November 28 — December 4, 2016 | bloomberg.com
p36
“Why didn’t I tell him to his face, immediately, that this was
misogynist, 1 racist, and unprofessional? He was my
direct superior” p42 “For any other “Putin’s a celebrity. Donald’s “I’m seeing people a celebrity. … He’s thinking, That smile now, clients of mine, purpose than guy’s a big dog. I’d rather be where I didn’t even know friends with him than one of these paperwork, I consider weaklings like Jeb Bush. That’s just they had teeth. Everyone myself an American” the way he thinks” I talk to is happy” p25 p50 p32 Cover Trail November 28 — December 4, 2016 How the cover gets made
① Opening Remarks Trump’s trajectory may follow those of other elected autocrats 6 “The story is about the Colonial Pipeline, specifically the implications Bloomberg View Don’t bully central banks • The trouble with the president-elect’s ISIS plan 8 of accidents like the explosion in Alabama.” Movers ▲ Weed floats on the NYSE ▼ Cooling Swiss watches and a warming North Pole 11 “The implications are generally good, right? Fire provides warmth, and Global Economics Lord knows it gets chilly this time of year. Trees just take up valuable Modi tries to drain the swamp 12 space, so it’s a quick and easy way to clear some land. And the oil The World Bank’s chief economist attacks the profession 13 industry is stable to the point of Europe braces for the next tremors from Italy 14 being boring. This at least shakes things up a bit.” Factories from everywhere set up shop in Russia 15 “Have you purposefully avoided Charlie Rose talks to Sebastian Mallaby about his Alan Greenspan bio 16 reading the story?”
Companies/Industries “I’m just trying to stay positive.”
Take 350 designers with no one in charge —and presto!—another sale for Zara 18
To speed up food recalls, Walmart taps blockchain 20
In China, a spoonful of sugar makes the Champagne go down 21 Politics/Policy
Even if Donald Trump wanted to give up his business interests, it wouldn’t be easy 22
Obama-era regulators race for the finish line 24
Sizing up the impact if 740,000 Dreamers leave their jobs 25 2 Technology
If Elon builds it, the crazies will come 27
Karhoo was said to have $250 million in the bank. It didn’t 28
IBM tries to be the ghostbusters of corporate hacking 29
Chewy (no, not that one) adds an occasional oil painting to its online pet supplies 30
Innovation: A hybrid walker/wheelchair to put activity back into aging 31 Markets/Finance
Hillary who? Wall Street and Donald are BFFs now 32
John Paulson’s bet on Fannie and Freddie suddenly looks really smart 33
London closes a door on Europe and opens one to the Chinese 34 Features Alabama Shakes What happens when America’s biggest pipeline explodes 36
Memo to HR: Compliance videos don’t stop sexual harassment 42
King of K Street Paul Manafort never really went away 50 Etc.
How brands became obsessed with the color pink 55
Drinks: Eight cocktails for winter nights 58
Workplace: Skirt Club attracts women who want to network (and see where the night takes them) 60
Astrology: December provides an opportunity to rethink long-term goals 61
The Critic: Miss Sloane has a lot to like, but can audiences stomach more politics? 62
What I Wear to Work: The global brand leader for W Hotels isn’t content with just one bracelet 63
COVER AND COVER TRAIL: PHOTO ILLUSTRATION BY JUSTIN METZ JUSTIN BY ILLUSTRATION PHOTO TRAIL: COVER AND COVER How Did I Get Here? Daniel Lubetzky didn’t like his snacking options. Now we have Kind bars 64
Index People/Companies
Grillo, Beppe 14 Netflix (NFLX) 44 SolarCity 27 Gucci (KER:FP) 56 News Corp. (NWSA) 25 Sony Pictures Nike (NKE) 22 Entertainment (SNE) 29 Nordstrom (JWN) 44 Space Exploration 36 H Northrop Grumman (NOC) 24 Technologies 27 Protecting the river H&M (HMB:SS) 18 Novartis (NVS) 11 Steinhafel, Gregg 29 Hayes, Tom 11 NPD Group 20 Stone, Roger 51 HR Learning Center 44 NYSE (ICE) 11 Symantec (SYMC) 11 HSBC (HSBC) 12 O I Obama, Barack 22, 24, 25, 38 IBISWorld 44 Oblong Industries 29 IBM (IBM) 20, 29 Off-White 56 Ikea 15 Opimas 32 Inditex 18 Ortega, Amancio 18 Industrial & Commercial Bank of China (601398:CH) 34 Ingham, Anthony 63 P 49 Inkling 44 Pantone Color Institute 56 Clarence Innovative Industrial Pascal, Amy 29 Thomas Properties (IIPR) 11 Paul, Rand 24 Inspired eLearning 44 Paulson & Co. 33 Ishag, Daniel 28 Paulson, John 33 Isla, Pablo 18 Pence, Mike 33, 51 T Perera, Jonathan 62 T. Rowe Price 30 Pershing Square Capital Target (TGT) 11, 29 J Management 33 Tesla (TSLA) 27 Jaitley, Arun 12 Petco 30 Thomas, Clarence 49 J.Crew 56 PetSmart 30 Trump, Donald 6, 8, 11, 14, Jefferies Group (LUK) 34 Pigalle 56 16, 24, 25, 32, 38, 49, 51 Johnson, Abigail 11 Pope Francis 11 Trump, Ivanka 22 Johnson, Edward 11 Prescott, Edward 13 Trump, Melania 56 JPMorgan Chase (JPM) 32, 44 Primark (ABF:LN) 18 Trump Organization 22 Provost, Joe 29 21st Century Fox (FOXA) 44 Putin, Vladimir 6, 8, 14, 51 Twitter (TWTR) 6 K Tyson Foods (TSN) 11 Kaczynski, Jaroslaw 6 Kind 64 QRS 4 Kinder Morgan (KMI) 38 Qatar Investment Authority 34 UVW Kissinger, Henry 16 Quest Integrity 27 U+I Group (UAI:LN) 34 KKR (KKR) 11, 38 Renaissance Capital 15 Uber 28 Klinsmann, Jurgen 11 Rentmeester, Marlien 56 UBS (UBS) 18, 22 Knopf 56 Renzi, Matteo 14 Vadon, Mark 30 Koch, Charles 25 Rokk Solutions 27 Visa (V) 20 Bush, Jeb 51 Cruz, Ted 51 Koch, David 25 Romer, Paul 13 Volkswagen (VOW:GR) 15 A Butler, David 38 Cuomo, Andrew 11 Koch Industries 38 Rove, Karl 51 Vornado Realty Trust (VNO) 22 ABP London 34 CVS (CVS) 11 Kushner Companies 22 Sabra Dipping 11 W Hotels 63 Abramoff, Jack 62 Kushner, Jared 6, 22 Samsung (005930:KS) 15 Walmart Stores (WMT) 11, 20 ABX Air (ATSG) 11 C Sargent, Thomas 13 Walt Disney (DIS) 56 Ackman, William 33 Calsonic Kansei (7248:JP) 11 DEF Savills (SVS:LN) 34 Wax, Gavin 27 Acne Studios 56 Carlson, Gretchen 49 Danler, Stephanie 56 L Scaramucci, Anthony 32 Wells Fargo (WFC) 33 ADP (ADP) 29 Carter, Jimmy 22 Day, Michael 30 L.E. Bell Construction 38 Schumer, Chuck 32 West, Kanye 11 Agricultural Bank of Century Properties DCI Group 33 Le Creuset 56 Schwarzenegger, Arnold 44 Wheeler, Tom 24 China (601288:CH) 34 Group (CPG:PM) 22 Deal, Nathan 38 LeJeune, Geneviève 60 Select Medical (SEM) 31 Willingham, Anthony Lee 38 Ailes, Roger 44, 49 Chanel 56 Deripaska, Oleg 51 LifeLock (LOCK) 11 Selexys Pharmaceuticals 11 Wine Intelligence 21 Al-Assad, Bashar 8 Chastain, Jessica 62 Deutsche Bank (DB) 22 Lockheed Martin (LMT) 27 Sessions, Jeff 22, 51 Alibaba (BABA) 21 Cheers 21 Development Specialists 32 Lubetzky, Daniel 64 Shell Pipeline (RDS/A) 38 Amazon.com (AMZN) 11, 20, 30 Cheney, Dick 51 Dole, Bob 51 Lucas, Robert Jr. 13 Shinawatra, Thaksin 6 XYZ American Airlines (AAL) 38 Chevron (CVX) 44 Domaine Chandon (Ningxia) LVMH Moët Hennessy-Louis Shinawatra, Yingluck 6 Xi Jinping 21 American Apparel 18 Moët Hennessy (MC:FP) 21 Vuitton (MC:FP) 21 Singh, Porush 12 Yanukovych, Viktor 51 American Continental Group 33 Dr Pepper Snapple (DPS) 11 Lyons, Jenna 56 Skillsoft 44 Yellen, Janet 8, 16 Amoruso, Sophia 56 Duterte, Rodrigo 6 Smith, Donnie 11 YouTube (GOOG) 30 Antonio, Jose E.B. 22 Emtrain 44 Société Générale (GLE:FP) 18 Zulily (QVCA) 30 Apple (AAPL) 44 Erdogan, Recep Tayyip 6 M Arena, Bruce 11 Eurasian Development Bank 15 MacInnis, Matt 44 Axelrod, David 51 Euromonitor International 21 Madden, John 62 EuropaCorp (ECP:FP) 62 Maduro, Nicolás 6 Exokinetics 31 Mallaby, Sebastian 16 B 62 Facebook (FB) 11 Manafort, Paul 51 How to Contact Bai Brands 11 Jessica Fannie Mae 33 Marenzi, Octavio 32 Bloomberg Businessweek Bank of America (BAC) 12 Chastain Farley, Richard 32 Marriott International (MAR) 25 Bank of China (601988:CH) 34 Fawcett, Chris 31 Mars 15 Editorial 212 617-8120 Ad Sales 212 617-2900 Bannon, Steve 6, 32 Chewy.com 30 Fidelity Investments 11 Mastercard (MA) 12, 20 Barclays (BCS) 34 China Construction Firtash, Dmitry 51 Masueger, Claudia 21 Subscriptions 800 635-1200 Barrack, Tom 51 Bank (601939:CH) 34 Founders Fund 31 May, Theresa 8 Address 731 Lexington Ave., New York, NY 10022 Bell, Larry 38 China Investment Corp. 34 Fox News (FOXA) 44, 49 McCain, John 51 E-mail [email protected] Berkowitz, Bruce 33 Chipotle Mexican Grill (CMG) 20 Freddie Mac 33 McCarthy, Gina 24 Fax 212 617-9065 Subscription Service Berlusconi, Silvio 6, 14 Citic Group 34 McCarthy, Kevin 24 PO Box 37528, Boone, IA 50037-0528 Bernanke, Ben 16 Citigroup (C) 34 McKibben, Bill 38 BHP Billiton (BHP) 20 Clinton, Bill 22, 49 G Merkel, Angela 11 E-mail [email protected] Black, Charlie 51 Clinton, Hillary 32, 51, 56 Gap (GPS) 18 Mnuchin, Steven 32 Reprints/Permissions 800 290-5460 x100 or BlackRock (BLK) 30 Coca-Cola (KO) 21 Gates, Bill 18 Modi, Narendra 12 [email protected] Blankfein, Lloyd 32 Cohen, Ryan 30 General Electric (GE) 11 ModSquad 28 Boeing (BA) 25, 27 CoinDesk 20 Glossier 56 Moody’s (MCO) 38 Letters to the Editor can be sent by e-mail, fax, Brandt, Bill Jr. 32 Colonial Pipeline 38 Goldman Sachs (GS) 30, 32, 44 Musk, Elon 27 or regular mail. They should include address, Breitbart News 6 Colony Capital (CLNY) 51 Google (GOOG) 44 phone number(s), and e-mail address if available. Brookfield Property Comey, James 51 Gramm, Phil 51 Partners (BPY) 34 Common Projects 56 Greenland N Connections with the subject of the letter should Brown, Garrett 31 Correa, Rafael 6 Holdings (600606:CH) 34 Nasdaq (NDAQ) 20 be disclosed, and we reserve the right to edit for
Bush, George H.W. 51 Credit Suisse (CS) 34 Greenspan, Alan 16 NBC (CMCSA) 32 sense, style, and space. STATES UNITED THE OF SUPREME COURT THE OF COLLECTION THOMAS: IMAGES; GRANITZ/GETTY STEVE CHASTAIN: BUSINESSWEEK; BLOOMBERG FOR GREGORY CHRISTOPHER BY PHOTOGRAPH BUTLER:
Opening Remarks
In the wake of Donald Trump’s to themselves and their stunning electoral victory, many images, making their administrations American political analysts are arguing reliant on their own personal influence. that his presidency has virtually no And in office, they usually conform precedent in U.S. history, and so it’s less to policy orthodoxies than poli impossible to know how he might govern. ticians with traditional backgrounds. However, Trump isn’t without pre Duterte, for instance, has mixed a cedent in modern democracy if you leftist economic policy, which includes look for examples outside America. To rural development and land reform, be sure, some of his populist mantras with a harsh and conservative antidrug echo those of the increasingly power crackdown. ful European hardright parties. But What else do the elected autocrats most of the hardright parties in Europe have in common? They usually win haven’t yet won control of a govern elections in part by dominating the ment. Instead, it’s better to study the media, sometimes by buying media slew of elected autocracies that have outlets or having allies who do so. In taken over developing nations during office, they further undermine the the past decade—and touched richer traditional media, using alternative 6 countries such as Italy, Hungary, and forms of communication and aggres Poland. According to the monitoring sively stoking public antagonism at By Joshua Kurlantzick group Freedom House, democracy has elites to blunt the power of reporting been on the decline worldwide since on their administrations. Berlusconi the late 2000s, with the rise of elected and Thaksin used their riches to pur autocrats—legitimately elected leaders chase major media outlets—the former who then undermine democratic insti had taken control of much of Italian tutions and culture—a major reason private television by the time he was for freedom’s ebb. These elected auto first elected in 1994—or had their crats include people on the left of the friends buy up important newspapers. spectrum, such as former Thai Prime Berlusconi reveled in attacking the few Minister Thaksin Shinawatra, Philippine Italian newspapers (along with many President Rodrigo Duterte, and foreign publications) that criticized Ecuadorean President Rafael Correa, him, apparently believing his approach as well as rightleaning leaders such won him more supporters than it cost as former Italian Prime Minister Silvio him. He sued the Economist for libel, Berlusconi and Jaroslaw Kaczynski, who and for almost a decade his posturing dominates Poland’s current ruling Law against the Italian media seemed to be and Justice Party. popular. In Russia, Vladimir Putin has Many of these elected autocrats used his network of business connec had little or no government experi tions to virtually control the broadcast ence before winning national elections. media and ensure favorable coverage. Like Trump, they’ve built personality Trump seems likely to take the same cults greater than exist in most farright approach to the media, even if he will European parties. Most won elections not buy networks and sites. His senior as much on the power of their own cha strategist, Steve Bannon, previously risma as on any set of coherent policy ran Breitbart News; his successors there ideas. (Leaders such as Berlusconi, could well turn the site into a kind of For the templates of his Duterte, and now Trump took advan state media for President Trump. He has presidency, look to the tage of complex political systems and openly mused about deploying libel laws multicandidate races, often winning more aggressively, while demonizing the experience of Thailand, with less than 50 percent of the popular mainstream press at nearly every cam the Philippines, and Italy vote.) They’re indeed deeply devoted paign rally. It wouldn’t be unthinkable for Trump allies, perhaps even family That said, elected autocrats’ extreme they’re so fearful of delegating power. members, to purchase a major television personalization of power is often their Chávez died in 2013 and left his party to network or set up a new one essentially downfall. By surrounding themselves a weak successor, beleaguered current dedicated to promoting the president. with unqualified family members and President Nicolás Maduro. Facing cor Trump, meanwhile, could continue sycophants, they make graft much ruption charges, Thaksin fled Thailand using Twitter to delegitimize more likely. Berlusconi notoriously in 2008, leaving his party to his younger the mainstream media, appointed former showgirls and other sister, Yingluck. Although she won an mix fiction with fact cronies to high office. Despite his efforts election in 2011, in part because Thaksin to confuse the to revamp the legal system to protect openly backed her, she proved an inef public, and himself, he was ultimately convicted fective political operator and was beset of tax fraud. Trump’s children—and his by scandal and street protests before soninlaw, Jared Kushner—are expected being deposed in a May 2014 coup. And to be extremely influential, while at Putin seems unable to imagine a future the same time having power over his Russia without himself, leaving a void businesses (page 22). David Frum of when and if he finally exits the scene. the Atlantic, a former speechwriter for As the elected autocrats age, in fact, George W. Bush, has already suggested they also need to make greater and that the Trump administration could greater efforts to stoke their cults of per be the least ethical in U.S. history. sonality. In recent years, Putin has over Trump, Frum wrote on Twitter, seen the rewriting of Russian history will “enable systematic looting & and the construction of monuments disable oversight.” across Russia designed to bolster his promote him Because of their person personality cult and distract Russians self—a strategy he alization of power, elected from worrying about what will happen seems to be pursuing autocrats also often when he’s no longer around. In Turkey, since his election. have difficulty building President Recep Tayyip Erdogan has In office, elected auto lasting movements overseen the construction of a lavish, crats try to slowly suffocate beyond themselves. Ottomanesque palace for himself. the civil service, military bureau Most struggle to The cults of personality that elected cracy, and other government name successors, autocrats have created often don’t networks that are supposed to be in part because survive them. Ultimately, when they apolitical and which normally provide exit politics, their countries struggle 7 continuity across presidential adminis to return to normal. After serving as trations. They substitute clientelism for prime minister, Berlusconi left Italy professionalism. Thaksin, who first took with slower growth and far weaker office in 2001, purged the esteemed legal institutions. The country hasn’t Thai civil service and replaced many yet recovered from the nine years he senior officials with his allies, while spent in office.
The personalization of power is at the heart of the elected autocrat’s success—and failure 8 View Bloomberg jeopardy? a itcross alinewhen Does apolitician—especially now Isthis in a balance hasbeenstruck. questions. In effect, confirmed Congressby theSenate; testimony hears and asks mandates; Fed governors are appointed by thepresident and invarious ways. accountable politically They have operating nochoice. parts effectively, policy to usefiscal leaving the Fedandits counter banks were to right adopt methods— these aftermeasures therecent was necessary recession. Thecentral to Fed Resorting for to the pastdecade. unconventional policy That should beobvious to anyone who’s beenpaying attention pressure applied for longer. are hardly Such decisions apolitical. curb inflation—with a sharp short, recession, say, or with gentler have bankssometimes And central how to decide quickly to quences. Changes in interest rates hurt some and help others. isn’t policy purelyMonetary Ithasreal-world technical. conse however, was always suspect—and never more so than now. like thing, runningautility.cal It’s apolitical. basically interest rates?) atechni is doneright Third, policy monetary (Wouldpolitics. anybody want to put Congress in charge of required, andthat demandssomeinsulation from day-to-day economic stability, a steady controls hand on the is monetary money.deficits by printing (SeeZimbabwe.) Second, to provide bankmightbetemptedcentral to financeunaffordable budget rests on threepolicy a government points. First, that controls a orbeyondbe above politics. criticism Janet Yellen. At bankscan’t thesametime,central expect to went of Federal repeated too far in his criticism Reserve Chair worth defending: U.S. DonaldTrump, President-elect for one, aroundseems to beunderattack theworld. is That principle ofindependencefor central banks The long-cherished principle work—intimidation isnot Disagreements are of part theway things Central Banks It’s Wrong to Bully The case for leaving the banks alone to conduct monetary for leaving monetary The case thebanksaloneto conduct Independence isn’t banksare Central allornothing. already two The first reasons remain as persuasive as ever. The third, governments failed - - - of resolving the Syrian political conflict. This of resolving This would leave theSyrian conflict. political the administration, Trump seems uninterested in the longer project andthenleavesState thesceneentirely. Unlike thecurrent be keen to work out in which a deal the U.S. eliminates Islamic andSyrian Putin both to thetest. President Bashar relationship would withVladimir This Putin. bethetimeto put has shown progress. consistent for Mosul, As essential. there’s nochangingawar planthat months. Acoordination planwith Russia andSyria would be their support personnelandequipment would take weeks or necessary, butmoving tens ofthousands ofcombat troops and its southern border. Sendinginmore U.S. forces probably is Turkey, ofaKurdish which theestablishment fears across state response from amilitary of supporting themwithout inciting fighting force onthe U.S. side,and Trump has to finda way terrorist groups includingtheal-Nusra ally. Front, anal-Qaeda Iran, Iraq, Kurds backed by theU.S., Syrian Arab rebels, and players inthewar: theSyrian regime, Hezbollah, Russia, Turkey, rorists was “a disaster.” said thefight of to Mosul fromretakecity theIraqi the ter 30 troops home.He’s alsotold thePentagon that itwillhave forces, quickly wipingout theterrorists, the thenbringing the group inSyria bynumber of sendinginasignificant U.S. to divulge He it. hashinted, however, that heintends to fight over Islamic buthe’s State, victory” plan for a“total refused Donald Trump hasfrequently spoken ofhaving a“foolproof” chaos that could give to anIslamic rise Statesuccessor.
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ILLUSTRATION BY TOMI UM
▲ German Chancellor Angela Merkel, Movers who′s been in ▲ The Dow Jones industrial average rose to By Kyle Stock a record high as energy companies benefited office since from an oil rally and investors anticipated Trump 2005, said she tax cuts. 2000 ▲ Abigail Johnson will succeed would seek a her father, Edward, as chairman fourth term. of Fidelity Investments after he Merkel expects retires. 1750 ▲ Dr Pepper Snapple She’s next year’s The Harry Potter agreed to spend already campaign to be prequel Fantastic Beasts has a magical replaced her toughest him as CEO 1500 U.S. debut $1.7b yet. Germany to buy Bai Brands, at the firm, 1/2016 11/2016 which makes a line 49 percent doesn’t have $75m of healthy drinks, of which is term limits still under Symantec acquires including on its ▲ General Electric LifeLock, adding coconut family sold its Connecticut ownership. top job. identity protection to its water and headquarters for security technology “antioxidant- infused” $31.5m ▲ Pope Francis extended fruit drinks. ▲ Weed hits the NYSE. Innovative to Sacred Heart indefinitelythe power $2.3b Just seven Industrial Properties aims to raise University. GE is of priests to forgive Novartis buys Selexys years old, $175 million during its IPO to become moving its C-suite Pharmaceuticals, Bai expects the first public to Boston for abortion, which is known for treating $425 million real estate lower taxes and a considered a “grave sin” sickle-cell disease in sales next investment $145 million incentive in the Catholic year. trust focused package, among on the $7 billion other things. Church. $665m marijuana Typically, Facebook staffs up to industry. The bishops were fill its new London office company will use $30 million of the only the proceeds to officials to 500 buy a New York grant such KKR buys auto parts Ups warehouse for maker Calsonic Kansei growing weed. absolution. $4.5b 11 The expected number of (very grumpy) U.S. air travelers during Downs Thanksgiving week rose 2.5 percent ▼ Store-branded aloe vera gel 27.3m sold at Walmart, Pilots for cargo carrier ▼ Rapper Kanye Target, and ABX Air went on strike West was CVS showed no at a tricky time for hospitalized for Amazon.com, a major exhaustion after $25m▼ President-elect Donald Trump paid $25 million to settle fraud charges evidence of aloe client canceling his concert against Trump University. Some 7,000 students will share the settlement, vera, according tour. He lost which is subject to court approval; plaintiffs’ attorneys waived their fees. to a lab hired 250 $30m by Bloomberg News. Swiss watch exports in potential ticket ▼ Tyson Foods CEO Donnie Meanwhile, the U.S. market plunged more in sales for the for aloe products grew October than they have 21 remaining shows. Smith, a 36-year veteran, in seven years will step down on Dec. 31 11 percent this year, to ▼ Temperatures at $146 million. and will be replaced by President the North Pole are –16% Tom Hayes, who’s been at Tyson for A fat flock helped bring 29 years. Smith will collect a golden 36F ▼ Sabra Dipping turkey prices down parachute worth at least $24 million. warmer than recalled this year The announcement resulted normal, delaying ▼ U.S. Soccer the formation of 57 –11% dismissed Jurgen almost immediately in the pack ice as winter varieties of its Klinsmann as coach company losing about one- approaches. hummus after it of the men’s national fifth of its market value. found listeria at one team, after the squad of its plants. lost two World Cup qualifying matches. It replaced him with Bruce Arena, a Major League Soccer coach “If there is a move to deport who held the position from 1998 to 2006. immigrants, then I say start with me.” ▼ New York Governor Andrew Cuomo, announcing a new state police unit dedicated to investigating hate crimes ILLUSTRATIONS BY OSCAR BOLTON GREEN; MERKEL: KRISZTIAN BOCSI/BLOOMBERG; FRANCIS: LISA MAREE WILLIAMS/GETTY IMAGES WILLIAMS/GETTY MAREE LISA FRANCIS: BOCSI/BLOOMBERG; KRISZTIAN MERKEL: GREEN; BOLTON OSCAR BY ILLUSTRATIONS
Queueing up to deposit and exchange discontinued currency Global at a bank on Nov. 17 Economics
November 28 — December 4, 2016
12
India’s Cash-Canceling Experiment
▶▶Modi is installing an almost cashless system that will expand banks’ deposits ▶▶“We are sitting almost idle. There are no buyers” India Prime Minister Narendra Modi the Reserve Bank of India said in a money going untaxed, Indian gov- stunned the country on Nov. 8 by statement. “Members of the public are ernments have had difficulty funding announcing that 500-rupee ($7.30) and requested not to panic.” infrastructure projects and other 1,000-rupee notes, which account for Modi’s action is aimed squarely at public spending. more than 85 percent of the money the cash-driven shadow economy, Tax officials will get reports on cash supply, would cease to be legal tender which accounts for about 25 percent deposits in excess of 250,000 rupees immediately. The announcement of gross domestic product. Fewer and compare those deposits with set off days of turmoil as millions of than 5 percent of all Indians file income disclosures. The authorities Indians tried to swap their suddenly tax returns. Many shop owners use can demand a tax payment and worthless old notes for hard-to-find cash for their transactions and don’t impose a penalty equal to 200 percent new notes of 500 and 2,000 rupees or declare their income. Wealthy Indians of the tax owed. The government older ones in smaller denominations. often avoid taxes by paying cash for estimates that as much as 5 trillion On Nov. 17 the central bank tried, with property and jewelry. Those busi- out of 15 trillion rupees will remain little effect, to reassure the nation nesses “are where black money is unredeemed as tax evaders unwilling that the situation was under control. hidden,” says Capital Economics to risk detection accept large losses. “There is sufficient supply of notes,” economist Shilan Shah. With so much As cash disappears, so does An Italian referendum Charlie Rose talks with may foretell Europe’s Greenspan biographer future 14 Sebastian Mallaby 16
Cheap labor. Cheap ruble. Russia’s the place for factories 15
such as refrigerators plenty more targets for his campaign and washing machines, against the underground economy. economic activity. For three decades, as well as discretionary purchases like “I don’t think it will stop here,” says Ashok Kumar has been a trader at expensive apparel. “All of that will def- Capital Economics’ Shah. �Bruce Azadpur Mandi, Delhi’s largest fruit initely take a hit,” she says. Einhorn, with Vrishti Beniwal, Archana and vegetable market, where much Gera says the pain may be short- Chaudhary, and Pratik Parija of the buying and selling involves lived. The attack on underground The bottom line Modi is trying to end tax evasion the now-banned notes. Since Modi’s money will increase bank deposits and impose a tax-compliant, above-board announcement, Kumar says, cash by as much as 2 percent of GDP, economy at all levels. transactions have nearly stopped. according to Bank of America Merrill “We are sitting almost idle,” he says. Lynch. Deposits swelled by 5.1 tril- “There are no buyers.” lion rupees from Nov. 10 to Nov. 18. On Highway 24 between New Delhi Because banks are getting a surge and the town of Dadri, gas stations are in deposits, Finance Minister Arun Economic Theory empty and trucks stranded. Drivers Jaitley said on Nov. 18, they’re spend their days playing cards, unable better positioned to spur economic How Rational Are to operate their vehicles because growth by making more loans. Rational Expectations? transport company owners can’t get Modi’s currency reform may also the cash to buy fuel or pay the drivers lead to an increase in the use of elec- ▶ The World Bank’s chief economist their 100-rupee daily food allowance. tronic payment systems. The prime questions a macroeconomic pillar “There’s no work,” says Sundar Singh, minister’s action “is a critical step in a 38-year-old truck driver from Aligarh, positioning India to be a leader in the ▶ “Assume A, assume B … blah blah a city about 90 miles southeast of global cashless and digital economy,” blah … and so … P is true” Delhi. “I can’t even charge my cell Porush Singh, Mastercard’s president phone,” he says, because he doesn’t for South Asia, said in a statement. Paul Romer hadn’t planned to trash 13 have any change. To ease some of the In addition to legislative victories macroeconomics as a math-obsessed pain, the Finance Ministry on Nov. 21 such as the approval of long-delayed pseudoscience. Or infuriate countless said farmers could use old 500-rupee tax reform and a new bankruptcy colleagues. It just sort of happened. notes to buy seeds for winter-sown law, Modi this year eased restric- In the months before taking over crops from state-owned stores. tions on foreign investment in indus- as the World Bank’s chief economist Modi has been trying to follow tries like pharmaceuticals, aviation, in October, Romer set out to write a through on promises to attack the and defense. Unlike the previous gov- paper to celebrate advances in the shadow economy since he took office ernment, his administration has been understanding of what drives eco- in 2014, with mixed results. An offer free of major scandals. The prime nomic growth. He soon lost heart. of amnesty for repatriated funds last minister has been lucky, too: Thanks Global growth has been disappointing year led to declarations of only about to low global oil prices, inflationary over the past few years, and economic 25 billion rupees in tax—20 rupees pressure has subsided, and after two models haven’t answered a core ques- per person. A separate amnesty years of drought, better rainfall this tion of the past cycle: Why has pro- that ended in September prompted year has helped farmers. The central ductivity stalled? the declaration of 652.5 billion bank has cut the benchmark interest He found the mathematical models rupees—about 0.5 percent of GDP, or rate to its lowest point in five years. used by most macroeconomists 500 rupees per capita. Modi said on Nov. 13 that the gov- unrealistic. Romer’s paper, The Trouble Modi is risking a temporary ernment will take more steps to With Macroeconomics, landed like a economic setback from demonetiza- curb tax evasion, including pur- grenade among his peers. “For more tion. Until the Nov. 8 announcement, chases of property investors make in than three decades, macroeconomics GDP was on track to increase the name of a third party. There are has gone backwards,” it begins. For 7.7 percent this year, and the govern- 20 pages, he critiques the state of ment had achieved some important his profession, accusing a cohort of goals in its drive to improve business economists of being more interested conditions. HSBC said in a Nov. 16 in preserving reputations than testing report that the economy could lose their theories against reality, “more 0.7 to 1 percentage point of growth committed to friends than facts.” In over a year. “It’s going to be very between, he offers a wicked parody of disruptive,” says Diksha Gera, an a modern macro argument: “Assume analyst with Bloomberg Intelligence in A, assume B ... blah blah blah ... and so Singapore, who expects consumers to Increase in rupee deposits at Indian banks we have proven that P is true.” FROM LEFT: EPA/ALAMY; GURPREET SINGH/HINDUSTAN TIMES/GETTY IMAGES TIMES/GETTY SINGH/HINDUSTAN GURPREET EPA/ALAMY; LEFT: FROM postpone spending on big-ticket items 5.1tfrom Nov. 10 to Nov. 18 Romer targets one of the basic Global Economics
tenets of mainstream economics, the foundations later, just does not seem Prime Minister Matteo Renzi has theory of rational expectations—the like a constructive way to proceed,” says staked his future on the vote, a consti- idea that consumers and businesses on V.V. Chari, an economics professor at tutional reform aimed at shrinking the average correctly predict the future and the University of Minnesota. Romer’s senate to make Italy more governable. make rational choices. He thinks that’s heard that line before. He bristles: He says the referendum would hit the not only wrong but also may result in “I’m saying, ‘The car is broken.’ And old guard of Italian politics that’s para- the misguided conclusion that govern- everyone’s saying, ‘Romer’s a terrible lyzed the country for decades, cutting ment action can’t fix big problems. guy, because he couldn’t fix the car.’ ” the number of senators from 315 to 100, That debate goes back at least to �Andrew Mayeda and Craig Torres eliminating their ability to bring down John Maynard Keynes, who thought the government with no- confidence The bottom line The World Bank’s chief economist policymakers needed to take bolder blasts the state of modern macroeconomic theory votes, and reining in their power to action to fix the deep shortfall in for straying from science and rigorous testing. block legislation. Although Renzi swept demand that was prolonging the Great into office in 2014 as a fresh face pledg- Depression. By the 1970s, Keynes’s ing to make difficult choices, he’s now ideas were mainstream —but the pol- considered part of the Establishment, icies they spawned failed to prevent so many voters see the referendum that decade’s high unemployment and Politics as a chance to “drain the swamp,” inflation. Economists came up with the Italian-style. And he’s threatened to theories of rational expectations and A Petri Dish of quit if it’s rejected, so the ballot has the “real business cycle.” Populist Dissent become more of a plebiscite on Renzi They argued that Keynesian models himself than on the new senate rules. didn’t account for how consumers “This government was born to enact ▶ Italy’s Dec. 4 vote hints at the and businesses change their behavior reforms,” says Lorenzo Guerini, dep- outcome of ballots across Europe to take account of policy shifts. For uty-secretary of Renzi’s Democratic example, the government can spend ▶ The country is “a breeding ground Party. “If Italians reject the most impor- more, putting cash in consumers’ for democratic crises” tant changes, we’ll have to deal with pockets. But those same consumers, the the consequences.” theory goes, can see far into the future To get a sense of Europe’s politi- Austria, France, the Netherlands, 14 and won’t be fooled: They’ll figure out cal weather, take a look at Italy: For and Germany face presidential or par- that taxes will have to rise to pay for the the past century, it’s served as a liamentary elections in the coming handouts. So they hang on to their cash barometer of the continent’s mood. year, and Spain is expecting a referen- and render those policies less effective. In the 1920s, Mussolini’s fascism pre- dum on independence for the region of The problem with that worldview, saged Hitler and the Nazis. In the Catalonia. As governments and main- says Romer, is that it rules out policy ’70s, Italy’s extreme left- and right- stream parties struggle to counter the or people as agents of change, leaving wing terrorist movements her- virulent denunciations by insurgents planners with the unrealistic conclusion alded armed groups in the rest of on everything from poor economic that the economy can be moved along Europe. Curious about the future of growth to the influx of immigrants, only by “external shocks.” Economists, a country run by a media-savvy bil- there’s a big chance of further gains by he writes, should be asking, “What kind lionaire with hair issues? Check out nationalists and populists. Next year of things influence what people do? how Silvio Berlusconi destroyed tra- “gives me the shivers,” Marco Buti, the What actually leads to an improvement ditional parties with TV slogans, European Commission’s in productivity in a factory?” anti-Establishment rhetoric, and One reason he’s ruffled feathers is garish displays of wealth. that he names names. Romer is partic- That’s why Europe will closely ularly critical of a trio of Nobel prize watch a Dec. 4 referendum winners: Robert Lucas Jr., Thomas over arcane details of Italian Sargent, and Edward Prescott, the parliamentary procedure.
intellectual architects of rational The ballot could indicate Berlusconi expectations. Sargent says he hasn’t whether the populism read the paper but suggests that Romer sweeping the world (think may be out of touch with the ways Brexit and Trump) is rational-expectations economists have still ascendant or poised adapted their models to reflect how to abate. “Italy is like people actually behave. Lucas and a seismograph,” says Renzi Prescott didn’t comment. Marc Lazar, a professor Allies of the three have been more at Sciences Po University outspoken and point out that Romer in Paris. “It registers tiny doesn’t offer a new framework to political tremors that then replace the one he says has failed. spread to Europe and the Grillo “Burning down the edifice, and saying rest of the world as bigger we’ll figure out what we’ll build on its shocks.” Global Economics
director general for economic and fragility makes it a breeding ground the past two years against the dollar. financial affairs, said in a Nov. 17 for democratic crises,” he says. “Its With wages rising across much of speech in Rome. weak institutions mean new move- Eastern Europe, Russia looks increas- While Berlusconi, who served as ments aren’t quelled or drowned ingly appealing to multinationals prime minister three times from 1994 out as quickly as they might be else- searching for a manufacturing hub to 2011, was undeniably populist, where.” �Alessandra Migliaccio and from which they can supply the entire the trend gathered strength in 2009 John Follain continent. In September, Samsung with the emergence of the Five Star started shipping washing machines The bottom line Europe is watching Italy, a Movement. The nonparty, led by a barometer of political trends, as Austria, France, the from its Kaluga factory to 20 European former TV comedian named Beppe Netherlands, and Germany brace for elections. countries. That same month, Mars- Grillo, created a system of online owned Wrigley inaugurated a voting for its leaders and united an $7.7 million facility in St. Petersburg, unlikely mix of disgruntled voters where it produces Juicy Fruit chewing from all sides of the political spec- gum, some of it for export. “It won’t trum. In fiery speeches peppered Labor Costs be an exaggeration to say that Russia with expletives, Grillo and his surro- may become the region’s factory,” gates give a voice to individuals with For Manufacturers, says Yaroslav Lissovolik, the Moscow- gripes ranging from unemployment Russia Is Now a Bargain based chief economist at the Eurasian and the euro to the dangers of climate Development Bank, whose members change and the need for better rela- are Armenia, Belarus, Kazakhstan, ▶ The ruble’s collapse has dragged tions with Vladimir Putin’s Russia. Kyrgyzstan, Russia, and Tajikistan. salaries below levels in China Five Star has surged to win City Hall in While industrial output is gradually Rome and Turin and is neck and neck ▶ The nation “may become the rebounding, most Russian manufac- with Renzi’s party as the biggest force region’s factory” turers aren’t in a position to exploit the in Italian politics. The movement sees opportunity provided by a weaker cur- the referendum as a way to bump Coming soon to a store near you: Made- rency and falling wages. “For firms to Renzi entirely from the stage, forcing in-Russia washing machines, sofas, capitalize on their current relative price new elections that could give it a shot chewing gum, and possibly much more. advantage in international markets, at forming a national government. The combination of the country’s they would need to expand and change 15 With parliamentary rules that grant worst currency crisis since 1998 and their output capacity and invest in both seats in the legislature to parties with a slide in real wages has resulted in their products and production pro- as little as 3 percent of the vote, Italy salaries that have become “broadly cesses,” said the World Bank in an April has become a petri dish for disruptive competitive” with China’s for the first report on Russia’s export competi- trends. That provides insurgents with a time since the czarist era ended a tiveness. Natalia megaphone to air their grievances—and century ago, according to investment Russia’s Kostyukovich, a has given the country 63 governments bank Renaissance Capital. Companies industrial output spokeswoman since World War II. While constitu- including South Korea’s Samsung for Volkswagen’s tionalists argue the proposed reforms Electronics, Sweden’s Ikea, and 0.6% 0.4% Russian unit, would curtail checks and balances Mars of the U.S. are taking advantage -3.4% says the compa- designed to prevent the advent of a per- of the cheaper labor costs to increase ny’s locally pro- ilously strong leader like Mussolini, exports from their Russian factories. duced vehicles Renzi says the referendum will make “Russian suppliers are competitive “aren’t yet globally Italy more stable. In the meantime, he’s today mainly because of the currency competitive.” taking a page from Five Star’s playbook situation,” says Magnus Benon, head 2014 2015 2016 “Time and PROJECTED PHOTO ILLUSTRATION BY 731: PHOTOS: AP PHOTO (1); GETTY IMAGES (2); DATA: MINISTRY OF ENERGY OF THE RUSSIAN FEDERATION THE OF ENERGY OF MINISTRY DATA: (2); GETTY IMAGES (1); PHOTO AP PHOTOS: 731: BY ILLUSTRATION PHOTO by amping up his own populist rheto- of purchasing operations for Ikea in investment are ric, railing against the bureaucrats and Russia, which has started exporting necessary for exports of Russian- budget rules of the European upholstery products to Scandinavia manufactured products to become a Union, and giving other national and metal beds to China. “I don’t think trend,” says Oleg Kouzmin, a former leaders the cold shoulder. this is temporary,” he says. Ikea has central bank adviser who’s now chief That could well be five factories in Russia, including a economist for Russia at Renaissance a harbinger of things $62 million facility in the Novgorod in Moscow. “But there are grounds for to come across region that came online in September. Russia to carve out a niche in exports Europe, says At $558 last year, the average to Europe.” �Olga Tanas and Ilya Giovanni monthly salary in Russia has dropped Khrennikov, with Andrey Lemeshko Orsina, a pro- almost 30 percent since 2011, taking The bottom line The average salary in Russia has fessor of gov- it close to incomes in other ex-Soviet dropped almost 30 percent since 2011, spurring ernment at republics such as Kazakhstan, accord- some multinationals to boost manufacturing there. Rome’s Luiss- ing to the Higher School of Economics, Guido Carli a university in Moscow. Most of the Edited by Christopher Power, Matthew University. decline has hinged on the ruble, Philips, and Cristina Lindblad “Italy’s which is down almost 40 percent in Bloomberg.com If you ask the smartest people, how do they rate Greenspan’s Fed tenure? The standard line is that his inflation Charlie Rose talks to... policy—his interest rates—was great, because inflation was very stable. But the way he messed up was on financial regulations, and that’s why we had the Sebastian Mallaby subprime crisis. Because I’ve looked into the politics of that regulation, I actually The author of The Man Who Knew, a new book on Alan Greenspan, think regulation in Washington is almost discusses the former Fed chairman’s role in the financial crisis impossible to get right. So I’m less critical of Greenspan on the regulatory side, but I’m therefore more critical on the You’ve made the argument that Greenspan’s personality affected his decisions monetary side. If regulation isn’t going at the Fed, an idea Ben Bernanke has taken issue with. to stop the bubble, then you need to use The notion that his psychological makeup has no relationship to his policy decisions isn’t very plausible. There was a paradox that Greenspan was extremely interest rates, too. persuasive when it comes to one-on-one situations but was shy and diffident in groups. He was frightened of going directly at people with a disagreement. But to prick a bubble, you had to be able to take on public opinion. You had to say, “Your Did he relish his position in Washington? 401(k) is worth more than it should be.” He didn’t want to do that. His reputation He essentially established central bank status and imprisoned him. He was the maestro. The crisis was baked in by the time he left. independence by fighting back against the politicians. I think he did relish it, though sometimes he disguised that because he was shy. He’d go to a party, and he’d seem ill at ease. People would say, “Why did he come?” In the ’70s, they’d go to earnest conferences and “Greenspan would leak stuff discuss productivity. At the end, all the economists would go to the bar except for one, because there’d be to the press to discredit a limousine outside with Barbara Walters inside, waiting adversaries. … He learned all the for him to go to dinner. dark arts of politics pretty early on”
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Will Donald Trump and Janet Yellen be able to coexist? Trump’s economic program, There are other Greenspan books. insofar as we have details, What prompted you to do this one? I wanted to write a big sweep is very inflationary. He wants history of modern finance. He joined to expand demand by having the Nixon campaign in the late ’60s, a tax cut, spending on when the dollar didn’t fluctuate because it was tied to gold. Interest infrastructure. And he wants rates didn’t move much because to restrict supply by having they were capped. There were Why did he join Nixon? zero immigrants, by disrupting no derivatives. Over the next four He was brought in by decades, we created the modern an Ayn Rand friend, a trade deals. And all of this system, and the person closest to Libertarian who said, at a time when the economy the center of it was Greenspan. “We want to persuade is pretty hot, 2.9 percent Nixon to abolish the draft.” That was his first political document, not growth in the last quarter. The economics at all. And he got into the campaign. Fed was going to raise rates I found all the memos he wrote to Nixon in ’67, before the election. It’s going ’68. They were in Pat Buchanan’s basement. He was Nixon’s speechwriter. When I read them, to have to raise extra because you see the man going from giving advice on of Trump. The president- economic policy. ... By the end, he’s talking about elect won’t like that, and he’ll messaging, spin, polling analysis. He was the guy who aggregated all the local polls, put them come after the Fed. Yellen will through his computer at work, and came back with have to learn to defend her advice on how you tweak the Nixon message. He institution later joined the Ford White House, and he would What did you learn about his ties to Ayn have these fights with Henry Kissinger, master of Rand as you wrote The Man Who Knew? in the way bureaucratic intrigue, but he lost when he was up A lot of people read books like Atlas Shrugged Greenspan did in against Greenspan. Greenspan would leak stuff to when they’re 19 or 20. Greenspan was doing the early ’90s. the press to discredit adversaries. He’d sneak in this in his 30s and 40s, and he gave this long at the weekend to rewrite the president’s speech series of speeches when he basically was Ayn because some adversary had written it. He Rand’s chief economist. I found them in the learned all the dark arts of politics pretty early on. basement of a Rand fanatic living in the woods in Virginia. He had the 300-page transcript of Greenspan’s speeches. And in those Watch Charlie Rose on Bloomberg TV Weeknights at 7 p.m. and 10 p.m. ET speeches it says, “The creation of the Federal Reserve was an historic disaster.” You couldn’t RELATIONS FOREIGN ON COUNCIL COURTESY make up the irony.
18 ▶ ▶ November 28—December 4,2016 Industries / Companies ▶ ▶ “Everyone to▶…is trying replicate designprowess” its The world’s biggest fashion retailer isthriving asrivals falter trast, Inditextrast, powered ahead withan and profit down is at H&M.Incon- havetime, sales fallenat Gapstores, inNovemberbankruptcy for asecond gling. gling. most globalclothingretailers are strug company, abreakaway is while success explainspartly why Inditex as thelatest fashion trends, andthat Moscow, andNew York. asfar-flungdirectors incities asTaipei, tomers, store managers, andcountry and thousands ofcommentsfrom cus- popular by figures monitoring sales inArteixo staff morning, divine what’s fashions for thecoming weeks. Every what’s theteamsdevelop stalling, feedsdata showing what’s sellingand aweek. Guidedbyto stores daily twice shippingand campaigns, fresh styles independence inapproving products Its 350 are designers given and there’s littlediscernible Primark indicate such styles are suchpopular. styles indicate patterns for China,where data sales traditional cutsfor Europe andbold They finally agree onsolidcolorsand rest withhim, andeveryone hasasay. doesn’topinions, butthedecision Mendivil, amenswear buyer, fields incharge. nooneis clear becomes Juan it too plainortoo daring, is collection theteamdebates As whether theearth. into fashion thebiggest retailer on Coruña ofLa store intheSpanishcity hasgrownfour decades from asingle thebrand thatof Zara, over thepast ofthesuccess abigpart somethings is their assentorexpress doubt. sneakers andaflowing Othersnod skirt. woman,ters aBritish dressed inwhite not sure about theboldpatterns,” coun - time,” says awoman from China.“I’m “It’s classic,butit’s new at thesame white labcoatsnearby. stitch prototypes white-tile floor, in while seamstresses andsuitsshirts, are spread out onthe double-breasted navy blazer. Sweaters, dressed incropped gray trousers anda swarm10 designers around amodel townhangar intheSpanish ofArteixo, cement edificethesizeofanairplane Deep insideasprawling glass-and- Zara’s culture isn’t aseasily copied Unlike rivals such asGap internationalofthirty This tribe American Apparel , Zara hasnochiefdesigner,, Zara Zara designersat work in Arteixo, Spain filedfor unparalleled , , itsparent hierarchy. H&M , and - -
ILLUSTRATION BY CAROLINE DAVID; COURTESY INDITEX (2); *REVENUE FOR FISCAL YEAR THAT MOST CLOSELY ALIGNS WITH CALENDAR YEAR; DATA COMPILED BY BLOOMBERG It’s blockchain vs. E. coli at Walmart 20
A sweet fix for a Champagne problem in China 21
Just as important is the way Inditex “pulls” ideas from consumers, Isla says, rather than designing collections months in advance and “pushing” goods on shoppers with ads. While analysts say H&M spends as much as 4 percent of sales on advertising, Inditex has virtually no ad budget apart from social media marketing. Since 2010, the data on what customers want has been augmented with infor- mation from online sales. Those are fueled by twice-weekly releases of new designs on Zara’s website, highlighted with photos from rapid-fire shoots in 11 percent rise in revenue in the first Zara’s quick Arteixo. On a half of the year. “There isn’t a magic turnarounds. rainy November formula,” says Pablo Isla, Inditex’s “Everyone in day, buyers, chairman and chief executive officer. the industry is analysts, and “There are no stars. We are able to trying to repli- commercial man- react to data during the season, but cate its design agers sift through in the end, what we offer our custom- prowess,” information on ers is fashion, and there’s a human Hughes says. computers in a element to that.” “No one could space the size of Controlled by Spanish billionaire match Inditex, 22 football fields, 19 Amancio Ortega, who this year briefly but the gap engaging in a surpassed Bill Gates to become the might close.” lively exchange world’s richest man before falling Isla rejects of ideas with back to second place, Inditex posted the fast-fashion label for Zara, saying designers. “Without the design, there €20.9 billion ($22.2 billion) in sales last it doesn’t reflect the time and detail would be nothing,” Isla says, sitting at year, from 7,100 stores in 93 countries. that goes into designing each garment. a pale-wood conference table in the Other Inditex brands such as Bershka, And he says analysts place too much company’s minimalist headquarters. Massimo Dutti, and Pull & Bear are emphasis on Inditex’s much-vaunted “It’s not a formula.” growing, but Zara still accounts for supply chain, a network of factories This means the designers are con- two-thirds of sales. Ortega hired Isla, in Spain, Portugal, and Morocco that stantly tinkering. When military a bespectacled former Banco Popular produces 60 percent of its merchan- jackets turned out to be big sellers this Español executive, as CEO in 2005, dise. With production nearby, Inditex autumn, the commercial team asked but he hasn’t retired. At 80, he still can quickly switch gears if weather or the designers to keep tweaking them comes to work most days, often sitting fashion trends change, getting designs with new fabrics and cuts. In May, a in the Zara women’s department, into stores in as little as two or three blue-and-white collarless women’s where his 32-year-old daughter Marta weeks, while rivals’ orders slowly coat for £69.99 (about $102 at the works on the commercial team after a make their way across the ocean on time) generated so much buzz that two stint at Bershka. While he can some- container ships. fans created an Instagram account— times be seen walking his dog Pepe in @thatcoat—to document the craze. But the town square of nearby La Coruña, instead of churning out more identical Ortega remains one of the world’s Fast Fashion, Speedy Growth coats, design teams came up with dif- most secretive billionaires, leaving Isla Change in annual revenue* since 2004 ferent fabrics and prints using a similar to oversee Inditex. 240% cut, ranging in price from $69 to $189. One concern for Zara is managing “The root of Inditex’s success is its pre- its growth, says Andy Hughes, a retail 180% dominantly short lead time, which analyst at UBS. With Inditex’s sales Zara gives a greater level of newness to its almost doubling since 2009, Isla is 120% collections,” says Anne Critchlow, a adding stores at a slower pace, concen- retail analyst at Société Générale. 60% trating instead on a smaller number H&M About two-thirds of Inditex’s prod- of flagship locations and its online ucts are generated under short lead business. Another concern is that Gap 0% times, vs. 20 percent for most retail- rivals might figure out how to match 2004 2015 ers, she says. Small production 20 ▶ ▶ would.” in theway anormalfashion retailer says. don’t “They really have seasons that really breaks therules,” Hyman abusiness is analyst “This inLondon. says Richard Hyman, anindependent yearend inventories intheindustry, That gives Inditex amongthelowest need to unload at adeepdiscount. ing upunwanted stock that itmight in various markets without build- tify the product, theproduct, tify take days to iden- ill,itcan becomes When acustomer food. with tainted to deal ally struggles largest- retailer occasion that’s beenrecalled. andremoving identifying purpose: food for data ameat-and-potatoes scenes hugeto catalog amounts ofbehind-the- however, usingblockchain’s is ability ventional money. Walmart Stores provide asecure alternative to con- and to tracktransactions technology that relies onblockchain’s database currency think ofbitcoin, thedigital Mention blockchain, andmany people Walmart Stop Food Bad Blockchain May Help Retailing in thefirst half of 2016—far outpacesitsrivals’. may bewhy Inditex’s revenue growth—up 11percent The bottom lineAuniquemanagement formula / Companies
days andminutes” “That’s thedifference between could speedrecalls The technologybehindbitcoin Like mostmerchants, theworld’s runs mean Zara can testdesigns can Zara runs mean �Stephanie Baker Industries , Mexican Grill abusiness— cripple break can and3,000hospitalized dying. Anout- are annually, afflicted with128,000 thatCDC estimates 48 millionpeople andPrevention. Control Disease The year, according to theU.S. for Centers each departments health and local areborne illnesses investigated by state it.”more at efficient sions around food flows, and even get that would attributes tant - inform deci hope you could captureotherimpor ofthefood systems.other aspects We good is for that enhancedtraceability have confidence,” hesays. “We believe als andletconsumers andcompanies blockchain, you remov dostrategic can at Walmart.dent for food safety “With according to Frank Yiannas, vicepresi- the spinach from hundreds ofstores, andyanking all handful oflocations pulling afew packages tainted ina daysbetween andminutes.” NPD Group. “That’s thedifference Marshal ananalyst Cohen, at researcher diately find came from,”where it says togives imme themanability with anoutbreak coli,this ofE. package.ual “Ifthere’s anissue individthe palletbutoneach - ular information, notjuston givecan retailers more gran- Thedatabase it. inspected the food was grown, andwho onhowers, details andwhere includingsuppli data, - crucial obtain using asinglereceipt, willbeableto Using ablockchain Walmart, database, shipment, andresponsible vendor. falling sales afterfalling sales several such events. More than1,000 outbreaks offood- It’s also thedifference between Using blockchain technology hassuffered a of year - Chipotle Chipotle � “If there’s anissue where from.” itcame with anoutbreak of them an ability to them anability NPD Group E. coli,thisgivesE. immediately find M - arshal Cohen, arshal - to astore for pickup. ers order groceries onlineandthengo expanding that letsconsum aservice - mobile-payment It’s service. also large retailers to introduce itsown nationwide, becomingoneofthefirst summer,This ittook Walmart Pay works such asVisa deadline mandated by net- credit-card checkout counters 10years before the readers at U.S. chip-card installing its supply chain.Theretail giantbegan help itbetter manage inventory across them onshipping cratesandpalletsto requiringtion tags, bigsuppliers to put of wireless radio- ago,a decade itwas anearly adopter before.new technologies More than as expected.” far thingsare flowing smoothly and Yiannissays.in bothcountries, “So will expand itto multiple food items supplyand itsefficient chain. tinue to bepressured by Amazon.com Traditional offlinemerchants alsocon- Association. Retail Leaders Industry gainsince2009,est according to the rosesales only 2.1 percent, thesmall- year, for allretailers. Last ical retail age- andwaste.crit Cuttingcostsis food to stores faster, reducing spoil- analysis.detailed ers get today, providing tools for more hold much more thanwhat data retail- entry. Ablockchainalso can database to reverse orchange atransaction an it’stampering; difficultifnotimpossible base’s to initsresistance lies strength produce item intheU.S. (itwon’t apackaged viathedatabase: ucts prod two tracking - started October by co-produced cial, health-care, andnatural-resource health-care, cial, industries. Companies such asIBM, Companies industries. record securely. transactions - Thedata being widely tested inthefinan- on thesceneonly in2009, already is Walmart hasbeenat theforefront of successful,WalmartIf thetestis That could help Walmart deliver Nasdaq Blockchain, a technology that came Blockchain, that came atechnology tributors, and retailers—can andretailers—can tributors, other—such asgrowers,- dis witheach doingbusiness nies uted ledger inwhich compa- multiple sands ofpackages shipped to China. Thetestinvolves thou- say which one)andpork in , andBHP Billiton A blockchain adistrib is IBM - frequency identifica stores. andMastercard , Walmart in have have - .
ILLUSTRATION BY KRIS MUKAI; DATA: EUROMONITOR INTERNATIONAL Companies/Industries deployed or are planning to deploy it to land for growing grapes than France. online Tmall marketplace next year. run their businesses more efficiently. China’s wine market this year will be The company hopes Chinese con- Fourteen of the top 30 banks are worth 153.8 billion yuan ($22.3 billion), sumers will pay as much as 200 yuan for testing blockchain to see if it can be of according to Euromonitor Inter- a bottle of Chandon Me. “To make them use in their businesses, according to national. Since 2014 the joint venture appreciate sparkling wine as it is today CoinDesk, an industry researcher. has been producing a bubbly mix will take 20 to 25 years,” Marcovitch In October the Walmart Food of chardonnay and pinot noir from says. Chandon Me will try to create a Safety Collaboration Center opened locally grown grapes at its winery in market now. Ma Huiqin, a marketing in Beijing. Through the Center, the Ningxia. To win over Chinese drinkers, expert and professor at the College retailer is collaborating with IBM and the company is tweaking its traditional of Horticulture at China Agricultural Tsinghua University to use blockchain formula, says Davide Marcovitch, University, says if the brand is well- to improve the way food is tracked, global president of LVMH subsid- known and the price is right, there’s transported, and sold to consum- iary Chandon, which makes sparkling “a very good chance” of success. ers in China, where food safety is a wines in Argentina, China, and other Jim Boyce, a Beijing-based wine pro- hot-button issue. If Walmart adopts countries. “We are innovating for con- moter and the founder of the Grape blockchain to track food worldwide, sumers who don’t like the traditional Wall of China blog, agrees the time it could become one of the largest taste of Chandon,” he says. might be right for Chandon. “We are deployments of the technology to date. Sparkling wine typically isn’t sweet seeing a fundamental change in the “They are setting the new standards enough for local tastes, says Claudia market,” says Boyce, who featured in terms of how technology can be Masueger, founder and chief executive 16 sparkling wines in a Beijing tasting implemented to solve a problem that’s officer of Cheers, a chain of wine stores competition last been with us for ages,” says Paul Chang, throughout China. People would often Wine sales December. “The an expert on the global supply chain at add Coca-Cola “to make it drinkable,” in China rise of the taste- IBM. �Olga Kharif she says. Now younger, affluent con- 180% based consumer is sumers willing to try different varieties Growth really going to have The bottom line Each year, about 48 million since ’10 Sparkling Americans contract foodborne illnesses. Walmart is of wine are buying it. an impact on spar- testing blockchain to address the problem. Sparkling wine consumption in 90% kling wine sales.” China is less than 1 percent that of non- To win over con- bubbly wine. In the U.S., the figure is sumers in other Still 21 about 5 percent, and in Japan, France, 0% Asian markets, and Britain it’s about 10 percent, says 2010 2015 Chandon plans in Wine Chuan Zhou, research director with 2017 to start selling Wine Intelligence, a market-research a fruity sparkling wine in Japan and For Chandon in China, a and consulting firm in London. a sparkling wine in India meant to be Kick From Champagne? “There’s still a long way to go” to per- served on the rocks. suade Chinese to try it, he says. In the first half of 2016, revenue for Traditionally, the bottles Chinese LVMH’s wine and spirits group, which ▶ The French vintner is making and consumers did buy were mostly given includes Chandon and Hennessy bottling the bubbly locally as gifts, to curry favor with govern- cognac, grew 7 percent from the year ▶ People in China would add Coca- ment officials—the price tag mattered, before, to €2.1 billion ($2.2 billion), Cola “to make it drinkable” not the wine itself. But a crackdown better than the group’s overall revenue on graft by President Xi Jinping’s gov- growth of 3 percent. Wine and spirits At first glance, the bottle might look ernment has curtailed such gift giving. profit grew 17 percent, to €565 million, like a fine Champagne from LVMH Sales of sparkling wine in China will LVMH announced on July 26. Moët Hennessy-Louis Vuitton, the be 8 percent lower this year than they Marcovitch dismisses Champagne French maker of wine, spirits, and were in 2014, Euromonitor says. purists who scoff at the changes other luxury goods. Gold wrapping Chandon is trying to raise the profile Chandon is making to appeal to new covers the pressurized cork, and the of its Ningxia wines by offering tast- customers. “We have to break the par- label bears the description “Méthode ings at supermarkets, organizing pro- adigm that sparkling wine has to be Traditionnelle.” The telling details motions at restaurants, and opening drunk in crystal only” and chilled, he are in the fine print. Thissparkling its winery to tourists. Early in 2017 says. “If you are in a hot climate and wine is made by Domaine Chandon the company will introduce Chandon you put ice cubes in your sparkling (Ningxia) Moët Hennessy, a partner- Me, a sweeter bubbly made specif- wine, it’s really much more pleasant.” ship between the winemaker and the ically for the Chinese market. (The �Bruce Einhorn local government of Ningxia, a small name is a play on the Mandarin word The bottom line To tap into the huge potential for region in north central China. for honey.) “We’re trying to balance sales growth in China, French vintners are breaking LVMH, like other wine and spirits the taste,” says David Tung, manag- tradition to make sweeter sparkling wines. makers, is counting on China to ing director of Chandon China. The become a major growth market. winemaker, which will produce white Edited by James E. Ellis and After more than doubling its vineyard and rosé versions of Chandon Me, also Dimitra Kessenides capacity since 2000, China has more plans to open a store on Alibaba’s Bloomberg.com Politics/ Policy
November 28 — December 4, 2016
22
▶▶It might be tough for Trump to divest his businesses, even if he wanted to (he doesn’t) ▶▶“Trump the brand is very closely intertwined with Trump the man” Late on Nov. 21, President-elect Donald taking time off from vetting cabinet battling with federal regulatory Trump tweeted: “Prior to the elec- members to meet with his Indian busi- agencies, whose heads he will appoint. tion it was well known that I have inter- ness partners. Maybe it was the photo He has ties to real estate concerns in ests in properties all over the world. of his daughter Ivanka Trump sitting in several countries, including Azerbaijan, Only the crooked media makes this a on his Nov. 17 meeting with Japanese the Philippines, and Turkey. big deal!” He may have been referring Prime Minister Shinzo Abe. Among the conflict-of-interest ques- to stories, since denied, about whether Trump’s businesses, which give him tions swirling around his global busi- he used a post-election phone call an estimated net worth of $3 billion, ness interests, the $150 million Trump with Argentina’s president to discuss a are far-flung. He owes debts to foreign Tower at Century City in Manila’s planned Trump-branded development lenders, including Deutsche Bank and financial district stands out. Century
in Buenos Aires. Or photos of Trump UBS. He’s associated with companies Properties Group, the Manila (2) GETTY IMAGES PHOTOS: 731; BY ILLUSTRATION PHOTO Federal agencies race to write new rules 24
Will Trump be a nightmare for Dreamers? 25 company behind the tower, paid as owner-developers on the premise that Vornado partnership, he remains indi- much as $5 million to use the Trump it will help them sell condos and hotel rectly exposed to its debtors for those name in a licensing agreement, accord- rooms at higher prices, isn’t public. towers, including the Bank of China. ing to the personal financial disclosure With other assets, Trump might not be Some of Trump’s other assets, like Trump filed with the Federal Election in a position to get top dollar. The profit- his Manhattan leaseholds for 40 Wall Commission in May. Trump has at least ability of his golf course portfolio—12 in Street, an office tower, and the build- 10 similar deals around the world, each the U.S., two in Scotland, and one in ing at 6 East 57th Street, which houses of which might complicate his adminis- Ireland, and two more planned in the a 90,000-square-foot Niketown store, tration’s international diplomacy. But in United Arab Emirates—is mostly secret. would be relatively easy to part with, Manila, there’s an extra connection: In The three European courses file annual says Joshua Stein, a New York real October, Century Properties’ chief exec- reports that are publicly available, and estate lawyer. Trump hasn’t said utive and controlling stakeholder, Jose all three are money-losers. whether he’ll put his liquid assets— E.B. Antonio, was appointed to serve Trump holds a 60-year concession to stocks, bonds, and funds totaling about as a special government envoy to the run a federal government building on $170 million as of his May disclosure— U.S. for Philippine President Rodrigo Washington’s Pennsylvania Avenue as into a blind trust. Both Bill Clinton and Duterte, who has vowed to expel the Trump International Hotel, which George W. Bush did just that. Jimmy American troops from his country and opened in October. Under the arrange- Carter appointed an independent is drawing closer to China. ment, he shouldered about $200 million trustee to oversee his Georgia peanut Antonio told Bloomberg News that he in renovation costs and pays $3 million business when he became president. visited Trump Tower in New York days a year in rent to the General Services Amanda Miller, a vice president of mar- after the U.S. election; he didn’t speak Administration. keting for the Trump Organization, to the president-elect but says he saw According to the declined to comment. Trump talking with potential appoin- Washington Post, Even without selling his businesses, tees. Trump spokeswoman Hope Hicks $5 foreign diplo- there are ways the president-elect could says: “They did not meet.” Antonio sees million mats are already wall himself off from his financial inter- 23 no conflict between his public role and piling into the ests, says Norm Eisen, a visiting fellow Century’s private partnership. “My role hotel to curry at the Brookings Institution who previ- is to enlarge the relationship between Maximum amount paid favor with a Trump ously served as the Obama administra- to Trump by a Manila the two countries,” he says. Of his busi- developer who is now administration. tion’s ethics czar. Trump could appoint ness tie to Trump, he adds: “I guess it a special U.S. envoy Trump owes an independent chief executive officer, would be an asset.” for the Philippines Deutsche Bank, institute a list of Trump Organization The president-elect could resolve his largest lender, executives he won’t talk to, and remove real and apparent conflicts by liquidat- about $300 million in loans against the his children from leadership roles ing all of the assets associated with the hotel and his Doral resort in Florida. there. “No matter how complicated it Trump Organization—including his Deutsche Bank is in settlement talks may be to unwind his involvement in golf courses, hotels, licensing arrange- with the U.S. Department of Justice over these assets, it is going to be infinitely ments, and office towers in Manhattan its lending practices leading up to the more complicated for him and the U.S. and San Francisco. Since his Nov. 8 elec- 2008 financial crisis. Trump has said and the world if he doesn’t,” Eisen says. tion, Trump has shown no inclination to he will appoint Alabama Republican There have already been compli- divest himself of his business interests. Senator Jeff Sessions to be attorney cations. Trump has agreed to pay He plans to hand management over to general; Sessions hasn’t indicated $25 million to settle claims that his his eldest three children—Donald Jr., whether he’d recuse himself from the defunct Trump University cheated stu- Ivanka, and Eric—while he’s in office. Deutsche Bank case or others involv- dents. And the Trump Foundation Even if Trump wanted to divest, it ing business partners of his boss. admitted in an IRS filing to a self-dealing wouldn’t be easy. Many of his assets Christopher Jackson, a spokesman for transaction with Trump. IRS rules gen- are in real estate, rather than in Sessions, declined to comment. erally prohibit such transactions. simple stocks or bonds, while others One of Trump’s most valuable assets Rather than taking steps to reduce depend on his involvement for their is a 30 percent stake in two office his conflicts, Trump has rejected the value. “Trump the brand is very towers—one in Manhattan, one in San idea that they pose any problems. His closely intertwined with Trump the Francisco—valued by Bloomberg at daughter Ivanka joined his call with man,” says Harold Vogel, an expert on $590 million. Both are majority-owned Argentine President Mauricio Macri; entertainment-industry finance. and managed by the publicly traded her brother Eric took selfies with one Trump’s international conflicts Vornado Realty Trust. Trump’s of his Argentine business partners largely stem from his licensing deals name isn’t on either one. Cathy on election night. Ivanka’s husband, with international developers. The Creswell, director of investor rela- Jared Kushner, who has his own real structure of these arrangements, tions at Vornado, didn’t return calls for estate interests through the privately under which he lends his name to comment. By remaining involved in the owned Kushner Cos., has been 24 ▶ ▶ Ben Bartenstein Bartenstein Ben and Stephanie Baker, Brody with Ben and interest concerns,too.” him to thumb noseat conflict-of- his says thelawyer Stein. “Iwould expect little bitat our extreme sensitivity,” paign, Trump thumbed nosea his Federal Register, where the September. Recent inthe entries compared allof witheightduring rules, significant nine economically administration finished reviews of following theNov. the 8election, the White House. weeks Inthetwo beforerules President Obamaleaves regulators are to scrambling At federal agencies across Washington, Before Inauguration A Rush to Regulate Transition he’s shown no signof wanting to divest. are unprecedented for anincomingpresident, and The bottom lineTrump’s businessarrangements Politics/
books, it’s harder toundo” “Once you have aruleonthe policies Republicans like don’t Agencies are tolockin trying advising Trump.- cam his “During known asJSTARS, even asmaintenance costs increased andtheplanes’ combat capability Total paidto from Northrop Grumman 2011 through 2015 for theupkeep of spy planes declined, according to aNov. 1auditby thePentagon’s Office oftheInspector General Policy $1.1b �Caleb Melby�Caleb finalize
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much, much more byrules theprevious administrationis put onholdandessentially withdraw haven’t to “That ability yet taken effect. of alegislative session. the tions voiding regulations entered into lawmakers enables act to pass resolu- The midnightrule-making. so-called Review a1996measure Act, to deter partly because oftheCongressional for thenextis president That’s to killit. an outgoing it theeasier administration, e-mail. inapost-election staff Administrator GinaMcCarthy told Environmental Protection Agency President Obama’s presidency,” U.S. walking, through lineof the finish use ingasoline.“We’re not running, wells, andquotasfor boosting biofuel requirements detection leak for oil on theuseofhydrofluorocarbons, green cards.limits Onthehorizon: highly skilled immigrant workers get oil wells andmeasures aimedat helping ing down from onmethaneemissions oftheInteriorrulecrack Department into thepublicrecord, includeaU.S. government enters new regulations “Once you have aruleonthebooks,it’s nonprofit Washington group.watchdog advocatepolicy forCitizen,a Public ing rules,” says AmitNarang, regulatory Presidents can alsoyankthatPresidents rules can The later aregulation released by is Federal Register inthelast60days harder to undo.” efficient thanefficient - repeal - publish them.” playing theodds,obviously you should smaller government. “Ifyou’re just Action Forum, that favors athinktank at theAmerican of regulatory policy them?” says SamBatkins, director tion, sowhat’s theincentive to hold be overturned by thenext- administra that any onemidnightregulation won’t “There’s chance significant apretty reason for agencies to holdback. usedby lines data businesses. a plannedvote ontherates charged for theagencycanceled tions andactions, put thebrakes onnearly allnew regula- ChairmanTomCommission Wheelerto asked Federal Communications that After warning. seniorRepublicans priate, overturns them.” your ifapproscrutinizes actions—and, toour ensure colleagues that Congress beawareplease that we willwork with “Should you ignore counsel, this heads.letter to agency anddepartment tion’s lastdays,” they wrote inaNov. 15 orregulationsrules - intheadministra caution you against tration’s waning months.“We writeto - intheObamaadminis policymaking they would take adimview ofany tee chairmeninwarning agencies that McCarthy (R-Calif.) joined21commit- Congress convenes inJanuary. regulations intheweek after thenew tors would repeal atahalf-dozen least said after Trump’s- that legisla victory vote. Senatority RandPaul (R-Ky.) onasimplemajor of theirenactment they dislike within60legislative days to invoke theirpower to toss rules Republicans have already threatened didonJan.istration 20, 2009. Top possibly undothem. get confirmed, review and therules, givinginto appointees effect, time to have beenpublishedbuthaven’t gone delay theeffective date that ofrules The Trump administrationcould also at George Washington University. tor oftheRegulatory Center Studies published, says Susan Dudley, direc- Federal Register buthaven’t yet been others that are on theirway to the new regulations andpullbackany willplaceamoratoriumistration on Donald Trumpsworn admin is - in,his Others say there’s really nogood Some agencies appear to beheeding Kevin Leader House Majority That’s what theObamaadmin- It’s expected that immediately after finalizing pending - -
COURTESY NORTHROP GRUMMAN 80 percent of immediately eligible Politics/Policy immigrants from Mexico have applied, a greater share than Birth countries of undocumented from any other country South Korea 9k immigrants registered for DACA Honduras 17k El Salvador 27k Ecuador 6k
Mexico All other 580k 62k
AS OF JUNE 2016. DATA: U.S. CITIZENSHIP AND IMMIGRATION SERVICES, MIGRATION POLICY INSTITUTE Guatemala 19k Colombia 6k Peru 9k Brazil 7k
Environmentalists are embracing stand-in program, implemented by also include Michael Bloomberg, major- that reasoning and lobbying the Obama executive action. DACA applies to ity owner of Bloomberg Businessweek administration to go big and bold by people who were born after June 1981; publisher Bloomberg LP.) creating national monuments and arrived in the U.S. under the age of 16; Immigration advocacy groups are imposing clean-air rules before they haven’t been convicted of felonies or advising people against filing first- hand over authority. “We’ve told the significant misdemeanors; and are in time applications for DACA. People White House and Interior Department school, have a high school diploma or in the program are required to give on everything—whether it’s offshore GED, or have served in the military. their addresses, making it easier for drilling or national monuments—to be Now 34, Belmonte has lived in the immigration authorities to find par- as ambitious as possible,” says Athan U.S. since he was 7. His mother brought ticipants. If Trump just cancels DACA, Manuel, director of lands protection him from Mexico on a tourist visa, and “we create a terrible situation for them for the Sierra Club. “We might as well they stayed after it ran out. “There’s a lot of where they are now exposed ask for the moon.” �Jennifer A. Dlouhy Unable to take out loans, he concern that a to deportation,” says Daniel put himself through college guy who says he’s Garza, executive director of The bottom line Republicans are threatening to going to focus on undo last-minute Obama regulations in the new by working in restaurants and criminals is going the Libre Initiative, a Latino Congress, but federal agencies are pushing ahead. warehouses. He graduated in to upend the lives outreach group backed by 2008 with a degree in industrial of Dreamers on the conservative billionaires Day One” engineering but couldn’t find Charles and David Koch. a company willing to sponsor Anti-immigration groups 25 him for a visa. So he spent the say Trump should keep his Immigration next four years working minimum wage promises. “What’s inhumane is to set jobs that he could get without one. After up a contradictory system where you Immigrants Prepare qualifying for DACA, Belmonte was have a sign on the border that says, For Life After Obama able to land work that made use of his ‘Keep out,’ and then below it you have college degree, first in tech support and a sign that says, ‘Come on in, and if then as a quality engineer. you can get over the fence, the honey ▶ Trump has said he’ll cancel It’s not clear whether Trump would pot of benefits are all yours, and help undocumented workers’ permits let workers such as Belmonte keep wanted,’ ” says Bob Dane, executive ▶ “Take them out of the workforce, existing work permits until they expire director of the nonprofit Federation for that’s a problem for business” or revoke them immediately if he American Immigration Reform, which cancels DACA. “There’s a lot of concern advocates restricting immigration. Gabe Belmonte showed up to his Silicon that a guy who says he’s going to focus While talking to lawyers about Valley engineering job the day after the on criminals is going to upend the lives whether there’s a route for him to get election in a state of shock. He hadn’t of Dreamers on Day One,” says Frank a visa, Belmonte is making plans in slept, couldn’t eat, and was struggling Sharry, executive director of the immi- case he gets deported. He’s paying off to ward off panic. Co-workers com- grant advocacy group America’s Voice. his credit cards, talking to his room- mented on how distraught he looked, Canceling DACA and preventing ben- mate about finding someone to sublet, Belmonte recalls: “Initially, I just said, eficiaries from working would erase at and arranging for his U.S.-born son to ‘Yeah, the election was kind of rough.’ ” least $433 billion in U.S. gross domes- stay with his grandparents. “For any The truth is he’s one of more than tic product over the next decade, other purpose than paperwork, I con- 740,000 undocumented immigrants according to an analysis from the non- sider myself an American,” he says. shielded from deportation and autho- profit, left-leaning Center for American “Having that peace of mind that DACA rized to work under President Obama’s Progress. “If you take hundreds of thou- has brought—that’s going to be lost. 2012 Deferred Action for Childhood sands of best candidates and take them And so you go back to being fearful.” Arrivals program (DACA), which Donald out of the workforce, that’s a problem �Josh Eidelson Trump has pledged to eliminate. DACA for business,” says Jeremy Robbins, The bottom line More than 740,000 people is available to young immigrants known executive director of New American are qualified for work permits through an Obama as Dreamers, after the congressional Economy, a business-backed immi- program that Trump may cancel. Dream Act. That immigration reform gration reform group whose co-chairs bill has repeatedly failed to pass but include leaders of Boeing, Marriott Edited by Allison Hoffman formed the cornerstone of Obama’s International, and News Corp. (Backers Bloomberg.com
A perk-hailing CEO Amazon just isn’t this crashes his ride- nice 30 sharing startup 28
IBM wants to be Giving a lift to aging the Q for corporate with a walker/ cyberdefense 29 wheelchair 31
November 28 — December 4, 2016
27
▶▶Are business rivals behind online attacks on Elon Musk? ▶▶Critics say the Tesla CEO “gets subsidy after subsidy he doesn’t need” On Sept. 2 the conservative web maga- to be an altered version of a former Space Exploration Technologies, zine the Federalist published an article Twitter executive’s LinkedIn headshot. better known as SpaceX, a rocket titled “Elon Musk Continues to Blow Musk attracts an unusually large company he founded and heads. On Up Taxpayer Money With Falcon 9.” and varied number of shrouded online Nov. 17 shareholders approved Tesla’s The author was identified as Shepard attacks, including phony op-ed pieces, $2 billion acquisition of SolarCity. Stewart. Two days earlier, the Stewart websites with shadowy backers, and These diverse business interests byline appeared on a piece on the individuals who hide behind aliases. mean Musk has numerous rivals. “It Libertarian Republic website called “These are tools used by those who seems like he’s got a lot of people who “Here’s How Elon Musk Stole $5 Billion don’t have facts on their side,” says don’t like him,” says Brian Walsh, in Taxpayer Dollars.” Two days before Sarah O’Brien, a spokeswoman for a partner with Rokk Solutions, a that, the Liberty Conservative site Tesla, the electric car maker Musk Washington, D.C., communications carried a Stewart article headlined co-founded and runs. firm. Walsh ticks off coal companies “Elon Musk: Faux Free Marketeer and The Liberty Conservative has taken and utilities uneasy about SolarCity National Disgrace.” down its Stewart article, as has the and automakers and dealers concerned Funny thing, though: Shepard Libertarian Republic. The Federalist site about Tesla. This spring, Walsh’s firm Stewart isn’t a real person. “Definitely still has its piece up. Editors with the worked for United Launch Alliance, a fake,” says Gavin Wax, editor-in-chief latter two didn’t respond to e-mails and a joint venture of Boeing and Lockheed of the Liberty Conservative. A chagrined phone calls seeking comment. Martin, and helped persuade Congress Wax says the “Stewart” character “went Musk inspires strong admiration and to let ULA buy Russian-made rocket totally dark on us after we published criticism for his industry-disrupting engines, over SpaceX’s objections. him.” Wax discovered that a photo- companies: Tesla; SolarCity, a solar During the lobbying fight, a website
PHOTO ILLUSTRATION BY 731; PHOTOS: GETTY IMAGES (2) GETTY IMAGES PHOTOS: 731; BY ILLUSTRATION PHOTO graph “Stewart” uses online appears panel installer he co-founded; and called Who Is Elon Musk? maintained 28 nonpublic data thanhadnonpublic data been released yahoo.com requesting more detailed received from ane-mail ElonTesla@ officer,chief financial JasonWheeler, tion about Tesla. OnAug. 3,Tesla’s ing Musk inpursuit ofinside informa- the bizarre approach ofimpersonat- but they haven’t responded.” reached out to them[for donations], behind thewebsite, says: Banister “We toward antagonistic nies Tesla mightbe with” Musk. Asked whether oilcompa- and“nothingcompetitivemostly” toare CFTR tributors “small donors, close itssupporters. says Banister con- under federal law doesn’t have- to dis welfare501(c)(4) social group, which aso-called Musk, is as theorganization paying for CFTR’s against campaign It’s impossible to tell who’s ultimately subsidy after subsidy hedoesn’t need.” whoepitome ofabusinessman gets site out singles Musk the because “he is as CFTR’s executive director, says the Banister, aPRexecutive who serves Citizensfor theRepublic.called Diana as aconservative group advocacy From Failing itssponsor Againlists online orinthebrick-and-mortar world. there’s ofthecenter notrace anywhere taxpayerson American andpolicy.” But to highlightingcronyism anditseffects dedicated organization “a nonpartisan andResponsibleBusiness Government, Center its sponsor asthefor tifies company orindustry.” Thesite iden- comment onasite notrelated to our “It would beinappropriate for ULAto United spokeswoman Launch says, website. “Idon’t know who itis.” A Politics, anonprofit research group.) according tofor theCenter Responsive groups andpolitical since2003,ticians (Musk hasgiven about $515,000 to poli- with millionsofdollarsindonations.” Democratic andRepublican politicians himof“liningthepocketsaccuses of American Swindler:, TheElonMusk Story Avideoonthesite,panies. titled SpaceX, aswell asMusk’s othercom- makes crazy” mesound fake rockets it because abouttheshouldn’t talk “People tell meI Technology One online antagonist allegedlyOne onlineantagonist tried A similarwebsite Stop Elon called “That’s notus,” Walsh says ofthe a steady drumbeat of criticism of of a steady drumbeatofcriticism complaints, also insists that SpaceX’scomplaints, also insists the Model Ssuspensions. doesn’t have anythingnew to say about Spokesman Thomassays Bryan NHTSA 7 percent onJune 9andJune 10. issue.”a safety Tesla’s stock dropped sought to create thefalseimpression of ulent” andthat “one ormore people of theNHTSA complaintswere “fraud- sions.” Musk saidon Twitter that most issue with fied any safety Tesla suspen - “review” andto date hadn’t “identi- aroutinesaid itwas conducting broader coverage. OnJune 10, NHTSA suspension complaints,igniting the never driven aTesla. pany’s stock dropping. says Leech he’s Tesla puts,anotherway to betonacom- plaints. He says herecently bought NHTSAof Shame”compilinghis com- hasposted a“Teslasellers, Leech Hall On theTesla Club, Bears asite for short Highway Traffic SafetyAdministration. based onthephotos withtheNational He says he’s filedabout 100complaints dence ofadefective suspension system. from junkyards that hesays show evi- photosyear ofcrashed Teslas collecting an obsessive.” He’s spent more thana puter engineerwho says he’s “a bitof Australian Keith aretired Leech, com- is actually Keef Wivaneff (“with-an-f”), posts underthenameKeef and Leech courage othercritics.” - embarrass andsilencehim,dis Twitter accounthacking his to “publicly claims, Katz accusedTesla ofunlawfully too “goofy” to bebelieved. Incounter because themessage inquestion was that Tesla’s suit should bedismissed papers saidincourt job at Quest, who’s Katz, sent thee-mail, lefthis Tesla alleged. ny’s push transportation, for cleaner compa- car to underminetheelectric of aneffort by the fossil fuelbusiness company. service industry He was part as CFO forIntegrity, Quest anoil Madoff andEnron Musk. Katz worked who admits Elon to usingthealiases ofTesla’scritic management financial against Todd online alongtime Katz, in September inCalifornia court state sleuthing, Teslasome digital filed suit closed itssecond- earlier that day when thecompany- dis Leech, whoLeech, continues to file Tesla On June 8, anauto site called ofTesla’s,Another onlinecritic who Without admitting ordenying he’d Daily KanbanDaily reported onthe results. quarter After - ▶ ▶ Ride to Nowhere A Would-Be UberRival’s Startups rockets,on electriccars, panels. andsolar real andfake onlineantagonists criticizinghiswork The bottom lineElonMuskattracts awidearray of crazy.” he says, itmakes mesound “because I shouldn’t about thefake talk rockets,” “People tell me ings notwithstanding. ahoax,videosoftheland- is earth success inlandingrockets backon Karhoo seemedto have asgood a shot $1 billion.Based on thosenumbers, inmoresaid itplanned to bring than $250million,andthecompanyraised Financial Times reported Karhoo had tech even by theIcarus-like standards of their jobs.Itwas ashocking collapse, people says. About 200 workers lost ers, andother itors, employees, manag property down. Itowed $30millionto cred- companythe London-based shut to anabrupt endonNov. 8, when iar withKarhoo’scame finances, former employees andothersfamil- Executive OfficerDaniel Ishag. much was Theculprit Chief about it. bacchanal.Nobody at Karhoo could do flights,amassivefirst-class Vegas tious: more- spending became ostenta flagged staffers thecharges, but shoes.a pairofdesigner Finance relatively Vet speaking. bills,clothes, unusual expenses small, started Karhoo At startup ride-hailing
very differently” “I trulywishthingshadturnedout while theCEO spent lavishly Karhoo’s fundingwas exaggerated Ishag’s by five spending,described startups, because lastyear thestartups, custom-branded Cubancigars, �Paul M.Barrett contractors, oneofthecontractors, , the -
ILLUSTRATION BY 731 The company paid
Karhoo’s app compiled a network of $100m Technology drivers from taxi and other car services to buy Resilient as anyone to take on the likes of Uber 90 percent of passengers’ credit card IBM’s security acquisitions in Europe. payments were being rejected, say In fact, two-year-old Karhoo had three people familiar with the systems. 2016 2013 raised only $39 million as of September Customer service was such a problem Resilient Network Fiberlink and couldn’t sustain its efforts to grab that Karhoo had to hire ModSquad, Systems Secure mobile Incident response management market share from Uber, according an outside contractor, to handle to internal documents shared with it. ModSquad has sued Karhoo for 2014 Trusteer Advanced fraud Bloomberg Businessweek. That was $500,000 in unpaid bills. Karhoo and Lighthouse Security protection news to at least two former employees, ModSquad are due in New York’s Group Cloud-enabled identity 2011 who were told in job interviews that federal district court on Dec. 8. Taxi management the $250 million figure was accurate. companies are also seeking payment. Q1 Labs CrossIdeas Security intelligence Potential business partners heard the ModSquad’s attorney, Erik Anderson, Identity governance same, according to a former employee declined to comment on the litigation. DATA: IBM, BLOOMBERG who attended a pitch meeting. Ishag, who’d previously co-founded “I deeply regret the impact and an online ad network and run a waste investigators found the company had inconvenience recent events have management company, said in a July missed early warnings that might have caused you all,” Ishag wrote in an e-mail interview with the online publication prevented the loss of data belonging to to employees after the shutdown. “I Startup that he conceived of Karhoo 70 million customers. When the news truly wish things had turned out very while in California, then developed a came out, lawsuits were filed, and Chief differently.” He didn’t respond to prototype in India. Executive Officer Gregg From 2002 to 2010, requests for comment for this story, but Employees say Ishag was more inter- Steinhafel resigned. IBM’s security arm he told the Times of London any per- ested in pitching Karhoo to investors Sony Pictures bought 12 additional sonal expenses were repaid and Karhoo than in keeping the app working prop- Entertainment’s fum- companies didn’t repeat the false funding number erly. He also charged the company bling response a year later to North to employees or business partners. $6,000 for his pug’s vet bills, flew first Korean hackers turned a bad situation Employees say they were largely class, stayed in top hotels, and brought into a terrible one, costing Amy Pascal, unaware of the company’s dire position exotic dancers to the Las Vegas party he one of the most powerful women in until a recent Friday, when managers threw during a tech conference, say two Hollywood, her job as co-chairman. at its headquarters said they couldn’t people familiar with his expenses. IBM, which has spent five years 29 cover payroll. There was no severance, Paul Cooper, the administrator man- buying companies to make itself and people weren’t paid for the previ- aging Karhoo’s bankruptcy, says he’ll the third-largest cyber security pro- ous month’s work. look into possible misuse of corpo- vider globally, wants to train corpo- Earlier this year, what now look like rate funds. In the Startup interview, rate security teams, CEOs, and PR warning signs could be dismissed as Ishag discussed the challenges of a tech departments to handle those kinds of the travails of a young startup. The venture. “It takes a toll,” he said. “It crises. Shortly after Election Day, the launch of Karhoo’s app, which com- takes a toll on the people around you.” company unveiled a facility that com- piled a network of drivers from taxi and �Adam Satariano and David Hellier bines gaming techniques and millions other car services, was delayed from of dollars of sophisticated hardware The bottom line Karhoo, a ride-hailing company January to May. Quickly, though, it that said it raised $250 million last year, shut down to re-create scenarios like Target’s topped 300,000 downloads, and Ishag on Nov. 8, owing creditors about $30 million. and Sony’s in white-knuckle, stock- spent heavily to expand. By the time plunging detail. the app launched, Karhoo had offices The idea is borrowed from the in Singapore, Tel Aviv, and New York. It Pentagon, which uses a similar also rented two New York apartments, approach to train soldiers for cyber- one of which cost $12,000 a month, Cybersecurity war. Instead of the pressure of combat, says a person familiar with the matter. the facility at IBM’s security division If the real estate wasn’t cheap, Training Companies headquarters on the Charles River in neither was Karhoo’s aggressive dis- To Handle a Hack Cambridge, Mass., wants to re-create counting. Because of a bug in the app, a postbreach pressure cooker that can promo codes offering free rides could move rapidly from a regulatory investi- ▶ IBM’s cyber range borrows tactics be used repeatedly. People on social gation to a call from the FBI to whatever from military simulations media said they took more than 100 free else the range’s multimedia producers trips. In October about 70 percent of ▶ “We don’t want to scare the crap can conjure. “We don’t want to scare Karhoo bookings used promo codes, out of people” the crap out of people,” says Caleb internal documents show. Barlow, vice president of IBM Security. Bugs hit Karhoo at almost every level Despite billions of dollars invested “We do want people to feel a little of the of the app. Its payment-processing in antihacking technology over the adrenaline burst and the pressure.” system lacked basic fraud protections, past 10 years, companies appear to By the time IBM’s cyber range is such as verifying a user’s address or have little idea of how to respond to a fully operational in January, it will requiring an e-mail address to set up cyber attack. When Target was hacked offer 12 training programs. Think of an account, so at one point, more than during the busy 2013 Christmas season, them as plays, Barlow says, with 30 $200 Technology narios. In thesimulations,narios. he also could add itto oneoftherange’s sce out how to replicate sohe theattack devices, Provostconnected figured home routers, TVs, andotherinternet- ofinfected withabotnet in October world’s mostpopular websites offline Days after hackers took someofthe Agency.of theNational Security tion architect andaformer employee project’s threat modeling andsimula- from came Joethat idea Provost, the miniature, internet. self-contained thousands ofweb pages to create a developers from data collected to thereal Instead,nected internet. gapped, which it’s means notcon- malware, air- sothewhole thingis to out test someofthemostvirulent Therangewithout risks. designed is Uh-oh. report. earnings shortly data beforecial itsquarterly they’d alsoaltered thecompany’s finan - hackers hadn’t juststolen information, leaked news ofthebreach, andthe source ofthebreach. Thenaninsider before theITcrew could the isolate hackerscache ofdata made offwitha HR sentto afictitious rep.e-mail The training programwitha began corporatea full-size network. floor below simulate stream thedata of the room.) a Racksofservers located Angeles, themostexpensive is thingin array, made byinLos OblongIndustries the movie Report Minority . (Theceiling to handsin manipulate withhis data same sensorsthat allowed Tom Cruise studdedwiththe wall, andtheceilingis videopanelscoverquality thefront simulator dozen. builtfor two Theater- executives.C-suite counsels, marketing teams,and range includinggeneral ofactors, cyber range andteams for intel andincident IBM spending on its IBM spendingonits Like many oftherange’s features, realismdoesn’tAll this come arecentDuring afternoon demo, the areaabitlikeThe staging is aflight settings, acts, andanunusuallysettings, acts, wide response million discovered that the team The security spun out ofcontrol. wore on,events pressure. tigation. More tiated an inves- ini- Commission and Exchange The U.S. Securities pressure mounted. As theafternoon As phishing phishing - ▶ ▶ They’re alsoentered to into alottery written thank-you card inthe mail. up’s 3millioncustomers gets ahand- ofthepet supply- online, each start there’s There’s andthen customer service, With anOilPainting Pet Food That Comes E-Commerce has to persuadecustomers to buyitsgear. training center to test corporate readiness. Now it The bottom lineIBMhasbuiltacybersecurity �Michael Riley That’s awhole different skill set.” about leadership intough you have management, which is crisis going on,andIhave Butthen to stop it. technology-based—Iis have anattack into asingletraining,” hesays. “One ferent processes andcombinethem takeveryhas beenabletodif dois two IBM’sing, planshould work. “What IBM train- gaps intraditional cybersecurity that basedonwhat heknows ofthe of payroll-services provider ADP, says experiment,” Barlow says. insomeways is buying. “This agrand to make technologies themworth curity enough value inIBM’s various cyberse effort to convince there’s companies sions; it’s more ofamarketing tool, an people who- comeinfor thetrainingses IBM says it’s notplanningto charge guarantee theinvestment willpay off. ing onthefacility, because there’s no icent to break out spend - major hacks.He may beret- investigationsfor on-site of response incident teams intelligenceof cyber and range andthedevelopment bined $200milliononthe company had spent acom- to run.Barlow says the exactly how much itcosts sive, andIBMwouldn’t say plays themainbad guy.
gigantic thoughtfulness machine hasquietly Chewy builtaStartup We know theirpets’ names” “We keep profiles, takewe notes. Roland Cloutier, officer chiefsecurity expen is - The facility Chewy.com . After registering situations. situations. - - ized how much heenjoyed into apetsupply site real after Cohen - jewelry company, which morphed used theirprofitsan online to start graduating from highschool.They keting company withDay, 33, after it. understating Executive Officer Cohen. He’sRyan andretention,”acquisition says Chief an “We artists. full-time portrait have weekeach by oneofChewy’s 200 oneof700ing oftheirpet, made receive gift—anoilpaint- asurprise from petsupplies. Amazon doesn’t break out itsrevenue and $7billionayear, and PetSmart inabout bring $4billion though itisn’t yet profitable. Petco and expects to top $1.5 billionin2017, in $880millionrevenue year this old Chewy says it’s ontrackto take PetSmart from thelikes ofAmazon.com $62 billionU.S. petsupplies market company grab abigger share ofthe willhelptheirdose ofthoughtfulness Day are unusual bettingthat this preorderinghas begun itspostage. postofficein2014,local thecompany Since buying out everyat the stamp parents” ahappy andslobberyseason. cards to its customers, wishingthe“pet than 1millionhandwritten holiday names.” year, Each Chewy sendsmore says.Cohen “We know theirpets’ “We keep profiles, takewe notes,” remember They’ll you,halitosis. too. flavoredcat’s toothpaste will temper a bowel syndrome andwhich poultry- food suits best adachshund’s tell buyersthey can which gluten-free Fla., center inDaniaBeach, foot call Atpet care. a24-hour, 30,000-square- areees reps customer service trainedin About 460ofChewy’s 3,000 employ Cohen, 31, started aninternet mar 31,started Cohen, Michael andco-founder Cohen aggressive approach to , andPetco respectively; . Five-year- . customer shopping irritable irritable ,
- -
FROM LEFT: COURTESY CHEWY (1); COURTESY ZEEN (3) Technology
for his teacup poodle, Tylee. “We wanted to create a more convenient way to shop,” Innovation he says. “We also didn’t want to lose the authentic- ity that comes with your local pet store.” A crew of Walker-Chair 40 uses three soundstages
to produce pet-care tuto- Form and function Innovators Garrett Brown and Chris Fawcett rials for the company’s The Zeen is a four-wheel, height-changing, Ages 74 and 58 YouTube channel. hybrid walker/wheelchair designed to help Chief executive officer and chief technology Chewy has raised people sit, stand, and walk without another officer of Exokinetics, a five-person $236 million from inves- person’s help. Philadelphia startup that began this summer tors including BlackRock and New Horizon, the venture arm of mutual fund T. Rowe Price. Billionaire 1. e-commerce veteran Mark Vadon, Origin Brown, the Chewy’s chairman, says he’s the Standing The user sits on Oscar-winning reason the company largely kept itself the seat and fastens the inventor of the seat belt, then leans forward Steadicam, started out of the press for its first five years. slightly to be lifted from a working on a more “I advised Ryan and Michael to lay seated position to a saddle- active wheelchair low,” he says. “It’s better to avoid com- supported standing one. alternative in 2012, Leaning back slightly shifts it when his father’s petition.” Two people familiar with back to a sitting position. health was in decline. the startup’s finances say Goldman Sachs is helping it prepare for an initial public offering next year. Cohen says he isn’t concerned about the Amazon threat hanging over his and every e-commerce busi- ② 31 ness. Chewy’s auto-ship subscription Price Brown says program works a bit like Amazon’s he aims to charge Dash Button, setting customers up to $2,000 to $3,000. regularly reorder such staples as pet food and kitty litter. The bigger ques- Funding Exokinetics tion: If Chewy can’t turn a profit now, says that by yearend ① with $880 million in revenue, when it will close a $2 million investment can it? “It’s not so much that there are from Select Medical, barriers to entry,” says Vadon, who which runs hospitals 2. took his online baby supply company and other facilities, and venture firm Zulily public in 2013. “There are barri- Founders Fund. ers to doing it well at scale.” “We don’t normally Chewy won’t say how much it partner with device makers, spends on portraits and other perks. but this could be Cohen acknowledges the overhead revolutionary,” says is high but says it’s worth it. “People Select President and CEO David Chernow. Walking To walk, the user want that great customer experi- pushes the armrests all ence that we specialize in,” he says. the way forward or back to By early 2018 the company plans unlock the wheels and lock the seat at the desired height. to add three 600,000-square-foot The user’s hands are then left warehouses in the U.S., doubling its free to work, carry things, or current footprint. “Making sure we perform household activities. can maintain what we’ve built is the focus now,” Cohen says. “We’ll find a Next Steps way. We are going to be No. 1, or we Exokinetics is starting supervised tests in U.S. retirement homes and will die trying.” �Olivia Zaleski rehab centers. Brown says the team will decide next year whether to seek approval for the Zeen as a medical device. Either way, the product could be The bottom line Chewy is on track for $880 million in annual revenue but hasn’t been on sale by 2018 or sooner, he says. “Once older people go from walker to able to make its model profitable. the wheelchair, there’s such a huge decline,” says Liron Sinvani, director for geriatric services at Hofstra Northwell School of Medicine in Manhasset, N.Y. Edited by Jeff Muskus “This really has the potential to improve quality of life.” �Nick Leiber Bloomberg.com Markets/ 5. More Richerer Finance
November 28 — December 4, 2016 Five Stages of Trump Grief 4. Richer 3. Elation 2. Acceptance 32 1. Shock
▶▶Donald Trump once made Wall Streeters anxious. They’re past it ▶▶“You can probably cut back on the legal team and compliance” Talking about the election result, a Dodd-Frank Act, spur infrastructure restructuring industry, and I’m going former Goldman Sachs executive’s development, and give jumbo tax cuts to get a tax cut. What a double-good emotions veer from grief over Hillary to the richest 1 percent. thing,” he adds. “It’s all good for me.” Clinton’s loss to enthusiasm for the Wall Street consultant Octavio On the campaign trail, Trump some- coming Donald Trump administration Marenzi learned something about times painted financiers as greedy in the course of a single phone his clients’ grins. “I’m seeing people criminals. “I’m not going to let Wall call. Speaking on the condition of smile now, clients of mine, where I Street get away with murder,” he anonymity, he notes that what Trump didn’t even know they had teeth,” said at a January rally in Iowa. “Wall does and says might hurt Muslims, says Marenzi, co-founder of Opimas, Street has caused tremendous prob- immigrants, and women. But he says whose clients include some of the lems for us.” An ad he aired at the end he accepts Trump’s win and perks up biggest banks. “Everyone I talk to of his campaign showed Goldman as he discusses the rise in bank stocks. is happy.” Sachs Chief Executive Officer Lloyd Before Nov. 8, Wall Street was It didn’t hurt that financial stocks Blankfein’s face as the candidate said fairly comfortable with the status popped, with Goldman Sachs in a voice-over that a corrupt global quo represented by Clinton, and like gaining 15 percent in the week after power machine was robbing the U.S. most Americans it didn’t see much the election and JPMorgan Chase But by the Friday after the elec- chance of Trump winning anyway. not far behind. Some turnarounds tion, Trump’s transition team included But the Street has adjusted its attitude clocked in at less than an hour. Goldman Sachs veterans Steven quickly, according to interviews Bill Brandt Jr., president of bank- Mnuchin, the campaign’s finance with a dozen executives. People in ruptcy consulting firm Development chairman and a front-runner for the financial-services industry are Specialists and a friend of the Treasury secretary; fund manager anticipating the money to be made if Clintons, spent about 20 minutes Anthony Scaramucci; and Steve Trump follows through on promises in a state of devastation. “And then Bannon, Trump’s chief strategist. to dismantle regulations in the 2010 I moved on,” he says. “I’m in the “Regulatory overreach probably China is building a better financial hub. On 5. More Richerer the River Thames 34
peaked,” says Robert McTamaney, a president might bestow on Wall Street now being sent to the U.S. Treasury former Goldman Sachs partner who reminds Brandt, the bankruptcy will go to shareholders instead. helped run its equities trading business consultant, of what he felt when he left That’s what Paulson and several in Asia until 2011 and now manages his a meeting in Florida two decades ago other prominent hedge fund managers own money. “It’s going to come off the with President Bill Clinton and then- have been espousing. They’ve spent boil, and you can probably cut back on Senator John Kerry. “They turned and years building a presence in Congress the legal team and compliance.” said, ‘We’re going to repeal Glass- and the surrounding ecosystem of Wall Street isn’t all glee, and not Steagall,’ ” Brandt recalls. “And I said, advocacy and influence. just because short-term boosts from ‘I’m all for it, because it’ll make me Even after Trump’s pledge to “drain deregulation, tax cuts, and higher rich.’ And it did.” �Max Abelson and the swamp” of Washington, polit- interest rates can fade. Despite Dakin Campbell ical donors and lobbyists for Republican control of Congress, some of the nation’s wealthi- The bottom line Bankers see tax cuts, lighter Dodd-Frank may be difficult to roll regulation, and more government spending ahead. est industries were linked back with Senate filibuster rules. Those matter more to them than Trump’s rhetoric. to the transition team. Incoming Senate Minority Leader Vice President-elect Mike Chuck Schumer said on NBC’s Meet the Pence has since prom- Press on Nov. 20 that he has enough ised to remove them. “My votes from both sides of the aisle to hunch is that every hedge block a Dodd-Frank repeal. Mortgages fund has somebody in The Republican platform called for Washington by now, or will reinstating the Glass-Steagall Act’s wall John Paulson’s Long soon,” says Timothy LaPira, between commercial and investment Bet on Trump Pays Off an associate professor who banking, set up after the 1929 stock researches lobbying at James market crash helped trigger the Great Madison University. ▶ The campaign donor has a stake Depression. That’s hard to square with Fannie Mae and in Fannie Mae and Freddie Mac 33 Trump’s promise to place a moratorium Freddie Mac buy mort- on new regulations. The officials who ▶ Lobbying for a fix “that restores gages from lenders write them have been rushing to finish the rights of shareholders” and package them into sweeping limits on Wall Street pay, the securities. They were last major unfinished piece of Dodd- John Paulson went long on Donald created by Congress Frank. The compensation rule is meant Trump when much of Wall Street went and had long enjoyed to rein in risk across the industry by short. Now he’s reaping the rewards of an implicit govern- forcing executives to wait longer to Trump’s victory. ment guarantee but cash out bonuses. Paulson made billions of dollars in were run as inde- Two traders who work for banks the late 2000s with a contrarian bet on pendent, publicly say they’re mostly optimistic. But credit-default swaps and other invest- traded businesses they also worry that no matter what ments that rose in value when the U.S. before the takeover Trump does, there’s no going back housing market crashed. Since then the in 2008. The feds to the fat old days. Markets in recent hedge fund manager’s company has spent $187.5 billion years have become much more trans- been lobbying actively in Washington. on the bailout. parent, with more transaction prices Much of its efforts are directed at The Obama now reported publicly, increasing shaping the future of Fannie Mae and administra- competitive pressure on banks. That’s Freddie Mac, the companies at the tion eventually unlikely to change. heart of the nation’s mortgage market, changed the terms Clinton supporter Richard Farley, which were taken over by the govern- of the bailout, so chairman of the leveraged finance ment during the financial crisis. the government group at Kramer Levin Naftalis & Paulson—a political donor and eco- received most Frankel, says he’s surprised at how nomic adviser to the president-elect— of the com- slow some people have been to pivot. has invested through his funds in panies’ profits, “There is a lot of hysteria, unfounded Fannie Mae and Freddie Mac. Once and it’s more than hysteria,” he says. “This is not the virtually worthless, the stocks of the recouped the ideal occupant of the White House. two companies have soared more bailout costs. Nonetheless, we’re going to have a than 80 percent since Election Day. Shareholders functioning government, most likely, Trump hasn’t said what he’ll do with have been with less regulation.” The thought the companies, but investors are seeking redress cheers him. betting his arrival at the White House in court ever
ILLUSTRATION BY CAROLINE DAVID CAROLINE BY ILLUSTRATION Excitement for the treats the next will mean some of the profits that are since—and Markets/Finance
A Trump Bump National Committee, and the National Fannie Mae and Freddie Mac on the Fannie Mae stock price Republican Congressional Committee, grounds the agencies help provide Freddie Mac stock price $3.40 according to the Center for affordable housing for ethnic minor- Responsive Politics. The financier’s ities and low-income groups. The $2.90 connection with the president-elect Leadership Conference on Civil and predates Trump’s campaign for the Human Rights has built a coalition $2.40 Election Day White House. In 2012, Trump bought to back recapitalization of the two the Doral Golf Resort & Spa in Florida companies. It says it’s received more $1.90 from Paulson and other investors. than $300,000 in donations from There are also academics, non- DCI, which is a regular donor to a $1.40 profits, and think tanks that have lined range of nonprofits. Paulson’s char- 9/12/2016 11/21/2016 up behind Fannie Mae and Freddie itable foundation gave $25,000 to Mac shareholder positions. They an affiliated group, the Leadership DATA COMPILED BY BLOOMBERG rarely disclose who, if anyone, they’re Conference Education Fund. also working furiously to change the getting funding from or collaborat- Paulson isn’t the only investor policy, allowing the companies to keep ing with, meaning that any particular suddenly doing well by Fannie Mae more of their earnings for the benefit investor’s involvement is unknown. and Freddie Mac investments. Mutual of shareholders. In September, Yale lecturer Logan fund manager Bruce Berkowitz, who The move to sweep up all profits Beirne and National Consumers said in a CNBC interview in September “violated the rights of thousands League Executive Director Sally he would support Trump, saw his of shareholders across America,” Greenberg made the case for saving the Fairholme Fund gain 12 percent Paulson’s company, Paulson & Co., companies by invoking the not obvi- between Election Day and Nov. 21, says in an e-mailed statement. It says ously related scandal at Wells Fargo. driven by gains in preferred shares the government’s action violated Their separate op-eds—published on of the two companies. Hedge fund the law that enabled the takeover of successive days in American Banker manager William Ackman of Pershing Fannie Mae and Freddie Mac, which and the Hill, using sometimes iden- Square Capital Management is many shareholders say requires the tical language—argued that it would the biggest holder of Fannie Mae government to allow the companies to be risky to leave the plumbing of common shares. At a conference 34 rebuild capital and eventually reenter America’s mortgage system solely in in New York, he said he woke up on the private market. “This action should the hands of banks. Their alternative is Nov. 9 “extremely bullish” on the be reversed,” the statement says, “and to allow Fannie Mae and Freddie Mac president-elect. �Joe Light we look forward to an outcome that to become strong companies again by The bottom line A spike in stock prices of restores the rights of shareholders in allowing them to retain more of their government-run Fannie Mae and Freddie Mac these companies.” earnings and recapitalize. shows investors see Trump as friendly to them. There are lots of ways to encourage Greenberg told Bloomberg the text that outcome. One is a direct track to came from talking points circulated influential politicians. Through the by a progressive advocacy group. third quarter of this year, Paulson Raben Group, a lobbying firm, says & Co. has spent $270,000 lobbying it helped place her article in the Hill; Real Estate Congress, according to the Center for its spokesman, Jamal Simmons, says Responsive Politics, more than triple there’s nothing unusual in “the same Chinese Investors Hear its 2007 outlay. Much of the money messaging documents” being shared London Calling went to American Continental Group. among diverse groups working toward An ACG lobbyist helped run the 2016 a common goal. The Hill took down ▶ Since the Brexit vote, rents are Republican convention. Greenberg’s op-ed after her response down, and some see bargains According to public filings, Paulson to Bloomberg. Beirne says he’d worked is also part of a group calling itself the with a conservative think tank and had ▶ The capital “is still a great magnet Informal Coalition on Housing Finance no contact with either the progressive for companies from Asia” Reform, along with three other money group or with Raben. managers. This year the group has Then there are apparently grass- With Britain trying to hammer out the spent $180,000 lobbying through the roots movements of small inves- terms of its exit from the European third quarter, up from $10,000 in 2015. tors pushing for outcomes that favor Union, is this the best time to start Late last year, DCI Group, a public- them—and also benefit those with a building a new financial district in relations firm that’s helped organize larger stake. DCI, the PR firm, has London? China thinks so. Fannie Mae and Freddie Mac share- been actively organizing such an Four of the country’s biggest banks holders, was also added to the coalition. effort in the case of Fannie Mae and this month agreed to finance the first Paulson, who was named as an Freddie Mac, as it did during the stage of a £1.7 billion ($2.1 billion) economic adviser to the Trump Puerto Rican debt crisis. transformation of an old East End campaign, cumulatively gave more Sometimes, big-investor money dock into a hub for Asian businesses. than $330,000 this year to Trump’s supports existing advocacy groups. In total, Chinese companies are presidential effort, the Republican Nonprofits have made the case for on track to invest a record £4 billion Markets/Finance
in London property this year. overnight, and it certainly won’t lose Barclays, Citigroup, and Credit Suisse The Brexit vote in June threatens that status so quickly.” are scaling down office space and to diminish London’s status as The project at the Royal Albert workers, Shanghai-based Greenland Europe’s financial hub, because banks Dock, near London City Airport, is Holdings is developing Spire London, based there may lose the passport- being developed by ABP London with set to be Europe’s tallest residential ing rights that allow them to easily investment company Citic Group and building upon completion in 2020. At do business everywhere in Europe’s has reservations for 13 of the 20 build- least seven prospective buyers signed single market. In July office values in ings in the first phase. Bank of China, up immediately after the project the City of London fell the most in at Agricultural Bank was unveiled in Beijing and paid the least seven years on concerns that of China, Industrial Spire London 10,000-yuan ($1,450) vacancy rates could rise and rents fall & Commercial deposit to secure a slot if companies move workers abroad. Bank of China, and when local subscriptions International businesses may shift as China Construction officially start. many as 100,000 jobs out of London Bank are lending to the History shows that within two years of the U.K. officially development. starting a London finan- starting the EU exit process, according ABP maintains that the cial district can be a to Jefferies Group analyst Mike Prew. drop in both London rents rough ride. Canary Chinese investors are looking at it and the pound’s value Wharf, built as a second from a different perspective. They’ve could attract expanding financial center along been bingeing on foreign properties companies from China what had once been around the world, driven by high prices and other parts of Asia East London’s busy and dwindling investment opportuni- looking for bargains. “We docks, was taken over ties in commercial property at home. have seen no drop-off in by creditors in 1992, And Brexit has depressed the value of interest since the vote; in after Paul Reichmann’s the pound against the yuan, making fact, it has increased,” says ABP spokes- Olympic & York Developments said U.K. property look cheaper. “We’re man Neil Robinson in an interview at it couldn’t pay interest on its loans. now getting inquiries from inves- the site, where workmen prepare the Songbird Estates, the owner of most tors who have sat on the sidelines for ground for construction. of the district, was forced in 2009 years,” says Rasheed Hassan, a director Whatever happens with the EU, for to sell shares to investors including 35 of cross-border investment at Savills. those doing business in Europe the China Investment Corp. to repay a The long-term payoff still depends city still has the advantage of location, loan as the economic crisis hit. Last on London remaining a vibrant busi- location, location. “London is still a year, Songbird was purchased by the ness center. “Chinese investors are great magnet for companies from Asia Qatar Investment Authority and betting that the U.K. will do well in the which already have trading agree- Brookfield Property Partners. Brexit talks, and if it doesn’t, compa- ments with the EU and can still trade “If you assume the exchange nies will still choose London as their irrespective of the trade deal that the rate between the renminbi and the base,” says Michael Marx, former chief U.K. eventually gets,” says Robinson. pound goes back to where it was, executive officer of developer U+I Chinese money is also flowing into there’ll be a currency gain on top Group. “London didn’t become the residential real estate. In Canary of any property returns, but there’s financial capital of the world Wharf, where banks including no guarantee that will happen,” Royal Albert Dock says Colin Lizieri, a professor of real estate at Cambridge University. “Rents or capital values could fall over time if there are oversupply issues or dwindling demand.” Too much supply is already a risk. “There’s a lot coming onto the market, adding to the mix of the Brexit shock,” says Jefferies’s Prew. His firm is anticipating rents falling 8 percent to 10 percent over the next 24 months, “with a downside risk of as much as 20 percent if the market goes the way of 2001 and 2002, when the tech bubble burst.” �Bloomberg News
The bottom line Chinese banks are developing commercial and residential properties in Europe’s financial hub, but the payoff is unclear.
Edited by Pat Regnier
RENDERINGS: COURTESY ABP LONDON; COURTESY GREENLAND HOLDINGS GREENLAND COURTESY LONDON; ABP COURTESY RENDERINGS: Bloomberg.com 36 A PIPELINE
AAs protests PIPELINE heat up, two accidents in Alabama have shown how fragile America’s energy system is By Christopher Leonard David Butler, Riverkeeper for the Cahaba, down- stream from a Colonial Pipeline explosion site
RUNS THROUGH IT 37
As protests heat up, two accidents in Alabama have shownRUNS how fragile THROUGH America’s energy system IT is Photographs by Christopher Gregory Halloween afternoon, nine men arrived with an increasingly troubled safety record. Built in 1962, the at a wooded ridgeline in rural Alabama. Colonial was the largest private- sector infrastructure project They parked their vehicles next to a gravel of its time. Roughly half of all refined fuel products used in road, forming a loose circle of pickup cities from Georgia to New Jersey run through its 5,500 miles, trucks, a semi, and an earth-moving track which branch out from oil refineries in Texas and on the Gulf hoe. A driver turned on the track hoe and Coast to gas stations in America’s most populated corridor. In drove it down into a long stretch of grass 1999, Colonial Pipeline paid a fine of $7 million—the biggest that ran along a hillside—the right of way ever at the time—for a massive spill in South Carolina. Four for the Colonial Pipeline, the largest gas- years later, it was fined $34 million, a new record, for spill- oline pipeline in the U.S. Beneath the ing 1.45 million gallons of oil in five states. ground, a 3-foot-wide steel tube carried At the same time, Colonial has benefited from an increas- roughly 1.4 million barrels of gasoline ingly dense regulatory environment for pipeline construc- each day to 50 million Americans in cities tion, which has helped protect it from competition and up and down the Eastern Seaboard. make it something of a piggy bank for its owners, to whom The men were there to conduct the company returns annual dividends that typically total repairs. Just over a month before, the about $300 million. Colonial’s pipeline consistently runs at pipeline had sprung a leak, forcing a shut- 100 percent capacity, leaving gasoline refiners and fuel mer- down that caused gasoline reserves on the chants, who pay transport rates in a manner akin to a toll East Coast to fall from 64 million barrels road, vying for space. The to 55.5 million, the biggest one-week drop company, headquartered in U.S. history. Prices spiked at the pump in many cities from in Alpharetta, a suburb Atlanta to Jersey City. The leak had been fixed temporarily of Atlanta, is privately ONwith a bypass, and now the crew was excavating about 5 miles held by a consortium of from the original rupture to rebuild the stretch that had failed. investors. The largest is They worked for a local contractor, L.E. Bell Construction, Koch Industries, with a that the pipeline’s owner, Colonial Pipeline Co., had hired 28 percent stake; others many times over the years. include the private equity Among the team was Anthony Lee Willingham, a 48-year- firm KKR, Shell Pipeline, old track hoe operator who’d been with L.E. Bell for almost and South Korea’s 30 years. He was familiar enough with the routine procedures National Pension Service. of pipeline repair to have built a kind of muscle memory. If Tight capacity and 38 he was at the wheel—the company hasn’t confirmed this—he the millions of gallons would have known to operate the track hoe blade slowly, delib- of new oil supplies pro- erately, without applying too much pressure. But somehow duced by the U.S. shale the blade struck steel, and the fuel ignited. boom have made some At that moment, not far down the gravel road, a farmer operators and indus- named Douglas Wright was at home playing with his grand- trial customers eager to daughter. The explosion shook the house to its foundations. build additional pipe- Wright looked outside and saw a column of flame rising hun- lines. Companies that rely dreds of feet in the air. Black smoke billowed into the blue on the Colonial, includ- sky. He told his wife to take their granddaughter and drive ing American Airlines, First responders at the as fast as possible, then he headed toward the fire, think- are among those press- Oct. 31 explosion ing to check on some elderly neighbors. As he got closer to ing for expansion. But the site, he heard screams. Wright arrived to find some of although pipeline operators maintain that moving fuel under- the workers on the ground, severely burned, as their unin- ground is cheaper and safer than moving it by rail, barge, jured colleagues tried frantically to move them away from or truck, resistance to more construction has grown fierce, the flames. The track hoe was charred. The semi was oblit- and not just in liberal communities. In addition to ongoing erated, and the pickup trucks were on fire. Amid the wreck- protests by Native American and environmental activists over age was the body of Willingham. Authorities were unable to the Dakota Access Pipeline in North Dakota, some deeply con- collect his remains until the next day. servative Southern counties have opposed projects as well. Aftershocks quickly shuddered up the spine of America’s energy system. When gasoline traders realized that East Coast Minutes after the explosion in Alabama, David Butler’s cell reserves were once again threatened, they started bidding up phone started ringing. Butler is a local leader of Riverkeepers, the price of fuel. In a matter of hours, the cost of a gasoline an alliance of activists who protect watersheds and rivers futures contract for December shot up 15 percent, the highest around the country. As Riverkeeper for the Cahaba, which jump since the financial crisis in late 2008. Merchants scram- snakes between the sites of the Colonial gas leak in September bled to secure supplies from tankers carrying imported fuel, and the explosion in October, he counts among his respon- causing the cost of cargo freight from the Atlantic to surge sibilities testing for pollution and responding to reports of more than a third, to about $17 per metric ton, according to sewer leaks. Colonial had also enlisted him to help monitor data compiled by Bloomberg. for pollution from its line and with cleanup after spills. That The chaos revealed something millions of Americans had afternoon, Butler and his wife, who live about 20 miles from long been able to ignore: They depend on a single pipeline the blast, were preparing to take their kids trick-or-treating. to deliver the gasoline that fuels their everyday lives. And His daughter was going to be Little Red Riding Hood, his son
that pipeline is operated by a single, little-known company the Big Bad Wolf. DEPARTMENT/REUTERS FIRE ALABASTER COURTESY The first calls were from neighbors, asking if he knew what overnight. Butler considered it a stroke of luck that the fire had happened. Then Colonial got in touch and confirmed wasn’t encroaching on the suburban communities dotting the that the fire had begun with an explosion. The implications highways between the explosion and Helena, a town 21 miles were dire: Hundreds of thousands of gallons of fuel could be south of Birmingham. Colonial had moved swiftly to shut pouring into nearby creeks and rivers, imperiling the Cahaba’s off the flow of gasoline in the pipe, leaving it to burn itself 173 species of fish and mussels, 14 of which are listed as threat- out as firefighting crews doused the edges of the blaze and ened or endangered. The waterway is also home to the rare built earthen berms to contain the fountain of ignited fuel. Cahaba river lily, which attracts thousands of tourists after it When Butler arrived in the morning to start collecting water blooms each May. (Local drinking water supplies were safe, samples, the fire was largely contained, but it remained about since they’re drawn from a river farther away.) 20 feet high. That evening, Butler arrived at the improvised command As he went from site to site, the early indications looked center Colonial had set up at a community building in the promising: no oily sheen on the water, no odor of gas. He did, town of Pelham. After being cleared by security, he entered however, notice a somber air among the pipeline employ- a large, gymnasium- like room where a disaster response ees and contractors. They seemed almost embarrassed, he team was working on a plan to contain the fire and assess thought. Colonial had been having a very bad year in Alabama. the damage. Butler might have seemed out of place amid the The company had already reported five leaks from its pipeline fire department staff, pipeline personnel, and officials from in 2016, one less in 10 months than it had had in the previous the Environmental Protection Agency and other government five years. In late January, the Colonial had discharged about bodies. With his dark beard, wiry frame, and casual cloth- 126 gallons of fuel into nearby wilderness. Several smaller ing—he often wears jeans and a yellow Riverkeeper T-shirt— spills followed, culminating in the big leak in September, when he typically looks like he’s just finished a long hike. He also 309,540 gallons of gasoline poured out of the line, filling local has the metabolism of a hummingbird, frequently fueling ponds and forcing the shutdown. himself with Powerade and miniature chocolate- chip cookies. Records from the federal Pipeline and Hazardous Materials That first night, Butler worked with Colonial employees Safety Administration (PHMSA) show that nationally, the and environmental contractors until roughly 3 a.m. to draw number of reported pipeline accidents has been creeping a map that showed where gasoline might be leaking into the up every year since 2012, from 573 that year to 715 in 2015. Cahaba. One point of concern was a creek near the explo- The number of reported accidents along the Colonial has also sion that fed into the river. This small stretch of water is the been climbing (though not in a straight line), from 12 in 2011 isolated habitat of the oblong rocksnail, a species thought to to 27 in 2015. Their cost, too, has been increasing. Last year, be extinct until a small population was found in 2011. Butler incidents involving the Colonial led to $18.1 million in property and Colonial decided that in the morning they would test damage and cleanup outlays, the highest total by far over the strategic points along the waterways for the presence of fuel. preceding decade. This year, the figure had already reached 39 As they worked that night, the fire was spreading along $75.6 million before the accident on Oct. 31. the hillside to nearby forested land. Alabama was in the Colonial refused to comment on what caused the middle of an historic drought, which had left the forest floor September leak or why accidents are up sharply in Alabama covered with dry tinder. About 31 acres of land were engulfed this year. Malesia Dunn, a spokeswoman for Colonial, said that the company is looking into the causes of both major incidents and can’t comment until the investigation is further along. Damage costs for The PHMSA has yet to determine the cause of the September Colonial Pipeline $80m and October incidents and wouldn’t comment either. In September, more Butler had worked with Colonial to contain the September accidents than 300,000 gallons leak. As bad as it was, he said, it could have been far worse. It of gasoline leaked had been discovered only by chance, by a state inspector who in Alabama; the next $40m month the pipeline smelled gas fumes while doing unrelated work in the area. And exploded because of the drought, the nearby ponds were low, which allowed them to become catchments for the spill. Had they $0 been full, the gasoline might have flowed into the Cahaba. 2006 2011 2016 Dunn wouldn’t discuss why the company failed to discover the September leak, but she stressed that it has an extensive Linden, N.J. detection system in place. The system includes pressure- monitoring equipment and flyover inspections, as well as training for local officials about Colonial’s operations, which lets them know “who to call if they see something,” she wrote in a statement. She added that a flyover inspection two days Norfolk, Va. before hadn’t spotted the leak. Nashville, Tenn. After the September spill was contained, Butler said, he Birmingham, Ala. had jokingly told Colonial employees, “I hope I never see you Atlanta again.” Now, as they once again raced to keep the Cahaba River safe from a gas spill, “it wasn’t like, ‘Hey, great to see Colonial Pipeline you,’ ” he said. “It’s like, ‘Here we are again.’ ” Houston
250 mi. Accidents like the ones on the Colonial have galvanized oppo- Oct. 31 explosion Sept. 9 leak sition to pipeline construction across the country. In
GRAPHIC BY BLOOMBERG BUSINESSWEEK. DATA: ENERGY INFORMATION ADMINISTRATION, ADMINISTRATION, INFORMATION ENERGY DATA: BUSINESSWEEK. BLOOMBERG BY GRAPHIC ADMINISTRATION SAFETY HAZARDOUS MATERIALS AND PIPELINE North Dakota, protesters have built huge encampments and blocked roads to halt construction of the Dakota Access with the backing of conservative state legislators. Even with Pipeline, a $4 billion project that would take crude oil from financing and a customer base locked in, the regulatory uncer- fracking wells in North Dakota to refineries and gasoline con- tainty was too great for Kinder Morgan to carry on. “That, at sumers in Illinois. Members of the Standing Rock Sioux Tribe the end of the day, was the problem of Palmetto—where you argue that the pipeline’s proposed route runs too close to have a regulatory environment that shifts,” Fore said. “The the Missouri River, the source of their drinking water. On playing field is not only altered, it’s basically shut down.” Nov. 15, hundreds of marchers closed down streets near the White House, while other rallies took place from Los Angeles In the days after the Alabama explosion, as Butler collected to New York. water samples, employees from Colonial and L.E. Bell raced to The Colonial’s history suggests their fears are justified. The get gasoline flowing again. The lessons of the September shut- leak in South Carolina for which Colonial Pipeline paid its down were fresh in their minds. They knew that oil traders 1999 fine, for example, sent roughly 1 million gallons of diesel and wholesalers would be counting the minutes until the fuel into a local waterway, contaminating a 23-mile stretch of pipeline reopened. river and killing an estimated 35,000 fish, along with beavers, The gravel road to the accident site was guarded by a rotat- muskrats, and turtles. In settling with the U.S. Department of ing shift of Shelby County sheriff’s deputies, who checked Justice, Colonial pleaded guilty to criminal neglect. credentials and kept strangers and reporters away. Traffic Over the past three decades, incidents like these, and the was almost nonstop. Heavy trucks with the L.E. Bell logo resistance they’ve spawned, have led to a much tighter reg- came and went, along with vehicles from specialists and con- ulatory environment for pipeline builders. Roger Williams, a struction companies from around the Southeast. The men pipeline developer from Wichita, said that in the mid-1980s and women driving looked stoic, ignoring reporters as they he oversaw a project that laid 1,300 miles of pipe from Texas passed by the entrance. At the site, workers prepared new to California, crossing several states and a mountain range sections of pipeline while fire crews sprayed smoldering tree for good measure. At 85, he’s now vice president for opera- stumps to prevent reignition. In the predawn hours of Nov. 4, tions on the 178-mile Pilgrim Pipeline project, which would four days after the blaze erupted, it finally burned out com- serve cities in New Jersey and New York. His team has spent pletely. The next day, the new section of pipeline was tested millions just to get to the beginning of the permitting process, and prepared for use. including money to hire herpetologists and other wildlife Employees of L.E. Bell appeared shellshocked in the days experts to examine the ecological impact of the new line. after the explosion. Word of Willingham’s death had spread After more than three years of groundwork, Williams said, quickly, and four of his co-workers were being treated at a “we don’t have one single permit yet.” In the meantime, the burn unit in downtown Birmingham. Trays of food and gallons company has had to shut down a branch office in New York of coffee were sent to provision family members as they held 40 and lay off its staff. “They protect everything up there except vigil. Those who knew Willingham seemed mystified by the human beings,” he said. accident, none more so than Jeremy Slaton, his next-door New pipelines are being thwarted in the South, too. In neighbor and close friend. The two often shot rifles together May, Georgia’s Republican governor, Nathan Deal, signed on a grassy hillside near their homes. Slaton recalled that a moratorium on pipeline permits following intense public Willingham could hit a target from several hundred yards opposition to a proposal by Kinder Morgan for a 360-mile away. Willingham was a steady hand and a competent worker, pipeline called the Palmetto. The line would have branched he said, which made him doubt that a simple mistaken swipe off from the company’s Plantation Pipe Line, tracing a route of the track hoe blade had been entirely to blame. “It would through Georgia, South Carolina, and Florida, and serving take tremendous, tremendous force to put a back hoe, or cities with limited or no pipeline service, such as Savannah a track hoe, tooth through a piece of pipe,” he said. “I’m and Jacksonville. Opposition arose almost immediately, led in thinking there’s something else … something was hidden that part by Tonya Bonitatibus, the Riverkeeper for the Savannah caused this.” River. The Palmetto was to be buried beneath miles of marshy Shortly after the accident, Colonial released a statement terrain that runs alongside sensitive rivers—wetlands that saying that a track hoe had struck the pipeline, but the serve, Bonitatibus said, as the rivers’ “liver and lungs,” by company didn’t confirm that Willingham had been driving letting pollutants settle out into sediment in the shallow, or otherwise elaborate. The company and the National slow-moving water. Transportation Safety Board are both investigating the acci- While some of the anti-Palmetto movement’s concerns dent, but neither would comment on their investigations or were environmental, their activism took on a conservative on the circumstances of the explosion. bent. Most of the resistance focused on Kinder Morgan’s Larry Bell, the owner and operator of L.E. Bell authority to use eminent domain to take property from land- Construction, declined to discuss the explosion in detail owners who wouldn’t cut a deal with the company, a power because of the legal troubles surrounding it. He would say granted to pipeline companies by a New Deal-era law intended only that it was a “freak accident.” He said, “it had nothing to spur infrastructure development. “They were incredi- to do with unsafe pipeline or workmanship. I’m not a betting bly arrogant the entire time,” Bonitatibus said. “There was man, but you’d win money on that.” absolutely no way that Kinder Morgan should have access to Bell lives on a large complex that also serves as his compa- eminent domain.” ny’s headquarters, on a winding country road near Heflin, an Allen Fore, a spokesman for Kinder Morgan, said that on hour or so east of Birmingham. On the left as visitors enter is a typical pipeline project the company uses eminent domain a giant warehouse and open lot. Next to that is a small office sparingly, invoking it for fewer than 5 percent of landowners. building, where visitors are greeted by a caged parrot. A sign He added that the company had also been prepared to push taped to the front door shows a pile of cash below the caption, ahead with Palmetto without eminent domain. But the activ- “This is the money you could’ve saved if you hadn’t voted for ists’ message carried the day, and Deal passed his moratorium Obama.” To the right of the office is a palatial house. The mix the company agreed to improve safety practices as part of its settlement with federal regulators. This year’s incidents appear to be affecting the company’s bottom line. In 2015, according to Moody’s, Colonial spent $163 million on capital investments, which includes mea- sures for system reliability. This year the figure is almost double that, roughly $300 million. That’s about the same amount the company has been returning to its shareholders in div- idends in recent years, but Moody’s notes that Colonial will reduce the payouts this year because of the accidents. Koch Industries declined to comment.
It’s possible that the presidency of Donald Trump will change the regulatory environment for pipelines, clearing the way for the Dakota Access to be completed and for the construction of the Keystone XL and other lines. But it’s unclear how much impact even a deter- mined White House could have, given that most pipeline battles are fought at the lower levels of govern- ment. Moreover, g asoline supply crunches won’t likely persuade the 41 environmental groups that pressured President Obama to kill Keystone XL and are now protesting the Dakota Access to back down from their objec- tions. “My worries about ‘infrastruc- ture fragility’ tend more towards, Buck Creek, a tributary of the Cahaba that runs through the town of Helena say, the effects of rapid sea level rise on the nation’s coastal cities,” wrote of home and business, Bell said, was “a country boy’s way of author and activist Bill McKibben, co-founder of the nonprofit doing stuff.” He was quick to point out that he and his wife 350. org, in an e-mail. were born poor and had been raised in a nearby small town. Environmentalists’ fight, he pointed out, is about more “We didn’t have no rich aunts or rich uncles or daddies … than preventing leaks—it’s a way to curb the construction of but we had some good ones,” he said. infrastructure that supports the oil and gas industry. “The Bell dropped out of high school to work as a laborer on the imperative need is to wean the world fast off fossil fuels—this Colonial in the early 1960s. He remembered when the pipe- is the hottest year our planet has ever recorded, with record- line ran its first gallons to fuel. His company now employs low polar ice for the date, with massive droughts and floods,” about 500 people, who help maintain the aging Colonial and McKibben wrote. “When we build new fossil fuel infrastruc- other pipelines like it across the country. Colonial Pipeline, ture we condemn the nation to another 40 or 50 years locked he said, goes “extremely overboard to make sure everything into the current way of doing business.” is done right and everything is safe.” He described pipelines For now, at least, the risks of climate change, water contam- as a necessity of modern life. “If we lined up trucks to trans- ination, and species loss remain the trade-off for driving our port our product from Louisiana and Texas to the East Coast, cars and heating our homes. By Sunday, Nov. 6, the Colonial we wouldn’t have any room on the interstate to run our cars,” was up and running again. Gas prices had barely been dis- he said. “Anything we do has got risk to it. There’s nothing rupted, leaving some 50 million people to forget once again that man makes that does not have a risk to it.” what an important role a single tube of steel and the company Dunn, Colonial’s spokeswoman, wouldn’t say what specific that owns it play in their daily lives. actions the company will take to boost reliability. “When inci- Butler’s water tests from the accident site came back neg- dents do occur, we investigate and determine the cause along- ative for gasoline. It was great news for him and the oblong side government regulators, and take corrective actions based rocksnail, but he wasn’t celebrating. Instead, he was nervous on lessons learned to minimize the likelihood of similar events that the next call from Colonial would be coming soon enough. happening again in the future. We are doing the same here,” The risk was always hanging out there, he said. “It’s sort of she wrote in an e-mail. After each previous major accident, a guillotine.”
42 is there anti-murder training?’ Sexual harassment is alive and well in the American workplace. ‘I mean, We’re all clicking through video compliance courses.
Something’s not working By Claire Suddath
is there 43 anti-murder training?’ Nine women talk the Massachusetts attorney gen eral’s standing in a room full of 300 people, about on-the-job office filed separate complaints. The and an elected official came up behind harassment diner settled without admitting to any me, grabbed me, and then put his hand wrongdoing. Billiel and at least nine between my legs. A colleague saw it other women will share a settlement of happen. He pulled me into the hallway Marie Billiel, 27 between $112,000 and $200,000.] and said, “If you don’t tell your boss, Boston Receiving a settlement doesn’t nec- I will.” So I did. Having someone else It started pretty quickly, within the essarily feel good. The diner closed. I see it validated my story. The man first two weeks that I was working at the still had friends who worked there, and couldn’t claim I was flirting with him or it diner. One of the cooks didn’t happen. grabbed my wrist and I know the elected tried to pull me into the official was talked to. I walk-in freezer where f you run a company in California, you have to take would’ve liked to see him there aren’t any cameras, state-mandated anti-harassment training every two banned from our meet- because he wanted to years. This October, Matt MacInnis, founder of a ings, but he wasn’t. One kiss me. I said no. I pulled digital distribution business called Inkling, clicked time he caught me after a away, went back out. I through two hours’ worth of slides about inappro- meeting and said, “I was was 18 and didn’t know priate touching and sexual comments in an online out of line, I was drink- how to deal with it. I course produced by an HR services company. As he ing, and I know that’s no We were whistled at answered multiple-choice questions to prove he’d paid atten- excuse, but I’m sorry.” all the time. Some girls tion, a thought occurred to him: This is a farce. MacInnis That was three years were oinked at. They couldn’t see how an online training course would keep “an ago. I still see him, but it’s would watch pornogra- a--hole from still being an a--hole,” as he puts it. “There is better now. phy on their cell phones a laudable goal, but the way we address sexual harassment I actually wrote the and then try to show it to now, the whole system is flawed,” he says. “I mean, is there sexual-harassment us. I was kissed without anti-murder training?” policy for our organiza- my consent. There were The Equal Employment Opportunity Commission tion’s meetings after that. other women there who (EEOC), which by law must investigate all federal harass- We didn’t have a formal got straight-up groped. If ment claims before they can proceed in court, received one. I mean, it’s 2016 for I resisted their advances, 13,000 sexual- harassment complaints last year (16 percent God’s sake. they would retaliate by of them from men), outpacing the number it received for *For the women who 44 “forgetting” to make my racial, ethnic, or religious discrimination. “We by no asked to remain anony food or burning my orders means think that’s the extent of the harassment,” says mous, we have verified or making other people’s Peggy Mastroianni, the organization’s legal counsel. She their names, place of orders first. My tip goes estimates that as many as 90 percent of people who expe- employment at the time down because of that. rience sexually inappropriate behavior at work never of the incident, and the There was one point take formal action. Many who do are contractually obli- names of the alleged where I was in a walk-in gated to litigate through private arbitration, which the harassers. freezer with a cook who EEOC can’t track. But decades of surveys show that harass- was consistently trying to ment remains prevalent: In a 1981 Harvard Business Review Alexandra get me to go out with him. survey, 60 percent of women said they’d been “eyed up and Marchuk, 30 One of the other cooks down” by male co-workers; last year the EEOC reported Jacksonville, Fla. shut the door on us and that somewhere from 50 percent to 75 percent of women I worked at Faruqi turned the lights out as have experienced sexual comments or touches that made & Faruqi my second this man was approach- them feel uneasy at work. summer of law school. ing me and asking if he For more than three decades, U.S. companies and insti- They offered me a job could bite me. [It] was tutions have addressed such behavior through corporate when I graduated in 2011. less than five minutes, policies and awareness programs, although there’s little It’s a small civil litigation but at the time it feels like evidence they’re effective. Compliance training makes up a firm in New York. The an eternity. sizable portion of what market-research company IBISWorld two founders are brother I told one of my man- estimates is a $4 billion HR software market. In California, and sister, but the part- agers. She passed it which has the most robust training requirements of any ners are mostly men. along to the owner, and There were some female nothing was done. I heard attorneys and of course the reason was because women paralegals and they’d heard that I had already been I’m not any less traumatized; I’m not any receptionists. Midway through that sexual with him, which is not the word less assaulted. [first] summer, Juan Monteverde was they used. That was untrue, but they hired. He specializes in intervening in decided they weren’t going to inter- Anonymous, 32* mergers on behalf of shareholders, vene based on something they’d heard Washington, D.C. saying the disclosures you’re making through the grapevine. I work for a political group. We do are insufficient. He was really good at [After Billiel left the diner and, in a lot of networking events. When you his job, sort of the rainmaker. 2014, blogged about her experiences, get people out of an office setting, they Juan had said some weird things the American Civil Liberties Union and change. This one time I was at an event, to me when I worked there over the summer. Once we’d been out at dinner, putting myself in a dangerous position. “quickly, forcefully, and painfully had and he joked in front of other people that And I still had to do the actual work. sex with her.” In his own court filing, I should give him a blow job for picking up I had this plan to wait until I got Monteverde disputed her account.] the check. I didn’t know until right before some experience and then jump ship. I actually went to work for two days I started that I’d be working directly I was trying to strike this balance— after that, but the second night I was like, for him. I was hesitant, but I also had don’t complain so you don’t get fired. “I can’t do this.” I called my mom, and she $250,000 in student loan debt and was In December [2011], I’d been there drove into the city and picked me up. really happy to have a job. three months, and we were at the firm’s I filed a lawsuit. I had gotten a full- On my third day at work, we’d just holiday party. I started talking to Juan time job in Omaha before I filed, and I’m come back from a court still with that company. hearing and were having They let me deal with it in a drink at a bar when the best kind of way. So Juan started kissing me. state, companies spend hundreds of millions of dollars on on that front, I was OK. He asked me to go have courses every year. About 80 percent of companies offer some But I didn’t think it would sex with him. I was like, form of training, although only three states—Connecticut be covered so closely “What? No.” He started and Maine, in addition to California—require them to do so. by law blogs or followed making comments all the (Thirteen more states order training for at least some gov- by the law community. time. He’d touch me in the ernment employees.) They use all sorts of courses, produced There are details in there elevator when I couldn’t by dozens of companies, from the cut-and-dried to risible that, when you Google get away. He kept inviting theatrical re-creations. me—I mean, bloodstains me out on his boat. He’d Skillsoft makes compliance videos covering everything on the carpet. One of my comment about my body from data privacy to environmental sustainability for about close friends thought in front of other people at 7,000 companies; it leans heavily on hired actors who dem- to e-mail every single the firm, asking me to go onstrate legal definitions in generic corporate scenes. HR person in her firm about to hearings with him so I Learning Center advertises one of its courses with a picture it. It was entertainment could be “eye candy” for of a man and a woman making out on top of a filing cabinet. for a lot of people. the judge. Inspired eLearning, which MacInnis used at Inkling, starts The firm denied it. A few weeks into this, one of its videos with the words “charges of sexual and other [Monteverde said the one of the female part- forms of harassment can land your company in court,” fol- relationship was consen- ners took me out to lowed by a picture of a frightened gray-haired man on what sual.] They countersued dinner, and I told her what appears to be a witness stand. Emtrain, which creates online me for $15 million, claim- was going on. I got the courses and runs in-person events for companies such as ing I was “obsessed” with 45 sense later that she talked Chevron, Netflix, and Nordstrom, urges employees to men- him. The lies they told to people about him, but tally color-code their comments—green is respectful, red is don’t even make sense. nothing was done. So I offensive—and to call out their co-workers with gentle warn- They said I hadn’t been just ... I don’t know. It went ings such as “that’s a little orange.” eligible for a bonus. Well, on and on. We did a case Early versions of these programs first cropped up in the I kept my offer letter, and involving a company 1980s, but the their use didn’t pick up until two U.S. Supreme it says I’m eligible for a called BJ’s Wholesale, Court decisions in 1998 clarified when companies can be held bonus. They claimed I’d and he’d joke in front of liable for harassment. In the cases, which considered what’s e-mailed the lawsuit to another attorney about known as “hostile work environment” harassment (frequent Juan and his wife and the how much he liked getting sexualized comments or touches), as opposed to the “quid firm’s clients. But it turned BJs. Sometimes it wasn’t pro quo” variety (the classic “sleep with me or you’re fired”), out that the IP address even sexual. He’d just do the court decided that a company will be held liable when a where the e-mail came things like make me work boss harasses a subordinate unless it can prove that it takes from was within Faruqi, all weekend on some- steps to prevent and address such behavior. after I’d already quit. They thing that wasn’t neces- Catchall policies that disavowed harassment quickly ended up dropping the sary; or he’d threaten to became the norm. Pick any major institution today, and countersuit. fire me knowing I had all you’ll find one: “We do not tolerate harassment or inappro- I was deposed for a this student debt; or he priate conduct,” JPMorgan Chase’s official code of conduct full day. All of the named said he’d chip in on my reads. Apple is committed to “a workplace free of defendants got to sit in rent if I let him sleep over harassment.” In addition to the standard prohibitory the room and look at me at my apartment. as I did it. They had a psy- I dreaded going into chologist evaluate me. It the office. I had to police was a three-hour session everything I said and did and what I about yearend bonuses, and he said he in the library of an attorney’s law firm, wore. I remember one time I was visiting wouldn’t recommend me for one. We’d and he asked a lot of questions about home, and my mom took me shopping at been drinking, and he said we should go my hobbies. It seemed to bother every- Brooks Brothers. There was a pencil skirt back to the office, and I agreed. That’s one that I had gone hiking on a vacation she wanted me to buy, but I said, “No, when he—we ... once during all of this. They asked a lot of Juan would comment on it.” I paid atten- (cries) questions about how I paid for the vaca- tion to when other people left for the day [In a lawsuit Marchuk later filed tion. They decided not to use the psy- so I wasn’t alone. It took an incredible against Monteverde and the firm, she chologist in the trial, so I don’t know what amount of energy to make sure I wasn’t said that back in the empty office, he the point of that was. The trial went on for weeks and was invited me to sushi for dinner. He said was like, “Am I overreacting? Is this guy insanely stressful. I read discovery from it would be a big group of co-workers. crossing the line?” I wasn’t sure. My some of my friends, and what they said When I got to the restaurant, though, supervisor said, “Absolutely he is. He about me in e-mails and Gchats behind there was nobody else there. I ate should not be sending you flowers and my back. By the time the jury had their dinner to be polite, but then I went home, asking you out when you tell him not verdict, so much had been argued that because it was weird. to.” He said he’d talk to him. That was it. I didn’t know what to expect. [Marchuk He started e-mailing me multiple mes- Everything stopped. lost under federal and New York state sages a day. He sent me flowers. He’d I learned later from my supervisor harassment law, but won under New say things like, “A friend of mine is a pilot that they’d had other issues with him. York City’s human-rights Two other women com- law and was awarded plained about him after I $140,000. In a post- did. I know they take this decision interview with language, Google urges its employees to “be excellent to stuff very seriously there, the Above the Law each other.” Goldman Sachs says it does “not tolerate any and I’ve always felt very blog, a juror explained form of discrimination prohibited by law.” Despite the recent safe. But he still works that the jury didn’t outpouring of harassment complaints regarding former Fox at the studio. He’s had believe Monteverde’s News Chairman Roger Ailes, the policy at the network’s promotions. sexual advances were parent company, 21st Century Fox, says that “unwelcome DreamWorks declined entirely unwelcome, that sexual advances [or] … verbal or physical conduct of a sexual to comment. Marchuk’s private e-mails nature” aren’t allowed, and people should feel free to report contained contradic- any harassment they see or experience. Anonymous, 32 tory messages about These policies often go hand in hand with the train- San Diego how she felt about the ing courses, which typically cover the legal definition of The first firm I worked law firm, and that the firm harassment and what kind of behavior can get people into for after law school, I was had dutifully recorded trouble. Maine and Connecticut passed their laws requiring a junior associate. The what Marchuk told the training in 1992, in direct response to the Supreme Court head of paralegal was female partner about confirmation hearings for Clarence Thomas. California fol- a guy who was about Monteverde’s actions.] lowed suit in 2004 after 16 women accused then-Governor 20 years older than me. The decision was dis- Arnold Schwarzenegger of harassment. (“With your back- Because I’m an attor- appointing but well within ground, you probably ought to sign it,” Sarah Reyes, the ney, I was above him. He the range of anything that state assemblywoman who introduced the bill, said about took great issue with this. 46 could have happened. Schwarzenegger at the time.) But according to employment He’d say things to me like, You just don’t know. It’s attorneys, HR managers, and the companies that design the “Why are you always such just a bunch of strangers courses, their goal isn’t to stop harassment—it’s to guard a b----?” “Why are you a who get to judge whether against lawsuits. hard ass?” It was offen- or not you deserved it. “You’re building a defense in the event of an incident, sive and all, but it was just In a statement, Faruqi passing liability from the organization to the individual,” talk. I just thought he had & Faruqi founding partner says Eugene Van Biert, vice president for global compliance something in his craw Lubna Faruqi says the solutions at Skillsoft. His company offers different levels about a woman of color law firm “takes the safety of training; he says most of its clients pick the basic online being his superior. and wellbeing of our course that employees click through to learn the legal do’s One day he came into team members very seri and don’ts. “They want to generate a record so they can my office, closed the ously. We have policies say they’ve done it, then they want to move on,” he says. door, and grabbed me. It and procedures regard Skillsoft’s most comprehensive program includes a way for was so sudden I was like, ing employment issues, people to report harassment they’ve experienced in the “What is going on?” He including but not limited past, but Van Biert says fewer than 20 percent of his clients got me in this bear hug. to, harassment and dis choose the service. He’s a much bigger guy crimination in the work Despite its popularity, there’s little research on this kind than me, and I couldn’t place. We considered of training. Last year the EEOC established a task force move. He started shoving Ms. Marchuk’s com to investigate workplace harassment and concluded that his hands up my shirt. I plaint to be without “much of the training done over the last 30 years has not told him to stop it right merit and vigorously worked as a prevention tool.” The commission could find now, or I’ll scream. The defended ourselves in walls were thin, and I New York federal court.” knew all I had to do was Monteverde didn’t make noise, and someone respond to a request for comment. and could fly us to Catalina Island for the could come in. He stopped. weekend,” or “Do you want to go on a I didn’t say anything to anyone about Anonymous, 41 hot air balloon ride in the desert?” It was it. The owner of the firm wasn’t very good Los Angeles never, “Hey, let’s get coffee.” I turned him at dealing with conflict. If I had reported I started at DreamWorks around the down, but he would just keep asking. And it, I’m pretty sure I would have gotten winter holidays, so there were a lot of asking. And asking. fired. They’d come up with an excuse. parties. That’s where I met him. He’d stop I stopped being polite and started flat This was in 2010 or so, and legal jobs by my office, send me e-mails asking out telling him no. That made him esca- were really scarce. Instead, I just made if I wanted to have lunch. One night he late. I eventually told my supervisor and sure other people were always around. Pretty soon after that, we moved to team. I was also the only woman. regret for not standing up for myself in another office, and I shared office space When I was still new to the role, we the moment. Did my nervous laughter with someone, so I was rarely alone. had a week of team-bonding events egg him on or give him implicit consent Even so, I still felt on edge. It’s a hard planned. This was the first time I’d spent to keep going? Why didn’t I tell him to feeling to describe, because once it’s extended time with my manager. He his face, immediately, that this was there, it’s always present. It was a harsh made a number of highly inappropri- misogynist, racist, and unprofessional? transition into the real world. It goes ate comments to me in professional and He was my direct superior. against everything I believe, but honestly after-work events: comparing women At work, I couldn’t focus. I lost my the best way to deal with that is to just from different Asian countries, telling me motivation. I was enraged at him for blow it off. making these comments and angry at myself for Magdalena Zylinska, 45 not being stronger. I Elmwood Park, Ill. only three studies, the most recent of which is 15 years old, struggled with whether In one of the houses that evaluated training programs over time at companies. or not I should report I used to clean, the man “These training companies are making buttloads of money my manager to HR, or if was always taking his off these courses, but what little information we have on I should keep my head clothes off. He expected them raises serious questions about their efficacy,” says down and let it go. I was us to clean while he Vicki Magley, an organizational psychology professor at scared that I was blowing was working naked. the University of Connecticut who co-authored two of the things out of proportion. Sometimes he would ask studies. There’s other academic research, Magley says, but it He was well-respected if you wanted to touch usually deals with fictional programs designed by research- on the team, and I was him. I didn’t know whether ers rather than actual courses that companies might use. concerned about what to run or stay and work In her experience, compliance courses help employees might happen to our team or what. I had a mort- understand the definition of sexual harassment, but don’t if he was disciplined or gage. I had a kid. I needed change people’s behavior. “I have absolutely no faith that even fired. What would the money. At the time I any kind of an online course is going to do anything to stop happen if his wife found was undocumented. So harassment,” she says. out, and I ruined their I stayed, but I made sure The companies that design the courses—and the HR marriage? I couldn’t make that when I cleaned his departments that implement them—also have trouble mea- sense of why I contin- house, there was always suring their impact. “I kind of don’t have any answers,” says ued to feel such empathy someone with me. I’d tell Phyllis Hartman, an HR consultant who’s been working on amidst my anger. It took them, “If I scream, you just anti-harassment training for 25 years. “You just sort of do it me two to three weeks, 47 run and call the police.” and hope it’ll be better.” Emtrain’s chief executive officer, but ultimately I decided to When I left [his house], I Janine Yancey, says her company plans to publish a report report his behavior to HR. tried to think about some- demonstrating how its services decrease harassment com- HR set up an inter- thing else, not about the plaints, but it hasn’t released any results yet. As a researcher, view with me so I could problems. But the first Magley once teamed up with a company to evaluate its anti- recount what hap- couple of years, it was harassment training but had to discontinue her study after pened. They asked for really, really bad. You’d the company got nervous about legal liability should she the names of people who be working, and he’s find it didn’t work. “The attorneys from this company came might have witnessed the nowhere around, and you in and said, ‘We are not finding out that information.’ They events, as well as spe- go to the basement to do pulled out of the study because they didn’t want to know,” cific times and locations. laundry, and he’s there on she says. “If we could ask companies, ‘Have you had fewer I cried. It was humiliation the treadmill, naked. HR complaints after taking our training?’ ” says Felix Odigie, all over again. From there, After three years or so, Inspired eLearning’s CEO, “and gather that kind of intel, they worked on corrob- I just told him, you either it would be gold. But I don’t know what company would orating my story with look for somebody else or provide that information. I asked the head of my own HR the witnesses I provided I’m going to call the police. department if they’d be comfortable with that, and she and also talked to my He stopped. I guess he looked at me like I had two heads.” manager to get his side kind of respected me for Focusing on the legal limits of harassment can make these of the story. Afterward, saying something. I still courses culturally tone-deaf. Last year an internal inves- they provided me with a clean for him, and some- tigation by the University of California at Berkeley found summary of their findings, times he asks, “Can I get a vague statement that naked?” I’m like, “No.” disciplinary action was To protect Zylinska, taken and that it should who still works for the client, we didn’t that every guy goes through an Asian never happen again, and assurances contact the homeowner for verification. fetish, asking me to sit on his lap (I didn’t), that Google had a no- retaliation policy telling me about his sex life during a one- in effect, so I should be protected in my Julia, 28 on-one meeting, and asking me to touch own career. They also checked in to see San Francisco the flesh of his palm as a way of describ- how I was feeling after everything. I had recently switched teams at ing why he had developed a strong sex I don’t know the specifics of how Google and had received a new manager drive at an early age. I responded with Google reprimanded him, but I know as a result. I was in my early 20s and nervous laughter and by changing the that he was given additional sexual- was the most junior member on our topic. In retrospect, I still feel shame and harassment training. He apologized to me for his actions and promised was the illegal workers—who were great, but I really loved that job. I love working not to do them again. He remained my by the way, always respectful. I think if outside. It’s hard as a woman to get manager for another year but was very they hadn’t been illegal, they probably someone to hire you to do manual labor. careful to only act professionally. He’s would’ve said something. But around I applied at a few other stables, but they still at Google today. certain people he’d act normal. I used to didn’t look twice at me. Also, part of me On the whole, I felt like Google and like to build fences with this one man in was like, maybe I’m being too sensitive. the HR department were on my side. his 50s, because when I was with him, Now it’s so clear to me that’s not at all They took my concerns seriously. But H. wouldn’t say anything when he came the case, but at the time I thought, well, it took a long time to rebuild my self- by. I don’t know if it was because he was maybe the problem was me. confidence. Later when I didn’t even think I was promoted, I won- about reporting him. It dered if I deserved the just wasn’t an option. He’s promotion or if it was that a renowned astronomy professor, Geoff Marcy, had for probably not even going given to me out of guilt. more than a decade repeatedly groped female students who to remember a lot of the Google declined to worked in his lab. (Marcy referred Bloomberg Businessweek instances that caused me comment. We reached to his lawyer, who did not respond.) And yet the school’s so much stress, because out to the manager for online anti-harassment training course included a hypothet- to him it was another day comment but didn’t ical scenario that was almost the opposite of what the uni- at work. receive a response. versity was dealing with. The course described a fictional female student who “is attracted to her dissertation advisor, Cynthia Brzak, 64 Anonymous, 34 Dr. Randy Risktaker, and for months has repeatedly asked Geneva Missoula, Mont. him out on dates.” Instead of discouraging a relationship, I started working at For two years start- Berkeley’s training course noted that legally, Randy Risktaker the United Nations in ing in 2002, I worked a could date the student as long as he first stopped being her 1979. In December 2003, summer job at a horse adviser. “I have to tell you, that is not a problem most of us I was in a meeting with farm. I was doing things encounter as professors,” says Michael Eisen, a biology pro- six men, including Ruud like setting up jumps fessor at Berkeley who took the course. Lubbers, the UN’s high [and] putting holes in the Sindy Warren, an employment attorney whose firm, commissioner for ref- ground for fence posts. I Warren & Associates, investigates workplace harassment, says ugees, who used to be worked with farm labor- the best courses go beyond the law. “If you draw lines around prime minister of the ers who were all illegal. behavior that’s just illegal, you’re missing the broader point. Netherlands. When I got 48 They were an all-male Lots of things are not illegal, but they’re not respectful or up to leave, two men crew. Hispanic. The guy appropriate,” she says. But she’s quick to point out that com- on my side of the table who hired me, who paid pliance training is better than no training at all. The EEOC’s stepped back to let me me—in cash, by the way— task force doesn’t want to do away with it either; it recom- pass in front of them, but was this older, 50-year- mends that companies supplement training with initiatives Mr. Lubbers grabbed me old guy named H. He is that emphasize broader topics such as civility and respect. from behind, pulled me also sort of related to me: MacInnis says he tries to do that at Inkling. Because his against him, and shoved H. is married to my dad’s company has only 150 employees, he often meets one-on-one his groin into me. I was in first wife. with people and asks about their concerns. Not long ago, for shock. When I got out of One of the first inci- instance, he had lunch with a recent college graduate, and the room and by the ele- dents I remember was they wound up talking about the gender wage gap most of vators, the director of when we were washing the time because it was on her mind. “The idea is that more human resources said, off fencing for the nuanced engagement will create the kind of environment “Oh, Cynthia, I saw what steeplechase course. I where, if it’s necessary, people can bring it up,” he says. the high commissioner was wearing Carhartt Even so, in the seven years since he founded his tried to do!” pants and a white T-shirt. company, MacInnis has dealt with a few internal harass- At a follow-up meeting H. came around to check ment cases. “I have friends who are CEOs who’ve dealt to what we’d been talking on what we were doing. with way more gnarly stuff than I have,” he says. “I’d like about, I was waiting for He made this comment: to say I’m lucky, but usually there’s some sort of observ- the elevators to go up to “I should require you to able behavior that you can see before it rises to the level the office, and the direc- wear white shirts and of something really serious.”
50 F IS O R BA T (BECAUSE HE NEVER C WENT AWAY) K On the morning of July 18, the first day of the 2016 Republican National Convention in Cleveland, a group of reporters covering A the presidential campaign packed themselves around a long table for an on-the-record breakfast with Paul Manafort—the seasoned political hand who, as chairman of Donald Trump’s presidential new campaign, had the unenviable task of trying to soften the candi- date’s rough edges. Manafort, 67, was sharply dressed, as usual. As one of the most successful lobbyists of the Reagan-Bush era, day is he’d developed a taste for the finer things: handcrafted Italian suits and Parisian shirts; homes in Palm Beach, the Hamptons, and Trump Tower. Now back on the scene after almost a decade coming out of the public eye, Manafort looked a little beleaguered. The road to Cleveland had been rocky. Trump was entering the con- vention without the unified support of his party, and no one in the pundit class seemed to believe he could hold himself together to long enough to convince anyone he had the temperament to lead. But over the course of an hour, Washington, Manafort calmly and steadily made a case for how and why Trump would prevail. The system, Manafort said, was “rigged.” Hillary Clinton, along with and elites like the people in the room, didn’t understand how struggling Americans cared more about improving economic opportunity than addressing social issues. “This is an election about change,” he said the flatly. “We have a candidate who everybody recognizes is a change candidate, and we’re running against the epitome of Establishment. I mean, you tell me any candidate—I couldn’t pick one off the shelf King better than Hillary Clinton to run against on change-vs.-Establish- ment.” This wasn’t just spin, he argued; it was math. His internal polling, he said, all but confirmed Clinton’s inability to transcend her base. “To the 11 million voters in the several states we have of to target, her profile is terrible,” he said. “People don’t see her as 51 somebody who can solve the problem.” This was, many would now say, the very reason for Trump’s K Street victory in November. But that morning in July, the reporters seemed unconvinced. What, some asked, about Trump’s lack of discipline, his volatility, his divisiveness? About all that, Manafort is simply referenced another insurgent Republican he’d worked for a lifetime ago, at the start of his long career as one of Washington’s most powerful political operatives. primed “Just like with Ronald Reagan,” he said, “I think once Donald Trump is accepted by the American people as somebody who can be president, I think the race is over.” and Then Manafort paused, allowing a small tilt of the head and a smile. “When that will be, I don’t know.”
ready By the time enough Americans had accepted Trump to make him our 45th president, Manafort had all but disappeared from view. He’d resigned from the campaign on Aug. 19, after one too many run-ins with the candidate about his temper and one too many exposés about Manafort’s alleged ties to Russian oligarchs. His replacement, Breitbart News Executive Chairman Steve Bannon, let Trump be Trump. Since the election, Bannon’s influence has only grown, with his appointment as chief White House strategist drawing attention to his ties with white nationalists and the alt-right. By But during the campaign, while Bannon was making noise with the fringe and Republican National Committee Chairman Reince Priebus was greasing wheels with the party faithful, it was Manafort Robert who had the discipline to get Trump past a dismal stretch of spring primaries and on a solid road to the nomination, articulating the message the candidate would eventually ride to victory, then step- ping aside when he saw that he wasn’t its most practical face. Kolker Manafort took Trump to the mountaintop. It’s a place Manafort knows well, where he still has contacts and friends. For years, he was the King of K Street, defining the modern-day cash-for-foreign-access lobbying system that Trump criticized during his campaign but has embraced during the presidential transition period. Manafort may never have the same visible role in Trump’s inner circle that he once had, but he maintains strong ties with key members of the transition team and with Trump himself. It’s already clear from the transition that the pop- ulist and nationalist platitudes of Trump’s rhetoric are colliding with the realities of Washington. That leaves Manafort poised to return to the role he knows best in D.C.: the most influential man you’ll never see. Manafort, who didn’t respond to requests to be interviewed for this story, has always worked best in the dark. In this way, he’s unlike many of the other political strategists of his vintage— swashbuckling friends like Roger Stone, folksy colleagues like Lee Manafort with Trump and his daughter Ivanka at the Atwater, and canny rivals like Karl Rove. Manafort came up in Republican National Convention Washington as a young Republican in the 1970s, the same time as Stone and Rove. As the middle-class son of a Republican mayor in that?’ Then he kind of walked away, and he said, ‘Very impres- New Britain, Conn., “Manafort gets the Reagan Democrat phenom- sive.’ He was nodding his head. He got it.” ena,” Stone says. “That is, the swing group that elects Nixon and Stone says Manafort was like Trump in that they were Reagan. This is a silent majority, the coalition of white Southerners limited-government Reaganites, not empire-building neocon- and Northern Catholics—blue collars.” After helping Gerald Ford servatives like Rove or Dick Cheney. But what motivated them fend off an advance by Reagan in 1976, Manafort became one of both, more than ideology, exactly, was cash. “Paul is clearly the first hires to help the Reagan campaign in 1980. Then, with driven by money, there’s no question about that,” says Stanton his man in office, he became one of the first to cash in on his -con Anderson, one of Manafort’s oldest friends, who was also his nections to the new White House. lawyer for 35 years. “He needed to make a lot of money to sustain He started a lobbying business with Stone, Charlie Black his lifestyle.” (Reagan’s 1980 political director, who also launched the career In the ’80s that was nothing to be ashamed of, especially on of Jesse Helms), and Atwater (whose Willie Horton ad would help K Street. When Manafort was exposed later that decade for using close the deal for George H.W. Bush in 1988). Aside from helping his connections to get a $43 million U.S. Department of Housing 52 Republicans such as Arlen Specter and Phil Gramm get elected, and Urban Development grant for a developer client, he testi- the firm—which was called Black, Manafort, Stone & Atwater (later fied brazenly before Congress: “The technical term for what we Black, Manafort, Stone & Kelly)—changed the way foreign influ- do is ‘lobby.’ For the purposes of today, I will stipulate that, in ence worked in Washington. In 1984, when Philippine President a narrow sense, some people may term it ‘influence-peddling’.” Ferdinand Marcos needed lobbying assistance, Manafort took the That quote would dog Manafort for the rest of his career. He was contract. In 1986, when Angolan guerrilla leader Jonas Savimbi never charged for any crime, but for a moment he became what needed an introduction in Washington, Manafort was there to he’d never hoped to be—visible, conspicuous, a target. help. In 1998, when Nigerian dictator Sani Abacha wanted to con- The HUD project was an early attempt by Manafort to set up vince Americans that he was a progressive democrat, Manafort’s a business for himself. There followed a real estate development firm was there for him, too. “I am not one to knock honest greed,” company in Manhattan, which was accused in a 2011 civil suit of William Safire wrote at the time, “but never has rainmaking seen being a money-laundering operation for one of his international such moneymaking.” clients, the Ukrainian natural gas dealer Dmitry Firtash. The suit Through many iterations of the firm and its roster of part- was dismissed, and nothing was ever proved, but it was clear ners, what set Manafort and his colleagues apart was the hotline Manafort was circulating with oligarchs by then. They included they had to the White House. “Manafort, at some point, became the aluminum magnate Oleg Deripaska, a friend of Vladimir Putin’s a very valuable asset for the State Department, whom he was whom Manafort introduced to both Bob Dole (whom Manafort working with,” Stone says. “If you look at all of our clients, they helped to secure the Republican nomination in 1996) and Arizona were all pro-Western, they were all pro-United States. They all Senator John McCain. Those new friendships ended up backfiring had good relationships with Ronald Reagan and his administra- on Manafort. The problem, old friends say, arose from his con- tion.” Manafort continued to work on Republican presidential nection to a longtime client, Viktor Yanukovych, an unpolished races, too, managing the 1988 convention for Bush. Stone remem- Ukrainian kleptocrat whom Manafort, Pygmalion-like, had trans- bers bringing Trump, who’d become one of the firm’s clients, formed into a politician who was palatable enough to the coun- into the convention’s production trailer to watch Manafort in try’s voters to win a presidential election. But Yanukovych was action. Manafort had known Trump since the ’70s—they were also influenced by the Kremlin. When, in 2006, the American said to have been introduced by the right-wing kingmaker Roy ambassador to Ukraine asked Manafort to get his client to stop Cohn. Trump was now seeking help protecting his gambling bad-mouthing NATO, Manafort flatly refused. His friends say that business from the rise of Indian casinos. (Black, Manafort’s old was the moment he crossed over. Where once he could rationalize partner, remembers Trump being slow to pay his bills. “The his work by saying he was supporting American interests abroad, stories you hear about him screwing subcontractors and all are doing well by doing good, he now seemed suspect. undoubtedly true, but I always held out till I got my money,” When McCain became the Republican presidential nominee Black says with a laugh.) At the ’88 convention, “Donald kind in 2008, friends recall that Manafort expected to work on the of just soaked it all in,” Stone remembers. “And he asked a few campaign, just as he had for Dole, the elder Bush, and Reagan.
questions—‘What’s the purpose of this? What’s the purpose of McCain was practically family: His campaign manager was Rick WILKING/REUTERS RICK SPREAD: THIS (1); SHUTTERSTOCK (3); GETTY IMAGES PHOTOS: 731; BY ILLUSTRATION PHOTO PREVIOUS SPREAD: Davis, Manafort’s partner at the D.C. lobbying firm, by now called Paul is,” he says, “and he probably figures Paul did a good job Davis Manafort. But when Davis’s association with Manafort’s for Yanukovych.” But the Trump connection isn’t convincing Ukraine work threatened to make him look bad, Davis dis- to Black. “Putin’s a celebrity. Donald’s a celebrity. [Trump] avowed everything, telling the Washington Post in 2008 that any doesn’t stop and think through the strategic foreign-policy Ukrainian connections he might have “all relate to my private implications of things. He’s thinking, That guy’s a big dog, I’d business and have nothing to do with Senator John McCain.” rather be friends with him than one of these weaklings like Jeb Davis kept Manafort away from the campaign, and their firm Bush. That’s just the way he thinks.” shut down. Anderson, a friend of both, says the two haven’t On the campaign trail, Manafort was conspicuous again, in the spoken since. spotlight. He wasn’t enjoying it. That, as much as the challenge “I thought Paul was permanently damaged by the international of guiding Trump, may have motivated him to step aside. Since stuff,” Anderson says. “I’m not sure any other candidate would then, he hasn’t gone away so much as reverted to form, working have brought him back, other than Trump.” behind the scenes. In the campaign’s final weeks, he was in close touch with Trump; Politico reported that Manafort helped the When Manafort joined the Trump campaign as a consultant this campaign develop a strategy to exploit the news when James spring—he’s no longer registered as a lobbyist—many pundits Comey announced, 11 days before the election, that the FBI was wrote him off as a has-been. Trump seemed desperate, in a looking at a new trove of e-mails from the private server Clinton slump. He’d lost primaries in Wisconsin, Colorado, and North operated as secretary of state. In the closing days, according to Dakota, and got 10 fewer Louisiana delegates than Ted Cruz, even Politico, Manafort encouraged Trump to go after blue-collar votes though he’d won that primary. But within a month, Manafort in Michigan, which he did. Manafort’s advice, and his loyalty, had engineered the departure of Corey Lewandowski as Trump’s proved useful until the end. campaign manager and taken over as chairman. He righted the ship, amassing enough delegates to bring Trump the nomina- After the selection of Mike Pence as Trump’s running mate, tion. Then the narrative changed. Now Manafort was Trump’s Manafort said he believed Pence could do for Trump what James Rasputin—an oligarch whisperer who’d worked his black magic Baker III did for Reagan: introduce the outsider to Washington in Ukraine and now was doing it for Trump. and help him through the transition. It was another perfect pre- The media resumed the investigations into Manafort’s murky diction. Pence indeed is running Trump’s transition. A source Russian connections. Was he a highly paid agent of the Kremlin, close to Manafort says he’s in regular contact with the vice pres- scheming to alter the Republican platform to help Putin’s inter- ident-elect, as well as with Trump’s attorney general pick, Jeff ests? When Manafort had started consulting in Ukraine, such Sessions, the Republican senator from Alabama and a Trump work wasn’t stigmatized in the way it became after the 2014 supporter and confidant. (Manafort and Sessions have known Ukrainian Revolution, when outbreaks of violence resulted in the ouster of Yanukovych, then the president, who’d balked at 53 aligning the country less with Russia and more with Europe. That “I’M NOT SURE Yanukovych was on the wrong side of the revolution was one thing; the bigger problem was that Manafort didn’t seem to mind. “It was like he was willing to throw away the perspective that he ANY OTHER came to that country with, the Reagan perspective,” says Jeff Link, a Democratic consultant who, with David Axelrod’s firm, worked CANDIDATE WOULD for Yanukovych’s opponent, Yulia Tymoshenko. Link believes Manafort must have been willing to “just walk away from that [perspective] apparently for the contract. Because I can’t imagine HAVE BROUGHT that he embraced that ideologically.” Aside from his teenage criminal record of assault and HIM BACK, O robbery, Yanukovych was most famous for the culture of graft THE he instilled. “No one doubted that Yanukovych was scummy,” T R says Andrew Weiss, who oversees Russia and Eurasia research HAN for the Carnegie Endowment for International Peace. “He was TR surrounded by all these thugs and then went on this kind of U rapacious push.” Last summer, the New York Times seemed to MP” connect the dots between Manafort and that corruption when each other since the ’70s.) And Manafort is also close with Tom it uncovered a registry suggesting that he received more than Barrack, the billionaire founder of Colony Capital, who has a $12 million in cash from Yanukovych’s political party from 2007 spot at the top of Trump’s inaugural committee. to 2012. There was no proof of any such transfer, just his name Friends say Manafort wouldn’t want to become a lobbyist listed 22 times. Manafort denied he received the money. again or to have a concrete role with the administration; that Even if Yanukovych wasn’t exactly a favorite of Putin’s, his would be too confining. But the Washington that Trump’s team policies benefited oligarchs who are friends of Putin’s. That will govern in is a place Manafort understands and had a strong potential conflict made Manafort a target when he joined hand in shaping. It’s a matter of time, perhaps, before his par- Trump’s team. Manafort, for his part, has roundly denied any ticular set of skills will be put to use again. And given the Trump connection to Russia, most recently telling NBC that the accusa- team’s apparent warmth toward Russia, there should be plenty tion was “Democratic propaganda.” Asked if there’s any possi- for the King of K Street to do—and plenty of money to be made ble truth to the notion that Trump chose Manafort because he doing it. had access to Putin and that the Kremlin was dictating policy The night of Nov. 8, Stone got a text from his old friend, at the and even hacking the opposition with Manafort’s help, his old exact moment one of the news outlets was calling the race for lobbying partner Black laughs. “Putin certainly knows who their man. The message was just four words: “How sweet it is.”
THE GUY BEHIND BUILD ‘MISS SLOANE’ KIND COME IN FOR A NIGHTCAP YOUR ROLODEXXX MISSES
How it became the color of our time By Jennifer Miller Photograph by Sara Cwynar Etc. Marketing
n September 2013, Marlien Rentmeester, founder of you.” Where J.Crew is the fashion site Le Catch, was combing the racks at promoting the color Shareen Vintage in Manhattan’s Chelsea neighbor- as a path to happiness, hood, when a fuchsia A-line frock caught her eye. high- fashion brands “It was so shockingly pink, so cool and different, such as Gucci and Chanel that I wore it out of the store,” she says. “On the have recast it as funky and street, women were giving me compliments left and right.” cool, with pink bomber jackets IRentmeester, the former West Coast editor for shopping mag- and bowler hats, respectively. Even azine Lucky, had a sharp eye. In the months that followed, cookware maker Le Creuset launched she started seeing pink everywhere: on streetwear blogs, in a series of hibiscus-hued pots and ad campaigns for Acne Studios and online beauty company platters this year because it provided Glossier, and in the pantsuits worn by Hillary Clinton. “vibrancy” and a “strong anchor” Fast-forward to 2016, and pink is an even greater phe- for the company’s spring line, says nomenon. Rentmeester long considered pink “fussy, dainty, Will Copenhaver, marketing communi- babyish, or even weak.” Now she says the color is emblematic cations director. of women on the rise financially, culturally, and politically— The idea that the color could be something other than even if Clinton’s pink pantsuits didn’t get as much attention as a feminine stereotype isn’t new. Historically, “there were no the pink pussy-bow Gucci blouse Melania Trump wore to the strong gender associations with pink,” says Michelle Finamore, second presidential debate. (Some pundits suggested the bow curator of fashion arts at the Museum of Fine Arts in Boston. was a subtle rebuke to her husband’s critics after the “grab Until World War I, babies of both genders were dressed in them by the p----” tape leaked.) “We interpret our environ- white because stains were more easily bleached. Even when ment through the colors we wear,” Rentmeester says. “Pink stores began to introduce “baby pink” and “baby blue” into is unapologetic, dramatic, and bold. We’re taking it back and kids’ departments, they weren’t divided by gender. A 1918 making it our own.” That reclamation is a story that’s not just article in Earnshaw’s Infants’ Department, a trade publica- about skirts, pantsuits, and blouses, but about how fashion tion, explained that “pink, being a more decided and stron- can upend larger cultural ideas about power and gender. ger color, is more suitable for the boy, while blue, which is Brands have long marketed pink in retrograde ways. Until more delicate and dainty, is prettier for the girl.” recently, the NFL took a “pink-it-and-shrink-it” approach Jo Paoletti, author of Pink and Blue: Telling the Boys From 56 to women’s wear, making bubble-gum-colored jerseys in the Girls in America, says modern asso ciations with the colors women’s sizes rather than offering choices in team colors, “took generations” to sink in. It was only after World War II that a strategy the league started phasing out early this decade. brands began marketing pastels to women, largely as an anti- And pink products are often considered specialty items; as dote to the military-inspired fashions and textile rationing of such, they’re routinely priced higher than identical products wartime. Catalogs advertised pink appliances, wallpaper, and marketed to men, according to a 2015 report by the New York upholstery. Bathrooms and kitchens were painted “Mamie” City Department of Consumer Affairs. pink, so named for Dwight Eisenhower’s wife, who wore a pink Now, companies are imbuing pink with all sorts of positive peau de soie gown to the 1953 inaugural ball. In 1955, Dodge associations, tapping into the same vibe Rentmeester felt. This introduced the pink and white La Femme, a two-door hardtop fall, J.Crew—a struggling company but still a bellwether of mass that came with a matching umbrella, purse, compact, and lip- tastes—promoted its new line around hundreds of custom- stick case. At the time, families were starting to buy multiple developed shades of pink. In an e-mail, Jenna Lyons, presi- cars, and women were more involved in the decision. dent and creative director, explained that pink was worthy And yet the company stopped producing La Femmes a year of the same rebrand as a once-sidelined vegetable: “If kale later. “Pink as a marketing device was just too limiting,” says can have its own marketing team, so can pink! We feel that Virginia Scharff, author ofTaking the Wheel: Women and the color is a natural mood enhancer, and like kale, it is good for Coming of the Motor Age. “Buying a pink lipstick is not that big
Mineral pink Pale shell There’s more than one way to name a pink Burnished Shell pink Sherbet Some of the ones J.Crew has come up with: Coral rose Light mauve Sharp pink Whisper pink Glamorous Pomegranate Faded shell Palazzo pink Rose dust Standard Tea rose Buff pink pink Bright Jasmine Crisp pink Light pink Heather Heather Crisp begonia Flamingo Pale jasmine Coral pink raspberry Dark peony beet quartz begonia Rose quartz Burnished Redwood Mauve blush Pink Light blush Burnished Heather Flash pink Vintage pink rose blush Victorian pink grapefruit Punch shell blossom Azalea Fuchsia Spiced rose Shocking Soft blush Sunset coral Burnished Sweet guava Deep rose Larkspur pink Petal Coral pink Subtle pink Bright pink coral Pink blossom Heather Pink Desert rose Rose petal Ashford berry Seashell pink Sun-washed Berry rosebud Powder Pale coral Peony Neon Bright pink Neon flame Heather deep Ash pink Tropical pink Heather petal peppermint sherbet Desert pink Warm blush coral Vintage shell Pale blossom Peppermint Classic pink Romance Metallic blush Fresh Heather Pink hibiscus Paris pink Tawny pink Vintage pink Light blossom berry Pink bouquet Heather shell Cranberry quartz Rose apple flamingo Raspberry Dusty Pink Caribbean punch Fresh Barbados Tropical Golden rose blossom lemonade pink Persian pink raspberry cherry guava Bright fuchsia Vivid fuchsia Iced blush Cool pink Heather Vintage berry Dark flamingo Sweet Vintage Vintage blush Frosty petal Frosty berry Dusty pink blush Pale hibiscus Urban pink blossom fuchsia Bright Sweet Wild petunia Bright berry Heather Flamingo Sorbet Pale rose Bright rhubarb fuchsia Stanton pink Light pink peony pink Blossom Picador pink flamingo Blush Soft peony Neon pink Pinup pink Seaside coral Sail pink Ballet pink Neon fuchsia Etc.
an investment. Buying a pink car is a differ- publisher worried the cover would alienate male readers, ent order of magnitude.” By the mid-1960s, she says, but in fact, pink’s cross-gender appeal is part of its brands were no longer exhorting women popularity: “There’s so much androgyny and fluidity that I to “think pink.” The counterculture drove didn’t think people”—men or women—“would be scared of fashion, in particular, from the latter half of the color,” Danler says. the decade through the ’70s; young people of The un-gendering of pink helps explain why Gucci, Off- both genders were more inclined to wear flowered pat- White, and Pigalle all released pink menswear in 2016—and terns and vibrant colors. why the buzziest color of Common Projects sneakers, a favor- Fashion historians say our recent understand- ite label among stylish men, was blush. It also explains why the ing of pink as an explicitly feminine color only Pantone Color Institute, which analyzes global color trends, emerged in the ’80s, when it became common for parents to learn the sex of their unborn babies. “A color becomes popular This created a marketing opportunity, says because it’s symbolic of the Paoletti, as stores could sell boy and girl versions age we’re living in. These are of everything. And because pink had been asso- ciated with women in the ’50s, it became the de turbulent times. People are facto girl’s color. (See: the 1986 John Hughes classic looking for calm” Pretty in Pink, starring Molly Ringwald.) But, Paoletti says, there’s a distinction between how people named rose quartz a 2016 color of the year. Laurie Pressman, viewed the color in the ’50s vs. the ’80s and ’90s. the institute’s vice president, says pale pink is associated with “In the 1950s, pink was presented as a fashion, a wellness and mindfulness. “A color becomes popular because cultural choice,” she says, whereas later on “it was it’s symbolic of the age we’re living in,” she says. “These are presented as part of [girls’] nature.” This happened turbulent times. People are looking for calm.” She points to with help from Walt Disney’s $5.5 billion princess studies in which shades of pink have been shown to soothe empire. The irony is that Disney itself proves the unruly students or prisoners. Pantone found examples of com- nature argument wrong. Not one of the iconic prin- panies that are “trying to help create balance for employees, cesses drawn prior to 1960 is known solely for wearing pink. reduce stress, and bring wellness-focused measures into the Snow White (1937), Cinderella (1950), and the Sleeping Beauty office space,” Pressman says, by using pink accents in décor. (1959) are all featured in blue. In Peter Pan (1953), it’s baby This year, for the first time, Pantone named a second color of 57 Michael who appears in pink footsie pajamas. the year: a pale blue called Serenity. As early as 2014, color With the reappropriation of pink, millennial women have experts began spotting an uptick in both shades across com- turned the dictate back into a choice. It’s why the cover mercial spheres, often as complements to each other. of #GirlBoss, Sophia Amoruso’s best-seller about taking Of course, now that pink has become chic among mil- charge at work, is pale pink. It’s why Stephanie Danler, lennials, it’s fair to be skeptical of marketing that leverages who wrote the hit coming-of-age novel Sweetbitter, was the color. Are publishers and fashion houses interested in so excited when she first saw her book’s salmon-pink supporting a feminist cultural movement? Or are they just cover. “I know that women have an ambivalent rela- looking to sell books and footwear? How long until the back- tionship with pink because it symbolizes femininity and lash begins, if it hasn’t already? For now, those questions are has been traditionally weak,” she says. “But I saw it as a state- less important than more practical ones. Historically, pink ment color, as challenging.” She thought millennial women was marketed as a warm-weather color. “You’d never find it would feel the same way, and she was right. Since May the this time of the year,” Paoletti says. But that’s no longer true. novel has sold more than 100,000 copies, and the cover has A Le Catch reader recently asked if she could wear her pink been tagged at least 2,500 times on Instagram—which Knopf Anne Fontaine moto jacket through November. Rentmeester’s told Danler is unusual for a book jacket. Some people at the answer was unequivocal: “Go for pink all winter long!”
Bohemian Copper rose Dusty petal Sheer pink Deep blush Guava berry Island coral Provence Sweet blush rose Dark azalea Pink sand Ornamental Neon azalea Soft rose Neon dahlia pink Pink frost Fuchsia Heather Pale pink pink Pink begonia Rose Ashen clay Picturesque Sweet blossom geranium Dusty bloom Soft seashell Dried papaya blossom Faded quartz pink papaya Clay sand Light Sweet Summer Fuchsia Peppermint Retro pink Fresh guava Heirloom Iced quartz hibiscus jasmine sorbet bloom ice Dark berry Frosty pink Vintage rose Pink mist Oxford pink Bright azalea Neon petal Ash rose Retro fuchsia blossom Desert Dahlia Misty rose Faded Summer pink Soft blossom Soft fuchsia Decorative Fresh sunset Light shell Pampered blossom Wild berry Bright coral Brilliant coral pink bouquet Dusty quartz Winter coral pink Bright papaya Fresh peony Neon Pale petal Warm pink Brilliant Spiced guava Iced rose Deep coral Bright rose primrose Coastal pink Fresh berry peony Hot pink Heather Petunia Soft azalea Soft berry Coral reef Dark bloom Neon Heather snapdragon Brilliant Heather pink Pale rhubarb Wild peony Dusty dahlia hibiscus petunia Wild rose azalea Bright Dusty peony Intense pink Carnival Soft petal Pink oxford Pure pink Autumn berry peppermint Distressed blossom Neon rose Dusty Guava Heather Antique pink quartz Wild Dover pink begonia Sweet dahlia sorbet Jasmine pink Soft pink strawberry Pale bloom Fresh papaya Neon Rose ash Pale blush Faded guava Neon coral Dusty blush Metallic rose Bauble pink blossom Light Powder pink Soft begonia Sunwashed Hibiscus Capri pink Jasmine Dried rose Beet flamingo Romantic Brilliant blush Wildflower Neon Light berry Bright tulip Bright dahlia Dark mauve pink poppy Dusty shell pink flamingo Sunset pink Dark begonia Coral shell Tulip Sweetbriar Pink wash Burnished Vibrant berry Fresh rose Begonia Faded blush Heather Quartz Vivid coral Smoky rose rouge Daybreak Pale fuchsia Shore pink Delicate petal
PHOTOGRAPH BY SARA CWYNAR FOR BLOOMBERG BUSINESSWEEK; ILLUSTRATIONS BY 731; CLOTHING COURTESY J.CREW COURTESY CLOTHING 731; BY ILLUSTRATIONS BUSINESSWEEK; BLOOMBERG FOR CWYNAR SARA BY PHOTOGRAPH raspberry Bright guava Dusty rose Neon berry Shell pink pink Festive pink Peruvian pink Icy rose Etc. Drinks Fancy a Nightcap? Eight ways to upgrade your end-of-day drink. By Sierra Tishgart
Grand Street Cocktail
Jessie Duré, bar manager at New York’s famed, newly reopened speakeasy Chumley’s, makes this soothing concoction with a dash of amaro. It’s great for settling your stomach before bed.
One bag of Sleepytime tea, steeped in 4 oz. of hot water for 3 minutes ½ oz. Amaro Montenegro ½ oz. sweet vermouth 1 dash Angostura bitters
Remove tea bag. Add amaro, vermouth, and bitters. Drop in a lemon wedge. Stir.
58
After-School Special
Kyle Davidson’s Chicago bar Elske is opening soon. Once it does, he’ll be unwinding with this supersimple twist on the Manhattan. The White 1 ½ oz. Cynar 1 ½ oz. bourbon (whatever you have Walker on hand—Davidson likes W.L. Weller 90 proof or Wild Turkey 101) Chamomile plus coconut milk is about as mellow as it gets. Chef Ari Pour over rocks. Jiggle the glass. Taymor of Los Angeles’s Alma at Add an optional orange peel or slice. Corn ’n’ Oil the Standard mixes the two with a little rhum agricole and lemon If a nightcap can help you unwind and make you think you’re on to create a sweet, tropical night- a tropical island, so much the better. Anthony Schmidt, beverage time treat. director at San Diego’s new tiki-inspired bar False Idol, is happy to oblige and carry you away to the Caribbean. 1 ½ oz. rhum agricole 2 oz. hot chamomile tea 2 oz. Barbados rum, such as Mount Gay 1 ½ oz. coconut milk ½ oz. John D. Taylor’s Velvet Falernum ¾ oz. lemon simple syrup 2 or 3 heavy dashes Angostura bitters (one part lemon juice, A squeeze of lime one part simple syrup) PHOTOGRAPH BY CAROLINE TOMPKINS FOR BLOOMBERG BUSINESSWEEK; PHOTOS: ALAMY; GETTY ALAMY; PHOTOS: BUSINESSWEEK; BLOOMBERG FOR TOMPKINS CAROLINE BY PHOTOGRAPH Mix ingredients, including the squeezed lime. Mix ingredients. Top with cracked ice. Stir. Rum & Tonic Etc. “A nightcap for me usually revolves around really good tonic water,” says Tara Gallina, co-owner of Vicia in St. Louis. It’s easy to stock in the fridge and easy on the stomach, and it’ll gussy up whatever booze you have on hand. Pineapple Rum Rickey 2 oz. dark rum 2 dashes Angostura bitters Top Chef alum Kwame Onwuachi, 1 bottle Fever-Tree tonic who opened his restaurant, Shaw 1 lime wedge Off Broadway Bijou, in Washington, D.C., in November, looks for evenly matched Pour rum and bitters over ice. Stir and top with A nightcap doesn’t have to be much more than a sweetness and acidity to balance tonic and a squeeze of lime. couple fingers of bourbon or brandy—but if it could out the craziness of the day. be both, wouldn’t you want that? Bartender Kevin King from McCrady’s Tavern in Charleston, S.C., 2 oz. aged rum, such as Cruzan uses apple brandy and orange bitters in this deli- Black Strap ciously autumnal drink. ¾ oz. pineapple juice ½ oz. lime juice 1 oz. apple brandy ¾ oz. simple syrup 1 oz. bourbon 1 oz. sweet vermouth Combine all ingredients in a shaker. 2 dashes orange bitters Stir. Pour over ice. If you have mint on hand, muddle it in the shaker prior to Stir with ice and strain into a coupe. mixing. If you have club soda, top it Garnish with a twist. with some of that, too.
59
Play Crack the Sky
On a cold night, Jon Lewis of the Rue bistro in Portland, Ore., recommends this spicy cocktail to warm things up. Miracle Mile bitters, made with exotic roots and spices, pairs well with any aged amber spirit.
2 oz. Old Grand-Dad, 100 proof ½ oz. genepi ½ oz. Punt e Mes 1 dash Miracle Mile Forbidden bitters
Stir. Serve over a big ice cube with an optional orange peel garnish. Etc. Workplace
NETWORKING AT NIGHT Skirt Club wants to help women be as confident in the boardroom as they are in the boudoir By Megan Koester
o you think you might get on politics, not to mention attend women- average, members self-identify as twos the body tequila table?” asks only social clubs, such as the Wing in New on the six-point Kinsey scale—one is Geneviève LeJeune. The founder York. But gatherings that provide a safe exclusively heterosexual, three is per- of the all-women networking space for women to support and learn fectly bisexual, and six is exclusively society Skirt Club, LeJeune is with from one another while also embracing homosexual. “Some of them are in a about 75 female professionals on their sexuality are rare. relationship, too,” LeJeune says, “and the Sunset Strip in Los Angeles at There are now Skirt Clubs in London, have come with the consent of their a bar called Mmhmmm, a thor- New York, Miami, Sydney, and Berlin, partner.” One L.A. attendee, a therapist, Doughly appropriate name considering with plans to expand to San Francisco, heard about it from her boyfriend, who the goings-on inside. One of the barely Chicago, and Toronto. More than half paid her admission—$50 for the event clad attendees stretches herself out, and the club’s membership of 5,000 lives in at Mmhmmm, though occasional edu- lines of salt are spread down her legs, the London, where it’s growing an average of cational workshops cost more. While red bottoms of her Louboutins reflecting 14 percent per quarter; in the U.S., where each event features some kind of central in the mirrored walls. The fastest woman the clubs were introduced earlier this activity such as the body tequila table, to lick the salt and down a tequila shot year, growth is at 22 percent per quarter. more of the women seem to use the will be rewarded with a slice of lime, Skirt Clubbers are often profes- party as a networking opportunity than transferred via kiss. sionals with entrepreneurial leanings, an erotic escape—of course the argument The scene isn’t quite as scandalous as though the largest group is lawyers. On could be made that, in L.A., networking 60 it sounds. Although Skirt Club is eroticism. (If you’re won- bills itself in press releases as an dering whether I exchanged “underground ‘play party’ for business cards with a charm- bisexual & bi- curious women,” ing Englishwoman who no sexual contact or “heavy described me as Jodie Foster- petting” are allowed. And it esque, I did.) isn’t just about tequila-soaked Much has been made of fun. Skirt Club’s motto is “con- the monetization of empow- fidence in the bedroom leads erment, but LeJeune has prof- to confidence in the board- ited little from Skirt Club so room.” The way LeJeune sees far. After paying venue fees, it, leaning in to take a lime out hiring all-female bar staff, of a woman’s puckered lips and purchasing “hundreds makes a woman more likely to of bottles of Champagne” lean in at the office. for each event, she says she LeJeune, 34, started Skirt feels as if she’s “running a Club as an experiment—the charity.” Starting next year, first event was held in her she’ll impose an initiation fee living room. She’d been explor- for new members, who are ing versions of these parties vetted for the legitimacy of in her native London three their interest. Her goal with years ago, but all she encoun- Skirt Club is simply to provide tered was “men grabbing and a safe space for women to pushing and insisting and enjoy one another’s company putting pressure on women to under the liberating rubric of fulfill their fantasies,” she says. sexual exploration . While that “I didn’t see women asking to aspiration may not be as filthy fulfill their own.” That was as the images that some minds because, she realized, they might conjure, it’s more pow- weren’t in a comfortable envi- erful. “We’ve had gentlemen’s ronment: Women today regu- clubs for centuries,” LeJeune larly convene at conferences says. “It’s high time we have
and kibitz online about gender our own.”
R HOR BE OS M By Ashleigh D. Johnson C E O C P E E D
60° And you’ll have help: Saturn, the planet of long-range planning, Jupiter, the planet of abstract thinking, and Uranus, the planet Four of the more surprisingk corporate A sextile—when the planets leadership changes, according to W. Glenn of sudden change and progressive reason- form a 60-degree angle with Rowe, associate professor of strategic ing, are working together at the begin- the earth—is considered a harmonious alignment. management at Ivey Business School at ning of December, as they will be all next Western University in London, Ont.: year, when Jupiter and Saturn form a Apple, 1985 sextile. Put day-to-day business aside and CEO John Sculley called an emergency block out time to come up with goals for board meeting after learning that 61 co-founder Steve Jobs was planning to oust the future. 8 him. The board thought Jobs was erratic On the 7th, emotional Venus enters and went against him. inventive, socially conscious Aquarius, Judith Beck, president of the Beck Institute for Cognitive Behavior Right move? There probably won’t be making it a good time to turn outward Therapy in Bala Cynwyd, Pa., on how to multiple biopics made about Sculley. and find ways to help others. But don’t put make a New Year’s resolution stick: those ideas in place until the 13th, when Home Depot, 2000 1. Think small. Giving in to defeatist Robert Nardelli wasn’t interested in an the full moon in sociable Gemini creates impulses is habit-forming. Aim extended grooming period before assuming opportunities for fruitful partnerships. for something you can achieve. the top job, so then-CEO Arthur Blank Mars moves into Pisces on the 19th, stepped aside, despite the company being putting the planet of drive and willpower 2. Focus on the payoff. Make sure the in good health. advantages of changing your behavior under the sign of compassion and sym- outweigh the disadvantages. For Right move? Over Nardelli’s seven years as pathy. Pisces also rules prisons and hos- example: managing your time better CEO, Home Depot’s stock lost more than a pitals, so you might focus your giving during the day so you’re home to put the third of its value. He was fired in 2007. kids in bed. there. Also on the 19th, Mercury goes Starbucks, 2008 into retrograde, as it was at the begin- 3. Lock yourself in. Whatever you Howard Schultz, who built Starbucks into ning of the year. The sun enters deter- resolve, put it in your “no choice” a coffee giant in the 1990s, stepped aside category of behaviors, alongside things as CEO in 2000; he returned in 2008, mined Capricorn two days later on the like checking for your keys on your way firing Jim Donald. Schultz wrote in his 2011 21st, the winter solstice, which can be a out the door. biography, Onward, that he wanted to return somber time of year; but Mercury going the company to its “core values.” retrograde gives 2016 a natural bookend— Right move? Schultz saw Starbucks you should feel more reflective than sad. through the lean times of the recession. The Put those reflections to use on the business has become a model of corporate 29th, when the new moon in Capricorn social responsibility. gives you the chance to restate long-term Four Seasons Hotels, 2013 goals. That day, Uranus returns to forward Kathleen Taylor, who’d been with Four motion after having been retro grade for Seasons since 1989, was the heir apparent to founder Isadore Sharp before taking a good chunk of 2016. This could open For Kguidance in determining where over the CEO job in 2010. There was never the door to sudden leadership changes to make charitable contributions, an explanation for Taylor’s departure, but at your company, so start imagining your- BBB Wise Giving Alliance (give.org), some speculated that she hadn’t expanded Charity Navigator (charitynavigator aggressively enough. self taking a big leap forward, and it might .com), CharityWatch (charitywatch.org), soon be a reality.
n a memorable scene from Miss in two directions, drawing in those who this time—and she gets told that a lot, Sloane, a high-stakes political drama are up for a taut political counterfactual mostly by her new boss (Mark Strong), 62 about a Capitol Hill power broker and scaring away people who’d prefer to who’s more of a not-by-any-means guy. taking on the gun lobby, the title sit through Bad Santa 2. First-time screenwriter Jonathan character—played by an ice-cold It’s a shame, because there’s a lot to Perera delivers a surprisingly ambi- Jessica Chastain—describes the job like. Chastain pops as Elizabeth Sloane, tious script, full of twists and turns and, of a lobbyist to a Senate ethics com- an insomniac workaholic and grade-A ass- perhaps most satisfying, the type of rat- mittee that suspects it has backed kicker, the kind of unscrupulous lobbyist a-tat dialogue that warms the hearts of Iher into a corner. It’s wrong. “Lobbying who learns all the rules so she can better West Wing fans. (The movie is directed is about foresight,” she says. “It’s about circumvent them. When her boss (Sam by Oscar nominee John Madden.) Perera making sure you surprise them—and they Waterston) recruits her to drum up more was inspired by real-life former lobby- don’t surprise you.” female support for the Second Amend- ist Jack Abramoff—who went to prison As zingers go, it’s OK. But it’s also ment (one suggested slogan: “God created for conspiracy, fraud, and tax evasion— a line the filmmakers might wish they women; Samuel Colt made but the script also shares could take back. When French indie dis- them equal!”), she abruptly DNA with two Big Tobacco tributor EuropaCorp sought a late Novem- switches sides, joining a TAUT POLITICAL political films of the late ber release for Miss Sloane, it anticipated competing lobbying firm 1990s and early 2000s: the a moment when post-election policy to ensure the passage of COUNTER- Michael Mann thriller The wonkery and Academy Awards buzz might the Heaton-Harris bill, a FACTUAL OR BAD Insider and Jason Reitman’s coalesce into a single, ripped-from-the- piece of legislation propos- satirical Thank You for headlines conversation. The film is, after ing tighter gun control. SANTA 2 ? Smoking. It’s worth noting all, about a strong, ambitious woman—a But Sloane’s conver- that, unlike the cigarette Washington heavyweight—navigating a sion isn’t a go-and-sin-no- industry in those films, the male- dominated industry while fending more moment. To rouse congressional pro-gun contingent in Miss Sloane isn’t a off sexism to get meaningful work done. support, she dupes a school-shooting boo-hiss villain. There’s even a good guy The timing looked perfect. survivor (Gugu Mbatha-Raw) into becom- with a gun. When he stops a bad guy with Surprise! ing the public face of the movement. a gun, it lends credence to the National Under different circumstances,Miss She also lies, cheats, and has emotion- Rifle Association’s cherished ideal that Sloane might have emerged as this year’s less sex with a high-priced male escort more guns equals more safety—and gives soapier answer to 2016 Best Picture (Jake Lacy). Eventually she’s dragged in the movie political verisimilitude. winner Spotlight, a small-studio offering front of a holier -than-thou senator (John Still, nothing—not good guys, not bad that rode sturdy performances and topi- Lithgow) to answer for her professional guys—can stop Sloane. Like any good cality to critical acclaim and an $88 million indiscretions. In Sloane’s world, the end lobbyist, the case she makes proves too worldwide box office. Instead, it stands always justifies the means, no matter compelling. The question is whether
to send holiday movie-season audiences how often she’s told she’s gone too far audiences will want to listen.
What do you do for W? I oversee any part of the W experience that touches the consumer, whether that has to do with where we build ESSENTIEL new Ws, the design process, the mix of bars and restaurants, or managing ANTHONY the preopening buzz.
WARBY PARKER INGHAM 44, global brand leader, W Hotels, New York What’s your day to day like? I move from dealing with real estate investors—who are generally a more corporate type—to mixing with our music director, who’s covered in tattoos and has a full beard.
LUCIO CASTRO
APPLE 63 How would you describe your style? Cool shirt. Traditional cuts with It has whimsical elements that give urban streetwear—I like it a lighthearted mixing it up. I have an touch. The print is tiny dogs. It’s nice that you aversion get to wear jeans to suits. on the job. I found these in London years ago, and they were Do you always wear such a perfect fit. bracelets? They’re slightly LEE BALLY elastic, so even I do. I got the red-and- though they’re white one at Davos in tight, they have Switzerland. The green some give. one I found randomly LINKS OF LONDON in Cape Town.
I like your glasses. Tell me about your shoes. They’re trainers in style, They’re so affordable, you can but the uppers are leather, just buy lots of them. Can you so they’re formal and casual tell I’m an impulse shopper? at the same time. OLIVER SWEENEY PHOTOGRAPH BY CHRISTOPHER LEAMAN FOR BLOOMBERG BUSINESSWEEK BLOOMBERG LEAMAN FOR CHRISTOPHER BY PHOTOGRAPH Interview by Jason Chen Etc. How Did I Get Here?
DANIEL LUBETZKY Founder and chief executive officer, Kind
“My dad survived Education Dachau. Around 1984, when I was 16, there were anti- Robert E. Lee High Semitic incidents in School, San Antonio, Mexico City, and he class of 1986 decided to bring us Trinity University, San to San Antonio.” Antonio, class of 1990
With his parents in Stanford Law School, At his grandparents’ ranch in Mexico City, late ’70s class of 1993 Mexico City, 1978
“I started selling watches in flea “I went to Israel to write a legislative markets at 16, then graduated to Work proposal encouraging American companies mall kiosks. I thought I was going Experience to be catalysts for Arab-Israeli ventures. No one wanted a Mexican-Jewish American to have kiosks across America.” lawyer telling them what to do.” 1993–94 64 Haas Koshland “PeaceWorks’ first venture was Fellowship Arab-Israeli. I tracked down a
1994– ” bankrupt sun-dried-tomato spread . Present n o i maker and said, ‘Why don’t we Founder, president, t c e
partner?’ We still exist under the PeaceWorks r i d
a
brand Meditalia.” t
2002– u o
Present h t Founder, i w
OneVoice Movement y a
w a
At a OneVoice meeting with Shimon Peres,
2004– u o
president of Israel at the time, additional mailing and at N.Y., York, New paid at postage Periodicals L.P. Bloomberg by and August, April, June, in January, one week except Published weekly, 4501 H Issue no. (ISSN 0007-7135) 28 – December 4, 2016 November 900) (USPS 080 y Present and actor Jason Alexander, 2011 r y
Founder, CEO, r a c
Kind e f
i l
2010– g n
“It’s an NGO for people i t
Present t e offices. Executive, Editorial, Circulation, and Advertising Offices: Bloomberg Businessweek, 731 Lexington Avenue, New York, NY 10022. POSTMASTER: Send address changes to Bloomberg Businessweek, P.O. Box 37528, Boone, IA 50037-0528. Canada Post Publication Post Publication Canada 50037-0528. 37528, IA Boone, Box P.O. Businessweek, to Bloomberg address changes Send POSTMASTER: 10022. York, NY New Avenue, Lexington 731 Businessweek, Offices: Bloomberg Advertising and Circulation, Editorial, Executive, offices. #12829 9898 GST as Bloomberg L.P. for GST Registered QST#1008327064. Unit4, Mississauga, ON L5T 2N1. E-mail: [email protected]. Blvd., DHL Global Mail, 355 Admiral to Canadian addresses undeliverable Return Number 41989020. Mail Agreement http://www.businessweek.com/ website: to our or log on Subscriber 800 635-1200 Services: Call or e-mail: [email protected]. 800 298-9867 Sales: Call Single Copy Office. Patent in the U.S. Title registered reserved. All rights L.P. Bloomberg 2016 Copyright RT0001. NUMBER 0414N68830 CPPAP PRINTED IN THE U.S.A. 290-5460 x100 or [email protected]. 800 at Group The YGS Permissions: & General Reprints [email protected] at Center Clearance Copyright Permissions: Educational custserv/manage.htm. At Kind’s first Businessweek Bloomberg l Co-founder, who are fed up with New York office, d Maiyet n a
2004 terror and determined l i a
to seize back the agenda m e -
g n for conflict resolution.” i r e
“I was dissatisfied with my w s n a snacking options. Everything
“It’s high-end stuff p u
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“We just announced the Kind l
made by craftsmen l was a need for snacks that you ’ Foundation. The inaugural program, u in developing o y
could feel good about eating.” Kind People, looked for people r
countries or where o
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transforming communities through e there’s been conflict.” s o
kindness. We got 5,000 nominations. p r u p
We also recently became the first d
national snack brand to publish the n a
Life Lessons
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added sugar content in our snacks.” n i n a e m ou 1. “Don’t allow yourself to believe it’s not gonna happen.” 2. “Show your humanity in commerce, business, and life.” 3. “Take time to refl ect on what gives y subject (5) Courtesy