August 2024

What a second term could mean for

Americans, the economy and the world
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FOR THOSE WHO KNOW

The difference is Gaggenau

 August 2024
◼ PHOTOGRAPH BY EVAN JENKINS FOR BLOOMBERG BUSINESSWEEK

Rivians have inspired a small but devoted fan following ▷ 68

5
Contents Contributors
Remarks Why (some) businesses embrace the Trump agenda 8 ● Nancy Cook, Joshua Green and
Mario Parker have followed Donald
In Context To be a capitalist in China, it helps to be a communist 11 Trump since he first ran for president
A hung parliament could be France’s best-case scenario 13 in 2015. Nancy is a senior national
Five questions for Apollo co-founder Josh Harris 14 political correspondent in Bloomberg
Climate forecasters have a valuable new tool in AI 14 News’ Washington bureau, Joshua
The Right Stuff: What to buy and where to go 16 is a national correspondent for
Addicts can’t kick the opioid habit. Neither can US insurers 18 Bloomberg Businessweek, and Mario
Another Albertsons merger, another loss for competition? 19 is managing editor for US economy
Airbnb hosts contemplate wriggling away from Airbnb 21 and government at Bloomberg News
A Walk With: Celebrity whisperer Anita Elberse 22 in Washington.

In View The AI revolution is playing to US strengths 25 ● Olivia Carville and Cecilia

The secret of Erewhon’s success 28 D’Anastasio filed dozens of public
When CFOs swap the “F” for an “E” 30 records requests for police reports
The case for and against a universal basic income 34 linked to Roblox for their story on the
online video game platform. Olivia is
In Depth For small investors, trading gets easier—and riskier 38 an investigative reporter, and Cecilia
Higher interest rates: A user’s guide 40 is a video game reporter, both at
The stock market gets democratized 43 Bloomberg News.
The downside to so many accredited investors 44
Giving the masses a louder voice in giving 46 ● Ed Ludlow hosts the TV show
Patrick McKenzie on digital money’s ins and outs 48 Bloomberg Technology, and Max
Chafkin is a senior reporter for
What a second term for Trump would 50 Bloomberg Businessweek. The
reporting for their story on Rivian
mean for business, in his own words included 100-mile Uber rides (not in
a Rivian).
Roblox, a popular online hangout for kids, 58
is struggling to keep its users safe ● The origin of Jordan Robertson
and Drake Bennett’s story on an
undersea data cable attack goes
Where the Musk haters are going for 68 back to a 2021 tip from a Norwegian
their luxury EVs security source. Jordan and
Drake are technology reporters at
A data cable snaps near Norway’s coast, and a 76 Bloomberg News.

Russian boat there sure looks suspicious

Cover
Pursuits A gut check on those “healthspan” startups 85
These resorts are selling vacationers on longevity 89
For our August issue, we
New York, New York, is a helluva pasta town 90 tapped Victor Llorente,
Summer is hat-wearing season 92 a Spanish photographer
based in Queens, New
CBS grows fat on a steady diet of spinoffs 94 York, to photograph
Yes, Rome in August is touristy. But when isn’t it? 96 former President Trump.
The portrait, made in
Bourbon and rye: There’s magic in the mashup 98 the Mar-a-Lago library,
A quiet Rolex; an oddball putter; six CEO diets 99 took place two days
before the June debate
between Trump and
Last Thing Complete the puzzle: Find the chip thief 100 President Joe Biden.

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6 Bloomberg Businessweek
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Remarks

Facing Trump
● By Brad Stone

Interviewing a presidential candidate may be drawn to the former president:

in person before a monumental elec- “Trump has a better understanding than
tion is always a coveted opportunity. the Biden administration that regulation
But after President Joe Biden’s dis- can be a business impediment.”
jointed debate performance raised There’s also nervous silence from many
doubts about his candidacy and Donald others in the business community. In 2021
Trump escaped an assassin’s bullet former American Express Co. Chairman
in Pennsylvania, examining the GOP and Chief Executive Officer Ken Chenault
nominee and his economic agenda for helped organize dozens of prominent
a Bloomberg Businessweek cover story Black business leaders to oppose restric-
became a journalistic imperative. tive voting rights bills in Republican-led
Trump has an aggressive plan for the states. There’s been no such groundswell
US economy and American companies now, despite similar perceived stakes for
that includes radically higher tariffs, a the future of democracy and fair elections.
lower corporate tax rate and mass depor- in his home. Now he posts photos with Chenault attributes this to Trump’s record
tations of immigrants that could further Trump to social media and rails against of vindictiveness toward his enemies. But
constrict an already tight labor supply. Biden’s appointees at the Securities and he says he hopes others will join the fray
Without this, he says, “you can fold Exchange Commission and the Federal soon. “I would not criticize a CEO for not
up Businessweek, because I don’t think Trade Commission, who’ve worked to speaking out because of the threat to their
it’s gonna be worth a damn. I think the restrain tech giants and cryptocurrency. company,” Chenault says. “What I would
whole country will go down the tubes.” Biden’s administration “has gone after hope is that a few CEOs, and I don’t think
Most economists disagree. In June, the crypto world, they have gone after it’s going to be large number, are able to
16 Nobel Prize winners published an open the business world, they are trying to act on their conscience.”
letter arguing that Trump’s agenda would regulate by executive policy with a much In the interview with Businessweek,
reignite inflation and balloon the federal more liberal, far-left view of capitalism Trump was personable, as vainglorious as
debt. A recent report from the nonpar- and corporations,” Pishevar says. “The ever in attempting to prosecute his case
tisan Peterson Institute for International Republican Party is much more open to for another term, and characteristically
Economics said Trump’s proposed tariffs new ideas and big ideas from our world.” boastful, bragging about everything from
would cost a typical household $1,700 a On the other side of innumerable first-term accomplishments to the vaulted
year “while inflicting significant collateral social media battles about the election is ceilings at Mar-a-Lago. (Considering his
damage on the US economy.” LinkedIn Corp. Executive Chairman Reid penchant for making false claims, we’re
But there’s vocal support for Trump in Hoffman, who sent an email to followers publishing the entire transcript of the
some surprising quarters. Elon Musk and after the debate calling Biden a “resolute interview on Bloomberg.com, annotated
Bill Ackman, founder of Pershing Square fighter” and saying attempts to replace with fact checks.) It was clear that Trump
Capital Management, are two recent him were misguided. Hoffman argues is feeling exceptionally confident—even for
converts who’ve endorsed Trump. In that European policy shows unequivocally him—about his prospects in November.
early June prominent venture capitalists that high tariffs impede growth and raise Surviving the assassination attempt, and
◼ ILLUSTRATION BY FELIX DECOMBAT

contributed more than $12 million to his prices, and that the unavoidable central having criminal charges over his handling
campaign at a San Francisco fundraiser. feature of Trump’s style is his tendency to of classified documents thrown out, has
Among the co-hosts was Shervin Pishevar, govern as if he’s still starring in a reality-TV only strengthened Trump’s improbable
a backer of Airbnb, Slack and Uber, who show. “Investors need a sense that they momentum. But four months is a lot of
once proudly hung photos of himself are investing in a stable future,” he says. time, and as recent events have shown, a
with Hillary Clinton and Barack Obama But he gets why some business leaders campaign can change overnight. <BW>

8 Remarks Bloomberg Businessweek

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 A new way to think about the world

Banking on the Party

● By Cathy Chan giants of Wall Street is in the throes of a party and the people.” The swelling
counterrevolution. Heeding Xi Jinping’s ranks of badge-wearing communists at
China International Capital Corp. was call for “common prosperity” and party CICC—roughly a third of its 2,000-plus
conceived as the mainland’s Morgan criticism of “hedonistic lifestyles,” CICC bankers have joined the party, insiders
Stanley, an investment bank unleashed has cast aside its dream of one day chal- say—underscore the new realities for
◼ ILLUSTRATION BY CHAU LUONG

from the constraints of state planning lenging the giants of global finance. capitalists in the China of Xi.
and bureaucracy. But lately, the hottest One after another, CICC’s bankers Gone is the burning ambition, the
credential at CICC is … membership in the are pledging their loyalty to the party, long hours, the princely pay. So, too, is
Chinese Communist Party. promising to follow the CCP’s direc- the steadfast belief that the markets rule.
Three decades after its founding, tives, guard its secrets and, per the In their place has come a new playbook
China’s answer to the hard-charging official oath, “sacrifice my all for the in which the party is paramount and

August 2024 In Context 11

 vital to career success. “There has Dealmaking Suffers Steep Decline close associates of the earlier, longtime
been a political redefinition of finance,” Volume of IPOs on China and Hong Kong CEO Levin Zhu, son of former Chinese
exchanges
says Zhiwu Chen, a professor at the Premier Zhu Rongji.
University of Hong Kong. $300b These days, Chen and division heads
The trend highlights Xi’s increasing typically open meetings by reciting slo-
control over the nation’s financial sys- gans known as “Xi Jinping Thought.”
tem and the consequences, intended and Next are highlights from the most recent
not, of his drive to reshape the business 150 State Council and Politburo conclaves. At
and cultural landscape. Interviews with a recent annual general meeting, senior
several senior CICC bankers paint a por- bankers pinned party badges to their suit
trait of the ideological makeover and its jackets to demonstrate their allegiance to
repercussions. Given how China polices 0 the CCP. Another time, bankers unfurled
dissent, these people spoke on the con- 2013 2024 a Chinese flag and a banner emblazoned
AS OF 7/11
dition they not be identified. CICC didn’t with Xi’s slogans at the offices of a
respond to requests for comment. Senior bankers whose salaries once mainland client.
Founded in 1995 during a period almost equaled those of counterparts at Behind the patriotic displays is a sober
of rapid growth and reform, CICC was Goldman Sachs Group Inc. or Morgan reality: Bankers must follow party pre-
soon dubbed the “Morgan Stanley of Guo Stanley now earn roughly half as much. scriptions about which companies and
Mao”—a nod to an early backer and the By law, Chinese companies must industries China does—and doesn’t—want
complex of office towers where it’s based. maintain CCP committees in their to nurture. On the “yes” list: manufac-
(CICC’s other shareholders include state- ranks. Even international banks oper- turing and technology. Luxury goods and
run China Construction Bank, Singapore ating in China have them, albeit on a fintech, meanwhile, have fallen out of
investment fund GIC Pte Ltd. and vari- smaller scale, as enforcement tends to favor. Between satisfying regulators, rec-
ous private equity firms.) Morgan Stanley be limited. But the growing number of onciling financial reports, working with
severed its ties with CICC in 2010 and party members at CICC stands in sharp clients and lining up investors, orches-
soon set up its own China securities contrast to the Wall Street culture it trating a big domestic Chinese IPO can
venture, which has recently been slash- once embraced. now take five years or more.
ing jobs because of a lack of investment The party’s increased influence wor- Granted, other Chinese investment
banking activity. ries longtime employees. Morale is flag- banks are in a similar boat. At CICC’s
At its founding, CICC aspired to chal- ging. Productivity is down. Worst of all, biggest rival, Citic Securities Co., more
lenge the giants of London, New York and business has dried up. Given the running than 750 employees, about a third of the
Zurich. If bankers were Communist Party tension between China and the US and staff, quit between 2021 and early 2023.
members, they rarely bragged about it. the Chinese government’s effort to assert Employees in Beijing and Hong Kong
The subject was taboo in financial cir- control over its markets, 2024 is shaping have clashed over tight budgets, pay cuts
cles. Some refused to join the party up to be the worst year for Chinese ini- and other management issues. The larg-
because doing so can heighten govern- tial public offerings worldwide in more est financial conglomerates have asked
ment scrutiny and threaten personal free- than a decade. senior staff to forgo deferred bonuses
doms, for instance requiring approval to Over the past two years, CICC’s Hong and in some cases return pay from pre-
travel abroad. Kong-listed shares have shed almost half vious years to comply with a pretax cap
Today, CICC bankers boast of their their value. The bank has been unseated of 2.9 million yuan ($400,000), people
party standing and encourage colleagues as the top arranger of overseas stock sales familiar with the matter have said. And
to join. As the calculus of success has for Chinese companies, a position it held a government-led anticorruption drive
shifted, many have taken to knocking off for five years, and it’s losing market share resulted in at least 130 financial offi-
early, at least by Wall Street standards. in cross-border Chinese merger deals. cials and executives being investigated
By 6 p.m. most evenings, the 27th and With the dearth of IPOs, profit and reve- or punished last year alone, according
28th floors of China World, home to nue slid for a second year in 2023. to Bloomberg calculations based on
the investment banking business, have Leading the charge is CICC’s new official announcements.
mostly cleared out, one person familiar chairman, Chen Liang, who signed on But the future for CICC—which once
with the operation says. last year from a smaller state-run invest- symbolized China’s vaulting ambition
That’s because CICC no longer ment bank, China Galaxy Securities in global finance—is less certain than
appeals to the ultimate capitalist motiva- Co. And several key CICC executives for most others, according to Chen
tor: old-fashioned greed. In April, CICC seen as friendlier to market capitalism at the University of Hong Kong. As its
notified its mainland bankers that their have exited. Among them were former overseas business fades, the bank must
base pay would be cut by as much as Chief Executive Officer Huang Zhaohui pivot to mainland markets and carefully
25%, and few received bonuses in 2023. and Chief Operating Officer Chu Gang, hew to the party line. And at home, it’s

12 In Context Bloomberg Businessweek

 bound to face stiff competition from those in the growing tech sector, which Medef, France’s largest business
domestic rivals, including some, such has benefited from the creation of a visa federation, also wants to see the status
as Citic, with closer links to the govern- that fast-tracks hiring nationals from quo preserved. “The engine of growth
ment. “The future of CICC,” Chen says, outside the European Union. can only start up again if the country
“is that there’s no more CICC in a few In a turbulent campaign, the specter pursues economic policy that is clear and
years’ time.” <BW> of a far-right France was joined by the stable,” it said in a statement.
ghost of a far-left past. Firebrand Jean-Luc The most pressing challenge for the
Mélenchon brought moderates and greens gridlocked National Assembly is the bud-
into an electoral pact geared at resuscitat- get. Even before the election, France’s

The Future of ing Gallic dirigisme, with its soak-the-rich

taxation and boundless public spending.
finances were in the spotlight after the
budget deficit swelled to 5.5% of gross
Macronisme Either extreme would have laid waste domestic product in 2023, prompting S&P
to Macron’s reform project. Over seven Global Ratings to downgrade the country
● By William Horobin years in office, the youngest-ever leader and the EU to instigate a procedure to
of the republic has worked to transform enforce greater discipline on countries
President Emmanuel Macron’s bet on France’s reputation as a country hostile with excessive debt and deficits.
regaining control of France with snap
elections backfired spectacularly, but the
resulting political gridlock means inves-
tors and business have escaped with the
least worse outcome.
Coordinated maneuvers by disparate
political forces aimed at blocking the
ascension of Marine Le Pen’s far-right
National Rally delivered a hung parliament
where no group has anything approach-
ing a majority. With Macron unable to call
fresh elections for at least a year, France is
saddled with a legislature riven with ideo-
logical and personal divisions so great that
it’s unlikely it will enact any meaningful
changes to current policy.
Investors initially panicked when
◼ PHOTO: ED ALCOCK/MYOP/REDUX ◼ DATA (CICC): COMPILED BY BLOOMBERG; (FRANCE): EUROSTAT, COMPILED BY BLOOMBERG

Macron dissolved parliament on June 9,

because they feared he’d opened a door
for National Rally to take control of the
legislature and drive through disruptive
and costly laws, including much tighter to business and finance. His corporate tax In France, there’s a tradition of
immigration controls. The prospect also cuts are unpopular with the public, but opposition parties voting against a bud-
unsettled many in business—especially foreign capital has flowed in, helping to get, no matter the circumstances. So
turn the tide of deindustrialization and when whatever government emerges
Loss of Discipline drive unemployment to a four-decade low. presents its spending plans at the end
France’s budget deficit as a share of GDP The outcome of the elections means it of September, there’s the risk it will suf-
Macron’s tenure will be hard to undo much of this. Leftist fer a defeat and possibly collapse in a
parties won the largest number of seats no-confidence vote. New bills and new
8% in the National Assembly, but not enough governments could come and go, and a
to enact their more radical policies, such budget might not be adopted.
as sharply increasing the minimum wage Fortunately for France, there are
or rolling back the recent increase in provisions in the constitution that would
4 the retirement age. “We must prevent allow the state to continue collecting
any reversal or revision of supply-side taxes and roll over spending approved
policies,” said Finance Minister Bruno the previous year. That autopilot setting
Le Maire. “We must make our best efforts may lend some comfort to business and
0 to build a majority based on projects that investors as they navigate through a
1995 2023 continue to defend this.” tense time. <BW>

August 2024 In Context 13

 ● Five Questions ● By Jason Kelly

Josh Harris, co-founder of Apollo

Global Management, talks about his
second act as a sports mogul
① Did you ever think you’d have a pressure on valuations as more and
sports empire? more eyeballs really engage in it.
Not in my wildest dreams. ④ So is there a ceiling at this point?
The notion that I would own the That’s all being driven by these
Philadelphia 76ers where I had gone to becoming entertainment businesses
college at Penn, the New Jersey Devils and not local event businesses.
where my dad had grown up, and then I would expect that to continue if the
the Washington Commanders where rumors about the NBA are true and
I spent my youth was an incredible it’s going to double over the next eight
dream come true. or nine years. And there’s a scarcity
② What’s different about investing in value. Sports teams are operating
sports teams? businesses, and they generate cash
In business, it’s about Ebitda, stock flow. Some of them don’t, a lot of them
price, valuation, cash flow. In sports, do. But then it’s also kind of a piece of
it’s about winning championships art. There’s only 30—or 20 depending
and creating memories. Obviously on the league or franchises—and
the journey started as more of a people want them. So at the end of the
value-oriented journey, very similar to day it’s worth whatever someone will
what I do at 26North [the alternative pay for it.
investments company Harris founded ⑤ You’re also in youth sports. What’s
in 2022]. But the evolution is quite the business case there?
different. At the time I paid $6 billion Sports changed my life. I was
for the Commanders, and at 60 times a college wrestler. If I hadn’t gone
Ebitda my credentials as a value
investor were shattered, I like to joke.
through the experience of having to
go out there and literally be physically
AI Versus
Hurricanes

◼ HARRIS: PHOTOGRAPH BY JEAN-PIERRE UYS FOR BLOOMBERG BUSINESSWEEK. BALLOON: WINDBORNE SYSTEMS
③ What’s driving the surge in sports dominated by another human being,
team valuations? I probably wouldn’t have worked as
If you look at the evolution of hard as I did in my youth. We want ● By Brian Kahn
sports content, particularly the the opportunity for everyone’s
big sports with the NFL and the kids to experience sports. So With the pull of a cord, a balloon laden
NBA leading the way, there’s a we started Unrivaled Sports, a with sensors rises into the cloudless
massive globalization because series of youth sports leagues sky above a parking lot in Palo Alto,
of the ability of people to and camps. It spans baseball with California. Below, the three co-founders
stream content and watch Cal Ripken to Shaun White of WindBorne Systems Inc., an artificial
it on their phone. So in adventure sports. intelligence weather-forecasting startup,
in many cases there Most recently we’re in crane their necks to watch what looks like
are more people flag football. We reach a jiggling jellyfish begin a multiday jour-
watching the more than 1.3 million ney monitoring speed, temperature and
Sixers in China kids, and people pay a atmospheric pressure.
than there are in lot of money to send WindBorne sells weather-related
Philly. And that’s their kids to get better data primarily to energy traders look-
the case all over at sports. ing to get ahead of potential strain on
the world. So the grid. Since 2021 the startup has also
you’re seeing Interviews are edited been working with the National Oceanic
massive upward for clarity and length. and Atmospheric Administration (NOAA),

14 In Context Bloomberg Businessweek

 “valuable addition” to weather balloon
data. The balloons’ ability to navigate the
atmosphere vertically means the startup
can capture differences at various heights
in temperature, pressure, wind direction
and more. This fine-grained data gives
forecasters a clearer picture of what’s
going on in the atmosphere. If traditional
weather balloon data is akin to trying to
figure out how warm the ocean is by
sticking a toe in, the startup’s is instead
diving all the way in.
So far, NOAA has tested whether
incorporating WindBorne’s data into
experimental models actually improves
predictions. Doing so would have
improved the accuracy of the agency’s
forecast for the track of 2022’s Hurricane
Fiona by 18%, according to results pre-
sented at the American Meteorological
Society conference in February.
NOAA and ECMWF both work with
several weather startups. A spokesperson
for ECMWF says that it still hasn’t fully
vetted the impact of WindBorne’s data
on its model.
WindBorne is using its balloons for
its own AI-powered forecasting model.
The system is trained on a vast dataset of
hourly weather since 1940. In traditional
WindBorne's Sushko
releases a balloon in
weather modeling, meteorologists pro-
Bodega Bay, California cess observations using physics equa-
tions; AI instead looks for patterns in past
which is testing whether the balloon data improving the existing technology. Since weather to predict the future.
can improve its forecasting abilities. weather balloons first took flight in 1890, WindBorne’s model isn’t available
In addition to collecting data, they’ve been subject to the vagaries of for public use, but the startup has pub-
WindBorne is developing its own AI fore- the atmosphere, riding the wind and lished case studies showing the quality
casting tool. Its tech, and that of compet- going wherever it blows. WindBorne’s of its forecast by applying its model to
ing startups, will be put through its paces have the ability to navigate on their past hurricanes. In a blog posted in May,
during what could be a record-shattering own, thanks to a unique ballast system it compared its ability to predict eight
hurricane season this year. “This is one of and a suite of sensors about the size of a cyclone tracks with NOAA’s and showed
the first seasons to really test these [new Starburst candy. The company can set a that its model outperformed the agen-
models],” says Matthew Chantry, flight path at takeoff, and operators can cy’s physics-based tool. WindBorne also
machine learning coordinator for the take control in real time. releases comparative analyses showing
European Center for Medium-Range Regular launches from four locations that since March its model has routinely
Weather Forecasts (ECMWF), an inter- in the US, South Korea and the Cabo been better at predicting near-future
governmental organization. Verde islands off Africa’s west coast weather than the NOAA and ECMWF
John Dean, Kai Marshland and Andrey provide a steady stream of global data, models. The company is in the process of
Sushko founded WindBorne in 2019, whereas specially programmed launches assimilating the data from its weather bal-
motivated largely by a love of releasing capture information about specific loons, which it expects will yield major
things into the sky. Weather balloons— weather events. Throughout this sea- improvements in accuracy.
which government agencies and even son, WindBorne is launching from Cabo WindBorne isn’t alone in applying
amateurs launch from hundreds of loca- Verde, a hurricane formation hot spot. AI to weather forecasting. In July 2023,
tions around the world each day—were On its website, NOAA has called researchers at Huawei Technologies Co.
a way to indulge that passion while the data that WindBorne provides a published a study in Nature showing

August 2024 In Context 15

 they’d created an AI-based model
that could predict the weather more
● The Right Stuff ● By the Pursuits editors

accurately than ECMWF’s physics-based

model, which is considered the world’s The products, experiences and innovations we’re obsessing over this month
gold standard. A few months later,
A High-End Hotel in
Google scientists published a paper
Low Country
showing that an AI-based model they’d
Opening just a short drive
built was even better. In February, from Charleston, South
WindBorne said its forecast bested Carolina, the Dunlin is the
latest addition to the Auberge
Google’s in geopotential height, a key Resorts Collection. Situated
metric that helps meteorologists track on 20 miles of waterfront
property and with 72 rooms
weather systems, though its results hav- decked in wicker and mint-
en’t been peer-reviewed. WindBorne’s green gingham (from $749),
it will attract both sporty and
Dean also acknowledges that it can be stylish types. Guests can hike,
hard to nail down what exactly counts as fish or explore the Kiawah
River estuary for sightings of
accurate, because all three analyses use dolphins, sea turtles and great
slightly different metrics. blue herons before hitting the
Aster spa.
Dean says the startup has more inter- The Brawn in Britain
est from customers than it can keep up The toughest nameplate in England just got tougher. Land Rover’s Defender
OCTA is the most powerful Defender yet, with a 4.4-liter turbocharged
with for now, but it has competition, V-8 hybrid engine producing 626 horsepower and 553 pound-feet of torque.
too. Rival AI forecasting startups includ- A launch control function can hit 60 mph in 3.8 seconds, but the vehicle’s
off-road prowess may win more converts: A widened stance and redesigned
ing Atmo, Jua and Tomorrow.io are all wheel arches have improved incline attack, and it can wade through more
hoping to sell their weather predictions than 3 feet of water—all while cosseting the driver in leather seats and
ebony textile trim. With prices starting at $152,000, order books are open.
to government agencies and weather-
dependent industries such as energy
and aviation. ECMWF and NOAA are also A Cosssstly A Scorching
working on AI models of their own. Necklace Vintage
AI models face the risk that climate Italian luxury house Dom Pérignon’s latest
Bulgari filled its 140th bottle of bubbly is
change could make training data obsolete

◼ RENDERING COURTESY THE DUNLIN/AUBERGE RESORTS COLLECTION. REMAINING: COURTESY COMPANIES

anniversary high- from 2015, the hottest
as it shifts global weather patterns. Then jewelry collection, growing season ever
dubbed Aeterna, with recorded. The $295
there’s the possibility that an inaccurate riffs on its classics. One bottle, the brand’s
AI forecast could undercut public trust of the most spectacular 46th vintage, shows
Lego Rocks is an abstract take that even with the
in the technology. Although AI models on the Serpenti motif, One Small Sip for extreme weather of
The Boat
are showing great promise at predicting which made its debut Man … climate change, great
Jaws returns this in 1948. This white Champagne can still
the paths of hurricanes, physical mod- summer, but this time gold necklace (price Breville has upgraded be made. Sensual,
els have a clear lead for now at predict- as a 1,500-piece, on request) evokes a its flagship Oracle powerful, harmonious
2-foot-long Lego set. slithering snake with Jet automatic coffee and rich, it
ing intensity, says Chantry of ECMWF. The $150 model includes ribbons of diamonds machine with the ability has a creamy
“Neither system is perfect for anything.” the great white shark, of trimmed with onyx. to make cold brew (and texture,
course—along with the At the center is a cold espresso) in less subtle
WindBorne’s founders are aware Orca, manned by Brody, 21.63-carat tanzanite. than 4 minutes, instead aromas of
of these risks. But they also point Hooper and Quint and of the usual 12-hour-plus peonies, and
equipped with fishing process. The $2,000 vivid flavor
to the promise of what a better- rods, spears and those stainless steel device notes of
observed world and more powerful famous yellow barrels. comes with 45 grind ripe, salty
It’s the brainchild of fan settings as well as lemons
forecasts could mean for society. A Jonny Campbell, who settings for dairy and and
2024 National Bureau of Economic posted it to the brand's nondairy milks so you green
Ideas platform, where can make an espresso papaya.
Research working paper found that hur- it got the 10,000 likes martini faster—and
ricane forecast improvements since 2007 needed for production better—than your
consideration. bartender.
have reduced the costs of damage and loss
of life by 19%, saving billions of dollars.
The long-term goal, WindBorne’s Shuffleboard, Under Glass
Milan design house Impatia takes the rugged
Marshland says, is to have 10,000 stuff of bars and taverns—think foosball and
data-collection balloons aloft at a time. billiards—and reimagines them as modern, minimal
art objects. Its latest release is Scivolo, a 12-foot-long
“What I want is for weather to be like a shuffleboard table ($27,750) that seems exclusively meant for
calendar,” he says. “It affects your oper- penthouses. Its frame is made of walnut, and the top and legs
are constructed of low-iron glass. But there’s no reason to fear
ations, you know that it exists. But it isn’t an errant shot from the stainless steel pucks: Their edges are
something unexpected.” <BW> covered in suedelike Alcantara leather.

16 In Context Bloomberg Businessweek

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 “Opioids are the most effective
fast-acting meds that we have,” says
Gerard Limerick, an assistant professor
at Johns Hopkins Medicine.
Usually, a new drug must outperform
what’s already on the market to be widely
prescribed by doctors and paid for by
insurers. Vertex’s drug didn’t quite do
that. In late-stage studies of patients
with acute pain after surgery, suzetrigine
worked better than a placebo. But it failed
to reduce bunion surgery patients’ pain
faster than a combination of an opioid and
acetaminophen, raising questions about
its commercial potential.
“It’s hard to make a case for denying
a patient a drug that has clearly superior
efficacy to everything else out there,”
Brian Skorney, a biotech analyst at Baird,
wrote in a note this year about Vertex’s
pain studies. “It’s much easier to deny an
expensive branded drug when there are a
myriad of effectively free, generic options,
some of which have now been shown to
even be superior to the expensive brand.”
Health insurers often require patients
to pay a higher copay for a branded drug
and try a cheaper generic first, a practice
known as step therapy. And hospitals typi-
cally get the same payment from Medicare
whether a doctor prescribes an opioid or
a non-opioid, creating an incentive to go
with the cheaper, more addictive option.
For instance, an intravenous version
of acetaminophen during surgery costs
more than $40, whereas a morphine

Why America Can’t Against that backdrop, the success

of a safer painkiller would seem
drip costs about $1, says Jianguo Cheng,
a professor of anesthesiology at the
Quit Opioids assured. A new drug, which Vertex Cleveland Clinic. “The reimbursement
Pharmaceuticals Inc. is developing, has won’t increase just because you use $45
● By Gerry Smith been hailed as a scientific breakthrough acetaminophen,” he says.
because it treats pain without entering the Vertex is betting the nonaddictive
Opioids. They’re a public-health pariah, brain, where opioids create addicts. The properties of its drug will make it an
leading to more than 80,000 overdose drug, suzetrigine, met its goal this year in attractive alternative to opioids. But it
◼ ILLUSTRATION BY SOPHI GULLBRANTS ◼ DATA: IQVIA XPONENT

deaths a year. Patients worry they’ll get pivotal trials for acute pain and is poised isn’t leaving anything to chance. Knowing
addicted to them. Doctors want noth- to become the first new class of pain med- it faces an uphill battle commercially,
ing to do with them. And politicians of ication in more than two decades. the company last year boosted its lobby-
all stripes are calling for less dangerous But all that may not be enough to ing spending almost 50%, to more than
options for treating pain. loosen the grip opioids have on American $3 million. Vertex is pressing Congress
“We are looking for absolutely any- medicine. Despite their dismal reputation, for new policies that remove “structural
thing that’s not an opioid,” says Seth they have two powerful things going for impediments” blocking access to opioid
Waldman, an anesthesiologist and direc- them: They’re cheap, and they work. The alternatives, says Stuart Arbuckle, its
tor of pain management at Hospital number of opioid prescriptions has been chief operating officer.
for Special Surgery, a top orthopedic cut by half over the past decade, but some Vertex has scored at least one legisla-
medicine center. 130 million are still doled out each year. tive victory: The No Pain Act, which goes

18 In Context Bloomberg Businessweek

into effect next year, provides an extra Waldman calls “a cruel joke.” “There
Medicare reimbursement to hospitals that are times when we can’t get a non-opioid
A Supermarket
prescribe alternatives to opioids. Another medication approved, but we can get Antitrust Replay?
bill introduced this year in Congress approval for an opioid,” he says.
would prohibit step therapy and limit how Vertex isn’t the only biotech company ● By Leah Nylen
much Medicare patients pay out of pocket looking for an opioid alternative. Earlier
for non-opioids. this year, Latigo Biotherapeutics Inc. When supermarket operator Albertsons
Other types of new drugs face this cost started with $135 million in funding to Cos. took over rival Safeway in 2015, it won
hurdle, too. The rollout of new contracep- find a nonaddictive painkiller. South government approval to complete the
tives or antibiotics has been hampered by Rampart Pharma Inc. recently completed $9.2 billion deal by agreeing to a remedy
insurers guiding doctors and patients to an early-stage trial for a nonaddictive antitrust regulators had been allowing for
older, less pricey meds. The difference is pain drug that works through unique decades: selling off some stores in overlap-
that those generics haven’t been declared pathways in the brain and aims to be ping markets, a move that was supposed
a public-health emergency. safer and more effective than Tylenol, to maintain competition and help keep
Without new laws to promote the use ibuprofen and other traditional medi- shoppers’ grocery bills down.
of alternative painkillers, insurers will cines, says Hernan Bazan, the company’s That divestiture of 168 supermarkets
continue to steer patients to lower-cost chief executive officer. was then the biggest ever. It was also a
opioids and fuel the addiction crisis, One of the furthest along is Tris disaster. Many investors in the sold-off
says Chris Fox, executive director of the Pharma Inc., which is starting late-stage stores lost their shirts, workers lost their
nonprofit Voices for Non-Opioid Choices. trials in treating acute pain and hopes jobs, and communities lost vital access
And even with new legislation, other to develop the same drug for chronic to fresh food and low prices. Only half of
obstacles remain. Getting doctors to pre- pain and opioid use disorder, says James those stores survive today as Albertsons’
scribe a drug such as Vertex’s may require Hackworth, president of the company’s competitors, a Bloomberg analysis found,
a massive reeducation effort. “The chal- brand division. If Tris Pharma can prove and some were bought back by the large
lenge we have is, by and large, our health- its drug works and is nonaddictive, it can chain for as little as $1, after their ailing
care workforce is trained to treat pain with be scheduled differently by regulators so buyer foundered.
opioids,” Fox says. it’s easier to dispense and prescribe than Almost a decade later, that scenario
opioids, which have restrictions, he says. may be playing out again. Kroger Co.,
Opioids Are Down but Not Out Founded in 1989, Boston-based Vertex with about 2,800 stores across 35 states,
Prescriptions dispensed by US retail pharmacies transformed into a biotech giant with agreed in October 2022 to acquire
almost $10 billion in 2023 sales after turn- Albertsons, which owns 2,200 in 34 states
ing cystic fibrosis from a debilitating lung and the District of Columbia, for $24.6 bil-
200m disease into a manageable condition. lion. The companies are proposing to sell
Now it’s trying to diversify into other off nearly 600 stores to keep regulators
treatments, including for diabetes and happy, but this time government officials
100 sickle cell disease. Developing a nonad- are pushing back. In an antitrust case
dictive pain drug, which Vertex has stud- filed by the Federal Trade Commission
ied for more than two decades, has been and nine states and territories that will
0 “one of the holy grails in pharmaceutical go to trial in August, regulators contend
2011 2022 research,” says Paul Negulescu, a senior that the 2015 Albertsons-Safeway deba-
vice president at Vertex. cle showed that major divestments don’t
Each year, about 80 million Americans Vertex’s drug blocks a sodium channel work in the food store business and that
are prescribed a medicine for acute pain, that helps control activity in the body’s this latest supermarket megamarriage
caused by the likes of broken bones, neurons and sends signals to the brain should be prohibited.
burns and the aftermath of surgeries. when you’re in pain. Wall Street is giddy Skepticism of the Albertsons-Kroger
Some 50 million more have diabetic about its prospects: Vertex’s stock soared deal “is strongly supported by what
nerve damage or other types of chronic about 40% over the past year, adding happened in the Albertsons-Safeway
pain that lasts at least three months, an about $40 billion to the company’s value, merger, where stores closed, jobs were
area Vertex is also studying. For the most largely due to optimism about the pain lost, consumers suffered, and the dives-
part, patients have only two treatment med, expected to hit the market in 2025. titure failed miserably to preserve com-
options: anti-inflammatory drugs like Still, Negulescu remains realistic. “We petition,” Colorado Attorney General Phil
ibuprofen, which aren’t very strong, or don’t imagine we’ll replace opioids with Weiser says. “We won’t risk another such
opioids, which are highly addictive. They this medication,” he says. Instead, the failed divestiture.”
frequently fight with insurers over cov- company’s goal is “to reduce the need to The stakes are high, not just for share-
erage of safer pain medications, which have to take them.” <BW> holders of the two companies but also

August 2024 In Context 19

What the Albertsons Merger Wrought In the 2015 deal, Bellingham-based divestitures risk failure. The Albertsons-
Ownership of the 182 grocery stores involved in Haggen Holdings bought most of the Kroger proposal to sell markets to C&S,
the 2015 deal
stores Albertsons sold off. Within months, they allege, is just history repeating itself—
Haggen declared bankruptcy—and was this time with even higher stakes.
Albertsons gobbled up by Albertsons. The result: Haggen, once the largest independent
58
Albertsons ended up buying back 44 of its grocery chain in the Pacific Northwest,
Albertsons former stores along with the 14 groceries was sold in 2011 to private equity firm
111
the Haggen chain had originally operated. Comvest Group Inc., which closed under-
Haggen
160
Ten other locations closed permanently, performing stores until only 14 grocer-
Other and 17 more were converted to hardware ies and one pharmacy remained. After
groceries
stores, gyms and even a hotel. Albertsons announced the Safeway
That cautionary tale—which FTC Chair merger in 2014, Comvest saw an oppor-
Safeway Lina Khan once called a “spectacular” tunity when the supermarkets proposed
57
failure—is now a key piece of evidence in selling off almost 200 stores in areas
Closed or
nongrocery the agency’s case, which heads to trial on where they directly competed.
Haggen 14 Aug. 26 in Portland, Oregon. Haggen originally wanted to bid
Premerger 2015 merger Current Kroger and Albertsons say their deal on only 22 stores, but when the firm
will benefit consumers, bringing them backing Albertsons, Cerberus Capital
for the towns and shoppers that could more modern stores. It will also bolster Management LP, wanted most stores
suddenly find themselves without a the grocers’ clout with suppliers to push to go to a single buyer, it agreed to pur-
convenient grocery store. Just ask Tina food prices lower. The increased buying chase 146 supermarkets for $309 million—
McKim, a co-founder of the Birchwood power and cost sharing will help them including locations in Arizona, California
Food Desert Fighters, which distrib- compete with bigger retailers such as and Nevada, where it had no existing
utes food weekly to about 90 families Walmart Inc. and Amazon.com Inc. business. In February 2015, the FTC
around Bellingham, Washington. The The merging companies have offered cleared the sale. Within six months,
Birchwood neighborhood saw its local to sell 579 stores to C&S Wholesale Haggen filed for bankruptcy.
Albertsons grocery store close after the Grocers, the largest US wholesale food This was how the merger played out
earlier merger. Residents—many of whom supplier, which is affiliated with the Piggly in Bellingham. After buying Haggen
don’t own cars—were left without a close, Wiggly chain. It operates only 23 super- out of bankruptcy, Albertsons closed
reasonably priced outlet for food and sta- markets in New York and Wisconsin and its store in the Birchwood neighbor-

◼ PHOTOGRAPH BY CHONA KASINGER FOR BLOOMBERG BUSINESSWEEK. ILLUSTRATION BY HANNAH ROBINSON ◼ DATA: BLOOMBERG REPORTING
ples. Instead, they had to take lengthy has little retail experience on the West hood, which served a racially diverse,
bus rides to other markets or shop at Coast, where many of the supermarkets low-income community and the nearby
expensive convenience stores. to be divested are located. Lummi Reservation. The city couldn’t
“It’s really been a struggle for people in The merging grocers say C&S is better coax another grocer to the location,
the neighborhood,” says McKim, who wor- financed to make the stores successful because Albertsons maintained a restric-
ries that the proposed Albertsons-Kroger and shouldn’t be compared with Haggen. tive covenant on the building that prohib-
tie-up could leave other towns in a similar But in three separate lawsuits to block the ited a rival leasing the space until 2038. A
situation. “We want people to be able to merger, the US and state attorneys general Big Lots store opened there in 2019, but
access food with dignity.” point to Haggen as proof that large store it sells only dry goods such as cereal and
canned soups. A local Mexican restaurant
At a Birchwood neighborhood food share offers some produce and dairy products,
but it can’t accept food stamps.
In late June, Albertsons agreed to lift
the restriction on the building’s use after
Bloomberg Businessweek submitted ques-
tions about it and the Washington attor-
ney general’s office began an investigation
into the practice.
Now locals worry what impact the
pending supermarket megadeal might
have on their town: Kroger and Albertsons
are the two largest chains in Washington,
with over 300 supermarkets collectively—
more than half of all grocery stores in the
state—so disruptions could follow. <BW>

20 In Context Bloomberg Businessweek

 came to Vasquez’s conference, began displaced families or contract workers.
Airbnb Hosts Look the shift several years ago and has done The interest in direct bookings
To Drop the ‘Airbnb’ well enough to quit her day job. Her creates an opportunity for businesses
property management company now such as Furnished Finder LLC, which
● By Natalie Lung includes more than 20 homes. Still, she charges $100 annually for listings rather
relies on Airbnb for half of her book- than taking a commission. Interest in the
This April, more than 600 landlords, ings. “I’m not strong enough to replace site spiked last fall when New York City
real estate agents and small-property Airbnb,” she says. effectively banned short-term apartment
managers traveled to a swanky resort Chief Executive Officer Brian Chesky rentals, and in October the platform
in San Diego to get advice from Jesse has downplayed the importance of indi- added more homes than in any month
Vasquez. A former salesperson at a vidual hosts circumventing Airbnb’s ser- of its 10-year history, according to CEO
hospice- care company, Vasquez now vices. In an email, a spokesperson added Jeff Hurst.
manages more than a dozen properties, that the company offers benefits that are Today, Furnished Finder has 300,000
in addition to his side hustle coaching hard to replicate, including background listings in the US. It’s a far cry from
his peers. “We don’t have to be relying checks, payment processing and insur- Airbnb’s 7.7 million globally, but the com-
on Airbnb,” Vasquez told his audience. ance. “When bookings and communica- pany is profitable and plans to hire more
“Don’t allow these big companies to sup- tion move off our platform, we are no engineers and product managers, says
ply your clients. Build your own house on longer able to ensure hosts and guests Hurst, who was hired in late 2023, one of
your own freakin’ land.” are covered by our extensive built-in a wave of former Vrbo employees who’ve
Airbnb, the world’s biggest short-term protections and support,” they wrote. migrated to the company.
rental platform, is thriving—it added more The hunger to develop alternate strat-
than a million active listings in 2023 while egies to find tenants is a big reason peo-
posting a record profit. Its hosts, at least ple were willing to pay the $897 Vasquez
those in the US, not so much. Through charged for his conference. He talks up
May of this year, earnings for US hosts the benefits of rental hosts referring
had declined in 22 of the past 28 months, potential clients to one another. “The
according to analytics firm AirDNA. Hosts mid-term space is all about connec-
blame oversupply, regulatory changes tions,” he says.
and Airbnb Inc.’s own policies. Some, like Vasquez rented out his first mid-term
those at Vasquez’s event, think the solu- property to a travel nurse in 2015, then
tion is to cut out Airbnb altogether. built up his portfolio by making a housing
In part, this is what always happens deal with his local hospital in Modesto,
when people rely on internet platforms California, and managing other people’s
to make a living. It’s akin to Uber drivers rentals. He now brings in more than
asking passengers to call them directly Airbnb wants to hold on to those hosts $80,000 a month in profit.
the next time they need a ride, or who are focused on longer stays, a group His social media following exploded
YouTube influencers and TikTok celeb- that’s bigger than it was before the pan- after he appeared on a real estate invest-
rities cutting side deals with brands to demic. It’s tailoring its platform to appeal ing podcast last year. The increasing
secure advertising income they won’t to them. Last summer, for instance, it prominence provided a significant boost
have to split with the platforms. Who reduced service fees for stays of more for what has become an even bigger
likes a middleman? than three months. source of income for Vasquez than rental
On Airbnb, there’s a specific opportu- For now, the mid-term segment is housing: giving other people advice
nity in the shift to mid-term rentals—stays dominated by large companies such as about rental housing.
of longer than 30 days but shorter than Anyplace, Blueground and June Homes, After the podcast episode, Vasquez
the leases people sign for their primary but smaller players are also setting up got more than 300 new students for his
apartments. Attracting enough new peo- their own booking websites, drawing yearlong mentorship program, which
ple to rent an apartment once or twice renters in with lower prices for proper- costs $6,500. He says his online men-
a week essentially requires a service like ties also listed on Airbnb or Vrbo. torship program turned a $1.3 million
Airbnb. If you’re only looking for a few For some hosts, the trick is not to find profit last year. The conference attracted
renters a year, it becomes more reason- renters one by one but to form relation- 60 more sign-ups, adding to the 450 peo-
able to find them yourself. ships with institutions that will bring in ple who’ve taken the course. Profit is
In practice, though, this strategy regular business. These can be compa- once again projected to top $1 million.
is often a way to supplement Airbnb nies helping their employees relocate, “It’s so crazy to feel like this move-
income rather than replace it entirely. or insurers and government agencies ment is happening,” he says, “and I get
Vivian Yip, an Austin-based host who in search of temporary housing for to be a catalyst.” <BW>

August 2024 In Context 21

● A Walk With ● By Austin Carr

◼ PHOTOGRAPH BY TARA RICE FOR BLOOMBERG BUSINESSWEEK

Anita Elberse studies what makes celebrity empires

soar—then teaches A-listers attending her Harvard
Business School program how to hatch their own
22 In Context Bloomberg Businessweek
A swarm of students waits in the MrBeast’s ad revenue numbers, then but also that it allows famous people to
classroom at Harvard Business School’s casually pivots to suggesting he and feel like Ivy Leaguers. “This week I got
McCollum Hall to take selfies with Elberse come up with a case study on accepted into Harvard! Words cannot
Anita Elberse. They’ve just finished her Drake’s business. (Left unmentioned is describe my excitement!” posted singer
sought-after executive education course, the musician’s recent spat with rapper Ciara online after getting into Elberse’s
and though a bunch of big names are Kendrick Lamar and the subsequent program in 2019. “Course complete!”
among the most recent batch of grads— blow to Drake’s reputation.) “That’d be declared Fixer Upper moguls Chip and
skiing icon Mikaela Shiffrin, ex-Daily awesome to do,” Elberse says. Joanna Gaines on Instagram the same
Show comedian Roy Wood Jr., FIFA World After graduating from college in her year, next to a photo of the couple wear-
Cup winner Juan Mata—Elberse is evi- native Netherlands, Elberse earned a mas- ing Harvard letter sweaters and holding
dently the bigger star on campus. “She’s ter’s in communications at the University up diplomas. (Elberse later wrote a case
a very popular lady right now,” says one of Southern California, where she first on their Magnolia Network.)
student after angling for a shot. became interested in the film indus- Elberse is back in her office a few days
Elberse, a Nike-wearing scholar of try, before transferring to the London after that end-of-course lunch, sipping tea
marketing, is best known for her course Business School for her Ph.D. While her to recover her voice after “inhaling chalk
The Business of Entertainment, Media, colleagues were drawn to consumer indus- for four days.” She says she generally
and Sports—or #BEMS to its alumni who tries with mounds of market data, such as works on about three or four case stud-
post about it on Instagram and LinkedIn. diapers or snack food, she observed there ies a year, following her interests, which
The four-day, $12,000 program, an elec- were plenty of metrics on movie budgets happen to align with the zeitgeist. In some
tive open to professionals not enrolled at and box-office numbers that deserved instances she gets pitched requests, such
HBS, has become a blockbuster for the MBA-level treatment. “I can’t imagine liv- as when Mercedes-AMG’s Formula One
university. Elberse’s case studies, ranging ing my life trying to become an expert on team reached out to recommend she con-
from David Beckham’s brand manage- the yogurt category,” she says. sider a case on boss Toto Wolff. (She did,
ment to Beyoncé’s music launch strate- Her thesis on supply and demand publishing it in February 2022.) “Ideally
gies, are often announced like an album dynamics for timing international film the release of a case is an event in itself,”
drop on social media. Which is why, along releases helped win her a tenure-track she says. “Like, ‘Oh my God, there’s a case
with execs from Hollywood and Madison role at HBS in the early 2000s. There, on this? I need to be part of it. When is the
Avenue, stars such as Channing Tatum she wrote case studies on LeBron James’ next class?’ ”
and LL Cool J have signed up, hoping to endorsement deals and how Marvel She acknowledges that booking A-list
build the next celebrity business empire. turned its comics into a cinematic uni- guest speakers risks becoming gimmicky
Elberse has just wrapped up her final verse. The research formed the basis of but says it’s no different from a finance
classes of the session, including one an HBS class—a semester-long course for course featuring a leading banker. “It’s
on a more new-age cultural specimen— enrolled MBA students, which Elberse not with the aim of: ‘How can we blow
YouTube megastar MrBeast. Not exactly still teaches—and culminated in her 2013 people away with the celebrities that we
a stranger to image management herself, book, Blockbusters, about the economics have in the room?’ ” says Elberse, whose
Elberse wouldn’t allow me to observe and marketing of hit-driven businesses. office doubles as an altar of autographed
the class, though she did have it filmed When she started teaching her execu- sports memorabilia, including a photo of
for promotional clips. Her March 2023 tive course a year later, it was clear she’d her heading a soccer ball to former guest
case study of MrBeast offers a peek into taken her own lessons on celebrity mar- lecturer Beckham. She says the celebrities
the type of analysis she brings to his keting to heart. “From the get-go,” she have to go through the same admissions
$100 million-generating content machine: says, “I had the sense that I want to mix process to land one of the 80 seats avail-
She covers his financials, mostly validates the talent side—the artists and athletes— able per session. But when Dwayne “The
his virality as a business model worthy of with the executives.” By then she’d devel- Rock” Johnson is one of your application
what she calls “the Harvard treatment” oped a strong network from her side gig references, as Elberse mentions he was for
and quotes his mom, Sue. (“We are mak- consulting for brands and corporations Olympic skier Lindsey Vonn, it can’t hurt.
ing it cool to take care of people,” Sue and says she called in a lot of favors to get This year marks the program’s
said of her son’s charitable efforts.) the buzz going. Supermodel Karlie Kloss, 10th anniversary. Elberse says the more
Elberse’s students stroll over to a cam- whom she’d briefly advised, joined the it grows in popularity, the more she has
pus cafeteria for lunch, where post-class inaugural class and posted about it on to guard against celebs co-opting the
debate continues. One student, whose social media. The next year, Miami Heat Harvard brand to further their own. “We
day job is as an influencer, argues that star Dwyane Wade joined—and decided sometimes say ‘no’ to people if I don’t
MrBeast, like Elon Musk, is driven by his to bring his actress wife, Gabrielle Union. get a sense they’re here for the right
passions, not money. Matte Babel, the The course was an immediate hit. reasons,” she says. “This is not about
chief brand officer of Drake’s produc- Its appeal isn’t just that it allows C-level you taking photos walking around the
tion company, takes issue with some of normies to study alongside celebrities Harvard campus.” <BW>

August 2024 In Context 23

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 In View Our contributing writers’ guide to a changing landscape

The future
belongs to
American
companies, not
necessarily to
Americans, says
Tom Orlik
◼ PHOTOGRAPH BY IAN SHIVER FOR BLOOMBERG BUSINESSWEEK; PROP STYLIST: KELSI WINDMILLER

August 2024 In View 25

Is there a better gauge of a nation’s strength than the vitality American Century
of its businesses? Thriving enterprises are a source of wealth Geographic breakdown of the world’s top 50 firms by market value,
as share of global GDP
and power, drivers of job creation, foundries for new technol-
◼ US ◼ China ◼ Europe ◼ Other Asia Pacific
ogies, and a sign that the institutions of education, finance,
◼ Other Americas ◼ Middle East & Africa
law and politics are working as they should.
So, eight years after Donald Trump won the White House
with a bleak vision of a US in decline, four years since the
Covid-19 pandemic tested national resilience and two years
since Russia’s invasion of Ukraine rolled the iron dice1, it’s striking 20%

that America’s biggest businesses are doing better than ever.

In 2023, American companies claimed 32 of the top spots
in a ranking of the 50 largest publicly traded firms by market
capitalization. That’s the highest number in data going back 10

to 1995. Their dominance is even more stark when you con-

sider that by market value, made-in-the-USA firms accounted
for 74% of the total; made-in-China companies—America’s
nearest rival for global supremacy—took only 3%. 0

Why the divergence? Part of it is strength at home. An 1995 2000 2005 2010 2015 2020 2023
unrivaled innovation ecosystem, deep and liquid capital mar-
kets, a nation-of-immigrants work ethic, and pro-business
taxes and regulations continue to produce winners. Nvidia Robots Rising
Corp., whose chips are powering the artificial intelligence Sector breakdown of top 50 firms, by market value
revolution, is the latest example. ◼ Tech hardware ◼ Tech software and services ◼ All other
Weakness abroad is also part of the picture. China’s crack-
down on its own entrepreneurs, billed as part of President
Xi Jinping’s campaign to promote “common prosperity,” is
a self-inflicted wound. India’s conglomerates are hobbled
by weak governance, as evidenced by the stream of corpo- $20t

rate scandals. In Europe, fragmented national markets, high

taxes and onerous regulations are stumbling blocks to global
competitiveness.
If the world is entering a period of struggle between 10

democracy and dictatorship, free markets and state control,

having the most powerful businesses is both a substantial
source of strength for Team USA and a powerful symbol of
the virtues of a democratic, free-market system. Another 0

positive: With 58% of Americans owning stocks, the financial 1995 2000 2005 2010 2015 2020 2023
gains touch a broad swath of society.
Before breaking out the ticker tape and commencing
a celebratory reading of The Autobiography of Benjamin Wider Moats
Franklin2, it’s worth asking a question. In 1953, responding to Number of new and old firms in the top 50
concerns about whether he would use his new position as ◼ New member ◼ Old member
secretary of defense to benefit his former employer, General
Motors Co., Charlie Wilson told members of Congress, 50

“What’s good for GM is good for America.”3

Even in an era of chrome-plated optimism about corpo-
rate success and middle-class prosperity, Wilson’s answer
appeared over the top. Seven decades later, with corporate
profits booming and middle-class incomes stagnating, ques- 25
◼ DATA: BLOOMBERG ECONOMICS

tions about the alignment between business interest and the

public good run even deeper.
Size is part of the problem. In 1995 the market cap of the
world’s top 50 firms equaled about 9% of global gross domes-
tic product. By 2023 that number had risen to 27%. The 0

Founding Fathers recognized the risks in that concentration 2000 2005 2010 2015 2020 2023

26 In View Bloomberg Businessweek

Sure enough, the evidence suggests today’s
corporate aristocrats are busy squeezing
workers, greedflating prices, minimizing taxes
and bending politicians to their will

of corporate power. Thomas Jefferson hoped to “crush” the his unborn baby. Semiconductor firms complying with the letter
“aristocracy of moneyed corporations” before they “challenge but not the spirit of sanctions have forced US regulators into a
our government to a trial of strength.” game of whack-a-mole to prevent China from getting its hands
Sure enough, the evidence suggests today’s corpo- on advanced AI chips.
rate aristocrats are busy squeezing workers, greedflating The efforts of the US to block China’s AI ambitions high-
prices, minimizing taxes and bending politicians to their will. light another question. The rise of reasoning robots will cer-
In 1995 the top 50 global firms paid a median effective tax tainly be good for real-world versions of The Terminator’s
rate of about 35% and had a profit margin of 6%. By 2023 Cyberdyne Systems, the fictional business that churns out
the effective tax rate had fallen to 20%—reflecting the grow- cybernetic assassins. Will it be good for everybody else? The
ing use of offshore tax havens—and the profit margin had answer depends on whether AI is a complement to human
risen to 20%. workers, boosting their productivity, or a substitute, throwing
With a portion of those profits, big businesses buy influence white-collar workers into unemployment in the same way fac-
over government policy. In the US, they recently scored a major tory automation did to their blue-collar brethren.
win. The Supreme Court’s decision at the end of June to strike The second industrial revolution, which brought innovations
down what’s known as the Chevron doctrine4 significantly including Henry Ford’s production line and Thomas Edison’s
reduces the scope for such regulators as the Environmental lightbulb, boosted corporate profits and workers’ wages at the
Protection Agency to make rules—tipping the scales in same time. In an optimistic scenario, the AI revolution follows
Jefferson’s “trial of strength” further toward corporations. the same trajectory.
Enormous size also means protection against competi- That outcome is far from guaranteed. As Massachusetts
tion. Warren Buffett, whose Berkshire Hathaway Inc. occupies Institute of Technology economists Daron Acemoglu and Simon
the ninth spot in the ranking, talks about the importance of Johnson demonstrate in their 2023 book, Power and Progress,
a “moat” to protect corporate castles from invaders. Moats in the grand sweep of history, advances in technology are pos-
appear to be getting wider: In 2000 some 27 of the com- itive for prosperity. Yet in the span of years and decades over
panies on the top 50 list were new entrants. In 2023 that which lives are lived, the losers often outnumber the winners.
number was only 14. The first industrial revolution made factory owners rich,
The growing importance of the tech industry also changes but it took decades for workers to share in the gains. As
the dynamic between business and the national interest. In Acemoglu and Johnson document, the arrival of power looms
1995 tech companies contributed 8% of market cap for the at the start of the 19th century decimated employment among
top 50 firms. In 2023 that share was 51%. Part of the reason Britain’s handloom weavers, whose real wages fell by more
for that rapid rise is their single-minded pursuit of corporate than half. The AI revolution might follow the same pattern.
interests, even when those are at odds with national priorities. A study that the International Monetary Fund published in
Examples aren’t hard to find. Apple Inc. reportedly inked a January found that about 30% of jobs in advanced econo-
secret $275 billion deal with the Chinese government promising mies may be in jeopardy.
to play a role in developing the country’s economy and tech- The risk is we’re all handloom weavers now. If that’s the case,
nology. Back in the days when Facebook still hoped for China the stock boom for America’s AI champions is—in part—a bet
market access, Mark Zuckerberg asked President Xi to name against the interests of a generation of American workers. <BW>

1. “If the iron dice must roll, may God help us,” said German Chancellor Theobald von Bethmann-Hollweg in a 1914 speech.
2. Forbes magazine once described the most entrepreneurial of the Founding Fathers as the “Colonial amalgam of Warren Buffett, Steve Jobs, and Bill Gates.”
3. Wilson was more equivocal than the public memory suggests. What he told Congress was this: “For years I thought what was good for our country was good for General
Motors, and vice versa.”
4. An administrative law principle established by a 1984 Supreme Court ruling that compelled federal courts to defer to a federal agency’s interpretation of an ambiguous statute.

August 2024 In View 27

Buying Power

The alchemy of
cult grocer Erewhon
is not what you think,
explains Amanda Mull

The rumors are true: Everyone who Lempert, a longtime grocery industry already become the stuff of retail legend.
shops at Erewhon, the notorious mini- analyst, described owners Tony and Neither was much of what I ate from
chain of luxury organic grocery stores Josephine Antoci—who bought the the store or saw on its shelves: heavily
in Los Angeles, is hot. Or at least it cer- 58-year-old company in 2011—as newly dressed chicken Caesar wraps, short rib
tainly looks that way when you enter the minted “grocery royalty.” Muscling burritos, macaroni and cheese, smash-
company’s stores, propelled as you are onto its shelves requires passing mus- burger sliders. The store’s most famous
directly into a scrum of young, beauti- ter with Josephine, who casts a strict prepared food, fried cauliflower doused
ful Angelenos queued up to buy tubs eye over every product’s ingredient list in bright orange buffalo sauce and sold
of takeout, $20 smoothies designed and sourcing. Her approval or lack of it by the pound, is the kind of thing you’ll
by Hailey Bieber or Kendall Jenner has become a make-or-break moment also find on the menu at a California
and tote bags emblazoned with the for up-and-coming food and wellness Pizza Kitchen or Buffalo Wild Wings.
Erewhon logo. When I visited outposts brands. “Erewhon has been made out But that’s precisely the point. Don’t
at the Grove and Venice Beach earlier to be a trendsetter, but we don’t identify let the sea moss gel and spirulina fool
this year, everyone was with a friend, that way,” she told me in an email. you: Erewhon isn’t successful because
a dog or both. All were wearing little When I arrived at the trendiest gro- it’s weird—it isn’t even all that weird.
tank tops and big pants and having the cery in America, I got to see firsthand The company is successful because it
kind of relaxed weekday afternoon that what I can only describe as a smoothie understands just what young Americans
suggested many of them had the types holding pen, where patrons wait for seem to want from their grocery stores.
◼ PHOTOGRAPH BY DAVID KITZ FOR BLOOMBERG BUSINESSWEEK

of careers Hollywood bequeaths on drinks dispatched from almost comi- There are several reasons you are
the preternaturally beautiful: actor, DJ, cally enormous commercial blenders greeted by a morass of attractive peo-
TikToker, nepo baby. designed to make a half-dozen drinks at ple when you enter an Erewhon, but the
Erewhon has only 10 shops, all sit- a time. But what I remember most vividly most important one is probably that there
uated in Los Angeles County’s toniest from my visits is a roast beef sandwich. isn’t anywhere else for them to stand.
neighborhoods, but following an infu- Red meat with caramelized onions and Relative to a standard American grocery,
sion of investor cash in 2019, its spec- creamy horseradish wasn’t exactly what the retailer’s locations are tiny and tightly
ter has fallen on the food business far I’d expected to find in a store whose woo- packed. At 10,000 to 15,000 square
beyond Southern California. The com- woo eccentricities—things like kelp noo- feet, a typical Erewhon is less than a
pany caters to a clientele disproportion- dles and refrigerated cases full of glass tenth the size of the average Kroger. The
ately flush with cultural influence. Phil jars of “medicinal” bone broth—have company says it’s averaging more than

28 In View Bloomberg Businessweek

$2,000 in annual revenue per square In this way, Erewhon is anything but an wealthy city dwellers. “We’re finding
foot; the grocery industry standard is outlier in the grocery business. Instead, that people tend to be less interested in
about $500. A big factor in that some- it’s taken some of the things that once the pomp and circumstance of a tradi-
what mind-boggling number is just how made Whole Foods Market a standard tional sit-down restaurant experience,”
much floor space Erewhon dedicates bearer for the industry’s future—its hot Josephine told me.
to its prepared food cafes, which typi- bar and putative commitment to health— Food service is “one of the fastest-
cally take up nearly a third of the square and pushed them further toward their growing and most profitable segments
footage and account for all the models logical extreme. Young Americans cook for retailers,” according to a recent
and influencers milling around. The lon- less often than previous generations report by Progressive Grocer. The soar-
ger you spend inside an Erewhon—or and eat out more, and they’ve helped ing cost of restaurant meals has pushed
right outside an Erewhon, on one of its spur growth in the prepared foods busi- more buyers to peruse the deli section
sun-dappled, plant-lined dining patios— ness at many different regional grocery of their local grocer on nights when they
the more it feels like a restaurant that chains—ShopRite, Hy-Vee, HEB—not don’t feel like cooking. The margins here
also happens to sell groceries. only those that cater to fashionable, for grocers are great: They can use raw
ingredients from their own inventory that
are nearing their sell-by dates to make
their prepared foods, preventing them
from having to discount those items or
write them off entirely. When you chop
that fruit or fry those chickens, you can
sell them at a premium. And when gro-
cers aren’t using up their own extras, their
purchasing power will still get them better
prices from distributors than what most
chain restaurants can command.
Although Erewhon has been around
for decades, it seems to have timed
its cultural ascendance perfectly.
Whole Foods, after being acquired by
Amazon.com Inc. in 2017, has strug-
gled to maintain its cachet for qual-
ity among the high- earning and the
health-conscious. That’s left a gap in the
market for a wily competitor.
Erewhon isn’t letting that oppor-
tunity pass by, capitalizing on all the
attention by selling its branded tote
bags and water bottles and a lineup of
private-label drinks and snacks on its
website. The company’s investment in
Los Angeles’ most expensive neighbor-
hoods has paid off, hooking the kinds of
customers who set trends far beyond
their own social circles. And many of
those customers are especially influ-
ential online, where young people are
always trawling for the next viral sand-
wich or snack. These are ideal con-
ditions for selling expensive, organic
versions of America’s favorite foods.
That you can’t taste them yourself with-
out being among all that beauty and
youth in sunny Southern California just
makes the nuggets of fried cauliflower
look all the more golden. <BW>

August 2024 In View 29

30
In View
Bloomberg Businessweek
◼ PHOTOGRAPH BY SARAH VAN RIJ FOR BLOOMBERG BUSINESSWEEK
More CFOs Are
Getting CEO Jobs.
Beth Kowitt on what’s
behind that trend
When copper miner Freeport-McMoRan Inc. instituted what But more than anything else, the CFO-turned-CEO
one analyst described as an “extreme austerity approach” movement is a symptom of the priorities prevailing in corpo-
during the pandemic, Chief Financial Officer Kathleen Quirk rate America right now, many of them of the slashing-and-
helped slash capital expenses by almost 30%. Over at DuPont, cutting and financial engineering variety. Companies have
CFO Lori Koch was tasked by the board with regaining the been buying back shares at record levels, with Apple Inc. in
trust of investors and “restoring operational discipline.” As the May announcing the largest share repurchase plan in history.
top finance exec at Newell Brands Inc., the company behind Layoffs at the likes of Alphabet, Amazon.com and Microsoft
Sharpie and Elmer’s glue, Christopher Peterson drastically have juiced record profit growth. The “year of efficiency” that
scaled back product variety to lower costs. Mark Zuckerberg called for at Meta Platforms Inc., marked by
In the past 18 months, they’ve also all ascended to the head count reductions and cost-cutting, has now taken hold
top job at their respective companies, part of a growing across the entire business landscape.
movement in corporate America to put the number crunch- It’s that very mindset, one focused on profit rather than
ers in charge. According to executive search company Crist growth, that historically held CFOs back from climbing further
Kolder Associates, 8.4% of companies in either the S&P 500 up the corporate ladder. But now that an emphasis on the bot-
or Fortune 500 promoted a onetime CFO to CEO in 2023—a tom line is in fashion, so are CFOs. This change in sentiment
record number that’s up from 5.8% in 2013. was best captured by a pair of dueling Financial Times headlines
Call it the revenge of the bean counters. Headhunters say published 14 years apart. “Why do so few CFOs become CEOs?”
that finance talent is in high demand across the board. Even the paper asked in 2010. (Its answer: Their skill set makes them
when CFOs aren’t moving into the top job, their sway and stat- ill-suited for the role.) Then, in March 2024: “Why More CFOs
ure are growing. Perhaps the highest-profile recent example is Are Becoming CEOs.” (Their purview has expanded, and they
Alphabet Inc.’s Ruth Porat. When she joined the company as are already effectively the No. 2 inside the company.)
CFO in 2015, Googlers dubbed her “Ruthless Ruth” and com- Some data suggest that letting the finance folks run the
plained that her mandate to bring discipline and focus to the joint doesn’t always pay off big. Of the four most common
freewheeling tech giant would kill its culture. In a sign of how paths to the top job, the CFO-turned-CEO is the least likely to
much power she’s amassed since, the company last year pro- outperform based on gains in shareholder value, according to
moted her to president and chief investment officer. a 2023 study by executive search company Spencer Stuart.
Part of what’s driving the ascendance of CFOs is their The report found that over the past 20 years, only 8% of CFOs
reputation as staid, risk-averse leaders at a time when the who advanced to the chief executive rank led their company to
world is in turmoil. During periods of uncertainty, boards tend the top quartile of performance, defined as total shareholder
to default to a steady (some might even say boring) hand at return during the CEO’s tenure compared with the rest of the
the helm. Managing complex issues such as regulatory chal- market. Executives who previously were divisional CEOs, chief
lenges, geopolitical tensions, market volatility and higher operating officers or leapfroggers—those promoted from two
interest rates—and knowing how to adeptly talk to Wall Street or more levels down in the company—were all more likely to
about all of it—plays to a CFO’s strengths. “It’s absolutely indic- outperform. It follows then that CFOs who shine at the top
ative of the current feeling about the global economy,” says tended to have had experience running a business line at
Ty Wiggins, a leadership adviser to CEOs. some point in their career.

August 2024 In View 31

Across corporate America, worshipping at
the altar of efficiency has taken hold, and that
can easily cross over into cutting corners, with
disastrous consequences

Human nature may be to blame for the lagging Boeing’s transformation from a company ruled by
performance. People focus on and excel at the things they’re engineers to one led by accountants began in the mid-1990s
most familiar with—and, no surprise, for finance executives when Boeing acquired McDonnell Douglas and a succession
that’s profitability. “As CFO, they have to act as the disciplinar- of General Electric alumni ended up as CEO. All of them imple-
ian to let the CEO lean into growth,” says Claudius Hildebrand, mented much of the numbers-driven playbook they’d learned
a Spencer Stuart consultant who conducted the study. So as disciples of Jack Welch: cost-cutting, outsourcing, layoffs
when a CFO moves to the top job, “it’s a huge mindset shift,” he and stock buybacks.
says. “You cannot save your way to prosperity. At some point By the 2000s, Boeing was outsourcing not only much
you need to be careful to not cut too close to the bone.” of the production of its planes but also some of its design.
CFOs-turned-CEOs adjust their approach over time, but at
that point damage may already have been done: According to A Mixed Showing for CFOs Who Take Charge
his research, Hildebrand says, companies led by former CFOs Company performance by CEO background
are at risk to produce almost $1 billion less in revenue because ◼ Top quartile ◼ Middle quartiles ◼ Bottom quartile
of lower growth during those first years in the job.
Still, the study notes that “Data is not destiny.” Plenty of Promoted from CFO
8% 61 32
CFOs go on to success running a company, and Hildebrand isn’t
saying that they shouldn’t be hired for the top job. Instead, he COO
25 49 27
cautions that CFOs-turned-CEOs—and the boards that select
them—probably should be aware of the challenge of going into Division CEO
27 52 20
the job with what the study calls “financial conservatism.”
“Those CFOs-turned-CEOs who are successful recognize Two or more levels down
41 33 26
this early and are able to pivot,” Hildebrand says, “whereas those
who do not adapt tend to run the risk of underperformance.”
More boards seem to be getting that message, giving their Shareholders were rewarded for what’s been called a “capital
finance chiefs more responsibility and rotating them through light” manufacturing model: As Fortune has reported, between
operational jobs, which better prepares them to potentially be 2014 and 2020 the company spent almost three times as much
the big boss. For example, Target Corp. promoted its CFO to on stock buybacks as it did on research and development for
chief operating officer earlier this year, and in 2023 Macy’s Inc. commercial airplanes. Critics say the consequences of the
expanded the responsibilities of its finance chief to include the relentless focus on profitability over quality came into devas-
role of COO. tating focus in 2018 and 2019 when two 737 Max crashes killed
The bigger risk to a company comes when the rise of the 346 people. Since then, faulty manufacturing has continued to
CFO reflects a board’s desire to make cost-cutting a top pri- plague the company.
ority. Across corporate America, worshipping at the altar of In a 2004 interview with the Chicago Tribune, then-Boeing
efficiency has taken hold, and that can easily cross over into CEO Harry Stonecipher said the quiet part out loud: “When
cutting corners, with disastrous consequences. people say I changed the culture of Boeing, that was the intent,
There is no more apt case study than Boeing Co. “It’s a so that it’s run like a business rather than a great engineering
classic example of what happens when cost-cutters take over firm. It is a great engineering firm, but people invest in a com-
◼ DATA: SPENCER STUART

a company,” says Bill George, the onetime CEO of Medtronic pany because they want to make money.”
who is now an executive fellow at Harvard Business School. That right there is the risk of what happens when you let the
“Boeing had four financially oriented CEOs running the com- number crunchers take over the place. Suddenly a company can
pany, and it’s paying a tremendous price now.” forget that its job is to make a quality product, not just a profit. <BW>

32 In View Bloomberg Businessweek

Conquer
complexity.
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sustainable finance decisions. With our scores,
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Common Ground Exploring two sides of a contentious issue and finding an elegant compromise

Universal
Basic Income ● By Sarah Holder

① The Predicament Attorney General Ken Paxton sued Harris profound, especially when delivered to
The idea is radical in its simplicity: Give County in April to halt its pilot program, parents. Getting cash aid early in life has
people regular cash payments to help and at least nine states have proposed been linked to better test scores and
them meet basic needs, with no strings or passed legislation that would preempt higher incomes as adults.
attached. It’s a quick, albeit costly, way localities from starting their own. Is there
to fill gaps in the social safety net, and a way for polarized policymakers to find ③ The Case Against
it’s the premise behind universal basic rare common ground? The most obvious case against a truly
income, more commonly known as UBI. universal basic income is that it would
Since 2018, more than 150 pilot pro- ② The Case For be prohibitively expensive. Critics argue
grams have launched across 35 US Unlike food stamps or housing vouchers, that to free up money for such a ben-
states, targeting specific populations unconditional cash can just as easily be efit, governments would have to cut
such as new mothers or youth transition- spent on gas and groceries as an emer- other social spending. Others see even
ing out of foster care. Over the span of gency car repair. Although research targeted programs as another form of
months or years, groups are getting reg- shows recipients typically use the money welfare that discourages people from
ular payments of about $500 to $1,000 for essentials, the flexibility is the point, working. “Workforce participation
a month, funded by public and philan- advocates say. “Guaranteed income shrinks and that’s bad for communi-
thropic dollars, to do with as they wish. allows people to juggle multiple issues at ties, it’s bad for small businesses, it’s
Opponents of guaranteed income are the same time,” says Mary Bogle, a princi- bad for the economy,” says Haley Holik,
becoming more vocal, saying such pro- pal research associate at the Washington, a senior fellow at the Foundation for
grams eat into funds that would be better DC-based Urban Institute. Government Accountability.
used on food or housing aid, and even Studies have shown the effects of
run afoul of state constitutions. Texas even short-term income boosts can be ④ The Common Ground
In the US, there’s growing bipartisan
consensus around one variant of basic
income targeted at parents. A universal
credit that benefits young children, who
can’t control their circumstances, has
broad appeal, according to Josh McCabe,
director of social policy at the Niskanen
Center, a nonpartisan think tank.
During the pandemic, the existing
federal child tax credit was temporarily
◼ PHOTOGRAPH BY LAUREN COLEMAN FOR BLOOMBERG BUSINESSWEEK

expanded and paid out monthly for all but

the wealthiest families. Congress now
is debating a bill that would help more
low-income families get a bigger credit. If
passed, it could lift around 400,000 kids
above the poverty line in the first year,
estimates the Center on Budget and
Policy Priorities.
States are meanwhile providing their
own case studies. Fifteen of them—
red, blue and purple—administer their
own child tax credits, and most have no
minimum income requirements. <BW>

34 In View Bloomberg Businessweek

For the trailblazers,
we light the way.

Whatever drives you drives us at IDA Ireland.

We partner with you when you choose Ireland. Offering
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in this place of extraordinary opportunity.
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Live with Lucas Shaw
October 9–10, 2024 | Los Angeles

Featuring:

Bela Bajaria Chief Content Officer, Netflix

Keily Blair CEO, OnlyFans
Comedian, Actor, Writer
Whitney Cummings & Producer

Matt Stone Co-Creator, South Park

Head of Prime Video &
Mike Hopkins Amazon MGM Studios, Amazon
Join us live:
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 In Depth A transformation in finance

The People’s Market

◼ ILLUSTRATION BY TIMO LENZEN

A few decades ago, it would have been extremely unusual to hear teenagers talking about trends in finance, and even a few
years ago, trading stocks was a complicated and expensive proposition. Now, of course, your Robinhood app sits next to
your banking app, and money moves at the touch of a finger. We spend time digging into the data, stories and unintended
consequences of this sea change in investing—and learn about what the democratization of finance could do for philanthropy.
For the stock market’s new players, the numbers don’t always go up.

August 2024 In Depth 37

Stock
Games
How trading got cheap and easy for small investors—and rapid and risky bets on price moves—has taken the retail
why they still end up as losers community by storm.
At the same time, sports betting has exploded, with
● By Claire Ballentine Americans wagering more than $220 billion in the past five
years, according to the American Gaming Association. A com-
Legions of retail investors flooded the stock market in 2021, pany called Masterworks LLC even lets regular folk buy frac-
eager to chase volatile “meme stocks” with strong social tional shares in artwork. “Trading has become interchangeable
media followings and weak financials. This passion to own with the same kind of online betting that we’re seeing for games
a piece of companies such as GameStop Corp. and AMC and in the sports world,” says Peter Atwater, an economics pro-
Entertainment Holdings Inc. seemed like a fever that was fessor at William & Mary. “It’s part of a gambling zeitgeist.”
sure to break. Fueled by pandemic stimulus checks and pre-
vaccine boredom, newbie traders had nothing better to do The bull market makes trading seem easy and fun, but it may
than funnel their cash into shares championed by internet well end badly for investors. When the S&P 500 fell 19% in
investing gurus including Keith Gill and Ryan Cohen. 2022, retail traders collectively lost $350 billion, according to
Flash-forward three years, and it’s abundantly clear: We’re Vanda Research. The average retail portfolio was down 30%.
living in a new age of finance. It’s never been easier to bet For the young, the risks are especially clear. Brains
your money—anytime, anywhere—and meme-stock craziness aren’t fully developed until people reach their mid-20s, and
is here to stay. A wave of technological advancements has US Surgeon General Vivek Murthy recently posted an advi-
coincided with new apps and platforms to create a thriving sory about the effect of social media on children and adoles-
ecosystem where everyday people can trade stocks with the cents, highlighting the risk of addiction. Online brokers share
ease of swiping for dates on Tinder. DNA with social media: Both are designed for interactivity and
Young people can open a trading account in minutes. engagement. And their users overlap, with investors sharing
Members of Generation Z start investing when they’re 19, tips on Reddit, X and TikTok.
on average, according to a Charles Schwab Corp. survey Clifton Green, an Emory University finance professor, says
released in June. That compares with 32 for Gen X and 35 that if today’s retail traders lose too much money, they might
for baby boomers. Schwab also found that almost 3 in 5 give up on investing for good, missing out on long-term gains
Americans today are investing in stocks. Federal Reserve data that could be more safely achieved through diversification and
show this proportion represents the highest on record. index-tracking funds.
Retail investors have plenty of ways to play once-exotic Despite all the fanfare over options and single-stock trad-
and out-of-reach markets. Exchange-traded funds that ing, if you just bought an S&P 500 index fund five years ago,
invest in Bitcoin premiered this year, and a boom in zero-day reinvesting dividends, you’d have doubled your money after
options—a turbocharged version that allows traders to make earning an average annual return of 15%. Research shows

38 In Depth Bloomberg Businessweek

 that investors, both professional and amateur, are better off Then there were the fees, which could add up to hundreds
sticking with a diversified portfolio for the long term and that of dollars. When the US Securities Acts Amendments of
rapid trading tends to lead to painful losses. 1975 ended fixed trade commissions, some brokerages took
Regulators are concerned that brokerages are gamifying that as an opportunity to increase their fees. Others did the
trading in a way that lures people into betting more and more opposite, creating the discount brokerage business. Charles
money. This year, Robinhood Markets Inc. agreed to pay a Schwab began charging just $70 a trade, a steal at the time.
$7.5 million fine to settle Massachusetts Secretary of State Thanks to better technology and competition, those fees
Securities Division allegations that the company’s gamelike kept decreasing, to a typical $13 a trade in 2005, then $5 by
features took advantage of often young, inexperienced cus- 2019, eventually giving way to the zero-fee era we’re living in now.
tomers. (Robinhood, which said the claims didn’t reflect current In the early 2000s, brokers started letting investors pur-
practices, denied wrongdoing.) chase just a slice of a stock, using as little as a dollar or even
One feature that the state faulted—and the company elim- a cent. Although fractional shares were introduced in the
inated: digital confetti that rains down on the screen when 1990s, high trading fees meant that it usually didn’t make
users complete their first stock trade. The US Securities sense to invest such a small amount. The decline in costs
and Exchange Commission and the Consumer Financial has also made it easier for retail investors to buy and hold
Protection Bureau are looking at such practices, too. A recent index funds.
report from the CFPB noted similarities between financial ser- Of course, nothing on Wall Street is truly free. Brokers
vices and gaming. today make money by sending their customers’ buy and
Julius Johnson, a 33-year-old who works in retail in San sell orders to computerized trading firms such as Citadel
Antonio and trades on the side, started investing in 2020 after Securities LLC and Virtu Financial Corp., who pay to get
he saw someone post on X about the money they made. He’s transactions sent their way. Although this system helps with
mostly interested in options on securities such as GameStop, market liquidity, the SEC has concerns that retail investors
DraftKings Inc. and the Invesco QQQ ETF, which tracks the may end up getting worse prices for their shares—in effect,
Nasdaq-100 Index. paying hidden commissions.
That first year, he lost $2,000 in two weeks and almost gave Still, what used to be a multiday process requiring phone
up his hobby. Johnson would trade on his phone during breaks calls and paperwork can now be done in seconds, without an
at work, and sometimes he’d sneak into the bathroom or sit in upfront commission. “Back 10 years ago, if you wanted to set
his car to check his options bets. “It’s very addicting,” he says, up investments, the fees would eat up half of what you were
“probably just the user interface and how easy it is to trade.” putting aside,” says Yelena Larkin, an associate professor of
He eventually jumped back in after seeing the S&P 500 recover. finance at York University in Toronto.
Larkin teaches an introductory finance course, a require-
To understand the changes in stock trading, consider the ment for students at her university. Almost everyone in it has
process of buying equities a few decades ago. Say you heard either a trading account or some knowledge of the stock mar-
your friends talking about a promising public company that was ket, she says. Trading fees aren’t even on their radar; they’ve
selling for $50 a share. You would’ve had to call your stock- grown up investing in a world without them.
broker and customarily would’ve asked to buy a round lot of Even a decade ago, self-directed trading would need to
100 shares for $5,000. To put together a reasonably diversified take place on either a desktop or laptop computer. Now, after
portfolio of 20 companies that way, you’d need $100,000. posting on X or Instagram, or watching TikTok videos, you can
place a few trades on your brokerage account at Robinhood,
Interactive Brokers, ETrade or Coinbase.
◼ DATA: BLOOMBERG INTELLIGENCE ESTIMATES. FIGURES FOR 2010 TO 2020 ARE ANNUAL

Small Investors Stick Around

Retail traders as a share of US equity volume “You have to offer your clients access to mobile,” says Joe
25% Mazzola, Schwab’s head trading and derivatives strategist.
“When we look at activity on mobile versus on platform, the
growth is exponential—mobile is a game changer.”
Pandemic-era Ben Allen, a 49-year-old who works in the music business
meme-stock bump 20 in Atlanta, has been trading stocks on the side for 15 years and
has watched fees shrink to nothing. He opened a Robinhood
account a few years ago, mostly because he didn’t want to
have to call his broker to make a trade.
15 Although Allen has a portfolio of retirement funds man-
aged by a professional, he likes to play around with a few
thousand dollars invested in companies such as Apple
Inc. and Nvidia Corp. “The world of brokerages used to be
10 opaque,” he says. “But now everyone understands, and it’s
Q1 2010 Q1 2020 Q1 2024 like the cat’s out of the bag.” <BW>

August 2024 In Depth 39

A User’s Guide
To Higher
Interest Rates

40 In Depth Bloomberg Businessweek

 The era of cheap money is long over, and Corporations, meanwhile, are paying those owing money to such services
things have turned out surprisingly about 5.3% to borrow when they issue said they were behind on payments.
fine. Here’s how to make the best of the investment-grade debt, up from 2.3%. The flip side of this pain is how much
new reality The Fed tweaks borrowing rates to more you can get just from stashing
strike a balance between growth and money in the bank. Many high-yield
● By Suzanne Woolley inflation. Starting in 2008 it was mostly savings accounts offered online, as
in growth mode, keeping rates low to well as many certificates of deposit,
Now that everyone is playing the market, stimulate borrowing and spending in the pay 4% to 5%, with deposits guaran-
today’s high interest rates are a sub- wake of, first, the financial crisis, then teed by the Federal Deposit Insurance
ject of casual conversation, like talking the Covid-19 pandemic. That changed Corp. Investors with idle money sitting
about the weather. And like the weather, dramatically in 2022 after the economy in their brokerage accounts can get an
they’ve had unpredictable effects. reopened and the Fed found itself fight- easy bump just by moving money out of
In a little more than two years, the ing the fastest spurt of inflation since low-paying “sweep” accounts and into
US Federal Reserve has raised the fed- the early 1980s. Inflation is now back money-market funds paying more than
eral funds rate, the benchmark that influ- down to 3.3%, in striking distance of the 5%. Money markets aren’t FDIC-insured,
ences the cost of borrowing just about Fed’s long-term 2% target. but they generally invest in low-risk,
everywhere, from near zero to more than This has led many analysts and short-term assets.
5.25%. That’s a big change on its own, traders to expect rates to start coming Those willing to take a little more
but it also represents an almost gener- down soon, though Fed Chair Jerome risk can consider longer-term bonds
ational shift. The last time this rate was Powell is looking for more evidence that and bond funds. When interest rates
above 5% was 2007, the same year the inflation is cooling. Investors can expect were ultralow, investors were hesitant
iPhone was introduced. No one under at least one rate cut this year, according to put money into assets with such low
35 has had to manage their finances with to Rob Williams, managing director for yields and return potential. “Investors
US rates this high in their adult life. financial planning, retirement income felt like, when choosing bet ween
Some of the fallout has been pre- and wealth management at Charles
dictable. Carrying a balance on a credit Schwab Corp.
card is more painful nowadays, and
would-be homebuyers are finding they It’s a Good Time to Borrow Less and
have to settle for smaller houses or lon- Lend More
ger commutes—or renting—as mortgage T h a n k s i n p a r t t o p a n d e m i c - e ra
costs soar. On the other hand, savers are government programs that shored up
collecting inflation-beating yields now. household balance sheets and now his-
But there’s also been a puzzling lack of torically low levels of unemployment,
reaction in areas where you’d normally consumers have been resilient in the
expect a large, negative impact, such as face of higher loan rates. But signs of
the stock market and housing prices. strain are showing. The pace of credit
To think through what’s behind those card and auto loans moving into serious
anomalies, as well as what higher rates delinquency— meaning payments are
mean for consumers and investors, overdue by 90 days or more—rose in the
Bloomberg Businessweek asked finan- first three months of 2024, according to stocks and bonds, they had to invest in
cial planners and market experts for a report from the Federal Reserve Bank stocks,” says Noah Damsky, principal at
their insight and advice. of New York. Credit card delinquencies Marina Wealth Advisors in Los Angeles.
are higher than in pre-pandemic days. “Investors leaned so far from bonds
How Did We Get Here? And How Long Do One kind of debt worth keeping an that their portfolios were sometimes
We Have to Stay? eye on is the short-term “buy now, pay entirely stocks.”
The federal funds rate is what banks later” borrowing offered through retailers In fact, many bond funds took painful
charge one another to lend money and phone apps. These programs pro- losses in recent years, because the mar-
overnight, and the costs of other loans liferated during the near-zero-rate era, ket value of existing bonds falls when
are built on top of that. The so-called offering easy terms as long as they were interest rates rise. But now yields are
◼ ILLUSTRATIONS BY TIMO LENZEN

prime rate, or the base rate for credit paid back on time. But costs can shoot strong, even after inflation, giving inves-
card and other consumer loans, is up if you miss payments, and some bor- tors a cushion. “It’s much easier to have
up to 8.5% from 3.25% at the end rowers seem to be struggling to juggle a balanced portfolio with a substantial
of 2021. In the same time frame, the their obligations across multiple BNPL amount of fixed income,” Damsky says.
average 30-year mortgage rate has programs. An April survey for Bloomberg “Those nearing retirement can return
risen to around 7% from about 3%. News by Harris Poll found that 43% of to balanced portfolios and sleep well

August 2024 In Depth 41

 knowing that fixed income can deliver stocks and, of course, in bonds. Higher enough to keep you from buying, it’s
real returns while serving as a hedge rates on fixed income also make rebal- wise to be more conservative on how
against troubles in the stock market.” ancing a portfolio grown fat on appreci- much you spend. Anthony Syracuse, a
ated stocks more palatable. wealth adviser and founder of Dynamic
Stocks Are a Little Weird Now “For an investor wanting to rebalance, Financial Planning in Scotts dale,
Hedging might seem counterintuitive, sitting on a lot of gains from equities and Arizona, tells clients to think about the
because the S&P 500 continues to on tech stocks in particular, there’s no potential long-term trade-off in their
reach new highs this year. That’s not in better time than the present to lock in budgets if rates don’t come down a
keeping with the typical economic script risk-free returns on cash in excess of lot. “If rates held, you’d pay as much in
for higher rates; normally one could 5%,” says Greg McBride, chief financial interest over 30 years as you did for the
expect increased borrowing costs to analyst at Bankrate.com. home,” he says. And though the price
eat into corporate profits and slow eco- appreciation of the past few years has
nomic growth. And the low-risk returns Housing Is Even Weirder clients excited about potential returns,
At today’s average rate, the monthly he says, “a lot of people don’t consider
payment on a new $500,000 home loan the 20- to 30-year holding periods,
is $1,200 higher than on a mortgage and all of the maintenance, repair and
taken out in 2021. You might think home remodeling expenses that dramatically
prices would get cheaper to adjust to bring down the annualized return.”
this affordability squeeze, but it hasn’t The tight housing market has some
happened. Homeowners sitting on 3% buyers looking for hacks to get a lower
mortgages don’t want to give up those mortgage payment. One option getting
rates, so they’re reluctant to sell their more attention is a rare type of loan that
houses, squeezing supply. allows a buyer to take over the existing
A New York Fed survey earlier this loan of the seller, including its interest
year found renters saying there’s a 60% rate. But these so-called assumable
likelihood they’ll never own a home—the mortgages can be tricky to arrange. For
highest reading since the survey started one thing, you’ll need to be able to pay
that investors can make by buying bonds a decade ago. Renting is now cheaper the seller enough in cash to replace the
now ought to make them more skeptical than owning a typical home in all but equity they’ve built up in the home. This
of paying high prices for stocks with one of 35 major metro areas in the US, may require a second mortgage on top
uncertain gains far in the future. according to data from real estate bro- of the one you’d be assuming.
But investors have a very big vision of kerage Zillow Group Inc. Data for April Other options include adjustable-
the future in their mind—and it’s overrid- showed owners paying 35% of income rate mortgages and loans that require
ing quotidian concerns about rates. With on housing, versus 29% for renters. only interest payments in the early
artificial intelligence promising huge There are still benefits to home- years. Although these mortgages have
changes in the economy, technology ownership, the most important of lower costs upfront—and in theory can
stocks are on a tear. Even after a recent which is protection from future rent be refinanced later at a fixed rate—they
dip in price, semiconductor giant and AI increases (though not from property tax also have risks. Rates might not come
darling Nvidia Corp. is responsible for increases). And there’s a decent chance down, exposing you to higher payments
more than 32% of the S&P 500’s roughly you’ll be able to refinance at a lower later, and with interest-only loans you
14% gain for the year as of June 28. rate later. But even if higher rates aren’t won’t be building equity. (Many home-
The 10 most valuable companies on the owners got in trouble with adjustable
S&P 500—most of them tech-related— mortgages in the 2007-08 housing
make up a record 35% of the index. crash.) Keith Gumbinger, vice presi-
This tech boom has been driven by dent at the mortgage and consumer
impressive earnings but also by that loan information company HSH.com,
dazzling story about AI. If confidence in says that such loans can offer greater
that story wobbles, richly valued stocks flexibility, but lenders aren’t pricing
are likely to as well. It’s difficult to antic- them very attractively right now. “There
ipate such turns, and trying to time the are at least some concerns that tight
market is a notoriously losing strategy Fed policy may slow the economy,” he
for most investors. But the concentra- says. “And that could potentially lead
tion of gains is, if nothing else, a reason to loan losses creeping higher in the
to check whether you’re still as diversi- coming years.” Take that as a yellow
fied as you want to be—in other kinds of caution light. <BW>

42 In Depth Bloomberg Businessweek

 Where the
How investors learned to like stocks again

● By Dorothy Gambrell

It’s a tale of two trends: more (and younger)

Money Goes
Americans buying stocks directly, and the giant
that is retirement investing. Almost 60% of
households had exposure to the stock market
in 2022, the last time the Federal Reserve ran
its triennial survey of Americans’ finances.
Many did so through funds and retirement
accounts, but the share of Americans trading
stock directly spiked to 21%, close to the
record set in 2001.
US Households Invested in Selected Assets
Besides bank accounts, retirement accounts such as IRAs and workplace 401(k) plans are the most commonly held financial
instrument. The median value in retirement funds is $86,900, compared with just $15,000 in directly held stocks.

Retirement accounts Directly held stocks Cash value life insurance Investment funds Directly held bonds

50%

Self-directed
retirement funds 40
Direct stock investing
took off as employers
peaked around the
shifted away from
◼ DATA: FEDERAL RESERVE SURVEY OF CONSUMER FINANCES. AGE OF HOUSEHOLD IS DETERMINED BY THE AGE OF THE REFERENCE PERSON, DEFINED BY THE FEDERAL RESERVE

dot-com bubble, then

traditional pensions
waned for years In 2019 some of the
largest brokerages 30
dropped commission
fees in response to
online challengers
AS THE ADULT IN A SINGLE-ADULT HOUSEHOLD, THE MALE IN A HOUSEHOLD WITH A MIXED-SEX COUPLE OR THE OLDER INDIVIDUAL IN A SAME-SEX COUPLE

20

10

1989 1998 2007 2016 2022

Change in Asset Ownership by Age, 2019-22

The share of Americans investing through retirement accounts grew in all age groups. Among younger investors, stock ownership
became much more popular as trading got cheaper and easier—though typical account sizes got smaller.

RETIREMENT ACCOUNTS DIRECTLY HELD STOCKS

◼ Change in share of households holding the asset ◼ Change in share of households holding the asset
◼ Change in median value of holdings ◼ Change in median value of holdings
Under 35 35-44 45-54 55-64 65-74 75 and over Under 35 35-44 45-54 55-64 65-74 75 and over

50% 50%

0 0

-50 -50

August 2024 In Depth 43

The Rich
can be too risky for the average person to back. So the US
Securities and Exchange Commission stipulated that, to be
accredited, an individual would either need to make more than
$200,000 a year or have a net worth of more than $1 million.
Those thresholds gave the government confidence that even

Investor
if an individual made a bad investment, they’d likely have the
means to recover.
But the thresholds haven’t been updated since Ronald
Reagan was president. Now roughly 1 of every 5 American
households could be an accredited investor. In the early

Club
’80s the figure was 1 of every 50. If the accredited investor
thresholds were updated to reflect today’s dollars, the income
requirement would jump to well over $600,000 and the net
worth to more than $3 million. What’s more, some of the
ostensible growth in net worth is linked to the boom in work-

Is Getting
place retirement accounts that investors can’t readily access
without a penalty.
Just as more Americans are finding themselves eligible
to invest in private markets, private market opportunities are
opening for them. It’s not a coincidence: The world’s larg-

Crowded
est alternative asset managers, which have lately seen their

More households than ever qualify as accredited

investors. Asset managers are thrilled, but democratization
has downsides

● By Charlie Wells

Attention, individual investors: You may be eligible for a

status upgrade.
Thanks to recent rising markets—paired with elevated infla-
tion and some very vintage rules—the number of Americans who
qualify as “accredited investors” has skyrocketed to an all-time
high. Accreditation gives individuals access to riskier, less regu-
lated assets. This includes private markets that have long been
the domain of endowments, pension funds and other “smart
money” types. It opens doors to the historically exclusive ech-
elons of private equity, credit and real estate placements. But
this expansion of access, with its tantalizing promise of greater
returns, comes with a key question: Is it worth joining a club that
would have you as a member?
Current rules for investing in private markets date back to
1982. They were intended to give a small subset of supposedly
more sophisticated, demonstrably flusher investors access to
private or limited offerings. Young, small firms need capital but

44 In Depth Bloomberg Businessweek

 sources of institutional funding dry up, are setting their sights Blackstone Inc. arrived early, as far back as 2017, with the
on the individual investor. likes of the Blackstone Real Estate Income Trust, known as
“It’s very much a democratization,” says Or Skolnik, a part- BREIT. The alternative manager has raised more than $4 bil-
ner in consulting firm Bain & Co.’s private equity and alterna- lion for the Blackstone Private Equity Strategies Fund, a new
tive investors practice. “It’s not yet a full, equal playing field private equity fund for wealthy individuals. Competitors are
between, say, the most sophisticated sovereign wealth fund circling, with KKR & Co. and Apollo Global Management Inc.
and the individual investor. But we are on the path, and it’s gone among the biggest names. Many products so far require a
much faster than folks have anticipated.” financial adviser as an intermediary, and some have additional
The numbers explain the speed. According to research by investment requirements, but a platform called Moonfare
Bain, individual investors hold some 54% of the $300 trillion allows individual investors willing to allocate a minimum of
in global assets under management but represent just 16% of $75,000 to invest directly in alternative assets.
assets managed by so-called alternative funds, which include Advisers to the affluent describe something of a FOMO
hedge funds and private equity. And investors who make it into effect on clients at a time when startups are no longer so
the accredited club and points just beyond—those with assets quick to go public.
between $1 million and $5 million—allocate only about 1% of “People playing on a golf course or going to cocktail par-
◼ ILLUSTRATION BY TIMO LENZEN

their net worth to private equity and similar investments. ties in the ’90s would come to me and say, ‘Hey, what’s your
The asset-hungry industry sees an opening and is charging favorite stock?’ ” says Robert Picard, head of alternative
toward it. Blackstone, Apollo, KKR and other large asset man- investments at wealth management firm Hightower Advisors.
agers are seeking high growth, but with institutional money “Today what’s actually happening is, at those same cock-
less available, they want—need—money from wealthy inves- tail parties, people are not talking necessarily about stocks.
tors. New products and platforms are popping up widely. They’re talking about ‘Which fund are you investing in? Which
private investments are you doing? What deals are you in?
Are you in the latest SpaceX round?’ ”
Advisers get the excitement. The deal with private markets
is generally that you swallow liquidity constraints and greater
risk for potentially higher returns than those in the public
markets. Still, in a space where reporting rules are more lax,
it’s hard to assess both performance and composition. That
helps explain why one of the biggest disses in the industry right
now is to call a fund “breadcrumbs”: the leftovers the smart
money didn’t want, packaged up for retail suckers. Fees for
such investments are often very high compared with those for
widely available investments such as exchange-traded funds.
“I hope advisers and clients are discerning, because I
think some of these opportunities can be good,” says Noah
Damsky, principal at Marina Wealth Advisors in Los Angeles.
“But I think a lot of them, they can be a lot of breadcrumbs.”
There’s also the psychology to contend with. Private funds
generally don’t report results with the same rapidity as stocks.
“If you have a bad month, it stings for that full 30 days,” says
John Bovard, owner of Incline Wealth Advisors in Cincinnati.
And liquidity limitations mean clients may invest their
money today but not be able to access it for years, given
that many private funds limit investors’ right of withdrawal to
a small percentage of assets over time. This was illustrated
recently when Blackstone’s BREIT limited withdrawals for
months, after a rush of investors tried to take out their money
amid a slumping real estate market. The fund is now meeting
redemption demands.
This has led Bruce Colin, a wealth manager in Rancho
Palos Verdes, California, to steer clear of private investments
for some clients who might struggle with the mere idea of not
being able to access their money for long periods of time. “If
it’s going to play on their emotional or mental health, I just
wouldn’t even do it,” he says. <BW> �With Ben Stupples

August 2024 In Depth 45

Democratizing
Could “citizens’ assemblies” give ordinary people a voice in
philanthropy or corporate decision-making?

● By Sophie Alexander

On the advice of 50 strangers, Austrian chemical heiress

Marlene Engelhorn is giving away €25 million ($27 million)
of her inheritance to 77 organizations supporting afford-
able housing, closing tax loopholes for the rich and the fight
against climate change.
What she organized, a citizens’ assembly, is an unusual
approach to philanthropy—but it’s not a new one, and it’s not
just confined to philanthropy. A process with roots that date
back to ancient Greece, a citizens’ assembly is based on the
idea that the more democratic way to make an important
→ Engelhorn, decision (as opposed to an elected assembly) is to engage
in Davos,
Switzerland,
a randomly selected group of people
in January who represent those who’d be affected
by the decision, educate them on the
issue and let them vote.
The modern iteration came about
in 2004 in British Columbia, when
the government brought together
161 people to make a decision about
electoral reform. Since then the
model has been replicated around
the world, including in Ireland, where
citizens’ assemblies have been used
in recent years to make decisions
on same-sex marriage and abor-
tion. (Ireland ended up changing
the laws in line with the assemblies’
recommendation to legalize both.)
The nonprofit DemocracyNext
has citizens’ assembly projects
to democratize decision- making
at museums in Germany and in
public- private partnerships in
central Oregon.

Bloomberg Businessweek
 Big Money
Philanthropy, largely an American concept, has followed but not for society or even most shareholders themselves.
a relatively rigid format for most of its modern existence. Take the lobbying of Exxon Mobil Corp. against climate
Usually an uber-wealthy person will take a chunk of their change regulation: If investors were to succeed in persuading
fortune and stick it in a foundation, typically named after the company to ease off, “Exxon’s share price might fall, and
themselves, and from there dictate where and how it they would be a little less well off,” Hart says. “But they would
should be distributed. It’s the power imbalance that made also be living in a better world.”
Engelhorn uncomfortable. “Philanthropy is only to be taken The way Hart and Zingales see it, anyone who has a
seriously when it considers its own abolition,” she says. retirement account or an index fund with Vanguard Group Inc.
She’s not the only person rethinking large-scale giving. or Fidelity Investments is a shareholder in these companies
MacKenzie Scott, the ex-wife of Amazon.com Inc. billion- in a small way. But cumulatively, the Vanguards and Fidelities
aire Jeff Bezos, has become known for making fast-paced of the world are huge shareholders in most companies on the
dispersals with relatively few strings attached, putting trust S&P 500. So how do they make sure their investors’ prefer-
in organizations to decide where the money should go. And ences are being heard?
Melinda French Gates, who left the behemoth and bureau- The professors have made a pitch to a retirement services
cratic Gates Foundation in June, is already experimenting company—they don’t want to name it yet—to organize an inves-
with new ways of giving by ceding $20 million to experts to tors’ assembly. They proposed randomly selecting 150 people,
directly distribute in their fields. each of whom would receive a packet of information about the
Engelhorn says in an interview that she was inspired by issues to be discussed, plus several online educational semi-
the 2020 book Open Democracy: Reinventing Popular Rule nars. After that period of information sharing, the people would
for the Twenty-First Century, by Hélène Landemore, a political get together for a weekend to split into groups led by facili-
scientist at Yale University. Landemore says she’d never seen tators and discuss the issues. Eventually, chosen representa-
anything like Engelhorn’s Guter Rat, or “good council,” as the tives would create guidelines for the fund to follow. Zingales
assembly she started was named. After it was announced, estimates a project like this would cost about $1 million to do
Telos Group, an impact investing and venture philanthropy properly, but he says that’s a drop in the bucket for a company
consultant in Europe, contacted Landemore to explore how it with the resources of a Vanguard.
might use citizens’ assemblies in its work. At the end of the day, all this effort has the goal of democ-
Now, Landemore and researchers at Harvard University ratizing capitalism. “If I am T. Boone Pickens, and I own 5%,
and the University of Chicago Booth School of Business are and I go to the board, the board pays attention,” Zingales
collaborating to rethink how the assemblies might be used says, referring to the late oil billionaire. “If I am Vanguard, and
for investors, too. The idea is that the current setup of share- I represent 25% of your stock, and my investors say that you
holder meetings and boards of directors isn’t doing a good should do X or Y, why should we be treated any differently
job translating the desires of shareholders into corporate than T. Boone Pickens?”
◼ FABRICE COFFRINI/AFP/GETTY IMAGES

behavior. “We don’t know how to give a voice to investors in Of course, democratic processes don’t guarantee any
the right way,” Landemore says. “There’s a demand on the particularly ethical outcomes—look at any number of countries
part of investors that [companies] be less narrowly focused that vote in authoritarian regimes. There’s also been a political
on profit, but it’s not heard.” backlash against fund companies considering environmental
Harvard economist Oliver Hart and Chicago finance pro- and social factors in recent years. But Engelhorn, the heir-
fessor Luigi Zingales say there are many ways companies ess who says she just parted with the bulk of her inheritance,
behave that may be in the best interest of their bottom lines, thinks a new approach to decision-making is worth a shot. <BW>

August 2024 In Depth 47

How Digital Money
Really Works
An interview with Patrick like very similar experiences—tap, tap, the money going in and out of the vault,
McKenzie, who’s built a following tap, my money moves. But under the you would, one, assume they’re getting
explaining the infrastructure of hood, there are complicated legal and paid exorbitantly for doing this, and, two,
modern finance technical substrates that are different ask why we have to keep bailing them
from each other. out. The answer is they’re not simply
● By Teresa Xie What’s most misunderstood about vault guardians. They’re doing a fairly
financial transactions? complex form of alchemy to turn large
If you have a burning question about People broadly assume their money portions of the economy into money—
how money works, Patrick McKenzie is sitting in a vault somewhere, and into this thing we can access at will, on
probably has the answer. The software it’s something they own, but their our phones and by our cards.
engineer/blogger/vaccine database money is usually a debt by some Are there big differences between
founder’s widely read newsletter, Bits other party in the economy to them. sports gambling sites like FanDuel and a
About Money, is dedicated to thinking That confusion between money as an stock trading app like Robinhood?
about the often-misunderstood asset and money as a debt—and how I think innovation in financial
concepts at the intersection of tech money is sometimes
and finance—or, as he puts it, “the simultaneously an asset
modern financial infrastructure that the and a debt—drives a
world sits atop of.” lot of the confusion

◼ PHOTOGRAPH BY TAYLOR EMREY GLASCOCK FOR BLOOMBERG BUSINESSWEEK. ILLUSTRATION BY BROWN BIRD DESIGN
McKenzie started his career as a among nonspecialists
“salaryman” in Japan, working 19-hour about how the financial
days before quitting to work for himself; ecosystem works.
now he advises payment processor What are the
Stripe Inc. in addition to software and consequences of
writing work. His real passion, though, people assuming their
seems to be making sense of what money is just sitting in a
happens when you tap “pay” on your vault somewhere?
phone. Our conversation with him has I think it informs a lot
been edited for clarity and length. of discourse about the
banking sector. People
What’s the difference between a bank both in broader society
and a digital wallet on my phone? and financial technology
In the mists of prehistory, there was circles are critical of
essentially one place to hold money. It the banking sector,
was in an account at a bank, and all of particularly after 2008.
your ways to access the money were It’s not that banks have
mediated by that bank. Life has become never done any wrong,
much more complicated, with a plethora but if you assume they’re
of apps that present different things simply supposed to be
on your phone, but that to the user feel guardians that count up

48 In Depth Bloomberg Businessweek

The Business of a Popular Payment App that the app is designed to help users
make informed investment decisions.]
When you buy something online, you

① Money Moves
Into Venmo
Venmo (part of PayPal
have all these card and payment options
in front of you when you check out. Why
are there so many different ways to pay?
Holdings Inc.) typically pays That number is going to increase
a fee when a consumer over time. For a very long time in
transfers money using a the US, there were 2.5 logos. It was
card or bank account. Visa, Mastercard and then maybe
Amex. We’re going to see more logos,
because facilitating commerce is
fundamentally a very valuable business

② Money Moves
Within Venmo
When money moves
to be in. And increasingly, over the last
couple years, businesses that did not
construe themselves to be truly in the
between two Venmo users, financial industry have discovered that
it costs the company if you have a business which is well-
nothing—it’s just an update loved by consumers, that facilitating
to a ledger. Businesses that their ability to make payments to you
accept Venmo pay it a fee. and others is just an excellent, excellent
business to be in. Both because of the
direct fee you can charge either to
the consumer or someone else, and

③ Money Moves
Out of Venmo
Venmo pays a fee to transfer
because the users who engage with
you in payments are going to intensify
their engagement with you.
money to a user’s bank. Historically, only the largest
That’s free for customers companies in capitalism could afford
if they can wait as many to do this. Apple and Google, most
as three days, but there’s famously, discovered that they have this
a fee if they want the cash wonderful piece of glass and plastic
instantly. If a business takes that people have in their hands every
a Venmo-branded card, it day for large portions of the day, and
pays a fee to Venmo and the that if they put payments into that piece
bank issuing the card. of glass and plastic, then that both
causes them to have a direct revenue
line associated with payments and
causes the user to transact more of
technology is largely pro-social. I think about the product. It was abundantly their economic life onto the surface the
it was a true fact that many banks in obvious from their advertising tech company controls.
the US, for a variety of structural and campaign. And it’s abundantly obvious So even if Apple and Google were
technical reasons, did not really invest from reading their quarterly and able to charge zero for transactions,
in giving users beautiful, easy-to-use annual reports and seeing how their they would prefer those transactions
affordances for accessing their own bread is actually buttered—where, for to occur over the internet on devices
money. And I think that has improved example, a large portion of revenue they controlled, connected to their
rapidly over the course of the past is due to options trades, which advertising ecosystems, versus
10 years. However, not everything retail consumers, and particularly having those transactions occur off
you can put a beautiful application the retail consumers Robinhood the internet. That logic applies to the
and design on top of is actually in the attracts, should not be making. [In a largest firms in capitalism. But because
customer’s interests. statement to Bloomberg, Robinhood the scale you need to launch a new
Robinhood is a gambling app that Chief Brokerage Officer Steve Quirk payment method and to get it accepted
wears the clothes of a responsible said that any comparison between by various places has been decreasing
financial institution. It was abundantly Robinhood and gambling apps is a over time, that on the margin brings
obvious from the way they used to talk “complete mischaracterization” and more firms to this business. <BW>

August 2024 In Depth 49

What Trump means
for business, the
economy and the
world order

By Nancy Cook, Photograph by

Joshua Green and Victor Llorente
Mario Parker
50 Bloomberg Businessweek
 ◼ PHOTO: ◼ DATA:

Month 2024
51
It’s late June, and Donald Trump is plotting his next presidency back to William McKinley, who he says raised enough revenue
in the gilded offseason isolation of the Mar-a-Lago Club. The through tariffs during his turn-of-the-20th-century presidency
adoring club members may have decamped to cooler climates, to avoid instituting a federal income tax yet never got the
but Trump is still in a good mood. appropriate credit.
Polls show a very tight race between him and President Joe And Trump (who has a proclivity to lie) insists he won’t par-
Biden, but his fundraising is through the roof. It’s also now clear don himself if convicted of a federal crime in the three federal
his 34 felony convictions haven’t upended the race. A big shock cases pending against him: “I wouldn’t consider it.” He may not
will come two days later, at the first presidential debate, and it have to—on July 15, a Trump-appointed federal judge dismissed
will be Biden who’s left reeling. Then a bigger one will arrive charges that he mishandled classified documents. (The special
on July 13, when Trump narrowly dodges an assassin’s bullet. counsel swiftly announced he would appeal the decision.)
The Mar-a-Lago sitting room features a soaring red balloon The broad strokes of Trumponomics might not be different
tower dotted with giant gold ones reading “47,” shorthand for from what they were during his first term. What’s new is the
the next president—a gift from a local admirer who affixed a speed and efficiency with which he intends to enact them. He
card gushing over “the best commander in chief America has believes he understands the levers of power much more deeply
ever known.” At Trump’s insistence, a staffer fetches the hot now, including the importance of selecting the right people for
new fashion item he enjoys showing guests: a red MAGA-style the right jobs. “We had great people, but I had some people that
cap emblazoned with “Trump Was Right About Everything.” I would not have chosen for a second time,” he says. “Now, I
Outside Mar-a-Lago’s gates, the rest of the world isn’t so sure. know everybody. Now, I am truly experienced.”
There’s worry about what another Trump presidency could Trump views his economic message as his best route to
portend. Wall Street firms from Goldman Sachs to Morgan trouncing the Democrats in November, with Republicans devot-
Stanley to Barclays have begun warning clients to expect higher ing the opening night of their presidential convention to the
inflation as Trump’s odds of recapturing the White House and theme of “wealth.” He’s betting that his unorthodox agenda of
imposing protectionist trade policies have risen. Giants of the tax cuts, more oil, less regulation, higher tariffs and fewer for-
American economy such as Apple, Nvidia and Qualcomm are eign financial commitments will appeal to enough swing state
grappling with how further confrontation with China could voters to hand him the election. It’s also a gamble that voters
affect them and the chips everyone relies on. Democracies will overlook the negative traits that characterized his first term
across Europe and Asia worry about Trump’s isolationist in the White House: the personnel fights, the 180-degree policy
impulses, his shaky commitment to Western alliances and his shifts, the 6 a.m. social media pronouncements. And of course
relationships with Chinese President Xi Jinping and Russian there’s the matter of the attempted insurrection on Jan. 6, 2021.
President Vladimir Putin. And while polls universally show that Already, polling shows signs that Black and Hispanic men are
American voters favor Trump’s stewardship of the economy shifting to the Republican Party as they tire of historically high
over Biden’s, it’s unclear to many exactly what they’ll get if they prices for food, housing and gas. As many as 20% of Black men
opt for another round with him. now back Trump, though some pundits think those numbers
He waves away such concerns. “Trumponomics,” he says, are overstated. Either way, Biden is struggling to sell key voters
equates to “low interest rates and taxes.” It’s “tremendous on his economic record, which includes a very low unemploy-
incentive to get things done and to bring business back to our ment rate and rising wages. He’s also facing down panic over
country.” Trump would drill more and regulate less. He’d shut his age. Trump could win in November, and many Democratic
the Southern border. He’d squeeze enemies and allies alike leaders are increasingly concerned he’ll deliver Republicans
for better trade terms. He’d unleash the crypto industry and control of the House and Senate along with the White House.
rein in reckless Big Tech companies. In short, he’d make the In that case, he’d have unprecedented leverage to shape the
economy great again. US economy, the climate for global businesses and trade with
That’s the sales pitch, anyway. The plain truth is that no one allies. His first term demonstrated that he prefers to work one-
really knows what to expect. So Bloomberg Businessweek went to on-one, which would give the CEOs and world leaders who have
Mar-a-Lago in Palm Beach, Florida, to press Trump for answers. the best relationships with him an advantage while leaving his
In a wide-ranging interview on business and the global enemies falling short, and perhaps even fearful of what he’ll
economy, he says that, if he wins, he’ll allow Jerome Powell to do. If one thing stands out from Businessweek’s interview with
serve out his term as chair of the Federal Reserve, which runs Trump, it’s that he’s fully aware of this power—and he has every
through May 2026. Trump wants to bring the corporate tax rate intention of using it.
to as low as 15%, and he no longer plans to ban TikTok. He’d
consider Jamie Dimon, chairman and chief executive officer of On the US Economy
JPMorgan Chase & Co., to serve as secretary of the Department Trump, in a dark suit and tie, holds court in the cool afternoon
of the Treasury. darkness of Mar-a-Lago’s chintz-and-gold sitting room, keen as
Trump is cool to the idea of protecting Taiwan from Chinese always to play the magnanimous host. He takes it upon himself to
aggression and to US efforts to punish Putin for invading order a round of Cokes and Diet Cokes for his visitors, then gets
Ukraine. “I don’t love sanctions,” he says. He keeps circling down to explaining how he’d govern if reelected in November.

52 Bloomberg Businessweek
“Now, I know everybody.
Now, I am truly experienced”
Business leaders prize stability and certainty. They didn’t get wages have gone way down. Their jobs are being taken by the
much of either in Trump’s first presidency. This time around, migrants coming in illegally into the country.” (According to
his campaign is more professionally run, but he hasn’t pro- the US Bureau of Labor Statistics, the majority of employment
duced a detailed economic policy agenda to reassure them. gains since 2018 have been for naturalized US citizens and legal
The vacuum has generated confusion among those who are residents—not migrants.)
planning for a second Trump term. Trump’s language turns apocalyptic. “The Black population
In late April, a few of Trump’s informal policy advisers in this country is going to die because of what’s happened,
leaked to the Wall Street Journal an explosive draft proposal what’s going to happen to their jobs—their jobs, their housing,
to severely curb the independence of the Federal Reserve. It everything,” he continues. “I want to stop that.”
was broadly inferred that Trump had endorsed the idea, which Drilling for oil aside, Trump hasn’t detailed a plan for low-
didn’t seem like a stretch given his prior attacks on Powell. In ering prices. His personal conviction that the robust tariffs he’s
fact, the Trump campaign insisted he’d endorsed neither the proposing will produce a US windfall isn’t shared by mainstream
proposal nor the leak, and his top campaign brass were furi- economists, who warn that they’ll spur further inflation and
ous about it. But the episode was a consequence of Trump’s amount to a tax increase for US households. A report from the
still-unformed policy, which has left wonks from such think Peterson Institute for International Economics estimates that his
tanks as the Heritage Foundation battling to fill in the details tariff regime would impose an additional annual cost of $1,700
and jockey for influence. Other conservative policy entrepre- for the average middle-income family. And Oxford Economics, a
neurs have been pushing proposals to devalue the dollar or nonpartisan research group, estimates that Trump’s combination
institute a flat tax. of tariffs, immigration restrictions and extended tax cuts could
At Mar-a-Lago, Trump makes it clear he’s fed up with the also increase inflation and slow economic growth. The through
unauthorized freelancing. “There’s a lot of false information,” he line of these policies, says Bernard Yaros, lead US economist at
complains. He’s eager to set the record straight on several topics. Oxford Economics, is “an increase in inflation expectations.”
First, there’s Powell. He told Fox News in February that he Then there’s the budget deficit. Trump’s desire to renew
wouldn’t reappoint the Fed chair; now he states unequivocally his landmark 2017 Tax Cuts and Jobs Act—estimated price tag:
that he’ll let Powell finish his term, which would last well into $4.6 trillion—and to further reduce corporate taxes doesn’t pencil
a second Trump administration. out to a balanced budget in any way that he or his advisers have
“I would let him serve it out,” Trump says, “especially if I yet explained. Coupled with the upward pressure on interest
thought he was doing the right thing.” rates economists expect from his protectionist policies, Trump’s
Even so, Trump has thoughts on interest-rate policy, at plans could exacerbate the country’s growing debt burden.
least in the near term. The Fed, he warns, should abstain from In the end, however, Trump’s other positions could be
cutting rates before the November election and giving the enough to sway business leaders to his side. Harold Hamm,
economy, and Biden, a boost. Wall Street fully expects two a Trump donor and the executive chairman of oil giant
interest-rate cuts before the end of the year, including one, Continental Resources Inc., writes in an email: “There seems to
crucially, before the election. “It’s something that they know be outright hostility to free markets in the Biden Administration.
they shouldn’t be doing,” he says. As a result, capital is parked on the sidelines. Why? Because of
Next on his mind: inflation. Trump has been endlessly crit- regulatory uncertainty and in some cases downright regulatory
ical of Biden’s stewardship of the economy. But he sees, in the hostility toward certain sectors.” Hamm cites the pause Biden
anger generated by high prices and interest rates, an opportu- put on liquefied natural gas projects in January as one example.
nity to woo voters who typically don’t support Republicans, “When Trump is re-elected,” he predicts, “that capital that was
such as Black and Hispanic men. Trump says he’ll bring down parked on the sidelines will be unleashed once again.”
prices by opening up the US to more oil and gas drilling. “We
have more liquid gold than anybody,” he says. On US Business Leaders
Third is immigration. He believes harsh restrictions are key Corporate America is still adjusting to the likelihood of Trump’s
to boosting domestic wages and employment. He character- return. Privately, many CEOs aren’t thrilled. “They can’t stand
izes immigration restrictions as “the biggest [factor] of all” in him,” says Jeffrey Sonnenfeld, a Yale School of Management
how he’d reshape the economy, with particular benefits for professor who runs a leadership institute for CEOs and speaks
the minorities he’s eager to win over. “The Black people are regularly with many top executives. Nevertheless, they recognize
going to be decimated by the millions of people that are coming that a shotgun remarriage could be in the offing.
into the country,” he says. “They’re already feeling it. Their On June 13, Trump met privately in Washington with

August 2024 53
 dozens of the country’s most prominent chief executives, a in 2017 he slashed the corporate tax rate “from 39% to 21%”
group that included JPMorgan’s Dimon, Tim Cook of Apple and (actually from 35% to 21%) and vowed to push it lower still, to
Brian Moynihan of Bank of America. The occasion was a “fire- 20%. “They loved it, they were happy,” he recalls. He adds that
side chat” put on by the Business Roundtable, a nonpartisan he wants to cut the rate even lower than that: “I would like to
lobbying group. The gathering brought Trump face-to-face with get it down to 15.”
a number of corporate leaders with whom he’s long had a vexed But Trump is also aware that whatever “love” the CEOs might
relationship. Many were leery of him from the outset of his have expressed was ultimately driven by self-interest: They can
presidency; some spoke out publicly after the Jan. 6 attacks on read election polls like everyone else. “Whoever’s leading gets
the US Capitol by his supporters. Cook, Dimon and Moynihan all the support they want,” he says. “I could have the personality
all condemned the violence, with Cook calling it “a sad and of a shrimp, and everybody would come.”
shameful chapter in our nation’s history.” Yet just weeks after a This wasn’t always the case. With Trump disgraced and seem-
Manhattan jury convicted Trump of 34 felonies, everyone duti- ingly finished in politics after his efforts to overturn the 2020
fully assembled to commune with him—an unmistakable sign presidential election, the Republican business community was
of the shifting power dynamic. part of a coalition eager to anoint a new standard-bearer for the
Trump is highly attuned to his standing with America’s party. It began lavishing money and attention on a rising gener-
corporate chieftains, and he vacillates between wanting their ation of business-friendly politicians, led by Florida Governor
approval and hoping to bend them to his will. At Mar-a-Lago, Ron DeSantis, former South Carolina Governor Nikki Haley
when he’s presented with the July issue of Businessweek, fea- and Virginia Governor Glenn Youngkin, who has also served as
turing LVMH Louis Vuitton Moët Hennessy SE CEO Bernard co-CEO of the investment firm Carlyle Group Inc. But in 2024,
Arnault on the cover, he refers to Arnault, one of the world’s DeSantis’ presidential campaign collapsed, Haley’s petered out,
richest men, as “an incredible guy, a friend of mine I think,” and Youngkin’s never took place. Business leaders were shocked
and asks whether this relationship had come up. (It hadn’t.) and crestfallen as Trump cruised to the nomination.
Trump bristles when it’s pointed out to him that no Fortune “Everyone read this wrong,” says Liam Donovan, a Republican
100 CEO has publicly contributed to his campaign. (Since then, business lobbyist. “There was a core assumption that Trump was
Elon Musk has pledged financial support.) And he’s still smart- finished. But DeSantis was never going to be the guy, nor was

◼ ROLLINS: DREW ANGERER/GETTY IMAGES. LIGHTHIZER: AL DRAGO/BLOOMBERG. MCMAHON, HASSETT: JOSHUA ROBERTS/BLOOMBERG. KUDLOW: JOE RAEDLE/GETTY IMAGES.
ing from CNBC’s coverage of the Business Roundtable meeting, Haley. People saw an opportunity to turn the page, tried to make
which featured quotes from an anonymous CEO who slammed it happen, and it didn’t happen. The base wanted Trump.”
Trump as “remarkably meandering” and “all over the map.” Trump famously carries grudges: At a conservative political
On the contrary, the meeting was “a lovefest,” Trump insists. conference last year, he pledged to deliver “retribution.” But
“I will tell you when I’m not loved, because I feel that better than asked at Mar-a-Lago whether he’ll go after CEOs he dislikes, he

BESSENT: STEFANI REYNOLDS/BLOOMBERG. VOUGHT: ELIJAH NOUVELAGE/BLOOMBERG. LAFFER: DANIEL BRENNER/BLOOMBERG VIA GETTY IMAGES
anybody,” he says. “CNBC called and apologized to me, because demurs. “I don’t have [plans for] retribution against anyone,”
they found that we had a great meeting.” (A CNBC spokesperson he says.
writes: “We did not apologize. We spoke to the former president He does rekindle long-running feuds with Meta Platforms
about keeping the lines of communication open.”) Inc. CEO Mark Zuckerberg and Amazon.com Inc. founder
Trump says he reminded the assembled executives that and Washington Post owner Jeff Bezos. Bezos, whose newspaper
kept a running tally of false claims Trump made while president
(it reached 30,573), draws particular ire. Trump says he has “done
Trump’s Economics Team a great disservice to himself” and made “a lot of enemies” with
The former president has put promises for higher tariffs, lower taxes and his ownership of the Post.
a sweeping crackdown on immigration at the center of his campaign. For all his corporate critics and enemies, Trump doesn’t
The behind-the-scenes brain trust advising him on those policies comes
from Wall Street, academia and conservative think tanks including the lack support in the boardroom or on Wall Street. “The Trump
Heritage Foundation, the America First Policy Institute, the Center for economy was very good,” says Scott Bessent, CEO of Key Square
Renewing America and the Conservative Partnership Institute. Some of
the advice is formal, some is informal, and some is conflicting. Capital Management LLC and a top Trump donor. “It worked for
Trump’s campaign makes it clear that nothing is policy unless the people at the top and at the bottom. The market was good. Real
candidate says so. Still, if he does return to the White House, at least
some of the personnel and policies will follow him. Here’s a snapshot of wages increased. It was a very good time.”
his economic whisperers:

Brooke Rollins Linda McMahon Robert Lighthizer Larry Kudlow

Rollins, based in Served under Trump A former US trade The former National
Texas, is president as head of the Small representative under Economic Council
and chief executive Business Administration. Trump, he’d likely play director. Kudlow
of the America First She chairs the AFPI a central role in a new continues to talk to
Policy Institute (AFPI), and has been among administration—possibly Trump informally. He’s
which was set up to promote those laying the groundwork for as Treasury secretary. A noted China effusively praised Trump’s 2017
Trump’s economic agenda—and has Trump’s potential return to the White hawk, he has Trump’s ear on trade corporate tax cut and recently
been described as Trumpworld’s House. She was previously president and other economic matters. He lives interviewed him on stage before an
shadow government. Formerly and CEO of World Wrestling in Florida near Mar-a-Lago. audience of CEOs.
Trump’s director of the Domestic Entertainment Inc.
Policy Council.

54 Bloomberg Businessweek
 Other prominent CEOs who don’t identify as Trump partisans government programs such as the New Deal (“the whole thing
have also been praising his presidency. “Be honest,” Dimon said with the parks and the dams”) and unjustly poisoned an impor-
at the World Economic Forum in Davos, Switzerland, in January. tant tool for economic statecraft. “I can’t believe how many peo-
“He was kind of right about NATO, kind of right about immigra- ple are negative on tariffs that are actually smart,” Trump says.
tion. He grew the economy quite well. Tax reform worked. He “Man, is it good for negotiation. I’ve had guys, I’ve had countries
was right about some of China. … He wasn’t wrong about some that were potentially extremely hostile coming to me and saying,
of these critical issues, and that’s why they’re voting for him.” ‘Sir, please stop with the tariff stuff.’”
Trump relishes the compliment. He’s changed his view of the To the consternation of many business and consumer groups,
man he attacked on Truth Social last year as “Highly overrated Biden maintained Trump’s tariffs on China, even increasing ones
Globalist Jamie Dimon” and now says he could envision Dimon, on steel, aluminum, semiconductors, electric vehicles, batter-
who’s thought to be contemplating a political career, as his sec- ies and other goods. “This is going to add price inflation across
retary of the Treasury. “He is somebody that I would consider,” the board, all in the name of ‘tough guy’ election-year politics,”
Trump says. (A spokesperson for Dimon declined to comment.) Yaël Ossowski, deputy director of the Consumer Choice Center,
For all his periodic wrath toward business leaders, Trump a nonpartisan advocacy group, said in May.
appears eager to have them serve in a second administration. In Trumpworld, however, Biden’s actions are seen as vali-
North Dakota Governor Doug Burgum, a former tech CEO, dation that Trump was right—and his Democratic critics were
made Trump’s short list for vice president and is likely to land in wrong—about the threat China poses to the US economy and
his cabinet. Bessent is also a candidate for Treasury secretary. security. Trump is eager to prescribe more of the same medicine,
Trump is even embracing CEOs who, not long ago, were con- including to European allies. In addition to targeting China for
sidered possible challengers. “Glenn Youngkin is prime time,” new tariffs of anywhere from 60% to 100%, he says he’d impose
he says in a post-interview aside. “I’d love to have him in my a 10% across-the-board tariff on imports from other countries,
administration.” And Trump’s ultimate pick as running mate, citing a familiar litany of complaints about foreign countries not
JD Vance, was a venture capitalist for years. buying enough US goods.
Still, many chief executives feel trepidation about a Trump “The ‘European Union’ sounds so lovely,” Trump says. “We
renaissance. Ken Chenault, the former chairman and CEO of love Scotland and Germany. We love all these places. But once
American Express Co., says Trump’s threats have had a chilling you get past that, they treat us violently.” He mentions reluctance
effect on corporate leaders. “People are staying on the sidelines,” in Europe to import US automobiles and agricultural products as
he says, “because they greatly fear that there will be retribu- key drivers of the more than $200 billion trade deficit, a statistic
tion.” Chenault raises another example of that happening during he considers a critical measure of economic fairness.
Trump’s presidency: his opposition to the $85 billion AT&T-Time As with so much else, Trump views trade in personal terms.
Warner merger and concerns he was trying to force a sale of CNN He speaks of it as though it were a private negotiation between
over displeasure with its coverage of his administration. himself and recalcitrant foreign leaders who understand full well
Current CEOs, Chenault says, are terrified of winding up in that they’re exploiting the US and therefore must be curbed. He’s
Trump’s crosshairs: “The fear is real.” animated as he recounts a conversation with Angela Merkel, then
Germany’s chancellor. “Angela, how many Fords or how many
On Foreign Policy Chevrolets are there in the middle of Munich right now?” he
As president, Trump shattered the long-standing Republican remembers asking.
orthodoxy of favoring free trade. He says he’ll go further if He mimics Merkel’s German accent in reply: “Oh, I do not
reelected. At Mar-a-Lago he offers an impassioned defense of believe many.”
US tariffs—he’s been studying McKinley, dubbing him “the Tariff “How about none?” he says he shot back.
King”—to make it clear he intends to ratchet up levies not just on Satisfied that he’s illustrated his point, Trump turns back to
China but on the European Union, too. the Businessweek reporters. “They treat us very badly,” he says.
“McKinley made this country rich,” Trump says. “He was “But I was changing all of that and that culture.” Return him to
the most underrated president.” In Trump’s reading of his- the White House, he suggests, and he’ll finish the job.
tory, McKinley’s successors squandered his legacy on costly Trump’s transactional view of foreign policy and his desire

Kevin Hassett Scott Bessent Russ Vought Arthur Laffer

Former chairman of the Bessent, founder of Policy director for the Laffer is a Reagan-
Council of Economic Key Square Group LP, Republican National vintage champion of
Advisers. Hassett’s a hedge fund, is a Committee, which supply-side economics.
name comes up on prominent Trump has promised to end Known for a famous
shortlists to chair the fundraiser and in line inflation, make the dinner napkin doodle,
Federal Reserve when Powell’s term for a top economic position. He’s US the world’s dominant energy “the Laffer curve,” he was awarded
ends in 2026. Hassett and Trump accused Treasury Secretary Janet producer and usher in “a new age the Presidential Medal of Freedom in
speak often by phone. Yellen of taking “control of monetary of prosperity.” Vought’s biggest 2019 by Trump. The former president
policy” through Treasury issuances. influence: proposals to fire thousands gets a kick out of Laffer and speaks
of career federal employees. with him by phone.

August 2024 55
 to “win” every deal could have ramifications around the the assumption that the United States has other, more urgent
globe—and even rupture US alliances. Asked about America’s national security priorities, and domestic ones as well.”
commitment to defending Taiwan from China, which views the
Asian democracy as a breakaway province, Trump makes it clear On Silicon Valley
that, despite recent bipartisan support for Taiwan, he’s at best During his presidency and afterward, Trump frequently took
lukewarm about standing up to Chinese aggression. Part of his aim at the US tech industry. For much of that time, Twitter
skepticism is grounded in economic resentment. “Taiwan took (now X) was his platform of choice for venting displeasure with
our chip business from us,” he says. “I mean, how stupid are we? companies such as Facebook, Google and Twitter itself, pre-
They took all of our chip business. They’re immensely wealthy.” Elon Musk. In 2020 he signed an executive order reducing legal
What he wants is for Taiwan to pay the US for protection. “I don’t protections for social media platforms under Section 230 of the
think we’re any different from an insurance policy. Why? Why Communications Decency Act of 1996. And his government
are we doing this?” he asks. launched antitrust probes into Amazon, Apple, Facebook and
Another factor driving his skepticism is what he regards as Google—actions carried on and expanded under Biden.
the practical difficulty of defending a small island on the other Trump’s attacks on Big Tech have never been ironclad state-
side of the globe. “Taiwan is 9,500 miles away,” he says. “It’s ments of policy or principle, exactly. Not unlike his tariff propos-
68 miles away from China.” Abandoning the commitment to als, they’ve served at least as much as leverage plays—his staking
Taiwan would represent a dramatic shift in US foreign policy— out negotiating positions that companies and CEOs must respond
as significant as halting support for Ukraine. But Trump sounds to. The central complaint he and Republicans used to make was
ready to radically alter the terms of these relationships. that tech companies were biased against conservatives—shadow-
His views about Saudi Arabia, by contrast, are more amicable. banning them, deplatforming them and (allegedly) suppressing
He says he’s spoken to Crown Prince Mohammed bin Salman Al right-leaning sources in search results. Today, Trump’s focus is
Saud within the past six months, though he declines to elaborate on a more broadly appealing charge: that out-of-control tech
on the nature and frequency of their talks. Asked if he worries companies are harming children—to the point, even, of causing
that increasing US oil and gas production would upset the Saudis, a nationwide epidemic of suicides. “They have become too big,
who wish to maintain their primacy in energy, Trump replies too powerful,” he argues. “They’re having a huge negative impact
that he doesn’t think so, pointing once more to a personal rela- on, especially, young people.”
tionship. “He likes me, I like him,” he says of the crown prince. This position may stem from Trump’s understanding of how
“They’re always going to need protection … they’re not naturally televised drama can shape public opinion. In February, during
protected.” He adds: “I’ll always protect them.” a Senate hearing of tech executives, Zuckerberg was effectively
Trump blames Biden and former President Barack Obama for bullied into apologizing to families in the audience who said
eroding US relations with Saudi Arabia, saying they pushed the social media abuse had driven their children to suicide. It was
country toward a key adversary. “They’re not with us anymore,” an arresting moment, and Trump has harnessed the charge for
he says. “They’re with China. But they don’t want to be with his campaign. “I don’t want them destroying our youth,” he says
China. They want to be with us.” of the social media companies. “You see what they’re doing—
He has reasons beyond American foreign policy for favoring including, even, suicides.”
closer ties with the Saudis. Hundreds of millions of dollars are at Moments later, however, he’s defending many of these
stake for him. On July 1 the Trump Organization and DAR Global same platforms as vital bulwarks against Chinese technological
announced plans to build a Trump Tower and luxury hotel in supremacy. Trump wants to personally dominate the US com-
Jeddah. An investment fund founded by his son-in-law Jared panies, but he doesn’t want foreign competitors replacing them.
Kushner has also taken a $2 billion investment from the Saudi “I respect them greatly,” he insists of the companies he was just
government’s wealth fund. bashing. “If you go after them very violently, you can destroy
Western allies, now familiar with Trump’s personal and mer- them. I don’t want to destroy them.”
curial approach to foreign policy, are taking extensive measures At Mar-a-Lago, the one exception to his claim to not want to
to prepare for his possible return to the White House. These harm US tech companies, and to privilege domestic ones over
include increasing defense spending, transferring control of mil- foreign ones, is TikTok. Discussing his recent embrace of the
itary aid for Ukraine to NATO, racing to improve relationships Chinese-owned social media platform, where he’s already quite
with Trump’s advisers and affiliated think tanks, and reaching out popular, Trump mentions that banning it in the US would benefit
to Republican governors and thought leaders to divine his inten- a company and a CEO he has no desire to reward. “Now [that]
tions. At a NATO summit in Washington, Ukrainian President I’m thinking about it, I’m for TikTok, because you need compe-
Volodymyr Zelenskiy urged allies to act quickly to help his coun- tition,” he says. “If you don’t have TikTok, you have Facebook
try repel Russia’s invasion instead of waiting for the election and Instagram—and that’s, you know, that’s Zuckerberg.” It’s an
results in November to decide what to do. outcome he won’t abide. He’s still stung by Facebook’s decision
Dan Caldwell, a policy adviser at the right-leaning think to bar him indefinitely in the wake of the Jan. 6 attacks. “All of a
tank Defense Priorities, says that “it’s actually in Europe’s inter- sudden,” Trump grouses, “I went from No. 1 to having nobody.”
est to ‘America-proof’ their defense and to start operating on His reversal on cryptocurrency has been marked by similar

56 Bloomberg Businessweek
“Taiwan took our chip business
from us. I mean, how stupid are we?”
dynamics. Not long ago he criticized Bitcoin as a “scam” and a most powerful device ever, in Austin is both a point of pride
“disaster waiting to happen.” Now he says it and other crypto- and a testament to the enduring power of American ingenuity.”
currencies should be “made in the USA.” He frames this about- Cook then gifted Trump a $5,999 Mac Pro, one of the first made
face as a practical necessity. “If we don’t do it, China is going at the Texas factory.
to figure it out, and China’s going to have it—or somebody Had Trump forced Cook’s hand? Doubtful. Apple had orig-
else,” he says. inally announced a year earlier that it would invest $1 billion
Not coincidentally, the crypto industry—spurned by the in a new Austin campus, and Mac Pros had been assembled
Democratic Party, brimming with cash and eager for friends in at existing Texas facilities since the Obama era. Nevertheless,
Washington—has now found its way to Trump. “Thanks largely the episode registered as a positive for Trump and established
to the actions of the Securities and Exchange Commission, the Cook at the opposite end of his personal CEO continuum from
Biden administration has stumbled into becoming anti-crypto,” Zuckerberg. It also created a potential road map for how tech
says Justin Slaughter, policy director at the crypto-focused invest- CEOs might navigate a second Trump term.
ment firm Paradigm. “Given that about 20% of Democrats own “I found him to be a very good businessman,” he says of Cook.
crypto, per polling, and its ownership skews young and non-
White, this was politically unwise.” Trump has moved to fill the On the Uncertain Future
void, declaring in a May speech that he would “stop Joe Biden’s What Trump thinks about American businesses and the
crusade to crush crypto.” The following month he reaped the people who run them suddenly matters more than ever. So
benefits, raising money from Bitcoin miners at a Mar-a-Lago do his views on the Fed, the economy and every important
fundraiser. Trump’s campaign then announced it would “build issue around the globe. The shock of Biden’s faltering debate
a crypto army,” and it now accepts crypto contributions. performance on June 27 supercharged doubts about the presi-
Some in Silicon Valley have learned that the best way to get dent’s cognitive health and plunged the Democratic Party into
Trump to alter his position on something is to appeal to him an existential crisis. It also gave Trump a measurable lead in
directly. That was certainly the case for Tim Cook. In 2019, Apple many polls—and, along with narrowly surviving the assassina-
Inc. looked set to be a victim of Trump’s trade war with China, tion attempt, may have amplified his already formidable sense
with billions of dollars at stake, as the president announced 25% of political inviolability.
import tariffs. He then publicly rejected Apple’s request for an “The debate certainly had a big impact,” he says in a July 9
exclusion. “Apple will not be given Tariff waiver, or relief, for Mac follow-up call, four days before the shooting. “A lot of the states
Pro parts that are made in China,” he wrote on Twitter. “Make are just starting now to come out, and it shows a very big swing.”
them in the USA, no Tariffs!” Asked whether Biden should drop out of the race, he says,
At Mar-a-Lago, Trump speaks fondly of Cook and reveals how “That’s a decision he has to make. But I do think our country
Apple’s CEO persuaded him to relent. He recalls Cook reaching is in great danger whether he stays in or drops out.” On Vice
out privately and asking, “Could I come in and see you?” Trump President Kamala Harris, considered a likely alternative at the
appreciated the gesture of respect from the head of what at the top of a Democratic ticket, Trump says, “I don’t think it would
time was the world’s most valuable company. “That’s impres- make much difference. I would define her in a very similar [way]
sive,” Trump says. “I said, ‘Yeah, come in.’” Trump remembers that I define him.” With months to go before Election Day, there’s
that Cook was straightforward. “He said to me, ‘I need help, you plenty of time for the dynamics of the race to change.
have tariffs of 25% and 50% [on Apple products imported from But even back at Mar-a-Lago, a couple of days before Biden’s
China],’” he recalls. “He said, ‘It would really hurt our business. debate stumble, Trump seemed to be riding this heightened
It would destroy our business, potentially.’” (An Apple spokes- sense of good fortune. When the resort’s longtime managing
person declined to comment.) director dropped by during the conversation, Trump noted
Trump wasn’t looking to do that—mainly, he wanted to with pride that the club would increase its initiation fee from
demonstrate that he could bring manufacturing jobs back to $700,000 to $1 million in October, with four new slots open—a
the US, as he’d promised to do. In his telling, he prevailed upon sign, presumably, of the increased value of proximity to poten-
Cook to expand domestic production. “I said, ‘I’m gonna do tially the next commander-in-chief.
something for you guys,’” Trump recalls, “ ‘but you have to And at the conclusion of our interview, Trump, boastful
build in this country.’ ” Four months later, Apple announced it to the very end, tried to send Businessweek off with that new
was beginning construction on a campus in Austin. The press MAGA hat (“Trump Was Right About Everything”). We politely
release quoted Cook saying: “Building the Mac Pro, Apple’s declined. That’s ultimately for the voters to decide. <BW>

August 2024 57
58 Bloomberg Businessweek
Roblox’s
Predator
Problem
The internet’s biggest recreation zone
for kids is fighting to keep pedophiles
away, and it’s not always winning

By Olivia Carville and Cecilia D’Anastasio Illustrations by Elliot Gray

August 2024 59
 octorRofatnik, known to fans as “Doc,” looked to another gamer, a friend who kept it running in his stead.
almost mayoral in a tall white hat, a red tie and Doc claimed the controversy tripled his earnings. The brag-
D an American flag pin. A smirk was permanently ging, and the efforts to expose him, continued until the spring
plastered on his face as he roamed his domain on of 2022. That’s when Doc disappeared from the internet.
Roblox, the multibillion-dollar gaming platform geared toward Gamers speculated that he’d killed himself. Then, a few
children. His name referred to the villain of Sega’s Sonic the months later, a player sent an alert on Discord: “Doc finally
Hedgehog, but to thousands of players during the first summer got arrested.”
of Covid-19, he was a hero. Posted below was an article from a New Jersey news site,
Doc was the architect of the game Sonic Eclipse Online. with the headline: “FBI: Groomed-For-Sex Indiana Girl, 15,
Anyone can make a game inside Roblox’s digital sandbox, and Rescued After Paterson Man Pays Uber To Bring Her To NJ.”
his bootleg version of Sega’s hit franchise was a runaway suc-
cess. It offered gamers a place where they could sprint across oblox was launched in the early 2000s under the
virtual half-pipes as the eponymous blue hedgehog alongside premise that games were the next frontier for
their friends, for free. R education software. Kids could design multi-
By September 2020 some 36 million people, more than half player online enclaves using a set of building
of them under 13, were on Roblox daily, making it the world’s blocks and a simple coding language. Unlike other companies’
biggest recreation zone for kids. Sonic Eclipse was a bustling complex, graphics-intensive games, Roblox’s were the kind of
cul-de-sac where children could buy virtual Robux currency thing kids might imagine during recess, like Experience Gravity
with their weekly allowance, then use it to get costumes and or Work at a Pizza Place. The platform’s weird, whimsical ethos
morph into cooler characters. Doc claimed to be one of the attracted thousands, then millions of kids, who moved
highest-paid developers on Roblox, boasting about it to his through its worlds as Lego-like avatars with frozen smiles and
community on the chat app Discord. There, thousands of beady eyes, spending Robux to spruce themselves up with
fans who’d filtered over from Sonic Eclipse got to know him as virtual wigs, clothes, dragon tails or wings. Eager to access
Jadon Shedletsky, 28, “a Game Developer, Industry Visionary, young eyeballs, big brands crafted their own games, such as
and a bit braggadocious,” as he wrote in his bio. He was the Gucci Town and Nikeland. Developers received a 30% cut of
California-based younger brother of Roblox legend John any sales, and Roblox took the rest. Bookings last year, mostly
Shedletsky, the platform’s longtime creative director, or so from Robux, reached $3.5 billion.
he said. No one knew what Doc really looked like, but he told With 78 million daily active users today, Roblox has become
anyone who asked that he was buff, with blond hair and teal social media for the youngest generation. Every second,
blue eyes. He said he drove around in flashy cars with a “hot according to Roblox, it processes more than 50,000 chat
Spanish girlfriend.” messages—Hey loser, cute outfit, let’s be friends—through its
Doc’s dark, edgy humor only made him more compelling moderation protocols, a combination of artificial intelli-
to many kids. When he posted a joke about rape, one fan gence technology and human workers that the company says
replied, “10/10.” When he called young girls who helped him scans all user content, including audio and text. Roblox has
develop Sonic Eclipse “sex slaves,” it became a running gag. He about 3,000 moderators, significantly fewer than TikTok,
quipped about being “the old man with kids in his basement.” which has three times the number of daily users but employs
Fans sparred with one another to get on his good side—and 40,000 moderators. (Roblox says the number of moderators
on his payroll. isn’t an indicator of quality.)
Some were also quick to defend his honor in Unlike other mass-market social media apps, which bar
September 2020, when a Sonic Eclipse player posted kids under 13 or shunt them into sanitized versions, Roblox
screenshots on Twitter of a private chat Doc had had was made for children. More than 40% of its users are pre-
with a preteen: teens, and with that market come special hazards.
“You’re 12, I expect you to be a little slow on the Since 2018, police in the US have arrested at least two
upbringing, but soon I’ll corrupt you beyond your dozen people accused of abducting or abusing victims
wildest dreams.” they’d met or groomed using Roblox, according to data
“Words cannot explain what I want to do with you.” compiled by Bloomberg Businessweek. Some were
“You’re the reason why I’m gonna end up already on sex offender registries or had been
behind bars .” accused of abusing minors; there were also a
The person who posted the screenshots was sheriff ’s deputy, a third-grade teacher and a
one of a group of gamers who’d grown tired of nurse. In just the past 13 months there have been
the homophobic, racist and predatory tirades seven arrests, including those of a man in Florida
Doc shared on Discord and had started digging accused of trying to kidnap a teen he played with
into the person behind them. When Roblox Corp. on Roblox; a man charged with abducting an 11-year-old
◼ ROBLOX

learned of the messages, it shut down Doc’s account. New Jersey girl he met on the platform; and a California
But by then he’d transferred ownership of Sonic Eclipse man who allegedly abused a kid he, too, had met on

60 Bloomberg Businessweek
Roblox. These predators weren’t just lurking outside the integration of specific ideas, tools or features is a reflection
world’s biggest virtual playground. They were hanging from of not caring or lack of prioritization is simply wrong,” the
the jungle gym, using Robux to lure kids into sending photo- spokesperson says.
graphs or developing relationships with them that moved to Most of the safety workers interviewed by Businessweek
other online platforms and, eventually, offline. say it’s harder to pursue pedophiles at Roblox than at other
Roblox’s chief safety officer, Matt Kaufman, calls safety online platforms, because every user is an anonymous col-
and civility “foundational” to the company. He notes that the lection of pixels. That’s the thing about catering to children:
platform’s moderation systems scan all chat and other digital You can’t ask for real names, email addresses or phone num-
content, bleeping out inappropriate words and blocking play- bers at sign-up. This protects the privacy of children—but also
ers from sending images. Those systems, which can intervene of predators.
in under a minute, are even more restrictive for kids under 13,
Kaufman says. efore Doc was wanted by the FBI, he was being
He rejects the idea that Roblox has a systemic problem with hunted by a posse of vigilante gamers. They’d
child endangerment and describes the issue as industrywide. B grown up playing Roblox, venting with one
“Tens of millions of people of all ages have a safe and positive another about its poor moderation. They ridi-
experience on Roblox every single day,” he says. He declined culed it for having overly strict chat filters, which they said
to comment on specific criminal cases. sometimes censored innocuous words yet didn’t catch acro-
Yet a number of people who’ve worked for Kaufman say nyms such as “erp” (for “erotic role play”), and for failing to
Roblox is on its back foot in its battle against predators. In detect avatars with absurdly large genitalia or simulating sex
interviews with more than 20 current and former employees— in digital toilet stalls. By 2020 many had lost faith that Roblox
including moderators, engineers and safety managers, all of could prevent predatory behavior, so they began policing
whom requested anonymity because of confidentiality agree- it themselves.
ments or fear of retribution from the company—Businessweek The leader of this pack was Ben Simon, now 27, who
repeatedly heard that while child safety might be the compa- broadcasts about Roblox on YouTube under the pseudonym
ny’s watchword, policing the platform and its 13 million games Ruben Sim from a bungalow in suburban Tucson. “Roblox

“You’re 12…soon I’ll corrupt you

beyond your wildest dreams”
is a Sisyphean task. One moderator says her team receives spends so much time, effort and money convincing parents
hundreds of escalated reports involving child safety every day, that their platform is safer than it actually is,” he says, sitting
far too many for her team to clear. in a gaming room smelling of marijuana and plastered with
Policing will only get harder as the company strives to reach WikiLeaks and rock music posters.
co-founder and Chief Executive Officer David Baszucki’s goal of Simon is a controversial figure. He has mocked Roblox
1 billion daily users, more than 10 times the number today. Eight employees for their physical appearance and sexual
current and former trust and safety workers say user growth preferences and has hurled insults at Baszucki, who blocked
at Roblox takes priority over child safety. They describe calls him on X. Roblox permanently banned Simon when he was 17.
for more resources going unanswered, resulting in a backlog Since then he’s started new accounts, expanding his YouTube
of incident reports and the departure of one manager who subscriber base to 1.2 million even as Roblox has shut him
left after promises for extra staff went unfulfilled. Others say down on its platform at least 100 times. His first videos were
that features they recommended to better protect kids, such cringey satires of its games. Now they have titles such as
as pop-up safety notices, were rejected and that safety set- “Uncovering Roblox’s Nastiest Community” and “Roblox’s
tings, for example to ensure users aren’t talking to strangers, Worst Moderation Problem,” and he makes money from
were switched off by default. And while the company says it’s the ads.
increasingly relying on AI for moderation and those systems are Some Roblox employees say they respect Simon’s efforts;
improving all the time, some employees say the technology isn’t others write him off as a “drama channel”—a bad-faith actor
yet able to detect subtle signs of grooming. who cares more about clicks than kids. But he says users
A Roblox spokesperson disputes the claims about resources desperate for accountability have sent him thousands of
and backlogs. The spokesperson says that safety team mem- complaints, figuring they’ll have better luck getting a creepy
bers are constantly sharing ideas about new tools, that the account shut down if he posts about it than if they file a report
company factors in “various considerations” when deciding with Roblox.
how to build them and that it has a “robust pipeline” of safety In September 2020, Simon started receiving messages
features in development. “Implying that a lack of immediate from the gamers who were seeking to bring Doc down. The

August 2024 61
 as she got older, Berner says, she realized “just how gross it
was for an adult to be talking to me like this.”
Four days after being notified by Simon, Roblox closed
Doc’s account and reported it to the National Center for
Missing & Exploited Children. In the meantime, Doc had
transferred ownership of the game to his friend and created
a new account. One gamer recalls him quoting Eminem after
his return: “Guess who’s back, back again. Shady’s back, tell
a friend.” Doc shared a screenshot on Twitter that October,
after his ban, showing a $15,097.35 payment from Roblox and
scoffed at Simon: “Thanks for driving more money to my
game, man! Jeez, you guys are really f---ing stupid by giving
me all this publicity.” (Roblox says it continued to search for
and ban any alternate accounts but left Sonic Eclipse running
because the game itself didn’t pose any safety concerns. It
also says that DoctorRofatnik cashed out a total of $41,000 in
developer fees in the first eight months of 2020 but that it has
no record of a payment to anyone for $15,097.35 that year.)
Simon sent a message to Roblox railing against what he
viewed as its weak response. “Roblox’s bottom line depends on
parents trusting the company with their kids’ safety and that’s
not going to happen if this is the response to child predators,”
he wrote. He says he didn’t get a reply. He tried reporting Doc
to the Tucson police, but all he could offer was an online alias.
Roblox finally responded to Simon, in a manner of speak-
ing, in late 2021—by filing a $1.6 million lawsuit against him. It
Simon, a vocal vigilante gamer banned by Roblox alleged he was the leader of a “cult-like cybermob” harming
screenshots they sent were of conversations Doc had had the company’s reputation. It also said he’d operated accounts
with young girls who worked for him, including ones detail- with names such as “cockassassin,” tried to upload pictures of
ing fantasies about kidnapping and raping a 12-year-old. After Adolf Hitler and used homophobic slurs inside Roblox games.
Simon reposted the messages on Twitter, vigilantes flooded (Simon says that his “cockassassin” account was created as a
Doc’s accounts, calling him a pedophile. Doc responded with a joke when he was 15, that he never tried to upload pictures
YouTube video defending himself. In his usual style—off-screen, of Hitler and that he probably used a few slurs while playing
with his voice electronically altered—he admitted the messages Roblox as a kid.)
were real but said they were just jokes. With Simon sidelined, others took up his campaign. “If
Simon packaged the allegations and admission into a Roblox wasn’t going to do anything, I had to find a way,” says
seven-minute video and sent it to an employee on Roblox’s Naru, a 22-year-old Japanese gamer who didn’t want her real

“Roblox spends so much time, effort

and money convincing parents that their
platform is safer than it actually is”
developer relations team. He asked the company to shutter name shared publicly for fear of being doxed. She settled on
the DoctorRofatnik account and Sonic Eclipse itself. A num- a different approach, writing to the vice president for product
ber of other users say they also alerted Roblox about Doc’s development at Sega Sammy Holdings Inc., which owns the
account, and so did the mother of the preteen he’d sent the trademarks related to Sonic the Hedgehog, and tweeting at its
messages to. press relations team. Their iconic hedgehog, she said, was
Katie Berner, who’s now 18, says her mother sought advice being misappropriated by a pedophile on Roblox.
from Simon before sending a report “explaining how creepy Sega subsequently filed a copyright infringement notice with
and dangerous it all was.” Berner had started playing Roblox Roblox, and at the end of 2021 the game was shut down. Sega
when she was 6 and was working for Doc by the time she was didn’t respond to requests for comment, but Roblox’s takedown
13. At first, she liked that he gave her so much attention. But notice was shared by gamers online. The irony that Sonic Eclipse

62 Bloomberg Businessweek
 had been brought down by the intellectual-property rights of a any stranger in a game, chat for hours and accept requests to
rival corporation, rather than child safety concerns, wasn’t lost converse in private messages.
on the gamers. “If a predator wants to target younger kids and talk with
Simon settled his lawsuit with Roblox about a month after them to build trust and start the grooming process, Roblox is
the game went dark. Court documents show he agreed to pay an easy way to do that,” says Ron Kerbs, CEO and founder of
Roblox $150,000 without admitting wrongdoing, though he online child safety company Kidas. “Instead of going to the
won’t comment on the terms or whether he paid the com- playground where everyone’s a kid, you go to Roblox.”
pany anything, citing a confidentiality agreement. Roblox also Roblox is available for free on a wide range of devices, from
declined to comment about the case. iPhones to PlayStations to PCs. It takes less than a minute
The same week Simon settled the suit, he got a tip from a to create an account, enter a date of birth and join an all-
fan. Five young sleuths from the US, the UK and Australia had ages-rated game. A Businessweek reporter signed up recently,
discovered one of Doc’s old Facebook pages. It contained a identifying herself as 4 years old, and rezzed into the popular
link to a dormant website, and when they’d looked up whom game Brookhaven RP. Her avatar appeared in a playground
it was registered to, they’d found a name: Arnold Castillo of in a sterile, white city. The first message in a public chat with
Paterson, New Jersey. 21 other players was a user saying, “I’m 8.” The reporter
Simon called Tucson police with the new information, but replied, “I’m 4.”
the report went nowhere. A spokesperson for the force says “#####,” said a user, their message bleeped out. “leVe the
that there wasn’t enough evidence to launch a criminal inves- game and lets chat,” said another. Within seconds, a friend
tigation and that it was outside their jurisdiction. Simon says request arrived and a private chat began.
he hadn’t known who else to call. “U single” the stranger asked. The reporter reiterated that
she was 4.
ho’s playing Roblox?” asks Kirra Pendergast, “Do u have chat,” the stranger asked, referring to
standing in front of 75 students sitting cross-legged Snapchat, which has a ghost logo. “Age is just a number ,”
“W on an auditorium floor at an elementary school in they added.
Lennox Head, Australia. About 60 hands shoot up. On darknet forums, adults looking to groom children for
“Who’s ever been asked to be someone’s boy- abuse trade tips for developing relationships in Roblox chats—
friend or girlfriend on Roblox?” This time a dozen hands go tactics such as misspelling certain words (“leVe” instead of
up, and there’s lots of whispering. “leave”) or using emoji to refer to apps where conversations
“Who’s been offered free Robux to do something inappro-
priate in the game?” Two hands rise slowly. The High Price of Growth
◼ PHOTOGRAPH BY CASSIDY ARAIZA FOR BLOOMBERG BUSINESSWEEK ◼ DATA: ROBLOX, NATIONAL CENTER FOR MISSING & EXPLOITED CHILDREN

The session, captured in a video in May, is like many others As Roblox’s business has expanded, it’s reported more cases of
suspected child sexual exploitation to the National Center for Missing &
conducted by Pendergast, founder and CEO of Safe on Social Exploited Children
Media Pty Ltd., an organization with offices in four countries
that advises schools and businesses about online safety. Daily active users Annual bookings Reports of
suspected child
“I started asking more specific things, like ‘Who’s been sexual exploitation
offered free Robux to strip their avatar down to their undies?’
and heaps of kids put their hands up, giggling,” Pendergast 70m $4b 12k

says in an interview. Hundreds of kids have told her since the

pandemic that they’ve been asked to shift messaging from
Roblox to Snapchat or Discord, or have been dared to do what 40 2 6

she calls “wildly inappropriate things,” such as sending naked

photos in exchange for Robux.
“Parents are letting children play on Roblox thinking it’s a 10 0 0

cute little kids’ game, with no idea what is really happening,” 2019 2023 2019 2023 2019 2023
Pendergast says. “If I could wipe one app off the face of the
Earth right now, it would be that one—it would be Roblox.”
Roblox’s open chat function is a contentious subject among can be unfiltered and photos and videos can be sent (the ghost
child safety experts. Other kid-focused online games, such as for Snapchat, a disc for Discord). One forum user described
Nintendo’s Splatoon 3, offer only preprogrammed dialogue successfully connecting with kids there: “I simply played the
options for talking with strangers. On Roblox an 8-year-old game or was active in the chat section and then hit it off.” Others
can, by default, post whatever they want in a game chat seen offer Robux in exchange for pictures. “Sometimes it worked like
by every other player unless AI censors intervene. It’s left to a charm,” wrote another poster on the same forum.
parents to activate child safety features such as restricting what References to Robux or Roblox gift cards—$25 for
categories of people their kids can talk to, or which games they 2,000 Robux, $100 for 10,000—appear in several police reports
can play. If parents don’t, children can introduce themselves to obtained by Businessweek. In one case, Clinton McElroy, a

August 2024 63
 48-year-old registered sex offender in Ellis, Kansas, met Hinshaw got approval from a judge to access the teen’s
an 8-year-old girl on Roblox in 2020. He traded thousands phone records. The last tower her cell had pinged was in
of Robux for more than 20 explicit images and videos she’d Pittsburgh, 350 miles away. She asked the girl’s family if she’d
shot of herself using her iPad. In one exchange, he wrote, “I been talking to anyone online recently. Yes, her sister said—a
can tell your not really into this.” She responded, “Anything man named Jacob Shedletsky, who was supposedly a popular
for Robux.” game developer on Roblox. Suspect No. 1, Hinshaw thought.
Roblox says the company has no tolerance for predatory The girl had met Shedletsky on Roblox that January, the
behavior on the platform. But the word “grooming” didn’t sister said. She was an artist, and he’d bought one of the draw-
appear in its 2022 moderation guide, a copy of which was seen ings she’d posted on Instagram. After calling her mother to
by Businessweek. And the company didn’t have automated ask for permission, Shedletsky paid $45 through Cash App.
systems in place to proactively search for grooming behavior Then, Amazon packages started showing up on the family’s
beyond basic text filters until that year, according to current doorstep addressed to the teen, containing a teddy bear,
and former employees. Several of them also say senior leaders a tablet drawing stand and a drawing glove. Occasionally
at Roblox haven’t looked at how its virtual currency is being orders from McDonald’s or a Chinese restaurant would arrive
used by predators, even though employees have raised the via DoorDash.
issue with managers. “By the end of that interview, I thought she was with that
A Roblox spokesperson says the company is building out its man,” Hinshaw recalls. “We just had to find him.”
capability and is looking to hire a
financial harms intelligence ana-
lyst. The spokesperson adds that
consumer privacy laws prevent
retailers from sharing informa-
tion on customers who buy gift
cards, making them hard to track.
Predators who do this
have evaded detection. Shane
Patrick Penczak, a 45-year-old
from North Port, Florida, was
charged with sexual crimes
against children in January 2022.
He told police that a 13-year-old
boy he’d met on Roblox had
shared his password so Penczak
could “put gift cards on to his
Roblox account,” according to
a transcript of his taped confes-
sion. In exchange he’d received
hundreds of photos and videos
of the boy showering and per- Hinshaw, an Indiana detective who specializes in sex crimes
forming sexual acts. Penczak, who was sentenced to 13 years, She traced the gifts to the Amazon account of a second
said he’d regularly signed in to the boy’s account to read his man, Nelson Betancur, with a Paterson address, giving her
private messages and pay him—thousands of dollars’ worth of another potential suspect. Then she called the phone number
Robux over three years. the teen’s mom had for Shedletsky. The man who answered
confirmed the name and said he lived in California. He said
◼ PHOTOGRAPH BY JAY GOLDZ FOR BLOOMBERG BUSINESSWEEK

n May 2022, four months after Penczak was that he knew the girl and had sent her gifts but that he didn’t
arrested, a missing-person report was filed in know anything about her whereabouts. Hinshaw recalls that
I Indiana. A 15-year-old girl had disappeared. Her he took a suspiciously long time to provide basic information
favorite electronics, plus charger cables, clothing such as his address and date of birth. When she asked the man
and a blanket, were gone from her bedroom. Her phone was off, why he’d sent the Amazon gifts from a different account, he
and the last thing she’d posted on Instagram was a photo taken said Betancur was a business associate.
from the back seat of a car, captioned “Goodbye, Indiana.” A few days later, Meta Platforms Inc. returned the results of
Stacy Hinshaw, a detective who specializes in sex crimes, a court-ordered search warrant for the girl’s Instagram mes-
quickly realized this wasn’t a typical teen runaway. The girl saging history, and a third name popped up: DoctorRofatnik.
didn’t have the financial means to travel, yet she’d clearly left She’d sent him hundreds of messages. He said he was in love
the state. Someone had taken her. with her and told her “sex is a beautiful thing.” When she said

64 Bloomberg Businessweek
she thought she might be too young for intimacy, he replied, flirting with the teen. He’d been using the handle LastOutlawz,
“You’re not.” On April 25 he wrote: “I want to see you really and their avatars were holding hands or embracing in match-
badly, the only way this is going to work is if you listen to me.” ing T-shirts that read “Boyfriend” and “Girlfriend.” Rothermich
With enough evidence in hand, Hinshaw called the got a search warrant compelling Roblox to turn over chat logs,
Federal Bureau of Investigation and was put in touch with IP addresses and login details for LastOutlawz. In the four
Len Rothermich, a special agent on the child abduction rapid months leading up to the arrest, Rothermich learned, Castillo
response team in Indiana. Rothermich soon discovered that and the girl had exchanged messages on Roblox about her
the girl had logged in to her Instagram account from a new intention to run away from home.
IP address. He called the service provider’s emergency office,
saying a teen’s life was at risk and he needed the account hold- hen executives at Roblox’s headquarters in San
er’s location. When he got it, he saw that the girl had logged Mateo, California, heard what had happened,
in from the same address used to send the Amazon packages. W they formed a team to analyze what had gone
In the early evening of May 11, eight days after the girl wrong. The company says that it didn’t know who
had left Indiana, six unmarked cars carrying uniformed Castillo was before he was arrested, that it didn’t make pay-
officers and FBI agents pulled onto a quiet residential street ments to anyone with that name and that it has no records of
in Paterson. Within minutes they saw her rounding a corner, accounts linked to him.
walking with a man. Officers descended on the pair, separat- But executives knew they had to do something to better
ing them. The girl was taken to a hospital; the man was put protect users. They rolled out a policy permitting Roblox to
in handcuffs and searched. He was carrying three unused boot users who harass people on other platforms or offline.
condoms. They asked him for his name. “Arnold Castillo,” They also gave moderators better tools to identify new
he replied. accounts started by banned users. Within a year the company

“If I could wipe one app off the face of the

Earth right now, it would be that one”
Castillo—22, pale and dumpy, with a thinning brown tangle had created some new roles, too, appointing two child safety
of hair—was taken to an FBI office, where he agreed to an inter- investigators, a child exploitation moderation team and a chief
view without a lawyer. He admitted he’d adopted the aliases safety officer reporting directly to the CEO.
Jacob Shedletsky, Jadon Shedletsky and DoctorRofatnik to hide With a stronger net in place and the pandemic pulling in
his identity. Castillo said that he’d used the Amazon account of millions of new users, Roblox began to catch more incidents.
an uncle in Florida to send gifts to the girl and that he’d cut a In 2023 it reported 13,316 instances of child exploitation to the
side deal with an Uber driver, paying $1,000 to bring her from National Center for Missing & Exploited Children, compared
Indiana to New Jersey. with 2,973 the previous year. The company says it responded
He was a successful game developer on Roblox, Castillo last year to more than 1,300 requests for information from
told the FBI. He had two dozen kids working for him, helping law enforcement, including subpoenas and search warrants,
design characters and manage Robux payments for a game a jump of almost one-third from 2022. It didn’t say how many
he’d created. He described the girl as a promising artist, of those involved alleged predators.
unhappy living at home, and said he’d wanted to help her. Current and former Roblox employees say the company
Castillo admitted they’d had sex multiple times over the eight wants to get safety right. Beyond the moral reasons, there are
days she’d been missing. business repercussions when it doesn’t: After a short seller
Rothermich listened to the interview from Indiana. “I was published a blog post last year that aggregated arrests linked
trying to figure out how all this happened,” he recalls. “How to Roblox, the company’s share price fell 8%. (Roblox says
this girl was willing to leave her home and go with this guy other factors may have caused the drop.) But there’s only so
she doesn’t know, what was enticing about him.” He started much moderators can do. Because Roblox users are mostly
searching Castillo’s alter egos online and was surprised to find children, the company can’t ask them for any personal infor-
not only that he was as popular as he’d said, but also that mation beyond their age, and it can’t ask those under 13 for
a year and a half earlier some teen gamers had sounded an proof of that. The username tab of its sign-up form even
alarm about him. “Seeing what those children did, as far as advises: “Don’t use your real name.”
compiling all this and their ability to identify Mr. Castillo,” he This anonymity shield makes it impossible to know if a
says, “well, they might want to submit some applications to child is pretending to be an adult to sidestep safety guard-
the FBI one day.” rails, or if an adult is pretending to be a child for more sinister
A few weeks after the arrest, Rothermich found screen- reasons. And when no one is who they say they are, it’s harder
shots from Roblox games on Castillo’s phone, showing Castillo to detect suspicious behavior. One safety moderator says it’s

August 2024 65
 common for predators to operate dozens of Roblox accounts Safety workers say those who are pushing for growth want
at the same time, pretending to be children of different ages. as few barriers to entry as possible. And every time the platform
Many safety advocates say Roblox has been able to avoid makes it easier for people to connect, they maintain, it becomes
the spotlight on child safety issues because predators tend to harder to police. “The minute those things were rolled out,”
shift sexual conversations with victims to other, less moderated one former child safety team leader says of the new features for
spaces. These critics consider it an oversight, given that Roblox adults, “our whole team was like, ‘Dear God, no, please Roblox,
can act as a gateway to those other platforms and its users are don’t do this.’ ”
particularly young and vulnerable, that the company wasn’t
called to a congressional hearing in January where the CEOs fter all the bravado and masquerading, Castillo
of social media platforms were questioned about online child cut a pathetic figure at the federal courthouse in
exploitation. (Spokespersons for Discord, Snap Inc., TikTok and A Indianapolis last August, when he pleaded guilty
Meta say their platforms have features intended to keep children to transporting a minor across state lines to
safe. Discord closed the Sonic Eclipse server after Businessweek engage in sex. With that, the web of lies he’d created finally
reached out for comment.) came unwoven.
Roblox has also argued that federal laws protect it from No, he wasn’t the brother of Roblox legend John Shedletsky.
accountability. In two lawsuits brought in the past year by No, he didn’t live in California or drive around in flashy cars
California parents alleging the company deceived them about the with a hot Spanish girlfriend. No, he wasn’t buff with blond
safety of its platform, it cites Section 230 of the Communications hair and blue-green eyes. Reality wasn’t as kind.
Decency Act of 1996, which prevents internet platforms from Born in New Jersey, the son of Spanish-speaking immigrants,
being held liable for what third parties say or do on their sites. In Castillo had been pulled out of school in seventh grade by a con-
one of these cases, filed in state court in San Diego, the lead plain- trolling mother, his attorney said. Despite his lack of education,
tiff alleged that anonymous users were sending her 7-year-old he’d found he had a knack with computers and could “make
son lewd messages via Roblox asking him to show his genitals good money” designing video games. But Castillo had mental
or perform virtual sex. In the other, filed in federal court in San health issues and “zero social confidence,” and he barely left
Francisco in February, plaintiffs say they would never have given the apartment he shared above a garage with his mother, the
their children thousands of dollars in Robux “had they known two of them sleeping in the same bed. He may have been king
that the Roblox platform was founded on the exploitation of their of an online fiefdom, but he had no real friends.
children.” Roblox disputes the allegations and has moved to have Federal prosecutor Tiffany Preston then laid out what
both cases dismissed. investigators believed had happened during the eight-day
A growing chorus of safety advocates, parents, teachers, attor- ordeal. Shortly after the driver dropped off the girl in New
neys and lawmakers is trying to hold tech companies accountable Jersey, Castillo took her to a “teeny, tiny” room he’d rented
for the harms their products have inflicted on children. In June, in the house adjacent to his garage apartment and sexually
US Surgeon General Vivek Murthy called for warning labels on assaulted her, Preston said.
social media sites, like those that appear on alcohol and tobacco There were no blankets or furniture, only a dirty twin
products. And some state and federal legislators have introduced mattress on the floor. The girl was dependent on him for
laws seeking to dilute Section 230 or force tech companies to be food and money. When she complained about being lonely,
more transparent about child safety. Castillo bought her a plushie doll. He also bought her hair dye
With its liability shield under attack and with growth in mind, to change her appearance. Preston called it “every parent’s
Roblox is making an effort to age up its user base. Gamers over worst nightmare.”
13 view it as a place for “little kids,” according to a 2022 internal The victim wasn’t present in court, but her sister was. In a
research presentation seen by Businessweek. “We know Roblox statement she read to the judge, she said the girl had been suf-
becomes less cool as they grow up,” it said. One way to address fering from depression and anxiety since being rescued—“she
that, the presentation read, would be to provide more “mature almost doesn’t want to come out of her room.” She’d lost
experiences.” Adults, in particular, carry less regulatory risk trust in everyone and refused to go to school. “These scars
and control their own bank accounts. In the past year, Roblox will remain with her forever.” The family declined requests
has announced a suite of features for users 17 and up, including for an interview.
avatar video calling and games involving romantic themes and Castillo’s sentence should be severe, Preston argued, to
“heavy bloodshed.” send a message about a bigger social problem. “It’s gained

Roblox has announced new features for

users 17 and up, including games involving
romantic themes and “heavy bloodshed”
66 Bloomberg Businessweek
some attention because it is the poster child for how badly Across three hours, Castillo spoke mostly about his personal
things can go wrong when criminals can use supposed kid-safe history, continually drawing the conversation back to his uncon-
applications to talk to children,” she said. Like millions of ventional childhood. He said he’d built his Shedletsky identity
kids, Preston explained, this teenager loved to play games on on a “mountain of lies,” starting when he was 12. “Everything I
Roblox, and that’s how Castillo had found and groomed her. couldn’t be was superimposed onto him,” Castillo said. “I very
“Predators like the defendant know that children are on these much played a character—and that character is long dead now.”
social media applications. They know they’re on Roblox. And He’d had two years in prison to think about his crimes, and
they are exploiting them every day,” Preston said. he said he was sorry for the pain he’d caused the victim and
The judge sentenced Castillo to 15 years. “We protect kids,” her family. He said he didn’t view himself to have preyed on
he said, “because they can’t protect themselves.” her, even though he knew his actions were now considered “a
textbook case of online predatory behavior.”
n a Friday morning in June, Castillo was escorted Castillo did have a few things to say about Roblox and why it
into a clammy visiting room at the Otisville might appeal to predators. Accessibility, for one. “It’s very easy
O Federal Correctional Institution in upstate New to make an account,” he said. “It’s very easy to play a game”
York. He offered a coy smile and a limp hand- and “very easy for an adult to talk to a young person.” It was
shake. “Hello,” he said in a buttery voice that was nothing like also easy to meet kids on the platform and shift them to less
the robotic tone he’d disguised it with online. Now 24, he was moderated spaces, he said. Roblox needed to tighten its chat
wearing a dark brown jumpsuit over a stocky frame, nowhere restrictions. He recalled simply using the word “cord” instead
near the 6-foot-1 he’d once regularly claimed. His dark eyes of “Discord” to evade the censors.
peered out from behind rectangular glasses. Thin brown hair But it had been a long time since he’d used Roblox, and he
curled into wisps at the nape of his neck. figured he probably never would again. “I think that chapter in
“Not what you were expecting?” he asked. His looks were my life is done,” he said. If he serves his full sentence, he’ll be
still a mystery to most people. His mug shot had been sealed close to 40 by the time he’s released from prison, and he’s had
by the FBI, and all the selfies he’d shared with fans were no work experience beyond developing games on Roblox. That
AI-generated renditions of Jadon Shedletsky, the alter ego morning he’d started his first real job: cleaning the showers in
behind DoctorRofatnik. his cell block. <BW>

August 2024 67
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 charged obsessions, but they can get
extremely exercised by topics such as the
question of whether there should be a
Rivian version of the hand signal that Jeep

LOT owners greet each other with on the road.

(Should you flick the headlights when you

IKE A LE, see a Rivian driver? Or maybe flash a “hang

L PEOP loose” gesture? The Rivian community

has thoughts!) “It’s really positive,” says

OF Hilbert, a regular waver. “That’s what Tesla

was, but it feels like it isn’t that anymore.”
Chris Hilbert has complicated feelings of actually having to fill up a gas tank.) You might assume this kind of quiet
about his Tesla Model S. Hilbert, who is Hilbert didn’t necessarily expect to enthusiasm would be rewarded by inves-
44 and lives outside Indianapolis, loves be blown away by his new Rivian—he’d tors in Rivian Automotive Inc., especially
his car’s instant torque and neck-snapping bought it essentially as a child hauler— amid Musk’s seemingly indefatigable
acceleration, but there are other aspects but he’s been pleasantly surprised. The effort to alienate the upper-middle-class
of Tesla ownership he finds less appeal- electric truck lacks fancy doors, the horn suburbanites who were once his customer
ing. For instance, he doesn’t credit the can’t make a fart sound, and it doesn’t base (and are also Rivian’s). But you’d be
company’s claims that his car is a few promise to one day transform itself into wrong. Even as Musk’s social media antics
software updates away from being able to a “robotaxi.” But it can go from zero to 60 have seemed to undermine his own com-
operate autonomously, and he wouldn’t in three seconds, it handles surprisingly pany at almost every turn—amplifying
particularly care about such a capability, well for its size and it never, ever needs antisemitism and posting wild conspir-
even if it existed. “I like to drive my vehi- gas. Hilbert didn’t initially love the Rivian’s acy theories, while overseeing a nearly
cles,” he says. He’s also put off by the rabid look. Its oval headlights make its front end 40% drop in his company’s stock price
fandom culture that’s come to surround resemble, depending on whom you ask, since November 2021—Rivian has done
everything related to Tesla Inc. and its the Canadian characters on South Park, or even worse, at least by the judgment of
chief executive officer, Elon Musk. the goofy robot in the Walt Disney Co.’s Big the stock market. Since reaching a high
Recently, when Hilbert complained Hero 6, or a Dyson fan. But the unmistaka- in the days after its initial public offering
on social media that his car’s “Full Self- ble design has grown on him. Rivians “are that same month, the company’s market
Driving” system seemed to consistently just fun,” Hilbert says. “They’re the kind value has fallen by more than 90%. Rivian
fail to stop for school buses, he was of big, boxy vehicles that Americans like.” has conducted layoffs every year for the
greeted with a mixture of denial (“Fake Reviewers have generally agreed. Car and last three, most recently parting ways with
news as usual”) and ridicule (“You suck”). Driver described the Rivian R1T as “one 10% of its staff in February.
“The big problem is, there’s Tesla and hell of a little truck,” and the YouTube- At the company’s headquarters in
there’s TSLA,” Hilbert says, referring to the famous reviewer Marques Brownlee sug- Irvine, California, the sense of whiplash
two species of Tesla fan. The first group gested the R1S was “the best SUV ever.” has been intense. Founder and CEO
cares about the cars and is basically like Today, Hilbert is one of the unofficial RJ Scaringe was briefly a Wall Street dar-
Hilbert. The second is mostly interested leaders of a small but passionate com- ling, the architect of the biggest American
in pumping up the stock ticker and attack- munity of Rivian enthusiasts, constantly IPO since Facebook and “Elon’s New
ing anyone who isn’t doing the same. “The posting about the brand on social media. Nemesis,” as a Forbes cover line described
stockholders are the toxic bit of it,” he says. Many of these Rivian stans are ambiva- him. Lately he’s been more likely to be
Hilbert, who works at a financial- lent Tesla owners, put out by either compared to the CEOs of other flailing
services company, is a lot more enthusi- Musk’s trolling social media persona or Tesla wannabes, such as Lucid Group Inc.
astic when talking about his family’s other his politics, or some combination of the (which has been able to continue operat-
car, a Rivian R1S. Last year he and his wife two. “I bought this before we knew Elon ing thanks to the largesse of Saudi Arabia’s
bought the three-row SUV, which starts was crazy,” an increasingly common Public Investment Fund) and Fisker Inc.
at around $76,000, by trading in their Tesla bumper sticker reads. (which recently declared bankruptcy).
old Tesla Model X, a luxury crossover Unlike the aspiring meme lords who In February, Musk paid Scaringe a back-
vehicle that seats six and features the dis- back Musk, Rivian fans tend to be earnest, handed compliment—“Their product
tinctive “falcon wing” doors resembling maybe even a little boring. They trade tips design is not bad,” he said—but only after
those of a Bugatti Type 64 or a DeLorean. about the best off-road tires and lust over predicting Rivian would go bankrupt.
The R1S had a seventh seat, making it big accessories such as the $2,800 rooftop tent Scaringe has also fielded complaints
enough for his five kids. (He considered the company offers as an add-on. They from politicians who suggested he was
a plug-in hybrid minivan, the Chrysler have little to say about the “woke mind squandering taxpayer funds, from union
Pacifica, but couldn’t face the idea virus” or any of Musk’s other politically leaders who charged that the company

70 Bloomberg Businessweek
 has underpaid its staff and from analysts ELECTRIC SLIDE
who pointed out that until very recently, Change in share price from November 2021 through June 2024
Rivian’s market value was roughly equiva-
lent to the amount of cash it had on hand. 0%

The dire implication of the last point: The

stock market was assigning a value of zero GM -19.7%
to the actual car company.
Scaringe winces at the suggestion that Ford -34.7

his company might not survive but says he Tesla -48.1

finds the criticism understandable. “What
makes that hard is if you look at our burn
rate per quarter and assume it stays the
same, you’re going to run out of cash,”
Rivian -88.8
says Scaringe, who has the physique of Lucid -95.1
a compulsive exerciser and the cautious Fisker -99.9
consultantspeak vocabulary of someone
who’s spent the previous decade raising are trying to pull off the same trick. As for a song—$16 million. The next year,
money. “And of course that assumes we Ramsey puts it, “They just don’t have Scaringe unveiled a prototype electric
make no progress.” In fact, as he explains much wiggle room to screw up.” pickup at the Los Angeles Auto Show,
while sitting in a conference room just off earning some favorable press coverage,
the company’s design studio in Irvine, The Rivian factory in central Illinois partly because of that distinctive front
he’s been engaged in a struggle to keep seems to bloom, almost miraculously, end but also because Rihanna, who was
the company above water— dramatic from a landscape of soybean fields and dating the son of the Saudi car dealer,
cost cutting, frantic product develop- wind turbines. The 3.3-million-square-foot showed up for the launch.
ment and sensitive negotiations with fed- plant, in the town of Normal, was origi- Scaringe got another break around
eral and state officials. nally built by Mitsubishi Motors Corp., the same time: To create a video for the
The turnaround effort culminated in in the late 1980s. It closed in 2015, after event, he hired a production company
late June, when Rivian announced a deal the Japanese carmaker’s US division had that in turn hired Jeff Bezos’ girlfriend,
with Volkswagen Group, which will license struggled for more than a decade, and Lauren Sánchez, to shoot aerial pho-
Rivian’s hardware designs and software sat vacant for the next two years, as state tography. Several months after the LA
while providing the startup with as much and local officials tried to find another car- event, Amazon.com Inc. led a $700 mil-
as $5 billion. The money gives Rivian the maker to take it over. lion investment in Rivian. Later that
cash to transform the kind of low-key loy- By that point, Scaringe had worked year, Amazon became the company’s
alty that Hilbert feels into a mass-market his way through a series of failed busi- first major customer, agreeing to pur-
phenomenon, while convincing anyone ness plans and mostly unsuccessful chase 100,000 electric delivery vans. The
turned off by Musk that electric cars are pitches. He’d gotten the idea of starting retailer would join several more invest-
indeed the future. an EV company a decade earlier while ment rounds over the next two years that
Rivian is “doing things better than earning a doctorate in mechanical engi- would eventually total more than $10 bil-
Tesla in a lot of ways,” says Mike Ramsey, neering at the Massachusetts Institute of lion in capital.
who covers the car industry for the Technology and started Rivian in 2009. Rivian’s trucks didn’t start rolling off the
research company Gartner Inc. “But Tesla One of his earliest investors was a Saudi line until 2021, a year later than Scaringe
benefited from the fact that they had the conglomerate best known for operating had planned. Even so, the timing looked
market to themselves for years.” Whereas Toyota dealerships. (The CEO had gone to ideal. Spiking gas prices and Covid-era
Tesla was able to target early adopters, MIT and was introduced to Scaringe by a travel patterns were making electric cars
Rivian is courting a customer base that mutual friend.) The startup struggled for seem more attractive than they had been
has so far remained reluctant to make years. “I was talking with suppliers, and in years, and a supply chain crunch had
the kinds of compromises that owning an they were laughing me out of the room,” made traditional cars temporarily more
electric vehicle requires—including higher Scaringe recalls. “Like, ‘You think people expensive and harder to come by. At a
prices, limited range and the need to are going to want an electric SUV. What if time when Toyota Camrys were selling for
◼ DATA: COMPILED BY BLOOMBERG

spend 45 minutes in a Panera parking lot it gets wet?’ And I’d have to explain that $40,000 or more and interest rates were
while your car charges. To win over these an electric vehicle can get wet.” close to zero, the idea of dropping $70,000
skeptics, Rivian will need to make a much Things started to change in 2017, when on an oversize EV didn’t seem entirely
cheaper car and to bring it to market at a Scaringe bought the Mitsubishi plant, crazy. Moreover, Rivian had already taken
time when General Motors Co., Hyundai which came with five enormous Komatsu 50,000 preorders from prospective own-
Motor Co. and other big automakers stamping presses. Rivian got the property ers, on top of the Amazon deal.

August 2024 71
 “Can’t wait to get these into the hands began and dropped by more than 80% even harder for himself. Convinced that
of our customers,” Scaringe tweeted that during 2022 alone. Semiconductors, a successful EV would need to seem far
September, posting a photo of himself which go into EV motors and many other superior to a gas alternative, he spared
driving the first Rivian pickup off the fac- crucial parts, were in short supply, causing no expense in the design, insisting on a
tory line. Two months later he rang the Rivian to dramatically slow down its pro- heavy-duty frame that initially had to be
Nasdaq bell from a podium set up at the duction plans. A plant Rivian had touted welded together by hand. He incorporated
end of the assembly line in Normal, and for as being capable of making 150,000 trucks high-end features such as a complex vari-
a brief period, Rivian was worth more than a year made only 24,000 trucks in 2022. able suspension system as well as dozens
$150 billion, making it the second-largest Turning a profit based on sales that of smaller flourishes—a custom-designed
US automaker by market value. low would’ve been challenging, if not flashlight nested inside the driver-side
In retrospect, the moment coincided impossible, because car companies almost door and a Bluetooth speaker that slid out
with what now looks like the very top of always lose money until their factories are of the center console.
a pandemic bubble. Rivian’s stock price close to reaching full production capacity. Not only did Rivian make the car too
started falling almost as soon as trading But Scaringe had arguably made things complicated, but it also overpaid for

72 Bloomberg Businessweek
 eventually settled in which a former familiar with the matter, Scaringe tried to
vice president alleged that Rivian’s chief get the federal government to cover some
growth officer, Jiten Behl, excluded her of the cost of the new factory through loans
from meetings and fired her after she com- and grants made available by the passage
plained about the company’s “toxic ‘bro of the Inflation Reduction Act. But a point
culture.’” In 2022 a dozen employees filed of contention, according to these people,
complaints with the Occupational Safety was Rivian’s relationship with the United
and Health Administration accusing the Auto Workers. US Department of Energy
company of safety violations at the plant, officials suggested that Rivian would have
and, more recently, the National Labor to take a friendlier position to the union
Relations Board investigated allegations if it expected federal funds. Scaringe has
of anti-union tactics. The company denies resisted unionization efforts so far and has
wrongdoing and says it worked with OSHA said that he favors a “direct relationship”
to resolve the safety complaints. Scaringe with employees. The negotiation is ongo-
has also reshuffled his executive ranks, ing. Rivian and the Department of Energy
parting ways with Behl last year and declined to discuss loan applications.
replacing the company’s chief product As Scaringe began planning for 2024,
development officer, Nick Kalayjian, with he desperately needed a car—really,
himself. Kalayjian says that he gave up the cars—that large numbers of consumers
job for personal reasons and that he and would buy. To him that also meant cars
Scaringe worked together on the transi- that were obviously different from the
tion. Behl declined to comment. most popular EV, Tesla’s Model Y. “A lot
There were signs of progress. Rivian of companies have looked at the success
produced 57,000 vehicles in 2023, and of that product and said, ‘Let’s create our
the R1S sold better in the US than other own version,’ ” he says, referring to a col-
expensive EVs, such as the Tesla Model X, lection of Tesla-like crossovers including
according to Kelley Blue Book data. the Ford Mustang Mach-E, the Kia EV6
Scaringe says that if, several years ago, and the Hyundai Ioniq 5. “The seating
he’d been told “we will end up with the configuration is the same,” he says. “The
bestselling EV in its price category, I’d be storage is almost the same. The look and
like, that’s a home run.” feel are very similar.” Rivian would make
Unfortunately, that category isn’t outdoorsy-ish cars true to its brand. More
as big as Scaringe anticipated, as rising important, they wouldn’t look or feel
interest rates have made high-end EVs anything like a Tesla.
much more expensive for consumers. As
Scaringe puts it, “the number of people When Elon Musk began opening up his
that are buying the vehicle over $70,000 company’s first showrooms in 2008, he
is constrained.” The result was Rivian modeled them after Apple Stores. Tesla
was paying for far more manufacturing Stores were spare, modern spaces, often
capacity than it was able to use while inside or near suburban shopping malls.
still incurring huge losses. As MotorTrend Fifteen years later, the approach seems
The Rivian R1S assembly line in Normal, Illinois put it, the company was losing a Honda efficient, if dated—perhaps reflecting
Civic’s worth of cash for every R1 it sold. Musk’s ambivalence about having to sell
almost everything in it. “We had to pay a Worse, Scaringe was already on the his cars at all. In 2019 he announced that
massive risk premium,” is how Scaringe hook to build a second, even larger fac- he would close all the company’s stores
puts it, euphemistically. “A vast majority tory, outside Atlanta. The deal was struck and sell his cars exclusively on the web.
of our bill of materials was negotiated in during the heady days after the IPO and He changed his mind two weeks later,
2018 and 2019, when our leverage was called for Rivian to spend $5 billion more keeping most of the stores open.
really weak. We hadn’t launched. The to build a smaller SUV, the R2, which By contrast, Rivian’s approach to
brand wasn’t known.” The result of all was supposed to come out in 2026 and retail reflects Scaringe’s own proclivities—
this was epic losses: In 2022, Rivian lost cost around $50,000. Georgia promised contemporary styling with try-hard
$6.8 billion—on top of the $5.7 billion the to kick in $1.5 billion, as long as Rivian spendiness. Rivian’s stores (or “spaces,”
company had lost the two prior years. employed at least 6,000 workers by 2030. as the company calls them) are mostly
There were other signs of upheaval, But the company no longer had the located in hip neighborhoods, sometimes
including a 2021 lawsuit that was cash for any of this. According to people in historic buildings, with details that

August 2024 73
 seem ripped straight from a Patagonia do we make Rivian more accessible to a planned for years, but in Illinois. This, he
designer’s mood board. They feature lot more people.” said, would allow Rivian to start making
exposed brick, lightly stained plywood, A wall slid open, and the company’s the cars six months ahead of schedule,
maps and coffee table books—all meant design chief, Jeff Hammoud, drove out in in the first half of 2026. He noted that the
to evoke the brand’s promise to take its the new car. The R2 looks like a smaller company still intended to open a factory
owners on an adventure into the wild or version of the R1S, with the same distinc- in Georgia but didn’t offer any specifics
at least on a camping trip with the kids. tive front end and boxy shape. It has a 300- about when or how he’d pay for it.
The most spectacular of these new mile range and will include a collection of Only a handful of Rivian employees,
stores is located in an almost 90-year-old sensors that Scaringe said will eventually along with the governors of Georgia and
movie palace in Laguna Beach, just down allow the car to operate autonomously on Illinois, had known about the change in
the California coast from the company’s highways. Scaringe rattled off the features plans. Scaringe says the call to Illinois’
headquarters. Rivian bought the decrepit and then added something unexpected: J.B. Pritzker was an easy one, helping
South Coast Theater in 2021, spending Rivian had a second new car to announce. Rivian land an incentive package worth
about $10 million on the purchase and “I am really, really excited to talk about $827 million for a factory expansion
then undertaking an extensive renova- R2’s sibling, which we call R3,” Scaringe in Normal. But he concedes that the
tion. The marquee was repaired, the art said. It would rely on the same base design news went over less well in Georgia.
deco ceiling restored and new murals but would cost less. The state’s governor, Brian Kemp, later
commissioned to replace ones that had As a hatchback crossover rolled out, called the delay “disappointing” but said
been destroyed. The theater reopened in the crowd of fanboys and employees he expected Rivian to finish the factory
December 2023 as a store and “commu- entered into a frenzied state that felt at by 2030, as planned. Scaringe says the
nity creative hub,” offering screenings of once rehearsed and rapturous. Several company’s relationship with Kemp is
indie films and, of course, test drives. people yelled out, “What?” and some- good and frames the shift as a painful
A few months later, in March, one else shouted, “Oh my God!” Scaringe but necessary one to “save us a couple of
Scaringe appeared at the theater before smiled. “So you didn’t expect that ‘one billion dollars” while bringing a cheaper
an audience that included employees, more thing’ here,” he said, making a model to market more quickly. “That
customers, reporters and social media slightly clumsy reference to Steve Jobs’ doesn’t in any way whatsoever reduce
influencers who’d been summoned to famous line. “It was shocking,” says our excitement for long-term scaling to
the unveiling of the R2’s design. Wearing Hilbert, who was watching from the bal- come,” he says.
his usual look of a neatly pressed ranch- cony. “With R2, they were saying, ‘Here’s Analysts mostly share Scaringe’s long-
er’s shirt and jeans and speaking with his what we’re going to do.’ With R3, they’re term optimism about electric cars. Despite
usual robotic precision, Scaringe briefly saying, ‘Here’s what we want to do.’ ” dour headlines, the category is still grow-
recapped the company’s history—the The R3 doesn’t really exist outside ing quickly worldwide, driven largely by
R1 (“our handshake with the world”), Scaringe’s imagination—there was no Chinese companies such as BYD Co. and
the retail strategy (“a chance for us to timeline for production, no performance its $10,000 Seagull sedan. The picture in
physically manifest our brand in a very specs and no price. But the prototype did the US has been muddier. Sales were flat
unique way”), the charging stations deflect attention from what probably during the first quarter of 2024, but that
(“our Rivian Adventure Network”). Then should have been the bigger surprise. slowdown was led mostly by Tesla, which
he turned to the future. “We’re here to Just before the event ended, and almost accounts for a huge portion of domestic
talk about how all this brings us to our as an aside, Scaringe mentioned that sales, and may say more about Musk’s
next set of products,” he said, “and how the R2 would be built not in Georgia, as failings than it does about the future of
sustainable transportation.
For years, Musk had teased the pos-
sibility of a so-called Model 2, an electric
car that would compete with the Toyota

O PLE Corolla and other affordable sedans. More

INK PE recently, he’s focused on promoting the

Cybertruck, a pricey, futuristic pickup

OU TH G TO RIC with limited appeal beyond the divorced

“Y E GOIN LECT dad demographic. Earlier this year, amid

AR NT AN E IF IT reports of the Model 2’s demise, Musk

announced that his company would pri-
WA . WHAT?” oritize the development of autonomous-

SUV S WET driving technology over new models and

GET
that Tesla should no longer be thought of
as a car company at all.

74 Bloomberg Businessweek
 That may pay off in the long run for
Musk, but the failure of Tesla or any-
one else to sell a cheap EV has limited
their adoption in the US. Tesla’s “sales
have declined, and a lot of it is because
they don’t have any new products,”
says Stephanie Valdez Streaty, an ana-
lyst with Cox Automotive Inc. Valdez
Streaty, whose employer invested in
Rivian before the IPO, says the central
question for Scaringe’s company is, “Do
they have a product that’s going to have
a wider audience?”

Last August, Scaringe met with Oliver

Blume, CEO of Volkswagen AG, at the
company’s Porsche Experience Center,
a museum and test track in Atlanta. The
subject of the meeting was software.
Blume’s predecessor, Herbert Diess, had
been forced out as EV sales stagnated
and customer complaints proliferated.
Now, Blume was trying to figure out how
to turn things around, and he seemed to
have his eye on Rivian. When Scaringe
asked a group of Volkswagen executives
if they’d driven his company’s trucks,
they responded that VW had a garage
full of Rivians.
Scaringe talked up his company’s
approach, which involved designing its
own electronic control units, or ECUs.
These are the little computers that con-
trol various systems in a car, includ-
ing the transmission and the power
doors. Historically, many components
in a gas-powered car essentially come in 2024. The result would be a less buggy Scaringe founded Rivian after getting a Ph.D. in
mechanical engineering at MIT
with their own ECUs, which means design that would require far less wir-
more than 50 computers in a car, each ing and cost thousands of dollars less to
custom-designed by a different parts sup- manufacture. works as intended, it’ll make VW a major
plier. Following Tesla’s example, Rivian Initially, Scaringe says, he thought Rivian shareholder and will allow Scaringe
had resisted this option, designing its that maybe Rivian would be able to sell to open the Georgia plant. A person famil-
own computers and software. In the past, its hardware designs and software to iar with the agreement says there could be
Scaringe says, “if you’re buying seats, Volkswagen, creating a modest second- more money in the future. The joint ven-
your seats come with an ECU.” Rivian’s ary revenue stream. But Blume made ture plans to eventually license its tech-
approach is different. “I want seats, but I clear he was open to something bigger, nology to other automakers besides VW.
want them to be dumb,” he says. “I want and over the next few months, the two Scaringe declines to elaborate much on
two wires to come out of the back, and I’m began negotiating a joint venture that the deal, but he’s bubbling with a sense
gonna bring my own computer.” called for Volkswagen to essentially give of possibility. “Far and away my favorite
This hadn’t been easy. The first version up on its own software efforts and use set of calls that happened the day after
of the R1 had 17 ECUs, still a fairly large what Scaringe had built. the announcement were with the major
number and one that had helped contrib- In late June, Volkswagen announced it semiconductor suppliers,” he says. “They
ute to the high costs in 2021 and 2022. But would invest up to $5 billion in Rivian over suddenly saw us as a massive customer.”
Scaringe’s team was working on an update several years. Rivian’s stock price soared Needless to say, nobody asked whether an
to reduce that number to seven starting as much as 50% the next day. If the deal EV could get wet. <BW>

August 2024 75
WHAT
WAS THE
SAAMI
FISHING
FOR?

A Russian fishing
boat is implicated
in an attack on a
data cable beneath
the Norwegian Sea

By Jordan Robertson
and Drake Bennett
Illustration by
Irene Suosalo

76
77
N
orway has always relied on silences. Much of his A CONNECTION INTERRUPTED
the sea. Fish long dominated the work involves a set of NORWAY RUSSIA
Lofoten-Vesterålen
country’s diet, and in the 19th cen- five powerful micro- Ocean Observatory
tury the bloody harvest from Norwegian phones strung along cable

whalers provided much of the world’s a 31-mile cable on the Damaged

lamp oil. Then came the discovery of an floor of the Norwegian section
even more lucrative source of energy in Sea called the
the depths: massive petroleum and nat- Lofoten-Vesterålen
ural gas deposits in Norway’s sovereign Ocean Observatory.
waters, which turned it into the world’s Known as LoVe to
most progressive petrostate. All of this the researchers who Norwegian
has left the country with a great interest run and maintain it, Sea
in understanding what happens off its it’s mostly a scientific
famously wrinkled coast. tool, but it’s also used
That’s why the Norwegian Institute of by Norway’s military,
Marine Research exists. Headquartered in which removes sensitive information barely an inch in diameter. They trace
the city of Bergen on Norway’s southwest- before releasing the rest to the public. coastlines, traverse oceans and carry 99%
ern coast, the government institute’s 1,100 The government is vague about how it of the world’s international data. They are
employees monitor the health of the coun- uses the data but acknowledges it could at once vital and vulnerable.
try’s salmon and cod stocks, measure the serve to identify specific ships in the area, In April 2021, Zhang was just back
environmental impact of deep-sea drilling whether those of Norway’s own military, from Easter break when he noticed
platforms and offshore wind farms, and its NATO allies or its adversaries. That the LoVe observatory had gone quiet.
chart how climate change is altering the also makes it an unorthodox part of the It wasn’t unusual for the cable to have
northern oceans. One of its acoustic engi- surveillance apparatus monitoring the problems—the isolated northern region
neers, Guosong Zhang, works out of an increasingly provocative activities of where it leaves the shore often has power
office cluttered with cables and devices Norway’s neighbor to the east, Russia. outages. But when Zhang rebooted the
and computers of various vintages, or on The cable that carries the data from the computers remotely, there still wasn’t
one of the institute’s eight ships, spending microphones back to shore is a capillary any data coming in. When he contacted
weeks at a time at sea. in a global circulatory system. Hundreds technicians from the IT company that
Born in Norway and educated in of underwater communications cables had installed the equipment, they didn’t
China, Zhang is brusquely matter-of- circle the planet. Fiber optics jacketed have any luck either.

◼ PEDERSEN: ANDREA GJESTVANG/BLOOMBERG. CABLE: TROMS POLICE DISTRICT ◼ DATA: LOFOTEN-VESTERÅLEN OCEAN OBSERVATORY
fact in a way that feels true to both in steel and plastic to protect against That meant the problem probably lay
cultures—in conversation, he doesn’t fill breakage and corrosion, they’re often out at sea. Zhang hired engineering firms
to do various tests of the cable’s electri-
“Sound is critical for the survival of everything that inhabits the ocean,” Pedersen says
cal and optical systems; they eventually
zeroed in on a segment some 17 miles off-
shore. It was just past one of the cable’s
relay units, which serve to amplify the
light pulses carrying information, ensur-
ing the signal doesn’t die. Finding out
more would mean getting access to the
equipment itself, an expensive and time-
consuming process requiring specialized
ships and trained operators of submers-
ible drones—both in short supply in the
Arctic from the spring through early fall,
when oil and gas companies take advan-
tage of the sea ice thaw to repair their
equipment, and when the institute’s own
research vessels are booked for fish pop-
ulation surveys and other expeditions. So
Zhang’s investigation stalled.
Finally, five months after the outage,
Equinor ASA, Norway’s state-owned
petroleum company and a partner on

78 Bloomberg Businessweek
 C
the observatory, informed the institute it The five microphones of the LoVe ompleted in 2018 at a cost
would sponsor a mission to examine the observatory are spaced along a curve that of $10 million, the LoVe
cable. The company offered Zhang and his extends northwest on the seafloor from observatory’s cable enters the
colleagues the use of the Havila Subsea, a a tiny fishing village in far northwestern ocean beneath a beach 600 miles north
321-foot-long support vessel Equinor had Norway called Hovden. Because sound of Bergen in the Norwegian archipelago
chartered for an unrelated job. waves can travel hundreds or thousands of Lofoten. It’s a wild, stirring landscape
On Sept. 10, the researchers gathered of miles underwater, these sensitive of rock pinnacles and fjords. In the fish-
around a computer in Bergen, watching a mics—hydrophones, technically—can ing villages dotting the coast, colorful
live video feed from one of the drones—a detect sounds in the middle of the Atlantic houses alternate with wooden racks
boxy 8,000-pound robot measuring 6 feet Ocean. In his office in Bergen, Pedersen called hjell, where cod cure in the open
by 6 feet by 10 feet with a pair of hermit- plays samples of the cacophony LoVe air. The LoVe’s local caretakers, broth-
crab-like arms. As it descended, the glare has captured: the reedy glissandos of ers Jan-Tore and Wilhelm Enoksen, are
of its lights caught krill jackknifing past humpback whales; a tanker ship propel- shark fishermen who live, with fewer
its camera lens. The observatory’s yellow ler’s thrum; the hoarse, rhythmic roar than a dozen others, in nearby Hovden.
data cable soon emerged out of the blue- of seismic air guns used to detect oil and During a recent visit, Jan-Tore, 58, showed
green haze, then the relay unit: a van-size gas deposits under the seabed. From up Bloomberg Businessweek a red wooden hut
metal cage, also yellow, protecting the toward the polar ice cap, the hydrophones above the beach. Inside, a rack of com-
equipment inside. At the approach of the record the steady drumbeat of icebergs puter servers and several desktop PCs pro-
submersible, fish that were sheltering crumbling into the water as they melt. cess the data from the cable’s sensors. The
inside the cage drifted lazily out. Usually, when an undersea
The cable was cleanly cut, most likely by a power saw
Then the drone circled the cage, and cable is damaged, it’s an accident
Zhang had trouble believing what he saw. or an act of nature. A ship drops
The output side should have been iden- anchor in the wrong place; an
tical to the unit’s input side—the same undersea earthquake wrenches
machinery, the same cable extending apart a cable. Fishing trawlers
north toward the next relay unit. But there dragging bottom nets are often
was none of that. The equipment on that to blame. In February 2024,
side had been ripped out, and the 12-ton internet traffic in Africa slowed
section of cable attached to it was missing. when Houthi rebels in Yemen hit
“It had been there for three years, and a cargo ship with rockets, causing
suddenly it’s gone,” he recalls. The cable it to drag its anchor across three
hadn’t malfunctioned; it had disappeared. cables as it sank.
Someone, or something, had taken it. Sometimes, though, the
cables themselves are targets. In the early caretaking job consists mainly of turning

“
T
here’s this conception that 1970s the US Navy and intelligence agen- the power back on after winter storms,
the ocean is quiet,” says Geir cies successfully attached a giant record- Jan-Tore says. He and his brother, who’s
Pedersen, a physicist and the man- ing device to an undersea Soviet cable in a year younger, have never seen anyone
ager of the LoVe observatory. He points the Sea of Okhotsk—divers had to descend suspicious, but if anyone did try to break
out that Jacques Cousteau called his every month to change the tapes. And in, they’re prepared: “We’d shoot them,”
pioneering 1956 undersea documentary more recently, cables and other pieces of he deadpans, “with harpoons.”
The Silent World. But the ocean is actually undersea infrastructure have been dam- From shore, the cable runs across a
noisy. “When you start to look into it,” aged in the waters along NATO’s rim. shallow coastal shelf before dropping
Pedersen says, “you see that everything The modern world turns out to rely into the Norwegian Sea’s depths. There
makes sound, and sound is critical for greatly on unprotected bits of equipment the Gulf Stream, intermingling with
the survival of everything that inhabits in remote places. “We are talking about frigid, nutrient-rich currents from the
the ocean.” It’s also critical to how we’re thousands and thousands of kilometers Arctic, creates a rich spawning ground
coming to understand that world. “One of infrastructure between Europe and the and a favored migration route for fish and
of the things about the ocean is that light United States and Asia,” says Katarzyna whales. Nestled in their own protective
doesn’t travel far underwater,” he says. Zysk, a professor of international cages, the hydrophones placed along the
“Using cameras, you’re not able to see relations and contemporary history at the way are roughly the dimensions of a hand-
very much around you. But listening, or Norwegian Institute for Defence Studies in held mic. The sounds they pick up are
sending out pulses of sound, then you’re Oslo. “This is a network that is extremely augmented by other tools: echo sound-
able to truly see what happens underwa- hard to surveil, to monitor and to protect. ers that ping off passing fish, profilers to
ter.” A growing, disruptive share of that This is infrastructure that is highly vulner- gauge wave height, sensors that measure
noise comes from human activity. able to sabotage.” acidity, clarity and carbon dioxide

August 2024 79
 levels. All that information is sent back went dark on April 3, 2021. (International

I
n the fall of 2021, after
to shore, becoming the basis for a steady determining that LoVe had lost law requires fishing vessels and other
stream of research papers. a segment of cable, Zhang con- large ships to have transponders con-
Other sounds picked up by the hydro- fronted the next question: Where was stantly transmitting their speed, location
phones garner less public discussion. it? At that point he still thought that and other information.) Zhang imported
Norway and Russia share both a land whatever happened had likely been those AIS results into a software pro-
border and the rich fishing waters of the inadvertent. A fishing trawler’s net is gram that let him create interactive maps
Barents Sea. In recent years, Norwegian often framed by weighty metal “doors” charting each ship’s course on the morn-
officials have charged Russia with using that keep it open as it drags through ing of the incident.
its submarine fleet—one of the world’s the water. If one of those had snagged The maps showed about a dozen
largest—to surveil and threaten critical the cable by accident and pulled it out ships. Most of them had spent that April 3
NATO subsea infrastructure. Last year of place, the crew might not even have tracing long arcs through a fishing ground
the Norwegian military released videos noticed. Nonetheless, if Zhang could a little to the southwest of the two relay
showing Russian nuclear attack subs identify the ship and trace its path, he units bracketing the missing segment. But
patrolling off Norway’s coast and follow- might have an idea of where to look for one ship, a 197-foot-long, Russian-flagged
ing the routes of undersea gas pipelines the missing equipment. trawler called the Saami, had behaved

◼ BENJAMIN FREDRIKSEN/NRK
and telecommunications cables. To do that, he contacted the differently. Traveling at about 10 knots,
The Norwegian Defence Research Norwegian Coastal Administration and it had passed back and forth over the
E s t a b l i sh m e n t ( t h e Fo r s v a re t s requested the automatic identification LoVe cable at least four times. “I saw this
forskningsinstitutt, or FFI), which serves system (AIS) data of all ships that had boat, only this one boat, cross the cable
as the chief adviser to the Ministry of been above that stretch of cable when it at this time,” Zhang says. “I locked my
Defence and the Norwegian
Armed Forces on defense- Hovden, the remote fishing village where
the cable leaves the shore
related science and technology
research, was involved in the
LoVe project from its earliest
days, Pedersen says. And while
he says he doesn’t know how the
military uses the information it
scrubs from the LoVe feed, he
notes that all ships have unique
acoustic signatures that can
be used to identify and track
them. Sea mines can even be
programmed to detonate when
vessels bearing specific acoustic
signatures pass by.
In a statement, the FFI con-
firmed its involvement with the
observatory, while emphasiz-
ing that its efforts focus not on
detecting Russian vessels, but
on obscuring the movements
and acoustic signatures of its
own military vessels and those
of NATO allies. The FFI scrubs
any such incriminating infor-
mation before the LoVe data is
made available to the public.
“If there has been an exercise
with Norwegian or allied ships
nearby, we also do not publish
data from the period the vessels
have been there,” the institute
specifies on its website.

80
suspicion on this one boat.” Once he’d at the first set of coordinates and deployed

I
n the end, and to Rogne’s
narrowed his parameters to the span of the ship’s drone, however, it came upon disappointment, the incident was
time when the cable disappeared, the the missing cable almost immediately, treated as a criminal case, not a
paths of the other ships dropped away six miles from its original location. national security matter. It fell under
on his computer screen, leaving just the Watching over the shoulder of the opera- the jurisdiction of the Troms Police
tight scribble traced by the Saami. At the tor, Zhang saw the yellow line emerge out District, which covers a huge, sparsely
precise moment the cable went dead, the of the drab seafloor just 18 minutes after populated swath of northern Norway
ship was right above it. the craft dropped into the water. At the and the waters stretching north into the
In late November, Zhang got a chance cable segment’s end was the ripped-out Arctic. A local police prosecutor named
to trace the Saami’s route in person. With equipment from the relay unit. Ronny Jørgensen got the assignment.
the Arctic winter beginning and oil and The following day, the ship’s crew He’s based in Tromsø, and most of his
gas work slowing, he was able to book a deployed the drone again to recover the caseload is taken up with incidents of
drone operator and time on one of the cable. In a feat of robotic dexterity, suspected overfishing. He knew little
institute’s own vessels, the G.O. Sars. He the operator used the remote-controlled about undersea cables, except that they
and his colleagues took the ship out from arms to knot a large chain around the were marked on nautical maps so fish-
Tromsø, a city of 78,000 inside the Arctic cable, attaching it to a powerful pulley ermen could avoid them. “Normally you
Circle, and headed for the map coordi- that slowly hoisted it and winched it into would want to stay clear of any object
nates marked by the Saami’s AIS track a large drum on the G.O. Sars. that can keep you from fishing,” he
from months before. Police officers joined Zhang a week points out dryly.
The team on the G.O. Sars was pre- after the recovery at a storage facility the Zhang’s findings were Jørgensen’s
pared for a long search. Once they arrived institute uses in Bergen. It was the first jumping-off point. Vessels such as the
time he was taking a close Saami are required to supply crew lists
look at the end where the to the Norwegian authorities when oper-
cable had been separated ating in the nation’s waters or docking at
from the relay unit, and its ports. Using that database, Jørgensen
he noticed something sig- flagged all the crew members who’d been
nificant. If the cable had on the Saami while it lingered over the
been torn apart or cut by LoVe cable. Police investigators man-
a trawl door, the break aged to interview several of the seamen
would have been jagged when their work brought them back
and uneven. But instead to Norwegian waters over the next few
it had been sliced through weeks. All were Russian, and all gave
cleanly, with some kind of the same response: They hadn’t seen or
power saw. That was hard heard anything to suggest the ship had
to square with the idea of hit the cable.
an accident. Given that the Saami had been the
At this point the police only ship in the cable’s vicinity when it
officially took over the was damaged, Jørgensen was skeptical.
investigation. Sissel Rogne, The most generous interpretation he
then the marine institute’s could see was that its net had gotten tan-
managing director, also gled in the cable, and cutting it had been
alerted Norway’s domestic the only way to free them. He believed
intelligence and security the crew members weren’t being com-
agency. In an interview with pletely candid. “The fishermen would
the Norwegian business definitely remember if a catch had
magazine DN Magasinet, the included a marine cable,” he says. But
publication that originally because they were Russians, and because
broke the news of the cable Jørgensen didn’t have a crime to charge
cut, she emphasized the them with, there was little he could do
implications for Norway’s beyond having them questioned.
military and intelligence Jørgensen did order tests on the sev-
agencies: “We are not con- ered cable, which confirmed it had been
cerned with submarines. cut by a power tool. “The people that cut
But they are concerned this cable,” he says, “they wanted this
about it.” cable to be cut.”

81
 And there his investigation, like when the cable was damaged, and its and patrolling around wind farms off the
Zhang’s, ran into a wall. Soon thereafter, movements that day were “totally nor- coasts of the UK and Scandinavia with
however, he got another, similar case. mal,” says Andrei Roman, a legal and its transponders off. The journalists had
Around 5 a.m. on Friday, Jan. 7, 2022, a economic aide to the company’s direc- tracked the vessel by listening in on radio
900-mile communications cable running tor. “We have nothing to do with this. communications relaying its location back
from the Norwegian mainland to the far Our ship didn’t violate any laws.” to a naval base in Russia. In footage that
northern island of Svalbard stopped work- aired in April 2023, they come alongside
ing. It was one of two cables servicing the the Admiral Vladimirsky and notice it has

A
ccording to Nils Andreas
Svalbard Satellite Station, the world’s larg- Stensønes, a vice admiral who abnormally large antennae and other com-
est ground station for collecting data from heads the Norwegian Intelligence munications equipment incongruous for
polar-orbiting satellites, including meteor- Service and formerly was chief of the a civilian boat. Then a man in a balaclava
ological and other imagery that has dual Royal Norwegian Navy, Russia has long and tactical vest holding a military-style
civilian and intelligence uses for American prioritized underwater operations. Even rifle appears on deck. After a few tense
and European government agencies. The during the Soviet Union’s fall, as its mili- moments, the journalists return to shore.
technicians from Space Norway, the com- tary was atrophying and its funding col- The past two years have seen other
pany that operates the cables, determined lapsing, Moscow never stopped investing suspicious cable outages. In October 2023,
later that water had somehow gotten into in submarine warfare and developing two telecommunications cables in the
one of the cables, causing an electrical techniques to map and potentially sab- Baltic Sea were damaged, along with a
short, and the power had gone out. otage adversaries’ subsea critical infra- gas pipeline in what authorities from
The incident could have been an acci- structure. One of the main vehicles for the affected countries said was poten-
dent. However, when the cables had been this work, Stensønes says, is a secretive tial sabotage. In that case, a Hong Kong-
laid in 2004, Space Norway had taken the agency called the Main Directorate of flagged ship called the Newnew Polar
precaution of burying them beneath the Deep-Sea Research, known by its Russian Bear—which was accompanied by a
seafloor in shallow areas where there acronym, GUGI. Russian icebreaker and had only stopped
was a risk of damage by fishing trawlers. Norway has seen all of this up close. at Russian ports since sailing from China
Cutting the cables, in other words, meant Unlike land borders, maritime ones tend a month earlier—dragged its anchor
first digging through 6 feet of protective to be porous: Fishing trawlers and other hundreds of miles along the seafloor en
mud. On Jan. 30, 2022, three weeks after ships travel relatively freely between route to Saint Petersburg. Investigators in
the outage, when an underwater drone Norwegian and Russian waters. That pro- Estonia, Finland and Sweden suspect that
went down to investigate the damage, the vides opportunities for information gather- strange act wasn’t accidental. Finland’s
cameras revealed deep trenches through ing. “We know that Russia is using civilian National Bureau of Investigation released
the seafloor above the cables. Jørgensen vessels for covert intelligence operations,” pictures of the damage, and Risto Lohi,
says the gashes could have been dug by Stensønes says. “We’re also monitoring chief of homicide and other serious crime
the steel doors of a fishing net. Finding ships related to Russia that have undersea investigations, said in a statement to
the exact coordinates of the cable and capabilities to see if they’re being used for Businessweek that the case is being inves-
digging down to the cables themselves, reconnaissance or more malign activities.” tigated as “aggravated criminal mischief.”
as someone had in this case, would take The statement also read: “The inves-
Enoksen, one of the cable’s caretakers
many passes—sustained activity that tigation is still ongoing and final con-
suggested intent. clusions about what was behind these
Journalists with the Norwegian incidents—technical failure, negligence
Broadcasting Corp. later determined or poor seamanship, or a deliberate
that a Russian-flagged fishing trawler, act—can be made only after all necessary
the Melkart-5, had crossed the cable’s investigative measures have been final-
◼ ENDOKSEN: BENJAMIN FREDRIKSEN/NRK. ZHANG: GEIR PEDERSEN

path 130 times around the time it was ized and this will still take some time.”
damaged. One expert, speaking in a Businessweek was not able to reach the
documentary film jointly produced by owner of the Newnew Polar Bear for
a group of Nordic public broadcasters, comment. (The best-known instances of
described the ship’s pattern of move- suspected undersea sabotage, of course,
ment as “completely illogical.” Murman Those fears have only grown since were the September 2022 damage to the
SeaFood Co., the Russian company Russia invaded Ukraine in 2022. In Nord Stream 1 and Nord Stream 2 natu-
that owns and operates the Melkart-5, November of that year, journalists with ral gas pipelines, which have spawned a
said the captain and crew were inter- the Danish Broadcasting Corp. used dizzying variety of conflicting theories but
viewed twice by Norwegian authorities a speedboat to approach the Admiral remain unsolved.)
and released without charges. The ship Vladimirsky, a Russian research vessel that To Zysk, the researcher at the
was trawling in a permitted fishing zone had been lurking in the waters of Denmark Norwegian Institute for Defence Studies,

82 Bloomberg Businessweek
the slicing of the marine institute’s cable out on a mission to recover and replace says, officials are conveying that they
and the damage to the Svalbard cable the damaged section, a year and a half don’t want to antagonize Russia.
bear the hallmarks of Russian intelli- after the short occurred. (They’d found “It’s an issue for the ministry and the
gence operations. She hypothesizes they a workaround to get the cable operat- security services to take on, and they
could have been relatively simple—and ing only a couple of weeks later.) Photos haven’t,” she says. “It is not a closed
deniable—ways to try and weaken parts released by police show the damaged case for us—the cable is not there, it’s
of Norway and NATO’s intelligence- cable’s protective outer coating stripped not functioning.”
gathering infrastructure, while also off like a snake’s molted skin, and rods of In a statement, the Ministry of Trade,
potentially serving as training exercises coiled metal armoring twisted and bent Industry and Fisheries said it didn’t pur-
for Russian operatives specializing in apart, revealing the fiber optics within. sue a claim against the Saami’s owner
sabotage of subsea infrastructure. Or In October 2022, Jørgensen closed the because the police investigation failed
they could simply have been a way for LoVe case, declaring it officially unsolved. to determine who was responsible. At
Moscow to demonstrate to offi-
Zhang (right), who identified the outage and, later, its potential cause
cials in Oslo that their underwater
infrastructure—from data cables
and power lines to petroleum
drilling platforms and pipelines—is
vulnerable. That type of behind-
the-scenes signaling and posturing
is common for spy services, which
do things like openly trail suspected
spies to send a message that they’re
being watched, she says. Both inci-
dents involved cables with specific
significance to the Norwegian mil-
itary, rather than transcontinental
ones that might provoke a more
forceful NATO response. In Zysk’s
description, that’s a sign of cali-
brated provocation.
The “extremely unlikely and
unconventional” behavior of
Russian-flagged ships in both
cases, she says, combined with
“our knowledge about Russia using civil- He did the same with the Svalbard case the same time, it did approve 57.8 mil-
ian trawlers for intelligence operations,” the following March. “The investigation lion Norwegian kroner ($5.4 million) for
make the incidents highly suggestive. has stopped,” he says. Either one could be LoVe repairs.
“The probability that this was intentional reopened if new evidence is found, but he Zhang and his colleagues have
damage is very high.” thinks that’s unlikely. Stensønes, the head decided not to use the money to replace
Nonetheless, the evidence remains of Norway’s intelligence service, declined the damaged section of their cable,
incomplete and circumstantial. For his to comment about the cases or about the however. Instead they’re planning to
part, Sergei Tsyganov, the Saami’s owner, findings of any parallel investigations circumvent it, replacing the silenced
denies that his ship was involved in cutting conducted by his agency or others in the listening posts beyond that section with
the cable. According to him, Norwegian Norwegian government. Russia’s Ministry battery-powered modules with wireless
police boarded the Saami and spent of Foreign Affairs did not respond to mes- transmitters. Much will be lost: The
12 hours questioning the captain and sages seeking comment for this article. wireless modules will be able to trans-
crew but made no arrests, and his ships Rogne, the former head of the Institute mit only a fraction of the data the fiber
still enter Norwegian waters and dock at of Marine Research—she now has a differ- optics once carried from those depths.
Norwegian ports. “We’re not guilty of any- ent role there—remains unsatisfied with Most of the information will have to be
thing; we didn’t do anything illegal,” he the investigation into the LoVe incident. collected physically, by sending ships
says. ( Jørgensen says the interviews with She told Businessweek the institute’s par- out to haul the devices up from the
the Saami’s crew took about an hour.) ent agency in the Norwegian government seafloor and connect them to a com-
In June 2023, Space Norway, the should have sued the owner of the Saami puter to manually download the infor-
company that operates the Svalbard and its insurance provider to pay to repair mation. But at least there will no longer
cables, was finally able to send a ship the cable. By not pressing the matter, she be a cable to cut. <BW> �With Henry Meyer

August 2024 83
PURSUITS

The Companies
Selling You on
A Longer,
Healthier Life

Pursuits 85
 A host of startups promises to slow the aging process,
at a price. But is “healthspan” more than just a money grab?
By Mark Ellwood
Illustrations by Khyati Trehan

It starts with a dark green box Celebs, of course, are getting in

shipped full of testing supplies. on it. In August 2023, Kim Kardashian
Inside are vials to spit and breathe posted about getting an on-demand
into and a monitor to wear for sev- MRI from Prenuvo Inc. (see side-
eral days before your appointment. bar): “It has really saved some of
The leaflet told me to bring them all my friends’ lives and I just wanted
to a consulting room on a tree-lined to share,” she wrote on Instagram,
street in Central London. It’s close noting it wasn’t a sponsored post.
to the private medical hub of Harley She was promptly scolded online
Street, and the company’s name, for promoting needless medical
Viavi, is discreetly noted above a treatment and programs not acces-
shiny brass buzzer. Appointments sible to most.
can last two workdays depending on As those in developed nations
the procedures. These might include can expect to live longer—average
a maximum oxygen consumption Americans live into their late 70s,
(VO2 max) test, which grades your per Centers for Disease Control
fitness level by cycling to fatigue on and Prevention data, 20 years
a bike while wearing sensors and a or so longer than a century ago—
mask. Or you might have a brain scan, ones that indicate a propensity for colon today’s health obsessives aren’t con-
with a grandmotherly doctor (definitely cancer and other maladies. An MRI, cerned with mere longevity, but the
out of place in the high-tech surroundings) performed at a nearby clinic, checks for quality of it. Gyms have morphed into
putting sensors in your hair. everything including cystic lesions and lifestyle centers, with physical thera-
The process is capped with an vascular aneurysms. pists and nutritionists working in tan-
extended session with the compa- All of this goes into a holistic lifestyle dem with personal trainers, charging
ny’s founder, Dr. intervention-slash-prescription. Donnai tens of thousands of dollars per year
A LONGEVITY Sabine Donnai, a explains the premise of her clinic simply: for the privilege. There are gene-based
LEXICON
crisp Belgian who “Just like you would have a wealth man- workout regimens, too, all inspired by
“Optimize” is just
one of the buzzwords whizzes through a ager, we manage somebody’s health.” an elusive, seductive premise: finding
commonplace in series of questions Viavi opened in 2009, an early pio- a science-supported fountain of youth.
this culture. Here
are other terms and (“Do you drink tap neer in a sphere that many upstart rivals Not everyone feels so feel-good about
techniques advocates water? What oil do are crowding to enter now: the high-end all this pricey prescription. “I feel like
often use.
you cook with? Do healthspan business. “Life span is the I’m the wellness Lorax,” says Rina
you floss?”) and conducts a physical. She number of years your heart is beating,” Raphael, a journalist who writes the
taps a tuning fork around your calves says Peter Bowes, host of the Live Long Well to Do newsletter. “I’m always say-
and feet; she says vibrations are better and Master Aging podcast. Healthspan, ing, ‘This is not going to work.’ So much
at detecting early multiple sclerosis than on the other hand, “is when everything is of this is just an exercise in psychology,
a reflex test. wonderful, and there’s no disease.” making people feel better about what
She’ll review your test results at a This term, where the duration of life they’re doing.” If these services work,
follow-up appointment. Those vials of spit is in sync with good health, was first she argues, it’s because they reaffirm
that you hawked up at intervals through- coined in the late 1980s. Recently, bio- established habits. Wealthy acolytes are
out the day a couple of weeks prior will hackers have made headlines with outré already able and willing to take care of
reveal whether cortisol—the body’s efforts in the area. Centimillionaire tech their health. It’s the willpower placebo
stress marker—spikes or remains stable. entrepreneur Bryan Johnson claimed effect; even putting a supplement into
Another vial had METFORMIN that—thanks to blood transfusions and your basket at the supermarket, Raphael
gone for a DNA test an all- consuming regimen of supple- notes, has been shown to give a boost
Another would-be
to scan for 30 genes wonder drug originally ments, exercise and treatments—he to the system. “Here’s a news flash: You
among the 23,000 aimed at treating Type 2
diabetes. Some say it
needs to celebrate a birthday only every don’t need any of this. Everyone knows
in the body and flag affects oxidation in the 19 months. exactly what they need to do for their
body, protecting against
aging in the process.

86 Pursuits Bloomberg Businessweek

 EPIGENETIC
REPROGRAMMING
health. Eat a balanced diet, get some One theory posits that traffic-light-style, and Los Angeles are nearing confirmation.
movement in, try to decrease your every cell effectively marked red, amber Each member pays a $10,000 induction
contains a backup copy
stress. It’s not rocket science.” or green. Red-
of its biological software. fee, then $10,000 per month for unlim-
Healthspan evangelists do, however, This is the “informationflagged areas should ited access to physiotherapists, massages
theory of aging,” says
talk a lot about science. And “optimiza- David Sinclair, “and thelead to intervention, and those plunge baths, as well as “per-
tion.” Fiftysomething healthspan expert hottest topic in the field
as they highlight a formance coaches,” known elsewhere as
right now.” As cells age,
Peter Attia, M.D., offered a way to mimic they lose the ability tobiomarker with high personal trainers.
use the right software
his age- defying vigor in a worldwide likelihood of affect- Why has there been such a rush of
at the right time. Old
bestseller last year, Outlive: The Science cells can be reset, ing your health—a companies into the healthspan space?
though: One injection,
& Art of Longevity. He says Medicine 2.0, tested on primates,
positive test for HPV, Harvard professor Sinclair points to the
as he calls it, wrongly prioritizes treat- restored damaged for example, is now pandemic: “People looked in the mirror
vision. Advocates claim
ing disease. Better to move to Medicine known as causal not
it could reverse aging in
and saw their own mortality—for many, it
3.0, he argues, and prioritize preven- any given cell. only in cervical can- was for the first time—and they had a lot
tive interventions. Others in the field cer but in many oral cancers, too. Amber- of time on their hands to think about it
agree. “I find it useful to think of aging tagged feedback means that ideally you then, too.”
as a medical condition that is treatable,” should take action, but it’s not a top prior- But the field isn’t exactly new; it’s an
says Harvard University professor David ity. Perhaps you have a high level of ApoB, iteration of concierge medicine, which, as
Sinclair, co-author of Lifespan: Why We a protein known to affect vascular health— most healthspan companies do, empha-
Age—and Why We Don’t Have To. Or, as but no other genetic or physical contrib- sizes an ongoing relationship that inte-
Viavi’s Donnai puts it, “Getting older is uting risk factors. All green results are grates medical care into daily life. Most
not an option, but aging is.” within normal levels. Some interventions patients in the US can expect an average
It would require a huge pivot to adjust can rapidly improve biomarkers, Donnai of only 17.4 minutes with their doctor at
medical priorities in this way: Only 3.5% of says. Changes in cholesterol can show any in-person appointment, per data
money spent stateside in the health-care up within six weeks; a hormonal change from the National Institutes of Health,
system is earmarked for prevention, per might take four months. Tests are regu- but wealthier Americans can time-warp
the Health Care Cost Institute. But clini- larly readministered, and lifestyle proto- back to the days of house calls and lifelong
cally and economically, there are incen- cols are tweaked based on their impact. family physicians. In fact, 1 in 5 wealthy
tives to increase that dramatically. And Jeff Halevy hopes his 25,000- people pay extra for direct access to their
the world’s wealthiest are leading the way. square-foot facility in New York will appeal doctor, according to a 2020 poll con-
Donnai’s clinic is one of the most to the same people primed to sign up for ducted jointly by NPR, the Robert Wood
in-depth healthspan operations. Its core Viavi’s services. Although not a doctor, Johnson Foundation and the Harvard T.H.
membership costs £22,000 ($28,000) for the onetime fitness expert for Today is a Chan School of Public Health. It’s esti-
the first year and about £17,000 a year serial entrepreneur in the wellness space: mated there are more than 12,000 such
thereafter. The fee includes inductions, Continuum, which opened this spring, is concierge-style physicians in the US.
health investigations, strategic goals and his latest. In their first 30 days, members Hadi Halazun, a doctor in New York
ongoing support with a health manager. undergo testing, including blood panels, with the $40,000-a-year concierge com-
Formerly the medical director of Nuffield a functional movement screen, VO2 max pany Private Medical, says he had one
Health, one of the UK’s top health-care testing and a DEXA scan, which grades patient, a superfit sixtysomething tri-
providers, Donnai also did stints studying the strength and thickness of bones using athlete, who was sick while overseas on
acupuncture in Sri Lanka and Indigenous a special X-ray. (Compare that with your business (diarrhea, then shoulder pains).
medicine in Australia. annual physical!) They also receive an He texted Halazun to ask if he should be
The vast majority of her clients aren’t Oura Ring health tracker. Continuum’s concerned and ended up in the office for
looking for their healthspan efforts to team will analyze all this data to design a an electrocardiogram, which looked fine.
overtake their life, Bryan Johnson-style. (If fitness and nutrition regimen. “But something was off. He didn’t look
you took just the exercise advice in Attia’s The two-story Continuum space like the same guy I knew, even though
Outlive, it would be a commitment of was formerly a DavidBartonGym and, there was nothing glaring on the results,”
more than eight hours a week.) The never- later, a Peloton studio; now, Halevy Halazun says. “It was a gut feeling. I tend
die-hards who prioritize healthspan above proudly shows off the flotation tank in a to get very close to my patients.” Sure
all else make up about 10% of her sign-ups, sensory-deprivation cupboard, artfully DNA ADDUCTS enough, a CT scan
Donnai says. About half are in good health surrounded by plants, and a pair of ice revealed what he
When a toxin or other
and simply looking RAPAMYCIN baths. “We would never call this a gym,” environmental chemical calls a “whopping”
attaches to your DNA,
to remain so. he says. “We’re not something else you’re p e r i c a rd i t i s , o r
The FDA approved this it becomes an adduct,
The feedback drug for organ transplant trying to cram into your day. It is a destina- which can be a starting heart inflammation.
from Viavi’s battery recipients, but anti-aging
advocates cite studies
tion.” His membership is capped at 250 at point for cancer. Some
healthspan experts say
It might well have
of tests is delivered, suggesting it can bolster the New York location. Outposts in Miami we can remove them been triggered
the cardiovascular and with techniques such as
immune systems in intermittent whole-body
healthy individuals. hypothermia.

August 2024 Pursuits 87

 by the virus that SENOLYTICS
caused his diarrhea.
This class of drugs has
Instantly, Halazun one purpose: culling
The Price of Healthspan
put the man on a cells that are no longer
working. Theorists
inflammation, hormones,
three-month treat- say allowing younger, cholesterol and key organ
functional cells to
ment protocol. replace them may slow
function. Steered by a
Brad Inman has or reverse aging. 90-minute doctor-led
perhaps the most intriguing theory as review, it results in a con-
to why people are rushing to such ser- crete action plan focusing
vices. The real estate media entrepre- on nutrition, exercise
neur has begun to organize introductory and supplements.
healthspan conferences with ticket prices
at $99. The first was in West Palm Beach, ● PREVENTICUM
Florida, this spring, with two more com- From £10,500 for an
ing in California in August. Inman points Optimal Assessment
to America’s evolution into a more secular This London clinic offers a
society. “As more and more people don’t daylong program includ-
think they’re going somewhere after they ing blood work, MRIs and
die, they think, ‘Oh, shit. I’m not going to Whether you prefer a friends $200 off a whole- tests such as an oxygen-
heaven,’” he says. “‘This is it, so I want to gentle on-ramp into the body scan for themselves. sensitive cardiac MRI,
live as long and well as I can.’” world of self-optimization which gauges coronary
I don’t know about heaven, but my or medical-level interven- ● ALTER vascular function in
test results from Donnai were reassur- tion programs, there are $2,995, plus $40 monthly just three minutes, and
ing: There was nothing urgently nasty in options for most wallets. Touted as a fitness BrainKey, which calculates
there. Although I’m only a few pounds program that’s person- brain age and recom-
heavier overall than I should be, my body ● INDEX HEALTH alized to your genes, mends lifestyle changes.
fat percentage is depressingly high—about $299 per month Alter has health coaches Regulars return annually
double the ideal for my age—which rico- This service, emphasiz- who use your DNA and for comparative tests,
chets through my readings. My VO2 max ing diet and nutrition, various biometric data and Preventicum will rec-
score, for example, is average, but it will begins with a telehealth to customize an exercise ommend interim testing
instantly improve if I can reduce my body consultation with a and nutrition program. at home.
fat. Along with a modified exercise regi- doctor, followed by blood Daily workouts and other
men, that could lift my score 10 points, testing and another virtual recommendations, which ● EQX OPTIMIZE
reducing what Donnai calls “all cause appointment to discuss adjust based on sleep Around $40,000 per year
mortality” risk (basically, my chances of results. Doctors champion and stress levels that are Equinox entered the game
dying from anything besides being hit various supplements and, tracked with a wearable, in May, in partnership
by a bus) in the next decade by 50%. My with a nutritionist, offer arrive on a 55-pound inter- with Mark Hyman’s lab
strength is that of a 70-year-old (I’m 51), ongoing coaching. active mirror. test startup Function
and I’m deeply right-favoring; I shudder Health. (Hyman is a polar-
at the photo of my scrawny left calf com- ● PRENUVO ● PREAMBLE izing figure in wellness
pared with my right. If I don’t even that From $999 to $2,499 $6,500 per year because of his vaccine
out, it will strain joints. This is the starriest Jesse Greer, a former views.) A battery of tests
At least I’m HPV-free, and my brain’s upstart, with backers US Army physician and looks at biomarkers like
in great health, though it seems as if I may such as Cindy Crawford flight surgeon in Arizona, triglycerides, which affect
have had a bang on my right side that I and Silicon Valley darling created Preamble, which heart health; cortisol,
don’t recall, which has scrambled some Anne Wojcicki, and it’s combines health assess- which plays a role in
brain waves there. A few sessions with where Kim Kardashian ment and in-person aging; and leptin, which
a neuro feedback NAD BOOSTING paid for her own scan. clinical care. His new affects fat metabolism.
machine can fix that. The six-year-old company Co-Pilot program includes It also provides fitness
Nicotinamide adenine
Mostly, I need to dinucleotide, or NAD, offers MRIs on demand at blood work, a metabolic testing, such as VO2 max.
work much harder is a molecule known to its nine locations. Results fitness assessment, DEXA A concierge designs a
at the gym. I already support cellular function, are delivered in two weeks scans and glucose mon- health program with
including keeping DNA
knew that, of course. from degrading over via a consultation call. itoring to devise a plan a team including a
Maybe now I’ll do time. Adherents support Every patient receives focused on improving sleep coach. It’s offered
something about it. supplementing NAD a referral pack, offering five areas: metabolism, in New York and Texas.
levels, which naturally
decline as we get older.
Low levels are associated
with accelerated aging.
88 Pursuits Bloomberg Businessweek
 The recent fixation on biohacking has been fueled by research
Six Senses Ibiza showing that certain science-driven interventions such as pho-
tobiomodulation (a NASA-pioneered light therapy), combined
with simple lifestyle changes in diet and sleep, can slow and even
reverse cellular aging.
Wellness retreats from Mexico to Italy have taken note, add-
ing spaces equipped with messenger-RNA-based molecular tests
that identify undesirable gene activity (such as oxidative stress)
and sci-fi-like hyperbaric oxygen chambers that are supposed to
stimulate cell repair by saturating the lungs with O2. The tests
help identify preventive health habits that fit with your genetic
code; the oxygen undoes recent damage that has you operating
below baseline.

Can a Vacation At RwoseBar, diodes connected to a metal surface measure

the flow of electricity through my palm, leading a clinician to say

Extend Your Life? that my parasympathetic response—my ability to calm down—is

low. A lifestyle coach sees my pulse-oximeter readings and says
that, despite my propensity for yoga, I’m not good at breathing
At first glance, the crowd at Six Senses Ibiza looks typical of deeply. She prescribes some exercises and three sessions in a
the revelers known to frequent Spain’s legendary party island. hyperbaric chamber; days later my tests improve.
Women in sparkly bikinis and macramé cover-ups dance with But can a vacation really lower your biological age? “Engaging
tanned, toned men as DJs spin poolside. But they’ve come for a in expensive treatments for a three- to seven-day experience
different kind of cocktail. can provide some short-term benefits to one’s health, but those
Inside RoseBar, the resort’s on-site longevity club, doctors, benefits do not last a lifetime,” says Emmaline Rasmussen, lead
nurses and nutritionists carefully administer everything from dietitian at the Center for Health and Wellbeing at Four Seasons
gut-scouring apple cider vinegar and cayenne shots to pills of Hotel Westlake Village in California. “Learning how to integrate
magnesium to promote sleep. I was prescribed a $750 IV drip realistic changes into your lifestyle will provide far greater
of NAD+, a coenzyme that plays a vital role in DNA repair. long-term success.”
“Boosting” on it, says a statuesque staffer with dewy skin, is like “The nurturing environment of a retreat can be an ideal
drinking from the fountain of youth. place to learn,” agrees BJ Fogg, a behavior researcher at Stanford
A vacation that promises to reverse aging isn’t novel. University. And for some, one week may be enough to kick-start
In the 1970s, the late Swiss doctor Henri Chenot opened a new habits, especially when paired with scientific feedback.
retreat that claimed to recharge mitochondria through an Did I learn to relax because machines told me to? Or because
850-calories-per-day vegan diet and detoxifying treatments. screen-free time at a pool is therapy unto itself? I’ll never know.
Today, devotees flock to the brand’s luxe flagship Chenot Palace But weeks later, when I was traveling and flight delays threat-
Weggis, on Lake Lucerne, for the strict seven-day protocol ened to take years off my life, I closed my eyes and let RoseBar’s
(starting at $5,900). breathing exercise do its thing. �Jen Murphy

THE NEW LONGEVITY BREAKS

SIX SENSES (SPAIN) PALAZZO FIUGGI WELLNESS MEDICAL CANYON RANCH (MASSACHUSETTS; TUCSON)
RETREAT (ITALY)
One-, three- The popular
and seven-day This grand palace’s wellness brand
packages can Murano chandeliers introduced its
be tacked on and original Longevity Life
to a stay, to frescoed walls can program in
include as now be enjoyed in November at
many as five a 65,000-square- two of its four
hours a day foot medi-spa that hotels. The two-
of treatments, opened in late 2021. night-minimum
therapies and But in addition to its plan combines
medical-team indoor charms, the diagnostics with
time. The retreat has added personalized
“Morning hiking to the sleep health coaching and covers basics including heart and
After” IV monitoring and CT scan machines of its tried-and-true lung assessments as well as strategies to improve diet
◼ COURTESY SIX SENSES

drip with longevity program, hoping guests continue to get their and rest. Extend to three nights, and you’ll undergo a
electrolytes and amino acids is designed to undo a steps back home. Three-hour treks in the surrounding sleep screening for further nutritional hacks. Book the
late night of partying. A week’s program in one of Apennine Mountains pass waterfalls and ancient full week, and you’ll have your glucose monitored and
the resort’s 137 rooms can help shift your lifestyle monasteries, then conclude with yoga, saltwater receive mental health counseling, plus have more time
through diagnostics and nutrition counseling. therapy pools and nutrient-dense, low-calorie meals to sample free daily classes, such as desert drumming
Ocean-facing rooms from $1,286 per night; one-day from Heinz Beck, chef of Rome’s only three-Michelin- in Tucson and pickleball in the Berkshires. Two- to
longevity program from $504 starred restaurant, La Pergola. From $8,800 seven-night programs from $1,700 per night

August 2024 Pursuits 89

 TOP CHEFS DECLARE:

THE BEST PASTA IN

NEW YORK CITY
By Kate Krader
Illustration by Tomi Um

The dog days of summer conjure daydreams dating to the mass arrival of Italian snacks he used to get from food trucks
of ice cream, picnics, barbecues … and immigrants in the 1800s. And as with outside his school. At Raf’s nearby, chef
heaping plates of hearty pasta? other city staples, namely pizza, bagels Mary Attea channels southern Italy for
“I used to think I needed to make the and burgers, there are a lot of strong spaghetti heaped with bottarga, the
pastas lighter in summer,” says Andrew opinions. Especially about where to find intense, salty dried tuna roe. At Daphne’s
Carmellini, who serves notable noodles the best. in Brooklyn, chef Jamie Tao makes his
at New York’s Locanda Verde, Café So we polled a few experts—the coun- ragu with fatty, luscious beef cheek that
Carmellini and Bar Primi. But in the hot- try’s top chefs—to tell us what they love. wedges itself in the nooks of spiral gemelli.
test months, he says, “we’d still sell so Alongside cult favorites like Don Angie, Here are some highlights to enjoy this
much carbonara and Bolognese, custom- there are newer options such as Torrisi, summer—and spring, fall and winter.
ers freaked out when I tried to change it.” where co-owner Rich Torrisi serves
Now he makes them year-round. cavatelli with an allspice- and chile-packed Visit bloomberg.com/nycpasta for the full
New York is a pasta town, after all, ragu inspired by the Jamaican beef patty list of 18 dishes.

90 Pursuits Bloomberg Businessweek

 PASTA TO-DO LIST

● Gemelli With Beef Cheek Ragu pasta should be,” he says. “It’s become
Daphne’s, Brooklyn one of my favorite restaurants. I go back
This recently opened hot spot updates time and time again just for this pasta.”
the city’s ubiquitous red sauce classics
with options like grilled pork collar with
garlic chives, as well as green tomato
vodka sauce-topped salsify. The effect is
cozy and fun and “really delicious,” says
Erik Ramirez, chef-owner of Llama Inn.
He highlights Jamie Tao’s gemelli with
beef cheek ragu because “it was the right
● Rigatoni Carbonara amount of rich and hearty and gave off
Bar Primi, East Village Bolognese vibes. I also liked that it didn’t
Occupying a corner on the rowdy have a lot of butter in it.”
Bowery is the two-story Bar Primi, ● Buffalo Milk Caramelle
where outdoor tables get packed in Don Angie, West Village
warm weather. Carmellini’s menu is Simone Tong, executive chef of Zoé
a crowd-pleasing roundup of Italian Tong in Austin, says her favorite New
antipasti and secondi favorites, but for York pasta right now is Don Angie’s
Mitsunobu Nagae, owner and executive candy-styled buffalo milk caramelle that,
chef of L’Abeille, there’s only one order: with its twisted ends, conjures a wrapped
rigatoni carbonara with guanciale (cured confection. It’s filled with creamy ricotta
pork jowl), pecorino and egg yolk. “It’s and strewn in a sweet-sharp citrus sauce.
a classic for a reason! Just a few ingre- The two-tone look comes from ribbons
dients, and done right, it’s the perfect of black sesame pasta. “Black sesame,
blend of flavors,” Nagae says. “I’ve yet ● Pici all’Arrabbiata candied kumquat—all my favorite flavor
to taste a better carbonara in the city.” Lodi, Midtown profiles,” she raves, “and the shape makes
Amid the throngs of tourists packing my inner-child smile so big!”
Rockefeller Center, this stylish aperitivo
bar is a peaceful oasis with an all-day
menu from Ignacio Mattos. The plump,
piquant tomato-sauced pici is tossed with
chunks of salty guanciale and is the obses-
sion of Kwame Onwuachi, chef-owner of
Tatiana. “I have been craving it every
day since the moment I had it,” he says.
“It’s so simplistic and incredibly nuanced
at the same time. Layered with flavor
from the guanciale, tomato and chiles, it
perfectly complements the thick pasta.”
◼ BAR PRIMI, TORRISI: COURTESY COMPANIES. REMAINING: EVAN ORTIZ/BLOOMBERG

● Spaghetti With Tuna Bottarga and

Calabrian Chilies ● Cavatelli With Jamaican Beef Ragu ● Uovo Raviolo di Nino Bergese
Raf’s, NoHo Torrisi, SoHo Rezdôra, Flatiron
“The spaghetti with tuna bottarga is Like its sister restaurant Carbone, Torrisi To get to Stefano Secchi’s terrific little
my idea of perfection on a plate,” says is a perennially packed power dining spot. restaurant, walk down an unremarkable
Amanda Cohen, chef-owner of Dirt But the superb menu extends beyond an Flatiron side street and descend a few
Candy. The Sicilian-inspired dish comes Italian-American highlight reel to include steps into a sliver of a space where his art-
from Mary Attea, who with her part- shell-shaped cavatelli in a meaty sauce ful pastas have captivated notable New
ners has transformed the original Parisi punctuated with sweet and hot Caribbean York cooks. Le Bernardin’s Eric Ripert
Bakery space, where the brick ovens flavors. Among its fans is Jean-Georges declares the uovo raviolo di Nino Bergese—
produced delectable Italian loaves, into a Vongerichten, whose restaurant empire in which one giant round is stuffed with
cozy hangout with a long Mediterranean includes the Tin Building food hall and herbed ricotta and an egg yolk that flows
menu. Here, the salted dried roe melts the ABC Kitchens. “It’s the most pleas- all over just as its dome is cut—his favorite.
into the pasta strands and imbues them antly surprising dish, packing spice and “It’s very original, difficult to execute, but
with the taste of the sea. punch, and it’s also comforting just as most importantly, delicious.”

August 2024 Pursuits 91

 SUMMER STYLE UPGRADE

It’s Not Too Late to

Be a Hat Person By Antonina Jedrzejczak
Photograph by Sarah Anne Ward
Set design by Ryan Schaefer

((5))

((3))

((1))

((6))

((4))

((2))

((7))

92 Pursuits Bloomberg Businessweek

 ((1)) BOTTEGA VENETA ((3)) JW BENNETT ((6)) EUGENIA KIM

The brand’s signature Sarah Kjorstad makes With a 3-inch visor

Intrecciato weave makes her hats in Jackson Hole, made of camel-colored
a cheeky appearance Wyoming, adding horsehair, the Kayla
in this lambskin bucket custom beading and is a fashion statement
hat. It’s also available in stitch work to each disguised as sun shield.
green, blue and bright piece by hand. The It also twists into a tight
red, but the deep brown Lakeside style, woven spiral for easy storage.
here will transition from Guatemalan palm
((8)) effortlessly into fall. straw, has a 4-inch $225
brim and uses a vintage
$1,500 bandanna for a hatband.
((7)) RUSLAN
$245 BAGINSKIY
((2)) CLARE V.
The Ukrainian milliner,
A classic throwback in ((4)) AYR who’s done bespoke
royal blue cotton made headwear for the
with a Velcro closure, With its hickory stripe, Princess of Wales and
this visor celebrating the cotton Bucky riffs Beyoncé, isn’t shy
le weekend is one on the classic pattern with his designs. This
we’ll be wearing from of a train engineer’s peaked cap comes in a
Monday to Friday, too. cap. Just toss it in your range of custom fabric,
weekender for your next monogram and color
$50 outdoor adventure. combinations.

$45 $300

((5)) CASABLANCA ((8)) WORTH & WORTH

PARIS
Can’t decide on just one
Pastels are cool again material? A handwoven
in the zigzag layers of take on the Panama
this crochet creation. hat combines a crown
The open-weave cotton made of straw with a
design has a soft, 3.5-inch brim in beaver
extra-floppy feel. felt, both dipped and
washed in indigo for a
€365 ($391) standout effect.

$1,600
((9))

((9)) STEPHEN JONES

The creations of British

designer Stephen Jones
have found themselves
on the heads of the
world’s top celebrities
and royals—and have
even been shown in
museums. The aptly
named straw Illusion hat
is a modern, whimsical
nod to safari toppers
with a mesh overlayer.

$525

((10)) PRADA

The elongated
proportions and
geometric pattern
cutouts of this Prada
bucket are balanced
((10)) out by the natural
yarn, woven to
create a raffia effect.
Just keep sunscreen
handy to avoid
triangular tan lines.

$1,100

August 2024 Pursuits 93

 SCREENTIME INSIGHTS

LORD OF THE
RATINGS By Hannah Miller
Illustrations by Brandon Celi

You could be forgiven for wondering if the characters in The Big (Georgie) and his wife as they raise a daughter and grapple with
Bang Theory universe have been on television since the dawn a 12-year age difference. The plot thickens as Georgie rises to
of time. The show, from old-school comedic mastermind Chuck success selling tires in Texas.
Lorre, centered around a group of nerdy, socially awkward For CBS’s fall premieres across categories, you’ll see the net-
scientists and premiered on CBS in 2007. According to Nielsen work sticking to what it knows best: familiar characters recycled
ratings, it was the No. 1 comedy for nine years. from other series and formulaic storylines. In September, NCIS:
The series concluded in 2019, but the network already had Origins will be the fifth offshoot of the NCIS franchise, joining
a replacement. The prequel, Young Sheldon, which follows the spinoffs in Los Angeles, New Orleans, Hawaii and Sydney.
childhood of Big Bang Theory protagonist Sheldon Cooper, This time, the action series about Naval Criminal Investigative
began airing in 2017 and ran for 141 episodes. It’s been the Service agents explores the early career of the original show’s
No. 1 comedy on TV since Big Bang ended. The last episode protagonist, Leroy Jethro Gibbs. (Baby boomer Mark Harmon
in May drew a colossal-for-2024 11.7 million viewers. (At its is now embodied by hunky millennial Austin Stowell.)
2011-12 peak, Two and a Half Men, another Lorre hit, averaged There’s also a Matlock reboot starring Kathy Bates. Another
15 million a week.) new show, Watson, takes its inspiration from Sherlock Holmes
This fall, yet another spinoff arrives in the form of Georgie and stars Morris Chestnut as Holmes’ famous partner—only this
& Mandy’s First Marriage. It’s billed as a heartwarming com- time, Holmes is dead, and Watson solves medical mysteries.
edy that follows the ups and downs of Sheldon’s older brother That’s a lot of known quantities. “We recognize how much

94 Pursuits Bloomberg Businessweek

 PURSUITS PICKS FOR AUGUST

our audience loves and invests in the characters on air, and that By James Tarmy
gives us a direction to move towards,” says Amy Reisenbach,
takes us through the
president of CBS Entertainment. history of the Bronx,
The fall slate comes at a tricky time for Paramount Global, from a contested
battlefield in the
the parent company of CBS and other networks such as MTV. American Revolution,
Chief Executive Officer Bob Bakish stepped down in April and to its halcyon days as a
20th century haven for
was replaced by the “Office of the CEO,” a trio of executives middle-class upward
mobility, to the inherent ● TELEVISION
that includes CBS President George Cheeks. In July, controlling racism in city planning BAD MONKEY
shareholder Shari Redstone accepted a proposal to sell her fam- that led to the borough’s Based on Carl Hiaasen’s
● FILM
near-destruction in the
ily’s interest in Paramount to David Ellison, son of Oracle Corp. SING SING
1970s. Aug. 20
novel and from an
executive producer
co-founder Larry Ellison. Director Greg Kwedar’s behind Ted Lasso, this
Paramount has been working to trim $500 million in costs pulled-from-life film, comedic series on Apple
which is set in the TV+ stars Vince Vaughn
and bolster its struggling Paramount+ streaming service, which high-security New York as a former Miami police
trails Amazon Prime Video, Disney+ and Max in number of prison, showcases the officer turned health
power of theater as a inspector who stumbles
subscribers—not to mention Netflix, which serves almost 270 mil- poignant form of artistic into a vast criminal
lion customers, more than triple the count of Paramount+. expression. A superb realm. Aug. 14
Colman Domingo
The yearslong success of CBS, however, has provided some stars alongside a mix
of professional and ● EVENTS
rare reliability. The network aired 13 of the top 20 broadcast LOCARNO FILM
formerly incarcerated
series in 2023. And for the last 16 seasons, it has been the most- actors. Aug. 2 FESTIVAL
watched network in the US. Tracker, which is going into its You’ve heard of
second season, was the top-rated nonsports show on televi- Sundance and Cannes,
but another film festival
sion, averaging 11.6 million viewers per episode. Starring Justin beloved by aficionados
Hartley as survivalist Colter Shaw, who uses his tracking skills is slightly off the radar, ● BROADWAY
at least to American OH, MARY!
to solve mysteries, it premiered after the 2024 Super Bowl and audiences. Set in the
lovely Swiss lakeside Simultaneously idiotic
scored 18.4 million viewers, according to Nielsen. town, just across the and brilliant, comedian
This means a lot for Paramount. Broadcast and cable TV ● NONFICTION Italian border, the Cole Escola’s play
PARADISE BRONX: star-studded fest is imagines an alcoholic
delivered $5.2 billion in revenue in the first quarter of 2024, THE LIFE AND TIMES one of the best places Mary Todd Lincoln
68% of the company’s total. “The corporate office may not be OF NEW YORK’S to see international lurching through
GREATEST BOROUGH independent films well the final weeks of
very stable right now, but the programming of CBS—you know before they make it to her husband’s life.
what to expect,” says media consultant Brad Adgate, who’s Funny, sweeping and theaters. The nightly Escola also stars in
written with evident outdoor screenings for the title role. It’s now
spent more than 35 years in the industry at companies includ- affection, New Yorker 8,000 people in the on Broadway for a
ing Turner Broadcasting and Comcast Spotlight. contributor Ian town’s Piazza Grande are limited engagement.
Frazier’s magnum opus a major draw. Aug. 7 to 17 Through Sept. 15
Shows such as Tracker rely on tried-and-true plot structures
to placate the network’s remaining audience following contin-
ued cord-cutting, according to Adgate. Nielsen found in May boosting audience numbers across all shows within a franchise,
that streaming accounted for a record 39% of TV viewership, according to Brandon Katz, senior entertainment industry strat-
while cable made up 28%. egist at research firm Parrot Analytics Ltd. “Viewers will con-
But in a surprise twist, shows like NCIS and Big Bang Theory sume that spinoff and then go back to the original, so you have
are also being embraced on streaming by those very same pingponging audience interest,” Katz says.
young people who’ve cut their cords. Young Sheldon reruns air Like The Big Bang Theory, Georgie & Mandy will be filmed
on TBS and Nick at Nite, following the old TV model—first on in front of a live audience using multiple cameras, a format
broadcast, then syndication on cable. But previous seasons are that Young Sheldon didn’t follow. It’s a setup unfamiliar to some
also on Netflix and Max. Audiences watched 6 billion minutes of Gen Zers who grew up with single-camera shows on streaming,
Young Sheldon in May, according to Nielsen, half of it on stream- but like its predecessors, Georgie & Mandy’s humor is designed
ing and half on traditional TV. to appeal to multiple generations.
This is a big shift that’s happened in the past couple of Viewers can expect some fresh creativity, too: With Young
years, where media companies have folded their gamble on Sheldon, the writers had to stick with facts that were already
streaming platform exclusivity and started licensing to every- established in The Big Bang Theory, such as the untimely death
one through deals that have not only brought in cash but also of Sheldon’s father. Georgie and Mandy’s relationship wasn’t
broadened viewership. “It was interesting and gratifying that explored much on The Big Bang Theory, giving writers some
Young Sheldon, when it went to streaming, especially when it more freedom. What we do know is that they both lied about
went to Netflix, kind of found this whole new audience,” says their ages during a romance on Young Sheldon that resulted in
Steve Holland, a writer on that show who’s moved on to devel- an unplanned pregnancy while Georgie was still a teenager.
oping Georgie & Mandy. But the rest? Well, it’s still unwritten. “We can kind of tell any
Spinoffs like these allow networks to save money while story,” Holland says, “and it can go in almost any direction.” <BW>

August 2024 Pursuits 95

 GO HERE NOW

Rome in August. Seriously

By Jen Murphy
Photograph by Federica Valabrega

The Spanish Steps right after sunrise

I arrived at Hotel de la Ville, an 18th tourists that spilled down the 135 steps sites and hidden gems since 2007.
century palazzo perched above the below made me wonder if Taylor Swift Discerning travelers write off summer
Piazza di Spagna, on the cusp of golden had decided to kick off the European leg because of the crowds, but August is the
hour, caught in the flow of locals and vis- of her Eras Tour early—and in Rome. one month in high season that feels quiet,
itors angling toward the city’s trattorias The reality is there’s no longer an De Bonis says over lunch at La Fiaschetta,
and wine bars for their daily aperitivo. offseason here. The Eternal City is eter- a tiny trattoria in the Campo de’ Fiori
The cool, drizzly March weather made nally full of tourists. It welcomed a record neighborhood. The throngs thin, the sun
a spritz at the hotel’s lively second-floor 35 million visitors last year, and 2024 is shines, and the rooftop bars stay open.
Julep Herbal & Vermouth Bar tempting. forecast to be another banner year. So one School is back in session in some parts of
But I had other plans: The Spanish Steps must be creative in planning a visit and the US, and, though people fear the broil-
were less than 100 feet away, and I imag- rethink old strategies. For example, in a ing heat, the weather is in fact not quite as
ined that at this food- and drink-centric complete inversion of what travelers have brutal as in June and July, he says. (He also
time of day, the famous travertine stair- long held true, it turns out August is the cites November, January and February as
case would be devoid of sightseers. Goldilocks month. That’s when things in good times to visit.)
How naive. the city are just right, says Fulvio De Bonis, Maria Strati, longtime general man-
I’d planned my visit to the Italian cap- co-founder of Imago Artis Travel. A born- ager at J.K. Place Roma—one of the city’s
ital for what I thought was the offseason, and-bred Roman, he’s been conducting most sophisticated hotels—concurs about
at the tail end of winter. But the sea of insider tours of the capital’s blockbuster August. Ferragosto, an old Roman holiday,

96 Pursuits Bloomberg Businessweek

 WHERE TO STAY WHERE TO EAT desserts, like a prickly pear
cannolo. Da Etta, steps from
The new standard for luxury You could follow food writer the madness of Trastevere,
in Rome is the Bulgari Hotel, Katie Parla to the outer serves an all-day menu of
right off the Piazza Augusto neighborhoods for the perfect Roman classics:
Imperatore. There’s a 60-foot restaurants Romans are raving deep-fried salt cod with
pool inspired by the ancient about—or explore the city on artichokes and puntarelle
Baths of Caracalla, and the her culinary tour. (Book six
paired with wines from the
114 rooms have mosaic marble to nine months in advance.)
2,000-bottle cellar. Orma,
floors and custom fabrics from Reservations anywhere are
near the Galleria Borghese, is
historic Venetian brand Rubelli. perpetually a challenge,
where you’ll find ambitious
Michelin darling Niko Romito but she can help you craft a
tasting menus by veteran
runs all six restaurants (from custom itinerary with hard-to-
chef Roy Caceres. His more
$1,750). Six Senses has earned score tables.
buzz for its social club vibe and Prioritize these hot-right- casual bistrot next door
extensive wellness offerings. now spots close to major sites: serves lunch signatures such
The brand’s first urban resort Near Campo de’ Fiori, the year- as the 65C carbonara egg,
has a scene-y rooftop bar, old Cesare al Pellegrino—an soft-cooked and floating in
health-minded restaurant offshoot of beloved trattoria Parmigiano-Reggiano foam,
and massive two-floor spa Cesare al Casaletto—is devoted served with a side of puffed
(from $1,080). Want to feel like to Roman comfort foods, such pasta and guanciale.
royalty? Palazzo Borghese is as pan-fried meatballs, and For DIY types, there’s
still inhabited by the heirs of natural wine. At the W Hotel the New Roman Times, a
its namesake family. But the near the Trevi Fountain, newsletter by American
east wing has been annexed as acclaimed Sicilian chef Ciccio writer Laura Itzkowitz. It
Palazzo Shedir, where four Sultano runs Mediterranean- offers discerning insights on
butler-serviced suites let guests inspired Giano, which does an everything from life-changing
try on their opulent lifestyle excellent spaghetti vongole. gelato shops to great beach
(from $850). Save room for the sensational towns worthy of a day trip.

falls on Aug. 15, and many Italians use it that have warranted $1.4 billion
as an excuse to make a monthlong escape in infrastructure investment. A lounge at Palazzo Shedir
to the coast. Some restaurants close for With all that in mind, here are
the week, but the city doesn’t shut down some tactics to help you navigate Rome’s released 30 days in advance and sell out in
like it used to, she says, especially in the attractions and discover its latest charms. a few hours. The experience is like being
historic center. in a VIP box at the Super Bowl, surveying
Anytime you go, though, you’ll need to SWAP SUNSET FOR SUNRISE the Colosseum’s arena, which is far more
strategize. New outposts of the Mandarin One trick is simply to beat the early birds. mobbed than any halftime show. And yet,
Oriental, Rosewood and Four Seasons During the magic hour after sunrise one Morciano one-upped all that by leading
are coming, contributing to a rise in hotel morning in March, I found the Spanish me down a narrow alley nearby and into
prices. The nightly average rate for a lux- Steps were empty except for a half-dozen a small church open only by appoint-
ury room rose to $715 in 2023, from $434 doves and a lone jogger—though this ment. Inside, she instructed me to sit
in 2018, according to data from CoStar; time of day is quickly becoming popular and close my eyes. When I reopened
this year is already trending higher. Yet with influencers. The social media set is them, a floor-to-ceiling wooden door
August provides a respite: Rates at luxury unlikely, however, to join a 6 a.m. tour had been unbolted to reveal a sweeping
hotels last summer were 24% lower, down of the Vatican that lets you follow the view of the Forum. It was a seat worthy
to $635 from an average of $834 in July. clavigero (key keeper) as he turns on the of a Roman ruler.
All these visitors mean more lights and opens the doors throughout
restaurant-goers. Requests made months the museum. Another option is to join EXPLORE BEYOND THE CITY CENTER
in advance—at any hour—at a classic seasoned marathoner and art historian Even if you’re a first-timer, Elisa Valeria
institution such as Roscioli, the revered Isabella Calidonna, chief executive offi- Bove, CEO of private tour company
family-run bakery and salumeria, may end cer of ArcheoRunning, on her fascinating Roma Experience, recommends ventur-
up on a waitlist. (Even for a table for one.) guided tour/workouts. ing a few miles out of the city. Strolling
Plus, more Romans are enjoying the Appian Way, one of the world’s old-
Rome, De Bonis says. Some are taking SPLURGE ON AN INSIDER est byways, dotted with royal villas and
advantage of free entry to museums as Experts such as De Bonis can unlock the mausoleums, is like “walking through
part of the city’s First Sunday initiative. city’s main sights and recommend local ancient Rome,” she says. That applies
New five-star hotels are embracing locals treasures you’d never find on the web— to food, too. Rome-based food writer
as well, he tells me. “Soho House gives private experiences for four people can Katie Parla pointed me toward less cen-
us a social club, and the terrace of the cost more than $15,000. tral spots, such as Trecca in Ostiense,
◼ COURTESY PALAZZO SHEDIR

Bulgari is my go-to spot to have a meeting For a Colosseum visit, he paired me Mazzo in Centocelle and Santo Palato
and cocktails at sunset.” with archaeologist Chiara Morciano, in San Giovanni. (All are open for most
There’s no sign the city will slow, not who walked me past the lines to the site’s of August.) I needed to book at least a
with 2025 a Jubilee year for the Vatican— recently opened third tier. Only eight week in advance, but my dinners were
filled with religious festivals and events visitors are allowed at a time; tickets are well worth the Uber ride. <BW>

August 2024 Pursuits 97

 “blended” label lest they look cheap and
turn off connoisseurs.
Dan Callaway, vice president for
product development at Bardstown
Bourbon Co. in Kentucky, is banking
on innovation—and beautiful flavor—to
make the case for bourbon-rye mashups.
Distilling the spirits separately and then
blending them optimizes the way each
grain interacts with oak during matura-
tion. Rye, for instance, strikes a balance
between grain and barrel earlier than
corn. “The flavor turns magical at six
years,” Callaway says, “an awesome rela-
tionship between herbal and wood notes.”
So if you blend a 10-year-old straight bour-
bon with, say, a 6-year-old straight rye,
you can tap into the sweet spot of both
grains in a more dynamic and meaning-
ful way than multiple barrels of bourbon
with a high-rye mash bill.
Michter’s Distillery has been casting
BOURBON + RYE a halo on the whole endeavor with its
Celebration sour mash. Each expression

AN AMERICAN marries barrels of bourbon and rye aged

from at least 10 years to 30-plus years, an
exceedingly long time for an American

BLEND whiskey—and an exceedingly expensive

effort. You’d be hard-pressed to find a bot-
tle under $18,000 now on the secondary
By Brad Japhe market, up from $7,500 at suggested retail.
Illustration by Ian Grandjean Andrea Wilson, master of maturation
for the Kentucky distiller, says the goal is
Whiskey makers in the British Isles tend vodka.” But a few US makers are starting to draw out a “unique panorama of flavor”
to view blending as an art; there’s a rea- to reclaim integrity in American blends that’s greater than the sum of its parts.
son Johnnie Walker has kept on walk- by mixing straight bourbon and straight Celebration, typically bottled at
ing for more than 200 years. But in the rye—that is, spirits made from at least around 110 proof, indeed brandishes the
US, blended whiskey is synonymous 51% corn and 51% rye, respectively, that best of both worlds: burnt sugar and can-
with flavorless, super-high-proof filler have been aged at least two years in died fruit from well-aged bourbon run-
known as grain neutral alcohol. Popular new charred barrels, absent any sort of ning tangential to the earthy and herbal
American blended whiskeys such Everclear-like filler altogether. elements of spry rye.
as Seagram’s 7 Crown and Kentucky The thing is, when they’re combined, Collectors, take note: The three-year
Gentleman legally can be loaded with as you can’t call them “rye” or “bourbon” wait between releases ends November
much as 80% of it, which is why they’re anymore, and premium distillers have 2025. Meanwhile, here are more readily
often derided as “whiskey-flavored traditionally preferred to avoid the attainable bottles earning praise today.

HIGH WEST BOURYE BARDSTOWN BOURBON THE BEVERLY RESERVE BARRELL CRAFT SPIRITS WILD TURKEY MASTER’S
AMRUT COLLABORATIVE PRIVATE RELEASE DSX3 KEEP UNFORGOTTEN
The Park City, Utah, distiller SERIES Blends have become an entry
was the first to explicitly point for upstarts looking to This Louisville nondistilling Wild Turkey’s first bourbon-
market the concept when This $160 bottle released make an immediate splash: producer holds that rye duet, Forgiven—claimed
it trademarked “Bourye” in June combines straight Beverly high rye’s first 50-50 blending allows for jolly to be a “tasty mistake”—was
in 2009. Its most recent bourbons with a rye finished recipe ($60) hauled home experimentation. This such a hit, it intentionally
expression ($125) remains in former single malt barrels a gold at the San Francisco cask-strength case in point repeated the effort with a
highly sought-after and utilizes from India. The separate notes World Spirits Competition. ($100), finished in a former 13-year-old bourbon mixed
four separate mash bills to of herbal tea, brown sugar and This newer 60-40 blend ($80) Pedro Ximenez sherry barrel, with 8- and 9-year-old rye.
deliver a layered matrix of cocoa nibs make a compelling in favor of bourbon begets paints the palate in bold Rich in body yet dry and
butterscotch, biscotti, cigar testimony to the value of a 116-proof sipper, rich with brushstrokes of nutmeg- peppery, it now commands
box and spicy chai. innovative blending. ripened berries and pecan pie. dusted peach cobbler. about $400 a bottle.

98 Pursuits Bloomberg Businessweek

 WATCH CLUB CEO DIET

THE QUIET ROLEX How Six Bosses Stay Fit

Collectors have long coveted
Rolex’s tool watches— JOHN ECKBERT, FIVE GUYS have to move in symphony with I also meditate every morning
rugged Cosmograph the other rowers and the boat. and track my sleep, recovery and
“I’m a bit of a gym I love to compete to this day, and strain using the Whoop strap.”
Daytona chronographs and rat. When I was in
Submariners you can read the lessons from the sport on
high school I ran focus, collaboration and getting
deep underwater. So cross-country ATISH DAVDA, EQUITYZEN
the best from each other have
it was a curious move and played been really helpful in my working
last year when the basketball, and “Every morning, I spend
life, too.”
brand introduced the I’ve kept up a lot of that. I’m 2 to 20 minutes
Perpetual 1908, a simple in the gym or running every meditating to help get
39mm dress watch. day, pretty much. I live in JULIE MACKLOWE, centered. Then I
Offered in 18-karat Hammersmith by the bridge [in THE MACKLOWE get a workout in.
white or yellow gold with London]. My workout of choice Doesn’t matter if I
a black or white face, it “I love waking up and have 10 minutes or over an hour,
is to run the Thames path. The
merely told the time. The running during the week.
question for me is not distance, anything that breaks a sweat.”
case rim was delicately fluted, I’m a total cardio
it’s how many bridges can you
not like the glittery crenellated junkie—cycling,
cross? I’ve topped out at five so
bezel on some Oyster Perpetuals. hiking, running. CHRISTINE SCHINDLER,
far. I’m pushing for six.”
And instead of a brawny link When I have a PATHSPOT
bracelet? A subdued alligator strap. little extra time in
MATT BRITTIN, PRESIDENT, the morning, I ride my ElliptiGO “I spend a lot of time
Could this line become Rolex
EMEA, GOOGLE in Central Park. It’s the craziest on the road meeting
canon? Many people want a watch
thing you’ll see on wheels.” with our restaurant
to be subtle, but no one wants it to
“I’ve never been and manufacturing
go unnoticed.
much good at ball customers and
Signs point to yes: A luxe platinum $30,900 sports or running NOAH GLASS, OLO
version, with a rare transparent caseback, jumping between
but loved rowing our offices. With
arrived in spring with an arresting ice blue “My work is built
the moment such a packed schedule, I have
dial. Its guilloché motif evokes ripples of rain on health and
I tried it. [Brittin to be creative and efficient with
curving across the surface of a pond. This felt the discipline of
rowed for the UK in my workouts. I like to get outside
like the start of a fresh tradition, in a sturdy routine. I run and
the 1988 Olympics in Seoul.]
metal to last generations. Beautiful? Yes. lift weights three times and walk to meetings whenever
To move a boat fast, you have
Daring? No. But Rolex didn’t get where it is a week, and that’s when possible, or join a phone-based
to be fit and strong, technically
by breaking tradition. It’s at its finest when it I listen to quarterly earnings calls exercise class.”
capable and, most of all, you
merely bends it. �Chris Rovzar and audiobooks on 2x speed.

IT’S “LIKE CHEATING”

Golf’s Weird Secret Weapon

By Michael Croley
Photograph by Joyce Lee

The Mezz.1 putter from LAB Golf isn’t a thing of hit the ball with a square face, down your target
beauty—it looks like a trapezoid in the midst of line, every time.
an identity crisis. But don’t be fooled. This ugly Nick Sherburne, executive vice president for
duckling, released in 2022, is responsible for operations at nationwide fitter Club Champion,
one of the most innovative changes in the game says what LAB has done is simple but impres-
since metal drivers. sive nonetheless. LAB putters are already his
The simplest of all golf strokes, the putt, is No. 1 sellers, eclipsing traditional brands such as
also the most confounding. You’re just tapping the ball so it rolls Odyssey, TaylorMade and Titleist. “To have a company come out
at the right speed along the right path, but it’s so nerve-racking and take over our putter market share is pretty wild,” he says.
◼ COURTESY ROLEX. ILLUSTRATIONS BY CHARLES DESMARAIS

that even seasoned professionals can crack. At this year’s US Open Championship, LAB putters could be
The key, as any club pro will tell you, is for the face of the spotted in the bags of former Masters champions Adam Scott
putter to be square—perpendicular to the diameter of the ball— and Phil Mickelson. Same with former US Open champ Lucas
when it makes contact, because the subtlest shift in your wrists Glover, who resurrected his career last year in part because of
can push the ball off its intended line. For years, manufacturers improvements in his short game with a LAB putter.
have tried different methods to remedy this. But Oregon-based Using the $550 Mezz.1 is a little like putting with a brick. The
LAB seems to have cracked the code, finding the optimal place brand’s clubs can weigh up to 530 grams, well above the 300g
to locate the shaft by measuring players and then drilling a series range of most putters. “It feels a bit like cheating,” says Paul Cope,
of customized weights into the head so the club resists involun- owner of Granville Golfland outside Columbus, Ohio, and a Golf
tary wrist-twisting. Its odd shape comes from accommodating Digest Top 100 Clubfitter. “LAB takes all the human error out of
the screws used to fine-tune the balance. The result ensures you putting.” Even if it looks like a mistake. <BW>

August 2024 Pursuits 99

 Bloomberg Businessweek (USPS 080 900) August 2024 (ISSN 0007-7135) Issue no. 4822 Published monthly by Bloomberg L.P. Periodicals postage paid at New York, N.Y., and at additional mailing offices. Executive, Editorial, Circulation, and Advertising

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Tower Heist ● By Kid Beyond

The plans for the world’s most advanced AI chip—the GrayCo4—have been stolen! To EXAMPLE
safeguard the superchip’s design, GrayCo divided the plans into four parts, each stashed 5
at a regional headquarters. But thieves zip-lined onto each city’s GrayCo Tower—seen 4
in the center of each grid below—from a taller building nearby. Which of GrayCo’s rivals 3
2
pulled off the caper: RedCor, BlueQ, GreenNV, GoldOrb or PinkThink? 1

To find out, solve the puzzles below by putting the numbers 1 to 5 in each row and
2 4 5 2 3 1 3

column, exactly once. Each number is the height of a tower, with 5 being tallest. The Looking from the left, two towers are visible:
pointers (▶) show how many buildings can be seen from that viewpoint. 4 and 5. From the right, three are visible: 1, 3
and 5. Larger buildings block smaller ones.

New York Taipei

3 2 2 2 1 1 2 3

5 1 1 5

2 3 2 2

2 4 4 4
1 3 2 2

3 2 3

2 3 4 1 2 4 1 2 2 3

London Dubai
1 2 3 2 3 2 2

1 4 2 4

2 2 3 U.S.A. CPPAP NUMBER 0414N68830

2 3 2 4 3
3 3 3

4 1

3 3 1 2 3

In each puzzle, one company’s buildings are all lower than GrayCo Tower. That clears the company of suspicion. When you’ve solved
the grids, the one remaining company is the culprit. We’ll reveal the answer in the Businessweek edition of Apple News+ and in our
newsletter, Businessweek Daily, on August 16!

100 Last Thing Bloomberg Businessweek

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You go beyond.

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decision so we’re constantly innovating
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Partner with progress.

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