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○ The EU’s vaccine debacle 12 ○ GE finally ditches GE Capital 14 ○ Wall Street’s biggest blooper 22
March 22, 2021 ○ ASIA EDITION When America
needed Covid
swabs, a tiny Maine
company became
an unlikely hero.
The two cousins
who own the
business still hate
each other 42
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March 22, 2021
◀ Couto at his Animal
Recovery Mission,
where rescues get to
live out natural lives
3
PHOTOGRAPH BY ROSE MARIE CROMWELL FOR BLOOMBERG BUSINESSWEEK FEATURES 42 One Essential Business, Two Feuding Cousins
To produce more Covid swabs, the government got into an epic family battle
48 Fighting for the Animals
Richard Couto’s campaign to bring down illegal Florida slaughterhouses
54 Thanks a Million, Bobby Bo
The Mets made a shrewd deal with the retired outfielder. Not that fans care
◼ CONTENTS Bloomberg Businessweek March 22, 2021
◼ IN BRIEF 7 A tax hike? ● VW’s battery-powered surge ● The Oscars ◼ COVER TRAIL
◼ OPINION
◼ AGENDA 8 Yes, reestablishing ties with Cuba might make sense How the cover
◼ REMARKS
8 Social media on the Hill ● Israeli elections ● GameStop gets made
1 BUSINESS
2 TECHNOLOGY ①
“So this week’s cover is
3 FINANCE 12 Did the EU play it too safe managing the vaccine rollouts? about a little company
4 ECONOMICS in Maine called Puritan.”
14 GE heads back to basics “Oh, yeah! We did a
photo essay about
16 Drones are China’s new calling card into the arms market them at the beginning
of the pandemic. Don’t
they make popsicle
18 DoorDash and Uber Eats have a fierce Dutch rival sticks as well as all our
20 Intel and AMD fret as companies craft their own chips
Covid nasal swabs?”
21 Deprived of its smartphone business, Huawei diversifies “Yep, and it turns out
the two cousins who
own the company have
22 Citi’s $900 million gaffe is a windfall for Revlon lenders a relationship about as
24 Bitcoin is supposed to be an inflation hedge. Is it? complicated as
Prince Harry and
25 Japan’s government hates pot—but it’ll put money in it Prince William’s.”
26 Modi ramps up investment incentives in India “Well, this sounds juicy.”
28 ▼ Philippine call centers face a reckoning with AI ②
4 “I’m gonna need 100%
less nostril.”
30 Canada’s housing surge just never quits “Ugh, fine.” ECONOMICS: PHOTOGRAPH BY XYZA CRUZ BACANI FOR BLOOMBERG BUSINESSWEEK; NOSTRIL: GETTY IMAGES; SWABS: COURTESY PURITAN MEDICAL PRODUCTS
③
5 POLITICS 32 The stage is set in Brazil for a Lula-Bolsonaro face-off
33 Sexual assault claims plague Australia’s Parliament
34 Backlogs and barrister burnout dog the U.K. courts
+ SOLUTIONS / 37 MBA networking goes digital for the lockdown era
B-SCHOOLS
39 U.S. schools to foreign students: Please come back “Getting closer! How
40 Stanford’s Jonathan Levin on learning in a pandemic can we up the drama?”
“Maybe with an
airport-newsstand-
◼ PURSUITS 59 Ken Burns presents: The Hemingway you never knew paperback vibe?”
62 History, gene editing, war … a seasonal reading list “Yes! Valley of the Dolls
64 Vintage band gear has become a very hot commodity meets James Patterson,
and we’re there.”
66 Loathed Justice League? The four-hour version is better
67 Astrolabes are fascinating, and Sotheby’s has a gem
◼ LAST THING 68 Advanced degrees mean jobs—except when they don’t
CORRECTIONS An Agenda item in the March 8, 2021, table of contents should have read “Derek Chauvin’s
trial,” not “George Floyd’s trial.” ● “Impact Investing Heads East” (Business, March 1, 2021)
should not have described Howard Buffett as having “a back-seat role” in the running of
I(x) Investments.
How to Contact Bloomberg Businessweek Cover:
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IN BRIEF Bloomberg Businessweek By Benedikt Kammel
○ There have been almost ○ President Biden ○ Volkswagen’s stock ○ The Netflix
121 million coronavirus is considering surged as much as drama Mank
cases worldwide, and nearly the first major scored
federal tax hike 29% 10 Oscar
2.7m since 1993. nominations.
on March 16, the most
people have died. France, His proposal would mostly affect in more than a decade. The black-and-white film about Citizen
Germany, Italy, and other those earning more than $400,000 Investors applauded the Kane writer Herman Mankiewicz
countries in Europe a year. The revenue would help carmaker’s ambitious leads the pack for Hollywood’s top
temporarily suspended use pay for his broad economic and push into battery-powered honors. Because of the pandemic, the
of the AstraZeneca vaccine infrastructure plans. vehicles, targeting 1 million ceremony has been delayed to April 25;
while they evaluate possible EV sales this year. attendees will socially distance in
side effects, including blood Los Angeles’s spacious Union Station.
clots. The company says its
shot is safe.
○ Purdue Pharma ○ Police arrested 7
is exploring a Robert Aaron Long, 21,
settlement plan in connection with the
that calls for the March 16 shootings
Sackler family to at three Atlanta-area
pay more than massage parlors. At least
six of the eight people
$4.2b killed were Asian-American
women, a group that’s
to help resolve seen an alarming increase
thousands of in hate crimes during the
opioid lawsuits. pandemic.
○ Thousands gathered at London vigils for Sarah Everard, 33, who disappeared
on March 3 and was later found dead. The police broke up some of the groups for
skirting Covid regulations, but their heavy-handed manner led to a public outcry.
CAR: COURTESY VOLKSWAGEN. LONDON: HENRY NICHOLLS/REUTERS. DATA: ARTPRICE.COM ○“I know you, and ○ Uber will reclassify all ○ Everydays: The First
you know me. 70,000 of its U.K. drivers as 5000 Days, by the digital
If I establish this workers, entitling them to artist Beeple, fetched
occurred, then be the minimum wage, vacation $69.3 million, including
prepared.” pay, and other benefits. It’s fees, in a Christie’s online
a landmark decision for auction on March 11.
In an interview with ABC News on March 16, President Biden said that he had a the gig economy, whose
“long talk” with President Vladimir Putin about allegations that Russia interfered in employees often enjoy only Most expensive artworks sold
the 2020 U.S. elections—and that Putin would pay for meddling. rudimentary protection and at auction since 2020, by artist
few perks.
Sandro Botticelli $92.2m
Francis Bacon 84.6
Wu Bin 76.6
Beeple 69.3
Roy Lichtenstein 46.2
David Hockney 41.1
◼ BLOOMBERG OPINION March 22, 2021
As the Castro Era Nears play a constructive role in resolving the Venezuelan crisis and
An End, the U.S. Should improve their record on human rights at home. The govern-
Engage With Cuba ment has recently taken some steps to rationalize the currency
system and promote the private sector, but it should do more
to open the economy to outside investment. The Communist
Party transition next month, when 89-year-old Raúl Castro is
scheduled to step down, offers a moment for the regime to
affirm its intention to reform.
Some House Democrats are pressing President Biden to Stubborn and suspicious as they may be, Cuba’s leaders
reverse U.S. policy on Cuba again, returning to the détente should remember two things. First, all these measures
that prevailed before Donald Trump took office. Biden should are in their nation’s own best interests. Second, any thaw
indeed take the first steps toward renewed openness—and put in relations will be temporary unless Biden can point to
the onus on Cuba’s leaders to respond. results. The Cuban regime made a big mistake in failing
As with so many of his predecessor’s policies, Trump was to build on Obama’s initiative, leading many in the U.S. to
quick to declare the Obama administration’s rapprochement conclude that engagement was pointless. The next détente
with Cuba a “bad deal” and began dismantling it whole- will fail unless it benefits Americans and Cubans alike. <BW>
sale, imposing or reimposing more than 200 restrictions on For more commentary, go to bloomberg.com/opinion
travel, trade, and financial and diplomatic ties. The clamp-
down won Trump votes in South Florida, but by almost any
other measure it failed. Cuba’s Communist regime remains ◼ AGENDA
firmly entrenched, and it’s grown even more dependent
on U.S. rivals China, Russia, and Venezuela. Hard-liners in
Havana have continued to crack down on dissent. Cuban
entrepreneurs flourished when Americans were allowed
to visit the island, but the combined impact of revived U.S.
8 restrictions and the pandemic have left them struggling.
None of this serves American interests. Under President
Obama, the U.S. and Cuba struck more than 20 agreements
that addressed U.S. security concerns on issues including
counternarcotics and the environment. Biden should open
the door to renewing such cooperation.
That will require lifting Cuba’s designation as a state spon-
sor of terrorism, which the Trump administration imposed in
its closing days with no real justification. Biden will also need
to restore frayed diplomatic ties—appointing an ambassador,
staffing up the U.S. Embassy (taking additional precautions ▶ Social Media’s Reckoning
while the cause of a mysterious illness that struck U.S. dip-
lomats in recent years remains under investigation), and The CEOs of Facebook, Google, and Twitter testify before
resuming consular services so Cubans can more easily travel a committee of the U.S. House of Representatives on
to the U.S. again. The two sides should cooperate on public March 25 about their roles in allegedly spreading and
health to combat Covid-19 and restart talks on security issues. elevating false information on their platforms.
Further opening should focus on improving the lives of
Cubans on and off the island. The administration should lift ▶ Israel holds general ▶ GameStop reveals ▶ Tencent reports
restrictions on remittances. And it should allow travel to the elections on March 23. quarterly earnings on its quarterly earnings
island, because American visitors are good for local enter- Prime Minister Benjamin March 23. The computer on March 24. China’s
prise. That means people-to-people exchanges and permitting Netanyahu is hoping game retailer has found government is
flights to cities other than Havana, while drawing up a shorter his rapid vaccination itself the darling of day increasingly cracking
“restricted list” of entities with which Americans are forbid- campaign will impress traders and the source down on major internet
voters more than his of some consternation companies to curtail
recent corruption trials. among regulators. their power.
den to do business. ILLUSTRATION BY JACKIE FERRENTINO
Cuba shouldn’t expect the U.S. to lift more targeted ▶ Mexico’s central ▶ Fed Chair Jerome ▶ The World Bank
sanctions, however, let alone the decades-old embargo—whose bank sets interest rates Powell and Treasury presents its annual
provisions are now codified into U.S. law—unless it begins to on March 25. Banxico Secretary Janet Yellen World Development
act, too. Among other things, that means addressing certified faces a narrowing path make their first joint Report on March 24.
claims for property seized after the 1959 revolution, now esti- to cut rates again from appearance on Capitol The bank’s major
mated at almost $9 billion, with interest. Cuba’s leaders should 4%, already the lowest Hill on March 23, to analytical publication
they’ve been in almost discuss their response is this year subtitled
five years. to the pandemic. Data for Better Lives.
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◼ REMARKS
Europe
Injects
More
Doubts
● The EU finds itself mired in perhaps out of political nervousness,” he told Bloomberg TV
bureaucracy and blame in its on March 16.
12 latest vaccine controversy
The EU had administered just shy of 12 doses per 100 peo-
ple as of that day, compared with 33 in the U.S. and almost
40 in the U.K., according to the Bloomberg Vaccine Tracker.
● By Ian Wishart Evidence in the U.K. suggests the shots not only protect the life
of the recipient, but also suppress transmission. On March 17,
European Commission President Ursula von der Leyen mooted
the use of emergency legal powers to effectively seize control
In the eyes of many Europeans, gung-ho populists such as of vaccine production and distribution, leading to another bit-
Donald Trump and Boris Johnson failed to afford Covid-19 ter exchange of words with the U.K.
the gravity it required last year. The European Union’s staid, AstraZeneca said the number of blood clots reported among
safety-first approach by comparison kept down the Continent’s people who have received its shot is lower than the ratio that
mortality rate. Yet caution and collegiality are now looking would be expected in the general population, and it’s work-
more like a hindrance on the way out of the pandemic. ing with national health authorities and European officials.
The EU’s slow, some say botched, vaccine rollout is expos- But now Europe is confronted with more doubts in a region
ing flaws in the communal system that threaten to weaken where the AstraZeneca vaccine was already struggling for
the bloc economically and its leaders politically. The problem acceptance compared with the homegrown BioNTech/Pfizer
has been exacerbated by several countries’ move on March 15 or Moderna versions. European officials complained they
to suspend AstraZeneca Plc’s coronavirus vaccine over con- couldn’t get enough of the AstraZeneca doses when the Anglo-
cerns about blood clots. Compounding a sense of drift and Swedish company said it had production issues. Since then,
panic, their decisions went against the advice of the European it’s been a drip, drip draining of confidence in both the supply
Medicines Agency, the EU’s regulator. It warned of a further and the product, with previous assertions by countries such
erosion of trust in a vaccination program that’s crawling behind as Germany and France that it wasn’t suitable for the elderly.
those of the U.S. and U.K., while the risk of death from the dis- In the EU’s decision-making bodies, as in capitals from
ease is rising along with infection rates. Berlin to Lisbon, officials are asking how Europe got into such
According to several officials, the decisions taken in dire straits. The 27-nation bloc prides itself on its habit of
Europe’s capitals were made unilaterally and without con- emerging stronger from crises. The chaotic vaccine rollout
sultation with the EU executive in Brussels. Yet the resulting may prove the exception to the rule; it was slow out of the
damage will take a united effort to undo. Halting the Astra vac- gates to begin vaccinating its 450 million inhabitants. The
cinations was “devastating” for a rapid vaccine rollout, said relative speed at which the post-Brexit U.K. has inoculated
Guntram Wolff, director of the Bruegel think tank in Brussels. its population—offering the prospect of reopening shops and
“It looks like quite an uncoordinated, spontaneous decision, businesses and even travel abroad—has been a key driving
◼ REMARKS Bloomberg Businessweek March 22, 2021
▲ Vaccine sites in Italy, Germany, and Spain on March 16
force behind the pound’s rally against the euro this year. long-lasting effects on European politics, could see incumbent 13
Whereas the U.K. government gambled early on vaccine governments lose power, and could hinder economic recov-
ITALY: STEFANO NICOLI/NURPHOTO/GETTY IMAGES. GERMANY: MARTIN SCHUTT/PICTURE ALLIANCE/GETTY IMAGES. SPAIN: ALVARO BARRIENTOS/AP PHOTO ery, particularly in worst-hit countries,” says Camino Mortera-
investment and rushed through emergency approval, the EU’s Martinez, senior research fellow at the Centre for European
more rigid adherence to scientific process rendered it slug- Reform in Brussels.
gish. That lack of flexibility was one reason cited by Brexit-
supporters for leaving the bloc, and it may have played a role Still, the EU has legitimate concerns over a shortfall in vac-
in the AstraZeneca impasse. cine deliveries. That’s especially true of the U.K.-produced
AstraZeneca drug—regardless of European reluctance to use it—
A slow take-up in vaccinations will come at a high price by with only about a third of the original doses due to be delivered
keeping businesses under virus curbs for longer, according to in the first half. The Biden administration, meanwhile, rebuffed
Maeva Cousin, an economist at Bloomberg Economics, who European pleas to share its shots. The reports of blood clotting
estimates the economic loss for each week that restrictions lin- couldn’t just be ignored, officials say. Germany paused inocula-
ger at about 3% of the bloc’s gross domestic product. That’s tions using the AstraZeneca vaccine on the recommendation of
at a time when Europe risks being left behind by President the Paul-Ehrlich-Institut, which oversees safety. Governments
Biden’s massive $1.9 trillion U.S. stimulus, which he aims to insisted that the decision wasn’t a politically motivated effort to
follow with a separate infrastructure program. punish the company for its delivery failings or a dig at its sym-
bolism as a post-Brexit success story. The move was “a precau-
With governments prolonging or retightening lockdowns, tionary one,” Italian Health Minister Roberto Speranza told an
the political ramifications of the mess Europe finds itself in are online health conference on March 16.
profound. German Chancellor Angela Merkel, who’s said she’ll
step down this year after 16 years at the helm of Europe’s dom- But that’s not a view shared everywhere. One European gov-
inant power, saw her Christian Democratic Union suffer his- ernment official says the foundations for the present situation
toric defeats in state elections on March 14 that were a test of were laid early in the vaccination rollout when Germany raised
voter opinion before September’s federal ballot. With the slow efficacy concerns. That put pressure on other countries to fol-
rollout blamed for her party losing support nationally, Merkel low suit. Several EU officials say Germany’s decision to suspend
is suddenly facing opposition calls to sack her health minis- the shot had a similar knock-on effect around the Continent.
ter following the AstraZeneca suspension. Mario Draghi’s hon-
eymoon period as Italian prime minister came to an abrupt On May 9 the bloc will celebrate unity for its annual Europe
halt after barely a month, as infections hit three-month highs Day. As the first incarnation of the virus crisis raged last year,
and he shut down schools again. Perhaps most damaging Commission President von der Leyen called for new political
for Europe’s political outlook, French President Emmanuel thinking. “We must recognize that the Europe that will come
Macron has watched his lead over far-right challenger Marine out of this crisis cannot and will not be the same as the one
Le Pen narrow as she lands blows over his handling of the that entered it,” she wrote.
pandemic. They’ll battle it out in an election early next year.
The question this year is whether it emerges stronger or
“The EU’s vaccine rollout—or the lack thereof—will have weaker. <BW> �With Ania Nussbaum and Milda Seputyte
Bloomberg Businessweek March 22, 2021
1 GE Gets Back to
B
U
S
I
N
E
S14
S
Edited by ○ The $30 billion sale of its Culp on March 10 announced a $30 billion deal to PHOTO ILLUSTRATION BY 731. DATA: COMPILED BY BLOOMBERG
James E. Ellis and jet-leasing unit finally ends the unload GE’s aircraft-leasing business, the move
company’s often-troubled foray returned something long absent from GE: simplicity.
David Rocks into financial services, returning
GE to its industrial roots Jet lessor GE Capital Aviation Services, or
Gecas, was the biggest remaining business of GE
Despite its storied history as an industrial icon Capital, the once-sprawling financial-services
founded by Thomas Edison, General Electric company that in 2010 had more than $600 bil-
Co. by a decade ago had morphed into a massive lion in assets. After the unit’s sale to Irish rival
financial-services company bigger than all but a AerCap Holdings NV closes a year from now, GE
handful of U.S. banks. That transformation brought plans to transfer what it says are just $21 billion in
with it a maddeningly complex web of businesses, remaining GE Capital assets onto its industrial bal-
opaque accounting, and financial risk that dogged ance sheet. It will also stop reporting results for
it for years. So when Chief Executive Officer Larry GE’s financial-services, industrial, and combined
businesses separately, streamlining the complex
financial reports that fueled criticism that trouble
could—and sometimes did—lurk for years in those
accounting statements before revealing itself.
◼ BUSINESS Bloomberg Businessweek March 22, 2021
“That’s why I say this is so transformational for for single-aisle jets that offers a more than 20% 15
us,” Culp says. “We end up being all about our reduction in fuel burn compared with the latest
core four industrial businesses. We’re really not engines from CFM International Inc., GE’s joint ▼ GE Capital assets
going to talk about Capital going forward.” venture with France’s Safran SA. $600b
GE plans to use proceeds from the deal—which Power-plant operators’ push to curb emissions 400
include $24 billion in cash, a 46% stake in AerCap also poses a challenge for GE Power, a gas-turbine
valued at $6 billion, plus an additional $1 billion at business whose installed equipment provides 200
closing—to help pay down another $30 billion from about half of the world’s gas-power generation.
the company’s bloated debt load. That would bring The unit is recovering from revenue declines 0
total debt reduction—a top priority for Culp since caused in part by excess global capacity and the
he became CEO in 2018—to about $70 billion since pivot toward renewable energy. It’s made prog- 2007 2020
that year. Taken together, the sweeping moves ress, generating positive free cash flow in 2020,
will reorient GE around its manufacturing oper- a year earlier than planned. And though gas tur-
ations, primarily making and servicing gas-fired bines are a major source of carbon emissions, GE
power-plant equipment, medical scanners, wind executives have argued that gas is still a cleaner
turbines, and jet engines. fuel for utilities than coal. GE Gas Power CEO Scott
Strazik says the company’s latest generation of
The moves “will significantly simplify not only large turbines emit about a third of the carbon
reporting but also the ability for management to dioxide produced by coal and can operate on fuels
focus on GE ‘making things’ again,” UBS analyst blended with as much as 60% hydrogen, which is
Markus Mittermaier said in a client note. drawing greater attention because it emits no car-
bon dioxide when burned.
Simplification isn’t without risk. GE’s credit rat-
ing may be cut, because the debt on its industrial The renewable energy division has been a
balance sheet will rise to about $70 billion after focal point of GE’s turnaround, benefiting from
the AerCap transaction closes. GE Chief Financial wind becoming a bigger part of the global power-
Officer Carolina Dybeck Happe says the company generation sector and surpassing Denmark’s
plans to buy back $25 billion of its bonds after the Vestas Wind Systems A/S as the world’s top turbine
sale and aims to reach debt of less than $45 billion producer in 2020, according to BloombergNEF.
by 2023. JPMorgan Chase & Co. analyst Steve Tusa, GE expects the division—which has accounted for
a longtime GE bear, expressed concern about the about $1.5 billion in combined losses during the
deal’s effect on the company’s debt load in a note last two years—to begin generating cash this year
to clients, saying, “We see material downside from and turn a profit in 2022 as it ramps up installa-
here” for GE’s shares. tions of massive offshore wind turbines. That mar-
ket is expected to grow rapidly in the years ahead,
Culp’s GE turnaround is still a work in progress, and GE forecasts its offshore wind gear will pro-
and its industrial units face a host of challenges. duce $3 billion in additional revenue by 2024.
Airline travel is depressed and will remain below
pre-pandemic levels for years, crimping GE’s Former CEO Jack Welch built GE Capital into
jet-engine unit. The company expects revenue to one of Wall Street’s biggest banks, offering every-
slip again this year at its gas-fired power-turbine thing from credit cards to commercial real estate
business amid a shift toward renewable energy loans to pet insurance. At its peak, it accounted for
sources to meet carbon-reduction targets. about half of GE’s sales and profits. Cracks began
to show after Jeffrey Immelt took over in 2001, and
GE Aviation, the company’s biggest indus- the lending unit almost sank its industrial parent
trial business at $22 billion in revenue last year— during the 2008 financial crisis.
and historically its most profitable division—has
been gutted by the pandemic, with airlines park- Immelt moved to shrink GE Capital in the years
ing jets and cutting flights. GE expects its revenue that followed. He hit the gas pedal in 2015 with
and profit margins to improve in 2021 as air travel a plan to offload more than half of GE Capital’s
begins to recover, but most of that improvement assets while holding on to only those businesses
won’t come before the second half. that supported GE’s manufacturing operations.
But in early 2018, not long after CEO John Flannery
Still, GE Aviation CEO John Slattery says the took the helm, GE shocked investors when it dis-
unit is continuing to invest in the next generation closed a $15 billion shortfall in reserves in an old
of jet engines as the industry faces increasing pres- portfolio of long-term-care insurance policies that
sure to reduce its carbon footprint. The company had badly deteriorated, a reminder of the risks
plans to spend $1.8 billion on research and devel- lurking in GE Capital. The news prompted an
opment efforts this year, in line with 2020 levels,
in a push to develop a next-generation engine
◼ BUSINESS Bloomberg Businessweek March 22, 2021
investigation by U.S. securities regulators that post-pandemic economy and the continuing green
resulted in a settlement in December, in which revolution, something some analysts say is a possibil-
GE agreed to pay a $200 million penalty without ity. “As General Electric shifts to growth investments
admitting or denying wrongdoing. and organic sales after years of portfolio pruning and
balance-sheet repair, we believe secular tailwinds in
Some remnants of GE Capital will remain with markets affected by climate change could fuel long-
the company after the AerCap deal. GE will hold on term market-share gains,” Bloomberg Intelligence
to the insurance portfolio, for example, which had analysts Karen Ubelhart and Christina Constantino
$50 billion in assets at the end of 2020; the holdings wrote in a March 16 note. At the very least, having
have become less of a wild card recently, thanks GE Capital in the rearview mirror leaves Culp with
in part to rising interest rates. Culp told analysts one less problem to worry about. �Ryan Beene
that should a prospective buyer show interest, GE
“would entertain those conversations.” THE BOTTOM LINE A decade ago, GE Capital had more than
$600 billion in financial assets. After parent GE sells its aircraft-
For now, his core focus is on managing debt leasing unit, its financial-services assets will fall to $21 billion.
while increasing revenue amid the rebounding
An Arms Race on Autopilot
● Drones made in China are coming to a conflict near you
A dozen years into its fight with the Islamic insurgent AVIC’s drones have two big selling points:
16 group Boko Haram, Nigeria is getting some new They’re cheaper than comparable aircraft from
weapons: a pair of Wing Loong II drones from producers in the U.S. or Israel—the other primary
China. The deal is one of a growing number of sales manufacturers—and China doesn’t much care
by state-owned Aviation Industry Corp. of China how they’re used, says Ulrike Franke, policy fel-
(AVIC), which has exported scores of the aircraft. low at the European Council on Foreign Relations.
The United Arab Emirates has used AVIC drones in “China is willing to export armed drones to almost
Libya’s civil war, Egypt has attacked rebels in Sinai anyone,” she says. AVIC didn’t respond to requests
with them, and Saudi-led troops have deployed for comment.
them in Yemen. The company’s drones “are now Over the past decade, China has delivered
battle-tested,” says Heather Penney, a fellow at the 220 drones to 16 countries, according to Sipri.
Mitchell Institute for Aerospace Studies, a think tank That’s prompted other nations to boost their
in Arlington, Va. “They’ve been able to feed lessons capabilities in the field, says Michael Horowitz, a
learned back into their manufacturing.”
Nigeria is getting AVIC’s second generation of
Wing Loongs—the name means “pterodactyl”— Combat Drones Delivered, 2010-2020*
which can fly as fast as 230 mph and as high as
30,000 feet, carrying a payload of a dozen missiles. By Chinese suppliers By U.S. suppliers
Since 2015, when AVIC introduced the newer model, Indonesia 8 Kazakhstan
it’s produced 50 for export and an unknown num- 10 12
ber for China’s People’s Liberation Army. And it’s Iraq 3
working on even more advanced aircraft, such as 9 Egypt 10
a stealth combat drone with a flying-wing design Nigeria
Algeria
6
similar to that of the U.S. B-2 bomber. The drone 25 Jordan 6 4
program, combined with deliveries of fighter jets, Pakistan U.K.
trainers, transporters, and assault helicopters, has 55 40 Uzbekistan MIKHAIL VOSKRESENSKIY/AP IMAGES
propelled AVIC into the upper ranks of the global Saudi Arabia UAE 5 Spain
arms trade. In 2019 it sold military equipment val-
ued at $22.5 billion, according to the Stockholm 12 10 2
International Peace Research Institute (Sipri), plac- Myanmar 4 Sudan Laos
Turkmenistan
9
Serbia
ing it sixth in the world, behind five U.S. companies. *EXCLUDES ORDERS THAT HAVE YET TO BE DELIVERED. DATA: STOCKHOLM INTERNATIONAL PEACE RESEARCH INSTITUTE
professor of political science at the University of establishment of diplomatic relations with Israel. ▲ AVIC’s Wing Loong II
Pennsylvania. Japan, South Korea, and Belarus are Although Biden has said he’s reviewing the UAE drone
developing drone technology. Turkey supplied sale, all three deals are on track to be finalized.
drones that helped Azerbaijan defeat Armenia in 17
last year’s conflict in Nagorno-Karabakh. Russia in AVIC is at the heart of a broader push by
January agreed to send drones to Myanmar and China to develop its aerospace industry, both
is working on longer-range models. Serbia and civilian and military. China Aerospace Science
Pakistan say they intend to use purchases from & Technology Corp. has sold combat drones to
China to seed their own programs. “Armed drone Egypt, Iraq, Saudi Arabia, and Serbia—the first
proliferation is inevitable because of Chinese time a European country has deployed Chinese
exports,” Horowitz says. unmanned aircraft. China North Industries Group
Corp. in November completed development of
The Chinese government rejects the charge its Golden Eagle helicopter drones, which the
that it’s fueling an arms race, saying it aims only to Communist Party-controlled Global Times news-
improve the defensive capabilities of its custom- paper said were “designed to meet the demands
ers. And unlike the U.S., it refrains from meddling of the arms trade.” Commercial Aircraft Corp. of
in their internal affairs, Foreign Ministry spokes- China, 12% owned by AVIC, is developing a jetliner
woman Hua Chunying said during a February to compete with the Boeing 737 and Airbus A320.
press briefing. “We are prudent and responsible in And AVIC has joint ventures with about 10 multi-
exporting arms,” she said. “This is totally different nationals in China-focused civilian businesses
from what the United States does.” such as aircraft components and avionics.
The Chinese drone push presents a challenge AVIC’s growing expertise is paying off in
for President Biden as he tries to move beyond improved quality, says Pawel Paszak, director of the
the Trump administration’s go-it-alone foreign China Monitor program at the Warsaw Institute, a
policy. Last fall, Trump deemed AVIC and its sub- think tank in the Polish capital. Although its drones
sidiaries part of the Chinese military, restricting don’t match the best offerings from American and
their access to U.S. technology. But last summer Israeli companies, they’re increasingly competitive—
he reinterpreted the Missile Technology Control and the price differential is significant: AVIC’s top
Regime—a 1987 agreement, signed by more than drones run $1 million to $2 million apiece, vs. more
30 countries, that had long kept a lid on U.S. drone than $15 million for a comparable American model.
exports—to allow sales of many such aircraft. “Maybe Chinese drones aren’t as good as American
drones,” Paszak says. “But 15 drones instead of one,
Despite criticism from Democrats, Trump and without any fuss about human rights? This is
agreed to sell 18 General Atomics MQ-9 Reaper a good offer.” �Bruce Einhorn, with Lucille Liu,
drones to the UAE. In November the administration Colum Murphy, and Nick Wadhams
approved a $600 million deal to provide Taiwan
with four Reapers; and the next month, Trump’s THE BOTTOM LINE AVIC sold drones and other military
State Department informed Congress of a con- equipment valued at $22.5 billion in 2019, making it the world’s
tract to sell four Reapers to Morocco following its No. 6 arms exporter, behind only U.S. companies.
Bloomberg Businessweek March 22, 2021
2
T Coming to company that had never had a presence in the U.S.
E America The deal, whose final value will be close to
C
○ Jitse Groen’s food delivery $7 billion, was an inversion of the normal course
empire prepares to take on of things in tech, where it’s more common for
DoorDash and Uber Eats high-flying U.S. businesses to sweep up smaller
European companies. It also made Takeaway’s
founder and chief executive officer, a 42-year-old
Dutch billionaire named Jitse Groen, one of the
most important players in U.S. food delivery.
The Grubhub deal is expected to close in
the first half of this year, pending approval by
Grubhub shareholders, meaning Groen could
arrive in the U.S. just as a semblance of normalcy
H The early months of the coronavirus pandemic returns. That could make things tricky for deliv-
were both a boon and a strain for U.S.-based ery companies, whose stir-crazy customer base is
food delivery companies. DoorDash, Grubh , probably eager to avail itself of the opportunity to
almost anything other than sitting in the house
N Postmates, and Uber Eats all saw a rush of busi- eati out of plastic containers.
ness while still suffering from the dismal eco- Co ared to Uber Eats and DoorDash,
nomics that had kept any of them from b coming
profitable. It was unclear whether the ckdowns Takeaway a Grubhub are focused less on deliv-
ering food the elves than on facilitating online
O were a moment to shine or collapse. orders. Groen believ this will make his company
So they started merging. I May, Uber more resilient, because
its artners are largely
Technologies Inc. was on the v ge of acquir- take t restaurants,
ing Grubhub. The deal fell apart at the
L18 11th hour, and Uber went on to buy ile mpetitors PHOTO ILLUSTRATION BY 731; PHOTO: GETTY IMAGES. GROEN: COURTESY TAKEAWAY. DATA: TAKEAWAY. INCLUDES JOINT VENTURES AND PARTNERSHIPS
Postmates for $2.65 billion work more with
Grubhub ended up in restaurants whose
the arms of Just E dining rooms will
O Takeaway.com V, open. “We will not
an Amsterdam-ba er that much from
end of the pandemic,”
said on a March 10 earn-
G ings call. “We do believe that
r competitors that are mostly
logistical businesses will suffer
from the reopening of the econ-
Y omies.” Groen projects a further
acceleration of growth in 2021, while
or ash said in February its outlook for the
year remains “highly uncertain.”
Still, he’ll be navigating new terrain and
starting from a disadvantage. In January,
DoorDash accounted for 56% of meal-delivery
sales in the U.S., according to data analytics firm
Second Measure. Uber Eats along with Postmates
made up 26%. Grubhub had 17% of the market.
A come-from-behind victory in the U.S. would
be a satisfying addition to Groen’s résumé;
its highlights include repeated instances in which
he’s outmaneuvered rivals in European markets.
The jackets and thermal food bags employed
by his company’s couriers—colored a bright
Edited by orange emblematic of the Dutch royal family—
Joshua Brustein are now ubiquitous across the continent. He
TECHNOLOGY Bloomberg Businessweek March 22, 2021
declined to be interviewed for this article. two months later, Takeaway became the largest ○ Groen 19
Groen started his company as a 21-year-old col- food delivery network outside of China—and
Groen had the daunting task of integrating two Countries where
lege student, inspired by seeing classmates pro- large operations almost simultaneously. Takeaway operates,
moting their companies in Dutch media, according select years
to a 2009 interview he gave to the Dutch business The U.S. comes with distinct challenges. Some ○ Western Europe
publication Emerce. He settled on meal delivery cities have passed caps on the fees companies can ○ Other European
after unsuccessfully trying to order Chinese food charge restaurants, which could further compli-
online for a family gathering in 1999. Six months cate their attempts to reach profitability. Even more countries
later, Groen paid €50 to register a website and attention has been paid to the practice of delivery ○ Americas
started programming in his dorm room. He even- companies classifying workers as independent ○ Other
tually dropped out of school to pursue the proj- contractors, deploying them via smartphone app 2000
ect full time. and describing them as mini entrepreneurs rather
than employees. The controversial labor model was 2007
It was slow going in the beginning. “I had to effectively blessed in California last year through
beg the first 700 restaurants to be on my website,” Proposition 22, a public referendum that classi- 2014
Groen said at a conference in 2016. He subsidized fied gig workers as independent contractors while
his core business by having his team of program- allowing them to access some benefits, but legal 2019
mers build websites for telecommunications wrangling continues over how such workers are
companies. As Takeaway’s site gained traction, classified in the rest of the U.S. 2021
he opened an office and hired customer service
agents to call restaurants and check if they’d In Europe, Groen employs his drivers directly. U.S. deal is due to
received orders, freeing him to dress up and drive He’s publicly questioned whether competitors close in the first
around the Netherlands—a country slightly bigger that don’t do so are breaching the law in Europe, half of 2021
than New Jersey—signing up restaurants. which has been moving to a more restrictive
approach on classifying workers as independent
Over the next several years, Groen’s business contractors. But Grubhub said in a public filing
began posing an increasingly stiff challenge to Just this month that classifying workers as employees
Eat, a much larger British company that was domi- would cause serious harm to its business.
nant in many European markets. Just Eat had been
used to steamrolling rivals, but it met its match Groen seemed to soften his stance on direct
with Takeaway in the Netherlands. “It was diffi- employment in the recent earnings call, say-
cult for us because of him,” says Adrian Blair, CEO ing his priority was to provide workers doing an
of digital accounting platform Dext, who was Just inherently risky job with adequate insurance. In
Eat’s chief operating officer at the time. Europe, this has meant direct employment. But in
the U.S. “there’s a different way of arranging that,
Groen’s recipe for success involved spending and that’s also fine for us,” he said. “We’re not
heavily and playing rough. One former Takeaway per se in favor of the employment model. We’re
employee remembers repeatedly clicking away in favor of treating our staff decently.”
at Just Eat’s Google banner ads until they had
exhausted its small budget for pay-per-click In Europe, Groen was willing to use profits from
marketing, causing the ads to disappear. Groen’s one market to secure growth in another. He’ll have
staff also removed Just Eat stickers from restau- to be willing to do the same in the U.S., accord-
rant windows—while using a special glue to keep ing to JMP Securities analyst Ronald Josey. Despite
their rival from doing the same to theirs, accord- Groen’s argument that the economics are better if
ing to Blair. his company doesn’t primarily handle deliveries
directly, that approach may keep Grubhub from
In 2016, Takeaway and Just Eat declared a gaining on its American competitors.
truce. Takeaway acquired Just Eat’s operations in
the Netherlands and Belgium, while Just Eat took Josey says Takeaway is going to have to spend
Takeaway’s brand in the U.K. Groen then poured to expand Grubhub’s delivery force, no matter
the profits from his Dutch operation into expan- what legal framework it attempts to pursue while
sion in Germany, squeezing local leader Delivery doing so. “You have to have that these days,” he
Hero until it agreed to sell its brands in the coun- says. And with Grubhub lagging behind in such a
try to Takeaway in 2018. The following year, competitive market, “the big question is going to
Takeaway took over Just Eat entirely, an expensive be how much is Just Eat Takeaway willing to invest
deal that turned Groen’s company into a major in the growth here.” —Natalia Drozdiak
global player.
THE BOTTOM LINE Takeaway’s acquisition of Grubhub puts the
The merger with Just Eat was approved in April company in a powerful position in the U.S. food delivery industry,
2020. When it announced the Grubhub acquisition but it faces significant challenges.
◼ TECHNOLOGY Bloomberg Businessweek March 22, 2021
No Thanks, as little power as possible, so the things wouldn’t die
I Roll My Own before the end of the day. As the demand for these
devices skyrocketed, there was immense incentive
to improve the low-power chips, which began clos-
ing the gap in performance with the muscle-car
models for data center business.
Energy efficiency has become increasingly
● Why Amazon and other big tech companies important. By 2025 data centers are expected to
want to design their own chips consume 15% of the world’s electricity, up from
about 2% last year, according to Applied Materials,
the biggest maker of chip manufacturing equip-
ment. Keeping power consumption down is
In the process of transforming itself from an online becoming more important than the cost of the
bookstore into a cloud computing giant, Amazon chips themselves for the data center owners.
.com Inc. became one of the world’s largest purchas- The technology underlying low-power smart-
ers of the computer chips that power data centers. phone chips is made by Arm Ltd., a British semi-
As its cloud business has expanded, the company conductor company that licenses it but doesn’t
has become increasingly fixated on designing its make chips itself. Amazon and Microsoft use Arm
own chips instead of buying them. The shift could as the basis for their internal chip designs. The
have potentially drastic implications for a critical Graviton chips were initially used only in special-
aspect of the technology industry—and could prove ized cases but have developed into arguably the
threatening for traditional chipmakers such as Intel first Arm-based chips to be a credible competi-
Corp. and Advanced Micro Devices Inc. tor to Intel’s general-use data center offerings.
Amazon began signaling its intentions in 2015 “It’s a renaissance in semiconductors,” says Jon
when it acquired Annapurna Labs, a small Israeli Bathgate, an investor at Colorado-based invest-
20 chip designer. It’s since become aggressive about ment firm NZS Capital.
developing chips specifically designed for Amazon As Amazon, Google, and Microsoft compete
Web Services’ own data centers. “This work is for cloud computing customers, the specific vir-
foundational—when we improve the hardware, tues of their chips may become a selling point,
everything that runs on it improves,” says Nafea says Smugmug’s MacAskill. “It’s going to get pretty
Bshara, an Annapurna co-founder who’s now an interesting when these cloud providers begin to
AWS vice president. Annapurna’s staff has grown differentiate themselves even further.”
tenfold since the acquisition. None of these companies manufacture the new “It’s a
Smugmug Inc., an online photo service that chips they design; they rely on the same interna- renaissance
tional supply chain that’s been showing strain during in semi-
uses AWS to show billions of photos to its users the coronavirus pandemic. If such a crunch contin- conductors”
daily, says it’s reduced its AWS costs by as much ues, it will slow their progress and eat into profits.
as 40% just by shifting to an AWS service that runs
on Amazon’s in-house chip, branded Graviton.
AWS mostly still relies on Intel chips, but Amazon
charges Smugmug 20% less for services utilizing its
own hardware, and Smugmug can buy less comput-
ing power because Amazon’s chips take 20% less
time to run its tasks. “It results in a much lower bill
for us without really having to do anything,” says
Smugmug Chief Executive Officer Don MacAskill. ILLUSTRATION BY SIMON LANDREIN. FISH: GETTY IMAGES
Microsoft Corp. and Alphabet Inc.’s Google are
also working on specialized chips. In part, the trend
reflects how different the current crop of tech giants
are from the data center operators of the past, which
didn’t have the resources to pour hundreds of mil-
lions of dollars into designing their own chips.
There’s also a technical shift under way, ushered
in by the rise of smartphones. While Intel and AMD
were making chips for data centers that prioritized
speed, mobile devices required processors that used
TECHNOLOGY Bloomberg Businessweek March 22, 2021
Then there’s the pending acquisition of Arm and spark innovations, which would be good for
by Nvidia Corp., itself a designer of chips used in everyone. Or almost everyone. To stay ahead of
some data centers. Nvidia has promised to main- the newcomers, Intel has been buying startups
tain open access to Arm’s technology and says it that make AI-specific chips while it dedicates mas-
has no incentive to do otherwise. Some of Arm’s sive resources to improving the efficiency of its
customers have already expressed concerns to cloud computing products and offers to design
regulators considering whether to approve the custom builds for its biggest customers. But NZS’s
deal. These complaints are private, but Bloomberg Bathgate thinks it will struggle to stay ahead.
News has reported that Google, Microsoft, and “This is an existential problem for Intel,” he says.
Qualcomm are among the companies that have —Ian King and Dina Bass
made them.
THE BOTTOM LINE Amazon’s Graviton chips now rival the
The surge in custom-made chips could further performance of the Intel chips it’s traditionally used for its data
reduce the cost of advanced comput g oducts centers, marking a potential turning point in the industry.
Phones A t performance from technologies Washington 21
Fish Farms Are In hasn’t banned, according to a person with
knowledge of the situation, who declined to be ○ Decline in
○ Huawei looks for alternatives after U.S. identified discussing internal matters. Huawei’s smartphone shipments
sanctions crush its phone business businesses in solar inverters and cars require less for Huawei in the last
sophisticated chips that can partly be sourced three months of 2020
Six months after the Trump administration cut off from Chinese and European suppliers, according
vital supplies of chips to Huawei Technologies Co.’s to two people familiar with the matter. 42%
smartphone business, the Chinese telecommunica- Huawei has worked with several manufactur-
tions giant is accelerating its work on a series of far- ers to test its autonomous-driving and driver-
flung alternatives to fill the gap. car-interaction technologies. Its entertainment
features can be found in Mercedes-Benz sedans,
Among its newest customers is a fish farm in east- and the company has teamed with domestic elec-
ern China that’s twice the size of New York’s Central tric automobile makers to develop smart-car sys-
Park. The farm is covered with tens of thousands tems. The Arcfox S HBT, the first model under its
of solar panels outfitted with Huawei’s inverters, partnership with Chinese EV maker BAIC BluePark
shielding the fish from excessive sunlight while also New Energy Technology Co., will be unveiled at
generating power. In coal-rich Shanxi province, the Auto Shanghai 2021 in April.
company’s wireless sensors and underground cam- Another initiative, dubbed 5GtoB, involves
eras monitor oxygen levels and potential machine Huawei working with companies from industries
malfunctions in mine pits. And next month, a new including health care and airplane manufactur-
electric car featuring its lidar sensor will make its ing to adopt 5G technologies. The company has
debut at China’s largest auto show. helped China build the world’s largest 5G network,
supplying more than half of the 720,000 base sta-
Huawei has been pursuing business beyond tions operating across the nation.
telecommunications gear and smartphones for While Huawei is betting that inverters, elec-
years, but the efforts took on new urgency after tronic mining technology, and smart-car software
phone shipments tumbled 42% in the final three may compensate for the decline of smartphones,
months of 2020, largely because of a Trump- its longer-term future—and its ability to continue
era order that deprived it of advanced semicon- powering China’s 5G rollout—remains cloudy. For
ductors needed to make the devices. The Biden now, the company has told its wireless customers
administration has shown no inclination to it has enough communications chips to support
ease the pressure on Huawei, and the company base station construction in 2021. But it’s unclear
isn’t expecting that to change, according to Ren how long those reserves can last and what options
Zhengfei, Huawei’s founder. Huawei has once they’re eventually depleted.
—Bloomberg News
To meet the increasing demand for semicon-
ductors, local suppliers are squeezing better THE BOTTOM LINE Huawei thinks it can replace lost revenue
from smartphones with new businesses that don’t rely on the tech
the U.S. has succeeded in keeping out of its hands.
F3Wall re tMaI
N BIGGESTBl
A ○ Citigroup accidentally sent the bank’s own senior managers in Delaware were
N hundreds of millions of dollars to preparing to process a $7.8 million interest payment
firms that won’t return it on a Revlon loan.
C
As one of the largest arrangers of corporate loans,
E22 Citigroup had distributed hundreds of interest pay-
ments to third-party lenders in the past. It’s a clerical
Fat-finger errors can happen at even the biggest role that doesn’t generate meaningful fees for the
financial companies. There was the time, three years bank but typically paves the way to future deals.
ago, when Deutsche Bank sent €28 billion ($33 bil- A quirk made the Revlon transaction less routine.
lion)—more than its entire market value—to one of One of the investment firms that owned a portion
its outside accounts. Such mishaps typically result of the loan had agreed to exchange its stake for a
in major embarrassment, but are quickly reversed. chunk of a different Revlon loan and needed to be
Then there’s the latest saga involving Citigroup paid interest that had accrued up to that point. It
Inc., where a human error forced it into a show- wasn’t a maneuver that Citigroup’s systems were
down with some of its most aggressive clients. The designed to handle, but the bank had a workaround.
bank mistakenly paid almost $900 million to cred- It involved moving the principal of the loan tempo-
itors of troubled lipstick maker Revlon Inc., the rarily into one of the bank’s own accounts and then
crown jewel of billionaire Ronald Perelman’s busi- recreating the loan to reflect that the creditor would
ness empire. The error has forced Citigroup to no longer own a piece of it.
restate fourth-quarter earnings and do a good deal What the employees didn’t realize that Tuesday
of explaining in front of regulators. And the bank evening was that by failing to check two boxes in
could ultimately be out more than $500 million. the byzantine software Citigroup uses to execute
Citigroup’s fight to recoup the funds also laid payments, they’d authorized the entire principal
bare the vitriol and resentment that’s built up in the on the loan—about $894 million—to be paid to the
credit market, where institutional investors provide creditors with the bank’s own money. Wire trans-
funding to companies, with banks acting as middle- fers of that size require the approval of three people, PHOTO ILLUSTRATION BY 731. PHOTOS: AFV/ABC
men, and contract disputes are part of the game. In but no one handling the Revlon payment became
this case, some funds got money they felt they were aware of the mistake until hours after it had been
owed by Revlon and decided to hang onto it—even distributed. “Bad news,” the Citigroup manager in
though it was Citigroup’s money, not Revlon’s. Delaware wrote in a Skype chat to his superior the
None of those ramifications were apparent to next morning. “Principal out the door when it was
Edited by the three back-office employees at the origin of the supposed to be sent to wash for Revlon structure.”
Pat Regnier and
wayward transfer. On a Tuesday evening last August, To make matters worse, the money could hardly
David Rocks
two Citigroup contractors based in India and one of have ended up in more hostile hands. Several of the
FINANCE Bloomberg Businessweek March 22, 2021
’s $900 million out to people who weren’t supposed “We were
to have it.” just paid
money that
Some creditors agreed to return the funds, we were
allowing Citigroup to recoup about $400 million. owed”
But in spite of numerous requests from the bank,
HPS and almost a dozen other creditors refused to
budge, arguing that they were entitled to keep the
cash. “We were just paid money that we were owed
by a borrower and an agent who were involved in
a significant game of chess,” Scott Caraher, head of
looperloans at Symphony Asset Management, told a U.S.
District judge when Citigroup went to court to get
the money.
The judge, Jesse Furman of the Southern District
of New York, has sided with the creditors, arguing
that there was no way for lenders to determine the
funds had been wired by mistake. The content of
chat messages written by the HPS and Citigroup
employees, some of which took place on a platform
operated by Bloomberg LP, which owns Bloomberg
Businessweek, were disclosed as part of the court
creditors that had received the payments—including proceedings. Citigroup is appealing the decision
Brigade Capital Management, HPS Investment and has asked that the court keep the money frozen
Partners, and Symphony Asset Management— while the dispute continues. In a statement, it said
had been embroiled in a bitter fight with Revlon the firms had “mistakenly received a windfall.”
and Citigroup over debt deals Revlon had made to Months later the consequences are still being 23
improve its financial position and stave off a default. felt. Citigroup has burned bridges with the firms
Brigade, HPS, and Symphony had accused Revlon that have refused to return the money. It’s exclud-
of violating the terms of its loan agreement by ing them from new debt sales and has refused to
pledging some of its intellectual property, including help some of them package their corporate loans
trademarks, as collateral for new debt. In the eyes of into securities for other investors to buy.
these funds, this put some of Revlon’s most valuable It’s not surprising that the dispute between
property out of their reach in the event of a bank- Citigroup and the investment firms couldn’t be
ruptcy. The investors also had made little secret of amicably resolved. Brawls among borrowers and
their antipathy for Citigroup, which they faulted for investors got dirtier and uglier than ever during the
facilitating the move and for helping Revlon secure a pandemic, as cash-strapped companies teetered on
new credit line from a lender sympathetic to Revlon the brink of restructuring. The increasingly complex
management that would side with the company in nature of loan and bond agreements, which crit-
disputes among creditors. ics say are riddled with loopholes, has made debt
Once a mainstay of beauty aisles, Revlon had investing more than a matter of yields and credit
struggled to remain relevant in an era dominated quality. It’s a fight for the legal upper hand.
by smaller companies promoted by Instagram “We all know that these docs have really
influencers. The loan Citigroup had just repaid in become Swiss cheese,” says Chad Valerio, a port-
full had been trading at less than 30¢ on the dollar, folio manager at Onex Credit Partners, which isn’t
reflecting the high probability of a default. involved in the Revlon dispute. “When a company
Surprise quickly gave way to mockery among is backed up against the wall and when a sponsor
Revlon creditors as news of the payment—and is trying to figure out how to extend their option,
notices from Citigroup demanding the money be or a creditor is trying to figure out how to get a
returned—started to hit their inboxes. “Downside better outcome for themselves, people are going
of work from home,” a portfolio manager at HPS to get really creative and do what they have to do.”
quipped in a chat message among HPS employees. —Davide Scigliuzzo and Katherine Doherty, with
“Maybe the dog hit the keyboard.” Jenny Surane
“How was work today, honey?” the same per- THE BOTTOM LINE The failure to check a couple of boxes in a
software program caused Citibank to accidentally send money to
son wrote, imagining both sides of a dinner table investors who were primed to fight for every dollar.
conversation. “It was OK, except I accidentally sent
FINANCE Bloomberg Businessweek March 22, 2021
Is Bitcoin Really speculative forces. That’s why it’s multiple times
more volatile than the stock market.” It’s conceiv-
An Inflation Bet? able that a bout of inflation could have the opposite
of the expected effect on Bitcoin. If inflation induced
a recession, investors might respond by stepping
away from riskier assets such as cryptocurrencies. U.S. Federal Reserve
○ Cryptocurrency’s history is too short to say In recent weeks, when investors concerned M2 money stock
if it provides protection against rising prices about inflation pushed the 10-year Treasury yield $20t
from 1.34% to as high as 1.62%, Bitcoin suffered its
worst drop in months. Crypto proponents argue
that Bitcoin traders long ago anticipated bond yields
would rise—and a subsequent spike in yields did 16
roughly track with a bump in crypto. Still, Bitcoin’s
recent moves bear at least a passing resemblance to
more straightforward speculative trades.
Bitcoin has received a stamp of approval from 12
notable Wall Streeters, including veteran hedge fund 1/4/16 2/1/21
manager Paul Tudor Jones, who say they like it as a
store of wealth. “That is certainly an element that Velocity of M2
has driven investment by institutions, particularly money stock
in the wake of the ways in which policymakers have 1.5
Hardcore Bitcoin enthusiasts say the digital coin worked to jump-start the economy” after the Covid
is the world’s best hedge against rising consumer slowdown, says Michael Sonnenshein, chief exec-
prices. The logic: Unlike U.S. dollars or any other utive officer at Grayscale Investments, which runs
normal currency, it’s designed to have a limited a fund that holds Bitcoin. “Certainly we have no 1.3
24 supply, so it can’t be devalued by a government or a shortage of global macro investors for whom adding
central bank distributing too much of it. Bitcoin has acted for them as a hedge for inflation.”
Almost every bull case on Bitcoin has looked pre- Bitcoin’s strongest advocates see its rising price
scient lately—the cryptocurrency is trading at around as an early-warning sign that the traditional finan- 1.1
$56,000 a coin, up from about $5,500 a year ago—so cial system is vulnerable, and argue that the crypto- Q4 ’15 Q4 ’20
that’s added some buzz to this inflation story. With currency could rise further as investors look for a
the economic outlook perking up, Covid-19 cases haven. Such arguments hinge on the idea that infla- ILLUSTRATION BY OSCAR BOLTON GREEN. WOOD: CINDY ORD/GETTY IMAGES. DATA: FEDERAL RESERVE (M2), BLOOMBERG (CANOPY)
falling, and greater amounts of fiscal stimulus on tion won’t just edge up with a growing economy, but
the horizon, investors in all kinds of assets seem to could explode because of so-called money printing.
expect a bit of a rise in prices. But that’s coming from The Federal Reserve doesn’t change the money
a very modest base. Over the past year, the inflation supply by literally printing bills. However, a measure
rate in the U.S. has been 1.7%. of the money in the financial system known as M2
Then there’s the question of whether the digital has increased, thanks in part to accommodative pol-
asset would really act as an effective hedge. It doesn’t icy. Fed Chairman Jerome Powell said in recent con-
have a long enough history to establish that, says gressional testimony that the growth of the money
Cam Harvey, senior adviser to Research Affiliates supply no longer has important implications for the
and a professor of finance at Duke University. economic outlook. “We’ve had big growth of mon-
Theoretically, if investors come to regard it as simi- etary aggregates at various times without inflation,”
lar to gold, Bitcoin might hold its value over a very he said. “So it’s something we have to unlearn.”
long term—as in a century or more, Harvey says. In Jim Paulsen, chief investment strategist at the
their research on gold, he and his colleagues have Leuthold Group, agrees. While there may be more
found that it’s held its value well for millenniums. money, its velocity—or the frequency with which
But they also found that it’s prone to manias and money changes hands—has dropped off. That’s
crashes over shorter periods. (Gold, notably, is down a crucial factor because it shows money is being
9% this year despite all the inflation talk.) saved rather than spent, which keeps price pres- ○ Wood
Bitcoin too has swung wildly in its short life sures muted. But even if velocity turns higher, off-
for reasons barely connected to anyone’s view on setting disinflationary forces could come into play,
inflation. “What’s going to happen to Bitcoin? It’s including an aging population and digital technol-
really unclear,” Harvey says. “The price is not just ogy’s propensity to push prices down. “Inflation
driven by the money-supply rule, it’s driven by other is turning up a little bit, but I don’t think that
◼ FINANCE Bloomberg Businessweek March 22, 2021
means that crypto is going to go nuts,” Paulsen says. GPIF spokeswoman Nao Honda declined to ▼ Canopy Growth
Rising prices may well be a risk for investors. say whether the fund still owns the stakes, which share price
it reported in disclosures last summer. Even at
“The kindling wood for inflation exists,” says Marc $80 million, the investments would be only about $50
Chandler, chief market strategist at Bannockburn 0.005% of GPIF’s $1.6 trillion in assets. She says
Global Forex. Yet Bitcoin’s not tied to any other GPIF’s rules bar it from direct purchases of shares 30
asset, such as oil or real estate or earnings from and that the vast majority of the fund’s stocks
a business, that might naturally rise in value with are bought via accounts intended to track equity 1/1/20 10
prices, and it’s also a bet on things besides inflation. indexes. “We are dedicated solely to ensuring long- 3/17/21
One of Bitcoin’s best-known bulls, Ark Investment term returns for our members,” she says.
Management founder Cathie Wood, said in a recent 25
webinar that she’s as concerned about the forces of GPIF—the world’s largest public pension fund—
deflation—or falling prices—as she is with inflation. is confronting an issue faced by many managers of
�Vildana Hajric public money: How to ensure good returns while
respecting the moral and legal principles of the
THE BOTTOM LINE Bitcoin is often compared to gold as a store community. State-managed funds in the Middle
of value, but, like the precious metal, it’s prone to a lot of short-term East, for instance, typically avoid investing in com-
volatility, which clouds the picture. panies that specialize in activities such as gambling
or selling alcohol or pork, but many hold shares—
● Despite harsh pot laws at home, Japan’s state either directly or through other funds—in businesses
pension fund owns shares in weed growers that would violate a strict interpretation of Islamic
law. The sovereign wealth fund of Norway, where
Even as much of the world embraces legal pot, Japan recreational pot use is illegal, invested in Canopy
is sticking to its longstanding zero-tolerance policies. and other pot companies but sold the shares after
The country’s ultra-harsh penalties for possession complaints from the Norwegian Narcotic Officers
include prison terms as long as five years for the Association. And more than a dozen pension funds
equivalent of a few joints, and in January the gov- for U.S. states, including one for public schools in
ernment floated a proposal to outlaw THC in the Texas, where even medical marijuana is illegal, hold
bloodstream, which could make it illegal to use weed stakes in a San Diego real estate fund that leases
during an overseas vacation. The national pension property to licensed cannabis growers.
fund, meanwhile, is investing in the stuff.
It would be almost impossible to entirely avoid
Financial disclosures show Japan’s Government putting public money into companies that engage
Pension Investment Fund (GPIF) accumulated in activities that conflict with a society’s values,
stakes totaling some $80 million in at least three says Meeta Kothare, an adjunct professor at the
pot companies. With 1.7 million shares of Canopy McCombs School of Business in Austin, Texas.
Growth Corp., which trades on the Ontario stock Most pension funds hold shares in index funds,
exchange under the ticker WEED, the fund would which invest in dozens or even hundreds of com-
be among the top 12 holders of the recreational panies that can be involved in myriad businesses.
marijuana dealer. Its shares in Cronos Group Inc., And regulations often lag shifts in social mores,
a Toronto company that owns pot brands such as Kothare says. For her, a more important question
Spinach and Happy Dance, are valued at about is whether GPIF is taking too big a gamble with
$17 million. And the $7 million stake it says it held pensioners’ money by investing in pot, a drug
in Aurora Cannabis Inc., which focuses on medi- that remains illegal in most places. But she says
cal marijuana, would make it a top 10 shareholder. many such funds have increasingly embraced
“It’s a complete contradiction,” says Michiko risk because safer investments such as sovereign
Kameishi, a criminal defense attorney in Osaka bonds no longer offer the returns needed to pro-
who’s represented dozens of defendants in pot vide for retirement—especially in Japan, the coun-
cases. “People’s lives get ruined for this.” try that the World Health Organization says has
the world’s longest life expectancy. “I do worry
about how pension funds are getting riskier and
riskier over time,” she says. “That is the ethical
issue.” �Jason Clenfield, with Michael Arnold and
Matthew Martin
THE BOTTOM LINE GPIF’s 1.7 million shares of Canopy Growth,
a recreational pot business trading under the ticker WEED, would
make it one of the company’s top shareholders.
4 Bloomberg Bus KDOCOMNMTEOENRSTET! 1 IC
E
AMPPORODVEID
N ● Prime Minister Modi from 15% to 25% over five years. Instead, the share
O is dangling investment fell and now languishes at around 13%.
incentives in a drive to
increase self-sufficiency This time around there are some early signs
of success. Amazon.com Inc. unveiled plans in
February to set up a manufacturing line in Chennai
to produce Fire TV streaming devices in partner-
ship with an Indian subsidiary of Taiwanese elec-
tronics giant Foxconn Technology Group. And
M India’s budget went paperless for the first time Apple said this month it will begin producing the
this year. That’s because the pandemic rendered iPhone 12 in India for local customers. “The relo-
unsafe the traditional practice of locking away cating to India trend has already started to gain
dozens of Finance Ministry staff inside a govern- momentum,” says Tanvee Gupta Jain, a Mumbai-
I26 ment printing plant to ensure none of the blue- based economist at UBS Securities. “This is a signif-
print’s secrets spilled out. Instead, Finance Minister icant turn in India’s manufacturing policy.”
Nirmala Sitharaman presented the spending plan The Modi administration is courting other big- KAREN DIAS/BLOOMBERG. DATA: MINISTRY OF STATISTICS AND PROGRAMME IMPLEMENTATION, BLOOMBERG CALCULATIONS, WORLD TRADE ORGANIZATION
to Parliament reading from a Samsung electronic name foreign manufacturers, including Tesla Inc.,
C tablet, which the media took pains to identify as which filed paperwork in January to register a
“Made in India.” business in India, fanning speculation that it plans
to open a production line there. While the com-
“Our manufacturing companies need to pany hasn’t commented on the rumors, Transport
become an integral part of global supply chains,
S possess core competence and cutting-edge tech-
nology,” said Sitharaman in her Feb. 1 address.
Tucked into the government’s spending plan for
the coming fiscal year, which starts on April 1, is
a $28 billion program to persuade foreign manu-
facturers to set up operations in India. It offers
cash incentives for meeting certain sales targets
in industries including autos, electronics, and
pharmaceuticals, aimed at luring investors from
regional rivals such as China and Vietnam that
have lower operating costs.
▶ A Foxconn-owned Part of Prime Minister Narendra Modi’s
plant in Tamil Nadu “Self-Reliant India” drive, the program is expected
to boost output by $520 billion over five years, Minister Nitin Gadkari has said the government is
according to official projections. Credit Suisse sees prepared to offer incentives to ensure that Tesla’s
it adding 1.7% to gross domestic product by 2027, cost of making electric vehicles in India would be
while creating 2.8 million jobs. less than in China.
It’s tempting to see Self-Reliant India as a repack- In late February, Modi’s cabinet approved
aged version of ambitions outlined repeatedly over earmarking $1 billion of the larger incentives pack-
past decades. The most recent was Modi’s “Make age for a program geared at expanding domestic pro-
Edited by in India” campaign. Unveiled in 2014, it aimed to duction of tablets, laptops, and computers, which
Cristina Lindblad bump up manufacturing’s contribution to GDP hasn’t kept up with surging demand. Imports of
◼ ECONOMICS Bloomberg Businessweek March 22, 2021
LBOUCYAL
REBATES ▼ Manufacturing as
AVAILABLE laptops alone, Asia. By adding investment incentives to its arsenal, share of India’s GDP,
mostly from the government hopes to persuade more multi- by fiscal year
China, have soared nationals to open plants in the country. If the pol-
icy mix seems incongruous, it’s because in today’s 16%
42% in the past five India, economic priorities are often at odds with
political realities. Modi must boost manufacturing
years and are esti- to create the 10 million new jobs a year the coun- 15
try needs to accommodate its growing workforce as
mated to have reached well as curb yawning trade deficits, especially with
China. But he also has to cater to the small and mid-
almost $5 billion in the size enterprises that make up his ruling Bharatiya 14
Janata Party’s base, and they’ve become accus-
current fiscal year, according to a tomed to being shielded from foreign competition.
report commissioned by the India Cellular & This clash makes it tough to tell whether 13
Self-Reliant India will succeed where initiatives of 2021
Electronics Association. Under the new rules, com- years past failed. India is the world’s second-most
populous country, which should be incentive ESTIMATE
panies will be eligible for cash payments equal to as enough for foreign businesses. Modi’s sweeteners 2012
may compel more of them to take the plunge.
much as 6% of the value of their sales, depending �Vrishti Beniwal and Anirban Nag
on how much they increase domestic production. THE BOTTOM LINE The Indian government has authorized 27
$28 billion for cash payments and other perks for companies that
The story in India has long been that for every ramp up domestic manufacturing. ▼ Average applied tariff
optimistic new entrant, there’s a battle-scarred The Last Gasp India
Of the Call Center
business looking for the door. Harley Davidson Thailand 17.6%
● Artificial intelligence and chatbots are 10.2
Inc. pulled out of India late last year, while Toyota increasingly replacing human operators
Vietnam
Motor Corp. in September threatened to shelve The coronavirus pandemic has been tough on the 9.6
global call-center industry, and nowhere more than
expansion plans because of the high taxes India in the Philippines, the world leader in the field. Indonesia
Hundreds of thousands of employees in the former 8.1
levies on new-vehicle purchases. What sends U.S. colony field queries from the other side of the
planet, and for the past year many of them have China
foreign companies fleeing is a combination of 7.6
entrenched protectionist tendencies, complex reg- Malaysia
5.6
ulations, and rickety infrastructure. India ranked
Japan
63rd among the 190 countries the World Bank 4.3
surveyed in its latest Doing Business report. China U.S.
3.3
came in at No. 31, and South Korea was No. 5. “The
real problem in India is the unease of doing busi-
ness,” says Pranjul Bhandari, HSBC Holdings Plc.’s
chief India economist.
Around the world, pandemic-induced short-
ages and supply chain disruptions have brought
new urgency to government-led efforts to achieve
greater self-sufficiency, whether in ventilators or
semiconductors. China’s latest five-year plan con-
templates large increases in investment in areas
such as integrated circuits and clean tech, while
in the U.S. the Biden administration has urged
Congress to appropriate funds for subsidies to spur
the construction of new U.S. fabs.
India’s efforts to nurture domestic supply chains
have historically relied heavily on import tariffs,
which are still the highest of any major economy in
◼ ECONOMICS
had to work alone from home through the night,
grappling with frequent electricity outages, isolation
from friends, and the snores of parents, partners,
siblings, or children crammed into tight quarters.
What comes after Covid-19 is likely to be even worse.
The lockdowns of the past year have acceler-
ated the shift to greater automation in respond-
ing to inquiries to lenders, insurers, and telecom
operators. Callers looking for assistance with a bill
or bank statement increasingly communicate with
artificial-intelligence-powered bots. And when they
do connect with a human, it’s more frequently in a
chat window with someone who’s engaged in mul-
tiple conversations at once.
Before the outbreak, clients used chat and AI
bots less than 10% of the time, but that’s climbed to as the Philippines. “The chatbot is at the bottom of ▲ At a Sitel Group call
almost 25% and could reach 35% by yearend, says the rung,” he says. “The high-level, industry-killer center in Metro Manila
Mike Small, the executive responsible for U.S. and type of engagement—it’s not going to happen yet.”
Canadian corporate clients for Miami’s Sitel Group, And creating and perfecting those systems
an operator of call centers with more than 20% of requires workers, says Arthur Nowak, head of the
its 100,000 employees in the Philippines. “Because Philippines for TTEC Holdings, an outsourcing
of Covid, plans that would have taken four to five shop based in Englewood, Colo., with about 20,000
years to implement were implemented in months,” employees in the archipelago. True, up to 40% of
says Small, who hasn’t increased staffing since 2019. simple transactions can be automated by imple-
The shift away from voice operators threat- menting the latest technology, he says, and fine-
28 ens many of the 1.3 million people employed by tuning can increase that by 5% or more annually.
outsourcing shops in the Philippines, about half But that’s shifting the focus of many TTEC work-
of them call-center operators. As companies have ers in the Philippines to keeping the bots running ▼ Full-time employment
taken advantage of the country’s low wages, cultural smoothly. “Part of the job now is not only to answer in Philippine call centers*
affinity with the U.S., and widespread English flu- customer inquiries, but also to work with teams on ● Pre-Covid forecast FROM LEFT: PHOTOGRAPH BY XYZA CRUZ BACANI FOR BLOOMBERG BUSINESSWEEK; COLE BURSTON/BLOOMBERG. *2020 FIGURE IS AN ESTIMATE.
ency, the sector has grown to account for 9% of gross identifying areas where the customer experience is range DATA: IT AND BUSINESS PROCESS ASSOCIATION OF THE PHILIPPINES
domestic product, according to Oxford Business inhibited by digital gaps,” says Nowak, whose head
Group, generating $26 billion in revenue in 2019. count has been flat in the past year, vs. the 3% to 5% ● Post-Covid forecast
growth he typically sees. range
The threat is building as AI enables bots to be
1.60m
as efficient—and empathetic—as humans for many To meet the evolving needs of the industry,
basic transactions. The Asian Development Bank the government in Manila is stepping up efforts to 1.45
predicts that by 2030 AI and similar technologies retrain workers at risk of being bounced by bots
could displace 286,000 workers, or almost a quarter and shift the focus to more sophisticated areas of
of the people in the Philippine outsourcing industry business process outsourcing, or BPO. President 1.30
today, though the bank says productivity gains may Rodrigo Duterte is increasing scholarships for sci-
create other jobs. The country’s IT and Business ence and technology education and wants to offer
Process Association expects the sector to employ tax incentives to outsourcing companies that focus 1.15
just 1.4 million next year, down from the 1.6 million on non-voice services less at risk of automation, such
it forecast before the pandemic. “We are alarmed,” as health-care information management and game 2017 2022
says Mylene Cabalona, president of BPO Industry development. The programs “will enable the cre-
Employees’ Network, a union for call-center work- ation of a Filipino workforce that is better able to
ers. “This will lead to massive displacement.” adapt to the disruption brought by increased auto-
Some local industry executives insist the situa- mation,” says Acting Economic Planning Secretary
tion isn’t as dire as many predict. AI is a long way Karl Chua. “There is potential for the Philippines
from replacing humans for more complicated voice to transition from a BPO services hub to a big data-
calls or chats, says Jonathan De Luzuriaga, president processing and analytics hub.” �Bruce Einhorn,
of the Philippine Software Industry Association. He Siegfrid Alegado, and Ditas B. Lopez
predicts that companies fearing a slow payoff from THE BOTTOM LINE AI and similar technologies threaten 286,000
expensive technologies will continue to stick with jobs, or almost a quarter of the workers, in the Philippine outsourcing
the cheap labor readily available in countries such industry, which accounts for 9% of the economy.
◼ ECONOMICS Bloomberg Businessweek March 22, 2021
Where the Housing ● Real estate dominates Canada’s
Boom Never Ends economy to an alarming degree
In December, Aaron Moore bought an unremarkable end of 2020—has propelled home prices to new
three-bedroom house in the Toronto suburb of heights, even with immigration falling. Data for
Brampton and, after throwing on a fresh coat of February showed several communities around
paint and laying down new hardwood floors, put it the country racking up year-on-year gains of
right back on the market. He sold it this month for 30% or more. Speculation may also be on the
C$810,000 (about $651,000), a stunning 28% more rise: In January 6% of all houses listed for sale in
than he paid. Toronto’s suburbs had been bought in the previ-
Normally this kind of quick-buck speculation ous 12 months, up from 4% a year earlier, accord-
would be interpreted as a sign of a housing bub- ing to brokerage Realosophy.
ble. But Moore has been a professional house flip-
per in the Toronto area for more than a decade,
during which a seemingly endless line of illustrious
doomsayers have taken the other side of his bet on
real estate, only to be proven wrong. ◀ This Toronto garage
Mark Carney, then Canada’s central bank was listed at C$729,000
governor, called the country’s reliance on housing
wealth “unsustainable” back in 2012. Then came
30 the wave of U.S. financiers whose collective bet
on a Canadian housing crash was nicknamed “The
Great White Short.” Among them was American
investor Steve Eisman whose prescient call on All this is putting homeownership, once
the U.S. housing collapse earned him top billing Canadians’ surest path to middle-class stability,
in Michael Lewis’s 2010 book The Big Short. out of reach for many, exacerbating inequality. In
When Covid-19 hit, even Canada’s own national a ranking compiled by urban-planning consultant
housing agency seemed sure this was finally the Demographia, Vancouver was the second-least-
end, predicting a dive in home values ranging from affordable city in the world, trailing only Hong
bad to catastrophic. Instead the market went on Kong. Toronto, where a detached garage recently
to another record year, and the housing agency’s listed for C$729,000, was No. 5. “We’re
leader had to take to Twitter to say they’d gotten it Policymakers from Prime Minister Justin spending a lot
wrong, shortly before being replaced. more keeping
Trudeau to Toronto Mayor John Tory have sig- a roof over
Just because there’s been no bust doesn’t mean naled they’re considering new taxes in an effort our heads
all is well. In Canada, the buying, selling, and build- to address the affordability problem. But Canada’s than we are
ing of homes takes up a larger share of the econ- long housing boom has survived policy tweaks on machines
omy than it does in any other developed country. before, from changes in down payment rules to and factories
Spending on residential structures climbed to a taxes on foreign buying and ownership. In the end, and AI”
record 9.3% of gross domestic product in the final those proved to be just speed bumps.
quarter of 2020, which in the U.S. peaked at 6.7% With housing inventory across the country at
during the housing boom. It also soaks up a larger its lowest level on record and the Trudeau govern-
share of investment capital than in any of Canada’s ment ratcheting up immigration targets to make up
peers. “We’re spending a lot more keeping a roof for last year’s lull, there’s every reason to think the
over our heads than we are on machines and facto- trend will continue. Says Moore, the house flipper:
ries and AI,” says Sal Guatieri, a senior economist “It would take something crazy, like a communist
with the Bank of Montreal. “That fundamentally is government, for me to lose my faith in the Toronto
not healthy.” market.” �Ari Altstedter and Kevin Orland
A dearth of housing supply combined with THE BOTTOM LINE Home prices in parts of Canada rose more
plunging interest rates—the average rate on a than 30% in the year to February. Ultralow mortgage rates and a
common fixed-rate mortgage was 1.97% at the return to high levels of immigration will keep the trend going.
Work Shifting
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March 31, 2021
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VP, Global Sales • Communications for a New Era
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Corporate Vice President
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Alain Sylvain
Founder and CEO
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5 Bloomberg Businessweek March 22, 2021
P
O
L Lula’s Back
I Now What?
T
I
C32
● The ex-president’s sudden The decision is not final, and Bolsonaro’s hand-
S return to politics sets up a picked prosecutor general is already challenging it.
2022 clash with Bolsonaro But even the president recognizes that the appeal is
unlikely to succeed and a 2022 matchup with Lula
is a real possibility. Bolsonaro considers the leftist
Workers’ Party as his main adversary in next year’s
The battle for Brazil’s top office is likely to be fought election, and he isn’t afraid of facing Lula, accord-
between two men whose careers were made—or ing to close adviser Onyx Lorenzoni. “Lula will suffer
were thought to have been ended—by the landmark the biggest defeat in his life in 2022,” Lorenzoni said
anticorruption probe known as Operation Car Wash. in an interview at the presidential palace.
On March 10, former President Luiz Inácio Lula After the ruling, the Brazilian real sank as inves-
da Silva blasted the probe, declaring himself a “vic- tors guessed that the prospect of vying for voters
tim of the biggest judicial lie in 500 years” of the against Lula would lead Bolsonaro, a hard-right
nation’s history, before taking aim at his chief rival populist, to set aside his promise to fix ailing public
and accusing current President Jair Bolsonaro of finances. They fear the candidates will pledge more VICTOR MORIYAMA/BLOOMBERG; DATA: INTER-PARLIAMENTARY UNION
turning Brazil into a Covid and economic catastro- spending in the middle of a protracted fiscal crisis.
phe. Lula refused to say whether he’ll seek the In his address—his first public appearance
presidency next year. “That’s a discussion for the since his convictions were annulled—Lula accused
future,” he told reporters. Bolsonaro of fueling one of the world’s worst
But he didn’t have to. Two days earlier a Covid-19 outbreaks with a business-over-lives atti-
Supreme Court justice tossed out a pair of graft tude. The normally mask-wary Bolsonaro appeared
convictions that had put Lula, a leftist who was on television hours later with his face covered. “We
Brazil’s president from 2003 to 2010, behind bars have been and are tireless when it comes to com-
and had permanently banned him from elective bating the pandemic,” he said.
office. Now the growing consensus among inves- Early polls are mixed. (Officially the campaign
Edited by tors, legal scholars, and even would-be opponents kicks off in the second half of 2022.) But veteran
Amanda Kolson Hurley is that Lula is probably back to stay. politicians say that given the political weight of the
◼ POLITICS Bloomberg Businessweek March 22, 2021
two men, there’s now much less room for a third wrong jurisdiction. Other cases are pending. Still, ◀ Lula speaks at a news
candidate, even though a lot of voters have reser- it’s very unlikely that the government could retry conference on March 10
vations. “Both Bolsonaro and Lula have a strong one of the nation’s highest-profile cases and get two
electoral base, which indicates polarization,” says convictions before Election Day, and given statutes 33
Congressman and former House Speaker Rodrigo of limitations, 75-year-old Lula is likely to walk, says
Maia. “At the same time, there is huge rejection of Michael Mohallem, a professor of law at the Getulio ▼ Share of women in
the Workers’ Party and bolsonarismo.” São Paulo Vargas Foundation in Rio de Janeiro. national legislatures
Governor João Doria, once seen as a top contender, (unicameral and lower
indicated he may no longer seek the presidency. The bigger worry, legal experts and antigraft houses)
“Polarization won’t bring any benefit for Brazil,” he activists say, is that the Supreme Court will soon
said in an interview. decide if Moro was a biased judge. The fear is that New Zealand
there would be grounds to do away with any con- U.K.
A onetime trade unionist, Lula held office in an viction he ever obtained. It “could—and this is an Australia
era of relative plenty fueled by a commodity boom extreme—undo a very large part in terms of con- Canada
and expanding social programs. A subsequent eco- victions that Lava Jato achieved over the past six U.S.
nomic slump and the graft charges have left a last- or seven years,” Aalbers says. �Andrew Rosati and
ing stain on him and his long-ruling Workers’ Party. Simone Iglesias, with Marisa Wanzeller 50%
Lava Jato, or Car Wash, was born out of a 2014 THE BOTTOM LINE Brazil’s Lula will likely be free to run for 25
inquiry into money laundering at a gas station in president again next year. The prospect of a Lula-Bolsonaro race
the capital, Brasília. Prosecutors unraveled a web may dissuade other contenders and is chilling investors. 1980 0
of kickbacks and illegal contracts centering on state 2020
oil giant Petrobras, and ensnaring some of Latin Australia’s Politics
America’s most elite executives and leaders—includ- Of Misogyny
ing Lula. According to Brazil’s prosecutor gener-
al’s office, hundreds were arrested and more than ● Assault allegations inside Parliament lead to
4.3 billion reais ($770 million) in ill-gotten funds protests and calls for structural change
were recovered.
Thousands of women rallied in cities across
Bolsonaro may be hoping to sell himself as the Australia on March 15, angered by the government’s
clean candidate once again. Back in 2018, he was handling of rape allegations inside Parliament.
a political outsider who found an opening when Gender equality advocates hope that the high-
Car Wash-related charges ended Lula’s candidacy. profile cases will prove a tipping point: It’s been
But after years of jaw-dropping revelations about more than a decade since Australia’s first and only
their leaders, analysts say, Brazilians have become female prime minister came to power, but there’s
jaded about corruption and are much more con- been little progress on changing a political culture
cerned about the pandemic. There are also many that is often described as toxic for women.
doubts about Bolsonaro’s own graft-fighting bona
fides. Perhaps most glaring is that he ended Car The strong public reaction to the cases shows
Wash, declaring last year there is “no more corrup- “that conversation that has been building to a real
tion” in Brazil’s government. The office of the pres- national focus, and I do think it creates the envi-
ident declined to comment on its closure of Car ronment for real change,” says Kate Jenkins, the
Wash. Yet Geert Aalbers, a partner at Control Risks sex discrimination commissioner at the Australian
in Brazil, says there has been backsliding in anti- Human Rights Commission.
corruption enforcement since Bolsonaro took office.
The Australian government has ordered multi-
One of the biggest doubts about the Car Wash ple investigations since Brittany Higgins, a former
probe is the fallen-star judge Sergio Moro, who parliamentary staffer, went public last month with
spearheaded the operation. He became Bolsonaro’s the allegation that she was raped by a colleague in
justice minister in 2019. A series of hacked phone 2019. Pressure is mounting on Prime Minister Scott
messages published by the Intercept showed appar- Morrison to hold a separate inquiry into an
ent coordination between Moro and the case allegation that Attorney General Christian Porter
prosecutor, casting doubt on his methods and moti- raped a woman he met at a school debating event
vations. (Moro later quit the administration and has
denied wrongdoing.)
In the March 8 ruling that involved Lula, Supreme
Court Justice Edson Fachin annulled two convic-
tions of corruption and money laundering (and two
pending cases) on the grounds they were tried in the
◼ POLITICS Bloomberg Businessweek March 22, 2021
more than 30 years ago. Police say they aren’t On March 15, Higgins, whose allegation lit the
pursuing that case because of a lack of admissible fuse of public outrage, made a surprise appear-
evidence, and Porter, who strongly maintains his ance at the protest against gender-based violence in
innocence, has started a defamation lawsuit against Canberra. “We are here because it is unfathomable
the Australian Broadcasting Corporation over its that we are still having to fight this same stale, tired
reporting on the claim. fight,” she told the sea of placard-waving protesters.
The problems associated with gender inequal- Organizer Janine Hendry noted that she rejected
ity reach well beyond the political sphere. By one an offer to meet privately with the prime minister
estimate, workplace sexual harassment costs the beforehand: “They have had enough advice about
Australian economy A$3.5 billion ($2.7 billion) a year, what to do,” she said. �Rebecca Jones
based on figures from Deloitte Access Economics for THE BOTTOM LINE Sexism is a long-standing problem in Canberra,
2018. Yet, in politics in particular, equality has stalled. the capital. Activists and experts say reports and committees aren’t
enough: Those who abuse women must face consequences.
Australia ranks above the world average in female
parliamentary participation, at 31%, according to
Inter-Parliamentary Union data, putting it ahead
of Canada and the U.S. However, the country’s suc- Britain’s Courts Are
cess has slackened on that front; since 1999 its rank- At a Breaking Point
ing has plunged from 15th to 50th. Meanwhile, the
U.S. now has a record number of women serving
in Congress. And there’s more progress in Australia’s
private sector; women’s representation on corporate
boards hit 30% in 2019, following a yearslong push
by pressure groups and pension funds.
Female politicians in Australia have long decried
sexist behavior. Former Foreign Minister Julie ● Case backlogs have soared, and public
34 Bishop said on her resignation in 2018 that women defenders are underpaid and burned out
in Parliament put up with things that wouldn’t be
“tolerated in any other workplace across Australia.”
Julia Gillard, the first woman to serve as prime
minister, famously stood up to then-opposition
leader Tony Abbott in 2012 and called out his
“misogyny,” adding that she’d been offended by
“cat-calling” to her inside Parliament.
Past attempts to address sexual discrimination,
including through a code of conduct, have faltered,
as have efforts to make lawmakers subject to the
country’s Sex Discrimination Act. That has left
them neither protected from nor liable for sexual
harassment. Another bid to make the law apply to
public servants, including lawmakers and judges,
will be heard in Parliament this month. Alejandra Llorente Tascon dreamed of becoming
“We don’t need more royal commissions, a criminal lawyer for years. Now the 27-year-old
inquiries, and reviews,” says Louise Chappell, struggles to see a future for many of Britain’s pub-
director of the Australian Human Rights Institute lic defenders. Based in London and self-employed ILLUSTRATION BY ROSE WONG. DATA: U.K. MINISTRY OF JUSTICE
at the University of New South Wales. “What we (like most of the U.K.’s public defenders), Tascon
need is a code of conduct with strong sanctions says she generally earns less than the country’s
that covers sexual harassment and gender dispari- hourly minimum wage after accounting for prepa-
ties, and we need structural change.” ration work and advising clients. “The more time
Some remain pessimistic about the pace of goes on, the more I question whether it is some-
change. Leonora Risse, an economist at RMIT thing I can do long term,” she says.
University in Melbourne, says she doesn’t see any After the financial crisis a decade ago, Britain’s
signs that government leaders truly understand the liberal-conservative coalition government intro-
nature of the problem and the ingrained factors duced austerity measures. Spending on publicly
that contribute to gender inequality. “If not this, funded criminal legal defense declined by 35% (in
then what will it take?” she says. real terms) from 2010 to 2020, according to Britain’s
◼ POLITICS Bloomberg Businessweek March 22, 2021
parliamentary library; spending on civil legal see in the United States public defender system,” “There is
defense (for cases in areas such as housing and says David Lammy, who’s the justice spokesperson absolutely
immigration) was also heavily hit. In recent years for Britain’s opposition Labour Party. Noting the nothing I can
the government has also cut the number of “sitting regional disparities in the U.S. court system, he do if the court
days” for judges, leaving some courtrooms empty adds, “There are some exceptional jurisdictions hasn’t got the
at certain periods. with great public defenders, but the lion’s share of judges or the
them just are not of the quality we’ve traditionally room to hear
Lawyers have launched campaigns and held enjoyed in the U.K.” The risk, he says, is if there are the cases”
demonstrations, warning the changes would dam- fewer top criminal lawyers, the system will have to
age Britain’s justice system and hinder the right to a resort to “people who aren’t fully qualified to take 35
fair and impartial trial. [cases] forward and very junior lawyers.”
▼ Change in
Then came Covid-19. In March 2020, as the Lammy, a former barrister himself, is also the outstanding cases
pandemic swept across Britain, the government author of a major government review into racial
stopped most jury trials and suspended hundreds and ethnic disparities in Britain’s criminal justice Magistrates’ courts
of courts. When they reopened at reduced capac- system. Published in 2017, it noted that “there is Crown courts
ity, the coronavirus continued to affect trials, greater disproportionality in the number of Black
infecting judges, jurors, defendants, and lawyers— people in prisons here [in England and Wales] 30%
and fueling high backlogs of cases waiting to be than in the United States.” Poorly funded criminal
heard. In the third quarter of 2020, the most recent defense risks exacerbating inequities; deprived 0
period for which court statistics are available, communities, often including minorities, would
there were more than 53,000 outstanding cases be less likely to access high-quality representation. Q1 ’16 -30
in England and Wales’s crown courts (which try Q3 ’20
more serious crimes)—a 44% increase from the pre- In recent months the government has opened
vious year—and about 412,000 cases in lower-level more than 20 pop-up courtrooms in several unusual
(magistrates’) courts. Thomas Winsor, Britain’s venues, including theaters, cathedrals, and hotels,
chief policing inspector, told Parliament’s justice to combat the backlog of cases. More so-called
committee in January of his “grave concern” about Nightingale courts are in the works; last summer the
the backlogs in a system already beset by delays, head of the country’s court service said 200 addi-
decaying buildings, and chronic underfunding. tional venues would be needed to clear the backlog.
A justice ministry spokesman says that “legal pro-
Delayed trials mean more people waiting lon- fessionals are being supported through this chal-
ger in jail before judgment and sentencing and lenging time,” noting the government is investing
potentially weaker evidence, in part because peo- £450 million to modernize courtrooms and improve
ple’s memories may fade over time. Tascon says technology. An independent inquiry into the future
she has clients in detention still waiting for news of criminal defense funding is also under way. The
about when they may be tried, while one of her government announced last year it would boost
cases is now scheduled for 2023. “There is abso- annual funding for the public defense sector, and it
lutely nothing I can do if the court hasn’t got the plans to increase judges’ sitting days again.
judges or the room to hear the cases,” she says.
“Our hands are really tied.” But James Mulholland, chair of Britain’s Criminal
Bar Association, says the government’s latest fund-
By the time some of the outstanding trials take ing announcements are making little difference.
place, more criminal lawyers may have left their Payment rates still remain “pretty much peanuts,”
jobs. According to a December survey of self- he says, and money isn’t filtering down to barris-
employed barristers (who, like Tascon, argue ters, in part because fewer cases are being heard.
cases in court) by the Bar Council, the organiza-
tion that represents them, 61% said they’ve had Kate Brunner, a senior barrister focusing on
to survive the pandemic on personal debt or sav- murder cases, hopes that the independent inquiry
ings, and 20% said they were unsure if they would will lead to further investment—and that the gov-
renew their licenses to practice this year. The Bar ernment and public will recognize the scale of the
Council has warned that the profession’s precari- problem in Britain’s courts. If not, she’s fearful that
ousness will particularly impact Black, Asian, and many of the brightest lawyers will avoid her line
ethnic minority barristers and threaten the field’s of work. This would mean darker days still for the
diversity. In October the council noted that some country’s justice system. “We really are at a crisis
junior barristers are earning less than £13,000 point,” she says. �Josh Jacobs
($18,000) annually pretax.
THE BOTTOM LINE Covid has exacerbated the strain on Britain’s
“The real danger of where we are now is that we justice system from earlier funding cuts. Case slowdowns and low
will end up with a system far more like what you public-defender pay threaten the future of fair trials, lawyers warn.
NEXT STOP:
SACRED HEART
UNIVERSITY
THE JACK WELCH COLLEGE OF BUSINESS & TECHNOLOGY
provides students with a competitive advantage in the
workplace through our advanced programs, technology
enabled facilities and highly skilled faculty.
DOCTORAL DEGREES
l Doctor of Business Administration in Finance (DBA)
MASTERS DEGREES
l Master of Business Administration (MBA)
l Accounting (M.S.)
l Business Analytics (M.S.)
l Computer Science & Information technology (M.S.)
l Cybersecurity (M.S.)
l Digital Marketing (M.S.)
l Finance & Investment Management (M.S.)
l Strategic Human Resource Management (M.S.)
www.sacredheart.edu/wcbt
Ross A. Riskin, DBA ‘20
CPA/PFS, CCFC, MS Tax
B-Schools +
Minecraft
S
MBA O
L
B-schools try virtual campuses and online U
competitions to emulate real-life networking T
I
When Grégoire Gloriod joined the master’s on his computer screen. “The biggest miss is O 37
program at Neoma, a business school with the moment between classes,” says Gloriod, N
sites in three French cities, he enjoyed the aca- who graduates in 2023. “That’s the point where S
demics but found himself savoring the social you can meet classmates, drink coffee, and talk
aspect of campus life even more. He attended about life.”
lectures and mixers, met people from all over
the world, and did his share of partying. Then A key selling point of business schools is
Covid-19 hit, and suddenly all that was left were their ability to bring together students of vari-
the marketing, accounting, and other classes ous nationalities and backgrounds, who forge
friendships in the hallways and lounges that
ILLUSTRATION BY MICHAEL DEFORGE March 22, 2021
Edited by
David Rocks
◼ SOLUTIONS Bloomberg Businessweek March 22, 2021
pay dividends decades later. “The ● Gloriod fixtures such as the Darden Follies
network is a close second, if not as and Spring Soirees were canceled,
important as the academic experi- the Darden Cup—a sporting competi-
ence,” says Minya Nance, assistant tion among the school’s five sections—
dean for student experience strategy took place through the Strava fitness
at Northwestern University’s Kellogg app. Students and staff logged a com-
School of Management. But in an era bined 10,496 miles of biking, running,
of online learning, MBA students are hiking, and even playing rounds of
struggling to make such connections— golf. The events “take your mind off
spurring schools everywhere to the many stressors of the MBA pro-
develop new avenues to those crucial gram by giving you a chance to have
relationships via virtual campuses, fun with your classmates,” says Nick
Slack channels, and Zoom roadshows. Talbott, a Darden student who set up
Neoma has created a Minecraft- the Jeopardy! games.
like world with 80 virtual rooms, lec- Harvard Business School profes-
ture halls, and workspaces where sors have started making time after
students—or, rather, their avatars— ● Caton online classes to chat informally with
can wander and engage in casual students or respond to their questions
conversations, cooperate on projects, about assignments. But for Rashveena
and debate the issues of the day. Rajaram, a member of the class of
The polygonal representation of the 2022, those sessions fell flat compared
campus, hosting activities such as with the interactions she’d been expect-
language courses, concerts, and ing. So she and her friends created a
case-study contests, is redecorated virtual version of the school’s annual
regularly for Christmas, the Lunar New visit to venture capital companies on
38 Year, and other seasonal events. The the West Coast, during which students
idea is to offer a break from the routine can connect with tech companies and
of back-to-back videoconferences, VC firms. In January, Rajaram and her
says Alain Goudey, Neoma’s chief peers organized a series of online
digital officer, whose blocky avatar— meetings with Silicon Valley stalwarts
decked out in a form-fitting black suit such as Sequoia Capital and Accel, but
and with better-kempt hair than the they also included funds from Europe
real human—frequently ambles through the virtual world. and Asia—something the pre-Covid physical trek didn’t
“We provide the context for people to be together at the offer. “I wouldn’t be surprised if some components of the
same time, in the same place, and do what happens on virtual trips stay,” Rajaram says, “especially when it comes GLORIOD: PHOTOGRAPH BY SOPHIE-ANNE BENOIT FOR BLOOMBERG BUSINESSWEEK. CANTON: ASHLEY FORMOSO.
ILLUSTRATION BY MICHAEL DEFORGE
the real campus,” he says. to being able to expand our footprint.”
At Kellogg, students have taken matters into their Harvard MBA candidate Grace An organized a smaller
own hands. Finding the Zoom-class experience lacking, health-care-club trek in March, inviting employers to
Marilyn Caton, a member of the class of 2021, created meet with current MBAs. The member of the class of
DIY Kellogg, an informal Slack channel where students 2022 says she appreciated the chance to engage in can-
can chat about life outside the classroom. The channel did conversations with people from the companies and
has been used for everything from networking groups to get insights into their aims for hiring, but she’ll have no
trivia nights and cutest pet competitions. Several times regrets about a return to pre-pandemic life. Sure, online
last year, students took to Slack to play a weeklong mafia forums can help with contacts, and participants often get
game in which they secretly colluded to decided whom to together for informal Zoom calls to shoot the breeze in
“kill off” each night until only one was left standing. Kellogg much the same way they might offline. But she’s tired of
students also teamed up with 10 other schools for a vir- relationships that rarely progress beyond texting, chat-
tual game show that raised $55,000 for Doctors Without rooms, and video meetings. Far more important “is the
Borders. “We all place a premium on in-person experi- bonding and the dinners afterward,” she says. “Just giving
ences, and thinking about doing it virtually was tough to someone a hug.” �Chris Stokel-Walker
wrap our minds around,” Caton says.
Students at the University of Virginia’s Darden School THE BOTTOM LINE MBA candidates studying online struggle to make
the connections that are a key part of the degree, so schools have sought
of Business have organized online games of Jeopardy! to develop new avenues to those crucial relationships.
to create a sense of cohesion. And though annual
◼ SOLUTIONS Bloomberg Businessweek March 22, 2021
Making America Foreign applications to MBA
Welcoming Again programs fell during the
Trump era. U.S. B-schools want
those students back
In 2016 half of American MBA programs reported an the U.S. are hedging their bets by also applying to Canadian 39
increase in international students. The following year less and U.K. schools,” says John Quelch, Herbert’s dean.
than a third saw international applications climb as many
foreign students, put off by the “America First” rhetoric Non-U.S. programs, meanwhile, are trying to maintain
of the new Trump administration, looked elsewhere. For the advantages they gained during the Trump administra-
the last four years there was “a perception that apply- tion. One big selling point is price: European schools cost
ing to business schools in the U.S. was a riskier proposi- $40,000 to $100,000 for the one-year programs typical
tion,” says Brigitte Madrian, dean of the Marriott School of there, vs. roughly $150,000 for a two-year degree at a top
Business at Brigham Young University, which saw a 60% U.S. school. “Although immigration and visa policies may
increase in international students from 2011 to 2016 but have influenced candidates’ choice, we also noticed that
ended the decade with fewer than it had in 2010. cost had a great impact on the decision,” says Antonella
Moretto, associate dean of MIP Politecnico di Milano,
The beneficiaries of this trend, of course, were non- which charges about $44,000 for a degree.
U.S. programs. At Rotman School of Management in
Toronto, the number of international students jumped Biden is clearly less antagonistic than Trump, but
45% from 2015 to 2020. Essec, a B-school near Paris many foreigners have lingering concerns about how wel-
where 94% of MBA candidates are non-French, saw coming Americans really are. That doubt has spurred
applications increase by half last year. International inter- non-U.S. schools to stress their open atmosphere and
est in European programs has been on the rise since the multicultural makeup of the student body. At Oxford
2017, and last year 74% of schools there reported global Saïd in England, for instance, less than 10% of students
applications either climbed or stayed stable. “European are from the U.K. That means that once on campus,
and Canadian schools have benefited from people who “most people are in a minority, and that’s why they
otherwise would have gone to the U.S.,” says Virginie choose to come,” says Matthew Conisbee, the school’s
Fougea, director of admissions at Insead, which has cam- MBA program director.
puses in France and Singapore.
Many foreigners had long seen an MBA from an
Two months into the Biden administration, U.S. schools American school as a first step toward employment in
are cautiously optimistic that the tide will turn in their favor. the U.S., but Trump barred new H1-B visas, which allow
Marriott saw a 117% increase in international applicants for skilled immigrants to work in the country. Biden has lifted
the class of 2022. And NYU Stern says global interest was some Trump-era immigration restrictions, but he hasn’t
strong last year, with a third of that class holding non-U.S. reversed the H-1B ban, which is set to expire on March 31.
passports. But Miami Herbert Business School says appli- Meanwhile, Rotman has been highlighting Canada’s rel-
cations from China—a key component of the international atively lax visa policies, including the ease of getting a
student body for most programs—are about the same as three-year postgraduate work permit.
last year. Chinese students “who would prefer to come to
B-schools rise and fall on the perceived value of a
degree, the connections one makes while studying, and
especially the employment prospects of graduates. Four
classes of MBA students have now had ample incen-
tive to explore Europe, Asia, and beyond, and many have
found highly paid jobs outside the U.S.—proving that an
American MBA isn’t required for success. That alone
offers a good reason for non-U.S. schools to be optimis-
tic, says Joseph Milner, vice dean of Rotman’s MBA pro-
gram. “Students may have more options than under the
last U.S. administration,” he says. “But many have learned
about Rotman and see it, and Canada, as a good move.”
�Chris Stokel-Walker
THE BOTTOM LINE With American immigration policies easing again,
B-schools elsewhere around the world are seeking to maintain the recruiting
advantages they enjoyed under the former U.S. administration.
Q&A Diversity, Covid, and Jobs
Stanford B-school Dean
Jonathan Levin on the challenges
of learning in a pandemic
Levin is an economist best known for his work on
contracting relationships and the design of market
rules. Education-finance reporter Janet Lorin caught up
with him via Zoom to discuss the coronavirus, jobs, and
the diversity initiative introduced last year by Stanford’s
Graduate School of Business, where he’s been dean
since 2016. Here’s an edited version of their conversation.
Has your diversity push involved changes to students seem to be having good our faculty have done things like
the case studies you use to illustrate the issues success. But we’re watching extensively using breakout rooms.
business leaders face? it carefully, because it’s such But there are parts of the in-person
an unusual time, with so many educational experience that we
We set a goal that we would try challenges. It’s a little early to just can’t replicate: the serendipity
to have all of the cases feature tell, but I’m hopeful that the of bumping into people on campus
protagonists who in some broadly opportunities for graduates will and talking after class—the people
defined way expand diversity. In be quite rich this year. There’s you meet in unplanned ways and
particular, we wanted to increase been so much disruption during the ideas that come up.
the number of cases with 100% the pandemic that, in a certain
minority protagonists. We got a lot way, it’s a great time to be starting Will you keep anything from the way you’ve run
40 of help from alumni, particularly out, because there are a lot things this year?
our Black alumni, who helped us of possibilities.
find interesting protagonists. About You can bring in guest speakers
19 are completed or in progress. What have you and the faculty learned during from China for 10 minutes instead
Two years ago, about 1% of our the pandemic? of flying them over for a three-
cases featured Black protagonists. day trip to talk to a class. And
Next year it will be 6%. It’s been the year of the most business school has typically been
innovation in education in decades, an intense residential experience
What will the B-school look like a decade from maybe ever. Every faculty member for a short period of time. With a
now if your efforts are successful? has had to rethink the way they virtual environment, you can start
teach. Lectures are not that giving access before students
We want everyone who comes effective on Zoom, so many of come and after they leave. You
to the school to be exposed to can spread things out. We’ve
a diverse community, a global already seen that in the last year LEVIN: STANFORD GRADUATE SCHOOL OF BUSINESS. ILLUSTRATION BY MICHAEL DEFORGE
community, of students and faculty, in the types of events we can run
and to be in a place where there’s all for alumni.
kinds of different experiences and
perspectives and a strong sense Were students from other countries able to
of belonging. If the school does its attend in person this year?
job well over 10 years or 20 years
or 30 years, what will be different is Last summer we offered all
the pictures of corporate leaders in our international students the
the U.S. and around the world. opportunity to defer the start of the
program, because it was unclear
What’s your sense of the job market? whether they could get to campus.
The great majority of them decided
It’s much, much better than last to come. We’ve continued to see
year. There’s a robust pipeline strong applications internationally.
of internships, and so far our
Bloomberg Businessweek
One essential business
42
The U.S. government A year ago, on Friday, March 13, about 50 government
gave the tiny company officials and experts met for the first time to talk about
that makes Covid swabs a crucial problem: how to test more Americans to deter-
$250 million to increase mine if they were infected with the novel coronavirus. Jared
production. That doesn’t Kushner stopped by; Mike Pence made an appearance later
mean the guys in charge that weekend. SARS-CoV-2 had spread to more than a hundred
stopped fighting countries—Tom Hanks had been infected in Australia—and
the death toll in the U.S. was expected to reach as high as
By Olivia Carville 250,000. Offices, schools, and streets were emptying; stocks
Illustration by Pete Sharp were plunging. The NBA had just suspended its season. It was
the official start of the global pandemic.
Admiral Brett Giroir, then an assistant secretary for health
at the Department of Health and Human Services, had been
put in charge of testing, and he had plenty of concerns. But
on that afternoon he was mostly concerned about one essen-
tial component of the testing process: swabs. Specifically, the
particular 6-inch swab flexible enough to sweep the depths of
the nasopharynx where the coronavirus replicates, the one
now known as the brain tickler, and the only one approved
for testing for such respiratory viruses. The U.S. had enough
of them to conduct about 8,000 tests a day. That was short by
March 22, 2021
Two feuding cousins
43
SWAB: COURTESY PURITAN MEDICAL PRODUCTS. STICK: three orders of magnitude—the U.S. needed to do millions of by Covid-19, and a small, family-owned business in Maine
PHOTOGRAPH BY TRISTAN SPINSKI FOR BLOOMBERG BUSINESSWEEK tests a day. Kushner told the admiral to secure a billion swabs called Puritan Medical Products Co. The swabs are highly
however he could and then left. specialized devices requiring precise manufacturing in pro-
prietary machines to meet the strict regulatory requirements
“How many nasopharyngeal swabs are in the national of hospitals. No other companies could quickly step in. “I had
stockpile?” Giroir asked the officials. None. “Does anyone this sinking feeling, like my entire blood supply just went to
know who manufactures them?” No. Giroir ordered an urgent my feet,” Giroir recalls.
market analysis of the industry. Some started Googling.
Throughout the evening and into the morning, the group He immediately arranged for C-17 Globemaster military
remained in the conference room next to his office on the sev- transport planes to pick up an order for a half-million swabs
enth floor of the Hubert H. Humphrey Building, overlooking from Copan before Italy closed its borders. Then he called
the Capitol. They drank Diet Coke, ate cold pizza, and called Puritan. It was Saturday evening when Timothy Templet, the
the chief executive officers of Thermo Fisher Scientific, BD, co-owner and executive vice president for global sales, saw a
Henry Schein, and other medical suppliers to ask about their Washington, D.C., number flash across his cellphone. Giroir
capacity to manufacture the swabs. One by one, the execu- told Templet he needed about 100,000 nasopharyngeal swabs
tives said they had no such capacity. within a week. Templet told the admiral that wouldn’t be
possible. Giroir asked him to reconsider. The next morning,
Giroir was in his office early Saturday afternoon when one Templet told him it would be possible.
of his staffers finally reported back: “Sir, I’m sorry to inform
you what we initially thought were 10 to 15 swab produc- Never before had Puritan, founded a century ago in the
ers are in fact only distributors.” Giroir was further told that tiny town of Guilford, been more important. And never before
only two companies in the world make the swabs: Copan had it been so dysfunctional. A yearslong feud between the
Diagnostics Inc. in northern Italy, an area then being ravaged two owners, Templet and his cousin John Cartwright, had
Bloomberg Businessweek March 22, 2021
left the business in a management crisis. Three weeks worked hard since March 2020 to provide swabs for Covid
before Giroir’s call, Templet had filed a lawsuit in Cumberland testing.” He said that doing so is their first priority and also
County Superior Court to dissolve their joint ownership of that he, Cartwright, and the company’s senior managers meet
Puritan and its other business, Hardwood Products Co., regularly. He wouldn’t discuss the company’s finances over
which had started out making mint-flavored toothpicks, the past year. Cartwright declined to comment, instead refer-
because of “major, longstanding and irreconcilable disagree- ring to a previous statement from his lawyer: The family trust
ments” between him and his cousin. Cartwright represents does not “think the press or the public
The rift had resulted in delayed investments to modernize have any basis for asking to know the details of the differ-
manufacturing lines, stagnant wages for a dwindling work- ences between two cousins in how they run their company.”
force, and an outdated back-office information technology The fight between the owners over Puritan’s fate contin-
system. “The general partners’ deadlock has created a dan- ues in private courtroom sessions, according to previously
gerous situation, leaving the companies close to a point where sealed legal documents Bloomberg Businessweek obtained.
something is going to break,” the lawsuit read. “Cartwright and Puritan now has three factories and soon a fourth, hundreds
Templet no longer speak, no longer make joint decisions, and of new employees, and a dominant share of a multibillion-
are essentially unable even to be in the same room together.” dollar industry. But the U.S. never developed a national test-
When Giroir heard about the lawsuit, he assumed ing strategy under President Trump. He tried to diminish its
Cartwright and Templet would set aside their animosities. importance and discounted the data that was available. More
He also knew what might happen than 530,000 Americans have died
if they didn’t: The government from Covid-19, far more than in
would have to buy Puritan—or buy any other country. And in Guilford,
out one of the cousins—at an out- those close to the cousins say their
rageous price. “Either they were a dispute over the future of the
good, stable company, or we were company is likely to become even
going to do something to make it more fraught now that Puritan is
that way,” he says. What the govern- worth so much more.
44 ment did was invoke the Defense G uilford, population 1,500,
Production Act, invest a quarter is about a two-hour drive
of a billion dollars into Puritan to
boost production tenfold, and hope north of Portland, divided by the
that would it make a good, stable Piscataquis River and surrounded
company, at least for the duration A rare sighting of the cousins, Cartwright (left) and by birch forest. Those woods made
of the pandemic. Templet, in October 2020, announcing expansion plans it an ideal location 100 years ago
for Lloyd Cartwright to manufac-
In the year since that first call,
Puritan has retrofitted two idle ture flavored toothpicks and later
plants in Pittsfield, Maine, and made plans to build one in other disposable products such as ice cream sticks, corn dog
Tennessee. Giroir estimates Puritan produced as much as skewers, and tongue depressors. By 1950 his two sons, Joe
90% of the 195 million swabs the government bought through and Edgar, and son-in-law Don Templet had taken over. The
January, when he left with the Trump administration. (He’s “three generals,” as they were affectionately called, ran
now an adviser to Gauss Surgical Inc., which makes rapid the company as equals. Former employees recall them often
at-home Covid tests.) The company used to make about visiting the factory. They knew most of the workers by name,
20 million swabs a month. Soon it will be almost 300 million. and often the names of their kids and dogs, too. In the 1960s,
Puritan and Hardwood had sales of about $55 million a year in the generals made an aggressive push into the disposable
2019. Government contracts will likely have doubled that. As medical products industry under the trade name Puritan.
protocols changed to emphasize rapid antigen testing, which Puritan manufactures more than 65 different types of swabs:
requires 3-inch foam or polyester nasal swabs, Puritan’s role for cleaning electronic devices, collecting blood samples at
only expanded. It makes those, too. “The world is still exqui- crime scenes, testing for strep throat and sexually transmit-
sitely dependent on Puritan,” Giroir says. ted diseases. Flocked nasopharyngeal swabs were one of its
Speaking on his cellphone while driving to one of the most niche products, typically used only if a patient was sick
new factories back in June, Templet was happy to talk about enough with a respiratory virus to be hospitalized. The medi-
Puritan’s success. “Our employees have gone way beyond the cal community prefers them because the tiny fibers on the tip
call of duty for the company and the United States,” he said. easily absorb viral particles and quickly release them for test-
When it came to the lawsuit, he had less to say. “I’m not going ing. They’re more complex than they look. A swab has to be
to comment. It’s personal. It’s not your business, and Puritan able to travel up the narrow shaft of the nose, through a pas-
is in a great position for America. Trust me.” Later he wrote sageway less than 4 millimeters wide, to an area roughly half-
in an email: “Our families along with all our employees have way between the ears. It has to be soft enough not to damage
Bloomberg Businessweek March 22, 2021
the nasal canal, yet sturdy enough to push through mucus offers scholarships to employees’ children, and encourages
and collect cells from the nasopharynx, where viruses grow. staff to volunteer for the fire department by keeping them on
Puritan’s proprietary machines can produce about the clock if they’re called to help during work. “It’s the bread
2,000 flocked swabs a minute, employees say. First, an and butter of Guilford,” says William Thompson, who’s served
extruder pushes thin sticks out of a big vat of molten plastic, on the town board for more than 40 years.
similar to the way a pasta maker squeezes out strands of spa- Locals can still point out the three generals’ former homes,
ghetti. Then the sticks are loaded into a vibrating container white, wood-framed, clustered on the edge of town, and now
with a thin slot at the bottom that feeds them individually into used as company housing. Five family members still live in
the grooves of a conveyor belt chain. There an apparatus places Guilford. The sour relationship between Cartwright and
a tiny dot of specialized adhesive on one end and then each tip Templet is common knowledge, says Tom Goulette, Guilford’s
is inserted into a box full of synthetic fibers. An electrostatic former town manager. When news of the lawsuit broke in
charge causes these fibers to stand on the tip of the stick, like a Maine newspapers last February, few were surprised.
delicate pipe cleaner; every tip is measured within a few thou- Some in Guilford say the feud started with a backyard fist-
sandths of an inch. A weighted razor blade scores an indent fight when the cousins were kids. Others say it began later,
onto the stick, allowing clinicians to snap the tip off into a vial when their fathers passed away. Despite jointly running the
after extraction. Finally, the swabs are sanitized, heat-sealed company for two decades, the two have never been seen
between two layers of paper, and sent to distributors. on the factory floor together, according to a dozen former
Before the pandemic, U.S. hos- and current employees. Even fam-
pitals needed only about a million ily members can’t recall when the
nasopharyngeal swabs a year. cousins last spent time together.
Puritan and Copan manufactured At Hardwood Products’ 100th
all of them; Copan, the bigger of anniversary celebration picnic in
the two, provided about 60% of Guilford in 2019, they avoided each
those. Both companies have pat- other the entire day.
ented their swabs and repeatedly “I think the town is holding
sued one another for design its breath as to what will happen 45
infringement. Rival manufactur- next,” Goulette says. “Everybody
ers have had no interest in enter- thinks that maybe with these
ing a static market for a relatively multimillion-dollar grants that
low-profit-margin product domi- this is going to fix things. Maybe
FROM LEFT: RICH ABRAHAMSON/MORNING SENTINEL/GETTY IMAGES; PHOTOGRAPH BY TRISTAN SPINSKI FOR BLOOMBERG BUSINESSWEEK nated by two litigious incumbents. With government funding, Puritan retrofitted it’s enough to make them say,
In 2005, when the generals this plant in Pittsfield, Maine ‘Let’s resolve our differences.’”
He pauses a moment. “Dream on.”
retired and “the younger fellas
took over,” the easy relationship
Ebetween management and the 500 or so workers ended, arly in their careers, Templet and Cartwright ventured
beyond the family business. Templet worked as a sales-
says Frank Conner, who spent four decades with the com-
pany. “The whole mill was a family operation. It seemed like man on the West Coast, and Cartwright as a contractor in
you had a name, and then they just lost your name, and you Alaska. By the mid-’90s, they were both back in Maine and
got a number on your time clock.” As older workers left and both in sales, Templet with Puritan and Cartwright with
Guilford’s population began to shrink, with younger peo- Hardwood. Jerry Noble was the general manager of the busi-
ple headed to college, Templet and Cartwright struggled to neses at the time. “I was aware there could be conflict, even
recruit. Puritan and Hardwood’s factories are in the poorest back then,” he says. “The Cartwright family was primarily
county in Maine, with an average household income of about interested in the woodworking side, and Templet was pri-
$30,000 in 2018, according to Data USA. The company is one marily interested in the medical side. There were some
of the few options there for a steady income. For years the underlying conflicts on what direction they wanted to take
cousins have paid fully trained employees $15 an hour, sig- the company in.” Noble says the dispute is a result of classic
nificantly higher than the state’s $12.15 minimum wage, and cousin rivalry. “If you do any research on businesses, when
offered full benefits, including a 401(k) plan. But the mill’s the third generation and cousins come along, that’s when a
10-hour shifts, which either start at 5 a.m. or end at 1:30 a.m., lot of the problems start,” he says. Studies show that 30% of
cramped social life, and the ban on cellphones on the factory family businesses survive through the second generation, but
floor scared off millennial hires and the college students who only 13% through the third.
used to work there during the summers. Those close to Templet and Cartwright say it’s not only
The company is important to Guilford in all the ways thriv- their business priorities that clash. Cartwright is known as a
ing companies are to small towns everywhere. It contributes methodical thinker, a frugal planner, and a sometimes dis-
to the local food pantry, donates playground equipment, tant boss. He also owns another business in Guilford with
Bloomberg Businessweek March 22, 2021
his wife, Stephanie, that supplies plastic knives, forks, and computerized power bars were installed at Puritan, allowing
straws. He’s become increasingly private as his fortune has machine operators to insert an ID key card rather than fill out
grown. “Not many people know him now. That’s John’s per- paperwork at the start of every shift. Coombs, who was excited
sonality,” says Janie Lander, a former classmate. Cartwright to use the new technology, remembers the power bars were
and his wife built a sprawling estate, known locally as “John’s “there one day and gone the next”—without explanation. The
big white mansion,” at the end of a 320-foot driveway and lawsuit refers to an incident where the company spent hun-
next to the home he grew up in. He’s one of only a few home- dreds of thousands of dollars on a technology upgrade orga-
owners in Guilford to ban the local four-wheeler group from nized by Templet and abruptly terminated by Cartwright.
crossing his property. In 2019, Templet began seeking support among relatives for
Templet is more approachable, to a point. During his early a potential sale of the company, according to people who didn’t
dealings with the government, White House officials called him want to be named discussing private information. At one point
Mr. Templet, not Timothy—and definitely not Tim. Templet he approved a buyout bid from an investment fund. Cartwright
lives with his wife, Elise, in Cumberland, on the coast, and rejected it. Templet also sought an appraisal, hoping he could
commutes two hours to Guilford. Relatives and associates sell his stake in the company, but deemed the valuation too
say he considers himself a visionary. He’s as stubborn as his low. The Cartwright-Templet family partnership terminates in
cousin, more willing to spend money on the company, and 2026, and the contract states that unless both sides agree to
more likely to stay in five-star hotels when he travels for work. end it early, the partnership must remain in effect.
He’s also more comfortable in the role of company spokesman. Templet had one other option. In Maine a court may
Throughout the pandemic he’s appeared on national television end a limited partnership if it’s impracticable to maintain.
and radio. Relatives describe Templet and Cartwright as hav- Templet asked the court to dissolve ownership of the com-
ing a kind of tortoise-and-hare relationship: Cartwright moves pany and supervise its sale—and, in the meantime, appoint
slowly but with purpose, while Templet “will run for the sake the company’s general manager, Terry Young, as its interim
of running, even if he doesn’t know where he’s going.” custodian, with the power to break deadlocks between
Former employees say conflict was inevitable as Hardwood the owners. Young had worked at Hardwood Products for
and Puritan grew into completely separate businesses operat- 20 years, and for much of that time he’d been the go-between
46 ing at different speeds and generating different profit margins. for Cartwright and Templet. A few weeks after Templet filed
Alvin McDonald, who used to keep track of how much it cost the suit, Young retired. When reached at his new home in
to make all the products, says Hardwood’s business was Florida, he declined to comment.
“nowhere near” as profitable as Puritan’s. “The medical
Iside was always interested in investing money in new equip- t was Admiral Giroir who managed to bring Cartwright and
Templet together, if only for a phone call. After Templet
ment, because they had the resources available, whereas
the Hardwood plant was on a tight budget,” McDonald disclosed the lawsuit to White House officials, Giroir spoke
says. The summer before last, in an interview with the busi- with both cousins. He thanked them for their service and
ness journal Mainebiz, Templet said the connection between asked them to rise above their differences. “I remember tell-
the companies could be frustrating: “They’re Cartwright (left) and Templet ing them how critical they were,” the admiral
linked by family, and that’s all.” The forests in 1971 says. “I said they may not realize it now, but a
surrounding Guilford are great for Hardwood, lot of the pandemic response will depend on
but no longer necessary for Puritan, he said. them. I said the country is counting on them.”
And the town’s remote location makes it Rachael Baitel, the former deputy chief of staff
harder to keep the factory fully staffed. at the U.S. International Development Finance
The growing tension turned into a full- Corporation and Puritan’s point of contact,
blown corporate fight in the summer of 2018, says the call lasted only a few minutes and
according to the lawsuit Templet filed, which Giroir was the only one who spoke. “He knew
was shifted to Maine’s Business & Consumer they needed a motivational speech of sorts,”
Docket. “The Partnership formerly held mul- she says. “I don’t think any of us realized how
tiple meetings per year to approve budgets, fundamental that call was in the scheme of
salary increases, and capital expenditures. Puritan’s history.” Templet seemed to agree.
Cartwright walked out of the last meeting in When he next spoke to Baitel, he said, “That
May 2018 and no subsequent meetings have was exactly what we needed to hear.”
taken place,” the document states. The pair dis- In April 2020 the Department of Defense
agreed on salary increases, capital investments, announced it was investing $75.5 million in
upgrading technology systems—pretty much Puritan to double its production of the foam-
everything. Michael Coombs, who spent two tip swabs used for rapid antigen testing. The
decades at Puritan, recalls how the rift would company renovated a dormant 95,000-square-
spill over onto the factory floor. Three years ago foot factory in Pittsfield in eight weeks, with
Bloomberg Businessweek March 22, 2021
government contractor Bath Iron Works in transit), and Puritan will continue to
building proprietary swab-wrapping benefit from its lucrative agreement with
machines in a quarter of the time nor- the government.
mally required. This facility is now
making about 100 million swabs a month. A deadly pandemic, an extraordinary
On June 4, former President Trump’s business opportunity, and a quar-
motorcade pulled up outside the Puritan ter of a billion dollars in federal fund-
headquarters. He was the first sitting ing haven’t quelled the cousins’ feud.
president ever to visit Guilford in an Court records show they have fought
official capacity, and residents lined over the location of the case. Cartwright
the streets. Trump spoke to a crowd sought to shift it to Piscataquis County,
that included the owners. It wasn’t lost where he lives, but Templet demanded it
on employees that it was the first time remain in Cumberland County, where he
many had seen Cartwright and Templet lives. When Businessweek filed a motion
together. “Powered by the dedication to unseal the case file, they disagreed
of the men and women in this room, about that, too. Cartwright fought to
America has become the world leader in block access, and Templet chose not to.
coronavirus testing,” the president said. Puritan is the biggest company in Guilford, Last March, as the lockdown began,
“And now Puritan is doing better than but it struggled to recruit workers Templet wanted to expedite the case
it’s ever done, I guess by a factor of a lot, because of Puritan’s crucial role in the
right?” Indeed, by a factor of a lot. One month later, Puritan Covid response. Cartwright objected. In April, with infection
received an additional $51.2 million grant from the Cares Act rates rising, Cartwright filed a counterclaim that denied all of
and repurposed a second facility in Pittsfield to produce Templet’s allegations, including that they were at an impasse,
about 50 million flocked nasopharyngeal swabs a month. In and asked the court to instead require Templet to sell his
November $11.6 million in other funds arrived, and in January stake back to the company. Templet objected. Cartwright
an additional $110 million allowed Puritan to procure equip- accused Templet of “secretly” seeking business opportunities 47
ment to increase production of its foam-tipped swabs. The and of filing the original complaint, and sending a subsequent
government is also likely to fund Puritan’s fourth facility, in press release, as part of a “smear campaign” against him. He
Tennessee, according to people familiar with the situation alleges that Templet has wanted to sell the company, not save
who didn’t want to be named discussing private matters. it: “Mr. Templet insists that everyone’s interest in this fam-
The government made a modest investment in Copan, too. ily gift must be put up for sale because John Cartwright does
In September it provided $10 million to help increase produc- not agree often enough with Mr. Templet and Mr. Templet
FROM LEFT: COURTESY PURITAN MEDICAL PRODUCTS (2); PHOTOGRAPH BY TRISTAN SPINSKI FOR BLOOMBERG BUSINESSWEEK tion of flock-tip swabs at a factory in Puerto Rico. could make more money by selling to a third party, to heck
Nonetheless, Puritan almost has a monopoly on the market with everyone else in the family.”
for Covid swabs in the U.S. now and is positioned to dominate A document Templet filed in May suggests the pandemic
a global medical swab industry that could be worth as much had exacerbated the cousins’ dispute: “The tremendous
as $4 billion by 2027. Even with vaccines, the virus won’t dis- surge in demand for Puritan’s swabs and the need for deci-
appear, variants will likely continue to emerge, and testing sive decision-making to respond to that demand are among
will still be important. For now, new competitors don’t seem the primary factors that have caused ongoing and critical con-
much of a threat. Experts did design injection-molded and flict between Cartwright and Templet.”
3D-printed testing swabs, but production is expensive, and cli- In July, as the U.S. death toll surged past 150,000, Templet
nicians are reluctant to switch to devices from new companies. requested a temporary stay so the case didn’t distract Puritan.
A dental brush manufacturer in Wisconsin also started making Cartwright objected. His motion alleged that Templet wanted
flocked swabs last May and by September had produced 20 mil- to delay so he could “goose the pandemic numbers,” that is,
lion. U.S. Cotton LLC—best known for its Q-tips—modified 7 of the sales numbers. “Mr. Templet picked this fight and he
its 180 machines to switch from cotton, which interferes with should not be allowed to walk it back because it is going to
Covid test results, to spun-polyester swabs. The company is cost him some time and money, and because he wants more
producing about 80 million swabs a month for Covid testing, time to see how the dust settles before deciding whether he
according to CEO John Nims, and plans to keep expanding to is in or out of the family business.”
meet demand. But its machines aren’t able to produce foam or A relative says the cousins are “tolerating” each other, com-
flocked swabs, which the medical community still prefers. The municating only when necessary. The judge stated, “They were
rise of saliva-based testing could plausibly damp Puritan’s sales able to set aside their differences—at least for now—in order to
growth, what with spitting into a tube or onto a strip of paper come to agreement on an extraordinary and presumably lucra-
being considerably less uncomfortable than having a swab up tive arrangement.” The company remains busy; the case is on
your nose. But saliva tests have their limitations (e.g., leakage hold. And Templet and Cartwright are biding their time. <BW>