GINA JACQUART THORSEN

President and Co-owner, Stormy Kromer

 October 11, 2021

 Damage from two

2020 hurricanes was
still visible on the
Capital One Tower in
Lake Charles, La., in
June 2021

3
PHOTOGRAPH BY VIRGINIA HANUSIK FOR BLOOMBERG BUSINESSWEEK

FEATURES 42 The $69 Billion Question

Each Tether stablecoin is backed by a U.S. dollar. But where is all that cash?

48 Southwest Louisiana’s Climate Exodus

As hurricane-battered residents leave, natural gas workers flood in

56 Moving In on a Low-Income Loophole

The advantaged take advantage of a New York real estate tax break
  CONTENTS Bloomberg Businessweek October 11, 2021

 IN BRIEF 6 Volvo heads for an IPO ○ More real estate worries in China  COVER TRAIL
 OPINION 8 D.C.’s workforce needs fewer appointees and more pros How the cover
 AGENDA 8 Big bank earnings ○ G-20 corporate tax meeting gets made

①
“So we have a great
 REMARKS 10 Financial apps bring ease, fun—and risk—to banking story this week
about a stablecoin
called Tether.”
BUSINESS 13 Corporate clients pressure elite law firms on diversity
1 15 The electric car revolution may drive past Michigan “Stable-whatnow?”

“It’s a type of
cryptocurrency that’s
TECHNOLOGY 18 Startups lead a space race to gather climate data designed to provide
2 20 A whistleblower’s plan for a safer Facebook stability by being
backed by real U.S.
21 Salesforce has a streaming service. Seriously dollars. Bitcoin traders
love—wait, did you ever
see the 1994 film D2:
FINANCE 25 A great time for companies to retire from running pensions The Mighty Ducks?”
3 27 The under-30 crowd joins the SPAC party “I mean, what kind of
28 Mobile money is off to a fast start in Brazil question is that?”

“What about the

ECONOMICS 30 To understand supply chain woes, play the Beer Game cartoon series
4 Inspector Gadget?”

“My 6-year-old self is

screaming right now.”

“Yeah, so they both

bizarrely relate here.”

“Are you telling me

the success of Team
USA in D2 was the
inspiration for this
4 cryptocurrency, and
now we’ve hired
Inspector Gadget
himself to find out
where Tether keeps
its money?”

“Uh … not quite.
Do you have a pen?”

32 Afghanistan’s spiraling cash crisis

POLITICS 34 A big political test for Janet Yellen

5 38 Divided, Democrats could fall hard in 2022—and 2024

 PURSUITS 63 What it’s really like behind the scenes at Disney World
ECONOMICS: COURTESY MIT SLOAN SCHOOL OF MANAGEMENT

68 Tricks to conjure more magic from your Orlando visit

70 Rivian’s R1T electric truck: Buyers be wary
71 A pocket-size photo printer from Polaroid

 LAST THING 72 Threats to central bank independence

How to Contact Bloomberg Businessweek Cover:

EDITORIAL 212 617-8120 ○ AD SALES 212 617-2900, 731 Lexington Ave. New York, NY 10022 ○ EMAIL bwreader@bloomberg.net Devasini: Tether.
○ FAX 212 617-9065 ○ SUBSCRIPTION CUSTOMER SERVICE URL businessweekmag.com/service ○ REPRINTS/PERMISSIONS Coin: Wit Olszewski/
800 290-5460 x100 or email businessweekreprints@theygsgroup.com ○ Letters to the Editor can be sent by email, fax, or regular mail. Alamy. Gadget: Everett
They should include the sender’s address, phone number(s), and email address if available. Connections with the subject of the letter Collection. D2: Disney.
should be disclosed. We reserve the right to edit for sense, style, and space ○ Follow us on social media  FACEBOOK facebook.com/ Bahamas: Juan Carlos
bloombergbusinessweek/ TWITTER @BW  INSTAGRAM @businessweek Munoz/Alamy
 We keep more
people safe online
than anyone else
in the world.
  IN BRIEF
○ Worldwide coronavirus
cases have topped
236m
Some 4.8 million people
have died, and more than
6.4 billion vaccine shots
have been given. Denmark
and Sweden decided to
stop vaccinating younger
people with Moderna’s shot
because of potential side
effects. Meanwhile, Norway
recommended that young
men choose Pfizer’s shot.
○ A leak of financial
records known as the
Pandora Papers exposed
the offshore financial
assets of world leaders and
celebrities, including former
British Prime Minister Tony
6 Blair and his wife, Cherie;
Russian President Vladimir
Putin and his inner circle;
and King Abdullah II of
Jordan, who spent lavishly
on properties in the U.K.
○ Crime in
New York City
has declined
to its lowest
level in three
decades.
According to Mayor Bill de Blasio,
shootings dropped 8.7% in September
from a year earlier, murders were
down 23.7%, and burglaries fell 15.8%.
Bloomberg Businessweek By Benedikt Kammel
○ Fantasia
Holdings Group
became the latest
Chinese property
company to miss
a maturing bond
repayment.
Democratic Senator Edward Markey of
The missed payment, on Oct. 4, Massachusetts reacted to testimony
reignited investor concern about by former Facebook product manager
China’s property sector as rival Frances Haugen. She accused the
Evergrande Group struggles to company of prioritizing profits over
stay afloat. user safety, a charge it denies.  20
○ Natural gas prices ○ The first vaccine for ○ Tesla was
surged 60% in Europe malaria, the mosquito-borne
before sliding fast there illness that kills ordered to pay
and in the U.S. on Oct. 6, $137 million in
after Vladimir Putin said
Russia was ready to help
stabilize energy markets. 
400k
people each year, is set to
damages to a
Black former
be deployed more widely elevator operator.
Dutch gas futures after the World Health
Organization recommended
€100 its use in children in sub-
Saharan Africa and other
regions with moderate to A judge found the EV pioneer failed
50 high rates of transmission. to intervene to stop the racial taunts
and offensive graffiti Owen Diaz
said he experienced while working
at Tesla’s Fremont, Calif., auto plant
MARKEY: STEFANI REYNOLDS/BLOOMBERG. BLAIR: DITMAS ARDIAN/BLOOMBERG. BLAIR: MONEY SHARMA/GETTY IMAGES.
0 in 2015 and 2016. The damages are
PUTIN: EVGENY PAULIN/GETTY IMAGES. ABDULLAH: STEPHANIE KEITH/GETTY IMAGES. DATA COMPILED BY BLOOMBERG
among the largest ever in an individual
6/1/21 10/6/21 employment discrimination case.
○ In Sweden’s biggest
listing in more than two
decades, Volvo Car Group
plans to raise at least
25b
kronor ($2.9 billion) in an
IPO later this year. Current
owner Zhejiang Geely
Holding Group says it will
remain Volvo’s largest
shareholder.
○ The Paris-Roubaix cycling race is called Hell of the North for a reason, but this
year’s ride was a particularly brutal 258km (160 miles) over slippery cobblestone
sections. The winner: Italy’s Sonny Colbrelli.
 Every day Google checks
the security of 1 billion passwords,

3 compromised passwords

protecting your
accounts from hackers.
We keep more people safe online than anyone else with products that are
secure by default, private by design, and put you in control.

g.co/safety
  BLOOMBERG OPINION October 11, 2021

political appointees in jobs better carried out by career

Fewer Political Jobs professionals. Administrative positions dealing with the fed-
eral agencies’ budgets, operations, and management should
And More Professionals be converted to career status and filled by senior civil ser-
vants. Making policy jobs below the rank of undersecretary
In Washington, Please permanent career positions—as in most other advanced
democracies—is also worth serious consideration. Giving
more authority to experienced professionals would help fed-
Almost nine months into Joe Biden’s presidency, scores eral agencies perform better, reduce leadership turnover, and
of senior executive branch positions remain unfilled. shrink government bloat.
Presidential nominations for more than 200 posts haven’t Unfortunately the country’s political leaders agree on
been announced, and more than 200 nominees await Senate vanishingly few priorities, but building a capably staffed
confirmation. Republican politicians are much to blame for bureaucracy ought to be one of them. Reducing the number
indiscriminately blocking votes on Biden’s picks, but the of presidential appointees and empowering a more profes-
logjam also underscores a bigger problem with political sional workforce would make Washington leaner and more
appointments. There are far too many. effective. That’s something both parties should want. 
Out of 2  million federal employees, about 4,000 are For more commentary, go to bloomberg.com/opinion
appointed by the president, and roughly 1,200 of those
require confirmation by the Senate. The appointments clause
of the Constitution requires that the president seek the advice  AGENDA
and consent of the Senate for all foreign ambassadors and
principal government officers. Once mostly limited to cabi-
net secretaries, that second category now includes dozens of
deputy secretaries and undersecretaries; 190 U.S. attorneys
and marshals; 60 legal and oversight positions; and hun-
8 dreds of independent agency officials, commissioners, and
policy-board members.
As the number of positions needing confirmation has
grown, so has the partisanship surrounding them. Individual
senators often use procedural tactics to freeze the system
even for well-qualified nominees, forcing the Senate to hold
time-consuming cloture votes simply to bring nominations
to the floor. A process that took 56 days on average during
Ronald Reagan’s administration extended to 117 days under
President Donald Trump.
To this point, Biden has been barely more successful than
Trump in getting his nominees to crucial posts confirmed,
 A Ticking Clock
partly because of blanket holds that Texas Senator Ted Cruz The UN’s COP15 conference on biodiversity takes place
placed. That’s left the government ill-equipped to man- virtually in Kunming, China, from Oct. 11-15. The forum will
age an array of diplomatic and immigration-related crises. explore the recovery and protection of plants and animals
The assistant secretaries of state overseeing policies toward for the next decade in increasingly fragile ecosystems.
Afghanistan and Latin America weren’t confirmed until
Sept. 13. Meanwhile, nominees for posts concerned with the  JPMorgan kicks off  The World Bank  The Bank of Korea
a busy week of banking Group and the IMF unveils its policy decision
Middle East, arms control, and immigration are languishing earnings on Oct. 13, hold their 2021 annual on Oct. 12. In August,
in the Senate. followed by Bank of meetings in Washington South Korea became
America, Citigroup, on Oct. 11 to discuss the first major Asian
The White House and both parties in Congress need to fix and Morgan Stanley a the economic outlook, economy to raise rates
this. Republicans such as Cruz and Missouri’s Josh Hawley day later, and Goldman financial stability, and and suggested more
Sachs on Oct. 15. poverty. hikes may be ahead.
should drop arbitrary holds and allow votes on nominees
for vital national security posts. The administration should
identify and eliminate Senate-confirmed positions that are  G-20 finance  The Milken Institute  Russian Energy
ILLUSTRATION BY LUCIA PHAM

ministers and central Global Conference Week will be held on

redundant or have remained vacant across multiple admin- bankers meet Oct. 15-16 convenes in Los Angeles Oct. 13- 15 in Moscow.
istrations. And the White House and Congress should reduce to finalize an agreement Oct. 17-20 to examine Much of Europe is
reached in July to disruptions, innovations, fretting about rising
the number of midlevel appointments and members of fed- establish a global and economic fuel prices and supply
eral commissions and boards subject to Senate approval. minimum corporate tax. hardship caused by the just as the heating
global pandemic. season begins.
Above all, the U.S. should stop putting underqualified
 Every day Google protects
4 billion devices from risky sites,

shielding you
from malware.
We keep more people safe online than anyone else with products that are
secure by default, private by design, and put you in control.

g.co/safety
  REMARKS
Software Is Coming for
Your Wallet
10
○ Regulators scramble to keep up
with fintech’s explosive growth
○ By Lionel Laurent
“There are more things in heaven and Earth, Horatio, than
are dreamt of in your philosophy,” says Hamlet. The paral-
lel in today’s mobile banking market might be, to quote one
startup founder: “There are more financial products for more
consumers than you could ever imagine.”
Browse potential homes for sale, and Zillow will offer you
a mortgage. Buy a pair of sneakers online, you’ll be presented
with 16 ways to pay at checkout, from Apple Pay to Klarna. See
a stock tip on Reddit, and you can act on it, commission-free,
on Robinhood. Should you want to deposit your paycheck
directly into cryptocurrency trading app Coinbase, you’ll be
able to. (Please don’t.)
If you want a no-frills bank account or something close to
it, several hundred are vying for your attention: BankMD for
physicians, Cheese for Asian Americans, Lili for freelancers.
Insurance policies, employer-sponsored pensions, and port-
folio management are now apps. There are 326 fintechs out
there, according to one database, from one-stop shops such
as PayPal Holdings Inc. and Revolut Ltd. to behind-the-scenes
payment processors like Stripe Ltd. and Adyen NV.
The bewildering array of financial services available at a
finger tap is something way more radical than the decade-old
Apple Inc. slogan of “there’s an app for that.” The new com-
panies aren’t like your parents’ fintech: Our post-pandemic
online lives, combined with the power of bounteous venture
PHOTO ILLUSTRATION BY 731; PHOTOS: GETTY IMAGES (10)
capital from such outfits as SoftBank Group Corp., are push-
ing digital finance deeper into our wallets than the Venmo-
style bill-splitting services of old.
Zillow Group Inc. is buying houses. Square Inc. offers busi-
ness loans. Such buy now, pay later firms as Klarna are turn-
ing checkout credit into something frictionless, cardless, and
potentially careless. Fintech companies now originate 38% of
U.S. unsecured personal loans, up from 5% in 2013. Plentiful
funding also allows them to woo clients with better savings
rates than banks.
 REMARKS Bloomberg Businessweek
Money and data travel at warp speed, compressing space
and time, with less need for human intervention and more
demand for products to manage the flow. In the minds of
techies, this is a revolution in inclusion and democratization
for those left behind by 20th century banks. Fair enough: If
the best tech is like magic, banking hasn’t been magical for
some time. Startups are clearly better at ginning up efficiency
through innovation.
But when instant gratification meets people’s pocket-
books, risks start to sneak in. Buy now, pay later programs
get more people to buy more things, but data in Australia
found 1 in 5 users paying late fees after missing repayments—
hardly a boon for equality. Robinhood Markets Inc., the
enabler for Reddit-fueled day traders, was fined $70 million
by the Financial Industry Regulatory Authority over mislead-
ing information and weak trading controls. The war for cus-
tomers means fintech firms lend to people more likely to
default, one study found.
Fintech firms’ use of data and models may also have bene-
fited from the lack of a long economic downturn. “Risks associ-
ated with lending haven’t been tested,” says former hedge fund
manager Marc Rubinstein. Federal Deposit Insurance Corp.
data show that from 2009 to 2014 there were 482 U.S. bank
failures, but only 29 since 2015. And in a world where technol-
ogy is winner-take-all, the algorithms that drive fintech suc-
cess could start to feel as exclusionary as the banks they seek
to replace. Their power is already being blamed for pushing up
home prices and discriminating against women and minorities.
This all adds up to a regulatory headache as governments
struggle to hold the reins of a sector that’s growing fast and
offers plenty of reward but also plenty of risk. The Covid-19
pandemic coincided with headline-grabbing fintech failures—
payments firm Wirecard AG and supply chain finance company
Greensill Capital—where red flags went unnoticed. The job of
having to beef up rules after each crisis isn’t made easier by
politicians calling on the tech sector to keep churning out uni-
corns to boost jobs. “When it comes to regulation, I worry,”
says economist Eswar Prasad, a Cornell professor and author
of The Future of Money. Regulators “seem to get overtaken by
rapid developments.”
Fintech’s disruptive potential was unleashed in mature
markets such as the U.S. only recently, thanks to a confluence
of factors: low interest rates, better technology, rising con-
sumer demand, and a more permissive attitude toward non-
bank finance. Efficiency gains in software have kept products
coming. The relentless march of e-commerce has boosted
demand for new ways to pay. And venture capital is the fuel:
Global VC funding in fintech reached a record $52.3 billion
in the first half of this year, according to KPMG. Since 2010,
fintech has raised $1 trillion in equity.
All that money pressures startups to keep growing at
breakneck speed—and explains the shift from plain-vanilla
payments products to more heavily regulated financial activ-
ities, according to Victor Basta, chief executive officer of
investment bank DAI Magister. Regular bank accounts don’t
October 11, 2021
Fintech companies that passed the
test presented by the pandemic have
seen their valuations soar
keep people swiping, unlike the stuff keeping users awake at
night: crypto trading, investing, shopping, and loans.
The pandemic was a key moment for the sector, as more
people were forced to turn to their smartphones for essen-
tials (government benefits and savings) and not-so-essentials
(storming the barricades of GameStop Corp.). The fintechs
that passed the test have seen their valuations soar: Stripe
($95 billion), Klarna ($45.6 billion), Revolut ($33 billion), and
Nubank ($30 billion) rank among the 10 most valuable pri-
vately owned unicorns in the world. On the stock market,
PayPal is worth $305 billion, Square $108 billion, and Adyen
€73 billion ($84 billion).
Traditional banks have been playing defense but also strik-
ing deals. Banks are one of fintech’s big funding sources:
Goldman Sachs Group Inc. and Citigroup Inc. participated in
69 and 51 fintech deals, respectively, from 2018 to 2020. Some
startups have chosen to become licensed banks themselves,
while big tech companies encroach into financial territory
from the other direction: Amazon.com Inc. offers payments,
credit, and insurance with partner firms. 11
And the complexity of financial regulation has opened
doors for tech startups. Some have exploited rules such as the
Durbin Amendment, which allows smaller banks to make more
money from card payments. Others have profited from laws
intended to improve competition, such as European Union
rules giving fintech companies access to bank account data.
The stunning collapse of Wirecard shows how easy it can
be to run rings around regulators. Here was a German bank
with access to deposits, a U.K.-regulated e-money institution,
and a payments firm on Visa Inc.’s and Mastercard Inc.’s net-
works, yet nobody acted on the red flags.
China—which had a head start on the U.S. and Europe in
fintech, thanks to years of cultivating revolutionary platform
companies such as Alibaba and Tencent—is likely the country
to watch. After a string of fintech scandals in the mid-2010s, the
government is cracking down on the platforms for perceived
monopolizing of sensitive data and hindering fair competition.
Governments have to do more to reduce the risks while
amplifying the benefits of fintech innovation. Stronger
consumer protection and improvements to financial liter-
acy would help. Regulators are also trying a more active
approach to technology, offering sandbox-type controlled
environments where fintech firms can experiment and grow.
But it’s hard to escape the feeling that a lot of the risks com-
ing down the pike are unpredictable and many-headed and
that regulators won’t keep up. With central bankers deter-
mined not to be disrupted in their management of the econ-
omy, perhaps another line from Hamlet will prove prescient:
“Neither a borrower nor a lender be.” 
 GEICO makes it easy to save
when you bundle your home, auto,
boat, cycle, or RV insurance.

Now that’s a fortune we’d all like to get!

Visit GEICO.COM to see if

saving more is in your future.

GEICO.COM | 1-800-947-AUTO | LOCAL OFFICE

Some discounts, coverages, payment plans, and features are not available in all states, in all GEICO companies, or in all situations. Boat and PWC coverages are underwritten by GEICO Marine Insurance Company. Homeowners, renters, and condo coverages are written through
non-affiliated insurance companies and are secured through the GEICO Insurance Agency, LLC. Motorcycle and ATV coverages are underwritten by GEICO Indemnity Company. GEICO is a registered service mark of Government Employees Insurance Company, Washington, DC
20076; a Berkshire Hathaway Inc. subsidiary. GEICO Gecko® image © 1999-2021. © 2021 GEICO 21_7 13276269
 Bloomberg Businessweek October 11, 2021

13

Big Law’s
White Male Problem
ILLUSTRATION BY 731

Corporate clients are withholding pay Edited by

James E. Ellis and
from firms that lack diversity Rachel Evans
  BUSINESS
Elite law firms in the U.S. and the U.K., long seen
as fusty bastions of mostly White men, are being
pushed by some of their biggest customers to
change. Facebook, HP, and Novartis are part of a
growing number of major global companies that
have warned they’ll take their work elsewhere or
cut fees unless they see more racial and gender
diversity in the law firms they hire.
It’s a serious threat: Facebook Inc. last year
spent $1.6 billion on legal fees, settlements, and
fines. “Money can make movements,” says Lauren
Hauber, a Facebook legal operations manager in
San Francisco. “And using buying power to push for
change will oftentimes start to move the needle.”
It’s not that the companies pushing for change
are models of diversity. Most have their own dis-
tinct struggles with representation, and Facebook
this week faced criticism in Congress that its pol-
icies foster division (page 20). But corporate law
firms have proved particularly slow to shape up,
with many structured as partnerships that give rel-
atively few dealmakers decades of influence over
how a firm is run. That’s an increasing concern for
clients, who say diverse legal teams deliver more
creative and well-rounded advice.
14 Many law firms have made public commitments
on racial, gender, and economic diversity, but they
have a long way to go. Women make up a little more
than a quarter of partners at 10 of the most pres-
tigious firms on either side of the Atlantic, shows
research by diversity-analytics company Pirical.
About 10% of partners at U.S. firms are people of
color, according to a 2020 survey of 883 law offices by
the National Association for Law Placement. Racial
minorities make up only 8% of U.K.-based part-
ners at elite British firms, according to Bloomberg
calculations based on company data. To put that
in perspective, about 12% of directors at the U.K.’s
100 largest companies are from an ethnic minority,
data from a government-commissioned report show.
“There are enough clients who are focused on
this—passionate about it and see it as their respon-
sibility to improve diversity across the legal sector—
that it will definitely have an impact on balance
sheets,” says Georgia Dawson, who last year became
the first woman to be elected senior partner—a cru-
cial management role—at Freshfields Bruckhaus
Deringer. The 278-year-old firm is part of London’s
so-called Magic Circle, a group of elite law offices that
have dominated the U.K. legal sector for decades.
This year, Linklaters, another Magic Circle firm,
picked its first female senior partner since its found-
ing 183 years ago, and 132-year-old rival Slaughter &
May chose a woman as managing partner, a newly
created role, in September.
Bloomberg Businessweek October 11, 2021
How Law Offices Stack Up on Diversity
Share of lawyers at elite Gender and ethnicity at U.S. firms
firms who are women
White men White women Men of color Women of color
Summer Associates Partners
associates 100%
U.K. 52%
50
40%
U.S.
0
2011 2020 2011 2020 2011 2020
DATA: PIRICAL ANALYSIS OF GENDER ACROSS BLOOMBERG SAMPLE OF FIRMS AS OF AUG. 1;
NATIONAL ASSOCIATION FOR LAW PLACEMENT DIVERSITY REPORT
The movement was gaining momentum even
before last summer’s Black Lives Matter protests
turbocharged the push for diversity and represen-
tation; Dawson says her clients, mostly banks, began
asking about diversity five to eight years ago. A big
break came in 2019, when 170 companies—including
Heineken NV’s U.S. unit and Etsy Inc.—sent an open
letter to law firms criticizing their lack of diversity.
That same year about 60 top lawyers at European cor-
porations signed a separate commitment to increase
diversity and inclusion across the legal sector. Signees
to that pledge have since doubled and include Anglo
American, BHP Group, Royal Dutch Shell, Unilever,
Vodafone Group, and other deep-pocketed clients.
Participants recognized their responsibility to use
“the power of our purse as clients to help encour-
age greater diversity,” says Richard Price, general
counsel at mining company Anglo American Plc.
“That isn’t so much about threatening the firms to
take our business away from them. It’s really about
working with them to encourage their initiatives to
drive diversity.”
HP Inc. was one of the first companies to warn it
would penalize law firms that flunked certain diver-
sity benchmarks, saying in 2017 it would temporar-
ily withhold a portion of fees from those that didn’t
have someone diverse handling staffing issues, or
at least one racially diverse attorney either manag-
ing or performing 10% of the work. The California-
based company has on average enforced that threat
on one or two firms each quarter since then, accord-
ing to a spokesperson.
Others have followed suit. Facebook requires
that half the lawyers on its external U.S. legal teams
are diverse—in terms of race, gender, sexual orien-
tation, or disability status—boosting the mandate
from 33% earlier this year, and is considering a pol-
icy to withhold fees from law firms if they don’t
meet targets, Hauber says. Swiss pharmaceutical
  BUSINESS
giant Novartis AG has said it will withhold 15% of
fees if firms don’t meet its diverse staffing commit-
ment, and telecommunications provider BT Group
Plc has promised a seat on its advisory panel to the
law office with the best representation.
“If any law firm turns up on a matter with noth-
ing but men working for us, they would have failed
to meet one of our criteria,” says Rosemary Martin,
general counsel at U.K.-based Vodafone Group Plc.
Such requirements are not without controversy.
In January, Coca-Cola Co.’s top lawyer proposed a
policy demanding that outside law firms include
diverse attorneys on at least 30% of new business
with the company and that Black lawyers receive
at least half of the billable work. He left after eight
months on the job, and his successor is reviewing
the standard. The company declined to say whether
this personnel change was related to the diver-
sity push, and a spokesperson said in August that
Coca-Cola remains “fully committed to advancing
equity, diversity, and inclusion in the legal profes-
sion.” The policy spurred at least one group of share-
holders to write to the board in opposition, saying
Where EV Growth
Is Bad News
○ Traditional carmaking made Michigan the Motor Capital. Electric cars could do the reverse
Ever since Henry Ford’s Model T brought mobility
WHITMER: DREW ANGERER/GETTY IMAGES. DINGELL: SARAH SILBIGER/GETTY IMAGES
to the masses a century ago, Michigan has been
America’s automotive epicenter, home to scores
of vehicle parts and production plants—and the
tens of thousands of jobs that go with them. Now
the birthplace of the U.S. auto industry is suffer-
ing a crisis of confidence after being passed over
by hometown hero Ford Motor Co. for $11.4 bil-
lion in new electric vehicle and battery factories
in favor of Kentucky and Tennessee. “The reality,”
the Detroit News wrote in an editorial on Sept. 28, is
that Michigan is “unprepared to achieve its dreams
of dominating the automotive future.”
The project includes three battery factories in
Kentucky and Tennessee and Ford’s first brand-
new assembly plant in a half-century, to be located
Bloomberg Businessweek October 11, 2021
it may give rise to lawsuits against the company.
A more diverse pipeline of young lawyers may help
tackle representation in years to come, based on law
school data and the number of women in lower lev-
els. Below the rank of partner, 50% of the attorneys
at top U.S. and U.K. law firms are women. That’s even
higher in transactional practices such as mergers
and acquisitions, where women account for 60% of
nonpartner attorneys in the U.K. and 49% in the U.S.
Many top U.K. firms have trainee cohorts that are
majority female, and they’re pushing to attract can-
didates from racial minorities, too. Almost 40% of
summer associates at U.S. firms surveyed last year
were people of color, a number four times higher
than at the partner level.
Still, “we don’t want anyone to feel complacent
about this,” says Jennifer Newstead, Facebook’s gen-
eral counsel. “This is a journey that’s not finished.”
—Ellen Milligan and Todd Gillespie, with Ruiqi Chen
and Rebekah Mintzer
THE BOTTOM LINE Elite law firms now have a financial incentive
to promote women and people of color as a growing number
of clients threaten to dock pay or work from nondiverse offices.
15
in a rural area near Memphis. The four factories,
which Ford is building with South Korean battery
partner SK Innovation Co., will employ almost ○ Gretchen Whitmer
11,000 workers.
The setback has led to criticism from pundits and
politicians of Michigan Governor Gretchen Whitmer
and her economic development officials for failing
to get in the game because they didn’t submit a bid
on the project. “It was a shock, and I’m extremely
disappointed,” says Tim Walberg, a Republican con-
gressman from Michigan. “The key question is: How
did this happen on Governor Whitmer’s watch? And
what is it about Governor Whitmer’s economic pol- ○ Debbie Dingell
icies that has Ford looking out of state?”
On the defensive, Whitmer accused Ford
of not giving Michigan “a real opportunity”
  BUSINESS
to bid on the big deal. Whitmer declined an
U.S. passenger
interview request for this story. But the gover-
nor, a Democrat, sent a letter to the Republican-
controlled Michigan Legislature on Oct.  5
imploring it to use a big chunk of $6.5 billion in
federal coronavirus recovery funds the state has
coming to “put more tools in our economic tool
box.” She also noted that the state has work to do
to attract business expansion, saying, “Let’s not
sell ourselves short—we have plenty to offer, but
we need to do more to be the number-one desti-
nation for any business.”
Representative Debbie Dingell, a Michigan
Democrat whose district includes Ford’s home base
in Dearborn, says the state’s previous Republican
governor dismantled some of the economic devel-
opment programs that could have been used
to offer incentives to rival what Kentucky and
Tennessee gave. But she acknowledges that the
state needs a better and less fractious approach
to land the automotive factories of the future.
“Pointing fingers at each other just gives another
reason for companies not to come to Michigan,”
Dingell says. “This is a wake-up call for all of us.”
Ford has tried to placate its unhappy neigh-
16 bors, with Chief Executive Officer Jim Farley tak-
Digital rendering
ing to Twitter to declare his “love” for the Great
Lakes State, where the automaker has invested
$7 billion in the past five years. Executive Chair
Bloomberg Businessweek October 11, 2021
Bill Ford, great-grandson of founder Henry, told
vehicle sales outlook
the Detroit News that the company considered by drivetrain
Michigan for its EV expansion, but it just didn’t Internal combustion
have a shovel-ready location that met the auto- Hybrid, plug-in hybrid,
maker’s needs, including enough acreage to match and fuel cell
the 6-square-mile megasite in Tennessee. Battery electric
Behind the bickering is the uncomfortable truth
for Michigan that winning investment during the 18m
century of the internal combustion engine is no
guarantee of riches during the dawning electric age.
Although Ford plans to produce the electric F-150
Lightning pickup at the vast Rouge factory com- 9
plex that founder Henry constructed a century
ago in Dearborn, no automaker has announced
a single new battery factory in the state. General
Motors Co. and its South Korean battery partner, 0
LG Chem Ltd., have chosen Ohio and Tennessee for 2021 2040
their first two plants, with no sites yet announced
for two others.
Moreover, because EVs don’t use conventional
engines and drivetrains, Michigan is at consider-
BLUE OVAL CITY: FORD. EV SALES OUTLOOK BASED ON BLOOMBERGNEF ECONOMIC TRANSITION SCENARIO. DATA: BLOOMBERGNEF ELECTRIC VEHICLE OUTLOOK 2021 REPORT PUBLISHED IN JUNE
able risk as the industry transforms. The state’s fac-
tories produce 1 in 6 internal combustion engines
in America and a third of transmissions, accord-
ing to the Center for Automotive Research in Ann
Arbor. More than 32,000 workers in Michigan built
gasoline-fueled engines and transmissions in 2019, of Blue Oval City,
Ford’s coming EV and
when factories were still running at full tilt before battery factories in
the pandemic. “What’s at stake is really the future Stanton, Tenn.
 BUSINESS
of mobility and the automotive industry,”
says Carla Bailo, CEO of researcher CAR,
who counsels Michigan’s leaders on luring
investment. “If all this work goes some-
where else, we have a number of plants
that do internal combustion engine work
that are really going to be in jeopardy. We
really need to take this seriously.”
Among Michigan’s biggest drawbacks is
its high cost of energy. The state has indus-
trial energy rates of 8¢ per kilowatt-hour,
more than the national average of 7.53¢
and well above its neighbors to the south,
with Tennessee at 5.85¢ and Kentucky
at 6.06¢, according to the U.S. Energy
Bloomberg Businessweek
has said that’s one reason it books a profit
on every Mach-E it sells. “We’re seen as a
union state, and that has baggage,” Bailo
says. She contends that can be “turned
around” by training UAW members for the
high-tech jobs of the future and encourag-
ing greater teamwork on the factory floor.
UAW spokesman Brian Rothenberg
took issue with such thinking. “That is
a 1980s analysis that does not apply to
today’s Michigan,” he says, noting that
Ford, GM, and Stellantis NV, the former
Fiat Chrysler, are building and renovating
factories around Detroit.
Michigan’s fractured political envi-
LEGAL NOTICE
U.S. POSTAL SERVICE STATEMENT OF OWNERSHIP,
MANAGEMENT, AND CIRCULATION
(Act of August 12, 1970: Section 3685, Title 39,
United States Code)
1 Title of publication: BLOOMBERG BUSINESSWEEK.
2 Publication No.: 080-900.
3 Date of filing: October 7, 2021.
4 Issue Frequency: Published weekly except for one week in
January, February, March, April, June, July, August, September,
October & November.
5 No. of Issues Published Annually: 42.
6 Annual Subscription Price: Domestic $99.00
7 Complete Mailing Address of Known Office of Publication:
731 Lexington Avenue, New York, NY 10022.
Contact Person: Daniel Murphy. Telephone: 212-318-2000.
8 Complete Mailing Address of Headquarters or General
Business Office of Publisher: 731 Lexington Avenue,
New York, NY 10022.
9 Full Names and Complete Mailing Addresses of Publisher,
Editor, and Managing Editor: Publisher: Bloomberg
L.P., 731 Lexington Ave., New York, NY 10022; Editor:
Joel Weber, 731 Lexington Ave., New York, NY 10022;
Managing Editor: Kristin Powers, 731 Lexington Ave., New
York, NY 10022.
10 The owner is Bloomberg L.P., 731 Lexington Ave., New
York, NY 10022.
11 Known bondholders, mortgagees, and other security
holders owning or holding 1 percent or more of total
amount of bonds, mortgages or other securities: None.
12 Not applicable.
13 Publication Title: BLOOMBERG BUSINESSWEEK.

Information Administration. ronment also takes a toll on economic 14 Issue Date for Circulation Data Below: September 6, 2021
15 Extent and Nature of Circulation: Average No.
That price premium would add up fast development. Mask mandates and school No. Copies Copies
Each of Single
in the factories Ford and SK are building, shutdowns during the pandemic exposed Issue Issue
A Total No. Copies
which together will have the capacity to deep divisions. Armed right-wing extrem- (Net Press Run) 450,753 295,508
B Paid Circulation
produce 129 gigawatt-hours of batteries— ists stormed the Michigan State Capitol (By Mail and Outside the Mail)

enough to power more than a million
electric cars annually. The highly auto-
mated and antiseptic environment that
battery plants require results in five times
the energy consumption of a typical auto
months before the siege on Jan.  6 in 1 Mailed Outside-County Paid
Subscriptions Stated on PS Form
Washington, and federal investigators 3541 (Include paid distribution
above nominal rate, advertiser’s
proof copies, and exchange copies) 247,703 155,286
broke up a plot to kidnap and possibly 2 Mailed In-County Paid
harm Whitmer. Subscriptions Stated on PS Form
3541 (Include paid distribution
above nominal rate, advertiser’s
Those hostilities continue to simmer proof copies, and exchange copies) 0 0

plant, according to Ford.
Making matters worse for the indus-
try, Michigan’s utility regulations cap the
amount of energy that industrial users
can buy via competitive bids at only 10%
of their consumption, which keeps rates
elevated, says Greg Keoleian, director
of the Center for Sustainable Systems at
the University of Michigan. “That would
as Republicans seek to oust Whitmer 3 Paid Distribution Outside the Mails
Including Sales Through Dealers 17
and Carriers, Street Vendors,
in the gubernatorial election next year. Counter Sales, and Other Paid
Distribution Outside USPS® 79,996 66,322
“Our governor has been concerned about 4 Paid Distribution by Other Classes
of Mail Through the USPS
cloistering us away and putting masks on (e.g., First-Class Mail®) 0 0
C Total Paid and/or Requested
our faces and keeping us out of school Circulation (Sum of 15B)(1), (2),
(3), and (4) 327,699 221,608
and out of work and out of church for
D Free or Nominal Rate Distribution
the better part of two years,” says GOP (By Mail and Outside the Mail)
1 Free or Nominal Rate Outside-County
Representative Walberg. “This better just Copies included on PS Form 3541 111,340 63,427
2 Free or Nominal Rate In-County
sock us between the eyes and wake us up.” Copies Included on PS Form 3541 0 0

account for a lot of the differences with
other states that have more competitive
markets,” he says.
Michigan’s reputation as a stronghold
of organized labor also works against
it, Bailo says. Electric vehicles are more
costly to build, mostly because of high
battery costs, so automakers are head-
ing south to Kentucky, Tennessee, and
other states with right-to-work laws to
lower their operating expenses. The
employees Ford and SK hire in Tennessee
and Kentucky will choose whether they
want union representation. Workers in
Tennessee have already rejected orga-
nizing drives by the United Auto Workers
at Nissan Motor Co. and Volkswagen
Tennessee’s Republican governor and 3 Free or Nominal Rate Copies
Mailed at Other Classes Through
the USPS (e.g., First-Class Mail) 3 2
Kentucky’s Democratic governor are 4 Free or Nominal Rate Distribution
boasting about their new role in usher- Outside the Mail (Carriers or other
means) 3,296 2,943
ing in the automobile’s electric era. They E Total Free or Nominal Rate
Distribution (Sum of 15D (1)(2)
paid dearly for it, with Tennessee giving (3) and (4) 114,638 66,372
F Total Distribution (Sum of 15C
half a billion dollars in incentives and and 15E) 442,337 287,980
G Copies Not Distributed 8,415 7,528
Kentucky forking out almost $300 million H Total (Sum of 15F and G) 450,753 295,508
and handing over a 1,551-acre site south I Percent Paid
(15c divided by 15f times 100) 74.1% 77.0%
of Louisville. 16 Electronic Copy Circulation:
A Paid Electronic Copies
But the Southern states’ leaders say 24,302 25,000
B Total Paid Print Copies (Line 15c) +
the payoff will likely last at least as long Paid Electronic Copies (Line 16a) 352,001 246,608
C Total Print Distribution (Line 15f) +
as Michigan has been the Motor Capital. Paid Electronic Copies (Line 16a) 466,639 312,980
D Percent Paid (Both Print &
At a splashy ceremony on Sept. 28 on the Electronic Copies) (16b divided by
16c x 100) 75.4% 78.8%
vast, 3,600-acre site in Stanton, Tenn., 17 Publication of Statement of Ownership: Publication
to be known as Blue Oval City, Governor required. Will be printed in the October 11, 2021 issue of
this publication.
Bill Lee declared, “West Tennessee will 18 Signature and Title of Editor, Publisher, Business
Manager or Owner
now lead the nation in the next industrial Joel Weber, Editor 10/11/2021

AG factories.
Ford builds its electric Mustang Mach-E
in Mexico, where wages are a fraction of
what U.S. workers make. The automaker
revolution.” —Keith Naughton
THE BOTTOM LINE Ford’s $11.4 billion investment in EV
and battery plants will result in almost 11,000 jobs. But
they won’t go to workers in its home state of Michigan.
I certify that all information furnished on this form is true
and complete. I understand that anyone who furnishes
false or misleading information on this form or who
omits material or information requested on the form
may be subject to criminal sanctions (including fines
and imprisonment) and/or civil sanctions (including civil
penalties).
 Bloomberg Businessweek October 11, 2021

T
E
C
H
N
18
O
L
O The View
G From Space
Y A startup uses satellites and AI to measure,
and maybe mitigate, the climate crisis ILLUSTRATION BY MARIA CHIMISHKYAN. DYER: COURTESY MUON SPACE

Over the past few years technology companies
have started to build something akin to a
computing shell around the Earth, where satel-
lites gather massive amounts of photos and other
measurements and artificial intelligence software
systems analyze the data. The results can be quite
spectacular. It’s no longer enough for systems
like these to count every tree on the Earth’s sur-
Edited by
face; now they aim to measure each one’s health,
Joshua Brustein size, and species to compute their total biomass
and ability to pull carbon dioxide out of the air.
Advances in hardware and machine-learning
software are vastly expanding what’s possi-
ble with satellite data. Once the province of
government-backed research, the most ambi-
tious work today comes from private companies.
Startups in the field say they want to assist scien-
tists grappling with climate change by providing
precise data about the health of the planet. But
they’re also chasing profits and counting on the
 TECHNOLOGY
information they’re generating being valuable to
those judging whether corporate and government
programs to better the environment are effective.
One of the most ambitious startups in the field is
Muon Space. While other companies have focused
on one part of the process—maintaining networks
of satellites, say, or creating computer models to
monitor specific situations such as wildfires or
methane leaks—Muon wants to do it all. Founded
by a team of satellite experts and scientists, it plans
to launch a fleet of satellites designed to analyze
Earth’s atmosphere, land, and water in fine detail.
The company will combine measurements from its
own equipment with decades of publicly available
satellite data to create a meticulously detailed pic-
ture of the planet’s ecosystems.
Muon’s goal is to build a single application to
help companies do things like monitor the efficacy
of their reforestation programs and allow regula-
tors to prove which farmers are polluting certain
rivers. “We think that over the next 10 years there’s
going to have to be a huge reckoning in terms of
transparency around things like carbon credits
and that we’re going to need better data to adapt
to climate changes,” says Jonny Dyer, Muon’s chief
executive officer and co-founder, in his first public
comments about the company’s technology. “We
need to move from images of the planet to funda-
mental geophysical measurements.” Muon recently
raised $10 million.
Historically, governments have openly shared
much of the data gathered from their satellites.
But working with the information has been tough.
Much of their systems’ technology predates any
planning for the modern era of cloud computing
and AI-based data analysis. “Twenty years ago,
the idea of putting every satellite image where
any scientist could access it was unheard of,” says
Joe Hamman, a research scientist at the National
Center for Atmospheric Research. “That vastly
limited how scientists thought about the problems
they would work on.”
Government bodies have been working to
modernize their tech, but private industry tends
to outpace their efforts. Microsoft, Google, and
Amazon.com have built systems that gather pub-
lic climate data, often obtained via satellites, and
make it available to just about anyone who wants
to poke around the images and measurements.
The motivation is a mix of altruism and a desire to
showcase their networks’ power to potential cli-
ents of their cloud computing products.
Microsoft Corp. also wants to monitor its own
environmental programs. Last year the company
said it planned to be carbon-negative by 2030, one
Bloomberg Businessweek October 11, 2021
of the most ambitious corporate climate pledges to
date. Dubious of the quality of some reforestation
and carbon capture ventures, Microsoft has been
looking for ways to assess its own efforts. “We are
the largest participant in the carbon removal mar-
ket today,” says Lucas Joppa, Microsoft’s chief envi-
ronmental officer. “How in the world are we ever
going to monitor and validate the removal that we
paid for in any sort of scalable way? The answer lies
in remote sensing.”
Microsoft’s Planetary Computer is one of the big-
gest repositories of climate-related data ever assem-
bled. Joppa warns that many problems still exist
around working with satellite data, including basic,
painstaking work such as pulling subpar images
from databases and finding the right algorithms to
simplify complex scientific measurements. “This is
not easy, and it’s not cheap if you want to extract
meaningful information,” he says.
Startups have also begun picking off various
aspects of the undertaking. Salo Sciences, Chloris
Geospatial, and NCX are applying image recognition
and other machine-learning techniques to existing
data. Planet Labs Inc. has the largest network of
image-taking satellites ever built and can take mul- ○ Dyer
tiple photos of almost all of the Earth’s landmass 19
every day. MethaneSAT, a subsidiary of the non-
profit Environmental Defense Fund, is planning a
fleet of satellites to monitor methane emissions at
more than 80% of the world’s oil and gas fields.
Hamman says this kind of approach has the
potential to lead to improvements on satellite work
that’s been going on for decades. Still, he’s con-
cerned that the typical startup hype cycles could
prove a distraction at a time of extreme urgency
for climate-related work. “I don’t want to downplay
what people are trying to do, but there are marginal
benefits on many of these things,” he says. “There
are fundamental challenges that we face with the cli-
mate that don’t go away because we have a new sat-
ellite or a clever way of doing accounting.”
Muon’s founders are veterans of the space
industry. Dyer was the chief engineer of Skybox
Imaging, a startup that created techniques to
make satellites smaller and cheaper, which was
purchased by Google in 2014. His co-founder, Dan
McCleese, is the former chief scientist at NASA’s Jet
Propulsion Laboratory.
Muon’s satellites, which the company expects
to launch in the next two years, will use thermal
infrared sensors, infrared spectroscopy, and low-
frequency radar to scrutinize almost every inch of
the planet. Until then it’s applying its algorithms to
existing image databases and calculating soil mois-
ture levels, snow depth, and the types of standing
  TECHNOLOGY
water in various locations. Muon has projects
with Google and weather forecaster Tomorrow.io
to prove out its data and image analysis techniques,
which have already allowed it to catch businesses
polluting areas meant to be protected.
“In areas like agriculture where there are some
bogus things going on, you can see something
like waste discharge very clearly with these
Facebook share price
approaches,” Dyer says. He considers a satellite-
based system for automatically monitoring
environmental conditions as inevitable, whether
it’s built by Muon or someone else. “When we look
back in 20 years, it’s going to be obvious that the
only way markets can develop around this stuff and
regulators can feel comfortable is if this is real and
you have good data.” —Ashlee Vance
THE BOTTOM LINE Private companies are leading the charge in
the use of satellites to keep track of both those polluting the planet
and those trying to save it.
The Whistleblower’s
20 Guide to Fixing
Facebook
○ A former employee calls for big changes but
doesn’t want the company to be broken up
A product manager who’d worked at Facebook Inc.
turned over reams of pages of internal documents
to government officials and the Wall Street Journal
Haugen during her
earlier this year because, she said, she’d reached
the conclusion that the company was unable to
change on its own. When there were “conflicts of
interest between profits and the common good and
public safety, Facebook consistently chose to prior-
itize its profits,” Frances Haugen told Congress at
a public hearing on Oct. 5. “I realized we needed
to get help from the outside, that the only way
these problems would be solved is by solving them
together, not solving them alone.”
The hearing came after weeks of damaging
revelations based on the documents Haugen
shared with the Journal and the day after a tech-
nical problem took down Facebook’s core prod-
ucts for hours, contributing to a sense of crisis
at the company. Haugen told Congress what she
thought Facebook had to do to make its main
social network and its Instagram photo-sharing
Bloomberg Businessweek October 11, 2021
platform safer, healthier, and less polarizing.
There are lots of ideas on this subject—Congress
and federal enforcement agencies have spent the
last several years formulating their own plans to
hold Facebook to account—and Haugen’s sugges-
tions didn’t always align with those of the compa-
ny’s harshest critics. 
Haugen’s overarching point: Facebook needs
to make big product changes that, she said, would
likely lead to less engagement, a decline in advertis- $380
ing dollars, and ultimately less profit. She called out
one of the core aspects of the social network’s expe-
rience, its “engagement-based ranking” system that
determines what people see in their news feeds. 350
In 2018, Facebook prioritized engagement as part
of a shift toward “meaningful social interactions,”
which the company said would lead to more vis-
320
ibility for posts from friends and family and less
for brands and publishers. The impact, according 8/31/21 10/5/21
to Haugen, was to emphasize content that elicited
strong emotional reactions, even if it was hateful
or polarizing. 
Instead of engagement, Haugen would prefer
that Facebook show content mostly in chrono-
logical order. It already offers this option but
doesn’t allow users to make it their default setting.
Company executives have said chronological feeds
would be less relevant to many users than one in
which its algorithms choose personalized content. 
Another idea that Facebook has partially imple-
mented is the removal of “like counts” showing
how many people reacted to posts on Instagram,
a feature that’s been linked to the social anxiety
that the product causes, particularly in teens.
After toying with the idea for years, the com-
pany  said recently it would allow people the
option to hide the like counts. Haugen called for
more sweeping action, saying minimum ages congressional testimony
JABIN BOTSFORD/THE WASHINGTON POST/BLOOMBERG. DATA: COMPILED BY BLOOMBERG
  TECHNOLOGY
for social networks should be raised to as high
as 18, because young people don’t have the self-
regulatory skills to adjust their behavior. The
platform’s algorithm has “feedback cycles where
children are using Instagram to self-soothe but
then are exposed to more and more content that
makes them hate themselves,” she said.
Facebook’s own research about the harms of
youthful Instagram use was one of the most explo-
sive aspects of the Journal series based on Haugen’s
revelations. In a statement, Nick Clegg, Facebook’s
vice president for global affairs, said the reports
contained “deliberate mischaracterizations” with-
out offering specific details. The company said in
another statement that Haugen wasn’t high enough
on its totem pole to understand its approach to
the issues she testified about. It repeated its call
to reform an important 1996 law governing social
media sites.
Lawmakers have introduced several bills tar-
geting large technology companies, some of
which deal with aspects of product design. While
The B2B Netflix
○ Wait, why does Salesforce have a streaming video channel?
In her essay “The White Album,” Joan Didion
famously wrote, “We tell ourselves stories in order
to live.” As far as human beings go, it’s as good an
explanation as any. But how about business-to-
business software companies? Why do they do it?
At this late stage of the streaming wars, it seems
like there’s no business that isn’t in show busi-
ness. Consider Salesforce+, the online
streaming channel that Salesforce.com
Inc., the world leader in customer rela-
tionship management software, started
in September. The channel, which I
recently spent a couple days watching,
is a collection of shows available through
Salesforce’s website where people (usually
company executives) interview busi-
COURTESY SALESFORCE
ness owners, entrepreneurs, and fel-
low executives. There’s The Inflection
Point, where chief executive offi-
cers (and, in one episode, CNBC’s Jim
Bloomberg Businessweek October 11, 2021
members of both parties agree on the need for
stronger privacy protections, they differ on the
more politically charged issue of content modera-
tion, with Democrats focused on the spread of mis-
information and Republicans accusing technology
companies of bias against conservative views. 
There is already bipartisan support for bills
confronting the market power of Facebook and
a handful of other huge tech companies, and the
Federal Trade Commission has challenged the
company’s acquisition of Instagram and instant-
messaging platform WhatsApp. Haugen said
breaking up Facebook wouldn’t help. Doing so,
she argued, would lead only to smaller companies
with the same privacy and transparency prob-
lems. And without Instagram to drive its growth,
Facebook would stagnate and “continue to be this
Frankenstein that is endangering lives around the
world.” —Naomi Nix and Anna Edgerton
THE BOTTOM LINE Facebook’s fixation on engagement has
made its products less safe, says a whistleblower, and the company
should accept lower profits to improve its social networks.
21
Cramer) talk about themselves. The series Leading
Through Change focuses on “how business lead-
ers are navigating the Covid-19 pandemic.”
Simply Put promises, in six-minute episodes,
solutions to “complex industrywide problems.”
A lot of the interviews are about telling stories:
either of personal journeys, or corporate
transformations, or, ideally, stories that
tie the two together into parables
of purpose-driven capitalism. In
one episode of Connections, Sarah
Franklin, Salesforce’s chief market-
ing officer, travels to Austin to speak  Astro, Salesforce’s
mascot
to Carla Piñeyro Sublett, IBM
Corp.’s chief marketing officer. As
the two walk through a park wear-
ing athleisure clothing and match-
ing foam-and-mesh trucker hats,
Sublett confides that she wants IBM’s
marketing to win an Academy
  TECHNOLOGY
Award. “I want to bring these stories to life in
a way that no B2B tech marketer ever has done
before,” she says. “I just got chills when you said
that!” Franklin responds. “That’s such beginner’s
mind and such innovative thinking.”
The good-natured willingness of Salesforce exec-
utives to try their hand at being TV personalities
is admirable. My journey through the Salesforce+
catalog, though, brought me no closer to under-
standing why the channel exists. (Admittedly, I’m
not really the target demographic: Like many busi-
ness journalists, I’ve never actually run a business,
though I’ve developed a very high tolerance for
business content.)
I reached out to Salesforce and ended up speak-
ing to Franklin herself, who said she came up with
the streaming idea soon after taking on her cur-
rent job in January. “I came into the CMO role with
an innovator’s mindset and in the middle of this
pandemic, and I was thinking, ‘How should we
adapt? What do we need to do differently?’ ” she
said. She looked at Netflix, ESPN+, and Disney+
and thought there was a place alongside them for
“engaging content and inspirational stories” related
to business.
22 On some level, Salesforce+ is just Salesforce tell-
ing its own story. What good is it to be a purpose-
driven, change-making company if you can’t tell
people about it? In Episode 3 of Leading Through
Change, Salesforce CEO Marc Benioff interviews
Julie Sweet, the CEO of Accenture Plc. At one
point, he unspools, with justifiable pride, a long
soliloquy that starts with how Salesforce secured
and distributed to health-care workers early in
the pandemic millions of pieces of personal pro-
tective equipment, then describes the company’s
work with Accenture to help clients do contact trac-
ing, before segueing into a discussion of the con-
tagion risk of elevators, all while Sweet nods along
politely. “Tell me,” Benioff concludes, “how are you
thinking about that?”
The context for all of this is that it’s getting
harder for companies to reach people the way
Bloomberg Businessweek October 11, 2021
they used to. Customers have “become experts  An episode
of Connections
at tuning out traditional advertising,” says Allen being filmed at the
Adamson, a brand strategist and founder of mar- Dreamforce conference
keting consulting firm Metaforce. At the same
time, the public backlash against cookies and ad
tracking software more broadly has led Apple
Inc., Google, and the other big software and hard-
ware platform companies to pledge (with vary-
ing degrees of enthusiasm) to phase them out. A
streaming service could be a way to connect to
customers who won’t let you pay to reach them.  Franklin interviewing
surfer Laird Hamilton for
Obviously, this only works if people come Connections
and watch the stuff. Salesforce+ was launched at
Dreamforce, the company’s annual conference,
a mostly virtual affair this year streamed on the
new channel. Much of the content retains the feel
of something adapted from a conference stage. But
instead of sitting in the same room for a few hours
until the alcohol-lubricated networking begins,
Salesforce+ viewers are being asked to focus on a
screen that could just as easily be playing sports
highlights, episodes of their favorite childhood TV
shows, or pornography. While I was watching it, I “I want to bring
found myself constantly clicking away to deal with these stories
my online to-do list. to life in a way
Salesforce+ is still new, of course, and a work that no B2B
in progress. Franklin is thinking of expanding into tech marketer
scripted content—she mentioned the HBO satire ever has done
Silicon Valley as an inspiration. I’m definitely curi- before ”
ous what that would look like. For now, though,
the channel failed for me, at least as infotain-
COURTESY SALESFORCE (2)
ment. As a productivity aid it worked pretty well.
—Drake Bennett
THE BOTTOM LINE Having trouble reaching customers
through traditional advertising, some unlikely companies including
Salesforce are getting into the entertainment business.
YO U G O T HE D ISTAN CE
F OR YOU R BUS IN E SS.
SO D O W E.
Every business is on a journey. Whether you’re expanding your clientele
or hiring new employees, Dell Technologies Advisors are here to help with
the right tech solutions. So you can stop at nothing for your customers.

Contact a Dell Technologies Advisor at

855-341-5261 or Dell.com/smallbiz

XPS 15

Do more with a modern device

and Windows 10 Pro

Copyright © 2021 Dell Inc. or its subsidiaries. All Rights Reserved. Dell Technologies, Dell, EMC, Dell EMC and other trademarks are trademarks of Dell Inc. or its subsidiaries. Other trademarks may be trademarks
of their respective owners. 570541
You don’t need to
be a helioseismologist
to help harness the
power of the sun.
Help power your portfolio with
the innovators of the Nasdaq-100.

NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE

There are risks involved with investing in ETFs, including possible loss of money. ETFs are subject to risks similar to those of stocks. Investments focused
in a particular sector, such as technology, are subject to greater risk, and are more greatly impacted by market volatility, than more diversified investments.
The Nasdaq-100 Index comprises the 100 largest non-financial companies traded on the Nasdaq. An investment cannot be made directly into an index.
Before investing, consider the Fund’s investment objectives, risks, charges and expenses.
Visit invesco.com/fundprospectus for a prospectus containing this information. Read it carefully
before investing.
Invesco Distributors, Inc.
 Bloomberg Businessweek
Take My Pension
Plan, Please
Booming markets have made it a great time for a
company to offload its retirement obligations
Many Americans who still have a traditional
pension—the kind that pays a regular income no
matter what the market does—could soon have a
different company paying their benefits. U.S. com-
panies owe current and future retirees and their
beneficiaries more than $3 trillion, and many have
been trying to exit the retirement business for
years. Right now they have a golden opportunity
ILLUSTRATION BY KATI SZILÁGYI
to buy their way out.
It’s called a pension risk transfer, or PRT: By
buying a financial product called an annuity, a com-
pany can essentially place the assets of a plan and
the responsibility for paying for it into the hands
October 11, 2021
F
I
N
A
N
C 25
E
of a life insurance company. The insurer makes
money if it can earn more from investing the assets
than it has to pay out. (Another risk-transfer option
is to offer to pay benefits in a lump sum; in that
case, the risk of ensuring the money lasts is taken
on by the pensioner rather than another company.)
These deals with insurers aren’t new, but record
high markets are making them especially attractive
to employers.
That’s because investment gains have helped
many pensions get close to full funding, mean-
Edited by
ing they hold enough assets to satisfy their obliga- Pat Regnier and
tions to current and future retirees. If a company David Rocks
  FINANCE
transfers a plan that’s not fully funded, it has to
pay to cover the shortfall. There’s a very small
amount to make up right now. The 100 largest cor-
porate pensions were funded at 97.1% in August,
according to the consultant Milliman Inc., and they
could creep as high as 102% by the end of the year
under optimistic projections. A year ago, pensions
were less than 87% funded.
The window to strike a pension deal could close
quickly. If the markets start to fade, an employer
would need to pay more to top off its plan before
handing it over. Conversely, if a plan’s investments
do well enough to surpass 100% funding, the spon-
soring company has less incentive to exit as it could
face a tax bill. And it doesn’t benefit from having
excess cash sitting idle in the fund. “There’s a bit
of an inflection point for sponsors as they reach
full funding,” says Matt McDaniel, a pension con-
sultant with Mercer, which advises companies on
their benefit plans.
There have already been a handful of jumbo pen-
sion deals this year, including a $4.9 billion transac-
tion by Lockheed Martin Corp. and insurer Athene
Holding Ltd. and a $5.2 billion accord between
Prudential Financial Inc. and HP Inc. By yearend,
26 insurance broker Willis Towers Watson Plc expects
more than $30 billion worth of transactions, which
could make 2021 the busiest year since 2012.
Companies have been eager to shed the plans
for several reasons. The simplest one is risk: A pen-
sion is a liability that sits on an employer’s balance
sheet for a very long time, and it has to be paid
even if business is slow and markets are down. Most
companies now prefer to fund 401(k) plans, which
put the burden of managing retirement assets on
the employee. Additionally, low interest rates and
bond yields mean that companies could struggle
in the future to earn high enough returns to fund
their obligations, even as the plans remain costly to
maintain. Providers are required to pay premiums
to the federally backed Pension Benefit Guaranty
Corp., which insures the trillions of dollars of obli-
gations the plans carry.
Many life insurance companies like pension
assets because they can balance the obligations
against other products in their portfolios. For
example, pension payments are made as long as
a participant lives, while a life insurance policy is
paid out only upon death. The insurer can hedge
the risk of people living longer than expected
against that of customers dying too soon.
Insurance companies backed by private equity
have also jumped into the business. Apollo Global
Management Inc. is the largest shareholder in
Athene, which is taking on the Lockheed Martin
Bloomberg Businessweek October 11, 2021
plan. Athene’s retirement assets have provided
Apollo with a big pool of long-term capital it can
invest and on which it’s earned lucrative fees.
In March, Athene and Apollo announced a plan
to merge. “The reaction
Pension plan participants might wonder how whenever
their benefits change after a risk-transfer deal there is change
goes through. Most things will seem quite similar: is concern”
Payments will still arrive monthly and in the same
amounts; Prudential Financial Inc. says it matches
previous payments down to the penny.
The big difference is in how these plans are
supervised. Rather than being insured by the
PBGC, which pays benefits up to a limit when a
plan fails, they’re monitored by the state regu-
lators who oversee insurance companies. Each
state also has a guaranty association that can pro-
vide some protection if an insurance company
collapses. Joshua Gotbaum, who served as the
director of the PBGC during the Obama admin-
istration, told a federal panel in 2013 that there
was no real difference between a plan backed by
the PBGC and one managed by an insurer. James
Szostek, a vice president for the American Council
of Life Insurers, says life insurers have “decades
of experience managing long-term obligations” as
well as being subject to regulatory oversight.
Even so, retiree advocates say the shift can be a
source of consternation for pension participants.
“The reaction whenever there’s change is con-
cern,” says Norman Stein, a law professor at Drexel
University and a senior policy adviser to the Pension
Rights Center. In a stroke, people go from relying
on the company they worked for over a career to ○ Pension liabilities of
U.S. companies
an insurer they may have never given a thought to.
Stein says some of the regulations around PRT trans-
actions and the protections for workers and retir-
$3t
ees after a switch can be murky. He says the shift
can be particularly worrying in the case of insurers
backed by private equity firms, which have a rep-
utation for risk-taking investments. Sean Brennan,
executive vice president of pension risk transfer
at Athene, says insurers are a safer bet than many
employer-run plans “with a bunch of equity and
interest rate risk.”
Since Prudential brokered two giant pension
deals nine years ago, life insurers have expanded
aggressively. There are now 19 life insurers willing
to strike PRT deals, and more are expected to enter
the fray, Mercer’s McDaniel says.
ILLUSTRATION BY SAM ISLAND
“Competition is certainly there,” says Melissa
Moore, senior vice president for U.S. pensions at
MetLife Inc. That’s helped bring down the main
cost of a transfer, which is buying the annuity.
“Annuity pricing is currently exceptional, and the
 FINANCE Bloomberg Businessweek October 11, 2021

annuity market is bustling as a result,” says Steve
Keating, managing director at BCG Pension Risk
Consultants/BCG Penbridge, which helps employ-
ers manage their retirement costs.
A recent study commissioned by MetLife found
that 93% of 250 plan sponsors surveyed intend
to divest all of their obligations, up from 76% in
2019. Companies can choose to fully divest the
plans or reduce the scope of pensions on their bal-
ance sheets without removing them entirely. But
plenty of businesses are looking to get out for good,
according to Yanela Frias, president of Prudential’s
group insurance business. “The reality is that an
insurance company is much better positioned to
manage this liability than a car manufacturer or a
telephone company,” Frias says. “We do this for a
living.” —Max Reyes
THE BOTTOM LINE U.S. employers have been trying for years to
get the cost of funding employees’ retirement off their books, and
insurance companies are ready to make them a deal.

Twentysomethings Spending
Other People’s Money
○ Young people are taking on Wall Street elites and joining the SPAC rush

The trajectory of so-called blank-check companies—

effectively vast pools of cash in search of invest- 27
ment opportunities—is shaping up to be a classic
Wall Street feeding frenzy. In the past two years,
they’ve morphed from a niche product aimed at
financial pros into a mass-market phenomenon
hyped on Twitter and CNBC. Almost 600 of these
special purpose acquisition companies, or SPACs,
are trading in New York, and high-profile financiers
such as hedge fund titan Bill Ackman, Japanese tech
billionaire Masayoshi Son, and Citigroup Inc. vet-
eran Michael Klein have jumped in. This year, some
450 SPACs have completed U.S. initial public offer-
ings, with a total value of $130 billion—more than
one-and-a-half times the massive haul of 2020—and
hundreds more are waiting to list.
Now the kids are joining the party. More than a timing. If you come at the wrong time for a product
dozen people age 30 and younger have been named that’s lost its luster, it’s going to hurt.”
as executives or board members at blank-check com- SPACs raise funds from investors to make an
panies that have filed listing plans since June, accord- unspecified acquisition, though they’ll some-
ing to data provider SPAC Research. These include times declare a theme such as health care, tech-
a 27-year-old who got a master’s in project manage- nology, or Asia. After a SPAC begins trading, its
ment from Georgetown University in 2020, a 29-year- promoters scour the globe for a good company
old Atlantan who’s involved in four of them, and a to buy. The two sides negotiate a deal and merge,
pair of 23-year-old fraternity brothers from Cornell effectively offering the target a shortcut to going
who list a $9 million, seven-bedroom mansion as public—and a rich reward for the SPAC’s found-
their headquarters. With so many aspiring entrants, ers. Increasingly, those founders are relative new-
the SPAC market today looks like “a pile-on after the comers. “Younger people have a lot of advantages,
match is over,” says Brett McGonegal, chairman of because they are very innovative and they have
advisory firm Capital Link International Holdings the punch,” says Sergio Camarero, a managing
Ltd. “The most important thing on Wall Street is partner at adviser ARC Group.
  FINANCE
Camarero’s team brought in Yoann Delwarde,
a 30-year-old consultant living in Shanghai, to serve
as chief executive officer of a SPAC seeking to raise
$50 million for a tech acquisition. A French engi-
neering grad who’s been in China for seven years,
Delwarde advises startups on business develop-
ment and motivating their sales staff. He sees run-
ning the blank-check company as a logical next step
and insists investors don’t care how old—or young—a
SPAC’s leaders might be. “It’s about the skill set and
quality of the team and quality of the network,” he
says, “rather than the age and the traditional ladder
of progress in the corporate environment.”
Many of the companies run by this new genera-
tion are targeting businesses with particular appeal
to the young. Vikas Desai, the 30-year-old founder
of cannabis investment firm WelCan Capital, plans
to raise $100 million for a SPAC focused on the
emerging industry. Alexander Hornung, a 27-year-
old living in Zurich, is chief financial officer of
Mountain & Co. I Acquisition Corp., which says it
will buy an internet business with the $200 million
it hopes to raise. Former Goldman Sachs Group
Inc. banker Claire Councill, a board member of
a SPAC that plans to acquire an entertainment or
28 other consumer-focused business, was 26 when
the company raised $173 million in June.
Others are like Rose Hill Acquisition Corp.,
seeking to bring capital to a relatively neglected
corner of the world. Started by teammates on
the Cornell tennis squad, Rose Hill aims to raise
$125 million to hunt for an acquisition in Latin
America, with a listing likely in October. Founders
Albert G. Hill IV and Juan Jose Rosas, both mem-
bers of the Delta Upsilon fraternity, spent time at
Chardan Capital Markets LLC, an adviser that’s
carved out a niche arranging blank-check deals.
Hill, a great-great-grandson of the legendary
gambler-turned-oil baron H.L. Hunt, also had a
stint as an entry-level investment banking ana-
lyst at Guggenheim Partners and runs an online
mattress company on the side. Rosas, an informa-
tion science major from Lima, was a member of
Cornell’s hedge fund club and interned at Point72
Asset Management.
Cohen & Co. and Chile’s Ameris Capital are
among the SPAC’s financial backers, and Wall
Street stalwart Cantor Fitzgerald LP has signed on
to underwrite the offering. Board members include
a former executive at a top Brazilian fund manager,
alumni of Banco Santander SA and UBS Group AG,
and the ex-CEO of one of Peru’s largest business
groups. Hill and Rosas, who will get discounted
stock that should help them profit handsomely from
a successful deal, declined interview requests citing
Bloomberg Businessweek October 11, 2021
a regulatory “quiet period” ahead of the IPO.
Of course, for every SPAC managed by a
twentysomething, dozens more are run by peo-
ple with decades of experience. Many in the busi-
ness welcome fresh faces getting an opportunity
to take on the old guard. But with growing num-
bers of SPACs chasing a shrinking pool of good
targets, the more established players are likely
to snap up the best deals, says David Pogemiller,
president of research firm Boardroom Alpha. “I
don’t think SPACs will go to the world of young
up-and-comers,” Pogemiller says. “Access to deal
flow and access to capital will be the real differ-
entiators—and that access goes to those with
experience.” —Ben Scent and Crystal Kim, with
Eduardo Thomson and Rachel Adams-Heard
THE BOTTOM LINE Some 450 SPACs have had IPOs valued at
$130 billion in the U.S. this year, 55% ahead of last year’s haul, and
more and more often they’re being run by young people.
Brazil Speeds
Up Mobile
Payments
○ A year ago the Pix platform didn’t exist.
Now half the population uses it like cash
BRANDT: RAPHAEL RIBEIRO/BCB. PIX: KARIME XAVIER/FOLHAPRESS. DATA: ACI WORLDWIDE
On a Sunday afternoon at a busy intersection in
central Brasília, a woman asks passing motorists
for money. Her cardboard sign, written in marker
in Portuguese, reads: “Need help. Hungry. I
accept Pix.”
Pix, a system that allows fast money transfers
over smartphones, has become ubiquitous in the
11 months since it was introduced by Brazil’s cen-
tral bank. All that’s needed to send cash to some-
one is a simple key they’ve set up, such as an email
address or phone number. Similar to the privately ○ Carlos Eduardo
Brandt
owned Zelle in the U.S., Pix works through multiple
apps from banks and other digital wallet services.
It’s already been used at least once by 110 million
Brazilians and about $89 billion has moved through
 FINANCE
Digital real-time
the network. Brazil now registers more instant
transfers than the U.S.
The launch of Pix turned out to be well-timed.
With businesses closed during the pandemic, the
use of cash at points of sale decreased by 25% in
2020, according to a report from technology con-
sultant FIS. About the same time informal work
boomed, accounting for 80% of the jobs added in
Latin America’s largest economy in the first three
months of 2021. Pix made paying people digi-
tally almost as easy as using paper money. “We
expected considerable acceptance from individu-
als, and we knew companies would come later on,”
says Carlos Eduardo Brandt, the chief of manage-
ment and operations for Pix. “But in terms of mag-
nitude, it surprised us.”
In July, Pix broke its own record of 40 million
payments in one day. Most were person-to-person
transfers, which is how Renata da Silveira Pires,
the owner of a small cat-sitting business in Águas
Claras near Brasília uses it. “Before Pix existed, I
had to have accounts in many different banks, so
that my clients wouldn’t have to pay the fee to send
money to another bank—which could be 30% of the
cost of one of my visits and would weigh heavily
on customers,” she says. “Now I just need to have
one account. This helps me control my finances.”
She often works on weekends and holidays, when
pet owners are traveling, and she’s able to receive
payment immediately instead of having to wait for
banks to open.
One of the goals of the Central Bank of Brazil in
creating Pix is to get more people inside the for-
mal financial system. “We want to offer an infra-
structure able to meet all the needs of our society,
especially in those sectors where needs are not
currently met,” Brandt says. But Pix by itself won’t
be enough. Brazilians still need a bank account
or some kind of payment service to use it, and
about 30% still don’t have one. Initiatives such
as Pix “make payments more efficient, especially
Bloomberg Businessweek October 11, 2021
for those who already have bank accounts, but
achieving financial inclusion is a whole different payments by market
thing,” says Liliana Rojas-Suarez, director for Latin 1b 2020 transactions
America at the Washington-based Center for Global
Development. She says countries in the region also
have to address costly regulations and low trust in
Growth in 2020 100%
the financial system.
The hope for Pix is that by speeding and simplify-
ing payments, banks and financial technology com- Thailand
panies will be goaded to innovate and provide new,
more accessible services. The country is particu-
larly fertile ground for digital payments: Brazilians
spend more time on social media than people in
any other country in the Western Hemisphere and
have the fifth-largest online population, according
to GlobalWebIndex. In recent years, fintechs such
as the Warren Buffett-backed Nubank have drawn
customers away from traditional Brazilian banks.
Nubank is eyeing an initial public offering that could
give it a market value of $55 billion.
Fast digital money has some of the risks asso-
ciated with cash. A notorious crime in Brazil is
India
“express kidnapping,” in which criminals grab
victims, take them to an ATM, and force them at
knifepoint or gunpoint to withdraw the maximum Nigeria
amount possible. Pix, it seems, is the new ATM: U.S. 29
Muggers skip the trip to the cash machine and sim-
ply make people transfer their savings via an app.
Brazil
Although Pix transactions are traceable, in some 1.3b
cases criminals may be using accounts in others’
names. Speaking at an event Oct. 4 in São Paulo,
central bank President Roberto Campos Neto
attributed the thefts to a general uptick in crime as
50
the economy has reopened, adding that “our plat-
form allows us to make adjustments very easily.”
Policymakers in August added safeguards similar
to those put on ATMs, such as limiting the amount
one can transfer at night, when such assaults are
most common.
Pix already faces competitors, such as a new
payment service through the Facebook Inc.-owned
messaging system WhatsApp. But the central bank
aims to keep expanding Pix’s reach. It will soon offer
ways for users to make payments when they aren’t
connected to the Internet. Pix is also working on
allowing international transfers as well as making
it possible for users to get cash from retailers as an
U.K.
alternative to ATMs. “We haven’t even started yet,”
said Campos Neto at an event hosted by the news- Mexico
paper Folha de São Paulo in August. “I would say we China
have only used 5% of its potential.” —Maria Eloisa
South
Capurro and Shannon Sims Korea
THE BOTTOM LINE Brazil’s central bank built a payments
platform that works with multiple banks and payment services.
Japan
0
It hopes this will bring more people into the financial system.
 Bloomberg Businessweek October 11, 2021

4
The Only College Beer
E Game That Matters
C A decades-old business school simulation exercise illuminates
how human error can snag up supply chains

O Prospects that the world’s snarled supply chains

may become less tangled were dealt a setback
MBA students at the prestigious Sloan School of
Management. Created in the 1960s, it models the

N
last month when a couple of MIT students bought
10,000 cases of beer.
The purchase order wasn’t real. It was part
of a role-playing exercise called the Beer Game
supply-and-demand dynamics among a brewery,
distributor, wholesaler, and retailer. At the Sept. 24
game, held at a Marriott in Cambridge, Mass., Team
Bemba got nervous, made the big buy, and amassed

O
that’s something of a rite of passage for first-year $213,000 in make-believe carrying costs.

30
M
I
C
S
ILLUSTRATION BY THOMAS COLLIGAN. COURTESY MIT SLOAN SCHOOL OF MANAGEMENT

Edited by
Cristina Lindblad
 ECONOMICS
The real-life takeaway: The urge to hoard, which
has fueled panic buying of everything from flour to
microchips, was alive and well in this crop of bud-
ding corporate managers. “The pandemic revealed
flaws that were latent all along our globalized sup-
ply chains,” said management professor John
Sterman, addressing the 125 assembled students
before the game got under way. “It’s urgent that we
figure out how to improve them so we are prepared
for the next shocks, whether another pandemic,
civil unrest, climate change—or all of the above.”
When the game wrapped after three hours,
all 15 of the MIT teams had logged higher-than-
average costs. So Sterman shifted the discussion to
understanding how such a select group could “all
do so badly. And not just badly, but really badly.”
Sterman, who has been running students
through the Beer Game for four decades and has
written papers about it, compares it to the flight
simulators used to train airline pilots. The pan-
demic has driven home the importance of putting
would-be corporate managers through comparable
exercises to determine how they’ll react under
pressure. “In an aircraft, or a firm, failure is too
costly,” Sterman says. “Simulation is then the best,
and sometimes only, way we can learn for our-
selves how to manage complex systems.”
The Beer Game is designed to teach players
about the bullwhip effect, a systems theory devel-
oped around the work of Jay Forrester, a computer
engineer who joined Sloan’s faculty in the late 1950s.
In the simulation, an unexpectedly large order for
beer typically sets off a wave of panic orders and
inventory building, with the effects amplifying
along the supply chain back to the factory.
All sorts of bullwhip effects are observable in
the global economy right now—ships backed up at
U.S. and Chinese ports, Britons lining up for gas,
carmakers idling production lines in response to
a scarcity of chips. “Fear of running out is causing
every company to over-order—like the toilet paper
shortage, but at epic scale,” Tesla Inc.’s Elon Musk
tweeted in June about semiconductors.
More recently, American retailers have indicated
they’re stocking up as much as possible based on
expectations that consumer demand will stay strong
for the foreseeable future. “We’re ordering as much
as we can and getting it in earlier, and I think as evi-
denced by most recent sales results, we’re doing OK
with this,” said Richard Galanti, executive vice pres-
ident and chief financial officer of Costco Wholesale
Corp., on a Sept. 23 earnings call.
As director of Schwarz Asia Pacific Sourcing
Ltd., a unit of one of the world’s biggest super-
market operators, Bjoern Lindner buys fixtures
Bloomberg Businessweek October 11, 2021
and fittings such as shelves, shopping carts, and “Traditionally
lighting, and ships them to Europe. “I have no clear with inventory,
predictability on when our goods can be shipped, the lower the
so the obstacle is transportation from the factory better. But
to my warehouse in Germany because there are a the world is
lot of uncertainties in between,” he says. different now”
Testrite Group, a Taiwanese trading company
that helps American big-box retailers source home
goods from more than 4,000 suppliers in markets
including China, India, and Southeast Asia, is hav-
ing to triple inventory levels, especially at U.S.
warehouses, because of shipping disruptions.
“Traditionally with inventory, the lower the better.
But the world is different now,” says Bruce Shen,
31
a spokesman for the company. “An inventory rush  The Beer Game
in action
like this was very rare before.”
Sterman believes that focusing on Covid-related
anomalies as the main source of supply chain strains
underplays the cascading effect of bad decisions.
“It’s not because of the pandemic. It’s because of
the way human beings reacted to the fear that the
pandemic induced,” he says. “That’s missing in the
supply chain discussion these days.”
That diagnosis resonated with Michelle Diab,
a student who took part in the September Beer
Game. “The amygdala surges into powerful over-
drive with frantic orders for hundreds of units of
inventory, high levels of frustration, and blaming
the customer,” she says, referring to the zone of the
brain associated with fight-or-flight and other sur-
vival behaviors. “I was left wondering how it is pos-
sible that any organization is capable of any good if
this is our human disposition when under threat.”
One of the lessons from the Beer Game is that
trust and collaboration are integral to the smooth
functioning of supply chains. These can break
down when there are production bottlenecks or
other types of stresses. For instance, a wholesaler
  ECONOMICS Bloomberg Businessweek October 11, 2021

that suspects a usually dependable supplier may
prioritize orders from bigger clients is more likely
to place duplicate orders with several factories—
even if it risks damaging valuable relationships and
winding up with too much stock.
Mike Swartz, who played a wholesaler on the
winning team, MmmmmmmBeer, says he focused
on tracking orders from the retailer and antici-
pating its needs without sending any bogus sig-
nals in the form of an oversize order. The key, he
says, was “trusting our teammates and keeping a
cool head.” —Brendan Murray and Enda Curran,
with Cindy Wang
THE BOTTOM LINE A role-playing game devised by researchers
at MIT illustrates the workings of the bullwhip effect, a dynamic that
has worsened supply chain disruptions amid the pandemic.
Afghanistan’s
Dollar Drought
32 ○ Cut off from central bank reserves and foreign
aid, the economy is collapsing
after the Biden administration froze assets held
at U.S. banks in mid-August, with others follow-
ing Washington’s lead. Funding from the Word
Bank and the International Monetary Fund is also
on hold.
To conserve what little reserves are left, the
Taliban have resorted to capital controls, includ-
ing barring Afghans from taking dollars out of the
country and limiting bank withdrawals to $200 a
week. In Kabul, some residents are selling furni-
ture and other household goods at flea markets to
raise cash. “The liquidity crisis is worsening, and
many banks aren’t able to pay depositors,” says
Ahmad Khesrow Zia, the former chief executive
officer of Bank-e-Millie Afghan and now an eco-
nomics professor at a private university in Kabul.
Small and medium-size enterprises flourished
in the years after the Taliban were ousted in 2001,
increasing their role in Afghanistan’s $20 billion
economy. Now they’re at risk of extinction. “If
these companies collapse, the whole nation’s econ-
omy collapses,” says Khanjan Alokozay, a senior
member of Afghanistan’s chamber of commerce.
Haleem Gul, an auto mechanic in Kabul, says
almost none of his customers have money to
pay for repairs. “Cash has absolutely vanished,”
he says. Jawed Mehri, who runs a rug factory in

Just weeks after the last U.S. troops left Afghanistan,

a cash crisis has crippled its already feeble econ-
omy. The tight supply of money, along with border
restrictions and increasing international isolation,
is robbing many Afghans of their livelihoods and
driving the cost of food and other essentials higher,
setting the stage for a humanitarian crisis.
During the 20-year U.S. occupation, the econ-
omy was propped up mainly by international
aid and U.S. dollars, which circulate alongside
the local currency—the afghani—and are used
regularly to pay for imported goods, as well as for
big-ticket transactions such as buying a home or
paying for private school tuition. Shah Mehrabi,
a board member of Afghanistan’s central bank
who’s now in the U.S., estimates that dollars
accounted for about two-thirds of bank deposits
and half of all loans. “Dollarization is still preva-
lent in Afghanistan, and our economy depends
on it,” he says.
The issue is that the U.S. and other countries
haven’t recognized the Taliban as the legitimate
authority in Afghanistan, because of concerns
about their involvement in terrorism and human-
rights abuses. The country’s new rulers lost access
to more than $9 billion in central bank reserves
 ECONOMICS Bloomberg Businessweek October 11, 2021

the northern city of Mazar-e-Sharif, had to halt  Afghans are selling

household items to
operations because there is no cash to pay sala- raise cash
ries. The withdrawal limits “will kill our business
and probably everyone else’s,” he says.
A report published in September by the United
Nations Development Programme projected that
gross domestic product could decline as much as
13.2% in the fiscal year that ends June 2022, plung-
ing almost all of the population into poverty.
“This is really a drastic situation,” says Abdallah
Al Dardari, the UNDP’s resident representative in
Afghanistan. A collapse in the national economy, he Afghanistan’s
central bank reserves
says, “is not where things are going. This is where
things are now.”
The UNDP report also warned that food insecu- $8b

rity was “rising precipitously” because of declin-

ing output, higher prices, and import constraints.
Prices for such staples as rice, cooking oil, and
flour have increased by as much as 30% since the 4

Taliban took over, according to data from the Kabul

Retailers Association.
The Taliban haven’t attempted to downplay
the severity of the situation. “If the public funds 0

remain frozen or aid remains halted, the country 2008 2020

could experience a worst-case economic crisis,
forcing local companies that provide jobs to col- 33
lapse,” Bilal Karimi, a Taliban spokesman, told
Bloomberg News on Sept. 29. According to Karimi,
the Taliban haven’t been able to pay government
salaries since assuming control. Reached again on
Oct. 4, he said a solution to the cash crunch is near,
without providing details.
International organizations and governments
have begun providing assistance, motivated in part
by the desire to avert a mass exodus of Afghan refu-

FROM TOP: ORIANE ZERAH/ABACA PRESS/ALAMY. MARCUS YAM/LOS ANGELES TIMES/POLARIS. DATA: WORLD BANK
gees. The UN in September announced $1.2 billion
in emergency pledges, while the U.S. has granted
sanctions exemptions for humanitarian organiza-
tions. China, which has criticized the U.S. freezing  Currency dealers at
Kabul’s largest money
funds, will give $31 million in emergency aid. But exchange market
this will only go so far in a country where external
aid accounted for about 75% of public spending in
recent years.
Bismillah Zakeri, who left his job as an admin-
istrator in the Ministry of Education before the fall
of Kabul, has taken to selling his family’s belong-
ings on the street to raise money for food and to
fund his planned journey to neighboring Pakistan.
“What else can we do to survive?” he says. “If the
hunger doesn’t kill us, the fear, anxiety, and depres-
sion because of the Taliban regime definitely will.”
—Eltaf Najafizada, with Ismail Dilawar

THE BOTTOM LINE International efforts to isolate the Taliban

regime by restricting its access to dollars threaten to cascade into
a humanitarian crisis and mass exodus of refugees.
 Bloomberg Businessweek October 11, 2021

P The Yellen Way

O
L
I
T
34
I
C
S

The treasury secretary relies on her quiet,

Edited by
Amanda Kolson Hurley above-the-fray authority for influence in Washington
 POLITICS Bloomberg Businessweek October 11, 2021

President-elect Joe Biden chose former Federal

Reserve Chair Janet Yellen to lead the U.S.
Department of the Treasury for her gravitas, quiet
consensus building, and attention to data—qualities
that served her well during a decades-long central
banking career. Democrats and Republicans alike
laud her judgment.
Now those strengths are being put to the test.
Yellen, 75, needs to persuade a deeply partisan
Congress to raise the debt limit without the kind of
political brinkmanship that a decade ago led to the
first downgrade of America’s public debt. (Yellen
has said it must be raised by Oct. 18; at press time, “We’re all
a short-term measure to raise it into December learning that
was under consideration.) She also has to fight for she’s not
Biden’s plan to spur the U.S. economy with historic, speaking as
politically charged spending on infrastructure and Fed chair but
social programs. as treasury
Her new job draws her into unfamiliar terri- secretary”
tory: negotiating in a narrowly split Congress where
quarrels play out in public. She’ll need savvy in the
world of lawmaker horse-trading and dealmaking
to avert what she’s called a “widespread economic
catastrophe” that would leave the nation “perma-
nently weaker” if the debt ceiling isn’t raised.
Her predecessors Robert Rubin, Hank Paulson, 35
and Steven Mnuchin could draw on decades of expe-
rience in managing client relationships at Goldman
Sachs Group Inc. when they arrived in Washington.
Yellen is more of an academic-cum-manager. “She’s
not the most political secretary of the treasury we’ve
ever had,” former Fed Vice Chair Alan Blinder says.
For some, that makes her a reassuring presence
as the nation’s financial stability hangs in the bal-
ance. “I don’t think of her as a politician as much
as I think of her as an economist,” says Michael
Bennet, a Colorado Democrat on the Senate finance
panel. “It leads her to being an important voice
that’s separate from” partisanship.
Even fierce Biden critics put stock in her exper-
tise. “The credibility of you two individuals is of
substance right now and very important to us in
the American government,” Representative Patrick
McHenry, the ranking Republican on the House
PHOTOGRAPH BY LEXEY SWALL FOR BLOOMBERG BUSINESSWEEK

Financial Services panel, said last month to Yellen

and Federal Reserve Chair Jerome Powell during
a hearing in which he blasted the administration
as dysfunctional.
Yellen declined to be interviewed for this story.
Last year, Yellen was enjoying private life after
retiring from the Fed. Her newfound free time went
to trying Indian recipes with her husband, Nobel
Prize-winning economist George Akerlof, and giv-
ing speeches to Wall Street bankers that made her
millions of dollars. Then Biden persuaded her to
  POLITICS
join his cabinet. The role of treasury secretary was
tough to turn down, and it made her the first per-
son to hold the three top economic jobs in govern-
ment: helming the Treasury Department, the Fed,
and the White House Council of Economic Advisers.
With staff, she’s been frank about her reluc-
tance to take the job, joking that she came out of
retirement to work for Biden, according to people
familiar with the matter who asked to remain anon-
ymous because they aren’t authorized to speak to
the press. That has Wall Street and administration
officials wondering when she will step down from
the Treasury Department. Some aides inside the
administration are even taking bets on whether she
resigns before or after midterm elections in 2022,
according to people familiar with the matter.
Inside the White House, officials say Yellen’s
desire to go back into retirement is clear, and some
have privately criticized her approach as not ener-
getic or visible enough. White House Chief of Staff
Ron Klain disputes this. “You can’t overstate how
invaluable Secretary Yellen is to President Biden,”
he said in a statement. “She brings unmatched
experience and credibility to the job.”
Eight months into Yellen’s tenure, “we’re all
36 learning that she’s not speaking as Fed chair
but as treasury secretary,” says Tim Duy of SGH
Macro Advisors.
But she sometimes seems to still be acting like a
Bloomberg Businessweek October 11, 2021
central banker. In public she has remarked about
monetary policy in ways that her predecessors
avoided, causing hiccups in financial markets one
day in May by saying interest rates will likely rise
as government spending ramps up. Although the
statement was self-evident, the rare outlook on
rates from a cabinet member gave jitters to some
in the White House. Asked during an interview with
Bloomberg in June if the administration would give
up on massive spending plans if inflation got out of
control, she quickly launched into a speech about
a higher interest-rate environment.
Even on Fed issues, where her expertise is
strongest, Yellen has been unable to unite the
Democratic Party behind her recommendation to
reappoint Powell as Fed chair. In keeping with Fed
tradition, she rarely takes questions from the press.
Yellen didn’t have a direct hand in molding
Biden’s key policies, which were shaped before
his inauguration by close, longtime advisers such
as Jared Bernstein. From Duy’s perch as an econ-
omist advising Wall Street clients, Yellen appears
to be “playing a supporting role” in setting an eco-
nomic policy agenda that is “largely driven by the
White House.” Blinder, the ex-Fed official, agrees,
noting that most of Biden’s economic plan had
been built before Yellen joined the administra-
tion. “They weren’t waiting for Janet Yellen to be
named,” he says.
This role, of policy taker rather than maker, sug-
gests a Treasury Department that’s less visible than
it’s been in previous administrations, when treasury
secretaries would shuttle from office to office on
Capitol Hill to talk with lawmakers and appear regu-
larly on TV to tout the president’s economic agenda.
An administration official who requested ano-
nymity to discuss an internal matter says Yellen
is the only cabinet official who participates in  Top: Yellen, who
then chaired the White
daily White House senior staff calls. She regularly House Council of
engages with members of Congress in both par- Economic Advisers, with
President Bill Clinton
ties, the person says, and with Democratic, but not and other officials in FROM TOP: JOYCE NALTCHAYAN/AFP/GETTY IMAGES. KEVIN LAMARQUE/REUTERS
Republican, congressional leadership. 1997. Bottom: Biden and
Yellen in the Oval Office
Yellen’s Treasury Department so far has had in January
a diminished role in one key area: managing the
U.S.-China economic relationship. If anything she
appears out of step with the rest of the administra-
tion’s hard-edged stance toward the Chinese govern-
ment. In July, Yellen said Trump’s tariffs have hurt
U.S. consumers, a comment that ruffled feathers
at the White House. A few weeks later, Commerce
Secretary Gina Raimondo—who hosts regular strat-
egy meetings on China policy without the trea-
sury chief—hailed those tariffs as “very effective.”
Treasury spokeswoman Alexandra LaManna says
Yellen is aligned with Biden’s U.S.-China vision.
 A DV E R T I S E M E N T

Fostering
the Desire to
Give Back
½ÛáÓÓ×ÜÕÛÝàÓçÝãÜÕÏÒãÚâáåÖÝ
want to get involved in philanthropy.
 μÜÒ×âáÐÓÑÏãáÓÛÝàÓÞÏàÓÜâáÏàÓ
âÏÚÙ×ÜÕâÝâÖÓÛÏÐÝãââÖÓ×à×ÜÖÓà×âÏÜÑÓ
ÚÓââ×ÜÕâÖÓÛÙÜÝåâÖÓçÖÏäÓÏáÏÔÓâç
ÜÓâÈÖÏâÏááãàÏÜÑÓÚÓÏÒáâÖÓÛâÝ
âÖ×ÜÙÏÐÝãâÖÓÚÞ×ÜÕÝâÖÓàá!
Stacey Roman
Wealth Advisor
Wells Fargo Private Bank

bloomberg.com/familywealth

Investment and Insurance Products:

• Not FDIC Insured • No Bank Guarantee • May Lose Value
ËÓÏÚâÖÏÜÒ½ÜäÓáâÛÓÜâÁÏÜÏÕÓÛÓÜâ(˽Á)×áÏÒ×ä×á×ÝÜå×âÖ×ÜËÓÚÚáºÏàÕÝ·ÝÛÞÏÜç˽ÁÞàÝä×ÒÓáùÜÏÜÑ×ÏÚÞàÝÒãÑâáÏÜÒáÓàä×ÑÓáâÖàÝãÕÖäÏà×Ýãá
ÐÏÜÙÏÜÒÐàÝÙÓàÏÕÓÏû   Ú×ÏâÓáÝÔËÓÚÚáºÏàÕݷݶÏÜÙÞàÝÒãÑâáÏÜÒáÓàä×ÑÓáÏàÓÏäÏ×ÚÏÐÚÓâÖàÝãÕÖËÓÚÚáºÏàÕݶÏÜÙÂμÁÓÛÐÓຸ½·¶àÝÙÓàÏÕÓ
ÞàÝÒãÑâáÏÜÒáÓàä×ÑÓáÏàÓÝøÓàÓÒâÖàÝãÕÖËÓÚÚáºÏàÕÝμÒä×áÝàáÏâàÏÒÓÜÏÛÓãáÓÒÐçËÓÚÚáºÏàÕÝ·ÚÓÏà×ÜÕÇÓàä×ÑÓáÀÀ·ÏÜÒËÓÚÚáºÏàÕÝμÒä×áÝàá
º×ÜÏÜÑ×ÏÚÂÓâåÝàÙÀÀ·ÁÓÛÐÓàáǽķÏÜÒáÓÞÏàÏâÓàÓÕ×áâÓàÓÒÐàÝÙÓà#ÒÓÏÚÓàáÏÜÒÜÝÜ#ÐÏÜÙÏû   Ú×ÏâÓáÝÔËÓÚÚáºÏàÕÝ·ÝÛÞÏÜç
\`^`_ËÓÚÚáºÏàÕÝ·ÝÛÞÏÜçμÚÚà×ÕÖâáàÓáÓàäÓÒ·μÆ#^g`_#^__ce
  POLITICS
Yellen has already notched some significant
wins. In July she led the Group of 20 finance min-
isters in striking a deal on global taxes that had
eluded negotiators for almost a decade. In March,
Biden signed a $1.9 trillion pandemic relief bill,
which passed Congress after Yellen helped con-
vince lawmakers that the economy was in need of
another fiscal boost, and she has shoveled more
than $700 billion to families and businesses. She
has also filled her agency with the most diverse
senior officials in its history.
Klain, Biden’s chief of staff, calls her a “tireless
driving force” of the president’s agenda: “When she
Party Discord Risks
Toppling Biden’s Plans
After Joe Biden locked up the Democratic
38 presidential nomination in the spring of 2020,
Democrats in the party’s progressive and centrist
wings exhibited what was, for them, an unusual
type of behavior: unity. Although the presidential
primaries highlighted Democrats’ growing ideo-
logical fissures, even left-wing firebrands such as
New York Representative Alexandria Ocasio-Cortez
spurned reporters’ efforts to sow division and
quickly fell in behind the centrist Biden. Democrats
across the spectrum calculated that they would fare
better with one of their own in the White House.
That same logic underlies the Democrats’ two-
step strategy for realizing Biden’s agenda. By marry-
ing an infrastructure bill with a social spending bill,
both wings of the party would advance their agen-
das in tandem while showing voters that Biden
really was the dealmaker he touted himself to be
on the campaign trail. The infrastructure bill passed
the Senate in August. But House Speaker Nancy
Pelosi’s decision on Oct. 1 to delay indefinitely a
vote on an infrastructure bill brought a swift end to
Democratic comity. It also raised a possibility that
most Democrats are loath to confront: They could
end up with nothing and pay a steep electoral price.
“The midterms are already going to be hard,”
says Rebecca Katz, a progressive strategist aligned
with several groups and politicians on the party’s
left flank. “They don’t have to be a bloodbath.”
Lawmakers and strategists from both wings of
the party concede that tensions never really went
Bloomberg Businessweek October 11, 2021
speaks, everyone listens both at home and abroad.”
Yellen is also using her voice to try to convince
voters, lawmakers, and Wall Street that massive stim-
ulus won’t translate to runaway prices. So far she
and Powell are on the same page: The spike in prices
is a temporary headache caused by an economy
adjusting to a once-in-a-century crisis. Whether that
assessment is correct may not be obvious for years,
but the results are likely to be factored into Yellen’s
legacy. —Saleha Mohsin, with Christopher Condon
THE BOTTOM LINE Yellen’s approach to the job of treasury
secretary involves less politicking than some would like, but her
credibility on economic issues transcends partisan divides.
○ If progressive and centrist
Democrats can’t agree on a big safety-
net bill, a midterm rout could follow
away. Rather, Biden’s agenda was split between
two bills to create a dynamic of mutually assured
destruction that was supposed to ensure that nei-
ther side could walk away. Centrists hoping to cam-
paign on the $550 billion roads and bridges package
would have to agree to a reconciliation bill in the
neighborhood of $3.5  trillion; liberals eager to
expand the welfare state and protect the climate
would have to back robust spending on mundane
construction projects. As long as the party stuck
together, it would have just enough votes to push
the president’s agenda across the finish line.
But that logic foundered in late September
when two centrist Democratic senators, Joe
Manchin of West Virginia and Kyrsten Sinema of
Arizona, balked at the size of the reconciliation
bill and quickly unwound 18  months of Biden- “Everybody is
led party unity. “Failure to pass it rips the ban- trying to make
dage off the wound within the Democratic Party this marriage
between the progressive and centrist wings of the work”
party,” says Jim Kessler, executive vice president for
policy at the centrist Democratic group Third Way.
Kessler remains optimistic that Democrats will
come together, if only because recent history illus-
ILLUSTRATION BY RICHARD A. CHANCE
trates just how costly their failure to do so could be.
“In both 1994 and 2010, Democrats had a new pres-
ident in the White House, majorities in Congress,
and major legislation that failed leading up to the
midterm elections,” he says, alluding to Bill Clinton’s
health-care bill and Barack Obama’s climate legis-
lation, respectively. Both times, Democrats were
 POLITICS
routed at the polls. “If we don’t have a reconciliation
bill, it’s a disaster for Democrats,” Kessler says.
Veterans of those administrations say mitigating
the political damage from such a collapse is all but
impossible. “I tried to get Clinton to give a speech
explaining the reason [the health-care bill] was not
happening,” says Stanley Greenberg, Clinton’s poll-
ster at the time, “that it had been stopped by the
insurance companies—the powerful special inter-
ests who control Washington and Republicans
who hated this change.” Clinton demurred, and
Democrats went on to lose 54 House seats and
eight Senate seats. They fared no better in 2010,
losing 63 House seats and seven Senate seats in
what Obama aptly characterized as “a shellacking.”
Those losses remain vivid in the mind of most
Democrats. They’re the driving force behind both
sides’ grudging efforts to come to an agreement
on a more modestly scaled reconciliation package.
“Everybody is trying to make this marriage work,”
says Adam Jentleson, a former top aide to Harry
Reid of Nevada, who was the Democrats’ Senate
leader under Obama. “Things could get really ugly
if Biden’s agenda goes down.”
For now, it’s in deep freeze. In an effort to revive
it, Biden has worked to lower progressives’ expec-
tations for a reconciliation bill, suggesting to House
Democrats in a recent private meeting that a price
tag of $1.9 trillion to $2.3 trillion is more realistic,
although neither Manchin nor Sinema has indicated
they’d accept that. “Just about everyone will be
Bloomberg Businessweek October 11, 2021
disappointed in some things,” Democratic Majority
Leader Chuck Schumer told reporters on Oct 5.
Voters have already begun to waver. In a Sept. 22
Gallup Poll, Biden’s approval rating fell to only 43%,
the lowest point of his eight-month presidency. His
approval rating among independents has fallen
24 points since January, to 37%.
Jentleson says he worries that a midterm rout
wouldn’t be the full extent of the price Democrats
would pay for failing to deliver the president’s
agenda. Biden ran for office on the strength of his
lengthy experience as a senator and vice president
○ The size of the
reconciliation package
that Manchin and
Sinema say is too costly
$3.5t
39
and a promise that he could restore Washington
to a functional civility that disappeared during the
chaotic tenure of President Donald Trump. The
early collapse of his main legislative efforts would
undermine the whole premise of Biden’s presi-
dency. “Ultimately,” Jentleson says, “Biden’s case
for reelection relies on being able to say that his
approach worked.”
The specter of losing the White House in 2024
could be the glue that holds Democrats together
in the rocky weeks ahead, as they work to salvage
Biden’s legislative agenda. “It should be in every
Democrat’s interest to have Biden be widely pop-
ular,” Katz says. “But if a few centrist holdouts
tank his agenda, they’re making him a weaker
president.” —Joshua Green
THE BOTTOM LINE Failure by Democrats to pass a reconciliation
package would undermine Biden’s presidency, a fate that centrists
and leftists alike are eager to avoid, whatever their differences.
 ADVERTISEMENT
THE SOLUTION
TO REVOLUTION
As the “Fourth Industrial Revolution”
gathers pace, one company has
quietly placed itself at the center of
global digital transformation.
$250 BILLION $800 BILLION 60% FORECAST
expected to be spent on edge
computing by 2024
The cloud industry will reach
BY 2025
Crisis-fuelled investment in digital infrastructure and
transformative technologies like 5G, Cloud Computing
and Artificial Intelligence (AI) has been one of the most
talked-about themes of the pandemic era.
The acceleration of the digital economy is likely to be one
of the lasting legacies of COVID-19; an echo of the virus that
will be heard long after the disease is finally brought under
control. By 2024, an expected US$250 billion will be spent
on edge computing, and the cloud industry will more
than double in value to about US$800 billion by 2025.
Meanwhile, 5G is continuing to roll out globally, expanding
at a staggering forecast CAGR of 60% through 2027.
Digital transformation is now the top priority for business
decision-makers worldwide. More than 80% of business
leaders increased their tech budget during the pandemic,
according to a Bloomberg study. And with decentralized
workplaces now expected to be a permanent reality, issues
such as cloud adoption are now a paramount concern for
employers.
CLOUD
5G AI
80%
OF BUSINESS LEADERS
increased their tech budget
during the pandemic
5G continues to roll out globally with
CAGR through 2027
The scale and speed of this transformation – from 5G
telecoms to hosting services to robotics to process
automation to predictive remediation – is creating
almost boundless opportunities, many as-yet
unimagined. The potential of 5G, AI and Cloud will only
become greater as the technologies mature and
converge.
But there are also immediate challenges for
companies to overcome.
IMMEDIATE
CHALLENGES
to Overcome
Nowadays, more and more businesses are looking for a
“best-practice” system that meets specific workload
demands. However, to build up an integrated
workload-driven system with optimized performance
requires considerable time and resources.
As the pandemic increasingly became a story of
opportunity as well as crisis, businesses have also found
themselves under pressure to transform quickly or risk
losing competitiveness. At the same time, in this
fast-changing environment, tech-spend decision-makers
have countless choices to make, but only one chance to
get it right.
Because Cloud, 5G and AI are all emerging technologies,
many organizations lack the in-house resources to explore,
plan, adopt and integrate them in a timely fashion. If they
delay, they face the possibility of being left behind. If they
 ADVERTISEMENT
make hasty or ill-advised decisions, they may be
dealing with obsolescence sooner than they expect,
which is expensive to remedy.
Too often, businesses postpone making one
important decision by making lots of smaller,
cheaper decisions: a bolt-on system here, a patched
upgrade there. The result is frequently fragmented,
inefficient and ultimately more costly, perhaps
involving competing service-providers.
The answer – to find an integrated solutions provider
– may seem obvious but, perhaps surprisingly,
companies that specialize simultaneously in AI,
5G and Cloud are rare.
Quanta Cloud Technology (QCT) is one of those companies.
Integrated
Capabilities,
technologies and solutions
Since 2012, QCT has been at the forefront of these solutions,
building digital ecosystems with leading companies such
as Intel. But more than just a hardware developer, QCT has
evolved into a global business with innovations and patents
that have earned the company, along with its parent
company, Quanta, a spot among the Top 100 Innovators by
Clarivate Analytics for consecutive years. Operating at the
very heart of the digital industrial revolution, QCT now
offers a vast suite of solutions and servers for data center
to edge computing and beyond.
QCT’s solutions span all industries and requirements.
For instance, for businesses contemplating the difficult
next-step decision in their digital transformation, QCT offers
a behind-the-scenes move to the cloud or next-generation
on-site infrastructures using QCT’s integrated suites of HW
and SW solutions powered by 3rd Gen Intel ® Xeon®
Scalable Processors that are based on a balanced, efficient
architecture that increases core performance, memory,
and I/O bandwidth to accelerate diverse workloads from
the data center to the edge. This combination
of leading technologies and innovations
guarantees the reliability, availability and
scalability required to support new
business initiatives while offering shorter
time-to-value and substantially lower costs.
“QCT provides a vast portfolio of
integrated solutions with certified
hardware designs backed by an
ecosystem of leading partners. No matter
which route our customers go for – direct
or indirect – QCT is always there to
support them with solutions that are
optimized for their particular workloads.”
Mike Yang, President of QCT
For almost a decade, QCT’s industry-defining customers
have relied on the company’s key characteristics.
QCT has a track record of developing AI-driven
high performance systems, including its TOP500
Taiwania 2 and Taiwania 3 supercomputers with
collaborative GPU and CPU clusters to combat
some of the most challenging computational
SMART workloads.
QCT is able to deliver solutions with quicker
time-to-market and significant cost reductions
when compared to traditional implementations.
QCT provided its hardware solutions to support
Rakuten Mobile's rapid buildout of the world's
SPEEDY first fully virtualized cloud native mobile
network.
Scalability is in the very DNA of the company,
having grown with their customers from
nodes and single-site racks to multiple-site
racks in a single region, to hyperscale
SCALING deployments across continents.
QCT offers optimized and pre-validated
solutions with our ecosystem of globally
recognised partners. QCT never stops
developing and absorbing new technologies
to meet customers’ never-ending need for
READINESS performance enhancements. The company
has worked with world-leading partners such
as Intel to tap into technologies ahead of
industry peers.
“Before our customers even come to us, we are always ready
with something that can make their business better,” Yang
said. “Businesses from SMEs to multinationals are facing their
most critical technology decisions in a generation. Successful
adaptation to the digital economy requires the kind of
integrated, nimble solutions QCT offers.”
Whatever questions businesses
are asking themselves about digital
transformation, QCT and
Intel is the answer.
For more information about QCT
visit go.qct.io/solutions/
QCT, the QCT logo, Rackgo, Quanta, and the Quanta logo are
trademarks or registered trademarks of Quanta Computer Inc. Intel,
the Intel logo, Optane, and Xeon Inside are trademarks or registered
trademarks of Intel Corporation in the U.S. and/or other countries. All
trademarks and logos are the properties of their respective holders.
42

A wild search for the billions of U.S. dollars supposedly

backing Tether, the world’s most popular stablecoin
By Zeke Faux Illustration by Scott Gelber
Bloomberg Businessweek
In July, Treasury Secretary Janet Yellen summoned the chair of
the Federal Reserve, the head of the Securities and Exchange
Commission, and six other top officials for a meeting to dis-
cuss Tether. The absurdity of the situation couldn’t have been
lost on them: Inflation was spiking, a Covid surge threatened
the economic recovery, and Yellen wanted to talk about a dig-
ital currency dreamed up by the former child actor who’d
missed a penalty shot in The Mighty Ducks. But Tether had
gotten so large that it threatened to put the U.S. financial sys-
tem at risk. It was as if a playground snowball fight had esca-
lated so wildly that the Joint Chiefs of Staff were being called
in to avert a nuclear war.
Tether is what’s come to be known in financial circles as
a stablecoin—stable because one Tether is supposed to be
backed by one dollar. But it’s actually more like a bank. The
company that issues the currency, Tether Holdings Ltd., takes
in dollars from people who want to trade crypto and cred-
its their digital wallets with an equal amount of Tethers in
return. Once they have Tethers, people can send them to
cryptocurrency exchanges and use them to bet on the price
of Bitcoin, Ether, or any of the thousands of other coins. And
at least in theory, Tether Holdings holds on to the dollars
so it can return them to anyone who wants to send in their
tokens and get their money back. The convoluted mechanism
became popular because real banks didn’t want to do busi-
ness with crypto companies, especially foreign ones.
Exactly how Tether is backed, or if it’s truly backed at all,
has always been a mystery. For years a persistent group of
critics has argued that, despite the company’s assurances,
Tether Holdings doesn’t have enough assets to maintain
the 1-to-1 exchange rate, meaning its coin is essentially a fraud.
But in the crypto world, where joke coins with pictures of
dogs can be worth billions of dollars and scammers period-
ically make fortunes with preposterous-sounding schemes,
Tether seemed like just another curiosity.
Then, this year, Tether Holdings started putting out a huge
amount of digital coins. There are now 69 billion Tethers in
circulation, 48 billion of them issued this year. That means
the company supposedly holds a corresponding $69 billion
in real money to back the coins—an amount that would make
it one of the 50 largest banks in the U.S., if it were a U.S. bank
and not an unregulated offshore company.
On Twitter, on business TV, and on hedge fund and invest-
ment bank trading floors, everyone started asking why
Tether was minting so many coins and whether it really had
the money it claimed to have. An anonymous anti-Tether
blog post titled “The Bit Short: Inside Crypto’s Doomsday
Machine” went viral, and CNBC host Jim Cramer told viewers
to sell their crypto. “If Tether collapsed, well then, it’s going
to gut the whole crypto ecosystem,” he warned.
As far as the regulators are concerned, the size of Tether’s
supposed dollar holdings is so big that it would be dangerous
even assuming the dollars are real. If enough traders asked for
their dollars back at once, the company could have to liquidate
its assets at a loss, setting off a run on the not-bank. The losses
October 11, 2021
could cascade into the regulated financial system by crashing
credit markets. If the trolls are right, and Tether is a Ponzi
scheme, it would be larger than Bernie Madoff’s.
So earlier this year I set out to solve the mystery. The money
trail led from Taiwan to Puerto Rico, the French Riviera, main-
land China, and the Bahamas. One of Tether’s former bankers
told me that its top executive had been putting its reserves at
risk by investing them to earn potentially hundreds of millions
of dollars of profit for himself. “It’s not a stablecoin, it’s a high-
risk offshore hedge fund,” said John Betts, who ran a bank in
Puerto Rico Tether used. “Even their own banking partners
don’t know the extent of their holdings, or if they exist.”
A green pentagon emblazoned with a white T represents the
Tether coin on the company’s website, which promises
“Digital money for a digital age.” The logo doesn’t look like
much, but it’s probably the most normal thing about Tether
Holdings, which is weird in almost every way imaginable.
Only a dozen employees are listed on LinkedIn, a tiny num-
ber for a company with $69 billion under management.
Tether’s website also touts a settlement with New York’s
attorney general, but the announcement of that settlement
made it sound like the company had been up to some horri-
ble stuff. Tether Holdings had been “operated by unlicensed
and unregulated individuals and entities dealing in the dark-
est corners of the financial system,” Letitia James, the attor- 43
ney general, said in a statement.
Elsewhere on the website, there’s a letter from an account-
ing firm stating that Tether has the reserves to back its coins,
along with a pie chart showing that about $30 billion of its
dollar holdings are invested in commercial paper—short-term
loans to corporations. That would make Tether the seventh-
largest holder of such debt, right up there with Charles Schwab
and Vanguard Group.
To fact-check this claim, a few colleagues and I canvassed
Wall Street traders to see if any had seen Tether buying any-
thing. No one had. “It’s a small market with a lot of people who
know each other,” said Deborah Cunningham, chief invest-
ment officer of global money markets at Federated Hermes,
an asset management company in Pittsburgh. “If there were
a new entrant, it would be usually very obvious.”
It wasn’t clear which regulatory body is responsible for
overseeing Tether. On a podcast, a company representative
said it was registered with the British Virgin Islands Financial
Investigation Agency. But the agency’s director, Errol George,
told me in an email that it doesn’t oversee Tether. “We don’t
and never have.”
The chief executive officer listed on Tether’s website, J.L.
Van der Velde, is a Dutchman who lives in Hong Kong and
seems never to have given an interview or spoken at a confer-
ence. The chief financial officer is Giancarlo Devasini, a former
plastic surgeon from Italy who was once described on Tether’s
website as the founder of a successful electronics business.
The only reference to him that turned up in a search of Italian
newspapers showed he was once fined for selling counterfeit
 Bloomberg Businessweek
Microsoft software. He didn’t respond to emails or messages
on Telegram, where he goes by Merlinthewizard.
Tether’s lawyer, Stuart Hoegner, told me by phone that Van
der Velde and Devasini prefer to avoid the limelight. He called
Tether’s critics “jihadists” set on the company’s destruction.
“We maintain a clear, comprehensive, and sophisticated risk
management framework for safeguarding and investing the
reserves,” he said, adding that no customer had ever asked
for money back and been refused.
But when I asked where Tether was keeping its money, he
declined to say. Nor was I reassured when he told me the com-
pany had more than enough cash to cover the most money
it had ever had to pay out in a single day. Bank runs can last
longer than 24 hours. Hoegner later responded to follow-up
questions with an emailed statement saying my reporting was
“nothing more than a compilation of innuendo and misinfor-
mation shared by disgruntled individuals with no involve-
ment with or direct knowledge of the business’s operations.”
He added: “Success speaks for itself.”
It was hard to believe that people had sent $69 billion in
real U.S. dollars to a company that seemed to be practically
quilted out of red flags. But every day, on cryptocurrency
exchanges, traders buy and sell Tether coins as if they’re just
as good as dollars. Some days, more than $100 billion in Tether
changes hands. It seemed the people with the most at stake in
44 the crypto markets trusted Tether, and I wanted to know why.
Luckily, in June, 12,000 of them were gathering in Miami for
what was billed as the biggest crypto conference ever.
At the Mana Wynwood Convention Center, I found the
usual cringey crypto signifiers. Models walked the floor body-
painted with Bitcoin’s logo. A podcast host screamed, “F---
Elon.” A dumpster full of Venezuelan bolivars was labeled
“cash is trash.” The place was full of people who held Tether.
Sam Bankman-Fried, a 29-year-old billionaire who was in town
to rename Miami’s basketball arena after his cryptocurrency
exchange, FTX, told me he’d bought billions of Tethers, using
them to facilitate trading other coins. “If you’re a crypto com-
pany, banks are nervous to work with you,” he said.
His explanation doesn’t make much sense if you still think of
Bitcoin as a peer-to-peer currency, an ingenious way to trans-
fer value without an intermediary. But most people aren’t
using cryptocurrencies to buy stuff. They’re trading them
on exchanges and betting on their value, hoping to make a
real money score by picking the next Dogecoin, which spiked
4,191% this year after Elon Musk started tweeting about it, or
Solana, up 9,801% in 2021 for seemingly no reason at all.
Think of crypto exchanges as giant casinos. Many of them,
especially outside the U.S., can’t handle dollars because banks
won’t open accounts for them, wary of inadvertently facilitat-
ing money laundering. So instead, when customers want to
place a bet, they need to buy some Tethers first. It’s as if all the
poker rooms in Monte Carlo and the mahjong parlors in Macau
sent gamblers to one central cashier to buy chips.
The biggest traders on these exchanges told me they
routinely bought and sold hundreds of millions of Tethers and
October 11, 2021
viewed it as an industry standard. Even so, many had their
own conspiracy theories about the currency. It’s controlled
by the Chinese mafia; the CIA uses it to move money; the gov-
ernment has allowed it to get huge so it can track the criminals
who use it. It wasn’t that they trusted Tether, I realized. It was
that they needed Tether to trade and were making too much
money using it to dig too deeply. “It could be way shakier, and
I wouldn’t care,” said Dan Matuszewski, co-founder of CMS
Holdings LLC, a cryptocurrency investment firm.
In the 1800s the hunters, trappers, and cowboys on the
American frontier faced a currency shortage. The U.S. govern-
ment didn’t issue paper money at the time, only gold and silver
coins, because its early leaders were fearful of inflation—“an
infinity of successive felonious larcenies,” according to John
Adams. So some states allowed banks to print their own notes,
redeemable for U.S. coins on demand. But certain banks didn’t
bother to hold the corresponding reserves. These institutions
came to be called “wildcats,” supposedly because they discour-
aged borrowers from bringing notes in to exchange by locating
branches in remote areas where wild animals roamed.
Many of these banks failed. One in Michigan filled boxes
with nails and glass, then covered them with a thin layer of
silver coins to fool examiners, who weren’t fooled. “What
a temptation was this for the unscrupulous speculator, the
adventurer, dreaming only of wealth, and ready to hazard all
in pursuit of it,” Alpheus Felch, a state bank commissioner at
the time, later wrote.
Almost two centuries later, the same temptation appeared
before Brock Pierce, a former child actor who’d played the
younger version of Emilio Estevez’s character in the Mighty
Ducks films. Now Pierce wears loud hats, vests, and bracelets,
like Johnny Depp in Pirates of the Caribbean, and speaks in rid-
dles, like Johnny Depp in Charlie and the Chocolate Factory.
After founding a successful brokerage for buying and selling
video game items—at which he employed, of all people, future
Trump consigliere Steve Bannon—Pierce was one of the few
early Bitcoiners with real money to invest. “I’m not an amateur
entrepreneur throwing darts in the dark,” he told me by phone
PIERCE: ERICK MARCISCANOP/GETTY IMAGES. COLLINS: TETHER. DEVASINI: ALBERTO GIULIANI
as he prepared for a trip to promote Bitcoin in El Salvador.
“I’m a doula for creation. I only take on missions impossible.”
Pierce said he came up with the idea for a stablecoin
in 2013, along with programmer Craig Sellars. To run the
company, Pierce recruited Reeve
Collins, who holds the dubious
distinction of inventing pop-under
web browser ads. They teamed up
with Phil Potter, an executive at an
offshore Bitcoin exchange, Bitfinex,
who was working on a similar proj-
ect, and adopted his name for it:
Tether. Working from a bungalow
in Santa Monica, Calif., they pitched
the venture capital firm Sequoia
Pierce
Capital, Goldman Sachs Group
Bloomberg Businessweek October 11, 2021

Inc., and others. No one was interested. Collins

called complaining customers whiners. “Are [you] just blowing
The problem was that Tether, like hot air out of your mouth or you forgot to switch your brain
other cryptocurrencies, broke just about on?” he asked one. But compared with other exchanges, which
every rule in banking. Banks keep track tended to collapse after stealing or losing customers’ funds,
of everyone who has an account and Bitfinex was pretty reliable. After about a third of its money
where they send their money, allowing was stolen in a hack in 2016, the exchange repaid customers.
law enforcement agencies to track trans- Bitfinex and Tether struggled from the start to gain access
actions by criminals. Tether Holdings to the regulated financial system. They’d resorted to a series
checks the identity of people who buy coins directly from of shaky workarounds to keep their bank accounts open—
the company, but once the currency is out in the world, it “lots of sort of cat-and-mouse tricks,” as Potter put it during
can be transferred anonymously, just by sending a code. A an online chat with traders. But as more people traded on
drug lord can hold millions of Tethers in a digital wallet and Bitfinex, and other exchanges started accepting Tether’s cur-
send it to a terrorist without anyone knowing. rency, it got harder to fly under the radar. By March 2017 more
The concern isn’t theoretical. Zhao Dong, a prominent than $50 million in Tether was in circulation. The following
Tether trader in China, is serving three years in prison there month, the banks in Taiwan that Tether and Bitfinex had been
for using the currency to launder $480 million for illegal casi- using closed their accounts, which left Devasini’s executives
nos. And in May 2013 the creator of a proto-stablecoin, Liberty so desperate that they considered chartering a jet and flying
Reserve, was arrested in Spain and eventually pleaded guilty pallets of cash out of the country, according to a person with
to a money-laundering conspiracy charge. Prosecutors said the knowledge of the plan.
anonymous online currency appealed to scammers, credit card Eventually they found a startup in Puerto Rico, called
thieves, hackers, and other criminals. “The U.S. will come after Noble Bank International LLC, that was willing to work with
Tether in due time,” Liberty Reserve founder Arthur Budovsky them. Its founder, John Betts, whom I met in Manhattan,
wrote me in an email from a Florida federal prison where he’s puffed on a vape pen as he explained that Tether was a legit-
serving a 20-year sentence. “Almost feel sorry for them.” imate business, or at least had been when he was its banker:
This prospect caused Pierce and Collins to give up on Tether “During the time Tether banked with Noble, we held in excess
after about a year in 2015. But Potter, the exchange executive, of 98% of their cash reserves and received and validated 45
was less worried about its legality, because, as he said on a 2019 monthly statements from their other account.”
podcast, his exchange was already operating in a gray area. His
boss there was Devasini, the former plastic surgeon. (Devasini From the start, cryptocurrencies have attracted skeptics
is CFO on paper, but people who have dealt with the company who are just as fervent as the boosters I met in Miami, and
say he’s in charge.) Potter and Devasini agreed to buy their in April 2017 they started coming for Tether. That month,
partners out of Tether for about what they’d put into it, less an anonymous critic on Twitter who goes by Bitfinex’ed
than $1 million. Pierce said he handed over his shares for free.
Then 50, Devasini was almost elderly by cryptobro stan-
dards. Property records show he split his time between Milan
and Monaco, where his home overlooks the Mediterranean.
Pictures show a tall, handsome man with long, curly hair and
a scarf wrapped around his neck. He modeled for a photo exhi-
bition at an art gallery in Milan in 2014, appearing in front of a
mirror, his face half covered with shaving cream, looking into
his own eyes with an expression that suggested he didn’t rec-
ognize himself. The show was about turning points, and in an
accompanying interview he said that his came in 1992, when
he walked away from his career as a plastic surgeon. “All my
work seemed like a scam, the exploitation of a whim,” he said.
He got into the low end of the electronics business, found-
ing a series of tech companies that imported memory chips
and set-top TV boxes. He started an online shopping site in
Italy and licensed a copy protection technology for adult DVDs,
according to a press release announcing a special bonus scene
in the 2008 film Young Harlots: In Detention.
In 2012 he invested in Bitfinex, then a nascent exchange that
had been built by a young Frenchman who’d copied the source
code from a defunct one. He soon became the de facto head of
Devasini
the company. In early posts on the forum bitcointalk, Devasini
 Bloomberg Businessweek
claimed Tethers weren’t backed by anything at all. He asked
where the company was keeping its money and why it hadn’t
produced audited financial statements. “They are literally Dave
& Busters/Chuck-e-Cheese Tokens,” Bitfinex’ed tweeted of the
coins. These claims, and others like them, circulated around
the cryptocurrency world and eventually in Washington,
where the Commodities Futures Trading Commission and the
FBI opened investigations.
Meanwhile, crypto trading boomed and the stablecoin grew
more popular, with more than $1 billion worth in use by the
end of 2017. That year, according to an investor presentation,
Bitfinex made a $326 million profit. Devasini’s share would have
been more than $100 million. That made Tether and Bitfinex
Noble’s biggest customers, and Betts felt Devasini was putting
the bank at risk by allowing rumors about Tether’s reserves to
spread. He told me he urged Devasini to hire an accounting
firm to produce a full audit to reassure the public, but Devasini
said Tether didn’t need to go that far to respond to critics.
Devasini may have had reason to be cagey. Tether’s web-
site had long displayed a pledge: “Every Tether is always
backed 1-to-1, by traditional currency held in our reserves.”
But, according to Betts, Devasini wanted to use those reserves
to make investments. If the $1 billion in reserves Tether said
it had at the time earned returns at, say, 1% a year, that would
be $10 million in annual profit. Betts saw this as a conflict of
46 interest for Devasini, since any investment gains would go to
Devasini and his partners, but Tether holders would poten-
tially lose everything if the investments went bad. When Betts
objected, Devasini accused him of stealing. “Giancarlo wanted
a higher rate of return,” Betts said. “I repeatedly implored him
to be patient and do the work with auditors.”
Tether’s leader wanted to pull the company’s cash from
Noble. Potter disagreed, so Devasini and his other partners
bought him out in June 2018, for $300 million. That same
month, Betts stepped down from his position at Noble for what
he said were health and family reasons. His partners would
later accuse him in court of spending company funds on high-
end hotels and trips on private jets; he said the travel was for
work. In any event, Devasini got his way and withdrew his
deposits, and the bank failed soon after.
Devasini faced another crisis that summer. His Bitfinex
exchange had entrusted $850  million to a Panamanian
money-transfer service, Crypto Capital Corp., one of the work-
arounds for its banking issues, according to documents later
revealed in a lawsuit filed by New York’s attorney general. But
suddenly, Crypto Capital refused to send the money back to
Bitfinex, leaving it unable to pay customers who wanted to
withdraw their cash, the documents show. It was a dangerous
situation—if the public found out, it could set off a bank run.
So Devasini made various excuses to customers, while
begging Crypto Capital to send some cash. His chats were
published as part of the lawsuit. “We are seeing mas-
sive withdrawals and we are not able to face them any-
more unless we can transfer some money,” Devasini wrote
to Crypto Capital’s founder in 2018. Another time, he said:
October 11, 2021
“There’s no agenda or
plot. They are not
Enron or Madoff. When
there’s a problem,
they fix it honorably”
“Please understand all this could be extremely dangerous for
everybody, the entire crypto community.” It turned out that
prosecutors in Poland had seized Crypto Capital’s accounts.
They’d later allege that Crypto Capital laundered money for
customers, including Colombian drug cartels. U.S. prosecu-
tors would charge Oz Yosef, one of its principals, with bank
fraud. He hasn’t responded to the charges in court. (Hoegner,
the lawyer for Tether and Bitfinex, said the firms were tricked
by Crypto Capital and believed it was following regulations.)
Rather than disclose that Bitfinex was insolvent, Devasini
filled the hole with loans from Tether’s reserves, which left the
stablecoin partially unbacked. In February 2019, Tether revised
its 1-to-1 pledge, changing its website to read: “Every Tether
is always 100% backed by our reserves, which include tradi-
tional currency and cash equivalents and, from time to time,
may include other assets and receivables from loans made by
Tether to third parties, which may include affiliated entities.”
That change signaled that Tether was lending from its reserves,
but few noticed at the time. The loans only became known to
the public in April 2019, when New York sued Tether, seeking
to force it to turn over documents.
Surprisingly, given that Devasini had lost much of his cus-
tomers’ money, the cryptocurrency world didn’t lose confi-
dence in him. In May 2019 a coalition of major traders bailed
out Bitfinex, investing an additional $1 billion in the business.
The exchange used the money to pay back the loans to Tether
Holdings. The next year, when crypto trading took off during
the pandemic, the company grew exponentially, selling 17 bil-
lion Tethers. It has sold more than 48 billion so far this year.
In February, Tether agreed to pay $18.5 million to settle
the New York suit without admitting wrongdoing. Supporters
spun this as an endorsement of Tether—would the state attor-
ney general settle if Tether were a massive fraud?—but in
Washington, investigations continued. Earlier this year, pros-
ecutors from the U.S. Department of Justice sent letters to
Devasini and other Tether executives informing them that
they’re targets of a criminal bank fraud investigation. The gov-
ernment is examining whether they deceived banks years ago
to open accounts. “Tether routinely has open dialogue with
law enforcement agencies, including the DOJ, as part of our
commitment to cooperation and transparency,” the company
said in a statement.
 Bloomberg Businessweek
Tether still hasn’t disclosed where it’s keeping its money.
The only financial institution I could find that was willing
to say it’s currently working with the company was Deltec
Bank & Trust in the Bahamas. I met the bank’s chairman,
Jean Chalopin, in Deltec’s office, on the top floor of a six-story
building ringed with palm trees in a nice part of Nassau. In a
past life, Chalopin co-created the cartoon Inspector Gadget,
and a painting of the 1980s trenchcoat-wearing cyborg
policeman hung on his office door. Magazine covers fea-
turing Chalopin’s wife, a former model, and his daughter,
a singer, were displayed on a shelf. Now 71, Chalopin has
a mop of red hair and wears rimless round glasses. As we
sat down, he pulled a book about financial fraud, Misplaced
Trust, off the shelf. “People do funny things for money,” he
said, cryptically.
He made himself a cup of tea and told me he’d come to the
Bahamas in 1987 after selling his first animation studio, DIC
Entertainment. The sale had made him rich—he bought a cas-
tle outside Paris and a pink colonial in the Bahamas, which
later served as the villain’s home in the 2006 James Bond film
Casino Royale. He banked at Deltec,
then befriended its aging founder.
The bank, which once conducted
investment banking throughout
Latin America, had dwindled to
just a few billion dollars of assets.
Chalopin invested, eventually
becoming the biggest shareholder.
Bahamian banks are often depicted
in movies as a haven for money laun-
derers, but Chalopin said Deltec’s
Chalopin
edge was customer service, not
secrecy. He decided to seek out clients in new lines of busi-
ness, such as biotech, gene editing, and artificial intelligence,
that were too small to get personal attention from bigger
banks. Another area was cryptocurrencies. “Crypto was like,
‘Don’t touch, it’s very dangerous,’ ” he said. “Well, if you dig
a little bit deeper, you realize it’s not, actually.”
He said he was introduced to Devasini in 2017 by a cus-
tomer who’d gotten rich from Bitcoin. Devasini cooked
Chalopin a risotto lunch and impressed him with his forth-
rightness. When they discovered that Devasini had grown up
in the same Italian village as Chalopin’s mother, they began
calling each other cugino (cousin). Devasini bought a house
near Chalopin’s in the Bahamas, and together they purchased
and divided the waterfront lot between the two properties.
Chalopin told me Tether had been unfairly maligned. “There’s
no agenda or plot,” he said. “They are not Enron or Madoff.
When there’s a problem, they fix it honorably.”
Chalopin said he investigated Tether for months before tak-
REBECCA SAPP/GETTY IMAGES
ing the company on as a client in November 2018. He signed a
letter vouching for its assets. He was surprised that critics still
insisted Tether’s currency was not backed by cash. “Frankly,
the biggest thing was at the time ‘the money doesn’t exist,’” he
said. “We knew the money exists! It was sitting here.”
October 11, 2021
But when I asked Chalopin if he knew for sure that Tether’s
assets were fully secure now, he laughed. It was a difficult
question, he said. He only held cash and extremely low-risk
bonds for Tether. But recently the company had started using
other banks to handle its money. Only a quarter of it—$15 bil-
lion or so—is still with Deltec. “I cannot speak about what I
cannot know,” he said. “I can only control what’s with us.”
After I returned to the U.S., I obtained a document showing
a detailed account of Tether Holdings’ reserves. It said they
include billions of dollars of short-term loans to large Chinese
companies—something money-market funds avoid. And that
was before one of the country’s largest property developers,
China Evergrande Group, started to collapse. I also learned
that Tether had lent billions of dollars more to other crypto
companies, with Bitcoin as collateral. One of them is Celsius
Network Ltd., a giant quasi-bank for cryptocurrency inves-
tors, its founder Alex Mashinsky told me. He said he pays an
interest rate of 5% to 6% on $1 billion in loans from Tether.
Tether has denied holding any Evergrande debt, but Hoegner,
Tether’s lawyer, declined to say whether Tether had other
Chinese commercial paper. He said the vast majority of its
commercial paper has high grades from credit ratings firms,
and that its secured loans are low-risk, because borrowers
have to put up Bitcoin that’s worth more than what they bor-
row. “All Tether tokens are fully backed,” he said.
Tether’s Chinese investments and crypto-backed loans are 47
potentially significant. If Devasini is taking enough risk to earn
even a 1% return on Tether’s entire reserves, that would give
him and his partners a $690 million annual profit. But if those
loans fail, even a small percentage of them, one Tether would
become worth less than $1. Any investors holding Tethers
would then have an incentive to redeem them; if others did
it first, the money could dry up. The bank run would be on.
The officials who gathered in July at the Treasury
Department are discussing regulating Tether like a bank, which
would force Devasini to finally show where the money is, or
even undermining it by issuing an official U.S. stablecoin. The
strange thing is that, at least for now, most participants in the
crypto market, including some very large and sophisticated
operators, don’t seem to care about any of the risks. Just last
month, traders bought $3 billion in new Tethers, presumably
sending billions of perfectly good U.S. dollars to the Inspector
Gadget co-creator’s Bahamian bank in exchange for digital
tokens conjured by the Mighty Ducks guy and run by execu-
tives who are targets of a U.S. criminal investigation.
The situation has parallels to the wildcat banking days. The
customers patronizing those not-banks weren’t rubes; sketchy
notes were the only money they could find. But that ended
when, in the early days of the Civil War, President Abraham
Lincoln started printing federal paper money and instituted
a prohibitively high tax on other currency. The wildcat notes,
which once fueled frontier cities’ economies, fell into dis-
use. Some gave them to children to play with. In rural areas,
they were used for wallpaper.  —With Daniele Lepido,
Alex Harris, Joanna Ossinger, Amanda Wang, and Allen Wan
 Bloomberg Businessweek

↓ Cheniere Energy’s
liquefied natural gas
facility in Cameron
Parish; (inset) house in
the Holly Beach area

48
B o o mt o
In the Eva c u a t i ein g b a tte re d
hwe s t Lo u isia na is b
Sou t
in g o ut , w or ke r
lo c als a re m ov
But while l iz e o n a
to cap it a
 October 11, 2021

o 49

ion Z o n e
by hurricanes. e sw arm ing in
th e c ou ntr y ar
rs from around
as bon an za anusik
a natura l g g inia H
s by V ir
og rap h
s Ph ot
no n S im
n
By Sha
 Bloomberg Businessweek
f you drive far enough down through
I southwest Louisiana, past the petro-
chemical plants and the wide marsh
to where the road ends at the Gulf of
Mexico, you’ll find Cameron, a little
town of oystermen and shrimping boats.
It’s right near the Chocolate Milk Beach,
which is what I called Holly Beach back
when I was a kid and my dad would
drive us there, 40  miles south from
our home in Lake Charles, stopping
for shrimp along the way. I didn’t know
back then that the water’s Yoo-hoo color
was caused by sediment dredged up so
places like Lake Charles could have a
shipway and an economic lifeline.
Today the communities of Cameron
and Holly Beach look a lot different.
In late August 2020, Cameron Parish,
where they both lie, was hit square-on
by Hurricane Laura. Six weeks later it
was lashed by Hurricane Delta. Laura’s
150  mph winds peeled off roofs and
smashed holes in brick walls. Into those
wounds poured Delta, bringing more
50 wind, 17  inches of rain, and a 9-foot
storm surge. Half-done repair jobs—
patched-together siding, new drywall,
jury-rigged front doors and windows—
were destroyed, along with the life sav-
ings of many families.
Lake Charles, the region’s hub city,
was left unrecognizable. When I visited
the morning after Delta, I found glori-
ous, Spanish-moss-dripping oaks rot-
ting roots-up in friends’ front yards like
dead roaches. Tall pines had snapped
in half, and magnolia branches were
clogging the drainage ditches where
I once caught crawfish. What remained
were homes with blue tarp roofs, micro-
waving under the bright, hot sky. “It’s
like someone turned on the lights here,”
one resident said.
The sad waltz of southwest
Louisiana had only just begun. A few
months later the historic freeze that
knocked Texas offline struck the crip-
pled communities across the state line,
too. Some people here spent 18-degree
nights shivering in roofless homes as
the death toll—from hypothermia,
exposure, carbon-monoxide poisoning
caused by generators—rose. The lucky
ones who’d skirted the storms with
only a lost fence or a roof puncture
now had to deal with burst pipes and
weeks without power or water. Then
May brought heavy rains and a thou-
sand-year flood, which seemed to be
a capstone event on the steady, dire
warning from Mother Nature about the
hazards of a changing climate.
Hurricane Ida, in August, largely
spared the Southwest, but it served as
a reminder of the region’s peril. Outside
the flood protection system around New
Orleans, some communities faced cata-
strophic, irreversible damage. There are
no levees around Holly Beach or Lake
Charles, and there’s only so much gov-
ernment can do to keep people dry. For
many in these parts, flood protection
means pylons, plywood, sandbags, and
crossed fingers.
Everyone around here speaks natu-
ral disaster. They know when to flee and
what can happen if they don’t. Ask any-
body you meet, and chances are they
lost a grandparent or a neighbor or a
cousin in 1957, when almost 400 people
were killed by Hurricane Audrey. You
might think, given the latest cascade of
traumas, that residents would be leaving
in droves, and it’s true, most are wres-
tling with the question of whether to
rebuild or start over someplace else. You
hear neighbors debating it on porches at
dusk, in line at the few remaining gro-
cery stores, in the comments section of
↑ Lake Charles house in June
October 11, 2021
the American Press newspaper. Many
are going. But people in southwest
Louisiana are stubborn about their
vision of the good life on the bayou:
rocking chairs, a Gulf breeze, and the
electric air of a Mardi Gras morning.
And for every family that decides
to pack it in and head for high ground,
others are rushing in on the counter-
flow. That’s because, for all the danger
the storms pose, the economic oppor-
tunities are too good. This region has
seen $100 billion worth of capital invest-
ment over the past decade, thanks to
liquefied natural gas, or LNG. Shale
exploration has left the U.S. with more
natural gas than it can use, and in 2018
the country turned from a net importer
to a net exporter. Already, a little more
than half of all U.S. LNG exports flow
through two terminals in Cameron
Parish, including the country’s biggest,
owned by Cheniere Energy Inc. Another
10 major projects are either approved
or under construction. The Southwest
Louisiana Economic Development
Alliance estimates that, between pend-
ing and completed projects, 77,000 jobs
are being created.
Natural gas is set to overtake coal as
the world’s second-biggest energy source
by 2035, according to the International
Gas Union, and little Cameron is poised
to provide. Drive across the bridges that
crisscross the swamp at night, and you’ll
Bloomberg Businessweek
see a Cajun Emerald City: steam towers
and hydrocarbon crackers, lit up in an
orangy glow.
So the jobs seem safe, even when the
region does not. But some locals hold
that the danger itself is a mirage. Many
of those who are staying say there’s no
proof the storms will keep getting worse.
And no, they don’t believe the fossil fuel
industry is to blame for recent weather
trends—that’s just liberal talk. And frack-
ing equals cash, damn right. Cameron
Parish is bright red, voting 90.9% Trump
in 2020. This is MAGA country, where
for many there is no climate change,
just random storms of random strength
issued by the heavens, again and again.
L
ast Oct. 10, hours after the eye
of Delta struck Cameron, I was
splashing down Highway  27 in
hip waders when I noticed the birds.
The pelicans and terns were flying
twisted and scattered, as though they
were still caught in the 100 mph winds,
desperately disoriented.
I was lost, too. I was trying to find
Tressie Smith’s restaurant, Anchors
Up, but with most buildings destroyed
or partly submerged and all the signs
blown away, the town I’d known since
childhood no longer seemed to exist.
Smith had asked me to take a photo of
Anchors Up so she’d know if there was
anything worth going back for. She’d
been at a relative’s house in Lake Charles
during Laura, texting me as things esca-
lated: “Raining like hell.” “Lights flicker-
ing.” “Power off.” When Cameron was
evacuated in advance of Delta, Smith got
wise and drove all the way to Houston.
The morning after the storm, they let
the media in, and I told her I’d report
back on what I found.
I walked through the main ceme-
tery and saw that the mausoleum was
exposed, with rows of empty slots where
bodies had once rested; the caskets had
floated out into the floodwaters. A lit-
tle farther along the road, I spotted
Anchors Up. The place had lived up to
its name, casting off from its foundation
and drifting, intact, on the storm surge
to the parking lot behind the Capital
One, about a block away. It sat next to a
Hurricane Country
LNG facilities: ○ Existing ○ Under construction
Storm path
Laura
2020
Ike
2008
Rita
TEXAS 2005
Gulf of
Mexico
DATA: U.S. ENERGY INFORMATION ADMINISTRATION; NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION
stranded shrimping boat like a beached
turquoise whale, bags of Zapps potato
chips still clinging to racks inside. I sent
Smith a pic, but she didn’t write back.
Maybe she was busy, or maybe she
couldn’t bring herself to reply.
One block over, a home alarm was
beep-beep-beeping beneath a pile of
debris. The only other sound was the
rhythmic lull of waves lapping against
the remains of people’s lives. A small
herd of newly stray dogs and cats
started following me around, meowing
and yipping, jumping from one junk
pile to the next, hoping for food.
At First Baptist Church, the windows
Laura had blown out were replaced by
plastic sheets that flapped and swished
in the wind. Inside, dozens of folding
tables had been set up, with donations
sent after Laura stacked high: cloth-
ing, loaves of bread, water, diapers. It
would have been a heartwarming scene
of community resilience, had Delta not
swept in. Clothes and diapers were
sopped with swamp water, as were the
bread slices that littered the floor. Water
jugs had fallen and burst. In one cor-
ner a whiteboard cheerfully announced,
“Take what you need!” It was a pic-
ture of compounded sorrow: Cameron
hadn’t recovered from the first disaster
before the next one hit.
In a sense, that’s how history has
played out here for decades. The
October 11, 2021
○ Proposed
MISSISSIPPI
Ida
2021
Delta
2020
LOUISIANA
Cameron
Parish
modern run of megastorms began with
Audrey, which made landfall in 1957
between Holly Beach and the mouth of
the Sabine River, where Cheniere LNG
is located now. Lacking a storm-warning
system, advanced radar, Doppler tech- 51
nology, or the Saffir-Simpson category
scale and its cones of danger, the peo-
ple of Cameron only had the word
of their local weatherman to go on.
Hundreds died.
The day before Audrey hit, the
Weather Bureau warned everyone liv-
ing in “low and exposed places along
the beach” to move to higher ground,
but many people didn’t, either because
they weren’t on the beach or they didn’t
believe they lived in a low-lying area. A
man named Whitney Bartie lost his fam-
ily when the storm swept them off the
roof, one by one. He sued the federal
government, claiming its warnings had
been insufficient to the point of negli-
gence. The lawsuit recounts that a TV
news broadcast the night of the storm
had said “there is no need for alarm
tonight” and “you can rest well tonight.”
It later emerged that the advice had
been intended only for Lake Charles
residents, not Cameron, but the words
became local legend down here anyway.
So, too, did the accounts of survi-
vors. Archives compiled by the National
Weather Service and the Louisiana
Digital Library include the story of
 Bloomberg Businessweek
a man and his niece who “floated
out the window” and then were sepa-
rated by a tidal wave that cast the man,
clinging to a piece of wood, 3  miles
away. Cameron, population 3,000,
was left looking, in the words of Mrs.
John R. Smith, “as if no one had ever
lived there.” I still remember reading,
↑ Ruined homes in Cameron after Audrey
in the town’s old library (itself since
destroyed by a storm), the tale of a
child who’d seen a ghost dressed in a
long white gown calling his name before
water sucked her out the back door. His
52 mother.
Stories such as these have suffused
Cameron with a haunted, gothic feel,
persisting through a relative quiet spell
until Rita (2005) and Ike (2008) pum-
meled the region in short sequence.
With every new storm, people’s rela-
tionship to nature frayed further. Many
locals carry the trauma defiantly, as a
sword against impending reality, insist-
ing on finding ways to stay put, storm
after storm after storm after storm.
In her 2016 book about southwest
Louisiana, Strangers in Their Own Land,
sociologist Arlie Russell Hochschild
calls this attitude the “Great Paradox.”
She concludes that people here dis-
miss skeptics, critics, and reality itself,
because they want badly to hold on to
the “elation” that comes with living
their own truth. But the storms of the
past few years are testing that elation
like never before.
I
feel powerless against Mother
Nature.”
Sarah Guilott-Mcinnis is sob-
bing in her kitchen in Lake Charles,
where she’s opened up her cabinets
full of colorful dishes and glass pitchers
October 11, 2021
for a rummage sale with hardly any beckoning Texans over the bridge to
customers. “I’ve been fighting water for its gaudy casinos. And Guilott-Mcinnis
so long. I’m so tired of fixing shit. I feel was now a four-time loser, one of many.
so defeated.” She gasps between hic- U.S. Postal Service address-change
cups. “I-I-I just want to leave and start records suggest that Lake Charles lost
fresh somewhere else, anywhere.” a greater share of its population in
Guilott-Mcinnis had a baby right 2020 than anywhere else in the coun-
before the pandemic hit. A few months try, shrinking 6.7%. The true figure is
later she took over the laundro- likely higher, because registering an
mat business her grandfather address change isn’t at the top of most
had started, only to watch the evacuees’ priority list. Following the
virus drive customers away. May floods the city government esti-
“I thought that was the worst of mated that 3,000 of 80,000 residents
it—Covid plus a baby plus a fail- were displaced, and it wasn’t clear if
ing business,” she says. “Then they’d ever come back. The trend is
the hurricanes began.” best described as a climate exodus.
In August, Laura ripped Guilott-Mcinnis and her husband
down the chimney and many are moving to Fayetteville, Ark. She
of the eaves of her home, a doesn’t know anyone there, but she
midcentury geodesic dome heard it was nice.
with a sunken den. Six weeks later,
when Delta dumped its record-setting own in Cameron you can find
21 inches of water in Lake Charles, the
rain streamed down the inside walls— D signs of a revival, albeit one
that’s leaving the town look-
“like from a faucet,” Guilott-Mcinnis ing much different than it’s ever been.
says—and drenched the bedrooms. Homes that became debris piles are
Come February, the freeze caused a being raked up and hauled out, and in
pipe to burst. She and her husband had their place hundreds of RVs have moved
to rip down a wall by hand so they could in. Many are company-owned: shiny,
stanch the spray. matching, and new, powered by a hum-
In May, Guilott-Mcinnis was dropping ming chorus of generators.
off her baby at her mom’s when she got The change has happened fast.
stranded by high water from the ran- Cameron is no longer a deep-rooted
dom, pre-summer swirl of storms that shrimping town. It’s become a get-in-
were bringing the thousand-year flood. and-get-out LNG town, the lodging site
Her husband phoned and said the
water was up to their front door. ↓ Guilott-Mcinnis and her daughter, Celeste
Half an hour later came the call
she’d feared all year. “It’s done,”
he told her. Their home, which
she’d bought at 23, poured almost
$100,000 into, and blogged about
because of its historic design, had
completely flooded. The family’s
most important possessions were
floating around in Tupperware,
a precautionary measure they’d
taken as the forecast worsened.
THE BEAUMONT ENTERPRISE/AP PHOTO
I notice a foot-high waterline on
the doorjamb below where they’d
measured the two kids’ heights in
green marker.
Lake Charles is a gambling
town, with billboards and leg-
ends of pirates and buried bullion
Bloomberg Businessweek October 11, 2021

for one of America’s most Covid-proof, each fit a 747 inside. There are two ship down. Miller points out that employees
booming industries. As of this June the berths; a third is on the way. are required to back in their cars when
local government placed the permanent All of this investment has to be pro- they park, so they can get out quickly in
population at 50 to 75 people, compared tected, of course. After Hurricane Ida an emergency. The only time the plant
with 900 more-transient facilities work- made landfall to the southeast in late has ever shut down and evacuated com-
ers. A gig at one of the plants brings in August, the Coast Guard received thou- pletely was during Laura.
$1,796 a week, on average, a wage the sands of reports of pollution seeping After Laura, some of the area’s LNG
Cameron Parish port touts as the coun- from the industrial corridor envi- terminals went offline, but within two
try’s highest for counties with a com- ronmentalists have dubbed Cancer weeks feed gas deliveries were again on
parable number of jobs. In the past Alley, and the National Oceanic and the move, and cargo ships were churn-
15  years, the parish’s median house- Atmospheric Administration received ing up and down the Sabine Pass. Delta,
hold income has almost doubled, from 55 spill reports. A similar storm in south- the freeze, and the floods saw only
$35,000 to $67,000. west Louisiana could be even more peril- a chlorine plant explosion, outside
Workers are bused daily to the two ous. Laura threatened 3.5 million barrels Lake Charles where the petrochemical
LNG facilities already operating here,
Cheniere and Cameron, and to the
six additional developments that are
under construction. Right over the bor-
der in Texas two more are being built.
According to a report from McKinsey
& Co. in February, 200  million met-
ric tons’ worth of new capacity will
be required by 2050 to meet global
demand. A big share of that will be in
southwest Louisiana.
On a sinisterly hot afternoon, I 53
toured Cheniere’s sprawling LNG facil-
ity, situated on a plateau of old Army
Corps of Engineers dredge spoils. LNG
is methane gas in liquid form. The
gas is piped into southwest Louisiana
from fracking sites around the country,
then cooled for liquefaction. The liquid
takes up one-six-hundredth the space
as the gas, making it vastly more cost-
effective to export. Once it reaches its
destination, it’s heated back into gas
↑ The Cheniere LNG facility
form for consumer use. Cheniere is
the largest American LNG producer per day of refining capacity, according refineries are—not bad for a place rife
and one of the world’s biggest export- to the American Fuel & Petrochemical with hazmat sites. Before I head back
ers. China and the European Union Manufacturers, and the flurry of LNG to Cameron, Miller reminds me of how
are its biggest customers, and Brazil is construction has left a vulnerable collec- much Cheniere has invested in storm-
gaining quick. tion of massive, half-built facilities. The proofing and notes that LNG would
Cameron and the Sabine Pass’s posi- industry has spent millions to safeguard “evaporate 100%” if it were to spill.
tion on the coast and in the middle of infrastructure in the area, and thus far, Within the industry, LNG is seen as a
the U.S. made the site ideal for import it has escaped major damage. solution to climate change, not a contrib-
terminals back when the country was As we tour Cheniere’s facilities in a utor to it. “Natural gas combines high
bringing in LNG. But the fracking boom truck, Amy Miller, the plant’s super- heating intensity and efficiency with low
led Cheniere to retrofit its facilities for visor for local government and com- emissions and virtually no pollution,”
export. From the highway bridge that munity affairs, who’s also a Cameron an executive from the International Gas
leads to Texas, the plant dwarfs the local, tells me the buildings are forti- Union, an advocacy group, said in a 2018
nearby fishing camps. It features five of fied against winds of 150 mph and the report. In some of the world’s poorest
the “trains” that liquefy and purify the cooling trains are elevated 18  feet in areas it replaces coal or can be used in
gas, with one more under construction, case of flooding. The site can also gen- lieu of cow manure or camel dung. India
and it has five storage tanks that could erate its own power if the local grid goes is set to almost double the length of
 Bloomberg Businessweek
its gas transmission grid, and China
is experiencing record natural gas
demand. At least four-fifths of Brazil’s
LNG imports come from the U.S.—
mostly through Cheniere—and that fig-
ure could increase as drought depletes
the country’s hydropower reservoirs.
LNG’s boosters often call natural
gas a “bridge fuel” that allows for
dirtier energy sources such as coal
to be replaced now, in anticipa-
tion of a future when it will itself be
phased out in favor of cleaner energy
sources. Environmentalists say that’s
Pollyannaish thinking, noting that
LNG is the product of a damaging pro-
cess, fracking, and that methane and
other harmful gases can be released
during the export process. Transport
via tankers adds to the greenhouse
gas tally. Additionally, “the mas-
sive investments in infrastructure to
support this industry,” the Natural
Resources Defense Council wrote in a
2020 report, “lock in fossil fuel depen-
54 dence, making the transition to actual
low-carbon and no-carbon energy even
more difficult.”
When I mention the word “climate”
in interviews around Cameron Parish,
people often get uncomfortable and
start sizing me up, trying to detect
which way my politics lean. Some
are blunter than others; one person I
interview interrupts me to ask where
my red hat is. Trump toured Sempra
Energy’s $10 billion Cameron LNG facil-
ity in 2019, shortly after signing two
executive orders to ease energy indus-
try restrictions, and visited again in
2020 after Laura, touring some of the
storm-ravaged neighborhoods
with Louisiana’s Democratic
governor, John Bel Edwards. “I “There’s a lot of fatigue.
know one thing: that we’ll
provide a lot of what they
call the green,” Trump said.
It’s no surprise a lot of
“We’re going to have this sit-
le ju st wa nt to m ove away ”
uation taken care of quickly.” peop
Within weeks, Delta struck,
and down in Cameron I was seeing
families huddled in cheap camping
tents, pitched on the concrete slabs
where their homes used to be. Tied to
barren pillars that had once supported
↑ Damaged sign in June
houses, you could see the bright red
flag still flying high: Make America
Great Again.
When you don’t believe man-made
global warming is creating more fre-
quent and severe weather events, it
stands to reason you’ll be more likely
to stay in their path. Bronwen Theriot,
a science teacher at Cameron’s high
school, once told me her attitude: “If
it’s God’s will, you’ve got no power to
change that.” Her school was rebuilt by
the federal government in 2006 after
Rita, and it now sits on steel and brick
pillars up in the sky. From Theriot’s
classroom, students listen to her natural
science lessons while gazing out over
the front line of climate change, a bare
horizon of marsh and the encroaching
Gulf of Mexico.
How many hurricanes does it take
to change a mind? For Nic Hunter, the
37-year-old, Trump-supporting mayor
of Lake Charles, the recent rounds
have been enough. “There’s just gotta
be a point where you say to hell with
politics and just call it like you see it,”
Hunter tells me when we meet in his
10th-floor office downtown. “And with
what we have been through over the
last year, how can you deny that there
is something going on?” In a sign,
perhaps, that voters are starting to
modify their views on climate change,
he won reelection in March with 74%
of the vote, up from 56% last time out.
President Joe Biden visited Lake
Charles in May, right before the floods,
to tout his proposed infrastructure
funding package. Hunter says they
spoke for “six or seven minutes,” during
which he asked the president to support
supplemental disaster recovery funding
for the region. He wanted the federal
government to bridge the gap between
what the state and private insurance
can pay residents. “He seemed very
concerned,” Hunter says of Biden.
“But ask me in six months if we have
the supplemental disaster aid we need,
and I will tell you if it was a good or
fruitless conversation.”
Hunter didn’t wait that long to
start pressuring the government on
Facebook. After the flooding, along-
side a montage of images of destroyed
homes covered in blue tarps, he
wrote, “Am I living in the Twilight
Zone? Is this America? I took these
pictures TODAY on JULY  17, 2021,
almost 11  months
after Hurricane
Laura, 9 months after
Hurricane Delta, 4 months after a
Winter Storm, and 2  months after
a 1,000 Year Flood Event. … Multiply
this by 600 and that’s a better picture
of southwest Louisiana right now.”
He added that federal supplemental
Bloomberg Businessweek
aid had arrived in New Orleans
10 days after Katrina and on the East
Coast 98  days after Sandy. The situ-
ation on the ground, he said, was “a
humanitarian crisis.”
For weeks over the summer, the
Lake Charles Convention & Visitors
Bureau’s Visit Lake Charles website
eschewed its usual colorful photos
of slot machines and kids holding up
baby alligators. A time counter on the
homepage ticked off the seconds, min-
utes, hours, days “SINCE HURRICANE
LAURA WITH NO SUPPLEMENTAL
FEDERAL DISASTER RELIEF FOR
SOUTHWEST LOUISIANA.”
In the meantime, in Cameron, a
$32 million project got under way, seek-
ing to scoop 2.36 million cubic yards
of sand out of the Gulf of Mexico and
plop it into what’s left of the marsh in
the name of coastal restoration. It’s a
Sisyphean way to approach nature, end-
lessly lugging sand after each hurricane
in preparation for the next one.
F
orecasters predicted that the
2021 hurricane season would
be major—with 13 to 20 tropical
storms, 6 to 10 of them hurricanes. Ida,
for one, delivered. In August, as radar
showed its red and yellow pinwheel
spinning north through the Caribbean
toward Louisiana, I checked in on my
people. Everyone was on edge. Social
media was lit up with expletive-laden
posts and “NOT NOW, IDA” pleas. There
was a palpable sense that the region sim-
ply didn’t have the fight left for another
storm. Instead, Ida went toward New
Orleans, sparing southwest Louisiana.
Local newspapers began pondering
whether it would help bring in fed-
eral assistance for their region at last,
or steal away aid that might otherwise
have headed their way—a Louisiana-style
hunger games.
On Sept. 7, perhaps goaded by Ida,
the White House asked Congress to fund
additional relief for southwest Louisiana.
A few weeks later the Biden administra-
tion said it was authorizing an increase
in federal funding to the state for debris
removal and unspecified “emergency
protective measures” as a result of Laura.
The amount destined for southwest
Louisiana is $600 million, far short of
the $3 billion the state government had
estimated was needed.
Hunter responded on Facebook. “I
thank President Biden for his support.
Though the final numbers are woefully
inadequate,” he wrote. They “represent
about 1/5 of what the state estimated our
unmet need to be.” And that estimate,
Hunter added, was from before the win-
ter storm and May flood.
“Ultimately, we will do what we
always do in SWLA. We will never give
up,” he said. That elation again.
But the hurricanes keep coming.
“There’s a lot of fatigue,” says Andy
Patrick, the National Weather Service
meteorologist responsible for Lake
Charles. “It’s no surprise a lot of people
just want to move away.”
↑ Smith outside Anchors Up
In Lake Charles’s Greinwich Terrace
neighborhood, the mostly Black resi-
dents were given that option in May—
quit rebuilding and take a buyout. The
community was identified for a vol-
untary program that’s operated by
the Louisiana Watershed Initiative
and funded with federal money, after
an engineering company found the
neighborhood was guaranteed to flood
during significant rain events. The res-
idents already knew this: It had hap-
pened three times in the past four years,
including in 2017 during Hurricane
October 11, 2021
Harvey, which didn’t significantly affect
other parts of Lake Charles. “The buy-
out is the best of a bunch of imperfect
options,” Mayor Hunter says. He’s
pledged to fight to make sure the resi-
dents are offered fair market value.
If everyone leaves, the plan is to
remove all the impervious surfaces—
concrete slabs and structures—in the
area to turn it into a drainage basin for
surrounding neighborhoods. In other
words, the community is slated to
become marshland.
“This is not normal,” Diamond
Meche, a Terrace resident, tells me on
her lunch break from her job at the
Walmart across the freeway. The appli-
cation period for the program is only
just beginning, and she and her par-
ents don’t know how much they’ll get
for their one-story brick home, but they
plan to take the buyout and join the exo-
dus. The people who want to stay or
can’t afford to leave, she says, should
expect more problems: “I wouldn’t
advise people here to buy furniture, 55
to be on the safe side. And I would
advise you to live out of Tupperwares.”
Meche  still doesn’t know where her
family will go.
Down in Cameron, Tressie Smith
has converted Anchors Up into a food
truck. “I realized that if I was gonna
stay here, I needed to be on wheels so I
can pick up and go,” she says. The cost
of rebuilding to meet new local con-
struction rules that require everything
to be up high made it too onerous to
root down. The LNG facilities have kept
Smith in business. “I depend on that
lunch rush,” she says, stubbing out a
cigarette. “How else is someone sup-
posed to survive down here?”
She cusses, laughs, and ducks back
into the truck as a facilities worker steps
up to the window to order. He’s from
Seattle, living in a man camp and wear-
ing a work vest from one of the engi-
neering and construction companies
building LNG facilities. While he waits
for his shrimp basket, he looks around
at the piles of tree branches and flat-
tened homes. “There’s nothing here,”
he tells me, “but it’ll make you all the
money you need.” 
 ich K i d
Bloomberg Businessweek

he R
T
Got a modest income but access
to lots and lots of cash? New York City
has an apartment ownership
program for you! Even if it wasn’t
meant for you at all

By Caleb Melby

56
d Next Do
October 11, 2021

or

57
 T
he changes at the building
in Brooklyn’s Williamsburg
neighborhood began in 2009,
when a guitar shop owner
whose father was a renowned art
appraiser purchased a four-bedroom
apartment. His mom lent him the
money. Then came a writer who bor-
rowed from her mother, a psychologist.
A movie production manager and her
partner, a photo director, bought their
unit with a loan from her father, a physi-
cian in Maryland. A flurry of additional
purchases without mortgages followed,
including by a Shakespearean actress
whose father lives in a terraced pent-
house overlooking Central Park and a
fashion designer whose father is a gyne-
cologist in California.
Similar colonies of young people with
creative sensibilities and well-off par-
ents have taken root in Williamsburg for
years, but the gentrification of this par-
ticular six-story building on South 2nd
Street had a surprising set of enablers:
the taxpayers of New York. It’s one of
about 1,000 properties across the city
58 that receive a special property tax break
created to make homeownership afford-
able for low-income people. The building
had income restrictions, and these buy-
ers met them. At the same time, they had
access to a lot of cash, which they used
to score their units at well below market
prices. Never mind their wealth or their
parents’; the tax break doesn’t require
any limit on assets or preclude gifts.
The children of America’s wealthy
are quietly sewing up deals like this
in some of New York’s most desir-
able neighborhoods, in buildings
known as Housing Development Fund
Corporation cooperatives, or HDFCs.
These buildings were at one time in
financial (and often physical) distress,
and many are still shunned by conven-
tional mortgage underwriters—hence
the need for buyers to pay cash. Many
are no longer cheap, because the agree-
ments that once limited resale prices
have expired. But even at prices that
can crest well above $1 million, they’re
discounted to the market, because of
the income limit on buyers and the
lack of available financing in some
cases. And the taxes can be remarkably
low. On South 2nd Street, the owners
enjoy annual property tax discounts of
roughly 70%.
The tax break was designed to be
simple—too simple, as it turns out.
The program sets a maximum taxable
value for every HDFC unit across the
city. This year it’s $11,079, in a market
where the median price for a home has
risen to $770,000. Because of this sys-
tem, half the aggregate tax benefit will
go to the top 20% of eligible buildings
by value. Struggling buildings in poorer
areas, meanwhile, will get no benefit at
all. Their values are too low for the tax
break to have any effect, and because
of their HDFC status, they don’t get an
abatement that most market-rate co-ops
6-UNIT LOFT BUILDING,
CHELSEA
SALES BUYERS
$1.6m Former Purdue
Pharma executive
Cash, and a microbiologist
February 2021
$1.8m Co-owner of a
bicycle equipment
Cash, June 2018 company and a
writer and editor
TAX EXEMPTION PER UNIT
$84k/year
receive. Dozens have been foreclosed
on in recent years for unpaid taxes.
In short, because of inadequate rules,
poor design, and decades of lax over-
sight, these low-income tax subsidies
are being scooped up by the well-to-do.
“They’re just gaming the system,” says
Penny Gurstein, an expert on afford-
able housing who directs the Housing
Research Collaborative at the University
of British Columbia. “This is now just
being used as a playground for the rich.”
Across the U.S., studies have shown
that local property tax systems, which
raise more than $500 billion annually,
are deeply unfair, favoring the wealthy
and systematically applying higher effec-
tive tax rates to lower-valued properties.
New York’s outcomes are among the
most unequal. But even in a system shot
through with inequalities, the exploita-
tion of the HDFC program by affluent
bargain hunters stands out.
HDFC sales are infrequent, and not
all of them go for big-dollar prices.
Nonetheless, it happens often enough
that the city’s Department of Housing
Preservation and Development acknowl-
edges that “strong reforms are needed.”
The agency made a run at that in 2016
but failed in the face of what a spokes-
man called “strong objections from many
HDFC co-ops and their elected represen-
tatives.” Since then, the most desirable
HDFC apartments, swept along by the
forces of the New York real estate mar-
ket, have only drifted further beyond the
reach of the people they were set up for.
A
n HDFC cooperative exists,
per New York state law,
“exclusively to develop a
housing project for persons
of low income.” That doesn’t stop some
HDFC buildings from advertising how
lax they are about enforcing income lim-
its. Bloomberg Businessweek found doz-
ens of listings dating to 2010 that failed
to mention income restrictions for the
building or plainly said there were none.
A four-bedroom unit at 238 W. 106th St.
was listed this year for $1.85  million
and advertised as having “no income
restrictions,” despite city records show-
ing it benefits from the exemption for
low- income housing. The building’s
HDFC status lowered its taxable value
 Bloomberg Businessweek
this year by $3.6  million and cuts its
owners’ tax bill by more than $400,000.
A building manager at ABC Realty, which
manages the building, told Bloomberg
Businessweek she would inform the bro-
kers that “they need to be compliant.”
When income limits are enforced, the
rules can be as complex and unintuitive
as everything else about New York City
real estate. Depending on its governing
documents, a building will set the limit
by various methods. One looks like this:
Take the annual common charges for
the unit, plus the estimated annual util-
ities, and multiply that by six (or seven
if the buyer’s family is big enough). Then
add 6% of the seller’s original purchase
price. That’s your income ceiling. Some
PREVIOUS SPREAD: ILLUSTRATION BY XAVIER LALANNE-TAUZIA. PHOTOGRAPHS BY MATT GENOVESE FOR BLOOMBERG BUSINESSWEEK.
buildings keep it simpler—and perhaps
DATA: NEW YORK CITY PROPERTY RECORDS; TAX RECORDS; LINKEDIN; CORPORATE AND PERSONAL WEBSITES; NEWS ACCOUNTS
get to a higher number—by using a per-
centage of the area median income, or
AMI, for the New York metropolitan
area. Buildings that are committed to
low-income ownership might set the
limit at 80% of AMI, which matches the
city’s definition of low-income. But an
HDFC can go as high as 165% of AMI.
This year that translates to $137,940 for
a single person and $196,845 for a fam-
ily of four.
For buildings with high prices and
tight income caps, gifting is just about
the only way a qualified person can buy
some of these apartments, especially if an
all-cash deal is necessary. The upshot is
that a child of well-to-do parents is some-
thing of a perfect buyer.
“They didn’t think about rich kids
with a trust fund but who make 30 grand
a year working for a nonprofit,” says
Matt DeSilva, a real estate agent who
24-UNIT BUILDING,
SOUTH HARLEM
SALES BUYERS
$1.1m Architect
Cash, January 2019
$995k Private-
practice
Mortgage, psychologist
August 2019
$845k A concert
pianist and a
Cash, October 2006 mezzo-soprano
TAX EXEMPTION PER UNIT
$60k/year
specializes in HDFCs. “Because that
wasn’t really happening when the pro-
gram was created.” In a way, DeSilva is
telling his own story. When his mother
lent him the money to buy into the
building on South 2nd Street, he was
playing bass in a band and running his
small guitar store.
Students at Columbia University
and Brooklyn’s Pratt Institute appear
frequently among HDFC buyers, as do
young adults pursuing passion proj-
ects that might pay off someday but
haven’t yet: DJing, fine art, influenc-
ing, music, modeling, fashion design.
Others are future doctors and lawyers.
Buyers frequently list their parents’
addresses in upscale suburbs of Los
Angeles, Pittsburgh, Baltimore, and
other cities on purchasing documents.
In extreme cases, cash buyers have ties
to the wealthy and powerful. A son of
British lord Simon Gavron bought an
HDFC unit; a son of former Grumman
Corp. Chairman John Bierwirth did, too.
Parents say HDFCs offer financial
breathing room for creative children.
Jessica Nacheman says a one-bedroom
unit on the Upper West Side, purchased
last year for $410,000 in cash, “was really
kind of a godsend” for her daughter, a
2015 Bryn Mawr graduate and harpist
who needed her own place to avoid dis-
turbing roommates with rehearsals. “She
had been able to put some money aside,
from gifts, etc., etc.,” says Nacheman,
who’s worked as a lawyer for a division
of Exxon Mobil Corp. and whose hus-
band retired as a principal in an engi-
neering firm. “Now she can go forward
with lower maintenance.” Maintenance
October 11, 2021
is a unit’s share of the common costs for
a building—staff, water, repair funds,
and, significantly, real estate taxes.
The HDFC tax break is one reason the
monthly maintenance for this apartment
was advertised at just $598 at the time of
the sale, perhaps half of what it might
be in a market-rate building. “It’s really
a great program,” Nacheman says.
Other parents are less eager to dis-
cuss it. “It was a one-time opportu-
nity,” says Avraham Glattman, a real
estate investor, in a brief conversation.
Glattman says that in 2016 his busi-
ness partner, Pete Jacov, found two
apartments in a building near Hudson
Yards, on the West Side of Manhattan;
a son of Glattman’s bought one, and
a son of Jacov’s bought the other, for
$220,000 apiece, in cash. Jacov hung up
when reached by a reporter and didn’t
respond to text messages. Both sons are
pursuing careers in law.
There’s nothing illegal about tak-
ing advantage of rules that offer such
obvious benefits for people with cash
to burn. And a lot of people might say
that if you can find an advantage in the 59
ruthless New York real estate market,
you should exploit it. But these subsi-
dized housing cooperatives were never
intended to be a windfall for rich kids.
They began as part of an historic trans-
fer of wealth that made first-time home-
owners of some of New York’s most
economically vulnerable people.
I
n 1970s New York, the economy
had collapsed, and slumlords had
stopped making repairs on their
buildings and paying property
taxes. Eventually, officials seized the
properties, making city government
one of the largest landlords in town. The
buildings remained in disrepair, and the
city couldn’t afford to fix them. Rather
than return them to unscrupulous slum-
lords, city officials sold them to tenants,
typically for $250 per unit.
The buildings were organized as
cooperatives, then the dominant form
of apartment ownership in New York.
But the co-op boards they formed
often lacked the expertise to man-
age the buildings’ finances or upkeep.
Education programs offered by the city
and affiliated nonprofits received
 mixed reviews. “The training was very
threadbare,” says Glory Ann Kerstein,
who’s lived in her HDFC unit since 1982.
Unpaid taxes, building code violations,
and fines piled up.
Faced with the awkward prospect of
seizing the very same properties again,
city officials came up with a solution
in 1989: a 40-year tax break that would
help the cooperatives dig out of debt.
The benefit was structured as an
absolute cap on the taxable value of
each HDFC unit, set at $3,500 in the
first year and climbing on a schedule.
That means a four-bedroom in Upper
Manhattan (like the one that sold last
WHERE THE TAX BREAKS ARE
Average discount on taxable value of HDFC
apartments, by block
 0%-40%  40%-60%  60%-100%
60
DATA: NYC OPEN DATA
year for $2.1 million) is taxed the same
amount as a one-bedroom in the Bronx.
The tax break itself wasn’t made con-
tingent on keeping prices affordable.
Some HDFC co-ops signed temporary
agreements with the city that included
price caps—tied to fixed schedules or
complex formulas—but the agreements
have been expiring over the years;
they’re now in effect at fewer than 25%
of HDFC buildings, according to the
housing department. The agency says a
small number of new cooperatives have
been formed with stricter rules around
income and assets.
The rise in prices is warping one
of the few shields against New York’s
exploding housing costs. For work-
ing people who made up the first gen-
eration of owners, including Black,
Puerto Rican, and Dominican families,
the buildings offered a chance at eco-
nomic stability.
As a child, Sandy Baez emigrated
from the Dominican Republic to live
with his mother in an apartment build-
ing in Washington Heights, in northern
Manhattan. The property’s absentee
landlord had survived previous foreclo-
sure waves, only for the city to seize his
three-building complex starting in 1991,
just before their arrival.
“It was infested with rats, there were
holes in the bathroom ceilings, there was
nobody to call for repairs,” Baez recalls.
Still, “it was a big improvement from
what we had in the Dominican Republic.”
It took more than a decade for the
city to officially transfer the deed of
the complex to its residents, 66 units
for $16,500, in 2003. Over time the new
owners pulled together to improve the
property. Because the taxable value of
the apartments fell below the HDFC
cap, the owners didn’t receive any tax
relief until 2015—$230 per unit, while far
wealthier buildings were reaping mil-
lions of dollars. Still, ownership offered
tranquility and stability, and Baez and
his siblings were able to attend college.
Only a handful of apartments in the
complex have traded hands since the
buildings became a cooperative, all for
under $50,000. Baez would like to see
his neighbors get more financial relief
from the city, and he’s frustrated that
he and they pay the same in tax as
owners of wealthier buildings. But he
50-UNIT BUILDING,
UPPER WEST SIDE
SALES BUYERS
$1.3m Engineer
Cash, August 2016
$915k Grandson of a New Jersey
attorney and philanthropist
Cash, March 2018
TAX EXEMPTION PER UNIT
$72k/year
supports the HDFC system. “Can the
city do more?” he asks. “I think so. But
I believe it works, 100%.”
H
DFC units can sell for 50%
or less of what a compara-
ble apartment might sell
for, depending on factors
like the financial and physical condi-
tion of the building. Because they are
often such bargains, cheating on appli-
cations for them does occur, brokers
say. “They’ll hand you a tax return that
they did on QuickBooks or Quicken
or TurboTax,” says DeSilva, the guitar
dealer-turned-real estate agent. He’s
started asking for tax transcripts from
the IRS.
For many buildings, the city doesn’t
monitor sales. That leaves agents and
the cooperatives to catch dishonest buy-
ers, but they have incentives to see high-
priced sales take place. Original owners
from the 1980s and ’90s often experi-
ence the biggest wealth-creation event
of their lives when their unit goes for
a high six-figure price; it’s the equiv-
alent of a retirement account. The
 Bloomberg Businessweek
“Units that are selling for $1 million now,
it’s hard to re-regulate that back”
cooperatives benefit, too; most collect
a so-called flip tax of about 30% of the
profit when an apartment sells. Big-
dollar transactions refill their coffers.
(In conventional co-ops, the flip tax typ-
ically tops out at 3%.)
The city estimates 27% of HDFC
cooperatives are experiencing some
form of distress, with many still weighed
down with debt or in need of major
improvements. For these buildings, it’s
almost impossible to resist the transi-
tion from low-income owners to wealth-
ier buyers. They need the flip-tax money.
Clara Meregildo knows how unsettling
these pressures can be. At her seven-story
prewar building about four blocks north
of Central Park, seven units have traded
for cash since 2018 at an average price
of $339,000. The flip taxes have helped
chip away at the building’s debt, but it
still stands at close to $650,000. There are
uncomfortable questions about the build-
ing’s future. “I’m committed to keeping
the building affordable,” says Meregildo,
a human resources professional who
bought a unit in 2007 and serves on the
co-op’s board.
Fellow board member Jeremy Fenn-
Smith, who bought in 2003, predicts
it won’t be easy, thanks in part to the
building’s present reliance on cash
sales. People who are paying cash to get
in now, he says, won’t be interested in
limiting their resale options. “The idea
is that everybody has a three-bedroom,
large unit close to the park; they’re
not going to want to have caps on that.
They’re certainly not low-income peo-
ple. We have racial diversity, we have
PHOTOGRAPHS BY MATT GENOVESE FOR BLOOMBERG BUSINESSWEEK
economic diversity. That will change. I
think that’s inevitable.”
On the other side of the block, in a
24-unit HDFC building, recent sales have
topped $1  million. Only three apart-
ments are still held by original own-
ers. Thanks to the HDFC tax break,
the entire property’s taxable value is
$281,856. Bart Platteau, a Belgium-born
jazz flutist who owns a unit in the build-
ing, says it doesn’t make sense for him
and his new neighbors to be receiving a
tax break for low-income housing. But
he isn’t suggesting giving up something
for nothing.
“Don’t give them the tax breaks, but
let them be free, and let them be regu-
lar co-ops,” Platteau says.
That idea is gaining traction in HDFC
buildings, in part because many owners
believe their units’ value would spike if
income caps were lifted. The New York
State Office of the Attorney General isn’t
encouraging the hope. In 2015 it issued
guidance to local officials that says the
law prohibits HDFC buildings from
reorganizing as market-rate co-ops in
most circumstances.
An interest group called the HDFC
Coalition is attempting to fight that. “We
DESILVA
insist on maintaining our right to dissolve
our HDFCs and convert to normal co-ops,
if only to keep city government from
taking over our private homes,” John
McBride, a leader of the group, said in
an email. McBride and others question
whether city officials who set HDFCs in
motion really intended to create a last-
ing low-income housing break. They
say the larger policy goal was to trans-
fer hundreds of often stressed and dubi-
ous buildings off the city’s books and
into stable, private hands. If the original
October 11, 2021
HDFC owners hadn’t been willing to take
them on, many of those buildings would
have been abandoned, McBride con-
tends. “HDFC shareholders saved these
buildings, and these buildings belong to
us and always will,” he wrote. “Period.”
The coalition wasn’t always so inter-
ested in laissez-faire principles. At its
founding, in 1992, one of its leaders
was Jordi Reyes-Montblanc, a West
Harlem community activist who told
the New York Times in 1998 that HDFCs
are “intended to be the permanent
homes for the self-supporting work-
ing poor and low- to moderate-income
families.” The units “are not intended
to be investment property or for mar-
ket speculation,” he said.
Last year, Harvey Epstein, a State
Assembly member for eastern
Manhattan, drew the ire of the HDFC
Coalition after crafting draft legislation
that would create an HDFC ombuds- 61
man’s office, which the group saw as
government overreach. He’s still work-
ing on a way to reform the law govern-
ing the co-ops, but he’s come around to
seeing the inevitable trajectory the
most expensive units are on: “I’d rather
let them go and make them pay full
fare,” he says, meaning the co-ops
would lose their property tax subsidy.
“Units that are selling for $1  million
now, it’s hard to re-regulate that back.”
Deregulating the most stable and
expensive buildings could spell wind-
falls for those who’ve played the sys-
tem artfully, the final move on their
way to achieving unfettered price
velocity. Epstein thinks state law can
be amended to prevent the problem
from spreading across other buildings.
If the system is left unchanged, it isn’t
hard to envision a future in which gentri-
fication fans out across more and more
neighborhoods and their HDFC cooper-
atives. Hardly a surprising outcome in
New York real estate, where the logic of
the market wins more often than not. At
least there’s a consolation prize: tidy nest
eggs for exiting owners, as their homes
and city are cleared for the affluent. 
 P
U
R
S
U
I
T
S 63

68
SECRET DISNEY Disney hacks 2.0

70
Will this electric truck
save the world?

11 Things I Never Knew 71

Share memories
the old-fashioned way

About Disney World

Until I Worked There
Whether it’s children ditched with Mary Poppins or ladies
October 11, 2021
lusting after Captain Jack Sparrow, “the Most Magical Place on
Edited by
Earth” is also one of the most colorful places to work Chris Rovzar

By Brandon Presser Illustrations by Tiago Majuelos Businessweek.com

 SECRET DISNEY Bloomberg Pursuits October 11, 2021

In the 1960s, Walt Disney had a dream:

He’d turn a San Francisco-size swath of
swampland and orange groves in central
Florida into a version of utopia where
childhood fantasies could spring to life.
The Magic Kingdom opened on Oct. 1,
1971—50 years ago last week—beginning
a fairy tale that’s panned out just as
intended. Over the decades, Walt Disney
World has lured millions of pilgrims to a
place where dreams come true, not just
for visitors but for employees, too.
In fact, there are no fans more devout
than the people working at Disney’s four
theme parks. Called “cast members,”
they are ambassadors of happiness
who delight in perpetuating a mythol-
ogy that never breaks the fourth wall
of the Cinderella Castle. In their minds,
Tinkerbell is real, there are actual ghosts
in the Haunted Mansion, and—most
important—there is only one Mickey.
They gave me a chance to become
part of their world as the parks staffed
up in preparation for Walt Disney
64 World’s golden anniversary, allowing
me to discover exactly how the fairy
dust is sprinkled on every guest experi-
ence. From shielding characters against
overeager fans on Main Street, to mak-
ing elaborate birthday cakes for hippos
at Animal Kingdom, to practicing Be Our
Guest cutlery choreography, here’s what
I learned during a week working at the Those actors move through the park on a least temporarily. The same rule applies
busiest resort on Earth. careful rotation, so guests never see dif- if an injury—a broken arm, maybe—could
ferent “Ariels” at the same time. distract from a convincing depiction.
Hiring cast members for other roles Most princesses “age out” by their
1. No One “Plays” like greeters or restaurant workers has mid-20s, says the former Character. Mary
become more inclusive as of late, and the Poppins has become a go-to transitional
Cinderella, But House of Mouse has relaxed rules about role when a Snow White begins to go a
uniforms to allow for things like tattoos little Snow Gray; most of the time, how-
She Has a Lot of and larger sizes. But characters who look ever, cast members move to another
like real humans—think Belle or Aladdin— department for a decade or two before
Friends are hired primarily based on their returning as a fairy godmother.
height, size, face shape, and skin tone,
If there is a hierarchy of Disney employ- which must closely resemble those of the
ees, on top are those who dress as animated originals. “They line you up in 2. Adult Guests
Characters (that gets a capital C at rows of 10, and you stand there silent and
Disney). But no one is hired to “be” a smiling,” says a former Character, who— Either Become
princess; instead, a team of casting direc- like many alums—requested anonymity
tors holds large-scale open auditions even in retirement. (Disney is fiercely Babies or Try
to find a “friend of Ariel” or “friend of protective of its image.)
Cinderella,” an official term that rein- Anyone who can’t fit into their Making ’Em
forces the idea that the princesses are (shared) costume gets demoted from,
real and not merely costumed laypeople. say, princess to princess handler, at “On more than one occasion, I’ve seen
SECRET DISNEY
parents just leave their children with
Mary Poppins and wander off,” says a
former Character. Adults often embrace
their inner children at the parks rather
than watch their own. “It’s like, ‘Here,
stay with her, she’ll take care of you—
she’s a governess!’ ” Inevitably, Miss
Poppins has to stay Chim-Chim-cheery
despite missing breaks to take her dis-
oriented wards to the Lost Child Center.
Even more frequently, parents bully
their kids into taking photographs with
villains, says a former Character. “I pay
$20,000 for you to go to Catholic school
to not be afraid of the devil—now smile
for mommy!” one woman screamed at
her petrified daughter in an attempt
to make her pose with Narnia’s White
Witch. (The child pulled down her
mother’s pants in protest.)
If some adults behave like babies,
others try to make them. “It happens
on any attraction that’s dark enough
and slow enough for a little action,” a
cast member says, amused that visitors
are still surprised to learn that rides
have video cameras for safety purposes.
Midride souvenir shots are rigorously
screened to expunge any overly magi-
cal moments. “I can’t believe I’m saying
this,” says Kerstin Cote-Crosson, a for-
mer attraction operator who’d watched
the cameras, “but I once had to kindly
ask a young woman on Splash Mountain
not to spit bodily fluids into the flume.”
Bloomberg Pursuits
3. On Any Given
Day, There’s a
Circle of Life
Aaron Crecraft, a guest experience
manager at 2,416-room Coronado
Springs Resort at Walt Disney World,
estimates that 75% of guests are visit-
ing the parks to celebrate a milestone,
from baby gender reveals (will it be a
Mickey or a Minnie?) to memorials. On
a day with official PhotoPass photogra-
pher Tyhra Heintz, we spent 30-minute
private sessions shooting graduations,
quinceañeras with elaborate costume
changes, and engagements. Marriage
proposals happen almost daily, and
some go wrong. “We shoot it anyway—
it’s still something to remember!”
Heintz’s assistant says.
Weddings are where people pull
out all the stops. The most elaborate
request, at the Four Seasons Orlando
at Walt Disney World Resort, involved
a bride who was particularly fond of
Belle from Beauty and the Beast—she
had the catering team learn the cho-
reography to Be Our Guest so they
could dance out like cancan-ing cut-
lery during meal service.
Even death finds room for cele-
bration, particularly at the Haunted
October 11, 2021
Mansion. “I’d venture to say, if the
Haunted Mansion is temporarily
closed, it means someone tried to
spread grandma’s ashes and we’ve
had to bio-vac the entire place,” a for-
mer cast member says. The ritual hap-
pens often—at least once a month.
And you thought the hologram ghosts
were spooky.
4. You Don’t
Want to Be a
“Treasured
Guest”
Sleepy, Grumpy, Dopey … they’re not just
the names of the Seven Dwarfs—they’re
also the prevailing attitudes among
guests around 3 p.m. on any given day.
“It’s hot, humid, everyone’s needing a
sugar bump,” says Kenzie Palm, my skip-
per trainer on the Jungle Cruise attrac- 65
tion, a favorite place to sit down and
recharge. It’s also the holy grail of dad
jokes, since the skippers also double as
comedians. (See that sandstone cliff ?
“Don’t take it for granite!”)
A skipper’s job, in many ways, is
to turn Grumpy and Sleepy back into
Timon and Pumbaa. “When someone
answers a business call or if a teen-
ager’s zoned out on TikTok, I usually
put in a joke request for them to order
me a pizza,” Palm says. Elsewhere
in the park, complaints range from
the mundane (“My kid dropped her
Dole Whip soft serve!”) to the insane
(“Where’s the dome over the park for
when it rains?”).
Those who ac t like wicked
stepsisters—and get passed between
cast members to resolve trivial gripes—
are called “treasured guests,” as in, staff
want to bury them like Jack Sparrow’s
booty. Screamers get cajoled into a fur-
nished “quiet room” off Main Street
or, worse, taken to security backstage
to await municipal authorities. (While
its movies include plenty of whimsical
prisons—Rapunzel’s tower, Quasimodo’s
belfry—Disney doesn’t have a jail.)
 SECRET DISNEY
5. Everyone Is
“Chris From
Orlando”
The most important piece of a
non-Character costume is the name
tag denoting a cast member’s first name
and hometown.
“In each group of new cast members
there’s always at least one person who
weeps tears of joy when they get their
name tag, handed to them by Mickey,”
says Megan Matsumoto, a training facil-
itator. “I definitely sobbed hard when I
got mine.”
Cast members treat their little plas-
tic rectangles (always worn over the
heart) as though they’re sacred relics.
But even the most consummate profes-
sionals sometimes leave theirs at home—
in which case they become “Chris from
Orlando,” the perfect neutral alias.
66
6. Ladies Love
Captain Jack
While Characters such as Cinderella
and Snow White have long been the
object of fans’ desires—much to Prince
Charming’s chagrin—it’s not the prin-
cesses who get hit on the most. “Back
when we debuted Jack Sparrow from
Pirates of the Caribbean, he was merci-
lessly felt up all the time,” says another
former cast member. “Women were
putting their hotel key cards in his
pocket every day, usually saying some-
thing like, ‘I know you’re not Johnny
Depp and I don’t care’ or ‘Come find
me later—and keep your costume on.’ ”
Scantily clad Tarzan had a similar prob-
lem, which is probably why he rarely
roams the parks these days.
But Disney goes to great lengths to
avoid unwanted advances on its staff.
An entourage of handlers keeps row-
dier guests at bay—one of my jobs was to
help ensure social distancing at perfor-
mances of the Dapper Dans barbershop
quartet—and nonverbal Characters are
Bloomberg Pursuits
trained to politely bow out of any tense
situation by using a special crossing of
the arms over their chests as a distress
code. (The posture isn’t allowed under
any other circumstances.)
7. Hippos Are
Pickier Eaters
Than Humans
Five thousand animals call Walt Disney
World home—everything from African
elephants and okapis (unicorns from
Congo) down to stamp-size jumping spi-
ders. It takes 120 people to train every
critter and facilitate research with more
than 600 conservation nonprofits.
During a shift assisting Jill Magee,
an Animal Kingdom zoologist, I was
responsible for feeding a hippo named
Henry; his daily meal is a full 40-pound
bale of hay plus colorful fruits and veg-
etables. “Everything’s restaurant-grade
and grown on site,” Magee says.
“Henry loves bananas and strawber-
ries but hates turnips and eggplant,”
she adds. His favorite is watermelon.
“It’s like Snickers bars for hippos.”
For his birthday, Hankopotamus got
a seven-tiered cake made from frozen
melon, apples, and bean paste—he ate
it in one bite.
October 11, 2021
8. Don’t Mess
With the Plaids
Guest services staffers, nicknamed the
“plaids” for their vests, get the unique
privilege of escorting celebrities and
dispersing fans. The best strategy, notes
plaid Philander Butler, is loudly break-
ing the disappointing news to celeb-
rities (again and again) that “we don’t
have time for selfies,” which “keeps cli-
ents from coming off as mean” and gets
guests’ focus back on Pocahontas.
Surprisingly, A-listers usually bring
hakuna matata vibes; one chanteuse is
such a joyful regular she’s befriended a
few friends-of-princesses, even inviting
them to Vegas to watch her perform.
9. Disney Has
Its Dirty Words
Cleanliness has been at the forefront
of Disney’s strategy since it reopened
in July with heightened sanitation pro-
tocols, mask mandates, and gallons
of easily accessible Purell. But even in
non-pandemic times, the parks have to
look utterly pristine, as any errant piece
of litter could detract from the magic.
The resort’s cleanup crews spend
SECRET DISNEY Bloomberg Pursuits October 11, 2021

the most time picking candy wrappers,

ice cream, and popcorn off restaurant
terraces and streets, especially after a
parade plows through. At night, larger
maintenance issues get resolved with
pressure hoses and ladders.
Christine Fougère, a cleaning-support
manager, says hazardous spills com-
mand code names—which I luckily never
heard in the line of duty. And yet, they’re
not uncommon. Code V is for vomit, and
Code H is for human waste. (Sometimes
kids—and even a few adults—have trou-
ble holding it in when they’re waiting
in line.) Code Winnies are called when
resort pools turn slightly yellow; oddly
enough, it’s not used for the Pooh.

10. You’ll Never

Know Who (or
What) Is Hiding
Inside Mickey 67

While nonhuman Characters require

their “friends” to be specific heights—no
taller than 5 feet for Donald Duck and
around 6 feet for Goofy—what’s really
essential in these roles is strength.
According to a friend of Sulley, the
costume for the shaggy blue charac-
ter from Monsters Inc. weighs about
80 pounds; his fiberglass arms, held by
internal handlebars around the elbows,
are 15 pounds each. And Goofy is con-
structed such that the person inside has
to bend their head downward; vision
is accessed through sheathing in the
mouth. “Once, I was having allergies
onstage, and my screen got completely
smeared after a sneeze. I was basically
blind!” says a former friend of Goofy.
Between 30-minute shifts in the
Orlando heat, “Fuzzies” retreat to
ultraprivate break rooms hidden behind
building facades on Main Street where
they can undress without ruining the
sanctity of their personae. (Even Disney
employees would be shocked to see Chip
and Dale without their heads.)
All costumes are vigorously laundered
after each shift, which for Goofy includes
black tights, black shorts, a white T-shirt,
special body pads for the gut and butt,
suspenders, pants, then the sweater and
giant shoes—plus, of course, the head.
“We’re all responsible for disinfect-
ing our heads with a spray at the end
of the day, then they all go on a rack
all together. It looks bizarre,” a for-
mer Character says. “Back in the ’90s
everyone had to share undergarments
as well,” he continues. “An outbreak of
scabies put an end to that.”
11. Magic Is
Preserved at
All Costs
Ultimately, the most difficult—and
crucial—part of being a cast member
is preserving the magic, no mat-
ter what happens. Training for that
begins on the first day of orientation.
All newbies—from sanitation to retail—
learn to say things like, “Have a magical
day” and respond to inane questions
with wonder.
But the most important duty is to
buy into the fantasy that there’s just
one Mickey or any other Character—
that’s why guests are strictly prohib-
ited from wearing costumes in the
parks. “My best advice for when some-
one asks you who is in the Mickey cos-
tume or how many Mickeys are there is
to play dumb,” says training facilitator
Matsumoto. “Mickey’s costume? Do you
mean his shorts?” Like the Tinker Bell
effect, if everyone believes it all hard
enough, maybe it will actually be true.
 TRAVEL Bloomberg Pursuits October 11, 2021

SECRET DISNEY

The New Disney World Hacks

With Genie+ replacing FastPass+—and pandemic-related
restrictions galore—there’s a lot you need to know to still have a
magical time in Orlando. By Carlye Wisel

At Walt Disney World, the kids can’t hug Mickey and Minnie
these days. Instead, because of the ongoing pandemic, they
wave to them on parade floats and balconies. One water
park, Typhoon Lagoon, has yet to reopen, along with attrac-
tions such as Disney’s Festival of Fantasy parade and a half-
dozen shows. Even the way you wait in line—or skip it—will
evolve this fall, as FastPass+ is being phased out in favor of a
paid digital system called Disney Genie+ for expediting entry
at popular rides.
None of this has stopped the crowds from returning. In the
68
third quarter of 2021, Disney’s theme park division turned a
profit for the first time since the start of the pandemic. Chief
Executive Officer Bob Chapek says the parks are welcoming
the maximum number of visitors allowed by capacity restric-
tions. That demand is only set to rise further, now that Disney
World kicked off an 18-month celebration of its 50th anniver-
sary on Oct. 1. VIP offerings are therefore harder to procure
than ever. If you’re planning your visit with an eye to luxury,
here are some workarounds to ensure you can still cut lines
and greet princesses, without a hitch.

WANNA HANG WITH GOOFY?
Head to the
Four Seasons
Your best chance at meeting a favorite
character won’t be in the park. It’s
at Ravello, the airy first-floor Italian
restaurant at the Four Seasons
Resort Orlando, located right outside
the Magic Kingdom’s gates but within
the Walt Disney World Resort complex.
For its prix fixe Good Morning Breakfasts
every Thursday and Saturday, the spot is
staffed by friendly servers bearing bagels
with house-smoked salmon. Mickey
and Minnie’s crew are also there stroll-
ing through to offer socially distanced
photo ops for each family. (Brunch is $48
for adults, $28 for children; reservations
are required.) It’s a better choice than
the character meals at Disney’s half-
dozen official venues, which offer more
basic breakfast fare. Can’t snag a res-
ervation? The hotel can arrange a pri-
vate meet-and-greet event, which runs
about $7,500.
TRYING TO PLAN ONE
NICE MEAL TOGETHER?
Get a line-cutting
Bypass the classic
concierge
restaurants
There are plenty of places to have
a knockout meal at Walt Disney
World: Takumi-Tei’s omakase menu
in Epcot’s Japan Pavilion and gas-
tronomic crown jewel Victoria &
Albert’s at the Grand Floridian Resort
& Spa come to mind. But they and
others have remained closed in the
14 months since the parks reopened.
Thankfully, notable newcomers
include Topolino’s Terrace, which
serves fresh seafood and pastas at the
Riviera Resort, and Steakhouse  71,
which mixes a traditionally indul-
gent menu with a family-friendly
atmosphere at the Contemporary
Resort. California Grill, sitting atop
that iconic A-frame building, is also
reinventing dishes from its first menu—
such as duck à  l’orange pizza—for a
50th anniversary throwback.
AVOIDING LONG WAITS?
Private VIP tours that whisk guests
directly onto rides with the help of a
knowledgeable guide are a mainstay
among well-heeled travelers. And for
good reason: For about $4,500 these
experts play fixer for the day, handling
every detail from chauffeured transpor-
tation (along out-of-sight routes) between
parks to securing viewing spots for fire-
works shows such as Harmonious, a
new multilingual spectacle at Epcot.
No surprise, they’re very much in
demand amid Covid-19. Reservations
must be made by phone (407 560-4033),
starting 60 days before arrival; set a
reminder to book as soon as slots open
at 9 a.m. local time, or you may wind up
with a gourd instead of a golden carriage.
There’s one other back channel to
getting in-park assistance. Although
Disney hotels don’t offer traditional
concierges, guests in certain room
 TRAVEL Bloomberg Pursuits October 11, 2021

types—club-level, suites, and select

top-tier villas—are given compli-
mentary access to Disney Signature
Services, which guides you through
all advanced bookings, dining reser-
vations, and park plans. Given the Thank goodness
operational changes on the way with for bottomless
mimosas
the introduction of Disney Genie+,
this will be more helpful than ever.
Instead of planning the next day’s
schedule of rides, you can take a late-
night soak in your hot tub, a perk in the
fancy two-bedroom cabins at Disney’s
Wilderness Lodge, or kick back in a
waterfront bungalow with Cinderella
Castle views at the Polynesian Resort.

LOOKING TO BE
CHAUFFEURED?

Think outside
the bus
C ommunal buses, though not
glamorous, have long been the most
seamless form of Disney transporta-
tion. But the red-polka-dotted “Minnie
Vans” that used to privately take fam-
ilies to the parks, hotels, and even the
airport haven’t yet returned. What’s
more, Disney’s Magical Express compli-
mentary airport shuttle is being phased
out in early 2022.
If you’re driving yourself, opt for
preferred parking, which shortcuts
the long walk to the front gate. Costing
$45 to $50 a day—about $20 more than
standard parking—it will smooth out the
hectic early-morning and late-evening
rush. Ride-sharing apps such as Lyft
and Uber are also an option; they have
clear pickup points in convenient spots,
with rides between hotels and parks
usually topping out around $15.
That said, eliminating the airport bus
is likely to spur demand for these apps
come January—making local black-car
outfits such as Mears Luxe a valuable
COURTESY FOUR SEASONS
Breakfast at the
Four Seasons Orlando
is your best chance
at meeting Goofy
NOT FEELING LIKE
CINDERELLA?
Get a makeover
Bibbidi Bobbidi Boutique is Disney’s
most iconic kids’ salon (yes, that’s a
thing), with three locations that trans-
form the 3-to-12 set into princesses and
knights. While they remain closed, a
handful of professionals—“fairy god-
mothers,” as the insiders call them—
have sprung up to fill the void. My
Magical Makeover, Have Wand and
Will Travel, and Sharon Judy can
give young ones a Disney-inspired
69
OR JUST ITCHING TO STAY IN
AND ORDER ROOM SERVICE?
Turn to local apps
Disney’s resorts don’t contain any
minibars, and because of ongoing
pandemic protocols, the only one
currently offering room service is the
Grand Floridian Resort & Spa, so
plan ahead for any post-park hunger
if you’re staying on property. Food
delivery apps aren’t the best solution,
either: They’ve been known to show
listings from inaccessible park restau-
rants, resulting in orders that dis-

addition to your contact list (you can
dial 407 422-2222 or download the app).
Whichever option you choose, remem-
ber those comfy shoes: You’re still going
to clock your 10,000 daily steps.
look in the comfort of your hotel
room (starting at around $100), and
Your Fairy Godmother’s ornate
dress rentals ($60 to $130) make for
picture-perfect memories.
appear at the last minute, which no
parent of hungry kids wants to face.
But three reliable (and good) options
are Earl of Sandwich, Chicken Guy!,
and D-Luxe Burger.
 CRITIC Bloomberg Pursuits
Electric Truck
vs. the Hype
The Rivian R1T promises to save the
70 world and change the way Americans
drive. Is it really that good?
By Hannah Elliott
On Sept. 22 I started test-driving a forest-green R1T pickup
from Rivian Automotive LLC, an electric-car maker based in
Plymouth, Mich., that anticipates an $80 billion initial public
offering this fall. Over three days, I crossed the Continental
Divide on paved switchbacks and scaled dusty peaks near a
family of fluffy mountain goats. I drove 200 highway miles
round trip between Denver and Breckenridge, Colo., and
can attest that the R1T is quick. Its 800-plus horsepower
and 900 pound-feet of torque from four electric motors eas-
ily pushed it to 100 mph; its three-second reported sprint
time certainly felt legit.
The people who make this truck, led by Rivian founder and
Chief Executive Officer RJ Scaringe, are campers at heart, and
their truck feels as if they took notes over many backcountry
climbing and biking trips, and then made a vehicle. The $5,000
two-burner camp kitchen option cooks a mean meal.
But there are some significant red flags. The discerning
consumer would do well to pause to consider them before
making a blind—and I do mean “blind,” as sales are restricted
to online—purchase.
Laden with vegan-leather seats and an all-glass panoramic
roof, the R1T is no workhorse. Its front end won’t sustain a
snowplow, and its 16-inch center touchscreen shouldn’t get
wet and won’t respond to input from gloved fingers. It has
October 11, 2021
plenty of power for hauling—more than the Ford F-150 and its
peers—but towing rapidly drains the battery. The bed is more
than a foot shorter than that of the F-150, too. Moreover, its
stiff, not-very-adjustable seats lack the comfort of the premium
work rigs that double as offices for contractors on the move.
After nine hours of driving, my neck and shoulders felt as if
they’d been wedged into the rear row on a trans-Atlantic flight.
Nonetheless, clever tools are hidden about. An 11.6-cubic-
foot gear tunnel runs the width of the truck without eating
into rear-seat legroom, and there’s an additional 14.3-cu.-ft.
space under the truck, plus an 11-cu.-ft. front trunk unlocked
via key fob, button, or the Rivian app. A cargo net helps hold
loose items, and lights inside illuminate automatically. A
12-volt outlet runs power from its deep recess. It feels like a
fisherman’s tacklebox—everything has its place.
The removable Bluetooth speaker doubled as a lantern as
we ate tacos off the camp kitchen. The driver’s-side door holds
a torch flashlight. I’m already predicting a Rivian x Patagonia
special edition, like the kind Ford Motor Co. did with Eddie
Bauer back in the day.
The R1T proved capable enough crawling over gullies and
up hard-packed inclines, with almost 15 inches of clearance
and an onboard air compressor for adjusting off-road tire
pressure on the fly. I loved the shape and feel of the steering
wheel and the craftsmanship of the natural-grain ash-wood
trim along the doors and dashboard. These fit-and-finish ele-
ments are better than what Tesla Inc. has given us so far.
But those seductions come at a cost: The $73,000 starting
price of the R1T soars above Ford’s coming F-150 Lightning
electric pickup, which will start at less than $40,000. And let’s
remember: The R1T isn’t a workhorse.
Rivian (like all electric vehicle companies) still lacks a conve-
nient charging network, instead relying on existing Combined
Charging System stations. Although I experienced no range
anxiety during my drive, and in fact the truck gained energy
through regenerative braking down steep grades, towing
another vehicle would’ve depleted range by as much as 50%.
Larger 22-inch wheels drop the 314-mile maximum by 15%.
Most troubling, the truck lacked the ability to monitor bat-
tery life in real time. (There’s no Apple CarPlay or Android
connectivity, either.)
“Not yet” was the refrain from Rivian engineers when asked
about those capabilities. “These are preproduction models,”
employees assured me when the rubber lining inside my win-
dows jammed, preventing them from rolling up. And when
the windshield wipers in the Rivian truck ahead of me went
on the fritz, erratically jerking. The trucks that customers get
won’t have any of these pesky glitches, they promised.
Even if the R1T does prove rugged and reliable, Rivian has
only four service centers currently for the entire U.S.—Tesla has
almost 200. Truck repairs will eventually be done via “mobile”
repairmen, which sounds to me like waiting for the cable guy.
COURTESY RIVIAN
For the core of America’s truck-loving customers who love day-
to-day utility perhaps more than camping glory and climate
friendliness, that’s a tough appointment to risk. 
THE ONE Bloomberg Pursuits October 11, 2021

The average phone 1 in. thick, scarcely

has 952 photos stored larger than a deck of
on it, according cards. Its pictures are
to a 2019 study also decidedly mini,
by cybersecurity about twice the size
company Avast of a postage stamp.
Software. The trick to It uses Fuji’s Instax
rescuing images from film, which has
their digital dungeon? the ink already
Print them, of course. embedded in
Polaroid’s portable the paper.
Hi-Print ($100) spits • Weighing in at a
out richly colored, mere 6 oz., HP’s $80
credit-card-size Sprocket is among
pictures. It weighs the lightest portable
just 10 ounces and printers on the
measures 3 inches by market. The 2 in.-
6 inches—roughly the by-3 in. paper it uses 71
same footprint as an is called Zink, which
iPhone 13 Pro Max— is a portmanteau for
and it’s just a bit more “zero ink.”
than an inch thick.
It comes with two THE CASE
cartridges that hold Even in a digital-
10 prints each and first world, handing
can print them all a snapshot to
on a full charge. The someone makes a
peel-off backs allow bigger impression
photos to be affixed to than merely tagging
walls, bulletin boards, them in an Instagram

For or even the back of

your phone.
post. The Hi-Print
makes it easy: The
only control on the

Keepsakes THE COMPETITION

• Like the Hi-Print,
Canon’s $150 Selphy
Square QX10 uses
printer is the power
button. To use
the device, install
Polaroid’s Hi-Print
a dye sublimation app on your phone
Polaroid’s Hi-Print transforms process to make richly and connect to the
your favorite digital photos into colored, long-lasting, printer via Bluetooth.
adhesive-backed After selecting an
immediate souvenirs prints, which in this image to print, you
By Matthew Kronsberg case are 2.7 in. square. can edit it, adding
At 1 pound, the printer text and “stickers.”
Photograph by Janelle Jones is slightly heavier than You can also adjust
its peers, but it can the color manually
hold enough paper for or with a range of
20 prints. filters—including,
• Fuji’s $100 Instax fittingly, one called
Mini Link is, at “Polaroid.” $100;
3.5 in. by 4.9 in. and polaroid.com
  LAST THING
Three Challenges to
Central Bank Autonomy
By Daniel Moss
Central bank independence, a totem of
72 economic respectability, is being chal-
lenged in some key emerging markets
as the Covid-19 pandemic rages toward
its second anniversary.
Autonomy in setting interest rates
has become almost holy writ the
past few decades. Countries whose
policymakers can act without political
encroachment are widely considered to
be better managed, with superior long-
term growth and inflation that’s under
control. The idea is that central bank-
ers can act in a nation’s long-term interest without defer-
ence to government leaders; the latter by instinct tend to
shy away from tough decisions.
That philosophy is now under stress in important econ-
omies in three hemispheres. In Brazil the central bank is
confronted with skyrocketing prices and a headstrong
president running for reelection next year. Indonesia,
which refashioned its institutions along Western lines after
a late 1990s financial meltdown, is undertaking a meshing
of fiscal and monetary policy once frowned upon in polite
circles. Turkish President Recep Tayyip Erdogan finally got
the rate cut he demanded, even as inflation surges.
ILLUSTRATION BY GEORGE WYLESOL
Brazil President Jair Bolsonaro signed a bill into law ear-
lier this year that formalized autonomy. The Central Bank
of Brazil has taken the freedom to heart, raising rates dra-
matically in a bid to crush inflation. It comes at a cost,
however; gross domestic product shrank in the second
quarter. Bolsonaro has denied an Associated Press report
changes to Bloomberg Businessweek, P.O. Box 37528, Boone, IA 50037-0528. Canada Post Publication Mail Agreement Number 41989020. Return undeliverable Canadian addresses to DHL Global Mail, 355 Admiral Blvd., Unit 4,
Mississauga, ON L5T 2N1. Email: contactus@bloombergsupport.com. QST#1008327064. Registered for GST as Bloomberg L.P. GST #12829 9898 RT0001. Copyright 2021 Bloomberg L.P. All rights reserved. Title registered in the
With Bloomberg Opinion
Bloomberg Businessweek (USPS 080 900) October 11, 2021 (ISSN 0007-7135) H Issue no. 4716 Published weekly, except one week in February, April, May, June, July, August, September, October and November by Bloomberg L.P.
U.S. Patent Office. Single Copy Sales: Call 800-635-1200 or email: bwkcustserv@cdsfulfillment.com. Educational Permissions: Copyright Clearance Center at info@copyright.com. Printed in the U.S.A. CPPAP NUMBER 0414N68830
Periodicals postage paid at New York, N.Y., and at additional mailing offices. Executive, Editorial, Circulation, and Advertising Offices: Bloomberg Businessweek, 731 Lexington Avenue, New York, NY 10022. POSTMASTER: Send address
that he regrets giving the approval to
independence. If the economy continues
to head south, the president will look for
a scapegoat and blame the central bank.
In Indonesia, officials have committed
the central bank to directly financing the
budget for three years. Bank Indonesia
will buy $15 billion of bonds directly from
the state this year and a similar sum next
year. Although monetary authorities the
world over have engaged in unconven-
tional practices to help combat Covid,
so-called debt monetization is a step few
have been prepared to make.
Turkey’s central bank, which says it sets rates at arm’s
length from the government, clearly keeps at least one
ear attuned to politics. Erdogan is on his fourth monetary
chief since 2019. When he fired Naci Agbal in March for hik-
ing rates to counter inflation, it was only a matter of time
before newbie Sahap Kavcioglu undid at least some of the
work. Kavcioglu made his move on Sept. 23 when he cut
the benchmark rate by a full percentage point.
There’s plenty of room for flexibility in a time of severe
economic and social stress. After all, the Federal Reserve
and European Central Bank have said they will tolerate
higher inflation in the short term—provided it settles to
within their targets. But as three important emerging econ-
omies have indicated, there is a risk that independence is
only for the good times. Yet it might be the really tough
days when it is needed most.  —Moss is a columnist for
Bloomberg Opinion