. The demonstra- followers, Jan. 5-12

than 16,000 members as of Jan. 11. tion of their power has raised concerns even from
If these sites become durable alternatives to the president’s critics, such as the American Civil Laura Ingraham

mainstream ones, the migration could aggravate Liberties Union and leaders in Germany and France. 228k

trends that predated Trump, says Genevieve Lakier, In the U.S. the insurrection at the Capitol has Stephanie Grisham

a First Amendment law professor at the University given Democrats who want Facebook and Twitter 202

of Chicago Law School. “One of the consequences to more actively police their networks a real-world Bill O’Reilly

of this might be further fracturing of our public example of what happens when that policing fails. 186

discourse,” she says, “so that Twitter becomes the Republicans who think tech companies wield too Ben Shapiro

place for certain groups and certain voices, and much power have watched Silicon Valley deprive 165

then other social media sites like Parler or Gab a sitting U.S. president of his preferred method of Jim Jordan

become a site for others.” communicating with the public. 187

It’s not a sure bet. Facebook and Twitter appeal Trump’s recklessness online may be what finally Greg Gutfeld

to political agitators because they draw a large creates regulations for an entire industry, Lakier 153

number of less political users who can serve as says. “Trump has played this really amazing light- Jesse Watters

an audience. Facebook has noted repeatedly that ning rod role in focusing attention on those ques- 151

many of its users spend little or no time interacting tions,” she adds. “The timeline has been sped up.” Lindsey Graham

with political content. The users of alt-tech sites, �Daniel Zuidijk and Kurt Wagner 132

by contrast, are relatively like-minded, so agitators Kimberly Guilfoyle

THE BOTTOM LINE New social networks, if they can survive as
have few people to argue with or recruit. right-wing alternatives to Facebook and Twitter, could further
130

So far, alt-tech sites don’t have the scale they’d increase political polarization online.

13
 ◼ TECHNOLOGY Bloomberg Businessweek January 18, 2021

Speak Softly and ● Amazon’s decision to cut ties with

Run a Big Cloud

Parler showed the often-overlooked
power its cloud computing division
has over the internet

When Amazon.com Inc. cut off Parler, a social

media service popular among far-right supporters
of President Trump, it highlighted the power that
comes with providing cloud computing to much
of the internet. 
Parler went offline early on Jan. 11 after Amazon
Web Services suspended its account. In a letter
to Parler viewed by Bloomberg, Amazon said it
was taking the action because the social network
was unable to effectively keep calls for violence
off its site.
Parler quickly sued, claiming Amazon’s deci-
sion posed an existential threat, saying in a federal
antitrust lawsuit filed later that day in Seattle that
the action was “the equivalent of pulling the plug
14 on a hospital patient on life support.” It’s seeking
an order forcing Amazon Web Services to main-
tain its account. Parler was still offline as of Jan. 13.
Amazon was acting out of political animus,
according to Parler, whose suit claims the com-
pany made its move not solely on its own behalf, Twitter declined to comment. Amazon said in ▲ CEO Jassy speaks
at an AWS Summit in
but also to benefit Twitter Inc., the microblogging a court filing that it had not communicated with San Francisco
platform that Parler sees as its primary competitor. Twitter about Parler, adding that it has no incen-
Parler said AWS had recently reached a deal to pro- tive to stop doing business with paying customers
vide Twitter with infrastructural services. Two days that comply with its agreements. The company
before AWS’s action, Twitter banned Trump for vio- also said in an emailed statement: “It is clear that
lating its policy against glorifying violence, creating there is significant content on Parler that encour- ▼ AWS share of cloud
infrastructure market
an opportunity for an alternative social network ages and incites violence against others, and that
to offer a more friendly environment for his sup- Parler is unable or unwilling to promptly identify
porters. Being booted from AWS “will kill Parler’s and remove this content, which is a violation of 32%
business—at the very time it is set to skyrocket,” our terms of service.”
according to the suit. But Amazon’s move to cut off Parler is a
The complaint provides no evidence to back up reminder that the company wields huge influ-
its allegation that AWS favored Twitter. But it does ence over what’s seen on the internet. AWS, the
echo a common theme in a growing body of anti- largest provider of on-demand software services
trust litigation against tech companies: Secretive and cloud computing power, provides the digi-
deals among a few large entities are allowing them tal backbone for millions of customers including
to consolidate power at the expense of competi- Netflix Inc. and U.S. government agencies, but it
tors. A federal antitrust lawsuit against Alphabet doesn’t generally police content that its custom-
Inc.’s Google centers on its agreements to pay ers help create.
Apple Inc. to be the default search engine on its In cases such as evidence of child pornogra-
mobile devices, and a separate suit brought by phy, AWS’s response can be swift and almost auto-
a group of states accuses Google and Facebook matic, according to a person familiar with AWS’s
Inc. of working together to rig auctions for digital actions with previous controversial customers.
advertising space. Legal and security teams get involved in more
  TECHNOLOGY

Q&A Rita Katz

complicated issues, and the decision to cut off
Parler or other customers always involves AWS The founder of SITE Intelligence, which
Chief Executive Officer Andy Jassy, the person
tracks extremism online, says the growth
says, adding: “It doesn’t happen very often.”
The cloud unit relies primarily on customers in right-wing radicalization in the U.S.
and the public to report abuse of its services. It stems from President Trump’s behavior
maintains a public email address for such issues,
and the dynamics of social media.
and the sales, social media, and security teams
have wide leeway to flag reports of illegal or —Joshua Brustein
inappropriate content among AWS users. When
Amazon suspends a customer, it makes its case
○ Born in Iraq, educated in Tel Aviv ○ Founded SITE after Sept. 11
using public-facing content, not proprietary data
○ Documented planning of violence in online forums in the weeks
stored on AWS servers.
before the Capitol riot ○ Writing a book about the online tactics of
Cloud computing services present themselves
jihadis and the far right
primarily as neutral providers of technical infra-
structure. Close observers of AWS say it seems
reluctant to take action against customers over What are the parallels between the right- dangerous conspiracy
political or social debates or questions of taste, as wing radicalization efforts online and
those of other extremist groups like ISIS? theory propagation?
part of an effort to serve as a neutral host for all
Censorship protocols are
who want to buy its services. “Amazon is not in ISIS and this new far right a lot more straightforward
the business of policing its customers; it doesn’t have had remarkably similar when you’re talking about a
want to be in the business of policing its custom- trajectories. Both were designated terrorist entity.
ers,” says Corey Quinn, who advises businesses formed out of rejection
that use Amazon’s cloud at the Duckbill Group, a of their movements’
consulting firm.  establishments, both were
What will be the impact of Donald
Trump’s effective disappearance from
But the move against Parler is not unprec- adept at leveraging social social media? 15
edented. AWS has cut off WikiLeaks and Gab, media for recruitment
another social networking site popular with the It was the right thing to
and setting up vast online
far right. It also encouraged an AWS customer do because it shields
infrastructures, and both
that worked with 8chan, the online billboard and mainstream audiences from
have prioritized action over a
hub for conspiracy theorists, to drop its support. toxic rhetoric. However,
coherent ideology. At times
Employee-activists and others have pushed cloud there is another side of the
the far right was following
computing companies to exert even more control coin: Now, as his supporters
in lockstep with ISIS’s
over how their technology is used, especially in migrate to lesser-regulated
playbook online, down to the
the case of potentially controversial government and fringe platforms, they
very platforms they used.
JASSY: DAVID PAUL MORRIS/BLOOMBERG. KATZ: NIKKI KAHN/THE WASHINGTON POST/GETTY IMAGES. DATA: CANALYS

contracts. In June, Amazon announced a one-year will only become more

moratorium on the use of Rekognition, its facial radicalized and dangerous.
Have tech companies and the U.S. When you throw similarly
recognition system, by law enforcement, a move government used similar strategies
that followed calls from civil liberties groups for a to combat the two threats? frustrated people together,
ban on such sales. they feed off each other and
Allowing one client to dictate its approach to Yes, but not to any become more radicalized.
another client would be a different matter alto- comparable level of
gether, though. Alan Sykes, a professor at Stanford coordination. The entire
Are you optimistic that the attack on
Law School, says if it turns out that Amazon banned globe gradually united the U.S. Capitol will spark a turnaround?
Parler at the behest of Twitter, Parler’s complaint behind fighting ISIS online.
could amount to a legitimate antitrust claim. With the far right it’s been No. Sorry to be a doomsayer,
Amazon’s decision to remove Parler for its poten- a far thornier path, and it’s but I believe we may be in for
tial to foment violence is defensible, says Sykes. been harder for different a generation of strife similar
“This concern for violence might justify taking companies to get on the to the civil rights era. Only
Parler off for a while, but it’s not clear that it could same page. Is QAnon in this time, unlike the 1960s,
justify a permanent ban,” he says. —Matt Day and the far right? What are the social media could play a
Joel Rosenblatt, with Chris Dolmetsch implications on free speech? devastating role in spreading
When does conservative conspiracies that induce
THE BOTTOM LINE Amazon Web Services says it doesn’t want commentary become further division and violence.
to police its users, but it made an exception in the wake of the
violence in Washington.
 3

16
C
E
Florida braces for a gold-plated makeover
as finance rethinks its attachment to New York
Construction cranes pirouette above the skyline in a family investment office in Boca Raton, news that
Miami. Porsches are selling briskly in Coral Gables. Goldman may move its asset-management division
Over in Palm Beach, along Worth and Hibiscus here was a watershed moment. “There’s no way to
avenues, the Gucci set is counting new neighbors. put that genie back in the bottle,” says Greenberg.
The scent of fresh money hangs over Florida these Maybe. This sultry home of tourism, cruise ships,
days like the sweet smell of orange blossoms. In the and retirees has been trying to diversify its econ-
midst of a deadly pandemic—and in truth, largely omy for generations, with mixed success. Even as
because of it—an optimism has taken hold among Miami’s Brickell neighborhood transformed into
the state’s boosters. Florida’s version of Manhattan a decade ago, the
Locals are buzzing again that the Miami area state has attracted only a smattering of mostly
might finally realize a long elusive dream of becom- small to medium-size hedge funds, family offices,
ing Wall Street South. Several prominent financial and banks looking for a convenient hub for Latin
companies, including the mighty Goldman Sachs American wealth management. In research firm
Group Inc., are considering moving some business Z/Yen’s Global Financial Centres Index, the Miami
there, or are relocating outright. And in these days of area doesn’t even make a cameo.
working from home, Florida’s low taxes, year-round But Covid-19 may just be the catalyst for a shift.
warm weather, and emerald golf links are already lur- For months, New York stock traders, portfolio man-
ing some Wall Street people down from New York. agers, and investment bankers scattered across the
Edited by
To David Greenberg, a former board member of U.S. Many headed south to spacious homes with pri-
Pat Regnier the New York Mercantile Exchange who helps run vate pools. Now, as the vaccine rollout begins and
 ◼ FINANCE Bloomberg Businessweek January 18, 2021

firms look toward a post-pandemic world, some are disappointed. The average salesperson peddling
realizing that their employees don’t want to return securities, commodities, and financial services makes
to their old lives in Manhattan high-rises. And there $149,880 in wages in the New York metro area, com-
are plenty of rich clients milling around: South pared with $88,220 in metro Miami, which includes
Florida is one of the most ostentatiously wealthy Fort Lauderdale and West Palm Beach, according to
places on the planet, home to two of America’s data from the Bureau of Labor Statistics. Financial
three richest ZIP codes. and investment analysts make about 43% less in
The 2017 tax overhaul, which capped the federal Miami than in New York.
deduction on state and local taxes at $10,000, only There are also challenges to living in the Sunshine
increased Florida’s tax advantage over areas such State, as the pandemic has made clear, including the
as New York and New Jersey. And while Miami isn’t crash of its unemployment website and a chaotic vac-
cheap—in fact, rents are far out of proportion with cine rollout. It’s also one of the parts of the world
service-sector-driven median income—the price that stands to be most affected by sea-level rise, a
per square foot of a condo in the Brickell district is deterrent for risk-averse corporations.
about a quarter of the cost in Manhattan, according Those issues haven’t stopped a boom in the parts
to appraiser Miller Samuel Inc. of the economy most affected by the wealthy. Ken
Doug Cifu, chief executive officer of electronic Gorin, CEO of luxury-car purveyor the Collection,
market-maker Virtu Financial Inc., says his com- says his Miami-area dealerships notched their best
pany’s decision to open a new office in suburban month ever in December. He attributes about 10%
Palm Beach Gardens is simply “rational.” He expects of the sales to migration. Just recently, he recalls, a
employees to save an average 10% to 11% on taxes, finance-industry transplant had come in for a Porsche
and much more on housing. “In terms of the qual- Macan for his daughter. By the time the transaction
ity of life, from my perspective, it is far superior in was over, the customer had also made off with an
Florida now than it is in New York, and I don’t see Aston Martin sport utility vehicle for his wife and a
that changing in the near to medium term,” he says. McLaren 720S Spider for himself. “This is now peo-
There have been a series of pushes over the years ple moving from California, people moving from 17
to expand Florida’s footprint in industries beyond New York—and it’s new,” he says.
tourism. Its airports and seaports have transformed Private schools are sensing a shift, too. At Pine
it into a major force in global trade; it’s become a hub Crest, an elite school with campuses in Boca Raton
for Spanish-language media and entertainment; and and Fort Lauderdale, interest has increased notably
there’s a booming health-care industry that caters since March, says Christine Dardet, a spokeswoman.
to one of America’s oldest populations. But the lack A 2019 analysis by Webster Pacific showed tuition
of critical mass for finance firms may have been a at top schools in the New York metro area averages
deterrent for companies coming to the area, says $54,000, vs. $39,000 in the Miami metro.
Sean Snaith, an economist with the University of Among locals, there’s also wariness. Couper of
Central Florida, who now sees it likely that more Wealthspire laments the possibility of transplants driv-
moves will be announced. ing up house prices and increasing traffic. Lorenzo
In a matter of months, firms including Paul Singer’s Canizares, a 73-year-old retired labor organizer in
Elliott Management Corp. and Tom Barrack’s Colony West Kendall, is concerned about more serious con-
Capital Inc. have put in motion relocations to Florida, sequences: the prospect that wealthy financiers will “There’s no
while Blackstone Group Inc. and Citadel are setting take advantage of the state’s tax structure to the det- way to put that
up offices there. Other workers who flocked to the riment of long-term residents. “When people like that genie back in
state as a Covid haven are simply choosing to stay, arrive here, everything seems to go up, and it makes the bottle”
a move investment banking honcho Ken Moelis has it very difficult for people here,” says Canizares.
already blessed for employees at his firm, Moelis & Co. For all the excitement, it’s unclear whether small
PHOTO ILLUSTRATION BY 731. PHOTOS: SHUTTERSTOCK (7)

Kevin Couper, a senior vice president at Wealthspire outposts for financial companies will spur a dra-
Advisors, arrived from California in July after being matic transformation. Goldman Sachs is looking for
asked to help open and manage the company’s new at least 50,000 square feet of office space, according
office in Boca Raton. “I was very used to a higher to the Palm Beach Post, a fraction of the 2.1 million
cost of living, higher income tax,” says Couper, 34, square feet at its headquarters on Lower Manhattan’s
who has also lived in New Jersey. “Here, both went West Street. The Florida Department of Economic
down, cost of living is less—at least where I am—and Opportunity’s own projections are modest in their
rent, too. Everything has been better.” assumptions about finance job growth. Wall Street-
Still, workers hoping they can move to para- type employment—involving securities, commodi-
dise and keep their Manhattan paycheck may be ties contracts, and other financial investments—is
 ◼ FINANCE January 18, 2021

expected to climb 12.8% by 2028, to 56,227 positions.

But that’s about the same growth rate expected for
Florida jobs overall.
There’s also the question of whether multitudes
of finance workers are willing to uproot their lives.
Throughout recent history, U.S. millionaires have
been less likely to move than the general public, ◀Dunn

and many ultra-wealthy people remain based in the

region where they built their business, according
to The Myth of Millionaire Tax Flight, a 2017 book by
Cornell University sociologist Cristobal Young. Many
careers are built upon social networks in a place,
and few midcareer professionals are willing to give
up their home-field advantage, he wrote.
South Florida saw some of its most astounding
growth in the immediate aftermath of the 1918 flu pan-
demic, according to Paul George, resident historian
at HistoryMiami Museum. The population of the City novel coronavirus in the U.S.’s first Covid-19 hot spot.
of Miami roughly quintupled to about 150,000 in the For 10 months, Dunn has managed to stay afloat
half-decade through 1925, aided by post-World War I by cutting deals with the three banks that hold mort-
relief. “We turned around after that pandemic was gages on her properties. Getting through the next 10
over and began to really look ahead, and this place won’t be easy without another lifeline. “I’m going to
boomed,” George says. “It was like we were being need more help,” Dunn says. “My runway is over.”
discovered for the first time in a mass way in South One of the surprising aspects of the pandemic is
Florida.” �Jonathan Levin and Amanda Gordon, with that it hasn’t yet led to a real estate meltdown on Main
18 Lananh Nguyen, Sridhar Natarajan, and Alex Tanzi Street. As businesses faced lockdown and employ-
ees were sent home, every link in a chain of finan-
THE BOTTOM LINE Lockdowns showed many wealthy finance
workers they didn’t need to be in the main office. But Florida
cial obligations—from tenant to landlord to investor
doesn’t have a critical mass of top companies and jobs just yet. to lender—was suddenly under stress. Yet, somehow,
many small businesses have stayed alive and com-
mercial landlords have avoided mass foreclosures.
The story of how Dunn and her tenants made it to
2021 shows how a mix of government programs,

How the bank forbearance, and a lot of scrappy improvisa-

tion kept the chain from snapping—at least, so far.
The strain is still building: U.S. retail landlords

Block Pulled count more than $50 billion in missed rent payments
last year, according to estimates from CoStar, some
of which may never be paid. Even as vaccinations

Through begin, Covid cases are spiking, workers are staying

away from offices, and the winter weather has cur-
tailed outdoor dining in much of the country. Smaller
landlords such as Dunn—and their tenants—are enter-
PHOTOGRAPHS BY DAVID JAEWON OH FOR BLOOMBERG BUSINESSWEEK

● A landlord and her small-business tenants are ing what may be the hardest stretch of the pan-
surviving lockdown but need more help soon demic. “They were in a tough spot back in March,”
says Zachary Streit, senior vice president at George
Smith Partners, a real estate debt and equity capital
Liz Dunn spent years transforming a handful of adja- adviser. “Now, they’re in a really tough spot again.”
cent properties in Seattle into an acclaimed urban Despite having a bunch of hard-hit small busi-
development, with apartments, offices, and a lot of nesses as tenants, Dunn had a few things going in
retail space. Among her tenants were restaurants, her favor. For starters, her buildings aren’t down-
a salon, a home-goods boutique, a bicycle shop, town. They’re on a block in the Pike-Pine corri-
a hardware store, and a CrossFit gym. Many were dor of Capitol Hill, one of Seattle’s best going-out
in trouble after the government passed sweeping neighborhoods (at least, pre-Covid). About a mile
restrictions in March to control the spread of the from Amazon.com Inc.’s urban headquarters, it’s
◼ FINANCE Bloomberg Businessweek January 18, 2021

an area where a lot of people live. While demand But there were other things she couldn’t help with.
for apartments in the neighborhood has softened, Years of gentrification and soaring real estate values in
it hasn’t emptied out the way central business dis- Capitol Hill have steeply increased the cost of renting
tricts across the country have. a commercial space in the neighborhood, since ten-
Also helpful: Many of her 20 or so retail tenants ants typically shoulder their share of property taxes
quickly pivoted. The restaurants offered takeout and as a part of their lease. Along with building insurance
rejiggered their spaces to comply with new restric- and maintenance—which they also pay—these addi-
tions. The bike shop launched a business delivering tional costs often account for a quarter or more of a
boxes of local food to people’s doorsteps. Within a tenant’s total rent bill, says Dunn. “We can’t pay for
week of the shutdown in March, the CrossFit gym these expenses on behalf of the tenants,” she says.
began offering virtual classes, renting out its dumb- “We’d literally go broke doing it.”
bells and other equipment to members. “There As it was, Dunn was already treading water. The
were a few that put a rower on their back and rolled investors backing her were willing to stop taking dis-
it home,” says Tony Lau, one of the gym’s owners. tributions to conserve cash. Still, “equipment wears
In late spring, some relief came in the form of fed- out, elevators go on the fritz,” she says. “None of that
eral stimulus. Dunn helped her tenants access the stuff comes to a standstill because of Covid.” The cost
funds, giving them information and connecting them for security also spiked as Capitol Hill became the
with banks that were doling out the money. Businesses local epicenter for racial justice protests in June. A
that list her properties as their address received almost Thai restaurant in one of her buildings, as well as the
$1.4 million in loans from the Paycheck Protection hardware store, had windows smashed. Dunn paid
Program and an additional $705,600 in grants and for the businesses to put up plywood boards for a
loans from the Small Business Administration’s time. Her security team went through six fire extin-
Economic Injury Disaster Loan program. Some of guishers one night putting out fires in the street out-
this debt could ultimately be forgiven. side her buildings.
Still, the pandemic put big holes in everyone’s Dunn was still getting most of the rent from her
businesses. Lau, the gym owner, says his revenue tenants in the apartments at her properties. But over- 19
declined 65% last year. Yukiko Sodos, who with her all, her collections were running at about 80% at
sister owns Cafe Pettirosso in one of Dunn’s build- one building, 65% at another, and just above 50% at
ings, says they’ve taken on more than $500,000 addi- a third, “which, as most landlords will tell you, isn’t
tional debt to keep that business and others they run typically enough to cover the mortgage,” she says.
▼ Dunn's Chophouse
afloat. “How many pastries and lattes can I sell to Worse yet, several of her office leases were expir- Row development
pay off half a million dollars?” she asks. ing, and many of those tenants weren’t renewing and some of her small
business tenants,
Dunn gave her tenants who were affected by the as more people decided that they could work from including Sodos, second
pandemic some form of rent abatement last year. home long term. from right, and Lau, right
 ◼ FINANCE Bloomberg Businessweek January 18, 2021

Before the pandemic, Dunn had more than could be on its way. President-elect Joe Biden has ▼ Cumulative estimated
missed rent in the U.S.
$25 million in debt on her properties. Her lever- said he’ll push for trillions of dollars in additional
General retail
age was conservative, averaging at about 60% of stimulus, some of which could aid small business.
Neighborhood retail*
loan-to-value, she says. There were no vacancies The Federal Reserve is likely to keep the spigots open
Malls
at her properties. After having a hard time during for the foreseeable future. And while some lenders
Other retail
the Great Recession with a big, national lender, will get aggressive with property owners who’ve
Dunn had switched to keeping her banking rela- fallen behind, many creditors are choosing to work $50b

tionships local. That meant she had someone to with borrowers, especially now that it’s possible to
call and plead her case with when things got dif- envision an end to the pandemic. “If you look far
ficult—which is exactly what she did as things spi- enough ahead, you can see land on the other side,”
raled downward last spring. says Michael Knott, a managing director at real estate 25

All three of her banks came through with some research firm Green Street. “It’s just going to be a bit
sort of relief, which she parlayed into rent abate- choppy getting there.”
ment for her tenants. But by the end of the year, Mason, who helped turn HomeStreet around after
the deals with her lenders had expired. “We thought the 2008 financial crisis, says the challenges facing 0

in April that by August or September, we would be today’s real estate market are far different from those 4/20 11/20
back to, if not normal, near normal,” says Mark a decade ago. Back then, prices plunged so much that
Mason, chief executive officer of HomeStreet Inc., building owners were underwater. In many cases.
a Seattle-based bank that issued a $15 million loan lenders had no option but to foreclose. “This is not
on one of her properties. “That just didn’t happen.” like that at all,” Mason says. Lots of commercial real

ILLUSTRATION BY YANN BASTARD. *SELLS CONVENIENCE GOODS AND PERSONAL SERVICES FOR DAY-TO-DAY LIVING NEEDS OF THE IMMEDIATE NEIGHBORHOOD, INCLUDING SUPERMARKETS. DATA: COSTAR
Now, Dunn says, she’s “basically back at square estate has held its value through the pandemic. And
one”—guessing, along with everyone else, how while retail space has been among the most challeng-
quickly the country will emerge from the pandemic. ing, a development like Dunn’s is a good asset in the
Without more help from her banks, she can’t offer long run, says Mason. “Time is really all she needs
the additional rent abatement that many of her ten- here.” �Noah Buhayar
20 ants sorely need and are frustrated they aren’t get-
THE BOTTOM LINE Rent abatements, help from banks, federal
ting from her right now. programs, and a lot of individual improvisation have staved off a
There’s reason to believe that more assistance commercial real estate meltdown.

It’s Harder to Invest in China.

More Confusing, Too
● The New York Stock Exchange reverses course—again—to cut three companies

From its historic trading floor to the $126 billion In November, President Trump issued an
worth of shares exchanged daily to the bell that executive order banning trades in companies
marks the open and close of the trading day, the- tied to the Chinese military starting on Jan. 11 and
New York Stock Exchange is a symbol of both the requiring any remaining holdings in those compa-
might and the reliability of U.S. financial markets. nies to be divested by this November. Six weeks
Yet over the course of a week, the exchange made passed before investors, exchanges, and index
a series of embarrassing U-turns on whether it would providers received more details about which secu-
continue to list three large Chinese companies. The rities would be affected. On New Year’s Eve, the
incident underscored the tensions with China that exchange announced it would delist the shares of
President-elect Joe Biden is set to inherit. Along the China Mobile, China Telecom, and China Unicom
way, the NYSE was rebuked by Treasury Secretary Hong Kong. All three companies are largely owned
Steven Mnuchin, was criticized by officials in both by the Chinese state.
countries, and sowed confusion among investors. Four days later, the NYSE scrapped the plan.
◼ FINANCE Bloomberg Businessweek January 18, 2021

The about-face prompted a disapproving phone in the U.S. have been oppressing foreign compa-
call from Mnuchin to NYSE President Stacey nies listed in the U.S.,” Foreign Ministry spokes-
Cunningham. The exchange reversed course woman Hua Chunying said in a briefing in Beijing.
again, saying it would delist the Chinese securi- Federal authorities had been considering add-
ties after all. Trading was halted in the U.S. on ing tech giants Alibaba Group Holding Ltd. and
Jan. 11. The companies still have shares trading in Tencent Holdings Ltd. to the blacklist, but Dow
Hong Kong. Jones reported on Jan. 13 that the U.S. no longer
“It’s odd for the NYSE to get this so wrong,” planned to do so. Other companies were expected
says Bloomberg Intelligence analyst Larry Tabb. to be added, the news service reported. It remains
“It’s bad enough to do a 180 on this within a week, to be seen if the incoming Biden administra-
but to go 360 degrees on such a major move so tion will enforce the trading bans. Adding to the
quickly means that they either got this terribly uncertainty is the chaos surrounding the outgo-
wrong, or there was significant outside pressure ing administration in the aftermath of the assault
driving these decisions.” Representatives of the on the Capitol by Trump supporters.
NYSE and Treasury declined to comment.
Market participants are still scratching their
heads. Some people familiar with the situation
say the NYSE, which is seen as politically savvy,
got mixed messages from an administration whose
policy was vaguely worded in the first place. Others
speculated that the NYSE bowed to pressure from
the business community to avoid antagonizing
China when it first backtracked. Some of the biggest
names on Wall Street have been courting business
from China, the world’s second-largest economy, as
it invites in more foreign financial firms. They don’t 21
want to be locked out. Shares of the telecom com-
panies have been held in emerging markets mutual
funds and were parts of stock indexes.
The NYSE move ultimately to delist, along
with belated guidance on restrictions from the
Treasury’s Office of Foreign Assets Control, set off
a cascade of actions across the financial industry.
S&P Dow Jones Indices, MSCI, and FTSE Russell The Securities and Exchange Commission has
have removed the securities from indexes. U.S. been pressing Chinese companies with stock
managers of mutual funds and exchange-traded trading in the U.S. to make sure investors are
funds such as BlackRock and Vanguard have aware of the potential risks they face. SEC lawyers
been selling their stakes. Goldman Sachs Group, cited concerns about company disclosures and
Morgan Stanley, and JPMorgan Chase said they accounting, as well as Beijing’s refusal to allow
will stop offering about 500 so-called structured outside inspectors to review audits of Chinese
products traded in Hong Kong. Such products securities issuers.
allow investors to make bets linked to the per- Biden will seek to reset U.S.-China relations, but
formance of indexes or stocks, and some were he’ll face pressure from lawmakers to take a tough
pegged to Hong Kong indexes that include compa- stance. “The developments drive home an unfor-
nies banned by the U.S. The trio of telecom com- tunate fact for China—it is by far the weaker party
panies lost more than $30 billion in market value in the financial relationship,” wrote Chang Shu,
following Trump’s order. chief Asia economist for Bloomberg Economics,
Republican Senator Marco Rubio praised the in an analysis. “For the U.S., it underlines the
NYSE’s ultimate decision after blasting its earlier painful balance in trying to contain China’s rise
reversal as “outrageous,” and serving the “inter- while allowing the U.S. financial sector to capi-
ests of Wall Street and the Chinese Communist talize on the massive growth opportunity China’s
Party at the expense of the United States.” Chinese opening offers.” �Lananh Nguyen
officials dismissed the impact of the restrictions
THE BOTTOM LINE Chinese companies are already intertwined
and said it would ultimately hurt U.S. interests, but with U.S. markets, and efforts to blacklist some have sent financial
they also struck a critical note. “Some politicians companies scrambling.
 Bloomberg Businessweek January 18, 2021

4
America’s in record numbers or taking leaves of absence.
Unlike the jobless rate, which has declined

E Missing Workers markedly from the peak in April, the rate of absen-
teeism has remained stubbornly high. More than
1.9 million people missed work in December
because of illness, according to Labor Department

C ● Near-record levels of
absenteeism could be
hampering the recovery
data, almost matching the 2 million record set in
April and underscoring the impact of a third wave
of coronavirus infections.
These lost days of work are sapping an economic

O Hundreds of workers at a Smithfield Foods Inc.

meatpacking plant in Crete, Neb., contracted
recovery that’s been progressing in fits and starts
for the past several months. Some indicators have
improved significantly, but others such as retail
sales and personal income have weakened as the

N
Covid-19 at the height of the pandemic last spring. pandemic rages and local governments impose
For about 50 of the facility’s 2,300 employees, a fresh restrictions on businesses and travel.
fear of getting sick because of preexisting condi- Michael Gapen, chief U.S. economist at Barclays
tions has kept them from working ever since. Plc, says vaccinations could start driving down

O “We work so close together,” says a Smithfield absenteeism by the second quarter. Until then,
worker in pork production who’s been on leave the missed work is causing supply chain disrup-
from the plant throughout the pandemic and asked tions that may eventually show up in economic
not to be identified for fear of retaliation. “It’s like data. Absenteeism “could lead to shortages, it

M pulling teeth to find out if the person next to you

tested positive.”
While the surge in the number of unem-
ployed Americans has been a focus of econo-
could lead to higher prices and more restrained
output,” he says.
The problem is so acute that companies in
industries ranging from meatpacking to consumer

I
22
mists throughout the pandemic, another problem packaged goods are lobbying to get their work-
in the labor market has been mostly overlooked: ers near the front of the line for vaccinations. The
The people that do have jobs are calling out sick Consumer Brands Association, which represents

C
S
ILLUSTRATION BY SAMANTHA SLINN. DATA: U.S. BUREAU OF LABOR STATISTICS

Edited by
Cristina Lindblad
◼ ECONOMICS Bloomberg Businessweek January 18, 2021

Clorox, Procter & Gamble, Kellogg, and others, says that Congress enacted in March made the decision ▼ U.S. workers absent
because of illness
the absenteeism rate has been averaging 10% over to stay home easier for some by allowing two weeks
the last two months, with some members report- of paid sick leave for certain employees. The law 2m

ing rates at high as 25%. “The challenge in keeping also allows leave for those unable to work because
lines up and running, the challenge in continuing to they must care for a child.
meet the extraordinary demand that’s out there is The latest stimulus bill, signed by President
absolutely enormous—and our companies are feel- Trump on Dec. 27, includes an extension of the 1

ing it,” says Geoff Freeman, chief executive officer act through March 31 but makes paid leave vol-
of the CBA. “There are instances of having to shut untary for employers rather than mandatory as
down lines at various points in time in order to it was in the first iteration. The act also excludes
manage the absenteeism.” essential workers, meaning those employed at 0

While U.S. Department of Labor data tracks facilities such as meatpacking plants can’t take 1/2015 12/2020
people currently in the labor force who are out advantage of the policy. That in turn may lead to
sick, a separate survey by the U.S. Census Bureau workplace outbreaks and further disrupt produc-
captures an even wider view. Its latest Household tion this year.
Pulse Survey—based on responses in December— “We know when the absenteeism will end, and
estimates that more than 18 million people weren’t that’s when we get the vaccine in people’s arms,”
working because of the virus. The figure includes says Freeman of the CBA. But a patchwork of state-
people who were sick as well as those who stayed run vaccine rollouts and a lack of federal leader-
home because they were worried about getting or ship means “this is the Wild West right now, and
spreading the virus, those caring for someone with we see the results of that.” �Olivia Rockeman, with
symptoms, and those looking after children not Michael Hirtzer and Julia Fanzeres
in school.
THE BOTTOM LINE More than 1.9 million workers called out sick
The effects are especially concentrated in man- in December. Absenteeism is snarling up supply chains and could
ufacturing. General Motors Co. put white-collar lead to lost production and inflation-inducing bottlenecks.
employees on the production floor in August to 23
cope with labor shortages amid strong demand
for cars and trucks. While safety protocols have
prevented Covid-19 spread within GM plants
in recent months, there’s no way to stop work-
ers from getting infected outside the workplace,
which presents an “ongoing challenge,” according
How China Won
to spokesperson Dan Flores.
The Institute for Supply Management’s gauge of
factory activity increased in December, with the
The Trade War
employment component returning to a level that
indicates growth. Even so, survey respondents ● A by-the-numbers refutation of Trump’s claim that there’s
noted that Covid is affecting them “more strongly been a reset in commercial relations
now than back in March.” One running complaint
among survey respondents is that vendors are
grappling with their own employee shortages, “Trade wars are good, and easy to win,” President
which is causing supply constraints. “The quan- Trump famously tweeted in 2018 as he began to
tity of infections and the quantity of people who layer tariffs on about $360 billion of imports from
are having to self-quarantine or be sick is just so China. Turns out he was wrong on both counts.
overwhelming that everybody has to be affected Even before the novel coronavirus infected
by it,” Timothy Fiore, chair of ISM’s Manufacturing millions of Americans and sparked the steepest
Business Survey Committee, said on a Jan. 5 call economic downturn since the Great Depression,
with reporters. China was withstanding Trump’s tariff salvos,
For office workers, 90% of professionals said according to the very metrics he used to justify
before the pandemic they’d sometimes go to work them. Once China got the virus under control,
sick, according to a 2019 study by staffing firm demand for medical equipment and work-from-
Accountemps. Covid changed the conversation, home gear such as computers expanded its trade
and more employees are staying home to protect surplus with the U.S. despite the duties.
themselves and others. While trade tensions between the world’s two
The Families First Coronavirus Response Act biggest economies predate Trump, he broadened
 ◼ ECONOMICS Bloomberg Businessweek January 18, 2021

the fight with punitive tariffs and sanctions on tech looking for an alternative to China.” But there’s little
companies. But China turned out to be a tougher evidence of any such shift taking place. In fact, U.S.
adversary than he bargained for. Nevertheless, he’s direct investment in China increased slightly, from
leaving his successor, Joe Biden, a blueprint for what $12.9 billion in 2016 to $13.3 billion in 2019, accord-
worked and what didn’t. ing to data compiled by Rhodium Group, a consult-
“China is too big and too important to the ing firm. In September the American Chamber of
world economy to think that you can cut it out Commerce in Shanghai surveyed 200 U.S. man-
like a paper doll,” says Mary Lovely, an econom- ufacturers with operations in or around China’s
ics professor at Syracuse University. “The Trump largest metropolis and learned that more than three-
administration had a wake-up call.” quarters had no plans to move production. “No mat-
On the stump in 2016, Trump vowed to very ter how high the Trump administration raised any
quickly “start reversing” the U.S. goods trade tariffs, it was going to be very difficult to dissuade
deficit with China, ignoring mainstream econ- U.S. companies from investing,” says Ker Gibbs,
omists who downplay the importance of bilat- president of AmCham Shanghai.
eral trade imbalances. The deficit has increased Trump claimed that tariffs had boosted the U.S.
over the time Trump has been president, hitting economy while causing China’s economy to have its
$287 billion in the first 11 months of 2020, higher “worst year in over 50” in 2019. Yet the impact of
than the $254 billion shortfall for the whole of 2016. tariffs on both countries wasn’t very great, because
As part of the phase-one trade deal the countries the value of trade between them is tiny relative
signed a year ago, China made an ambitious pledge to the size of their economies. China’s economy
to import an additional $172 billion in U.S. goods in grew at or above 6% in both 2018 and 2019, with
specific categories in 2020. But through the end of
November it had achieved just 51% of that goal. A
slump in energy prices and problems with Boeing No Shift in the Balance of Power
Co.’s planes played a part in that failure. China’s trade surplus with the U.S.* Foreign direct investment

24 The persistent trade deficit is a reflection of how ◼ Chinese investment in U.S.

reliant U.S. companies have become on China’s vast ◼ U.S. investment in China
manufacturing capacity, a reality that’s been under- Trump imposes
first tariffs
scored by the pandemic. China was the only coun- $35b $45b

try capable of increasing output enough to meet

surging demand for goods including medical equip-
ment and work-from-home gear. 25 30

Trump repeatedly said China’s accession to

the World Trade Organization in 2001 caused its
economy to take off like a “rocket ship,” a result 15 15

he viewed as unfair. As it turned out, his trade

war coincided with another expansion in Chinese
exports. After shrinking for two straight years in 5 0

2015 and 2016, China’s overall shipments grew each 1/2011 1/2018 11/2020 2011 2019
year after Trump took office, including in 2019
when exports to the U.S. fell.
*JANUARY-FEBRUARY 2020 IS COMBINED BY SOURCE. DATA: CHINA’S GENERAL ADMINISTRATION OF CUSTOMS, RHODIUM GROUP
The Asean group of 10 Southeast Asian nations
replaced the U.S. as China’s second-largest trad- U.S. tariffs costing it about 0.3% of gross domestic
ing partner in 2019, after the European Union. The product those years, according to Yang Zhou, an
shift to Asia is likely to continue because Southeast economist at the University of Minnesota. By her
Asian economies are projected to grow faster estimate, the trade war cost the U.S. 0.08% of GDP
than developed countries over the next decade. over the same period. The clearest winner was
Those trade links will be further cemented by the Vietnam, where the tariffs boosted GDP by almost
Regional Comprehensive Economic Partnership 0.2% as companies seeking to escape the volleys
pact signed in late 2020, which commits 15 coun- and countervolleys of a tariff war piled in.
tries in the region to gradually drop some tariffs Trump repeatedly asserted that China was pay-
on one another’s goods. ing for the tariffs. But economists who crunched
Trump said tariffs would encourage U.S. manu- the numbers were surprised to find that Chinese
facturers to move production back home, and in a exporters generally didn’t lower prices to make up
2019 tweet he “ordered” them to “immediately start for duties, meaning it was largely U.S. companies
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 January 18, 2021

◀ A Chinese
shipment of personal
protective equipment
being unloaded
at Los Angeles
International Airport

and consumers who wound up footing the bill. of California at Berkeley, says that while Beijing has
The researchers estimated that tariffs reduced total made “tremendous legislative changes” in the past
inflation-adjusted incomes in the U.S. by about two years to strengthen IP protection, its desire to
$1.4 billion per month in 2018, according to their spur innovation at home may have been a more
paper, which was published by the National Bureau important factor than U.S. pressure. The agreement
of Economic Research. didn’t “push the structural reforms in China that
Another own goal: Tariffs on imports of Chinese would make its system more systemically compat-
components eroded the competitiveness of U.S. ible with most of the world,” he says.
exports. According to an analysis of confidential Chinese companies spent a record $7.9 billion in
company data by researchers at the NBER, the U.S. 2019 on royalties and fees for the use of U.S. intel-
26 Census Bureau, and the Federal Reserve, compa- lectual property. But the increase tracks a broad
nies that together account for 80% of U.S. exports upward trend in their intellectual property pay-
had to pay higher prices for Chinese imports, ments to the whole world.
reducing export growth. It’s now up to Biden to decide whether to carry
Trump campaigned hard in 2016 on a pledge to on with the trade war. In a recent interview with
revive the Rust Belt by taking on China and bring- the New York Times, he said he wouldn’t remove
ing plants and jobs back home. It didn’t happen. the import duties immediately and would instead
Growth in U.S. manufacturing employment flat- review the phase-one deal.
lined in 2019, partly because of falling exports. Compared with tariffs, an escalating conflict over
Even regions home to industries such as steel that technology is of more concern to China. Sanctions
received explicit protection from Trump’s tariffs and export restrictions imposed by Washington
experienced declines, according to research over national security concerns have threatened
by Michael Waugh, an economist at New York the viability of leading Chinese tech companies such
University Stern School of Business, suggesting the as Huawei Technologies Co. and Semiconductor
trade war didn’t significantly alter the trajectory of Manufacturing International Corp. The Trump
U.S. manufacturing. “There’s no evidence that the administration’s multipronged campaign to freeze
tariffs benefited workers,” he says. out Chinese tech giants from lucrative markets in
The Trump administration argued that the lev- the U.S. and elsewhere represents an existential “There’s no
ies provided leverage over China’s leadership, threat to Beijing’s efforts at engineering new driv- evidence that
compelling Beijing to enact reforms that would ers of economic growth. the tariffs
benefit U.S. companies. “I love properly put-on The impact of U.S. actions has been to acceler- benefited
tariffs, because they bring unfair competitors ate China’s drive for technological self-sufficiency. workers”
from foreign countries to do whatever you want The issue has rocketed up the Chinese Communist
them to do,” Trump said during an August visit to Party’s agenda, symbolized by a statement last
a Whirlpool Corp.-owned plant in Ohio. month that increasing “strategic scientific and tech-
The biggest victory claimed by the administra- nological strength” is the most important economic
RICHARD VOGEL/AP PHOTO

tion as part of its trade deal was vows from Beijing task. �Tom Hancock and James Mayger
to enhance intellectual property protections. But
THE BOTTOM LINE China’s trade surplus with the U.S. is at a
that was probably in China’s interests anyway. Mark record as Trump’s term winds down. The Biden presidency will
Cohen, an expert on Chinese law at the University likely bring change in tactics if not goals.
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 Bloomberg Businessweek January 18, 2021

P Why the U.S.

O Senate Is Broken
L
I
But in the 1970s it began to be deployed on
● Adam Jentleson argues that
other issues and shed its racist taint. Over the
toxic partisanship rose when years, canny insiders like Senator Richard Russell
the filibuster became a cudgel of Georgia, the Democratic segregationist, quietly

T “This is not a particularly uplifting history,” Adam

Jentleson warns at the beginning of Kill Switch:
tweaked Senate rules to change the filibuster
from a measure that guaranteed the minority an
opportunity to debate bills (a delaying mecha-
nism) to one that obligated the majority to amass

I The Rise of the Modern Senate, his new book about

partisan dysfunction in the Senate and how to fix
it. The violent Jan. 6 attack on the Capitol illus-
trates his point. Senate Democrats began the week
60 votes to end that debate and proceed to a
vote—a requirement that could be used to kill all
but the most popular legislation.
By the time Jentleson arrived in the Senate in

C
28
exultant that twin victories in Georgia would give 2010, the Republican leader, Mitch McConnell
them control of the chamber under President Joe of Kentucky, was aggressively undermining
Biden. They ended it in an outraged clamor to President Barack Obama’s promise to unite the
expel two Republicans, Josh Hawley of Missouri country by deploying the filibuster to block or

S and Ted Cruz of Texas, and likely headed for a

second impeachment trial of Donald Trump.
Jentleson wasn’t surprised. “What we’re seeing
today is really the culmination of centuries-long
limit almost every piece of major legislation. For
his part, McConnell was happy to cop to what he
was doing. “When you hang the bipartisan tag on
something,” he said in 2011, “the perception is that
historical trends,” he said the day after the attack, as differences have been worked out and there’s a
images of the pro-Trump mob blanketed cable televi- broad agreement that that’s the way forward.”
sion. For seven years, Jentleson, 39, had an up-close Jentleson’s formative experience in the Senate
view of growing Senate dysfunction as a top aide to was watching McConnell wield the filibuster with
former Democratic Majority Leader Harry Reid of impunity to kill much of Obama’s agenda, while also
Nevada. He left with a healthy contempt for how blocking him from filling an open Supreme Court
both parties operate and a clear diagnosis of the seat in 2016. Because most people pay no attention
institution’s primary ailment. The success of Biden’s to Senate procedure, what was seen as a failure by
presidency, he believes, will hinge on whether Obama to fulfill his campaign promises ultimately
Democrats recognize it and commit to reform. caused many people to sour on him and his party.
Kill Switch traces the rise of toxic partisanship— Since leaving the Senate in 2017, Jentleson
and the ebb of productive legislation—to the has assumed a role as an outspoken critic not
emergence of the filibuster in the middle of the only of Senate dysfunction but also of his own
19th century. In Jentleson’s telling, it’s a long, party’s guilelessness and gullibility when deal-
sordid tale. The filibuster wasn’t envisioned by ing with McConnell and Republicans. Too often,
the framers. It isn’t in the Constitution. “It arose he says, Democrats have fallen prey to a collective
as the need to maintain slavery led Southerners amnesia and allowed themselves to be swayed by
to search for new ways to defy the majority,” he McConnell’s claims that a 60-vote threshold is a
says. Throughout most of the 20th century it was sacred American principle rather than an expedi-
Edited by
Amanda Kolson Hurley
used almost exclusively by segregationists to stop ency crafted by a determined, obstructive minority. 
and David Rocks civil rights legislation.  “It’s remarkable how, despite everything we’ve
 ◼ POLITICS Bloomberg Businessweek January 18, 2021

seen over the last 10 years, Democrats will still prevailing simultaneously that are unlikely to ever “It always had
engage with McConnell in the very next negotiation prevail together again: the filibuster coming into the potential
as if he’s a good-faith negotiating partner,” Jentleson common use and relatively low levels of partisan to become
says. “It’s like Lucy and the football. McConnell’s polarization. It’s easy to forget now, but when Biden the tool that
single most effective skill is getting inside the heads arrived in Washington, many of the most conser- the minority
of Democratic leaders and making them think that vative members of the Senate were Democrats and wields to block
beneath the surface he really is an institutionalist some of the most liberal were Republicans.” everything the
who really does want to cut bipartisan deals.” In that environment, neither party gained majority wants
Jentleson’s frustration is increasingly common a clear advantage by using the filibuster, so the to do”
among Democrats of his generation. So is his pro- rule wasn’t abused. It was simply one negotiating
posed solution. “Any path to a functional Senate,” tactic among many. “It always had the potential to
he says, “entails eliminating or reforming the become the tool that the minority wields to block
filibuster to restore the framers’ vision of a place everything the majority wants to do, but it didn’t
where votes are decided on a majority-rule basis.” yet operate in that way,” Jentleson says. Not until
Biden in particular worries reformers because decades later, when the parties had sorted them-
he hails from the older generation of Democrats selves, did the temptation to routinely block the
who, they contend, prize bipartisanship above majority prove irresistible.
all else, hold a benign and outdated view of the Despite all of Biden’s backslapping, old-school
filibuster, and refuse to see McConnell for the Senate know-how, his gamble that he can achieve
savvy, cold-blooded realist they believe he is. True bipartisan comity is a risky one with the parties now
to form, Biden has insisted that his negotiating so bitterly divided. It’s the same bet Obama made,
prowess and long relationship with McConnell and and lost. Even aside from Trump’s likely impeach-
other Republican Senate veterans will allow him ment trial, Biden’s stated priorities—major cli-
to forge deals that eluded Obama and avoid hav- mate legislation, new voting rights, deficit-funded
ing to blow up the Senate rule that’s supplied so stimulus to the tune of trillions of dollars—run
much of McConnell’s power.  directly counter to Republican goals and are sure to 29
Jentleson says this view is typical among meet firm resistance. What then?
Democrats of Biden’s generation who first came to Witnessing Republicans obstruct Obama’s
power in the 1970s. “The ’70s and ’80s were a unique agenda gradually convinced some Democratic tra-
period,” he says, “because you had two conditions ditionalists that reform was necessary. In 2013,

◀ Jentleson
PHOTOGRAPH BY SUSANA RAAB FOR BLOOMBERG BUSINESSWEEK
 ◼ POLITICS Bloomberg Businessweek January 18, 2021

Jentleson’s boss, Reid, triggered the “nuclear

option,” changing Senate rules by a majority vote
to eliminate the filibustering of presidential nom-
Persona Non Grata
inees, excluding Supreme Court nominees (by
that point, Jentleson writes, half the filibusters ● Josh Hawley is a political pariah
against nominees in U.S. history had been waged following the Capitol riot
by Republicans against Obama’s). McConnell and
Republicans extended the rule to include Supreme If Jan. 6 was one of instigating [an] assault on democracy.”
Court nominees in 2017 to confirm Neil Gorsuch. the grimmest days Likely more damaging were comments
in modern American from David Humphreys, chief executive officer
Doing away with the legislative filibuster is a step history, Jan. 7 was of Missouri-based Tamko Building Products,
many senators still prefer to avoid, although previ- a personal nadir for who gave almost $350,000 to Republican
Josh Hawley, the causes in the 2020 election cycle. “Hawley’s
ous Democratic skeptics, such as Biden’s ally and Republican junior irresponsible, inflammatory, and dangerous
fellow Delaware senator, Chris Coons, hinted over senator from Missouri. tactics have incited violence and further
In the space of 24 hours, a key donor and a discord across America,” Humphreys said in
the summer that reform may finally be necessary. former mentor turned on him, newspapers in a statement.
Jentleson, a habitual cynic, is uncharacteristi- his home state and colleagues in Congress “I thought he was special,” said 84-year-
called for his resignation, and Simon & old John Danforth, who served three terms
cally optimistic about the potential for reform in Schuster canceled the publication of his as a Republican senator from Missouri, in an
the not-too-distant future. The next few months, book The Tyranny of Big Tech. interview with the Kansas City Star. “And I
did my best to encourage people to support
he says, will reveal whether Biden’s throwback ● WHY HE’S BEING VILIFIED him both for [Missouri] attorney general and
approach is a viable one or whether he’s just The cause of the pile-on was his role in later the U.S. Senate, and it was the biggest
contesting President-elect Joe Biden’s victory mistake I’ve ever made in my life.”
the latest Democratic president to be gulled by over President Donald Trump. Hawley was
McConnell’s slow-walking and continual promises the first in the Senate to say he’d object to ● WHY HE MAY OUTLAST IT
certifying the Electoral College votes, later Hawley doubled down, saying he would never
that a deal is just out of reach. Jentleson has little joined by Republican Senator Ted Cruz of apologize for challenging the election result
doubt about how that will unfold. Texas and others. Hawley still voted to object and (incorrectly) calling the book cancellation
after a pro-Trump mob stormed the U.S. an “assault on the First Amendment.” He may
This time, he believes, Democrats will have no Capitol, claiming the lives of five people, and not pay much of a political cost for fueling
choice but to force a resolution. “The issue will he was photographed giving a fist pump to conspiracies that boiled over into violence.
Trump supporters that day. Doug Heye, a former Republican House aide
30 become very acute until you either have to reform who also worked in the George W. Bush
the filibuster,” he says, “or give up and accept ● WHAT CRITICS ARE SAYING administration, says even a censure by the
Before the siege, the 41-year-old senator Senate might not hurt his ambitions. “We’re in
nothing is going to happen.” �Joshua Green appeared to be positioning himself for a a different political environment,” Heye says.
2024 presidential run. The editorial board “This is part of Trump’s success—he would
THE BOTTOM LINE A former Senate aide contends that the of the St. Louis Post-Dispatch wrote that smash norms.”
filibuster, once a protection for the voice of the minority party, now his “presidential aspirations have been �Nancy Ognanovich is a reporter for
gives it too much obstructionist power and must be reformed. flushed down the toilet because of his role in Bloomberg Government

Inoculating Against a Loss

At the Polls
● After Israel’s vaccine rollout slowed, Netanyahu scrambled to beef up supplies—and his campaign

As most places struggle to vaccinate even 1% of force for Maccabi Healthcare Services, Israel’s
their population, in Israel 21% of residents—1.9 mil- second-largest medical network. “There’s a lot
lion people—have gotten shots since the Health of pressure.”
Ministry began offering the vaccine from Pfizer Centralized government, limited territory, and
Inc. and BioNTech SE on Dec. 20. Prime Minister a relatively small population—9.3 million—have all
Benjamin Netanyahu says almost everyone in the helped Israel reach a level of coverage that’s almost
country (though not Palestinians in the adjacent double that of the No. 2 country, the United Arab
West Bank) will be vaccinated by early spring. Emirates, and seven times that of the U.S. Israel’s
“We’re moving very fast in all directions,” says advantages have been amplified by its universal
Arnon Shahar, a doctor running the virus task health insurance and a digitized medical system
 ◼ POLITICS Bloomberg Businessweek January 18, 2021

with extensive records that allow providers to target

at-risk populations and track progress. And with
Netanyahu desperate to win an upcoming election,
he’s made the vaccination effort a top priority.
But Israel also offers a cautionary tale about
the continuing risks of the coronavirus: Despite
the vaccinations, infections have surged to one of
the world’s highest rates per capita. The country
in late December imposed a third lockdown
that shuttered schools, restaurants, and most
stores and set draconian restrictions on move-
ment. And with the rapid inoculation campaign
depleting supplies, new vaccinations have slowed
because Israel is reserving half its doses as boost-
ers to be administered a few weeks after the initial
treatment—in accordance with the manufacturer’s
recommendations—rather than giving initial shots
to more people and delaying follow-ups.
Netanyahu is betting a successful rollout can 6.3% this year with rapid vaccinations, but only ▲ Israelis have thronged
mass immunization sites
rekindle economic growth before Israelis head 3.5% if the pace slows. “If Netanyahu is responsible
to the polls on March 23 for the fourth national for the vaccine, OK, he can take responsibility,”
election in two years. Upbeat economic news is says Yoaz Hendel, a former Netanyahu aide who’s
vital for the prime minister, who faces a bribery now a candidate for Sa’ar’s New Hope party. “At the
and fraud trial that will soon require him to appear same time, he has responsibility for the unemploy-
in court frequently. Opinion polls show him strug- ment and political instability.”
gling to win sufficient backing to form a new gov- The rapid rollout starkly contrasts with the 31
ernment as he faces a strong field of challengers situation for the millions of Palestinians living
such as Gideon Sa’ar, a high-profile defector from under Israeli control. Even as crowds jam public
his Likud party. “If the country is first to get vacci- vaccination sites in Tel Aviv, West Bank areas such
nated and first to get the economy back on track, as Bethlehem, Nablus, and Gaza haven’t set a start ▼ Vaccinations per
100 people reported as
of course it will be a major boost,” says Srulik date for shots. The Palestinians are awaiting doses of Jan. 13
Einhorn, a Netanyahu campaign adviser. from international donors after West Bank officials
To keep supplies flowing, Netanyahu repeat- say they rejected a shipment from Israel as laugh- Israel

edly called Pfizer Chief Executive Officer Albert ably small. “We are connected in this pandemic,” 20.7
HAWLEY: TOM WILLIAMS/CQ-ROLL CALL/GETTY IMAGES; ISRAEL: KOBI WOLF/BLOOMBERG. DATA: BLOOMBERG REPORTING

Bourla—17 times in recent weeks, the government says Khaled Shiha, a senior official in the Palestinian U.A.E.

says. The effort paid off, and Netanyahu on Jan. 7 Health Ministry. “They can’t consider themselves 11.9

said Israel can expect enough doses for all citizens vaccinated without doing the same thing with the Bahrain

to get vaccinated by late March. “We will be the Palestinian population.” 6.2

first country in the world to emerge from the Back in Israel, health-care providers have set up U.K.

coronavirus,” Netanyahu told reporters. In return clinics and dispatched mobile vaccination units to 4.3

for expedited supplies, he promised to provide every corner of the country. While the activity isn’t U.S.

Pfizer with data on outcomes to help the company as frantic as it was in late December, the pace is 3.0

better understand the vaccine’s performance and likely to pick up again soon. Gili Regev, director Denmark

spot any unexpected side effects. Vaccine ship- of the infection prevention unit at Sheba Medical 2.0

ments from Moderna Inc. started arriving in early Center near Tel Aviv, says health-care workers Iceland

January, and AstraZeneca Plc will begin sending who got the vaccine early in the campaign have 1.4

its version this spring. shown increased levels of antibodies, and those Italy

Israel won plaudits for a strict early clampdown who’ve fallen ill have typically had a milder case 1.3

that largely contained the outbreak, but in May of Covid-19. “Within a week or two we’re going Slovenia

the government let down its guard, with schools to really see the effects, probably in all of Israel,” 1.1

reopening and Netanyahu urging citizens to go out Regev says. “It looks very promising and gives us a Spain

and “have fun.” New infections spiked, taking the lot of optimism.” �Ivan Levingston 1.1

air out of any economic recovery, and unemploy-

THE BOTTOM LINE Israel’s success with vaccinations offers a
ment now tops 12%, triple the pre-pandemic level. cautionary tale about the continuing risks of the virus, as infections
The Bank of Israel forecasts that output will expand surge amid a third lockdown and Palestinian areas wait for shots.
 a
Bloomberg Businessweek

d
32

i
Elon Musk’s
unprecedented h
What happen
has served the s
By Matthew
with Chunying Z
David Stringer, an
 January 18, 2021

33

company got
help from Beijing.
ns once Tesla
state’s purpose?
w Campbell,
Zhang, Haze Fan,
nd Emma O’Brien
 Bloomberg Businessweek January 18, 2021

Last Feb. 10, as authorities in China ended work stoppages As Tesla’s presence has grown, it’s been fair to wonder if
intended to halt the novel coronavirus, much of the country Musk has become Xi’s favorite foreign capitalist. But though
remained quiet. Transportation was still disrupted, and many Musk’s is a privileged position, it’s also an awkward one. U.S.-
workers were stuck in their home provinces. Others had been China relations are at their lowest point since at least the early
told to avoid their factories and offices until managers formu- 1990s, a trend intensified by President Trump but almost cer-
lated plans to reopen safely. tain to continue beyond his term, with President-elect Joe
But on a marshy plain on the outskirts of China’s larg- Biden increasingly skeptical of China and hawkish attitudes
est city, Tesla Inc.’s Giga Shanghai was bustling. Thousands commonplace among legislators from both parties. Stung by
of laborers were back on the assembly line, many of them years of protectionism and intellectual-property theft, and
brought in on government-provided buses from dormitories mindful that China has been accused of large-scale human
secured by officials to keep them from mingling with the com- rights abuses in Xinjiang and Hong Kong, few American CEOs
munity. The workers had plenty of N95 masks: Unlike many are willing to publicly praise it anymore. Even fewer would say,
businesses, Tesla had been allocated ample shipments by the as Musk did on a podcast over the summer, that “China rocks.”
bureaucrats who’d assumed control of protective gear sup- So far, Musk’s dealings there have done little to undermine
plies. The factory was being cleaned with a disinfectant that his position at home. Beloved by many liberals for his environ-
required a regulator’s license to purchase, too. mental credentials, hailed by Trump-aligned conservatives
In its first week after resuming production, with Toyota for his efforts to restore U.S. manufacturing, and—through
Motor Corp., Volkswagen AG, and other foreign carmakers still SpaceX—trusted by the Pentagon to launch spy satellites, he
unable to fully reopen, Tesla Shanghai made about 1,000 cars. seems as popular in Washington as he is in Beijing. But as rela-
By March it was up to 3,000 a week, a higher rate than before tions between the two capitals deteriorate and an increas-
the shutdown. Around that time, according to people familiar ingly authoritarian China seeks to seize global leadership in
with the conversation, an executive remarked in an internal key technologies such as EVs and artificial intelligence, it’s not
discussion that Tesla didn’t just have a green light from the clear how long Musk will be able to straddle this geopolitical
government to get back to work—it had a flashing-sirens police fault line. U.S. politicians could decide they don’t want one
escort. (In an email, a company representative said that “no of the country’s flagship industrial companies sharing knowl-
34 Tesla executive has ever made such a statement.”) edge with a strategic rival; Chinese leaders could adopt a less
Tesla’s rapid return to normal was consistent with the rela- indulgent view of Tesla once it has served their purposes.
tionship the electric vehicle maker has enjoyed with the Under Xi’s economic strategy, “foreign companies are
Chinese state since 2018, when it announced plans to build the going to have pretty good opportunities, but they have to be
Shanghai plant. Again and again, it has extracted perks other aware that the ultimate plan is for all the advanced technol-
international companies have struggled to obtain, including tax ogies to be Chinese,” says James McGregor, the chairman for
breaks, cheap loans, permission to wholly own its domestic Greater China at government relations firm Apco Worldwide.
operations, and assistance constructing a vast facility at aston- “I hope that Elon is going in there with both eyes open.”
ishing speed. Support from the government has helped Tesla
turn China into its most important market outside the U.S. China is the world’s largest market for EVs by a huge
The Model 3 is now among the bestselling EVs in the world’s margin, with about 1.2 million sold in 2020, more than 40%
most populous country, and in Tesla’s most recent earnings of the global total. To a large extent, their popularity is driven
report, China accounted for about a fifth of revenue—a perfor- by government policy. For a decade, central and local admin-
mance that helped make Elon Musk the world’s richest man istrations have offered a complex mix of subsidies and incen-
this month. Perhaps most crucially, the company is moving tives for buying plug-in hybrid or fully electric cars. Some big
closer to the heart of the frenetic Chinese technology sector cities have also implemented systems that penalize owners
than almost any foreign rival. Tesla China is more than a branch of conventional vehicles. In Shanghai, for example, license
plant; it’s intended to do original research and development plates for new gasoline-powered cars have to be purchased
work, allowing it to hire some of the country’s brightest tech- in an auction, at prices that are currently around $14,000,
nical minds and keep them away from potential competitors. whereas plates for EVs are free.
In turn, Tesla and its chief executive officer have done all Yet even in the most plugged-in cities, Teslas were rare
the right things as far as Beijing is concerned. Musk, who until fairly recently. In 2015 the company sold about 3,700 cars
didn’t respond to requests to be interviewed for this story, in China, compared with almost 33,000 by then-leader Zhidou
has effusively endorsed China’s talent pool and its ambitious Auto, a maker of golf-cart-size electric hatchbacks. There
plans for EVs, remarks that go a long way in a country whose were some costly early mistakes. When Tesla began selling its
leaders are intensely sensitive to foreign judgments. Tesla’s first sedan, the Model S, in China in 2014, its designers hadn’t
local unit has also aligned itself explicitly with President Xi grasped that Chinese buyers wealthy enough to afford one
Jinping’s economic policy goals and forced China’s vast array tended to have chauffeurs and so wanted fancier backseats.
of EV manufacturers to up their game, a crucial step in the Its software suite was also missing some popular Chinese
government’s efforts to dominate the age of electric mobility. apps, and its cars’ charging ports were compatible only with
 January 18, 2021

condition: 100% control of its

local operations, to protect its
IP and arguably the world’s
hottest automotive brand. No
other entity, Chinese or other-
wise, could take even a small
financial stake.
This was a very big ask.
Since the 1990s, China had
barred foreign car companies
from setting up wholly owned
An event to celebrate the shipment of China-built units. Instead they had to enter 50-50 joint ventures with
Model 3s to Europe in October
Chinese entities, sharing revenue, technology, and expertise
Tesla’s proprietary chargers, not China’s national standard. with companies that might use those assets to develop com-
The bigger problem was that every Tesla sold in Beijing or peting products. Changing the rules would require both local
Shanghai was made in the U.S. Like many Chinese govern- and national government support. By late 2017, Tesla had set-
ment initiatives, EV subsidies had been designed to expand tled on Shanghai as the likely choice for a factory, but people
the country’s industrial base and support state companies, familiar with the matter told Bloomberg News early the next
so they generally didn’t apply to imported vehicles. Chinese year that negotiations were stalled over the ownership ques-
manufacturers such as BYD Auto Co. and BAIC Group, by tion, with central government officials insisting on a JV.
contrast, benefited enormously from the aid, which allowed Musk’s timing proved fortuitous, though. The U.S.-
them to sell midrange EVs for the equivalent of $20,000 or China trade war was intensifying, with Trump threatening
less after purchase subsidies. wide-ranging tariffs and American companies encountering
Within Tesla, discussions about China proceeded warily. a more hostile environment in the People’s Republic, includ-
Three former senior managers, who asked not to be identi- ing calls on social media to boycott their products. In a sur-
fied describing internal deliberations, recall intense scrutiny vey of member businesses published in 2018, the American 35
of dealings with Chinese suppliers or partners, in part over Chamber of Commerce in China reported that 75% felt “less
concerns about protecting intellectual property. The integ- welcome than before,” reflecting “perceptions among foreign-
rity of supply chains was another worry. Tesla executives, invested companies that they are not treated equally.” For
two of the managers say, often didn’t feel they knew enough the first time since China’s economic opening in the 1980s,
PREVIOUS SPREAD: XI: IORI SAGISAWA/POOL/GETTY IMAGES; MUSK: PATRICK PLEUL/DPA/AP PHOTO. THIS PAGE: DING TING/XINHUA/GETTY IMAGES

about the environmental records of some Chinese vendors— it seemed possible that the inward flow of foreign money
for example when it came to graphite, a critical battery com- and expertise would reverse course, jeopardizing growth.
ponent whose mining can cause severe pollution. “China was looking for headlines to say that U.S. companies
In 2017 the company’s orientation to China began to still want to come here,” says Kenneth Jarrett, a former U.S.
change. That March, Tencent Holdings Ltd., a flagship tech consul general in Shanghai and now a senior adviser at the
business with close connections to the state, bought a 5% Albright Stonebridge Group. “And Tesla realized that and real-
stake in Tesla, prompting Musk to declare on Twitter that ized that they could bargain harder and win.”
it would be “an investor and advisor.” He didn’t specify on Musk held out for full control, and in April 2018 he got it.
what Tencent would advise, but the deal seemed to presage That month the powerful National Development and Reform
a serious push into China. Tesla was also working to correct Commission announced that the 50% foreign ownership cap
some of its earlier issues, by adding, for example, Chinese- for automotive businesses would disappear by 2022, with
standard charging ports. operations devoted entirely to EVs exempted almost imme-
Out of public view, Tesla was exploring how it could build a diately. Three months later Tesla sealed an agreement with
more robust presence there, with executives canvassing main- the Shanghai government for a factory capable of producing
land cities in search of potential factory sites. Shanghai, tra- 500,000 vehicles a year.
ditionally China’s most outward-looking metropolis and the
hometown of Robin Ren, the Stanford-trained engineer who Early in 2019, Musk and a host of dignitaries gathered
headed Tesla’s Asia-Pacific operations, was an obvious front- by a muddy field in the Lingang New Area, a development
runner. But Chinese cities have a long history of competing to zone an hour and a half ’s drive from the center of Shanghai.
attract big-name foreign investors, and in the U.S., Musk had Taking the stage behind a white, Tesla-branded lectern, he
proved adept at making governments vie for his affections, marked the occasion with characteristic hyperbole. The fac-
securing generous incentives and tax breaks for a factory tory the company was breaking ground on, he said, would
near Reno, Nev., and a rocket launch site in South Texas. be “perhaps the most advanced” on the planet. What was
In its discussions with potential Chinese hosts, according to more, “we think, with the resources here, that we can build
people familiar with the search, Tesla had a nonnegotiable the Shanghai Gigafactory in record time.”
 Bloomberg Businessweek January 18, 2021

He then went to Beijing, his every move tracked on echelon of the Chinese state. She hung a large organizational
social media by Chinese fans, many of whom were charmed chart depicting the upper reaches of the central government
by his decision to dine at one of the city’s better-known hot and senior officials in key provinces—critical Kremlinology in
pot restaurants. The highlight of the trip was an audience modern China. According to the employees, she’s said that
with Premier Li Keqiang. “I love China,” Musk said as they if she wants to get a message to Xi, she need only go through
met, providing a soundbite that would be distributed enthu- one intermediary, which would be an astronomical level of
siastically by state media. It quickly became clear that China access in China. (The Tesla representative denied that Tao
loved him back, and not only because Li replied that Musk has ever made this claim.)
might be granted permanent residence. As Tesla’s plans for production in Shanghai advanced,
In March of that year, several state-backed banks finalized the help kept coming. In early December 2019, China-made
a deal with Tesla for as much as $521 million in construction Model 3s were approved for purchase subsidies of just under
financing. They agreed to lend the money at a subsidized 25,000 yuan ($3,900) per vehicle, despite a broad government
rate and on a nonrecourse basis, meaning that in the event of effort to curtail such giveaways as EVs became more compet-
default, the banks would have no legal claim on Tesla beyond itive with conventional cars. Shortly afterward, Tesla secured
its collateral. The factory was already going up at an astonish- another financing deal from state-controlled banks, this time
ing pace, with the Shanghai government prodding it on any worth more than $1 billion.
way it could. Tesla had been allowed to begin work before Musk’s claim that the Shanghai factory would be up and
securing all its permits, and local officials were stationed on running with unprecedented speed proved correct. Its cars
site to process paperwork. Connecting the facility to the water began rolling off the line right before the end of 2019, less
network took only four days, and State Grid, the national than a year after groundbreaking. In keeping with company
electricity distributor, said it had completed Tesla’s power practice, the first vehicles were reserved for employees, one
hookup faster than for any project of comparable size. of whom, as the launch event unfolded, proposed to his girl-
Tesla seemed as popular in Beijing, where Musk returned friend with the car as an engagement gift. She said yes.
in August 2019 for a schedule of meetings that included a sit-
down with the minister of transport, Li Xiaopeng. The same So far, Chinese consumers—who, because of the near-
36 day, the government announced that all Teslas, no matter elimination of the coronavirus within their borders, are
where they were made, would henceforth be exempt from closer to economic normalcy than the citizens of virtually
a 10% purchase tax on new vehicles. The carve-out brought any other major country—have reacted enthusiastically to
the number of carmakers receiving the exemption, intended Tesla’s expanded presence. The Model 3 was China’s most
to encourage the adoption of EVs, to 33. The other 32 were popular EV for much of 2020, and the Shanghai plant has
foreign-domestic joint ventures or wholly Chinese. also begun producing the Model Y sport utility vehicle. In
Then again, Tesla’s local operation was beginning to look October the city’s government delivered yet another blow to
like a domestic entity. In mid-2019 the company had begun traditional cars, declaring that vehicles with out-of-town reg-
an overhaul of its Chinese business, previously part of an istrations would be barred from key downtown roads during
operating unit for the Asia-Pacific region. Now, Tesla China the daytime, an effort to tame resurgent traffic snarls. That
would be an independent division reporting directly to the prompted more demand for EVs among commuters seek-
U.S. headquarters. Tom Zhu, a Chinese-born executive who’d ing to capitalize on the vehicles’ exemption from the auc-
been overseeing construction in Shanghai, was put in charge, tion system for new Shanghai plates. Potential buyers were
and he set about making the unit more autonomous and dis- particularly interested in Teslas, thronging local dealerships
tinct from the rest of Tesla. in maskless, undistanced crowds.
Soon after he took over, according to current and former Already, the Chinese market has become crucial to Tesla’s
employees who asked not to be identified discussing internal overall business. The company recently changed how it
matters, Zhu told staff to start writing emails in Chinese when- reports financial figures to make China the only country, aside
ever possible. Most departments were directed to report only from the U.S., for which it breaks out quarterly revenue. It
to him, the employees say, and direct contact with the U.S. rose there from $669 million in the third quarter of 2019 to
was sharply limited—so much so that sending a direct message $1.74 billion in the same period of 2020. Musk’s bet, in other
without Zhu’s approval to Musk, who’s long invited even low- words, is paying off.
level staff to bring problems straight to him, could draw a rep- The question of what China is gaining is more complicated.
rimand. (The Tesla representative said there are “no measures For many automotive experts, the government’s prime motive
blocking connections” between China and headquarters.) is clear: to upgrade the capabilities of the Chinese electric
The reorganization also increased the power of Grace Tao, car industry by forcing Tesla’s competitors and suppliers to
a former correspondent for state-controlled China Central improve their game. Beijing in recent years has been gradually
Television who leads communications and government withdrawing support for EV companies, seeking to consol-
affairs. Tao made little secret, the employees say, that her idate an industry that at one point had almost 500 domes-
priority was to ensure Tesla retained support from the top tic players. Tesla, the theory goes, will be the stick against
It’s long been all but impossible to make money in China
without official cooperation, and that’s become even more
the case as Xi has expanded the state’s power over every
sector of the economy
which the remaining players measure themselves. It will also evolve to become rolling platforms for advanced sensors and
provide a major boost to companies such as Contemporary artificial intelligence, though, it’s not hard to imagine a time
Amperex Technology Co., the Chinese battery giant providing when U.S. authorities might take a more restrictive view—or
power packs for some of Tesla’s Shanghai-made cars. Thanks when, at the very least, it will be politically controversial for
in part to its relationship with Tesla, its shares tripled in 2020, an American automaker, particularly one led by a CEO who
and it currently has a market value of about $140 billion; other also runs SpaceX, with its close ties to the U.S. military, to
suppliers hope for similar windfalls. engage as intimately with China as Tesla has.
“Tesla’s presence is meant to help develop the entire supply If that evolution occurs, the closeness of Tesla’s Chinese
chain,” says Scott Kennedy, a senior adviser at the Center for operations to the state won’t help the company. In late
Strategic & International Studies who researches the Chinese September a Chinese blogger broke the news of an upcom-
economy. There’s a precedent for this in the smartphone ing Model 3 price cut. He was soon visited by police who
industry. Most iPhones are assembled in China, to the ben- instructed him to delete the post. Tesla demanded that the
efit of a vast array of domestic suppliers. But though Apple blogger reveal his source, then announced not long after that
Inc. generates considerable profits in the Chinese smartphone a logistics manager had been fired for leaking confidential
market, the sector is dominated by local companies such information and was being investigated by law enforcement.
as Huawei, Oppo, and Vivo, which have prospered in their (Tesla’s representative said the company reported the leak
U.S. rival’s wake. “On the one hand you have access to this to police as a “breach of business confidence” and had no
extremely efficient manufacturing supply chain and a huge involvement in the subsequent investigation.) Meanwhile,
market,” Kennedy says. “On the other you’re standing inches a recent Chinese-language company news release empha-
from competitors who could put you out of business.” sized that Tesla’s plans to export Shanghai-made Model 3s
At this point, going out of business is almost as remote a to Europe would “contribute to the new development struc-
possibility for Tesla as it is for Apple, but there’s already evi- ture of China’s ‘dual circulation’ ”—a direct reference to Xi’s 37
dence that, despite its early success, the carmaker may fall blueprint for making the country more self-reliant and there-
short of its most transformative expectations for China. It fore resistant to Western pressure.
has repeatedly cut the price of its Shanghai-made Model 3s To achieve the Chinese presence that Musk seems to want,
to align them more closely with their domestic competi- this kind of alignment is probably essential. It’s long been
tion, and in a recent investor presentation it boasted that all but impossible to make money in China without official
the vehicle is now “the lowest-price premium midsized sedan cooperation, and that’s become even more the case as Xi has
in China.” It’s also exporting Model 3s from the Shanghai fac- expanded the state’s power over every sector of the econ-
tory to Europe, a possible sign that the Chinese market isn’t omy. Highlighting Tesla’s utility to the government is also a
soaking up all its production. Meanwhile, local EV manufac- good way to ensure that, once domestic competitors have
turers are investing heavily in better-looking products and grown strong enough to challenge it head-on, the company
more sophisticated technology. One of the most prominent, still has friends in Beijing. As the sudden disappearance of
XPeng Inc., raised $1.5 billion in an initial public offering in Alibaba Group co-founder Jack Ma demonstrates—the gov-
New York last year, and another, NIO Inc., is now worth con- ernment halted the IPO of his financial conglomerate, Ant
siderably more than General Motors Co. Group, after he criticized regulators in a speech in October,
The more immediate challenge to Tesla’s business in China and he hasn’t been seen publicly in months—it’s unwise to
could come from Washington, even with Trump out of the take anything for granted.
White House. For most of his career, Biden was one of a num- Veterans of the Chinese car industry, who’ve watched
ber of senior Democrats who advocated closer ties with Beijing, world-leading companies such as Volkswagen and Toyota
arguing that the best way to push it toward democratic val- struggle for decades to achieve what Musk has managed
ues was by embracing it within the international system. He’s in only a few years, are impressed with how skillfully he’s
sharply changed his tune in recent months, calling Xi a “thug” navigated the mainland system. Their praise is qualified by
and pledging to force him to “play by the rules”—an attitude a key caveat, though. “Elon’s played the game very well,”
the incoming Senate majority leader, Chuck Schumer, is likely says Bill Russo, a former Chrysler executive who’s now the
to emulate. Many of the contenders to lead the post-Trump CEO of Automobility Ltd., a Shanghai-based consultant. “But
Republican party, including senators Tom Cotton and Ben Tesla got this because it was in China’s interest for Tesla
Sasse, are also at least as hawkish on China as Trump. to have it.” <BW> �With Dana Hull
At the moment, controls on what U.S. companies can Editor’s Note: Haze Fan, a member of Bloomberg News’s Beijing
do and sell on the mainland tend to focus on technologies bureau, contributed to this article before being detained by
such as semiconductors, rather than automobiles. As cars Chinese authorities in December.
38
oom er us nesswee uary 1

m
c i st fa
the favor e —
 Bloomberg Businessweek January 18, 2021

When Spotify went public in April 2018, Daniel Ek had Obama Podcast, and Spotify expects new shows from Prince
been struggling with this question for more than a decade: Harry and his wife, Meghan Markle, to put up big numbers,
How would the company make money? The Swedish entre- too. Spotify now hosts almost 2 million podcasts, up from
preneur had saved the music business from 15 years of 2,500 three years ago, and has more than 600 exclusives.
declining sales with an app that can stream millions of songs Apple still has the most listeners in the U.S., but Spotify has
on demand. But in exchange for that bottomless buffet, he narrowed the gap. And it’s No. 1 in many overseas markets.
agreed to return more than 70% of every dollar Spotify The company has already converted more than 20% of
earned to rights holders. So despite building the most pop- its 320 million total users—about 70 million people globally—
ular paid music service in the world—it would take in $6.1 bil- into podcast listeners. The larger the audience gets, the
lion in sales in 2018—Spotify Technology SA hadn’t turned easier it is to pry ad dollars from radio and TV; Spotify’s
a profit since Ek co-founded it in 2006. Wall Street is obvi- ultimate goal is dual revenue streams from ads and sub-
ously capable of forgiving years of a company’s losses (see scriber fees. “If you look at the amount of people listening,
Amazon, Netflix, Tesla, etc.). But investors have never made how young the demographic is, anyone would look at that
sense of Spotify’s business model. For every $5 that comes and say this is going to be the next big medium,” says Dawn
in, about $3.75 goes right back out. Ostroff, the company’s chief content officer.
Ek had long argued that the answer would come from Many of Spotify’s biggest partners and competitors,
changing how the music business operated. Three record including record labels, advertisers, and talent agents, ques-
label groups control the majority of new music releases, giv- tion if it’s wasting money on a niche business. In 2019 the
ing them power over Spotify in negotiations. But Ek thought podcasting industry generated less than $1 billion in U.S. ad
streaming would begin an era when artists didn’t need sales, a fraction of the $14 billion captured by radio. Apps
labels. Musicians could use social media to promote their such as Luminary, which charge customers for original
work and Spotify to distribute it. “The old model favored shows, haven’t worked. “The audience for podcasts has
certain gatekeepers,” he wrote in a letter to prospective grown, and Spotify’s share is growing,” says Michael Morris,
investors in February 2018. “Today, artists can produce and an analyst at Guggenheim Partners LLC. “It’s still not clear
release their own music.” what that will mean in terms of money.”
40 Shortly after going public, Spotify unveiled a feature that
let artists upload music directly to its app. Without inter- Courtney Holt thought short-form video would solve
mediaries, performers got a larger share of royalties, and Spotify’s money problems. He joined the company in
Spotify kept more money. The company tested the feature 2017 after a stint at Maker Studios Inc. (now Disney Digital
with a handful of artists—Chicago rapper Noname was an Network), which sold ads and provided tools, services, and
early adopter—and expanded the trial to a few hundred partic- data for thousands of YouTube channels. He’d seen up close
ipants that September. But most artists weren’t ready to forgo the growing audience for video and thought Spotify could
the help they get from labels to promote their work, espe- create a product like Snapchat’s Discover page, where orig-
cially since millions of people use services other than Spotify, inal series sit alongside videos from TMZ and the Daily Mail.
and the labels didn’t like being circumvented. By December Spotify had already licensed clips from ESPN and Comedy
its stock had slipped to a low of $106.84, a drop of more than Central and produced original series from Russell Simmons,
20% from April, and doubts about the company’s long-term Tim Robbins, and other celebrities; shows were as much as
viability grew. In July 2019, Spotify ended the program. 15 minutes long and included dance competitions and docu-
Ek wanted to build a business the labels couldn’t touch, mentaries. But they were parked in a video tab on the app and
and there was another massive audience up for grabs. The got little promotion. Holt realized he couldn’t compete with
number of people in the U.S. listening to podcasts monthly YouTube and Facebook Inc. People didn’t come to Spotify for
had grown from 32 million in 2010 to 73 million in 2018. video, and it was expensive to produce, anyway.
Although the vast majority of them used the iPhone’s pod- Podcasting was accounting for a growing share of overall
cast app, Apple Inc. had never converted it into a rev- activity on Spotify. In Germany the app was the most popular
enue stream: Podcasts get money from ads, which Apple way people listened to podcasts thanks to a 2016 partnership
doesn’t sell. Outside the U.S., where most of Spotify’s users with comedy talk show Fest & Flauschig. Its success convinced
reside, there was no dominant player. Spotify had already Spotify that the format deserved a closer look. “We saw that
dethroned Apple as the king of online music. Maybe it could the people consuming podcasts were more highly engaged,”
do the same in podcasting. Holt says. “Why not take advantage of the millions of Spotify
In the past two years, Spotify has spent close to $900 mil- users we could convert into podcast listeners?”
lion acquiring podcast production and technology compa- At the time, Spotify’s library had only a few thousand
nies. And it’s spent millions more on exclusive rights to shows shows, mostly about music. There were no executives dedi-
from celebrities such as Kim Kardashian and TikTok star cated to licensing or talking to people in the industry. Holt’s
Addison Rae. Two of its most popular programs are come- team started securing licenses from thousands of creators, con-
dian Joe Rogan’s The Joe Rogan Experience and The Michelle vincing them Spotify could expose their shows to a younger
 Bloomberg Businessweek January 18, 2021

41

▲ Dawn Ostroff ▲ Lydia Polgreen

audience than listened elsewhere. Engineers built out a home analysts. The number of podcasts on the service climbed from
in the app for podcasting, creating a landing page and copy- 185,000 at the end of 2018 to 700,000 at the end of 2019, and
ing features from the music service, such as customized play- more than 40 million users were listening to them.
lists. Spotify also started buying exclusive rights, starting with The experience with Budden and Schumer taught Spotify
comedian Amy Schumer and talk show host Joe Budden. execs that it’s easier to buy an audience than build one.
Hosting exclusives, the thinking went, would persuade Rogan, the industry’s biggest and most controversial star,
people to commit to Spotify as their main podcasting ser- has attracted a massive following by creating a forum for
vice. Budden’s show was popular prior to the company’s stand-ups, mixed martial artists, moguls, scientists, assorted
involvement, and it amassed a large following on the app. galaxy-brain free-speech absolutists, and people such as
Schumer’s podcast didn’t catch on right away; Spotify lacked Gavin McInnes, founder of the neofascist Proud Boys. Rogan
the infrastructure at the time to advise her on production had never offered his podcast on Spotify, but in May 2020
or content, and there wasn’t much of a promotion strategy the company agreed to pay him as much as $100 million for
outside the app. (The show still airs.) Executives realized his show and, eventually, the exclusive rights. As part of the
they needed help. arrangement, Spotify committed to stay out of Rogan’s way.
PHOTOGRAPHS BY MARK ELZEY FOR BLOOMBERG BUSINESSWEEK

In February 2019, Spotify announced it would acquire Since the deal, he’s interviewed the author of Irreversible
Gimlet Media Inc., a podcast studio, and Anchor, a tech com- Damage: The Transgender Craze Seducing Our Daughters,
pany, for about $340 million. Founded by radio journalist Alex whose concerns about people transitioning at young ages
Blumberg and media executive Matthew Lieber, Gimlet had a are widely criticized as anti-trans. For the third time, he
reputation as the HBO of podcasting—the home for premium hosted conspiracy theorist Alex Jones, who’s promoted the
storytelling. Anchor made Spotify the podcasting equivalent false claim that the mass shooting at Sandy Hook Elementary
of YouTube, enabling people to upload shows to the service. School in Connecticut never happened. ( Jones was sued
The next month, Spotify announced a deal for another stu- for defamation by eight families of victims, though not for
dio, Parcast. Ek declared it was a new era for his company. comments he made in conversation with Rogan. In a depo-
“We believe that over time more than 20% of all listening sition, he acknowledged that the shooting happened and
on Spotify will be nonmusic content,” he said on a call with blamed “psychosis” for his statements.) Apple, Facebook,
 Bloomberg Businessweek January 18, 2021

“We were the ones to say we’re going to go make this

a real thing. If we are great, that’s great for Spotify.
If others see greatness and want to copy, cool”
YouTube—as well as Spotify—had banned Jones’s show sells ads at the scale YouTube does with video, and the vast
Infowars for violating their terms of service. Employees peti- majority of podcasts have no advertising, says Jay Richman,
tioned Spotify to punish Rogan for hosting guests that spread a vice president in charge of Spotify’s ad business.
misinformation and hate. Ek heard their concerns at multi- Richman says he’s solved the problem with a technology
ple internal meetings, but he declined to discipline Rogan. called streaming ad insertion. It lets Spotify serve an ad when
While Ostroff, the chief content officer, says Rogan’s show a listener gets to a certain point in an episode, so marketers
must meet corporate standards, she doesn’t tell him whom pay only for an ad that’s heard (or played, at least). The fea-
to book. “We are very happy with the deal,” she says. ture is available on select shows, with a wider rollout in prog-
The Joe Rogan Experience is Spotify’s most popular pod- ress. Since Spotify sells the ad, it can provide data about when
cast globally, topping the charts in more than 15 markets, and how someone is listening—on a phone, say, or a tablet.
according to the company. Spotify shares rose more than This helped persuade Catherine Sullivan to commit
10%, to $175.01, the day it announced the deal. Wall Street $20 million to Spotify in July. Before an internal promo-
sees Rogan benefiting Spotify much as House of Cards did tion, she was chief investment officer for North American
Netflix Inc. When it began airing in 2013, the political thriller operations at Omnicom Media Group, which buys ads for
starring Kevin Spacey and Robin Wright attracted millions of companies including Disney, Google, and McDonald’s. She
new subscribers—and reduced Netflix’s dependence on rival started looking to invest in podcasting in late 2019 and talked
studios, much as podcasts lessen Spotify’s reliance on Sony to other major participants, including Pandora Media LLC
42 Music, Universal Music Group, and Warner Music Group. and IHeartMedia Inc., but she ultimately decided against
Throughout 2020, Ostroff and Holt pursued podcasts investing with them. “If it continues to grow at a 15-to-20%
from life coach Brené Brown and Kardashian; commissioned clip when everything else is declining, it will continue to
shows based on DC Comics characters (the first is Batman siphon money away,” Sullivan says.
Unburied); and struck a multiyear deal with the Duke and In the ad world, $20 million is minuscule—TV networks
Duchess of Sussex, who’ll start producing and hosting pro- make more during one quarter of the Super Bowl. But a
grams this year. From Gimlet, Spotify gets reported series commitment of that size was a first for podcasting and pos-
such as Reply All, which investigates internet culture, and sibly a sign of more to come. Sullivan compares it to early
Resistance, which explores recent civil rights movements. ad deals with Snapchat and Twitter Inc., which, she says,
Parcast churns out addictive titles like Serial Killers and “started small, and then they start scaling.”
Political Scandals that are cheap to produce and sound
like someone’s reading a Wikipedia entry. The Ringer, a Spotify’s outsize investment in podcasting almost
sports media company founded by popular podcaster Bill guarantees that it will supplant Apple as the world’s No. 1
Simmons, provides many of Spotify’s sports and pop culture distributor. But is the company creating a business or a bub-
shows. Podcasts that don’t fit in those buckets—including ble? It’s spent millions of dollars buying shows it gives away
those from Obama, Kardashian, and other tentpoles—fall for free and will continue to lose money on podcasts for at
under what’s known internally as Studio Four. (Employees at least a few years. It’s had little success reducing payments
Gimlet, Parcast, and the Ringer are negotiating with manage- to the record labels.
ment for better pay and more control over how their shows Spotify’s competitors are making investments of their own.
get turned into movies, TV shows, and books. Spotify has Apple, which has the second-most-popular streaming ser-
said little publicly about the talks.) vice with Apple Music, is funding original series and plans a
With its huge user base, Spotify often dictates what’s a larger overhaul of its podcasting business. Amazon.com Inc.
hit. The Michelle Obama Podcast, in which the former first is Spotify’s biggest rival for programming, buying shows for its
lady talks to friends, family, and celebrities, surged up the music app and its audiobook service, Audible. In December,
charts with constant promotion on the app. The same goes Amazon announced it is acquiring Wondery, a major podcast
for The Journal, a daily podcast about the Wall Street Journal’s producer, for its music service. (Bloomberg LP, which owns
newsroom. Even so, marketers have been reluctant to commit Bloomberg Businessweek, has partnered with Wondery on the
to ads, because it’s hard to know if people hear their promo- podcast The Shrink Next Door.) Holt says that more big play-
tions. Most podcast services can tell advertisers that a show ers validate Spotify’s investment: “We were the ones to say
was downloaded but not if anyone listened. No one company we’re going to go make this a real thing. If we are great, that’s
 Bloomberg Businessweek January 18, 2021

great for Spotify. If others Share of Americans

see greatness and want to Who Listen to Podcasts
copy, cool.” ◼ In the past month ◼ Ever
Spotify executives speak 50%

with some certainty about

how podcasting will solve 40

the company’s profitabil-

ity problem. If it happens, 30

it’ll take some time. Ek has

sold investors on a future 20

in which shows from Rogan

and the royals reduce 10

Spotify’s reliance on record

labels and lift it to profit- 0

ability. His dealmaking has 2008 2019

bought him time to deliver DATA: EDISON RESEARCH

on that promise: The company’s stock price more than dou-

bled in 2020, boosting its valuation from about $27 billion to
more than $60 billion. But ad sales stayed largely unchanged,
and estimates put losses at more than $300 million.
Still, listeners are loyal to their favorite hosts, attend-
ing live tapings in the pre-Covid era and buying merchan-
dise. This could let Spotify charge customers added fees for
podcasts without ads, or open up additional lines of busi-
ness, such as TV adaptations. Podcasts could turn Spotify
from a technology platform with bad margins into a media 43
business with decent ones.
To make this work, the company needs to find the next
Joe Rogan. It’s also targeting new audiences by making ▲ Kat Lazo
shows in multiple languages and experimenting with for-
mats. Currently, Spotify operates studios in 17 countries, Morning shows have long been a staple of FM radio, where
where it’s adapting popular shows from the U.S. into local the most popular stations marry well-known hosts with hit
languages and developing regional hits. Fausto, a true-crime songs, such as on The Breakfast Club in New York or Big Boy’s
series about a 1991 murder in the city of Ecatepec, topped Neighborhood in Los Angeles. But unlike radio, which offers
Spotify’s charts in Mexico in 2019, and the second season everyone the same music, The Get Up serves up tailored play-
started in November. The top news podcast in Brazil is Café lists based on what Spotify’s algorithm thinks a person wants
da Manhã (Breakfast, in Portuguese), a collaboration with to hear. The show has had more than 1 million listeners since
the newspaper Folha de São Paulo; Spotify now produces it started in October, according to Lydia Polgreen, Gimlet’s
versions of it in Argentina, Chile, and Colombia. One of its head of content. “We’re really, really excited about how well
most popular podcasts in Indonesia is a talk show hosted it’s going,” says Polgreen, who was previously editor-in-chief
by four former radio personalities that replicates conver- of Huffington Post. That’s because The Get Up has already
sations in neighborhood shops, or warungs. delivered in a key way, by getting people who use Spotify
In 2020, Spotify introduced a feature that lets creators solely for music to consider something else.
combine songs and talk into one program. Early tests in In a November episode, the hosts talked about how the
PHOTOGRAPH BY MARK ELZEY FOR BLOOMBERG BUSINESSWEEK

this genre include 60 Songs That Explain the ’90s, hosted by pandemic had been make-or-break for many relationships.
music journalist Rob Harvilla, and Rock This With Allison They shared their own dating history, too: “My family asks
Hagendorf, featuring interviews with Foo Fighters and me what feels like every other day why I’m still single,”
Smashing Pumpkins lead singer Billy Corgan. Morman said. Although the hosts hadn’t met before they
The most popular new podcast on Spotify is The Get Up. started taping, they’ve developed a rapport. Jernigan and
The daily morning show opens with headlines and then Morman tease Lazo about her frugality, while Jernigan is
intersperses songs with pretaped talk segments on subjects often mocked for his knowledge of arcane facts. They’ve
such as self-care, pickup lines, and music. It’s hosted by Kat turned the latter into a segment called “Stump X,” in which
Lazo, a YouTube creator turned video producer; Xavier “X” Jernigan answers trivia questions. “It’s an ever-changing
Jernigan, a podcaster and Spotify exec; and Speedy Morman, show,” Morman says after taping. “I just wanna put emphasis
who anchors video series for the media company Complex. on the fact that it’s growing and evolving.” <BW>
Bloomberg Businessweek January 18, 2021

Test All of
Minnesota?

You B
Saliva samples from across
Minnesota are processed at the Minnesota is setting an example for other states and
Infinity BiologiX facility in Oakdale
the federal government. If anyone is interested
By Susan Berfield and Michelle Fay Cortez
Photographs by Ackerman + Gruber

45

Betcha
 Bloomberg Businessweek January 18, 2021

T he deliveries arrive at the lab four times a day, most in

UPS trucks, some by courier, the last usually just before
midnight. Each brown bag contains a sealed vial filled with
Not all of the tests offered in Minnesota in the last months
of 2020 relied on saliva samples. But almost every one that
did, no matter where in the state it was collected, arrived
saliva turned bright blue from a fluid that deactivates the at this lab in Oakdale. It’s a joint venture of sorts between
coronavirus, if there is any, but preserves the nucleic acid so Minnesota and Infinity BiologiX LLC, which developed the
it can be detected. The lab is on the fourth floor of a building first saliva test authorized for emergency use and runs the
in what will eventually be a biotech hub. It has light sculptures facility, and its partner, Vault Health Inc., which oversees
in the lobby, is surrounded by farmland and construction, the collection of the saliva.
and is just 10 miles from downtown St. Paul, which is conven­ One pallet of reagents, with 16 boxes of product—enough
ient but not nearly as important as its proximity to a United for 10,000 tests—seemed like a lot to Jennie Ward, the lab
Parcel Service Inc. depot. When the lab opened in Oakdale manager, in October. A month later, Minnesota’s positivity
in late October, the staff used to pile the bags onto standard rate was 14% and at least 25 pallets were lined up. The lab
rolling carts. By early November those were no longer suffi­ was going through one pallet a day, then two. If it reached
cient. They began using bins, but those required them to lean three it would be at its limit, which meant it would be oper­
in deep, again and again. By Thanksgiving they’d switched ating every hour of every day and processing 210,000 tests
to Gaylord boxes, with sides that easily pull down, which weekly. Just before Thanksgiving the lab had 80 people
allowed them to more quickly unload the 900 or so samples on staff, a couple of freezers full of positive samples, and
each one holds. new lab coats, tags still on, hanging on a rack in a hall. By
That was a small adjustment among many as the velocity year’s end, Ward had plugged in the backup freezers, hired
of the virus’s spread increased. Positivity rates, hospitaliza­ 20 more employees, and ordered extra lab coats. About
tion rates, intensive care capacity, R­naught, lives lost: There 400,000 of the state’s 5.6 million residents had tested posi­
are so many ways to describe the contours of the Covid­19 tive, and the Oakdale lab had processed more than 800,000
pandemic and measure its devastation. Every one of them tests. “It’s worse than what I expected it to be,” Ward says of
was moving in the wrong direction by late autumn, first in the autumn and early winter. “I expected it to be bad. But I
the states around Minnesota—the Dakotas, Iowa, Wisconsin— didn’t know what bad looked like.”
46 then in Minnesota itself. That’s when the state government
began an ambitious effort to encourage every resident to be
tested—easily, quickly, and for free.
Minnesota isn’t the biggest state or the wealthiest. But it
M eredith Vadis had been in charge of the Twin Cities’
wastewater operations, mass transportation, and land
use planning. In March she became the state’s chief operating
has a progressive governor, a budget surplus that’s allowed officer for Covid testing, a role she remained in for the rest
it to supplement federal funding and spend about $150 of the year. Initially, Minnesota’s focus was on testing people
million on testing so far, and a well­functioning pandemic with symptoms of the disease and those at high risk, such as
task force. It’s home to the Mayo Clinic and the University of employees at food manufacturing plants with outbreaks, hos­
Minnesota, one of the nation’s best public research institu­ pital workers, and residents and staff at long­term­care facili­
tions. All those advantages may explain why it’s one of the ties. In those early times, Vadis says, the state processed fewer
few states to implement a testing strategy that the federal gov­ than 2,000 nasal swab samples a day.
ernment should have adopted, one that helped Hong Kong, On May 25, Memorial Day, a Minneapolis police officer
South Korea, and Taiwan avoid the worst of the pandemic’s killed George Floyd. In the weeks that followed, tens of thou­
ruin, and that doesn’t require dramatic scientific advances sands of people in Minnesota alone protested against racial
or carry any potential health risks. “I love what Minnesota is injustice. The state, like others, encouraged those who’d
doing,” says Ashish Jha, dean of the Brown University School marched and chanted to get tested. Minnesota pushed
of Public Health. “We need a lot more of that.”
Instead, every U.S. state has been on its own, says
Minnesota Governor Tim Walz: “It was a catastrophic failure
on the federal level.” Vaccines are coming, slowly, and limited
at­home self­testing is now available. But restrictions could
be lifted too soon, again, or continue to be dismissed. New,
more transmissible variants of the virus will mean increased
exposure and infections, and testing may have to be refined
to detect these genetic changes. It’s still people vs. the virus.
The virus is opportunistic—and people continue to provide
it many opportunities. For much of this year, if not longer,
testing will be essential. The incoming Biden administration
has promised to make it a priority. And even when the pan­
demic subsides, the coronavirus will remain.
Bloomberg Businessweek January 18, 2021

past 10,000 tests a day. But the protests didn’t accelerate doctor to help his penis and it’s a different story.” Vault
the spread of the virus; the positivity rate among the specialized in prescription testosterone therapy and treat­
demonstrators was never higher than 1.8%. ments to help reduce anxiety and improve hairlines. It
By late summer, after some restrictions were loosened and offered its own “sex kit.” It was also working with the genom­
others ignored, 1,800 people had died and 6,500 were hos­ ics lab at Rutgers University to develop a fertility test that
pitalized. Vadis and the task force adopted a new strategy. would determine the effective age of someone’s sperm. That
The Harvard Global Health Institute had calculated that the connection would prove fortuitous: The lab was develop­
state would need to complete 17,500 tests a day to mitigate ing a saliva­based PCR test for the novel coronavirus. The
the spread of the coronavirus in the unyielding Minnesota U.S. Food and Drug Administration authorized the test for
winter, and 63,500 to suppress it. Health officials had collab­ emergency use at home in May. Vault turned its telemedicine
orated with the University of Minnesota and the Mayo Clinic service to focus on Covid, and in August the Rutgers lab
in the early months of the pandemic to create the capacity to became a private company, Infinity BiologiX, backed by
test as many as 45,000 people a day with nasal swabs. Now it private equity. “Everything good that’s happened with Covid
needed the ability to process almost 20,000 more. is serendipitous,” says Dr. Andrew Brooks, the company’s
That’s when Minnesota found Vault, or maybe it was the chief executive and scientific officer. The sperm project, he
other way around. Jason Feldman, a former Amazon.com notes, is ongoing. Vault still sells the sex kit, too.
Inc. executive, and Claire Cochrane, a former Blue Apron Vadis and the Minnesota task force wanted to make testing
executive, had started Vault in 2019 as a men’s medical con­ so convenient, timely, and accurate that everyone would be
cierge service offering visits at home and online. He’s the able to determine if they were infected, whether they had
chief executive officer; she’s the chief operating officer. After Covid symptoms or not. Antigen tests, which detect a specific
raising $30 million in early 2020, Feldman told TechCrunch, protein in the virus, are inexpensive and quick to process,
“You tell a guy to go see the doctor about his heart health which is why many public­health officials recommend their
and he likely won’t, but you tell him you’ll bring him a widespread use. But antigen tests are also less sensitive than
PCR tests, which pick up infections when only a tiny amount
of the virus is present. Antigen tests work best when people
Scenes from a pre-Thanksgiving
Covid testing event at Gustavus
are at the peak of their infection. Minnesota’s task force didn’t 47
Adolphus College in St. Peter think that would be good enough.
Vault’s saliva tests are as sensitive and as accurate as the
nasal PCR tests, according to data posted by the FDA. The
kits can be sent to people’s homes, and even when adminis­
tered at testing sites, collecting saliva samples requires fewer
medical professionals and less personal protective equipment
than using nasal or throat swabs. Spitting into a tube is more
comfortable than being swabbed. And the virus is deacti­
vated with a shake of the tube, which takes the worry out of
transporting them.
The state leased the space for the lab and paid for the
equipment—$4.7 million in total. Infinity BiologiX set it up
in eight weeks. When the day comes that Minnesota no
 Bloomberg Businessweek January 18, 2021

longer needs it, Infinity BiologiX will keep the equipment—

the Chemagic 360 machines named Shelly, Randy, Timmy, Ward, manager of the
and Jimmy, after characters from South Park; and the Infinity BiologiX lab

QuantStudio 5s named Morticia and Gomez, after The Addams

Family. In the meantime, Minnesota receives discounted
prices on the tests themselves and a promise from the com­
panies to process as many as 30,000 a day and make results
available within 48 hours after the samples arrive at the lab.
Minnesota has set aside at least $30 million for the program.
Feldman says Michigan, New Mexico, and Wyoming also want
Infinity BiologiX labs, but this winter, with federal funding
uncertain, they haven’t had the budget.
Minnesotans swarmed the 10 community testing sites as
soon as they began saliva collection in late October, “tail­
gating for testing in the parking lot before we opened,” says
Vadis. Vault brought in people from Walt Disney Co. with
experience in line management. It trained members of the
National Guard to oversee the collection process. Many of
them are medical practitioners of some sort, says Feldman,
though they don’t have to be. It takes about 30 minutes to
learn how to supervise the spitting and package the spec­
imen. There’s also cultural training. “We’re teaching the
guards to be super approachable, so no one is intimidated,”
Feldman says. Minnesota is home to sizable populations of
Somalis and Hmong, and finding enough staff who can trans­
48 late medical terms in their languages has proved challenging.
Vadis, who’s been regularly tested, has advice for first­
timers: Get some pickles. “You can’t eat them until you’re people not do that. “It’s not a great idea to have one in your
done, but if you smell them it helps produce saliva.” The tests medicine cabinet like a box of Band­Aids.” So far almost
require a lot of saliva. She sometimes picks up pickles at an 400,000 kits have been requested, and fewer than 150,000
Arby’s drive­thru. In a pinch, lemons will help, too. have been returned to the lab.
By early November the positivity rate in Minnesota was Minnesotans overwhelmed Vault’s online customer
more than 15%, and in places such as St. Cloud it was reach­ service, too, in the nicest possible ways. Spit supervisors
ing 30%. Doctors and nurses in the Twin Cities reported used to begin the Zoom call: “Have you had any recent expo­
shortages of beds in intensive care units and long waits for sure to anyone with the virus?” Minnesotans would often
patients in emergency rooms. Vault opened its online regis­ take the opportunity to share all sorts of details from the
tration for home testing kits on Nov. 12, and 30,000 people past two weeks of their lives. Some asked questions about
signed up. UPS and Vault itself were overwhelmed, Vadis the pandemic. Others had ideas about how to fight it. Many
says. That Sunday, the obituaries in the Star Tribune filled just wanted to chat. Vault had to change the script. Now
more than 10 pages. Over the next week, people ordered the supervisors are explicit: “I’m going to ask you a series
153,000 tests. of yes­or­no questions.”
The kits didn’t come back at the expected rates. It turned In January, Minnesota announced that because saliva tests
out people were hoarding them. “We know that Minnesotans are easier to administer, and the Oakdale lab can handle
are really into free stuff,” Vadis says. “They’ll order the tests more samples, that will be the only kind of test it offers at its
because they’re free, but they won’t use them.” She’d prefer 20 community sites.

“Our strategy was effective.

But its effectiveness was blunted by th
magnitude of
 Bloomberg Businessweek January 18, 2021

A few days after the Vault lab opened, Dr. Deborah Birx,
the coordinator of the White House response to the pan­
demic, visited the state and said: “We have deep concern
pandemic,” says Michael Osterholm, an epidemiologist at
the University of Minnesota and an adviser to the incoming
Biden administration. But in Minnesota, he says, “it abso­
about Minnesota at this moment.” She recommended that lutely would have been worse without the testing.” Governor
every person from age 18 to 35, more than a million in all, Walz notes that when North Dakota and South Dakota had
be tested before Thanksgiving and again before the end of the highest positivity rates in the nation, Minnesota was
the year. Young adults were reporting the highest case rates, ranked 21st. “Our strategy was effective,” he says. “But its
seemed most likely to be asymptomatic if infected, were still effectiveness was blunted by the sheer magnitude of cases.”
social, and were headed home for the holidays.
One of the state’s epidemiologists asked all the higher edu­
cation institutions to test their students, with help from Vault
in some cases, community health clinics in others. “They
A t the lab, the only thing that isn’t changing is the
process itself. That’s not allowed. It has 12 steps and
takes four to six hours. On this November day, the morning
said, ‘You betcha.’ It’s Minnesota,” says Dan Huff, assistant batch has already arrived. As samples come in, the outside
commissioner for the Health Protection Bureau. The admin­ of each collection tube is decontaminated with an ethanol
istration at Gustavus Adolphus College in St. Peter sent emails solution. Employees log the tubes into the computer, then
and texts to tell everyone on campus about the one­day uncap them and slot them into racks, which are placed on a
program. They asked coaches to prod their players, teach­ Janus machine. The Janus transfers a bit of saliva from each
ers to remind their students. They offered thousand­piece tube into its own small vial, placing 96 samples on a plastic
jigsaw puzzles to the first 250 people who showed up and plate that looks like a honeycomb. It’s put in a Chemagic 360
AirPod Pros and a JBL speaker as prizes. machine, which uses magnetic rods and beads to protect the
About a hundred people stood in line outside the gym­ viral RNA and a buffer solution to remove everything else.
nasium on a bright and cold Friday, Nov. 13, waiting for the What remains is a purified genetic sample. The plate is
testing to begin. More wore masks than hats. By day’s end combined with three others to produce a single new plate,
about 60% of the school’s 1,800 eligible students had been the size of two mobile phones stacked together, that holds
tested, along with almost 200 faculty and staff. Only 20 came a tiny portion of the spit sent in by 384 people. Then comes
back positive. the PCR testing. The plate runs through a thermocycler, 49
But throughout the state the situation had gotten worse which heats and cools it in a preset pattern. Attached fluo­
faster than most people expected. On Nov. 19, a week before rescent markers grow with each cycle, eventually signaling
Thanksgiving, the governor issued a statement. It had taken if the virus is present. At the end of the day, the vials con­
29 weeks to reach 100,000 infections in Minnesota and only taining samples determined to be negative are disposed of.
an additional six to reach 200,000. He expected that in just The positive ones are stored in the deep freezers for future
three more, the total would be close to 300,000. He ordered research—including tracking genetic changes in the virus.
bars and restaurants to stop serving indoors, and gyms and Vault notifies people of their results within 24 hours of com­
theaters to close. That rendered the effort to test young adults pleting the test.
specifically less crucial just as it was getting under way. In all, The lab processes so many samples that certain supplies
about 380,000 people were tested in Minnesota the week can be hard to come by, Ward, the manager, says as she walks
before Thanksgiving. Vadis says it’s hard to know for sure from room to room. Some supplies, such as reagents, are
how many were 18 to 35 years old. crucial—if the lab doesn’t have the specific ones it needs,
After the governor’s executive order, the task force set a it can’t operate. (That’s never happened.) Other items can
new winter priority: to make sure all those who held criti­ be replaced. Pipettes and tips are used to siphon the saliva
cal jobs could be tested. “How?” asks Huff. “I don’t know. from each sample. At one point they were unavailable in the
We’re going to figure that out.” He and Vadis are pragmatic. quantities required, and the lab had to find a new vendor
They know all their efforts make up just one slice of what and invest in equipment to ensure a steady supply. The staff
epidemiologists call the Swiss cheese approach to disease prefers screw caps on the test tubes, which are easier to
protection. “We know you can’t test your way out of this use, but for a while had to make do with push caps instead.

he sheer
Because the lab’s supplier had temporarily run out of the
labels needed to create bar codes, Ward had stopped at a
Staples on her way into work that morning to pick up some.

cases”
Test kits for the staff are stacked along a wall of Ward’s
office; snacks—apples and oranges, nuts and protein bars—are
piled on top of her desk. Around noon, she gets a call. The
lunch she ordered for everyone has arrived. She gets another
call. Samples from some of Minnesota’s first responders are
on the way. Those get expedited. “Call me when you’re at the
curb,” she tells the driver. “I’ll run down.” <BW>
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Why blind optimism is driving us nuts
By Mark Ellwood
Illustration by Simone Noronha

J e

Buss ess
Bus sss
 WELLNESS Bloomberg Pursuits January 18, 2021

W
hen her patient started talking about sick “At least,” which are followed by a suggestion that however
notes, neuropsychologist Judy Ho decided bad you’re feeling, at least you’ve got plenty else that should
to intervene. Her client, a wildly successful offset and outweigh it. Even the oppressive insistence that
entrepreneur, was rich, happily married, we should love our body, no matter what, can tip into upbeat
and well-regarded by his peers. intolerance by implying that it’s not OK to want to work on
The problem was the days when he felt tummy folds or laugh lines.
depressed and run-down but unable to FONO can power any delusional self-belief, whether it’s
admit it. The only way to address it, he felt, politicians trying to spin their way out of Covid-19 failures
was to regress, like a schoolboy, and look for permission from with platitudes about strength or hucksters selling a chance
a doctor to regroup. “He knew he wasn’t sick, but he’d go in to get ahead. The Federal Trade Commission has reported an
and make something up,” she says, “just so he could take a uptick in Ponzi schemes during the pandemic—70% higher in
day off and be OK with himself.” the second quarter of 2020 than the year before. Ordinary
She recognized he was suffering from a surging contem- Americans, casting around for inspiration and reassurance,
porary malaise. “He always had to demonstrate his worth to became prime targets for these peddlers of perkiness. Such
people,” she continues. “He was thinking, ‘I must exude this magical thinking has paralleled the rise of professionals hired
image of success and a happy life that everybody has come to be a personal cheerleader. Membership of the International
to know about me, and I don’t want Coach Federation, the life coach-
to ever change that image.’ That’s ing body, has soared from almost
toxic positivity.” 4,700 worldwide in 2001 to more

790%
Call it FONO, or fear of a nega- than 41,000 today.
tive outlook. Also known as “dismis- Successful people are the most
sive positivity,” it’s expressed as an likely to fall prey to this way of
overbearing cheerfulness no mat- thinking, says Naomi Torres-Mackie.
ter how bad things are, a pep that
denies emotional oxygen to any-
Increase in part-time As head of research at the Mental
Health Coalition and a practicing
52 thing but a rictus grin. You see it
on Instagram, where the affective
and full-time life coaches psychologist at New York’s Lenox
Hill Hospital, she works extensively
filter is always upbeat, usually fol-
lowed by the hashtag #blessed. You
worldwide since 2001 with patients trapped on what she
calls “the achievement treadmill.”
hear it from the SoulCycle instruc- That’s where self-doubt and reflec-
tor exhorting every rider to swag- tion are elbowed aside in favor of a
geringly sweat through the pain. gung-ho, can-do spirit.
It’s available from the newly anointed chief creative officer Take the recently married financier she treated. At the pin-
for Vital Proteins, actress Jennifer Aniston, who claims that nacle of his career, his sole identifiable problem was sleep-
renewal isn’t only a result of its powders: Instead, “it’s within lessness. As he worked with Torres-Mackie, the Wall Streeter
us.” You might even recognize it in the boss who insists that recognized the cause was his singular fixation during waking
colleagues start every Zoom meeting by sharing a piece of hours on how he compared with others.
good news to help keep moods buoyant amid the gloom. “The only questions he asked himself were ‘How much
Think of this mindset as one that responds to all human success am I having, and what is my boss thinking?’ ” she
anxiety, or sadness, with uncompromising optimism. It can says. “He was so focused on putting out a picture-perfect
be found in sentences that start with those negating words happy and positive image, it left him no room at all to pro-
cess and digest the tough stuff.” Only after lying down at
night would those concerns come to the fore and keep
him awake. His treatment afterward centered on breaking

“Some of the best

the connection he’d forged between seeming happy and
being successful.
For the current generation, the origins of this emotional

moments in life...are full cure-all lie in the 1990s, when then-president of the American
Psychological Association, Martin Seligman, posited that pes-

of mixed emotions”
simism is a learned behavior. Therefore it both could and
should be avoided.
That observation snowballed into bestsellers such
as The Secret, first published in 2006 by Australian TV
executive-turned-author Rhonda Byrne. It was popularized
after Oprah Winfrey championed its ethos. That breakout
 How Toxic Is Your Positive Outlook?
We’ve compiled a 10-question test to see how you score on the FONO scale:
Give yourself one point for every question you answer with a yes

1 4 8
Have you started a Do you own a 6 Do you have a ringtone
sentence with “At least …” well-thumbed copy of Have you set to Happy by
in the last week? The Secret? considered keeping Pharrell Williams?
a gratitude journal?
2 5 (Add another point 9
Would your friends Have you ever worked if you already do.) Would you prefer
describe you as the in one of the to be a blissful idiot
motivator of the group? following professions: 7 rather than
life coach, spin instructor, Have you used a tortured genius?
3 cheerleader, or the phrase “Smile”
Have you liked an uplifting Tough Mudder franchisee? or “Cheer up” or 10
meme on social media (Add a half-point “It’s not all bad” in the Did you read this story
recently? (Add a point if you for each additional gig last month? without acknowledging
posted one.) checked.) any downsides?

0-2 POINTS 3-5 POINTS 6-8 POINTS 9+ POINTS

YOUR Ouch. You’re more of a A happy medium. You’re It might be time for You are suffering from
SCORE sad sack than a Pollyanna. no more cheerful than you to watch Inside Out acute FONO. Unless your
Keep it up, and no one you ought to be, like a again—at least until name is Mary Poppins,
53
will invite you to parties person who’s finished the you get to the parts please seek treatment
(once it’s safe to do so). last Zoom of the week. that make you cry. immediately.

bunkum bible was essentially built on claims that the power Ho, the neuropsychologist, has an unexpected suggestion
of positive thinking would provide whatever you want, be it to help calibrate a Pollyanna perspective: a session watching
a baby or a Mercedes-Benz. This past summer it was turned Disney-Pixar’s Inside Out, which animates and dramatizes
into a straight-to-video movie starring Katie Holmes. human emotions. “One of the best antidotes to toxic posi-
Contemporary corporate culture exacerbates these ten- tivity is reexamining your value system and understanding
dencies. Pre-pandemic, employees were urged to be happy that some of the best moments in life, when you truly feel
because they worked in an office, perhaps, with pingpong good, are full of mixed emotions,” she says. “And that’s what
tables and free lunches. Now, in a work-from-home world, we should be embracing as human beings.”
they’re urged to be grateful simply to have a job. Along with yourself, allowing others to express negativity
Whitney Goodman, a psychotherapist in Miami, explains is vital, too. Banish the words “at least” from your emotional
that such workplaces create a Catch-22 where employees vocabulary, Ho recommends, and instead focus on reflec-
aren’t able to raise concerns for fear they won’t be seen as tive listening. “Repeat back what you think you heard, with-
a team player or worthy of a promotion; stuck with unex- out adding anything to it. You don’t always have to Band-Aid
pressed concerns, they’re more likely to fail in the end. (Her something, or ask, ‘What can I do?’ ”
new book, Toxic Positivity, will be released under an imprint It’s no surprise that Byrne would also return now. Her
of Penguin Random House later this year.) sequel, The Greatest Secret, came out in November. Read
Clinical reports underscore her thesis. A 2018 study pub- it, the blurbs tout, and you can remove all negativity—as if
lished in the Journal of Personality and Social Psychology echoed doing so should be a central goal in life. (More than 80% of
previous research when it found that people felt more sad Amazon.com Inc.’s user reviews gave it five stars. It would be
when they were expected to conceal such emotions. Brett too negative to be negative, it seems.)
Ford, a psychology professor at the University of Toronto “This year, with crisis on top of crisis, we’ve gone back
and one of the study’s authors, says tackling toxic positivity to the instinctive ways of coping pounded into us from a
requires staring down, rather than past, uncomfortable feel- young age—that we need to be positive to get through this,”
ings. “Notice them, let them be, try not to push them away,” Goodman says. “It’s true that we need to have some aware-
she says, “and they will pass. Emotions are supposed to be rel- ness this isn’t going to last forever, but we also have to attend
atively short-lived experiences.” to the fact that, well, this isn’t normal.” <BW>
 WELLNESS Bloomberg Pursuits January 18, 2021

TheMix-and-MatchFitnessPlan
Working out is hard. Working out from home is even harder. Let us do the
heavy lifting and show how to make it work for you. By Britt Smith

C O N N ECT E D !
GET

54

FINE TUNE!

FOR THE UNMOTIVATED FOR LAPSED ATHLETES

Community builds accountability. LEVEL UP with a Hyperice Replace a cable machine, barbell, LEVEL UP with a Whoop
With the new Peloton Bike+ Hypervolt Plus Bluetooth ($399) and in-person trainer with Tonal Strap 3.0 (from $180). It mea-
($2,495), you can ride with oth- massage gun. Automated sessions (from $2,995; $49 per month sures strain from workouts and
ers who will champion your suc- adjust the speed for you, and the membership), a digital system in everyday stress against sleep and
cess, send virtual high-fives on app generates a score to indicate which opposing electromagnetic recovery to help identify burnout
the interactive leaderboard, and how you’re recovering from work- fields—not actual weights— and overtraining.
celebrate streaks and milestones outs. Compete with yourself to get create resistance all within a
(like 100 rides)—all of which may the highest number possible. 7-by-7-foot space. Internal sen- DOWNLOAD TrainingPeaks
encourage you to make it a daily sors gauge your form to deliver ($20 a month for a premium sub-
habit. “Find a favorite instructor DOWNLOAD personalized coach- guidance and keep you safe by scription) for one-on-one access
[out of 23] who will uplift you,” ing at Ladder Teams (from $59 a dropping weight if they sense to elite coaches who can share
says Ash Wilking, a Nike trainer month). The experts there devise fatigue or failure, while dynamic specific notes for marathon, tri-
and founder of Ash Fit. “Chances super-motivating workout plans, modes increase resistance at the athlon, and lifting programs. Don’t
are you’ll go longer than expected says Chase Weber, a certified bottom of, say, a biceps curl to have a coach? A detailed question-
and feel like a new person after.” personal trainer. give you a better burn. naire will help find a perfect match.
 W N SS Bloomberg Pursuits January 18, 2021

T H R O U G H !
PULL

FOR THE WHOLE FAMILY FOR QUICK RECOVERY

Don the Oculus Quest 2 ($300) authentic simulation prioritizes If your knees can’t handle LEVEL UP by putting physical
to gamify your workouts. Its technique and timing over power. pounding the pavement anymore, therapy in the palm of your hand.
FitXR video game ($30) gives you try the well-designed, water-filled PowerDot (from $199) has wireless
access to an on-demand trainer PRO TIP Get silicone headset Ergatta Rower ($2,199), a low- electrodes that relax postworkout
or to group workouts. Challenge covers to mitigate the buildup of impact option for creaky joints. muscle aches or accelerate injury
friends or family in multiplayer sweat and bacteria. Hone your endurance with its recovery, and the connected app
mode, though everyone will need Push Programs, sequential work- tells exactly where to place them.
their own device. Kids will love div- DOWNLOAD thorough, science- outs calibrated to your skill level
ing past obstacles and mimicking backed workouts with Sworkit that end in a challenge such as GO STREAMING with Sky
poses in OhShape ($20), or break- ($10 per month). Its myriad rowing for 30 straight minutes. You Ting TV ($20 per month) to cor-
ing a sweat following the chore- options cross disciplines and age can also race against eight other rect posture and relieve tightness.
ography set to 32 songs in Dance groups, varying skill levels and rowers in your competitive subset Its library of yoga flows accommo-
Central ($30). Miss your box- time, including quick-burst energy on a virtual course. Relaxing open dates different levels—“Yoga for
ing gym? Enter a virtual ring with release programs for kids and flex- rows let you go for a set distance Dads” has all of the sun saluta-
The Thrill of the Fight ($10). The ibility sessions for older adults. or time—or just go. tions and none of the chaturangas.
55

FOR CARDIO FIENDS

lights up your entire body. At
more than 7 feet tall, CLMBR
($5,000) features a sizable touch
display that connects you to on-
demand, instructor-led classes
and tutorials—but you can also go
rogue and do all-out, two-minute
finishers to empty your tank and
test your cardiovascular fitness.

LEVEL UP with a Garmin

Forerunner 945 ($600), which
sends expert training plans right
to your wrist. Superior metrics
FOR ABSOLUTE BEGINNERS
such as ground contact time, Think of the Bowflex SelectTech LEVEL UP with a Manduka Pro
balance, and cadence help opti- 552  Dumbbells ($349) as a Yoga Mat ($120). It’s densely
mize your form, which may reduce Russian nesting doll of adjust- cushioned to protect joints during
injury risk. The watch can recom- able free weights housing floor-based moves like a bird dog,
mend workouts based on your 15 sets in one. A simple turn of kneeling overhead press, or plank.
daily training load and recovery the dial scales them up from 5 to Also great for yoga, of course.
status as well. 52.5 pounds, making them “easy
PHOTOGRAPHS COURTESY COMPANIES

to adjust between sets, which GO STREAMING with the begin-

DOWNLOAD the premium I love,” says Ash Fit’s Wilking. ner workouts on Apple Fitness+
workouts on Nike Training Club The first 25  pounds go up in ($10 per month), available on
High-intensity cardio coupled and Nike Run Club and take the 2.5-pound increments, so they’re Apple devices. They cover basic
with resistance training makes guesswork out of the equation. a stellar option for steady pro- movements like a bodyweight
vertical climbing machines one of Favorites include “Full Body Cardio gressions as you grow stronger. bent-over row, so you learn proper
the most grueling pieces of equip- Crush” and the audio-guided Go lighter for lateral raises and technique before putting those
ment; the push-pull movement “Don’t Wanna Run Run.” heavier for front squats. dumbbells to good use.
 WELLNESS Bloomberg Pursuits January 18, 2021

Check In
On Your
Skin
Whether it’s dehydrated or
stressed, your body’s first line of
defense could use some love
By Aja Mangum
Illustrations by Simone Noronha
56

A tumultuous 2020 affected more than our mental health.

The barrage of bad news followed by worse news compro-
mised complexions as well.
“To the professional eye, it’s noticeable—we can liter-
ally see the stress on your face,” says medical aesthetician
Candace Marino, who’s also known as “The L.A. Facialist”
in Hollywood circles. “Since resuming practice, I’ve noticed
clients who normally have flawless skin deal with new con-
cerns like acne, hyperpigmentation, dryness, and sensitivity
resulting from stress.”
LEGS FEET
The correlation between skin health and overall well- While the face gets most of the Self-care may conjure spritzes of
ness isn’t a new concept, but the strain of our new normal attention, the overpumping of cortisol lavender, a fluffy robe, and spa
can affect the laxity and radiance slippers for some, but for others a
is sending droves of patients to dermatologists. “Although
of other parts of the body as well. luxurious portion of Fico D’India Bath
there are many factors that can impact someone’s com- “Outside of the face, dry brushing is Salts ($41) with notes of fig and cedar
plexion, stress happens to be the leading cause for dull a great way to self-care as it helps to helps soften stresses (and skin) in
drain the lymph in our body, increase a very master-of-the-universe way.
skin,” says Mona Gohara, of Dermatology Physicians of
blood circulation, and exfoliate For more serious cases, slather feet
Connecticut and an associate clinical professor at Yale. the skin,” says Nicole Rouzan, an in CeraVe Healing Ointment ($20),
“When stressed, the body produces high amounts of corti- esthetician at Effacé Aesthetics in throw on a pair of thick socks, and
Santa Monica, Calif. Made with sturdy let the hyaluronic acid and ceramides
sol, the main hormone that breaks down the skin’s collagen
sisal fibers, the Goop G. Tox Ultimate restore the epidermal barrier. “Once
and elastin, which leads to causing inflammation, aging, and Dry Brush ($20) scrapes off dead skin the moisture levels drop, heels start to
accelerated production of wrinkles.” cells and preps skin for a hydrator— produce thick, hard areas of skin cells
ingredients should include humectants, that build up,” says Ava Shamban,
Add in extra booze or too many double espressos, plus
emollients, and occlusives to attract owner and director of a full-service
the annual scourge of winter weather, and dehydration water, soften, and seal in moisture. dermatology clinic in Beverly Hills.
presents another set of issues: Nails become brittle, heels The Alastin TransFORM Body “This can cause increased pressure
Treatment With TriHex Technology on the pad on the heel” and result in
crack, and skin can become scaly. As daily Covid-19 updates,
($195), designed to smooth skin after cracking and bleeding fissures that
remote learning issues, wearing a mask, and missing loved a surgical cosmetic procedure, is a not only are incredibly painful but also
ones take an emotional toll, here’s a guide to keep those glycerin-rich silky cream with squalane can leave feet vulnerable to infections
for high-tech body nourishment. and further damage.
parts of the body that are most visible in fine form.
WELLNESS Bloomberg Pursuits

SCALP
Stress-related hair loss shouldn’t be
cause for alarm—it was going to shed
anyway. “It’s just those traumatic
events push you to the edge where
a bunch of it happens at one time,”
says Corey Hartman, founder and
medical director of Skin Wellness
Dermatology in Birmingham, Ala.
Nutrafol supplements ($88) contain
Sensoril Ashwagandha to balance
stress hormones and tocotrienol
complex to help detox. Pop four a day
and use in conjunction with the brand’s
antioxidant-packed serum ($59), and
your mane should thicken back up in
three to six months.

EYES
The skin around the eyes is thin and
often shows the most visible signs
of aging and stress. “Bags are more
related to lymphatic fluid, which is
the body’s response to stress,” says
Joshua Ross, founder of SkinLab
in Los Angeles. Use the Joanna
Vargas Magic Glow Wand ($285)
to stimulate blood flow and reduce
puffiness. Not to be confused with
dryness, which means the skin lacks
oil, dehydration refers to moisture
loss. The jellylike Schwanen Garten
antioxidant cream ($50) tackles that
57
to help melt away fine lines.

LIPS
Mask-wearing wreaks havoc on
the mouth, says Shamban: “Lips
are suffering from dehydration
exacerbated by trapped heat, humidity,
sweat, bacteria, and repetitive friction.”
Augustinus Bader’s The Lip Balm ($38)
protects without a glossy shine. Under
stress, chronic conditions such as cold
sores tend to flare up. Eos’s The Fixer
Medicated Lip Ointment ($5) tastes
like candy and contains peppermint
and menthol to reduce the sting.

FACE
If lifestyle changes—less caffeine
and alcohol, more fresh veggies—are
too daunting, Kate Somerville’s KX
Concentrates Squalane + Hyaluronic
Serum ($98) can assist. The milky
combo absorbs instantly. Stress is a
different beast: Sebaceous glands go
into overdrive, collagen and elastin
break down, and breakouts increase.
“Stress doesn’t make anything better,”
Hartman says. Heraux Molecular Anti-
Inflammaging Serum ($250) uses
HX- 1, a molecule that shields stem cells
from stressors, along with peptides,
vitamins C and E, and hyaluronic acid
to reduce hyperpigmentation and
smooth wrinkles. 
 CRITIC Bloomberg Pursuits January 18, 2021

indicate where and when you’re supposed to strike, and

force sensors track your power and accuracy. An interac-

Knock
tive display broadcasts trainer-led workouts or quick chal-
lenges, while the software’s patented Rhythm Technology
syncs punching combinations to dance and pop music.
You can compete against friends and family mem-
bers on the same workout and compare results. Or down-

Yourself Out
load the Liteboxer app ($29 a month after a three-month
free trial) and choose from expert-led lessons and other
options, including 15-minute “quick hitters” as well as
endurance-focused 45-minute sessions built around vari-
ous tempos and rhythms of punch combinations.
The app holds a decent selection of songs to accompany
A new piece of home boxing a round, but my first three choices crashed it. To my dismay,
equipment is more video game than only Gold Digger, from former third-party presidential can-
didate Kanye West, allowed my fitness journey to continue.
sweet science—and that’s the point I found the equipment to be highly effective in offering
By Brin-Jonathan Butler a stimulating workout to burn calories and break a sweat,
but any background in actual boxing tends to hinder rather
than reward its use. The Liteboxer is a stationary platform
The morning after the coal-black, 6-foot-tall Liteboxer was with targets that in no way replicate the anatomy of a human
delivered, I walked into the living room and found my cat, being, let alone one with any mobility. Even the swaying of
at a cautious distance, staring up in wonder at this strange a humble punching bag requires rhythm, balance, move-
intruder. It reminded me of the scene in 2001: A Space ment, and constant adjustments to maintain an optimal
Odyssey when the apes encounter the black monolith. range for striking.
58 I, too, had reason to be Likewise, footwork is the foundation for
wary. The $1,495 Liteboxer boxing, but once you settle on an effective
advertises itself as “Peloton strike stance with the Liteboxer, it doesn’t
for boxing,” a reimagin- allow your feet to move anywhere so you
ing of the traditional can reset your balance and deliver more
punching bag. Yet punches. Remaining stationary is anti-
in my living room, thetical to almost all the training I provide for
I couldn’t decide my students. The lighting system telling you
if the enormous where to punch and the sensors measuring
free-standing device force, accuracy, and timing took me out of a
looked more like a boxing gym and into a retro arcade.
high striker that a carni- For many users this will very likely add to
val strongman might pound with its appeal. Case in point: When I tested it out
a sledgehammer or a personalized with two of my students (one intermediate, one
teleporter standing ready to beam beginner), they had a great time syncing the flow
me up to the USS Enterprise. of their punches with the beat of the music. When
Co-founded by Jeff Morin, an MIT- I asked my intermediate student how our one-on-
educated engineer and certified personal one workouts involving focus mitts and light spar-
trainer, and Todd Dagres, general partner at ring compared with using the Liteboxer, he said,
Spark Capital, Liteboxer raised $6 million in an “It’s basically the difference between seeing a lion
attempt to replicate the experience of a sparring on safari in the Serengeti vs. at the Bronx Zoo.”
workout at home. I’ve been intimately involved in box- That sounds about right to me. For anyone under-
ing around the world for the past 26 years—as an amateur standably intimidated by the prospect of entering a
fighter, trainer, and journalist covering the sport—and I boxing gym—much less an actual ring—the Liteboxer
found myself bracing for something like Hasbro’s Simon offers a narrow version of what the sweet sci-
game, Whac-a-Mole, and Dance Dance Revolution all rolled ence has to offer. It’ll be a perfect fit for those
COURTESY LITEBOXER

into one for my fists. who love the thrill of throwing punches to
The cat and I watched the “feature tour” video, relieve stress and get a good burn without
which sounded as if it was scored by Hans Zimmer for all the drawbacks of, you know, getting
a Christopher Nolan white-knuckler. Green LED lights punched in the face. 
 THE ONE Bloomberg Pursuits January 18, 2021

Sometimes taking surface that turns THE COMPETITION with larger bubbles. THE CASE milk textures and
care of yourself is as into an LED screen • Breville’s $130 Milk It just doesn’t heat Outside of a gives more modest
simple as rethinking to control the Cafe features two or cool. steam wand on a concoctions such
a routine. The $169 heating element types of whisk and • The $200 milk professional-grade as cappuccinos a
Nespresso Barista and whisk power variable temperature frother from espresso machine— superior mouthfeel.
certainly adds a level inside the stainless- selection to make Smeg uses two and the skills to The countertop
of indulgence to your steel jug. You can extremely precise— different whisks match, naturally— device excels at
morning ritual. More also personalize and very hot—pours and has a simple no frother rivals more than milk-
compact appliance recipes—turmeric from its carafe. knob interface to the Barista. It uses specific drinks, too.
than mere frother, it’s latte, anyone?— • A longtime select between 600 watts of power, Add chocolate to
capable of preparing or select more standard for hot and cold and 100 more than any the jug to easily
20 coffee-based complicated options at-home frothing, thick and light other. Its innovative make a rich mocha,
recipes at almost- from a Bluetooth- the $20 handheld settings. It comes whisk, a wavy disk or toss in espresso
cafe quality. Choose linked app. Either Aerolatte is a in seven colors that that attaches to a and ice for a
from flat whites or way, all you have to battery-powered correspond with the flat magnetic base, satisfyingly thick
iced frappés using do is add ingredients wire whisk that brand’s other retro- permits a wide iced nitro. $169;
a touch-sensitive and push a button. produces foamy milk style appliances. range of specific nespresso.com

59

results,
For best cow’s
le
use who plant-
r
milk ove natives
PROP STYLIST: REBECCA BARTOSHESKY

e r
based alt
 ◼ LAST THING With Bloomberg Opinion

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China’s Gen Z
Learns to Goof Off
By Shuli Ren

China is known for its diligent restaurant meals, or cars. People will
60 worker bees. The so-called 996 office work less if the prevailing wages in
schedule—9 a.m. to 9 p.m., six days a labor markets are too low, or if the cost
week—has become standard, especially of leisure activities gets cheaper.
in the tech industry. In the first week Technology is making that happen.
of the year, a 22-year-old collapsed and Watching Netflix shows or TikTok vid-
died while walking home at 1:30 a.m. eos is a cheap, entertaining way to kill
with colleagues from Pinduoduo Inc., time. And with Covid still out there and
an e-commerce company. young people spending more time at
But Generation Z is starting to rebel home than ever, there’s less urge to
against the workaholic culture. A new go shopping. That means they don’t
philosophy has taken hold during the need to earn as much to pay for trips
pandemic, called “touching fish.” The to the mall.
term comes from an idiom saying the best time to catch Even before the pandemic, this demographic trend had
a fish is when the water is muddy. With bosses distracted emerged in the U.S. Men age 21 to 30 are working less,
by the challenges of operating amid public health restric- because of a shift toward video gaming and “recreational
tions, young people lounge around at work, deliver the computing,” according to a recent paper published in the
bare minimum, go for frequent bathroom breaks, and Journal of Political Economy. From 2014 to 2017, young men
refuse to do overtime. spent 2.3 more hours a week on leisure activities than they
It’s a reflection of Gen Z’s disappointment with pay. did a decade earlier and worked 1.8 fewer hours. Men age
Last year, China churned out 8.7 million university gradu- 31 to 55 also consumed more leisure, but instead of work-
ates, a record high. More than 80% surveyed were hoping ing less, they just did fewer house chores.
to earn at least 5,000 yuan ($770) a month in their first job, China, which has a vibrant online scene, can’t be far
according to a recent study conducted by HRTechChina, behind. It boasts the world’s most valuable video game
a recruiting site. Fewer than 30% ended up getting that publisher, Tencent Holdings Ltd. Another popular video
ILLUSTRATION BY GEORGE WYLESOL

much. What’s the point of working hard for so little site, Bilibili Inc., had 1.3 billion daily views in the third quar-
money? State-owned enterprises, which pay less but offer ter, up 77% from a year earlier. Beijing has been worried
cozy, easy gigs, became graduates’ second-most-desired about young people’s online addiction for a while, going as
destination, after internet companies. far as imposing gaming curfews in 2019. But stagnant wage
That’s only part of the story. Labor economists like to growth and cheap online content will only encourage it. <BW>
think of leisure as a consumption good, just like clothes, �Ren is a columnist for Bloomberg Opinion
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