● The price of money is ↑↑↑ 24
● Ozempic’s ripple effects 10
● A new Middle East nightmare 8
October 23, 2023 ● DOUBLE ISSUE
How far can CEO
Sergio Ermotti take
the Swiss bank?
18
The Remarkable Rise of
October 23, 2023
◀ Wilson’s therapy has
raised questions about
who gets to decide
which diseases find
a cure
PHOTOGRAPH BY ALANA PETERSON FOR BLOOMBERG BUSINESSWEEK
1
FEATURES
30
Exporting American Gun Culture
With SHOT Show, Commerce helps gunmakers hunt for new customers
38
Chip Wilson’s $100 Million Cure
44
Out of the Park
Battling muscular dystrophy, Lululemon’s founder is as aggressive as ever
How the Indian Premier League turned cricket into a financial winner
◼ CONTENTS
◼ IN BRIEF
◼ OPINION
◼ AGENDA
◼ REMARKS
Bloomberg Businessweek
4
6
6
Joe and Bibi ● Putin and Xi ● Pfizer fizzles
Fossil-fuel subsidies: An idea whose time has gone
European Council ● Tech earnings ● Priscilla Presley
8
Netanyahu: “This is only the beginning.” That’s not good
1
BUSINESS
10
12
Ozempic has more on its mind than diabetes and weight
Luxury vs. rough-and-tumble: Jeep has a split personality
2
TECHNOLOGY
14
16
How much would you pay for ad-free social media?
The oldest fight in tech is back
3
FINANCE
18
Sergio Ermotti’s complicated recipe for turning UBS into
the world’s wealth management king
4
ECONOMICS
24
27
The new era of high interest rates isn’t all about the Fed
▼ As Argentina’s election nears, to dollar or not to dollar?
October 23, 2023
◼ COVER TRAIL
How the cover
gets made
①
“This week’s story is
about the biggest threat
to Wall Street in years.”
“I’m scared. Where is
this threat coming from?
China? India? Inflation?
Various wars? The
internet?”
“Switzerland.”
“I’m confused.”
“Stay with me here.
Remember how UBS
acquired its rival, Credit
Suisse? Well, now it
wants to become the
one-stop shop for the
world’s richest people.
How’s that for an
exciting financial story?”
“You seem giddy.”
“Yes! Because it gets
better: The CEO has
agreed to a portrait!”
“This is more exciting to
you than your birthday
falling on a three-day
weekend, isn’t it?”
2
“Definitely color
me stoked.”
“Can we prop it with
some Swiss chocolate?”
“What? No.”
◼ PURSUITS/
SKI SPECIAL
51
55
56
58
59
Independents Day: This season isn’t all Vail and Alterra
Safety gear you didn’t know you needed
If even the pope can look cool in a puffer …
Upgrades will add to resort dazzle—and shorten lines
Après ski, lug your gear in something stylish
◼ LAST THING
60
Why risk takers populate The Businessweek Show
How to Contact Bloomberg Businessweek
EMAIL bwreader@bloomberg.net ● TWITTER @BW ● INSTAGRAM @businessweek ● FACEBOOK facebook.com/
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businessweekmag.com/service ● REPRINTS/PERMISSIONS 800 290-5460 x100 or businessweekreprints@theygsgroup.com
Cover:
Photograph by
Salvatore Vinci
for Bloomberg
Businessweek
ECONOMICS: ERICA CANEPA/BLOOMBERG
“To each his own …”
● Opposition
leader Donald
Tusk called
on Poland’s
president to start
the handover
of power.
His Civic Platform and its electoral
partners, the Third Way alliance
and the Left party, won 248 seats in
the 460-seat legislature on Oct. 15,
defeating the hard-right Law
& Justice party. Turnout
broke records at 74%,
with people in big cities
queuing overnight to
cast their votes.
● Vladimir Putin
met with Xi
Jinping in Beijing
on Oct. 17.
4
Attending the Belt and Road Forum for
International Cooperation, President
Putin met privately with President Xi.
With the West severing trade ties to
Russia, China’s exports to the country
have jumped 57% so far this year, and
the yuan accounts for almost half of all
foreign exchange trading in Moscow—
up from 0.4% in January 2022. China
has also become the largest importer
of Russian fossil fuels, more than
doubling its coal shipments since 2020.
Bloomberg Businessweek
● War in
Israel
▶ Hundreds were killed by an Oct. 17
missile strike on the Al-Ahli Arab
Hospital, which was housing thousands
of Palestinians who’d fled the bombing
in Gaza City. Officials in Hamas-run
Gaza blame the blast on an Israeli
airstrike; Israel and the US say their
intelligence suggests the hospital was
hit by a missile fired by Islamic Jihad.
▶ In the aftermath of the hospital blast,
Jordan’s King Abdullah II canceled
a summit that had been planned for
Oct. 18 in Amman to discuss Gaza
with US President Joe Biden, Egyptian
President Abdel Fattah El-Sisi and
Palestinian President Mahmoud Abbas.
● The value of distressed
commercial real estate in
the US approached
$80b
in the third quarter, its
highest level in a decade,
as rising interest rates and
sagging office demand
shook the property market.
MSCI Real Assets reports
that office properties
account for 41% of the total.
● “I have come to Israel
with a simple message:
You are not alone.”
President Joe Biden, meeting with Israeli Prime
Minister Bibi Netanyahu in Tel Aviv on Oct. 18,
restated America’s unequivocal support for Israel. He
also announced $100 million in aid for Gaza and the
West Bank, saying there would be checks to ensure
that aid did not go to Hamas, and cautioned Israel
not to let anger dictate its strategy. “We believe in the
fundamental dignity of every human life,” Biden said,
which he said “sets us apart from the terrorists.”
● Meet Digit,
Amazon’s newest
employee.
On Oct. 18, the e-commerce goliath
announced it’s testing Digit, a humanoid
robot built by Agility Robotics, to help
employees in its warehouses. The
company has also begun to dispatch
drug drones in College Station, Texas,
broadening its still-experimental
effort to deliver goods by air.
● Taylor Swift: The Eras
Tour instantly became one
of the highest-grossing
concert films ever, taking
in almost
$93m
in US and Canadian
ticket sales in its
opening weekend.
● The Changan Automobile distribution center in Chongqing, China. From January
to September, China exported 825,000 EVs and hybrids, according to the China
Association of Automobile Manufacturers, a 110% year-over-year increase.
By Mark Leydorf, with Bloomberg News
● In yet another sign that
Americans have put the
pandemic behind them,
Pfizer on Oct. 16 cut
$9b
from its annual sales
forecast as demand
for its Covid-19 shots
and Paxlovid treatment
subsides. Rival shot maker
Moderna, test seller Abbott
and drugstore giants CVS
and Walgreens are all
seeing revenues decline.
● India’s Supreme
Court declined to
legalize same-sex
marriage.
Five years after the court struck
down a ban on gay sex, it sided with
Prime Minister Narendra Modi’s
socially conservative government,
voting unanimously on Oct. 17 to
leave the question of marriage to
Parliament. It’s a major setback for
India’s LGBTQ community, which has
called marriage a “bouquet of rights”
that affects everything from adoption
to inheritance.
TUSK: OMAR MARQUES/GETTY IMAGES. BIDEN: EVAN VUCCI/AP PHOTO. AMAZON: COURTESY OF AGILITY ROBOTICS.
CHINA: CFOTO/FUTURE PUBLISHING/GETTY IMAGES. SWIFT: FREDERIC J. BROWN/AFP/GETTY IMAGES
◼ IN BRIEF
◼ BLOOMBERG OPINION
6
The fight against climate change commands the support of
governments around much of the world. Targets for carbon abatement have gotten more ambitious, and policies to
address the challenge are proliferating. Yet one measure of
progress shows how badly these efforts still fall short. Global
fossil fuel subsidies in 2022 expanded to a record $7 trillion,
roughly 7% of global gross domestic output.
This remarkable number comes from a recently updated
assessment by the International Monetary Fund, drawing
on detailed disaggregated data for 170 countries. Rightly, it
uses a comprehensive definition of subsidy, combining outright support (spending that offsets production costs) and
implicit support (underpricing for environmental harms and
forgone tax revenue).
Explicit subsidies have more than doubled since the previous assessment for 2020, to more than $1 trillion, thanks
partly to efforts to soften the blow of higher energy prices
after Russia attacked Ukraine. Implicit subsidies, about 80%
of the total, surged as well; unlike the explicit kind, they’re
on track to rise further, both in dollar terms and as a share
of global output, by the end of the decade.
These enormous supports often result in policies at
cross-purposes. Keeping fossil fuels cheap offsets the other
taxes, subsidies and regulations governments use to reduce
emissions and promote clean energy. In effect, with some of
their policies, governments push fossil fuel demand in the
right direction; then, with generous subsidies for pollution
and climate change, they push it back.
The gap between efficient prices and actual prices is especially egregious in the case of coal, which is both a potent
driver of global climate change and in many countries a main
cause of local air pollution. According to the Institute of
Health Metrics and Evaluation, outdoor air pollution resulted
in 4.5 million premature deaths in 2019. The IMF finds that
80% of global coal consumption was priced at less than half
its true cost in 2022.
Insisting that people pay full price for fuel would not only
reduce consumption and slash emissions but also align that
purpose with greater economic efficiency. First, it would make
plain that some fossil fuels are worse than others, differences
that can and should be priced accordingly. Second, it would
provide a transparent basis for more effective inter­national
cooperation. Because air pollution and climate change both
count in the calculations, efficient fossil fuel prices vary from
country to country according to local circumstances. But
the gap between true costs and actual prices provides a consistent yardstick. Finally, cutting subsidies raises revenue,
which allows for higher spending on worthwhile goals, lower
­government borrowing and/or cuts in other taxes.
No doubt governments will blame politics for the dysfunction: Making fossil fuels more expensive is unpopular. This
excuse is hardly compelling, because the existing subsidies
could be put to better and more popular use. Still, if politics is
indeed the obstacle, the rise in fossil fuel prices since 2020 provides an opportunity. Instead of letting prices subside in due
course back to the pre-Ukraine norm, governments could withdraw or offset their existing subsidies at the same time, narrowing the gap with true costs without forcing prices higher.
The new assessment shows that the numbers involved
aren’t rounding errors. They’re enormous—and enormously
counterproductive. Working to reduce and then eliminate
fossil fuel subsidies should be an overriding priority for
governments everywhere. <BW> For more commentary, go to
bloomberg.com/opinion
◼ AGENDA
▶ All Together Now
The European Council meets in Brussels on Oct. 26 and 27.
The leaders of the EU and its member states have much to
discuss: still-high inflation and anemic GDP growth, to say
nothing of the wars in Ukraine and Israel.
▶ The European Central
Bank makes its interestrate decision on Oct. 26.
With inflation steadily
declining in the euro
zone, economists believe
the bank is finished
hiking rates for now.
▶ On Oct. 30 the Bank
of Japan is also setting
rates. On Oct. 18,
Makoto Sakurai, a former
BOJ board member, said
he thought Japan would
end its negative interest
rates by yearend.
▶ The US Bureau of
Economic Analysis puts
out its core PCE price
index, excluding food
and energy costs, on
Oct. 27. Month-overmonth increases have
been very low of late.
▶ The Australian Bureau
of Statistics publishes
its year-over-year rate
of inflation for the third
quarter on Oct. 24.
Inflation has been
stubborn Down Under,
but it’s declining.
▶ It’s a big week for
tech earnings: Microsoft
and Alphabet report
quarterly results on
Oct. 24; Meta and
Amazon follow suit
on Oct. 25 and 26,
respectively.
▶ If last year’s Elvis left
you wanting Priscilla’s
side of the story, you’re
in luck: Priscilla, directed
by Sofia Coppola and
starring Cailee Spaeny
and Jacob Elordi, opens
on Nov. 3.
ILLUSTRATION BY RACHEL LEVIT RUIS
Why Are Governments
Still Subsidizing
Fossil Fuels?
October 23, 2023
◼ REMARKS
● The Rafah refugee
camp in Gaza on Oct. 15
8
The New Middle East Is an
All-Too-Familiar Nightmare
◼ REMARKS
Bloomberg Businessweek
● The attack on Israel has plunged
the region into crisis, and there’s little
hope of normalcy
MOHAMMED ABED/AFP/GETTY IMAGES
● By Sylvia Westall
Rockets rain on Israel; Gaza is bombarded. Anger erupts on
Middle Eastern streets, and there’s squirming in the Gulf
Arab capitals.
The Oct. 7 Hamas attack on Israel—which killed more than a
thousand Israelis, with some 200 more snatched as ­hostages—
has already upended the region. Israel has responded by
pummeling the impoverished Gaza Strip, killing thousands
of Palestinians, while Hezbollah has attacked from Lebanon.
Meanwhile the promising diplomatic overtures between Israel
and Saudi Arabia are as good as frozen. What was supposed to
be a “new” Middle East—one that ended old enmities between
Israel and the Arab world in the pursuit of stability—is now
looking like something else that’s horribly familiar. And things
may only get worse, perhaps much more so.
“This is just the beginning,” Israeli Prime Minister
Benjamin Netanyahu said in a televised speech on Oct. 13 as
300,000 Israeli troops mobilized in preparation for a ground
attack on the Gaza Strip. “Our enemies have only begun to
pay the price.” In the week following the worst single-day
attack in its history, Israel formed a rare emergency government and launched an all-out war on Hamas, an Islamist
group the US and European Union have designated a terrorist
organization that’s never recognized any legitimacy to Israel
and never will. While the recent atrocities come after years of
neglect to the Palestinian issue, they ultimately spring from
an enduring cult of violence and death that, no matter what
else is happening, has proven extremely hard to destroy.
The question everyone wanted to ignore—can there ever
be peace with the Palestinians?—again dominates Middle
Eastern geopolitics. Managing long-standing tensions with the
Palestinians had become a “sort of a check box” for normalizing relations with the Saudis, Netanyahu told Bloomberg News
in August. The idea that millions of stateless people could just
be swept under the carpet is looking more arrogant than ever.
Israelis and Palestinians have entered an ugly phase triggered by Hamas’ shock incursion. It also comes as a reminder
that such deeply rooted issues never really go away. For the
US, long keen to untangle itself from conflicts after years of
war in Afghanistan and Iraq, it’s yet another foreign policy
quagmire ahead of elections. Other geopolitical confrontations,
in Ukraine, Syria and elsewhere, have left hundreds of thousands dead, their countries in rubble and diplomacy stalled or
ignored. Now Israel must return to the fight again, the consequences of which will be devastating—indeed, they already are.
One of the worst assaults in Israel was on Kibbutz Be’eri, a
collective near the Gaza Strip. Vivian Silver, who’d campaigned
October 23, 2023
for peace with the Palestinians, was taken ­hostage from her
home. She’d been hiding in her closet, her son Yonatan Ziegen
said. He doesn’t know if she’s still alive but says she wouldn’t
want Gaza destroyed in revenge. “She would be mortified,
because you can’t cure killed babies with more dead babies,”
Ziegen told the UK’s Channel 4 News in a video interview. “We
need peace. That’s what she was working for all her life.”
But the rhetorical lines, like the battle lines, have already
started to blur. “It is an entire nation out there that is responsible,” Israeli President Isaac Herzog said at an Oct. 13 press
conference, referring to the Palestinians in Gaza, a tiny
coastal enclave that’s been under Hamas rule since 2007. “It
is not true, this rhetoric about civilians not being aware, not
involved. … They could have fought against that evil regime
which took over Gaza in a coup d’état.” Just hours beforehand, Israel had ordered the 1.1 million residents of northern Gaza to evacuate south. Meanwhile, the United Nations
warned of a humanitarian disaster.
In support of Israel, the US has sent two battle fleets into
the Mediterranean and had Secretary of State Antony Blinken
crisscrossing the Middle East; now President Joe Biden is flying in on Oct. 18 to temper Israel’s response and try to prevent
a wider conflict. Blinken even rang his Chinese counterpart,
Wang Yi, to urge Beijing to use its influence in the region to
prevent the crisis from escalating, a move widely viewed as
an attempt to restrain Iran. Israel has the right to defend itself
and ensure this never happens again, Blinken said during
his increasingly frantic tour, standing next to Netanyahu on
Oct. 12. “How Israel does this matters.”
In Iran, Iraq, Jordan and Lebanon, tens of thousands
have taken to the streets to protest Israel’s response, with
smaller demonstrations in Morocco, Oman, Qatar, Turkey
and Yemen. Iran has warned of a new front if the blockade
of Gaza ­continues—an escalation that could easily sweep
the region into a conflict of devastating proportions, engulf
nearby US military bases and jeopardize some of the world’s
most important shipping routes.
The circumstances have become especially awkward for
Saudi Arabia, where Crown Prince Mohammed bin Salman
has been trying to modernize a kingdom that’s long been
sclerotic while cracking down on dissent. He doesn’t want his
multitrillion-­dollar plans derailed by a regional war. But in pursuit of ties with Israel he, like everyone else, appeared to be
sidelining the Palestinians. Hence Saudi Arabia’s about-face, in
which MBS blamed Israel’s occupation of Palestinian territories
and Israeli provocations for “the exploding situation.” Saudis
defending Hamas’ actions online shared the statement widely.
“What is certain is that we are witnessing a situation similar to post-September 11 in the United States,” Saudi journalist Tariq Al-Homayed wrote in a column in the pan-Arab daily
Asharq Al-Awsat. “But this time, it’s in Israel, where the strategic rule is madness, and where there is no place for the voice
of reason,” he wrote, warning against “changing the maps and
returning to ground zero.” If only such a conclusion didn’t
seem inevitable right now. <BW>
9
1
October 23, 2023
B
U
S
I
N
E
S
S
Edited by
James E. Ellis
The weight-loss wonder could cut demand for drugs targeting
kidney and heart disease, and even Alzheimer’s.
That’s bad news for makers of medicines for those conditions
ILLUSTRATION BY IRENE SUOSALO
10
Bloomberg Businessweek
◼ BUSINESS
Bloomberg Businessweek
October 23, 2023
Ozempic is arguably the world’s most famous drug,
a diabetes treatment turned miracle weight-loss
cure that’s rocketed up the sales chart despite supply constraints. This may be only the beginning.
Recent studies have started to illuminate the
far-reaching benefits of Ozempic and other medicines in the same class, known as GLP-1 receptor
agonists. The drugs appear to have a protective
effect on the heart, liver and kidneys in addition to
helping people lose weight, which in itself reduces
the risk of many ailments. There’s also reason to
believe GLP-1s could help combat substance abuse
or even Alzheimer’s disease.
That’s bad news for a broad spectrum of makers of drugs and medical devices. For example,
Americans spend about $250 billion a year treating
cardiovascular disease, the leading cause of death
in the US. That includes what insurers and patients
pay for blood pressure medicines, bypass surgery
and implantable cardiac devices such as pacemakers. Analysts at Wells Fargo Securities estimate that
GLP-1s could reduce the market for cardiovascular
disease treatments about 10% by 2050.
As evidence mounts for GLP-1s’ additional uses,
investors are waking up to the potential fallout.
When Novo Nordisk A/S announced on Oct. 10 that
Ozempic’s effectiveness against kidney disease was
so conclusive that it was stopping a trial early, it
sparked a $3.6 billion selloff in shares of dialysis providers Fresenius Medical Care AG and DaVita Inc.
“The market has reached a point of near peak
hysteria regarding the impact of GLP-1s,” Matthew
Taylor, an analyst who covers medical-device
stocks for Jefferies LLC, wrote this month in a
research note. “The carnage in medtech has
been notable, and broad, almost indiscriminate,
impacting names that seemingly have no perceived linkage to GLP-1s.”
Just six years since it was introduced, Ozempic
has already become the top-selling branded
prescription medicine in the US, according to
Symphony Health retail gross sales data, and Eli
Lilly & Co. has lofty aspirations for its competing
drug, Mounjaro. The more approved uses the companies can rack up while their drugs are still protected by patents, the better for business.
“I don’t think any of us had the vision that,
40 years later, we would be thinking about all
of these different actions of GLP-1,” says Daniel
Drucker, a University of Toronto professor who
helped discover how the drugs work.
In the 1980s, Drucker and a small group of scientists in Boston established that a little-known gut
hormone called GLP-1 stimulated insulin production in rats. GLP-1 injections were later developed
to mimic that hormone for people with Type 2
­diabetes, helping bring down their blood sugar.
Ozempic was approved for treatment of diabetes
in the US in 2017, followed by Mounjaro in 2022.
The GLP-1 hormone also signals the brain to
pump the brakes on appetite, which helps in weight
loss. Novo in 2021 launched a higher-dose version
of Ozempic specifically for obesity, called Wegovy.
Because of shortages of Wegovy and similarities
between the drugs, Ozempic and Mounjaro have
also been widely used for weight loss, even though
they’re only approved in the US for diabetes.
Prescriptions for GLP-1s quadrupled from 2020
to 2022. Mounjaro is still a relatively small drug for
Lilly, with about $480 million in sales last year, compared with $880 million for Wegovy and $8.5 billion
for Ozempic. Lilly expects its drug to get approval for
weight loss this year, and that could be just the tip
of the iceberg. “This is transformative biology,” says
Richard DiMarchi, a professor at Indiana University
who spent more than two decades at Lilly.
Wegovy has been shown to reduce the risk of
heart attacks and strokes by 20% in overweight people with a history of heart issues. Novo and Lilly
are also conducting studies to ascertain whether
the class of drugs is effective against nonalcoholic
steato­hepatitis, a severe form of liver disease. More
than 64 million people in the US were estimated
to have nonalcoholic fatty liver disease in 2016,
Where Ozempic Could Hurt Business
Annual US spending on treatment for conditions that could see
patients turn to the new weight-control drugs
Parkinson’s
disease
Substance
abuse
$25b
Alzheimer’s
disease
$321b
$35b
Nonalcoholic
fatty liver
disease
Cardiovascular
disease
$251b
$103b
Kidney
disease
$125b
Diabetes
$237b
Obesityrelated medical
care
$173b
DATA: CENTERS FOR DISEASE CONTROL AND PREVENTION; AMERICAN
HEART ASSOCIATION; YOUNOSSI ET AL., HEPATOLOGY, 2016; LI ET AL., JAMA
NETWORK OPEN, 2023; MICHAEL J. FOX FOUNDATION
“ I don’t think
any of us had
the vision
that, 40 years
later, we would
be thinking
about all of
these different
actions of
GLP-1”
11
Bloomberg Businessweek
with annual direct medical costs totaling roughly
$103 billion, or more than $1,600 per patient.
Even if the drugs get approved for new uses,
some hurdles remain. The biggest is cost. The list
price for Ozempic is about $900 a month, and for
Wegovy it’s more than $1,000. That’s much more
expensive than generic statins and other heart
medications. Insurers would have to treat numerous patients with Wegovy for years at a total cost of
$1.1 million just to prevent one heart attack, stroke
or cardiovascular death, according to a recent
analy­sis from data company Airfinity Ltd. Experts
say costs will start to come down as more GLP-1
drugs become available, but that’s still a ways off.
Drugmakers will also need to work out how to
make next-generation weight-loss drugs with fewer
side effects. European authorities are probing
reports that GLP-1s contribute to an increase in suicidal thoughts and cause complications in people
who’ve been administered anesthesia. Separately,
studies have shown Ozempic can cause troubling
stomach issues such as bowel obstructions.
On the other hand, activating GLP-1 pathways can actually make cells healthier by reducing inflammation and improving their function,
according to Drucker. GLP-1 receptors are found
in nerve cells and astrocytes, a type of cell in the
brain that helps the body respond to inflammation. That’s one reason scientists think GLP-1
drugs might help treat Alzheimer’s or Parkinson’s
diseases, which cost the US health-care system
about $350 billion a year.
Novo is testing whether the active ingredient in
Ozempic, semaglutide, helps patients with early
stages of Alzheimer’s. That study is expected to
be completed in 2026. Current treatments for the
disease include Leqembi, a breakthrough drug
from Eisai Co. and Biogen Inc. that slows cognitive decline. Lilly is also seeking approval for an
Alzheimer’s drug called donanemab.
The companies’ other clinical trials run the
gamut from knee osteoarthritis to sleep apnea. At
the same time, outside researchers are increasingly
excited by reports from people on Ozempic that
they no longer have any desire for alcohol, cigarettes or other common cravings. That’s prompted
at least nine clinical trials to see whether GLP-1s can
be used to treat addiction.
For now, academic institutions and research
grants are funding these studies. The companies
say there’s not enough supply to study everything,
but some researchers have questioned whether
the relative lack of insurance coverage for treatment of some conditions is partly why they aren’t
investing more broadly.
“I suspect that Novo has a list of other ­conditions
that are reimbursed better than alcohol use
­disorder,” says Joseph Schacht, an associate professor of psychiatry at the University of Colorado
School of Medicine who’s studying GLP-1s.
It may be years before all the benefits of GLP-1s
are known. Lorenzo Leggio, an addiction researcher
at the National Institutes of Health, likens Ozempic’s
development path to that of Viagra. The erectile dysfunction drug was originally developed by
Pfizer Inc. for high blood pressure and chest pain,
but researchers discovered its other use by accident
during clinical trials. It went on to break records for
fastest initial sales growth for a prescription drug.
With how widespread Ozempic has become
and even more potent formulations on the horizon, experts say the most interesting discoveries
may be yet to come. “There’s just a tremendous
amount of new innovation and new information that we’re looking at over the next decade,”
Drucker says. �Madison Muller, with Naomi Kresge
October 23, 2023
THE BOTTOM LINE The ability of Ozempic and other GLP-1 meds
to improve cells’ functions and reduce inflammation has excited
researchers over their prospects to treat many big-ticket diseases.
Jeep’s Climb to Luxury Prices
Leaves Many Buyers Behind
● The shift boosted profits but left the automaker selling fewer cars
For years, Jeep has been the go-to ride for drivers
seeking adventure in hardy off-roaders that scramble
through mud and over rocks, then clean up nicely.
The challenge for its parent company—first Fiat
Chrysler, now Stellantis NV—has always been leveraging that rugged image to expand its reach.
Jeep has had success steadily raising prices and
extending the brand into luxury realms, with some
of its full-size SUVs topping $100,000. That’s helped
Stellantis Chief Executive Officer Carlos Tavares
transform an historical underdog into the most
profitable of Detroit’s automakers. But ever-higher
prices also make it harder to hold on to the brand’s
loyal US customer base as interest rates bite.
Jeep’s move upmarket is running headlong into
a consumer shift toward more affordable vehicles.
Automakers with lower-priced options, such as
Toyota Motor Co. and Hyundai Motor Co., are picking off some of the brand’s buyers and threatening
▼ Jeep brand vehicle
sales, North America
250k
200
150
Q1 ’16 Q2 ’23
PHOTO ILLUSTRATION BY 731; PHOTOS: COURTESY STELLANTIS (2); FORD: COURTESY FORD; HONDA: COURTESY HONDA; TOYOTA: COURTESY TOYOTA. DATA: COMPILED BY BLOOMBERG. BRONCO AND CR-V PRICES FOR 2024 MODELS, 4RUNNER FOR 2023
12
◼ BUSINESS
◼ BUSINESS
to steal new ones, data from automotive researcher
Edmunds show. Meanwhile, the return of the Ford
Bronco has given Jeep a true off-roading rival.
Overall, unit sales for the Jeep brand fell 4%
in the third quarter, the ninth consecutive quarterly decline. Sales are down 9% this year through
September, with all but two models—the Compass
and the Grand Cherokee—reporting lower deliveries year-over-year. That’s after Jeep sales declined
12% in 2022 and 2% in 2021.
The SUV brand, best known for its rugged
Wranglers, is losing ground even as the broader US
auto industry shows strength. General Motors Co.,
Ford Motor Co., Toyota and Hyundai all posted
strong gains last quarter as recovering vehicle
inventories fed pent-up demand. South Koreabased Hyundai is now poised to unseat Stellantis
as the fourth-biggest carmaker in the US this year,
according to researcher Cox Automotive Inc.
Stellantis, formed from the 2021 merger of Fiat
Chrysler and France’s PSA Group, released the
gloomy third-quarter results shortly after Christian
Meunier, global head of Jeep since 2019, announced
he’d leave the company. He’ll be replaced by
Antonio Filosa, an Italian who’s been running the
automaker’s business in South America.
Dating to World War II, Jeep has long been the
envy of the auto industry, thanks to its ability to command higher prices from its loyal customer base.
Owners often customize their Wranglers to reflect
a sense of freedom, individuality and escape that
Jeep’s off-road SUVs and pickups convey—which can
quickly add to a vehicle’s price tag.
Jeep has capitalized on that image by raising
prices on its popular Wrangler over the past five
years by 40%—more than the industry average of
31%, according to Cox—while it’s pushed into the luxury sphere with the Wagoneer and Grand Wagoneer
to compete with GM’s Cadillac Escalade and Ford’s
Lincoln Navigator. But the move upmarket, coupled with the highest interest rates in more than two
decades, means fewer buyers are in the mood for
tricked-out SUVs selling for north of $50,000.
“Their portfolio has lost touch with the mainstream consumer, and therefore the whole Jeep
portfolio is less attractive,” says Mark Kudla, a former director of product planning at Fiat Chrysler
who’s an adviser at consultant NorthStar Vision LLC.
“The new Jeep guy is gonna have a lot of challenges.”
The runup in prices is creating an opening for
Jeep’s rivals, according to Alexander Edwards, president of branding research firm Strategic Vision.
The Wrangler is facing stiffer competition from the
Ford Bronco, which returned to market in 2020
after a more than 30-year hiatus. Companies such
Bloomberg Businessweek
as Hyundai, Kia Corp. and Honda
Motor Co., which offer midsize SUVs
packed with new technology at a
lower price, are also nibbling away market share.
In September, Jeep introduced a lower-priced
version of its top seller, the Grand Cherokee, starting at around $36,000—about $3,000 lower than
the model’s previous starting price. The cheapest Wrangler, the two-door Sport, starts at about
$32,000, while a four-door starts at just under
$36,000. Still, the average transaction price on a
Wrangler was about $59,000 in September, well
above an industry average of just under $48,000
for new vehicles, according to Cox Automotive.
“Jeep is continuing to gain traction in the market,
and we’re looking forward to continued success,”
Jim Morrison, head of Jeep in North America, wrote
in an emailed statement. Morrison said a monthly
payment on Jeep’s Wrangler 4xe, the top-selling
plug-in hybrid in the US so far this year, can be as
low as $399 after factoring in the $7,500 consumer
electric-vehicle tax credit. The cheapest plug-in
hybrid Wrangler starts at $49,995, about $10,000
more than its gas-powered sibling.
The Wagoneer and Grand Wagoneer have been
successful attracting new customers from brands
such as Ford, GMC, BMW, Tesla and Mercedes,
show data from Strategic Vision’s Edwards. But
even that success could have negative consequences, because it may alienate Jeep loyalists who
can no longer afford a new Wrangler.
“Jeep is supposed to be authentic and roughand-tumble, but also sophisticated and classy,”
Edwards says. “It’s not supposed to be this
thing that is more than most new vehicle buyers’ median salaries. It doesn’t send the right
­message.” �Gabrielle Coppola
THE BOTTOM LINE The price of a Jeep Wrangler has risen 40%
over the past five years. That’s been great for profits but may be
pricing out traditional buyers who also face higher financing rates.
October 23, 2023
▲ Jeep’s product
line ranges from the
off-roading Wrangler
Rubicon to the luxe
Grand Wagoneer
13
▼ Starting prices of
competitors shopped by
Jeep Wrangler buyers
● Ford Bronco, $39,130
● Honda CR-V, $29,500
● Toyota 4Runner,
$40,155
14
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Edited by
Joshua Brustein
October 23, 2023
A Path to a Better
Internet
● Can paid subscriptions make
major social media services
healthier and happier places?
In certain ways, Meta Platforms Inc. is a
­complicated company. It runs an ever-growing collection of social media apps—Facebook, Instagram,
WhatsApp, Messenger, Threads—and the virtual-­
reality app Horizon Worlds. It sells gaming headsets, smart sunglasses and business productivity
software. It also operates advanced research labs
developing next-generation artificial intelligence
and new types of computer interfaces. But when
it comes to how Meta actually pays for all this, the
story is a lot simpler. Almost all the company’s
­revenue—98.4% in the most recent quarter—comes
from a single source: personalized advertising.
Targeted advertising revolutionized the media
business, made Meta one of the most valuable
companies in the world and gave co-founder Mark
Zuckerberg the kind of disposable income (net
worth, according to the Bloomberg Billionaires
Index: about $120 billion) that’s allowed him to fashion himself into a leading philanthropist and parttime cage fighter. Users regularly complain that
this type of advertising is creepy and distracting
ILLUSTRATION BY TRAVIS CONSTANTINE
2
Bloomberg Businessweek
◼ TECHNOLOGY
Bloomberg Businessweek
October 23, 2023
and that the data-hungry operations supporting it
come with downsides. Ad tracking causes users to
disclose private information, often without realizing it, and the content recommendation algorithms
that keep everyone scrolling through ads also tend
to leave them angry and misinformed. And so, for
pretty much as long as there’s been social media,
a steady stream of criticism has argued that the
entire system would work better if people could
pay for the services they use instead of agreeing to
tracking and targeting.
Meta has never taken this argument seriously—
and why would it, when the system the company
built has worked so fantastically? Now the company
is being forced to, as a result of a court ruling in
Europe this summer requiring it to obtain consent
before showing users personalized ads. According
to the Wall Street Journal, Meta has told European
Union regulators that within months it plans to
charge EU users around €13 ($14) per month for
access to an ad-free version of Facebook on their
phones and €6 for Instagram.
Competitors are working on similar offerings.
Both Snapchat and TikTok are testing ad-free versions. And Elon Musk, owner of X (aka Twitter),
teased “a higher priced subscription that allows
zero ads” in a post earlier this year. That would
probably cost substantially more than X’s current
premium plan, which starts at $11 per month when
purchased on a phone and cuts the number of ads
in half. At a meeting with the company’s bankers on
Oct. 5, Chief Executive Officer Linda Yaccarino suggested X would create three different tiers of service, with prices going up as fewer ads are shown.
Will ad-free social media take off? Probably not.
If Meta’s no-ads option were offered in the US, the
European pricing would translate to roughly $240
per year, making Facebook and Instagram more
expensive than some cellphone plans, newspaper
subscriptions and gym memberships. They’d also
cost about twice as much as X’s current premium
tier, which has attracted only a tiny percentage of
the company’s user base.
It might be possible to persuade users to try a
more reasonably priced ad-free service, but it’s
unlikely that companies would be willing to drop
prices far enough to find out, says Jonathan Zittrain,
a Harvard Law School professor and co-­director of
the Institute for Rebooting Social Media at Harvard’s
Berkman Klein Center for Internet & Society. “The
revenues for the targeted ­advertising-based online
platforms are staggering,” he says. In 2022, Meta
took in roughly $117 billion in revenue, and it collects about $220 per user per year in the US and
Canada by selling ads, according to analyst estimates
compiled by Bloomberg. Says Zittrain: “It’ll be hard
to substitute subscription fees for it, especially when
people are used to not paying.”
Meta has signaled that the new ad-free service
is more about placating regulators than attracting users. When Zittrain interviewed him at a 2019
Harvard event, Zuckerberg said “all the data that
I’ve seen suggests the vast, vast, vast majority of
people want a free service,” adding that he believed
Facebook users preferred seeing ads to browsing
the site without them. “People like being able to get
information from local businesses,” he said.
Meta reiterated this view when asked to comment on the new European service. The company
“believes in the value of free services which are supported by personalized ads,” it said in a statement.
“However, we continue to explore options to ensure
we comply with evolving regulatory requirements.”
The Recurring Costs of Modern Life
Monthly subscription cost
Washington Post
Spotify
$10
11
Disney+
14
Planet Fitness
14
Netflix
15
15
Max
16
Mint Mobile
17
Facebook and Instagram
New York Times
20 (proposed)
27
DATA: COMPANY WEBSITES, BLOOMBERG. DISNEY+, NETFLIX AND MAX ARE
AD-FREE SUBSCRIPTIONS. ONE-TIME AND ANNUAL FEES ARE AMORTIZED OVER
A ONE-YEAR PERIOD. FACEBOOK AND INSTAGRAM COSTS ARE AS PROPOSED TO
EUROPEAN REGULATORS, ACCORDING TO THE WALL STREET JOURNAL
Zuckerberg may resign himself to offering an
expensive ad-free version of Facebook that only a
few people will use; what he’s unwilling to give up
on is the kind of detailed tracking and personalization that have made his apps so profitable. Today,
Meta’s software is embedded in most big websites
(and lots of small ones), and it monitors users to try
to figure out what topics they’re interested in and
which products they’ve browsed. The company
combines this information with the data it already
collects on each user’s behavior within Facebook
and Instagram to build detailed profiles, which
advertisers can then essentially rent out to serve
hyperpersonalized ads to prospective customers.
(It’s possible to opt out of some of this personalization, but Meta doesn’t make it easy.)
Privacy advocates have complained that users
don’t really understand how much information
they’re giving up when they come into contact with
Meta’s products. That’s partly why the EU in 2018
Bloomberg Businessweek
required many companies there to ask ­customers
to agree before they start getting served with personalized ads.
But personalization is at the core of Meta’s business model—and the reason it can command advertising rates that are far greater than those of most
websites. “Being able to track behaviors across
the internet is what gives companies like Meta
the power,” says Alessandro Acquisti, a Carnegie
Mellon University professor who studies public policy and social media.
According to Acquisti, a more consumer-friendly
policy would be to offer a middle tier of services
that allows customers to opt out of all tracking and
targeting without necessarily opting out of ads.
Meta’s choice to ignore this possibility is “disingenuous,” he says, adding that the company “may be
trying to reframe as an ‘advertising/no advertising’
problem what is actually a ‘tracking users without
their consent’ problem.”
Streaming video services such as YouTube
and Hulu already offer ad-free subscription
tiers. Completely ad-free social media services
already exist, too. Mastodon, for instance, relies
on donations and a Wikipedia-esque network of
volunteers. But it’s minuscule compared with
mainstream services, and its founder isn’t on track
to become a centibillionaire.
One argument against tiered subscriptions
is that they create a situation in which wealthier
people could opt out of digital tracking and personalized ads, while poorer people have no choice
but to submit. Zuckerberg himself alluded to
this in the 2019 interview with Zittrain, saying he
believed that it might be all right to charge customers for an ad-free experience, but charging them for
enhanced privacy “feels wrong.”
On the other hand, if ad-free social networks did
somehow take off—either because customers proved
more willing to pay up or because social media companies were compelled to accept lower ­profits—the
internet would arguably be a lot healthier. The need
of social media companies to keep users inside their
apps looking at their ads for as much time as possible has hurt news publishers, which have seen traffic referrals from social media collapse in recent
years, and led to algorithms that seem to favor rage
bait over all else. A Facebook with a paid version
would have less incentive to keep us away from
more productive uses of our time—so long as it’s useful enough to keep us paying the bill each month.
�Max Chafkin, with Aisha Counts
Biden’s FCC Settles
An Old Score
THE BOTTOM LINE Meta may soon release paid versions of
Facebook and Instagram, but the ad-based versions are too
lucrative for it to try to make subscriptions a real alternative.
October 23, 2023
● The agency aims to revive Obama-era net neutrality
rules gutted under Trump
The Democrat-led Federal Communications
Commission is heading into the next round of
Washington’s longest-running fight over technology policy. On Oct. 19 the agency was slated to take
a preliminary vote to reassert its authority to regulate broadband providers, clearing the way to pass
a version of the net neutrality rules it eviscerated
during the Trump administration.
For almost two decades the tech policy world
has fought over net neutrality—the principle that
broadband providers should be prohibited from
interfering with web traffic. It became a popular cause in Silicon Valley, then a mainstay issue
during the Obama administration, when Democrats
framed the rules as necessary to keep the internet
open to all and to prevent cable and broadband
companies from interfering with rivals’ web traffic
and favoring their own content.
Republicans and broadband providers have
consistently said there’s little or no evidence of a
problem. Further, they’ve described net neutrality as an unnecessary policy that will choke off
investment, penalizing a sector that’s brought fast
internet service to most US homes. Republicans
have also said the FCC is overreaching: They
point to the Trump‑era FCC’s decision that said
the agency lacked the authority to impose the
Obama-era rules.
President Joe Biden has called for the reinstatement of net neutrality since being elected, but
the FCC didn’t have the third Democrat it needed
to push through the policy at the five-member
agency until Anna Gomez joined in September.
Just one day after Gomez became a commissioner,
FCC Chairwoman Jessica Rosenworcel acted to
move forward, saying Covid‑19 lockdowns had
ratified broadband as “essential infrastructure for
modern life,” yet the FCC “has limited ability to
oversee these indispensable networks.” This puts
the commission on a timeline that could have a
new version of net neutrality regulations in place
by mid-2024.
Both sides are preparing for a familiar fight.
“Here we go
again. We’ve
been trapped
in Groundhog
Day fighting
this absurd
battle”
CHIP SOMODEVILLA/GETTY IMAGES
16
◼ TECHNOLOGY
◼ TECHNOLOGY
“Here we go again,” says Jonathan Spalter, chief
executive officer of Washington-based trade group
USTelecom, which represents companies including AT&T Inc. and Verizon Communications Inc.
“We’ve been trapped in Groundhog Day fighting
this absurd battle.”
Advocates for the policy have been hoping to
get moving on it since Biden took office. The long
delay is “because of the powerful influence of the
largest cable and telecommunications companies
in Washington,” says Chris Lewis, president of the
policy group Public Knowledge. “We need an FCC
that clearly accepts and asserts its authority to protect consumers in the broadband market.”
The outline of the proposed rules will be familiar to those who’ve followed the debate up to this
point. The rules prohibit broadband providers that
bring the internet to homes and businesses from
blocking or slowing access to web traffic or offering paid “fast lanes” that put their business partners’ traffic ahead of everyone else’s.
Rosenworcel’s FCC also says new rules are
needed in part to protect national security and
public safety. Under her proposal, the commission
could deny companies controlled by hostile foreign governments access to broadband networks.
In terms of public safety, it could bolster the agency’s authority to require internet service providers to report and fix outages. The chairwoman
will have the support of advocacy groups such
as Free Press, which see net neutrality as a key
form of customer protection. “What this proceeding is about is protecting American consumers—­
ensuring that our broadband providers don’t rip
us off, don’t discriminate against us and that they
provide reliable connections in good times and
bad,” says Jessica González, the group’s co-CEO.
Spalter argues that a wave of investment since
the last net neutrality debate has led to more
capacity and faster speeds and leaves no reason
for carriers to block content. “Those limitations
are gone,” he says. “The original argument has no
validity anymore.”
A parallel discussion about the policy’s legal
foundation could be crucial. Some question
whether the FCC even has the authority to regulate broadband using rules written decades ago for
old-fashioned telephone service. Rosenworcel’s
proposal seems likely to end up in court.
Opponents of net neutrality—and some outside observers—predict the rules will inevitably be struck down if the matter wends its way
to the US Supreme Court, which in recent years
has circumscribed the authority of federal agencies and is considering cases this term that
Bloomberg Businessweek
October 23, 2023
17
could undermine the power of the Consumer
Financial Protection Bureau and the Securities
and Exchange Commission.
Bloomberg Intelligence analyst Matthew
Schettenhelm gives companies an 80% chance of
overturning regulations adopted by the FCC. “If
so,” he wrote in a Sept. 29 note, “only Congress
would be able to adopt federal broadband limits.”
That doesn’t seem likely, given that net neutrality is an area of profound disagreement between
Republicans and Democrats. There was a time
when there at least seemed to be significant public energy around the issue. When Donald Trump’s
FCC proposed gutting Obama’s rules in 2017, more
than 2 million comments arrived at the FCC within
a month. But such rules have since fallen significantly down the list of issues that can capture public attention. In the weeks leading up to the October
vote, the FCC received about two dozen emails on
the topic. �Todd Shields
THE BOTTOM LINE The debate over net neutrality is one of the
longest-running issues of internet policy, and an effort to pass
new rules could eventually end up at the Supreme Court.
▲ Rosenworcel
speaking at a 2017
rally in Washington to
protest the end of net
neutrality rules
3
18
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Edited by
Joel Weber
Bloomberg Businessweek
October 23, 2023
The Swiss
● Sergio Ermotti is back at
the helm of UBS—and looking
to capitalize on the deal of
a lifetime
On a Saturday in March this year, FC Collina d’Oro
was grinding its way to a 1-1 draw against Zug 94,
rivals in a Swiss amateur league. The soccer ground
in the south of the country is a modest one—no
grandstands, just bleachers in the open air—but it’s
perched on a hillside above Lake Lugano and surrounded by Alpine peaks.
The club’s president, Sergio Ermotti, was trying to keep his mind on the players, but his phone
wouldn’t stop buzzing—and the numbers looked
vaguely familiar. Credit Suisse, the 167-year-old
pillar of Swiss banking, had ended that week close
to bankruptcy; officials in Bern, the country’s
capital, were already attempting to engineer an
­emergency rescue.
Only when the whistle blew for halftime, with
the two teams deadlocked, did he return the
calls. As the former chief executive officer of UBS
Group AG, the biggest bank in Switzerland and a
wealth ­manager of global standing, Ermotti was
more than an a
­ verage spectator—and soon enough
he’d be pulled into the biggest contest of his career.
In the rescue plan hammered out that weekend,
UBS would ultimately buy its former rival for just
$3.8 billion. It was also quickly evident that the CEO
of UBS at the time, Ralph Hamers, a Dutch national
with little experience in the complexities of investment banking or wealth management, was not the
man for the job. Two weeks later, Ermotti was in a
temporary office at UBS’s monumental headquarters in Zurich, getting ready for his second term
running the bank after giving up his role as chairman of reinsurer Swiss Re.
It was “surreal” to be back less than three
years after stepping down, he told Bloomberg
Businessweek in an exclusive interview in Zurich
on Oct. 11. But “after 48 hours, it was almost like
I’d never left.”
Bloomberg Businessweek
Solution
October 23, 2023
“ The true, real
legacy is also
to prepare the
bank for the
next chapter”
19
PHOTOGRAPH BY SALVATORE VINCI FOR BLOOMBERG BUSINESSWEEK
◼ FINANCE
Bloomberg Businessweek
In the months since, investors have
­ nthusiastically backed Ermotti’s plan to chop up
e
Credit Suisse and use the choicest bits to buttress
his own bank. UBS’s shares have risen by almost a
third since March. It’s preparing to cut tens of thousands of jobs over the coming years, with a confirmed 3,000 in Switzerland alone. Yet the Swiss
establishment has more or less given UBS a free
hand. The disappearance of one of the country’s
two global banks generated some political grumbling, and finance minister Karin Keller-Sutter’s
Free Democrats party has taken a dent in the polls
before an Oct. 22 general election. For this vote,
however, the Swiss seem more urgently concerned
with rising health-care costs and immigration.
In his first decade at UBS, Ermotti was a stabilizing force. The bank had required a state bailout
during the global financial crisis, and a rogue-­
trading scandal in 2011 further rocked its reputation. Although Ermotti overhauled the bank’s
playbook, swapping the volatility of investment
banking for the steadiness of wealth management,
the overall growth strategy at the time of his 2020
departure remained vague. Hamers, in charge for
less than three years, failed to set a clearer path.
Ermotti is now making amends and laying the
groundwork for UBS’s growth strategy far beyond
the absorption of Credit Suisse. “I see my mandate
as not only about integrating the bank,” he says.
“The true, real legacy is also to prepare the bank
for the next chapter.”
If he plays everything right, Ermotti can use
Credit Suisse to bulletproof UBS as the undisputed
global wealth champion far beyond his own t­ enure.
The core of that transition will be to harness Credit
Suisse’s more muscular, US-focused investment
bank to serve America’s ultrawealthy, challenging
the Wall Street giants on their own turf. UBS will
report third-quarter earnings on Nov. 7. A key point
to watch will be the extent to which UBS’s profits
can absorb the bleeding at Credit Suisse. The latter
expects a loss of some $2 billion for the period, as
some business areas are wound down.
The integration of Credit Suisse comes with a
raft of potential difficulties, from closing out positions to managing the legal liabilities inherited from
UBS’s rival. The combined bank is entangled in a
long list of lawsuits, as well as a US Department of
Justice probe into suspected compliance failures
that allowed Russian clients to evade sanctions.
UBS’s ascent to becoming the only properly
global wealth manager began in the 1990s, following the merger of its antecedent institutions, Swiss
Bank Corp. and Union Bank of Switzerland. Like its
peers, UBS went after the fortunes to be made in
the newly liberalized world economy, as globalization went into hyperdrive following the fall of the
Soviet Union. It still traded on its founding Swiss
values of “confidence, security and discretion,”
which helped secure business in rapidly developing
economies, notably in Asia. In Chinese, the characters used for “UBS” simply mean “Swiss Bank.”
October 23, 2023
● Hamers
◀ UBS headquarters
in Zurich
HEADQUARTERS: ALAMY. HAMERS: BLOOMBERG. DATA: BAIN & CO. (GLOBAL TOTAL); COMPANY FILINGS (BANK FIGURES)
20
◼ FINANCE
◼ FINANCE
Bloomberg Businessweek
October 23, 2023
A sign of UBS’s standing is its claim that it banks
more than half the world’s billionaires. That’s
focused efforts on building piles of money into
mountains of cash for the so-called ultrahigh-­­­networth bracket, a broad category that means having
at least $50 million or so to invest.
And yet, UBS remains a relative minnow on
Wall Street, being just one of several European
lenders that have tried, and mostly failed, to make
it big trading and doing deals there. Deutsche
Bank AG closed its equities business in 2019,
while HSBC Holdings Plc said in 2021 it would
divert capital from its investment bank in New
York to fund its pivot to Asia. (Ermotti’s own
scaling back around 2012 involved exiting most
debt-trading activities.)
Now, UBS, one of the best-valued major
European institutions, wants to take a second run
at the US, but this time in the more staid business
of managing wealth—and in the largest market for
such services in the world. The challenge is still
stiff. Rivals such as Morgan Stanley have much bigger client networks and bigger investment banks to
craft whizzy financial products for them. UBS has
also already suffered setbacks in trying to scale up
its wealth management offering in the US. The latest was the $1.4 billion deal under Hamers to buy
robo-adviser Wealthfront Corp. in 2022, which
had been abandoned by the time the Credit Suisse
acquisition came to pass.
UBS’s valuation has accordingly trailed that of
Wall Street’s titans, and Chairman Colm Kelleher
has made little secret that he thinks it should be
higher—as high, perhaps, as that of Morgan Stanley,
where the Irishman spent most of his career. For
Ermotti, boosting UBS’s second-rate presence in
the US would fix a glaring deficit at the heart of the
bank’s long-term strategy, a deficit he didn’t manage to address last time on the job.
“No one else in the industry has had this kind
of chance,” says Christoph Kuenzle, a lecturer on
wealth management at Zurich University of Applied
Sciences. “In UBS’s 150 years of history, this was the
one big opportunity, almost for free. I think they
would really have to mess up for it not to work out
for them.”
Ermotti was born in 1960 in Lugano, the l­ argest
city in the canton of Ticino—an Italian-speaking
area that serves as something of a Riviera for landlocked Switzerland. There’s a Mediterranean climate and easy access to the lakes and mountains
that form the border with Italy. In terms of its presence in Switzerland’s business and political life,
though, Ticino tends to be overshadowed by the
German- and French-speaking regions.
“Ermotti is attached to Ticino,” says Christian
DePrati, a childhood friend who worked at Credit
Suisse First Boston and Merrill Lynch and still stays
in touch with him. “It is one of his strengths to be
really grounded and not losing contact with reality. He knows what his roots are.”
He’s also fiercely competitive, which manifests
in his passion for soccer. As a young man, he played
for his local team and even dreamed of becoming a
professional. Once, in a soccer match organized for
a bachelor weekend, DePrati says, Ermotti scored a
goal so spectacular that he was given the nickname
Pinturicchio, after Italian national star Alessandro
Del Piero. But Ermotti eventually switched his
ambitions to finance.
He’d taken an apprenticeship at Cornèr Bank in
1975, where he stayed about a decade in various
roles. Merrill Lynch hired him in 1987, where he
worked until the early 2000s. He ran investment
banking and served as deputy CEO at Italian lender
UniCredit SpA, joining UBS in a regional role in
2011, before being appointed CEO in the same year.
At UBS, Ermotti’s strategic pivot away from
investment banking and toward wealth management capitalized on one of the financial industry’s
recent megatrends. In a world of low interest rates,
the humdrum business of checking accounts and
mortgages presented a challenging environment
for financial institutions. Ditto investment banking, where the turbulence of arranging share sales
and advising on company mergers led to a proliferation of losses. Yet the astonishing rise of global
financial wealth on the back of an historic surge in
asset prices these past three decades has provided
a banking bonanza for a lucky few in New York,
Zurich and Singapore.
The trend looks set to continue. Bain & Co. estimates that the global wealth market will double
in size, to $230 trillion, by the end of the decade,
with $254 billion in new revenue up for grabs for
financial institutions catering to the rich. As of
yet, no single player looks set to nab all of it.
▼ Global wealth
management assets
as of Dec. 31, 2021
UBS’s Valuation Trails Behind
Over the past decade, UBS’s value to investors—shown as its priceto-book ratio—has decreased.
Price-to-book ratio ● 9/30/2013 ● 9/28/2023
0.5
1.0
1.5
JPMorgan Chase
Morgan Stanley
Wells Fargo
UBS
Bank of America
DATA: BLOOMBERG INTELLIGENCE
Global industry total
$137t
Morgan Stanley
$4.9t
UBS and Credit Suisse
4.5
Wells Fargo 2.2
JPMorgan Chase 1.9
Bank of America 1.6
21
Bloomberg Businessweek
No one manages more than a small percentage
of the existing global wealth pool—some $137 trillion—making the space ripe for both e
­ xpansion
and ­consolidation. The Credit Suisse deal, which
boosted UBS’s client asset pile to more than $5 trillion, will help solidify the bank’s leading position
in Asia and the Middle East.
For Ermotti the clear prize is the US, the world’s
largest pool of wealth. He’s quick to quote statistics showing there are more than 36,000 people in
the US with a liquid net worth topping $100 million, triple the number just four years ago. And he
says his task now is to increase the share of these
wealthy people served by UBS—and then offer them
a broader range of ways to expand their money.
In the US the industry operates mostly like a
brokerage, using teams of mom and pop financial advisers that commit to using UBS or Morgan
Stanley or JPMorgan Chase & Co. to bank their
transactions. While UBS has a network of about
6,000 financial advisers, Morgan Stanley has
16,000, underlining the challenge of scale. UBS’s
push for growth also comes in a crowded market
that will struggle to replicate the unprecedented
tailwind from asset prices over the past decade.
About 70% of US wealth managers’ $30 trillion
in asset growth in the nine years through 2021
small,” he says. “But of course we are not as large
as the pure domestic players. So we need to grow
in a way that helps us to narrow the gap.”
The Credit Suisse acquisition, in theory,
means UBS now has a bigger, more s­ ophisticated
­investment bank to help funnel entrepreneurs—
who need banking, initial public offering and deals
advice—into wealth management services once they
get rich. The irony, however, is that Ermotti is relying on what’s widely regarded as the most problematic part of Credit Suisse to execute his US strategy.
The investment bank, once known as Credit Suisse
First Boston, was the site of the $5.5 billion loss over
the collapse of Archegos Capital Management in
2021. Defusing the risks inherent in that part of the
bank is one of Ermotti’s most vital tasks in the integration, along with keeping the relevant staff amid
an exodus of d
­ ealmakers. Measured by its assets,
the investment bank is set to downsize by about
two-thirds.
Ermotti says the investment bank’s focus should
be on sectors including technology and health care
as well as private equity firms, which hold stakes
in privately held companies. Those sectors have
the best prospects for minting millionaires who will
later need their wealth managed. The CEO says he’s
confident he has a “critical mass” of the bankers he
needs to get that job done and can attract new talent from competitors in a way that the relatively
smaller UBS investment bank couldn’t do before.
“You need to offer more, bring more assets onto
the platform and offer more products to the same
clients,” Ermotti says. “Narrowing the gap in the US,
in addition to what we have outside the US, reinforces our unique standing as the only truly global
wealth manager. Nobody else can claim that.”
UBS will give an outline of its three-year growth
strategy, which will include a focus on the US market expansion, in February 2024. Ermotti talks
about being called back to UBS as a confirmation of
his first mandate. The idea that UBS would be seen
as having the strength to absorb its largest competitor is evidence of how far the bank has come
since it had to go, cap in hand, to the Swiss government in 2008.
But Ermotti is focused on building a legacy that
goes beyond just being Bern’s firefighter. “In two
or three years’ time, the integration will be over,
and the clock resets,” he says. “We need to look at
the next opportunities.” �Marion Halftermeyer,
Myriam Balezou and Alessandro Speciale, with
Max Reyes
Crowded Market
Global wealth management revenue
UBS
Morgan Stanley
Bank of America
Wells Fargo
JPMorgan Chase
$25b
15
5
20132022
DATA: BLOOMBERG INTELLIGENCE
came from markets appreciating, according to
McKinsey & Co. A world with higher­-for-longer
interest rates may not be so kind.
Also, every major US bank sees the same opportunity that UBS does; grabbing a slice of a steady
business that investors love looks increasingly
imperative. While Ermotti admits it’s pretty much
impossible to eclipse the giants on their home
turf, he still has these peers in his sights. “We have
$1.7 trillion of assets in the US, so it’s not that we are
THE BOTTOM LINE The UBS acquisition of Credit Suisse creates
a global wealth manager that is eyeing a bigger role in the US,
which it identifies as a major growth opportunity.
October 23, 2023
● Kelleher
● Keller-Sutter
GETTY IMAGES (2)
22
◼ FINANCE
24
E The Price
C Of Money
O
N
O
M
I
C
S
● The real reason interest rates
are set to stay high doesn’t have
much to do with the Fed
Edited by
Cristina Lindblad
What’s the most important price in the global
­economy? The price of a barrel of crude? A microchip? Or maybe a Big Mac?
More important than any of these is the price of
money. For more than three decades, it was falling.
Now it’s going up.
Take the yield on 10-year US Treasury notes,
which has surged toward 5% in recent weeks, pulling up the cost of mortgages and corporate loans
in its wake. At first it seemed as if the market was
reacting to another blistering jobs report. But when
what looked like a blip turned into a bond market
rout, an alternative explanation emerged: Investors
are finally coming to grips with the realization that
October 23, 2023
something fundamental has changed. Money is
going to stay expensive for a good long while—and
not just because it’s taking longer than expected
for the Federal Reserve to wrestle down inflation.
Ask most people how the price of money is set,
and they’ll say central banks. It’s true, the Federal
Reserve is in charge of setting interest rates. But
intrinsically, the price of money, like the price of
anything else, reflects the balance of supply and
demand. When the supply of savings expands
because, say, workers are socking more of their paychecks away, then the cost goes down. If it’s investment demand that’s growing quickly—because the
government is pouring money into road upgrades
or companies are splashing out on factory robots—
then the cost goes up.
For economics wonks, the price of money
that balances savings and investment while keeping ­inflation stable is called the “natural rate
of interest,” or r-star. To understand why this
ILLUSTRATION BY VINCENT KILBRIDE
4
Bloomberg Businessweek
◼ ECONOMICS
Bloomberg Businessweek
concept is central to policymaking, imagine what
would h
­ appen if the Fed set borrowing costs well
below the natural rate. With money too cheap,
there would be too much investment and not
enough savings, and the economy would overheat, sending inflation spiraling upward.
Flipping that around, if the Fed set borrowing costs above the natural rate, there would
be too much s­ avings and not enough investment, and the economy would cool, pushing
up unemployment.
This equilibrium point is notoriously difficult to pin down. “The natural rate is an abstraction; like faith, it is seen by its works,” wrote the
American economist John Henry Williams in 1931.
The quandary for central bankers, according to
Williams, is that “one can only say that if the bank
policy succeeds in stabilizing prices, the bank rate
must have been brought into line with the natural rate, but if it does not, it must not have been.”
Almost a century on, r-star retains much of its
elusiveness, which is why Fed Chair Jerome Powell
has repeatedly expressed skepticism about its usefulness as a guide for monetary policy.
Nevertheless, some economists say we’ve
reached an inflexion point. Former US Secretary
of the Treasury Lawrence Summers and
Kenneth Rogoff, who was chief economist at the
International Monetary Fund, both argue that the
era of cheap money is over, citing factors such
as stepped-up government borrowing to finance
increased military outlays and the transition to a
greener economy.
But that view is far from unanimous. “Today’s
inflation will not last, but I believe that low rates
will,” wrote Olivier Blanchard, another former
Why Money Got Cheap
Long Decline in Borrowing Costs Is at an End
Natural rate of interest
10-year real bond yield
Credible interval for natural rate: ◼ 90% ◼ 68%
6%
4
2
0
-2
Q1 1970
Q4 2023
THE NATURAL RATE IS THE BLOOMBERG ECONOMICS ESTIMATE OF THE EQUILIBRIUM REAL
10-YEAR US TREASURY BOND YIELD. THE ACTUAL RATE IS THE 10-YEAR BOND YIELD LESS THE
BLOOMBERG ECONOMICS ESTIMATE OF TREND INFLATION. DATA: BLOOMBERG ECONOMICS
October 23, 2023
hange in the US natural rate of interest since 1970,
C
in percentage points
Percentage-point contribution:
◼ Growth ◼ Inflation risk ◼ Investment prices
◼ Inequality ◼ US debt ◼ Population aging
◼ Global spillovers and other
1
0
-1
-2
-3
-4
19702022
THE MODEL IS DESIGNED TO CAPTURE THE BIG FACTORS DRIVING THE SUPPLY OF
SAVINGS AND DEMAND FOR INVESTMENT AND TO QUANTIFY THEIR IMPACT ON THE
NATURAL RATE OF INTEREST. DATA: BLOOMBERG ECONOMICS
IMF chief economist, in a blog for the Peterson
Institute for International Economics. Those
in this camp argue that the forces that drove
down the natural rate going into the ­pandemic—
such as demographics and sluggish productivity
growth—will reassert themselves once inflation has
been corralled.
To find out what drove interest rates lower
and to forecast where they might go in the future,
Bloomberg Economics built a model of the big factors driving the supply of savings and demand for
investment capital in the US. The dataset spans a
half-century and focuses on 12 advanced economies
deeply enmeshed in the global financial system.
Based on this exercise, Bloomberg’s team of
economists estimates that, adjusted for inflation,
the natural rate of interest for 10-year US government notes fell from 5% in 1980 to a little less than
2% over the past decade.
One of the most important reasons for the drop
in the natural rate was weaker economic growth.
In the 1960s and ’70s, gross domestic product
expanded at an average of almost 4% a year thanks
to the combination of a swelling workforce and—
in the early part of that period—rapid productivity
gains. But by the 2000s, those forces were petering out. In the wake of the global financial crisis
of 2007-08, average annual GDP growth slumped
to around 2%. Investing for the future became less
­attractive, dragging the natural rate lower.
Shifting demographics contributed in another
way. From the ’80s on, as America’s baby boomers started squirreling away more funds for
25
“The natural
rate is an
abstraction;
like faith, it is
seen by
its works”
26
◼ ECONOMICS
Bloomberg Businessweek
retirement, the supply of savings went up, e
­ xerting
more downward pressure on the natural rate.
Other factors were bearing down on the price
of money. China began recycling a portion of its
growing trade surpluses into US Treasuries. And US
income inequality worsened, which had the effect
of expanding the supply of savings as high earners
tucked away a bigger portion of their income.
On the investment side, computers got cheaper
and more powerful, so companies didn’t have to
spend as much upgrading their technology, thereby
pulling the natural rate lower.
For the US economy, that fall in the price of
money had profound consequences. Bargain basement borrowing costs allowed households to take
on bigger mortgages. And in the early 2000s, many
bit off more than they could chew, helping set the
stage for the global financial crisis.
Cheaper money also meant that even as US federal debt almost tripled, from just over 30% of GDP
in 2000 to more than 90% today, the cost of servicing that debt remained low, allowing the government to continue spending without restraint. For
the Fed, a lower natural rate meant less room to cut
interest rates during downturns, leading to much
hand-wringing about the diminished firepower of
monetary policy.
All that is changing. Some of the forces that
drove the price of money lower have swung into
reverse. And other vectors are coming into play.
Baby boomers are leaving the workforce and
spending down their nest eggs, which eats into
the supply of savings. Meanwhile, China’s appetite for US Treasuries has been diminished by tensions between Washington and Beijing and by a
­rebalancing of China’s economy.
US federal debt surged as the global financial ­c risis ripped through the economy and
Upside Risk to Natural Rate
US Government Got a Free Pass as Rates Fell
Federal debt held by the
public as a share of GDP
Interest payments on federal
debt as a share of GDP
100%
20002022
2%
50
1
0
0
20002022
DATA: CONGRESSIONAL BUDGET OFFICE (HISTORICAL BUDGET DATA, FEBRUARY 2023)
October 23, 2023
Natural rate on 10-year US government notes, inflation-adjusted
◼ Baseline forecast
◼ Climate action ◼ Fiscal imprudence ◼ Technological leap
4%
3
2
1
0
20222050
DATA: BLOOMBERG ECONOMICS
again when the coronavirus pandemic struck.
Government ­spending on stimulus has tapered
off, but ­deficits remain wide and competition for
investment ­capital has intensified. That’s partly
because incentives in federal laws that have
sparked a boom in construction of electric-vehicle plants and semiconductor fabs. The rising
debt is creating upward pressure on long-term
borrowing costs.
How much higher will the natural rate go?
Bloomberg Economics’ model shows a rise of about
a percentage point, from a trough of 1.7% in the
mid-2010s to 2.7% in the 2030s. In nominal terms,
that means 10-year Treasury yields could settle
somewhere between 4.5% and 5%. And the risks
are skewed toward even higher borrowing costs
than that baseline suggests.
In the base case, governments eventually take
action to put borrowing on a sustainable path.
But with Democrats and Republicans struggling to
find common ground on how to get America’s fiscal house in order, there’s a clear danger that deficits will stay wide for the foreseeable future. Action
to tackle global warming has so far been modest, but if the world does get more serious about it, massive investment will be
required. BloombergNEF estimates the
energy infrastructure needed to
support a zero-emissions
economy will cost more
than $30 trillion globally,
equal to about 30% of
world GDP last year. And
rapid advances in artificial
intelligence and other breakthrough technologies might boost
productivity, bumping the US onto
a faster growth trajectory.
● The cost of building
a zero-emissions
energy network
$30t
ILLUSTRATION BY VINCENT KILBRIDE. DATA: INSTITUTE OF INTERNATIONAL FINANCE
◼ ECONOMICS
Bloomberg Businessweek
According to Bloomberg Economics estimates,
the combined impact of ­persistently high levels of
­government borrowing, more spending to fight
­climate change and faster growth would lift the
natural rate to 4%, translating to a nominal 10-year
bond yield in the region of 6%.
Even under the less extreme scenario, the shift
from a falling to a rising natural rate will have profound consequences for the US economy and the
global financial system. Low-cost mortgages have
been a major contributor to the almost relentless
rise in US housing prices since the ’80s, creating an
affordability crisis.
There’s a similar story in equity markets. Since
the early ’80s, the S&P 500 has surged, powered in
part by lower rates. With borrowing costs on the
rise, that impetus for ever-increasing home and
equity valuations will be taken away.
The shift to higher rates might trigger a
Schumpeterian episode of creative destruction, by
laying waste to the growing legions of corporate
zombies. The number of unprofitable companies
has risen in recent decades, reaching almost 50%
of all publicly listed companies worldwide in 2022,
according to a report Goldman Sachs Group Inc.
published in October. In an ideal world, an increase
in bankruptcies might result in capital and labor
being redeployed to more efficient ends.
Perhaps the biggest loser in this new high-rate
regime will be the US Department of the Treasury.
Even if debt rose no further relative to the size
of the economy, higher borrowing costs are set
to add 2% of GDP to debt payments annually
by 2030. If that had been the case last year, the
Treasury would have paid out an extra $550 billion to bondholders, which is more than 10 times
the amount of security assistance the US has funneled to Ukraine so far.
Of course, some of the reasons rates might
move higher—such as stronger productivity growth
or investment to get to net zero—are positives not
negatives. And higher rates create winners as well
as losers: Savers and investors piling into bonds
will enjoy higher rates of return. And when recessions hit, the Fed will have more room to lower
borrowing costs to spur the economy.
Powell once said that r-star is less reliable than
the celestial stars that mariners in ancient times
relied on to guide their voyages because its trajectory
shifts often. That’s happening now, and it’s going to
be rough sailing. �Jamie Rush, Martin Ademmer,
Maeva Cousin and Tom Orlik, with Rich Miller
Dollarization Holds Promise
And Peril for Argentina
THE BOTTOM LINE A model devised by Bloomberg Economics
has yields on 10-year Treasuries rising as high as 6% because of
factors such as climate change and high government borrowing.
October 23, 2023
● A bungled switch to the greenback could
bring back the monster of hyperinflation
Leon Romero is all in on Javier Milei, the ­political
maverick whose radical proposal to scrap the
Argentine peso and replace it with the dollar has
made him the favorite heading into the Oct. 22 presidential election. “I’m not scared to try something
different. I am scared of what I know doesn’t work,
which is what we’ve been living with for years,”
says Romero, a 23-year-old accounting assistant at
a bakery chain whose 150,000-peso monthly salary has been decimated by inflation. In July his
monthly paycheck was worth about $300 at the
most widely used parallel exchange rate; today it’s
half that. “In dollars, my salary will be safe.”
But when asked about the details of Milei’s
plan, Romero concedes he’s fuzzy on exactly how
it would work. He’s not alone. Milei says dollarizing would tame inflation that’s running at 138% and
unleash about $250 billion in pent-up investment.
But the mechanics are complex, even for a population replete with doctorates in kitchen-table economics: Freeze the peso-dollar exchange rate, lift
capital controls, and allow both pesos and greenbacks to circulate for a while before the majority of
transactions simply migrate to dollars.
Milei’s opponents say that the plan is too risky
and that if he pulls it off, Argentina will have effectively ceded monetary policy control to the US
Federal Reserve—meaning it won’t be able to adjust
interest rates, devalue the currency or print money
in response to an external shock such as the global
financial crisis. Milei says that’s exactly the point: to
take decisions out of the hands of Argentine policy­
makers, who, he says, have a terrible track record
managing the economy.
Economists say that if Milei were to win office,
he’d need roughly $40 billion on hand to begin
­dollarizing the economy. It’s unclear where he might
procure that many dollars. The central bank doesn’t
have any—net foreign reserves are negative at the
moment—and the nation is effectively shut out of
international capital markets because investors are
pricing yet another default on government debt.
If he has any hopes of making his plan work,
Milei will have to coax Argentines into moving the
billions of dollars they have stashed in safety
▼ Argentines’ offshore
assets
◼ Currency and
deposits
◼ Other investment
assets
$400b
200
0
20062022
27
28
deposits at home and savings accounts abroad
into the local banking system. Argentina’s national
statistics agency estimates its citizens hold about
$250 billion in foreign currency outside the banking system, under mattresses and in lockboxes
within the country. That would account for more
than 10% of dollar bills in circulation globally. They
also hold another $250 billion in liquid assets in
offshore accounts, according to data from the
International Institute of Finance.
Perhaps nobody has a better view into
Argentines’ hidden stash of greenbacks than Juan
Piantoni, the founder of Ingot. In a building in
downtown Buenos Aires, down four flights into a
subterranean bunker, past a metal detector, biometric eye scanner and then bulletproof doors,
Piantoni shows off a room lined floor to ceiling
with safety deposit boxes. They’re filled with cold
hard cash: Ingot currently insures at least $225 million for clients at its six branches in Argentina
and Uruguay. “Money should be at the bank. The
­logical thing would be for it to generate interest
in a normal country,” Piantoni says. “People don’t
trust the system.”
And why should they, when their leaders have
been so quick to part them from their hard-earned
money during times of crisis? It happened in 1989,
when the government forcibly converted about
$3 billion in short-term deposits into long-term government bonds. Then again in 2001 when, to stem
a bank run, authorities instituted a $250-per-week
limit on cash withdrawals.
Some aspects of daily life already operate in
dollars. Homebuyers, high-end restaurants and
importers are accustomed to dealing in greenbacks. “We don’t have 30-year mortgages or bank
loans that are easily attainable,” says Maximiliano
Gölz, a real estate agent in Buenos Aires. “Ninety
percent of transactions are done exclusively in
cash. I mean literally bags of money with dollar
signs on them.”
Ecuador’s and El Salvador’s experience with
­dollarization has been largely positive, though not
entirely pain-free. When Ecuador ditched the sucre
in 2000, the local currency lost about a quarter of
its value in the week before dollarization as p
­ eople
flocked to dollars in anticipation of the switch.
In Argentina, the gap between the official
exchange rate of 350 pesos per dollar and the
rate in parallel markets has widened dramatically since an open primary in August confirmed
Milei as the front-runner in the presidential
race. The lower the peso falls, the easier dollarization may be, because it will require fewer
greenbacks—a dynamic that Milei acknowledges
Bloomberg Businessweek
October 23, 2023
is advantageous for his plan, even if it penalizes
Argentines ­without dollar savings.
But there’s also a risk that the peso will continue
to plummet and dollarization never comes to pass.
That would almost certainly unleash another ruinous episode of hyperinflation, defined as prices rising at a monthly rate of at least 50%. Argentina’s
most recent reading was 12.7%.
Claudio Porcel, founder and chief executive
officer of Balanz Capital, a local brokerage, says
that if Milei wins the presidency, either in a first
round victory this month or in a runoff scheduled for early November, his administration will
have to move fast. Avoiding “hyperinflation is like
being in the middle of the African Savannah, and
there’s a lion coming at you, and you only have
one b
­ ullet,” he says. “You better put the bullet
between the eyes.”
Noelia Zuñiga, 27, says she’s ready for dollarization and is sick of the hassle that’s built into the
current system. Before buying her first car last
year, she spent years socking away her earnings
from a coffee cart, eventually stuffing $10,000 in
dollar bills behind the bedroom dresser in the windowless apartment she shares with her mother.
Although Zuñiga, a fan of Argentine soccer
superstar Lionel Messi, acknowledges she doesn’t
really know the specifics of how Milei’s proposals
will work, she’s sure it will be better than the current system. “I have a lot of faith in Milei,” she says.
“He’s like Messi and the ball. I just know he’s going
to pull it off.” �Scott Squires and Manuela Tobías
▲ Milei
THE BOTTOM LINE Presidential candidate Javier Milei’s plan to
swap the Argentine peso for the dollar faces numerous obstacles.
For starters, there aren’t enough readily accessible greenbacks.
“Ninety
percent of
transactions
are done
exclusively in
cash. I mean
literally bags
of money”
MATIAS BAGLIETTO/NURPHOTO/ZUMA PRESS
◼ ECONOMICS
EXPORTING
AMERICAN
GUN CULTURE
Bloomberg Businessweek
By Jessica Brice and Michael Smith
Illustration by Maxime Mouysset
EXPORTING
AMERICAN
GUN CULTURE
How hundreds of US government employees
became sales reps for the gun industry
EXPORTING
AMERICAN
October 23, 2023
31
Bloomberg Businessweek
October 23, 2023
FOR
32
several days each January,
some 52,000 gunmakers, dealers and enthusiasts flood a
2 ­million-square-foot convention center near the Las Vegas
Strip. They come from all parts
of the globe for the Shooting, Hunting and Outdoor Trade
Show, better known as SHOT Show. It’s the world’s biggest
firearms industry event and as much party as it is trade expo,
with a buffet of weaponry, gun influencers livestreaming in
a dozen languages and models with AR-15s propped on their
shoulders. The big producers, such as Glock Inc. and Smith
& Wesson Brands Inc., host lavish dinners; the startups rent
penthouses for boozy bashes.
Through this maze of 2,500 exhibitors and up an escalator is a collection of quieter spaces, including one called
the International Trade Center. With its partition walls and
stackable burgundy chairs, it lacks the flash of most other
SHOT Show attractions. But to the US firearms industry, it’s a
vital gateway to sales beyond American borders. Inside, foreign buyers can cut deals with US gunmakers in glass-walled
conference rooms or at big round tables. Interpreters mill
about, offering free translation services.
The National Shooting Sports Foundation, the industry group that runs SHOT Show, provides the space, but
this is a US Department of Commerce operation. In 2013,
Commerce agreed to start hosting people from around
the world at SHOT Show as part of its International Buyer
Program, an effort to boost exports of various US products
by promoting stateside trade shows. The NSSF considered
the move a “crucial” step in a multiyear plan to bring in
more overseas business, according to a decade-old NSSF
blog still lingering online. In the first year of the partnership,
Commerce’s Foreign Commercial Service, which operates
out of US embassies and consulates, steered 370 buyers to
SHOT Show. By January 2023, that number had surged to
more than 3,200.
The global network of Foreign Commercial Service
employees has effectively become a combination SHOT
Show travel agency, gun industry promotion service and
deal brokerage. “The assistance we get from the Commerce
Department, especially at SHOT Show, is invaluable,”
says Luis Guerra, founder and chief executive officer of
Armaq SA, a Peruvian gun importer and retailer. To make
his point, he presents a printout from the 2023 show, listing
dozens of appointments with suppliers he says the department helped him set up. “You really can’t be in this business without that help,” he says.
In recent years, Commerce employees overseas have
organized group trips to Las Vegas from South America,
Africa, Asia and the Middle East. In interviews, invitees of
the US government detailed how Commerce officials booked
flights and hotels for Guatemalan firearms shops, scored
discounted Cirque du Soleil tickets for Brazilian importers, provided matchmaking services for Peruvian buyers
At the 2018 SHOT Show
and helped rush through a visa approval for a politician in
Brazil’s “­bullet c­ aucus,” a band of National Congress members focused on fighting for gun rights. US lobbying groups
and companies fill out the foreign attendee ranks by flying in activists and influencers. The NSSF offers them all
training sessions on how to start grassroots gun-rights campaigns and dominate social media. The NSSF didn’t respond
to requests for comment for this story.
The partnership has been particularly successful in
Latin America. In Peru, a lobbying group for hunters’ rights
spent almost a decade mentoring and financing the advocate who helped mold gun-rights legislation in the image of
US laws. In Brazil, starting in 2015, US activists and lobbyists cultivated ties with a little-known lawmaker named Jair
Bolsonaro. By early 2019, Bolsonaro had become president,
and within two weeks of his swearing-in he began scrapping
the country’s restrictive gun laws, blowing open one of the
world’s biggest potential markets. The pro-gun ambitions
and rhetoric of popular lawmakers in Argentina, Colombia
and Ecuador can also be traced to US ties and events.
There have been setbacks. In Brazil, a returning president,
Luiz Inácio Lula da Silva, rolled back gun rights; in Peru,
firearms shipments were frozen after the US Department
of State raised concerns about civil unrest and possible
human-rights violations, according to export license documents. Nonetheless, the blossoming of American-style gun
culture—the elevation of gun ownership as a personal and
political identifier, the social interaction at gun events, the
framing of public debate over any restriction as a step toward
oppression—portends a shift in voter sentiment and an overall increased tolerance of more firearms. The number of progun lawmakers in Brazil’s Congress has surged to more than
100 since the early 2000s, when Bolsonaro was the lone deputy making the pro-gun agenda his priority.
This is what the National Rifle Association meant when
a top executive in January 2021 touted the power of “quiet
diplomacy” to rewrite the foreign political landscape and
change public opinion. It’s a long game. And it’s working.
Bloomberg Businessweek
SHOW: ETHAN MILLER/GETTY IMAGES. SALIDAS: PHOTOGRAPH BY ANGELA PONCE FOR BLOOMBERG BUSINESSWEEK
I
October 23, 2023
n 2014, the first year the Commerce Department ­partnered
with SHOT Show, Thomas Saldias, an avid bird hunter
from Peru, used the occasion to announce a new pro-gun
lobbying group—the Latin American Legal Guns Coalition,
or CALL, for its Spanish acronym. Firearm ownership across
Central and South America “is under coordinated attack,” said
Saldias in a statement released ahead of a news conference.
Activists need to join forces, the statement said, to fight gun
bans “being pushed by deep-pocketed international organizations.” His words that day had been carefully reviewed by
a different sort of deep-pocketed organization: Safari Club
International, the NRA ally that had taught Saldias the art of
lobbying against gun control, American-style. Today, Peru has
some of the most permissive gun laws in the Americas. In a
nation haunted by a history of coups, narco­terrorism and violent crime, the liberalization of gun laws has marked a substantial win for the industry.
Saldias was in his late 30s in 2005, when he went to Texas
A&M University to study for a doctorate in wildlife sciences.
The hunting culture he saw in the US—regulated and with
access to millions of acres of national parks—left him in
awe. He dreamed of bringing that way of life back to Peru.
He emailed the Safari Club asking for help and quickly got
a call from Norbert Ullmann, director of the organization’s
international division.
Saldias says his education in the American art of
­lobbying was hastened later with an all-expenses-paid trip
to Washington for Safari Club’s annual convention. One
morning Ullman invited him to join the group on a visit
to Congress. He watched as volunteers fanned out across
the US Capitol, knocking on lawmakers’ doors and asking
them to support a regulatory tweak. Saldias can’t recall
what rule it was now, but he remembers his astonishment
at how effective a grassroots pressure campaign could be.
“We just didn’t have that custom in Peru,” he says.
It wasn’t long before Saldias was banging on doors himself. Peru’s 2011 presidential election was won by Ollanta
Humala, a left-leaning army commander who wanted to
crack down on crime by banning most gun ownership.
By then, Saldias was Safari Club’s Latin America representative, a volunteer position that came with a small stipend. He clocked legislative win after win, first helping
to persuade lawmakers in Peru’s Congress to expand gun
rights, then lobbying to open up the market to higher calibers and different types of guns. Civilians with a clean
criminal record can now buy just about any level of firepower they want in Peru, short of a machine gun. “For
sure, he learned the ropes in America, and he introduced
this US attitude to South America,” says Ullmann, who’s
since left Safari Club.
CALL went international at the 2014 SHOT Show news
conference. Then, that June, at a truly global scene: the
United Nations in New York. Saldias remembers stopping
to collect his thoughts and calm his nerves before testifying at the biannual meeting of the UN program to fight
He remembers his
astonishment at
how effective a
grassroots pressure
campaign could be.
“We just didn’t have
that custom in Peru”
Saldias on a pigeon hunt in Trujillo, Peru
33
Hunters in Trujillo
34
the illicit trade of small arms. Representatives from scores
of countries watched, while interpreters in glass booths translated the proceedings into Spanish, Arabic, Chinese and
Russian. Saldias spoke for three minutes, saying his group
would give a voice to millions of gun owners. “The truth is
that a lot of the advocates here propose disarming civilians
and penalizing law-abiding gun owners,” he said. “We are
here to keep that legal right.” Sitting at a long table, he was
in the company of some of the most powerful gun lobbyists in the world, including NRA executive James Baranowski.
It was Baranowski who later told the NRA board about the
organization’s quiet diplomacy. “While our efforts are often
in the shadows,” he said, according to board minutes released
as part of a court case, “our results … can be seen and heard
around the world.” One of its greatest successes, he told them,
was persuading President Donald Trump to withdraw from a
UN treaty regulating small arms sales—the kind of restrictions
Saldias had testified against. Baranowski, the NRA and Safari
Club International declined to comment for this story.
F
or invitees of the US government, the road to SHOT Show
can start thousands of miles from the Vegas Strip, at gun
events where Foreign Commercial Service workers scout
buyers to add to their show rosters. In Brazil, that task
falls to Genard Burity, a Rio de Janeiro native who’s been peddling Made-in-the-USA for almost a quarter-century, including
software, Boeing planes and American movies. In recent years,
guns have also become a big part of the job.
Burity is part of a network of about 675 local hires at
embassies and consulates around the world who make up
the US government’s sales team abroad. American officers
rotating in and out on two-year stints call the shots, but ­locals
like Burity, whose title is specialist, know all the right ­people.
“Their job is to work with any and all American companies
and talk about what they can do to sell their products in
Brazil and elsewhere,” said Anton Kemps, a US Department
of Defense official, on a recent trade mission to Brazil.
How exactly they do that is a secret, classified by
Commerce as confidential commercial information. At a fourday defense expo in Rio in April, the consulate provided a
full rundown of State and Defense department employees
in attendance, but declined to name Commerce employees
there, even though Burity and two of his American bosses
were visibly present. Burity declined to comment for this article, as did the US consulate in Rio, the US Embassy in Brasília
and the Commerce Department.
By piecing together Burity’s movements over several
months earlier this year, via interviews with people he met
and emails sent from the embassy to gun importers, it’s possible to get a sense for how the US government’s chief business
promoters operate on foreign soil. During the Rio defense
expo, Burity touched base with contacts old and new. He
introduced Brazilian deal brokers to US makers of armed
boats and rifles favored by SWAT teams. He checked in with
the biggest importer of Smith & Wesson weapons, to whom
he introduces US firearms dealers every couple of months.
Bloomberg Businessweek
HUNTERS: PHOTOGRAPH BY ANGELA PONCE FOR BLOOMBERG BUSINESSWEEK. LAAD: ANTONIO LACERDA/EPA-EFE/SHUTTERSTOCK
The LAAD Defense & Security Expo in Rio
And he spent two hours talking to Sig Sauer’s local rep, a
bulked-up salesman who wanted Burity to put pressure on
his bosses to fight Lula’s gun restrictions.
In the months before and after the April event, Burity and
embassy staff helped push through paperwork and licenses
for 30,000 Springfield Armory handguns going to São Paulo
prisons and 500 Sig Sauer rifles for Rio’s police. Burity set up
a meeting between a Brazilian pro-gun lobbying group and
embassy officers. He also gave feedback on the prototype of
a new magazine modeled after an NRA periodical.
Gunmakers doing business in Brazil say the help they get
from the Foreign Commercial Service is key. “I run all my
deals past Genard whenever I do business,” says Luiz Horta,
international sales director for Springfield Armory. “We’re
old friends.”
Burity is one of at least two dozen specialists stationed in
Africa, Asia, Europe or South America who leads foreign buyers to SHOT Show each year, along with a range of other trade
expos, including an event in Denver in May on robotics and
drones. Save-the-date notices go out months in advance. As
the show approaches, embassy staff encourage invitees to use
a State Department app to book meetings with US gunmakers
and dealers eager to fill their orders. It’s unclear how much
time and money the Commerce Department spends on activities tied to SHOT Show each year. When the agency didn’t
turn over spending documents in response to public records
requests, Bloomberg News filed a lawsuit in May to get access
to the information; the suit is ongoing.
S
HOT Show, of course, isn’t the only expo Commerce
works with. The International Buyer Program brings
thousands of foreign professionals each year to a range
of events, for industries as diverse as concrete, dental
equipment and electronics. But none of them blends business
and political activism like SHOT Show does. Federal law prohibits government employees from using their position to favor
specific candidates or a political party, but it’s hard to argue
SHOT Show isn’t a partisan event. The NSSF, whose annual
lobbying expenditure has overtaken that of the NRA, has said
it gets more than 75% of its annual budget from the event. The
October 23, 2023
NSSF contributed to the campaigns of 256 national candidates
in the 2021-2022 election cycle. Four were Democrats.
While the NRA has historically presented itself as the voice
of gun owners, the NSSF represents companies. Finding new
customers is a key part of its mission. Its Big City Tours project
aimed to persuade urbanites and minorities to pick up guns; its
+One Movement urged social shooters to bring a friend to the
range; and marketing materials such as an article titled “Not
Just Pink Products” offered tips on how to win over women. In
a 2020 study, the NSSF touted the success of such efforts: a 56%
increase in gun purchases among Black Americans, compared
with 2019, as well as 8 million first-time gun buyers. Women
accounted for 40% of all sales.
But the push for international buyers was different. Strict
regulations meant US manufacturers couldn’t simply export
guns the same way they shipped, say, car parts or toilet paper.
For decades, almost all guns sold abroad fell under the same
export controls as sensitive military equipment. Thousands
of items sat on the so-called Munitions List, requiring State
Department approval on every export license, congressional
notification on deals worth more than $1 million and limits on
technology sharing.
The Obama administration originally proposed overhauling
the list to free up State Department resources and cut red tape
for US companies. The State Department would keep oversight
of the heavy-duty and highly deadly—the rocket-propelled missiles, the flamethrowers, the fighter jets and submarines. The
Commerce Department would take everything else, from night
vision goggles to parts for satellites. It was up to a Washington
lawyer named Kevin Wolf, Commerce’s assistant secretary for
export administration from 2010 to 2017, to figure out where
pistols and rifles belonged.
Wolf is a pragmatist who’s spent his career moving
between government desks and law firms. “When I arrived,
as an export control agency we were spending most of
our time reviewing and approving parts going to allies,”
he said recently from his home office, where portraits of
Presidents Barack Obama and Joe Biden hang on his wall.
NSSF donations to US Congress members
$700k
◼ Republican
◼ Democrat
◼ Independent
350
0
2012
2014
2016
2018
2020
2022
DATA: OPENSECRETS
35
Bloomberg Businessweek
36
“All our resources were spent approving things we’d been
­approving for decades.”
In his proposed executive order, Obama left in a requirement that Congress be notified before large gun shipments
were approved. The State Department would also keep veto
power. The Obama administration had been set to formally propose the shift of firearms oversight when, in December 2012,
a 20-year-old gunman walked into Sandy Hook Elementary
School in Connecticut and murdered 26 people, 20 of them
children. No one wanted to go near the issue, Wolf recalls,
so he stowed the proposal in a ­government-issued yellow
folder on a bookshelf in the hallway outside his office at the
Commerce Department, where it sat until Obama’s term in
office ran out. “I just dumped it at the bottom of the list,” Wolf
says. “I thought, ‘Well, maybe, you know, if Hillary wins, we’ll
pick it back up.’ ”
Hillary Clinton didn’t win the presidency, and Trump’s
­inauguration, on Jan. 20, 2017, coincided with the annual SHOT
Show, where he’d been a keynote speaker the year before. Big
screens were set up across the expo center, broadcasting the
ceremony as crowds cheered.
Wolf had moved on to legal consulting at law firm Akin
Gump Strauss Hauer & Feld, and Larry Keane, the NSSF’s top
lobbyist, quickly hired him as a strategic adviser. Wolf says
he still believes the shift to Commerce was the right move,
mainly because that department has more enforcement
resources than State and because requests for export licenses
by Commerce would trigger multi-agency notifications. He says
he was frustrated with how the Trump administration hyped
the change as a way to boost gun exports, but he had no say
over its final form. “It was no longer my job,” he says. Wolf,
who isn’t a lobbyist, says he has hundreds of legal consulting clients, mainly in semiconductors. “I don’t work for the
gun industry other than, you know, Larry calling me up for
thoughts and advice,” he says. Keane declined to comment.
When the switch from State to Commerce finally took effect,
in March 2020, the NSSF rushed to alert its ­members. Keane,
in a blog post, called it a “crucial milestone” for US manufacturers. The move eliminated congressional notification. It drastically cut fees, which inspired scores of small companies to
jump into the global market. And it eliminated the requirement
for order-by-order approval, which cut the time it took to get
an export license by more than half. The NSSF started offering
training courses on the new regime at SHOT Show. For $150,
would-be exporters can access a five-part webinar on the NSSF
website in which Wolf himself explains the system.
The industry’s decade-long push to win over international markets was finally set to take off. From March 2020
to June 2021, the Commerce Department approved almost
$16 ­billion in firearms export licenses—a 30% increase from
historical averages, according to congressional estimates.
Biden, who’s said fighting US gun violence is a key issue,
has not significantly tightened export licensing requirements,
though his administration has partially reinstated the congressional notification requirement for some semiautomatic
October 23, 2023
From March 2020 to
June 2021, Commerce
approved almost
$16 billion in firearms
export licenses—
a 30% increase from
historical averages
weapons. “American foreign policy has become much more
focused on the economics,” says Jon Michaels, a professor at
the UCLA School of Law who’s written extensively about the
relationship between government and private industry. He
called Biden’s inaction surprising. “There are very few levers
that the Biden administration has to regulate guns—very few
spigots to shut off—and this seems like an obvious one.”
A
martial artist, a lawyer and a priest walk into a gun
club. They’re all social media stars, and they’re at
the Top Gun Shooting Range in Florianópolis, Brazil,
to promote a sharpshooting competition. But in the
world of guns, it’s impossible to separate the product from
the politics. All conversations among the 100 gun enthusiasts here eventually turn to the question on everyone’s mind:
What now?
Months earlier, on his first day in office, Lula had shut
down one of the gun world’s most promising markets. New
ownership licenses were frozen. Cargoes of weapons and
ammo at warehouses in
US semiautomatic gun exports to Brazil
Florida, Georgia and Texas
were denied entry. Anyone
◼ Bolsonaro administration
who’d purchased guns
20k
under the previous administration was given 60 days
to re-register their arms in a
national database.
10
The swing from the policies of his predecessor was
extreme. Bolsonaro, with
close ties to the NRA, was
0
the politician the lobby had
always dreamed of. His gun
2012
2022
market overhaul fueled an
DATA: US CENSUS BUREAU
Bloomberg Businessweek
TARGET: PHOTOGRAPH BY ANGELA PONCE FOR BLOOMBERG BUSINESSWEEK. MANSUETO: SANSONE MANAGEMENT
almost 600% surge in licensed owners and dramatically
expanded what calibers and models civilians had access to.
But Bolsonaro’s legacy won’t be as the president who pumped
an overwhelming ­number of firearms into Brazil. The nation
was already flush with weapons, many of them illegal, long
before he took office. The most important thing he did, says
Clovis Cesar de Aguiar Jr., owner of the ISA shooting range outside São Paulo, was send a message: “He simply communicated
to citizens of this country they had a right to own a weapon.”
Bolsonaro’s true gift to the industry will be a proliferation
of gun clubs in the mold of Top Gun and ISA, which helped
unite a diverse group of shooters under a single pro-gun banner. During his presidency, the number of gun stores doubled,
to 3,200. By his final year, a shooting range a day was opening up. (A month after the Top Gun gathering, Lula would sign
a decree taking gun restrictions even further and aiming to
force the closure of hundreds of ranges. The decree is being
challenged in court.)
The network of gun clubs now operating across Brazil
taps into a strategy the US industry has long known as its
most v
­ aluable: emphasizing face-to-face gatherings. It’s why
the NSSF holds so many in-person meetings—SHOT Show
in January, a members visit to Congress in April, an expo
for shooting ranges in Wisconsin in July, a conference for
Checking the target at a shooting tournament in Peru
Mansueto at the Top Gun club in Florianópolis
October 23, 2023
exporters and ATF officials in Washington in August. The
NRA and Safari Club hold almost as many national meetups.
But the small on-the-ground events at shooting ranges
form the backbone of gun culture in the US, and advocates in
Latin America are re-creating that. “Unfortunately, some people, and specifically this government, they have no idea what
it means to spend a weekend at a shooting range—the emotion, the importance,” Salesio Nuhs, CEO of Taurus Armas SA,
the biggest Brazilian maker of guns, tells the crowd gathered
at Top Gun as he sits on a tufted leather couch atop a stage
erected for the occasion. In front of him are a film and sound
crew, and behind them, on the back wall, giant American
and Brazilian flags hang side by side. Over the next 12 hours,
during a YouTube livestream to promote the upcoming competition, set to take place at 1,500 shooting ranges across
Brazil, every type of pro-gun personality will cross the stage,
sit in the Top Gun podcasting booth or participate in mini-­
challenges at the range.
There’s the mixed martial artist Thiago Santos, known as
Marreta (Portuguese for “sledgehammer”), for whom shooting
is a rare opportunity for alpha male bonding. “That’s exactly
why we’re here, so that people can come and get to know the
industry,” he says. “How pleasant it is to meet up with your
friends, go to the range, practice shooting and exchange ideas,
right?” The lawyer Luciano Lara draws parallels between the
US Second Amendment and Brazil’s Constitution, which guarantees the right to life in one of the most violent nations in
the world. “We must have the means to enforce that guarantee,” he says. And the priest Edivaldo Ferreira says the
Bible demands that a man protect his family. Joining them is
Edilaine Mansueto, a shooting instructor who says guns make
women safer. It’s “one of the great equalizers,” she says.
The gathering is organic, the movement homegrown. There
are no US industry lobbyists lurking in the corner or clearing
speeches. They really don’t need to be there. Nuhs, who’s traveled to SHOT Show every year for three decades, says the gun
culture in Brazil is now self-­sustaining and getting stronger. “It’s
not as simple as just bringing American gun culture here,” he
says. Brazilians are ready to carry the flag themselves. “Once
you create that culture, there’s no going back.”
That appears to be true in Peru as well. Guerra, the
importer who’s been to SHOT Show several times with US government help, says the American pause on exports to Peru
has merely meant his business now goes to other countries.
Saldias also has a story showing how entrenched Peru’s gun
culture is. In early August, the country’s version of the Bureau
of Alcohol, Tobacco, Firearms and Explosives quietly proposed rolling back gun ownership rights. As soon as he got
wind of it, Saldias says, he started working the phones. He
secured $3,000 from Peruvian gun importers to cover a trip to
Lima. There, he spent two weeks lobbying Congress and successfully squashed the effort before it could gain momentum.
“I didn’t need Safari Club’s help this time,” Saldias says. “I
already knew what to do.” <BW> �With Eric Fan, Michael Riley
and David Kocieniewski
37
The famously blunt founder of Lululemon is putting $100 million into curing the rare muscle-wasting disease
he was diagnosed with decades ago. True to form, his approach is highly aggressive and not without its critics
By Ari Altstedter Photograph by Alana Paterson
O
38
n the outskirts of Silicon Valley, at a private clinic inside a two-story office
­building near the highway, Chip Wilson was undergoing an experimental medical procedure to retain the use of his legs. Wilson is 68 and has a net worth of
$7.1 ­billion, thanks largely to his development in the late 1990s of a type of yoga
pants he could sell to women for $100 a pair. The company he founded, Lululemon
Athletica, more or less invented an apparel category, athleisure, which it continued
to dominate even after he stepped away in 2013 following some particularly insensitive comments about how the pants looked on some women’s bodies.
Unknown to the public, throughout his long career Wilson was watching his own
body slowly waste away from muscular dystrophy. Lying supine as Matt Cook, the
clinic’s proprietor, ran an ultrasound wand over his legs, Wilson surveyed the damage the disease had done. Where images of healthy muscles are largely black, with
only specks and striations of white indicating fat, Wilson’s were heavily marbled.
“His muscles kind of look like Kobe beef,” Cook remarked. It was the result of
inflammation, the first stage of the muscle death wrought by the disease. Cook, who
started off as an anesthesiologist before getting into regenerative medicine, has been
using two experimental techniques to stem or even reverse the process. The one
Wilson was undergoing involves injecting plasma distilled from his own blood into
the inflamed areas, a treatment long used by professional athletes to overcome injury
but unproven against muscular dystrophy. The other involves injections of stem cells,
which secrete a protein Cook thinks might work even better. Because stem cell therapies are restricted in the US, Wilson’s twice-yearly sessions require him to fly from
Vancouver, where he lives, to Tijuana, Mexico, stopping to pick up Cook on the way.
To say that such a course of treatment would be out of reach for the average ­person
is an understatement. But Wilson figures he has about five years until this disease
puts him in a wheelchair, and the sessions with Cook represent only a fraction of
what he’s spending, and enduring, to save himself.
The form of the disease Wilson has is FSHD, for facioscapulohumeral muscular
dystrophy. It affects about 1 in 8,333 people, and he has the even rarer Type 2 version, which afflicts only 5% of those who have FSHD. The pharmaceutical industry
has been reluctant to invest in finding a cure, as there aren’t enough patients to justify the cost. So last year, Wilson announced he would invest $100 million of his own
money to do it. He’s taken stakes in biotech startups, organized conferences and tried
experimental treatments such as Cook’s.
It’s the highest-profile example to date of an emerging funding model designed to
tailor medical research to the most acute needs of the ultrawealthy. For the estimated
870,000 patients worldwide who share Wilson’s diagnosis, the initiative has brought new hope. But it also raises ethical questions about
who gets to decide which diseases find a cure.
As many as 10,000 known diseases are at least as rare as Wilson’s,
and FSHD likely isn’t the lowest-hanging fruit. By putting such a fortune into curing one form of muscular dystrophy, he’s drawing away resources and
attention that might otherwise be devoted to some other awful disease that could
be more widespread or more curable. He’s blunt in acknowledging this is an advantage his money brings, noting that he’s drawn the world’s foremost experts on muscle disorders into his orbit. And if a cure does come along, he’ll likely be first in line.
To Wilson, who once decorated Lululemon tote bags with quotations from Atlas
Shrugged, this is capitalism working as it should. He readily concedes his initiative is
self-interested but argues that’s exactly what’s leading him to bet on long shots where
no one else would. Wilson says billionaires ­motivated by conditions affecting them
personally can fill gaps in the research pipeline that government and the pharmaceutical industry have left unaddressed. They might be the most immediate beneficiaries, but others’ lives will improve, too.
The Fight o
Bloomberg Businessweek
Month
October
00,
23,
2023
2023
of Chip Wilson’s Life
Bloomberg Businessweek
“My time is limited,” Wilson said, underscoring, as Cook
prepared to begin the treatment, how soon he expects to need
a wheelchair. For an hour and a half, 20 syringes of yellow,
­viscous plasma were injected one by one into Wilson’s back
and legs, leaving him gasping in pain. On the ultrasound monitor, he could see blocks of white fat being broken up with black
plasma, like patterns shifting in a lava lamp. “I have the right
amount of money at the right time,” he said. “And I’m willing
to take the risks.”
W
40
ilson was diagnosed with FSHD in 1987, at age 32, and
afterward mostly tried to ignore it, continuing to live a
life that had always revolved around sports. He’d swum competitively as a child, played football in college and gotten deep
enough into snowboarding that he started a company making
apparel for it. He competed in an Ironman triathlon at 28. But
when he started complaining of back pain in his early 30s, he
only needed to take off his shirt for a doctor to see that he had
muscular dystrophy. Wilson’s triceps were already disappearing, and loss of muscle in his lower back was forcing him to compensate with a distinctive slouching posture called swayback.
Muscular dystrophy is a group of genetic diseases that cause
progressive muscle weakness in different parts of the body. For
many people, symptoms begin to appear in childhood. FSHD,
which most often affects the face, shoulders and upper arms
first, can eventually make it impossible for patients to close
their eyes when they sleep, render speaking difficult and rob
them of the use of their arms and legs.
Wilson was lucky: His disease was progressing slowly, and he
figured that as long as he could walk
he’d be fine. He carried on running his
unprofitable snowboard apparel company until 1997, when he sold it after
18 years. Unsure what to do next, he
considered becoming a barista. He’d
remained physically active since
October 23, 2023
getting his diagnosis, though, striking on yoga to help manage
his back pain; that led to an idea to make apparel catering to his
largely female classmates. Wilson developed a proprietary fabric for stretchy, skintight pants and began making and selling
the line under the name Lululemon. He’s said he designed the
pants to make women’s butts look good, crediting the choice to
his being one of the few straight men making women’s apparel
at the time.
He also benefited from timing: Lululemon’s sleek products hit the scene just as yoga was making its North American
breakout from hippie hobby to mainstream wellness staple. The
company was at the forefront of this craze; over the following
decade and a half, Wilson did more than perhaps anyone else
to make wearing exercise gear outside the gym not only acceptable but cool. Everyone from Gap Inc. to high-­fashion houses
piled into the market he created.
Along the way, Wilson developed a reputation for saying
retro­grade, tone-deaf things. In 2004 he told a Canadian magazine he’d come up with the name Lululemon because the “L”
sound doesn’t exist in Japanese, and “it’s funny to watch them
try and say it.” (He later denied making the comment, saying the
name stemmed from his belief that the “L” sound would lend
cachet in Japan because it would signal the brand as authentically American.) The next year he told a Canadian newspaper
that plus-size clothes were a money loser because they require
30% more fabric. And in a 2009 blog post, since taken down,
Wilson linked rises in the divorce rate to the introduction of the
birth control pill, and the increased prevalence of breast c­ ancer
to “cigarette-smoking power women who were on the pill.”
“I have the right amount of money at the right time. And
Bloomberg Businessweek
Wilson undergoing treatment
in California and Vancouver
starting to go, and with them his dreams of an active old age.
“That was a wake-up call,” he remembers. He realized that,
at the rate of progression he was seeing, he’d be in a wheelchair
within 10 years. He had to do something, and fast.
W
ilson’s fortune lends a curiously corporate flavor to his
private life. At the hip brick-and-beam headquarters of
his family office in Vancouver, the weekly all-hands meeting
moves fluidly between the two subjects. The value of Wilson’s
Amer stake is discussed alongside his son’s yacht club application. A suggestion about selling some Lululemon stock is followed by family-reunion planning. A conversation about visa
applications for another of his sons turns to the branding of
two other companies Wilson owns. It’s like a C-suite crossed
with a household staff—university-educated professionals tackling corporate strategy and mundane chores with equal gravity.
So when it came to his health crisis, Wilson’s natural first
step was to commission a study from the consulting company
McKinsey. The analysts came back with a plan that crossed venture capitalism with nonprofit research funding. For Wilson to
have any hope of finding a cure for his disease, they said, he’d
have to deploy his fortune against a notorious bottleneck in the
modern drug development process: the Valley of Death.
In the world of pharma, basic scientific research is relatively
cheap and well funded by governments. This means things such
as animal experiments, cell studies or investigations of specific
genes, all of which can help establish potential therapies. In the
US, the National Institutes of Health provides about $29 billion
a year for such endeavors. Once a potential therapy emerging
from this pipeline is shown to be promising and safe enough to
be tested in humans, there’s a healthy ecosystem of companies
and investors willing to risk the much greater sums required to
(they hope) get it the rest of the way. The private sector spends
about $64 billion on that each year in the US alone.
Between those two stages lies the Valley of Death. It encompasses the risky, exhausting, frustrating process of figuring out
which academic idea to pursue, determining how to make it
a deliverable product and doing the animal tests necessary to
prove it’s safe. It was at this step—demonstrating that
specific therapies weren’t toxic at the doses needed to
be ­effective—that the Dutch company into which Wilson
had poured $30 million kept stumbling. In that, it’s
not unique: The NIH estimates that the Valley of Death
(which it calls the “translational gap”) is where as many
as 90% of new therapies fail.
McKinsey advised that, to increase his odds of finding a cure, Wilson should usher as many potential therapies through the Valley as possible. This meant making
smaller bets but more of them, and adding money only
as treatments cleared hurdles.
Wilson’s philanthropic efforts have included pledging C$100 million ($73.5 ­million) to protect vast tracts
of British Columbia wilderness, helping build a design
school and backing a long-­standing effort to build
schools in Ethiopia. For this highly personal quest, he
I’m willing to take the risks”
41
PHOTOGRAPHS FROM LEFT: PHOTOGRAPHS BY RYAN YOUNG FOR BLOOMBERG BUSINESSWEEK (3);
PHOTOGRAPH BY ALANA PETERSON FOR BLOOMBERG BUSINESSWEEK
The final straw at Lululemon came after a manufacturing
defect resulted in some of its signature black yoga pants being
too sheer, making them transparent when some women put
them on. The company had to recall almost one-fifth of its
inventory. Wilson then compounded the public-­relations disaster by going on Bloomberg Television and saying that “some
­women’s bodies just don’t work” for the pants. He identified
the problem specifically as “rubbing through the thighs.”
For a company built on making women feel good about their
body, the comments were especially damaging. Wilson posted
an apology video to YouTube, but it was addressed only to
Lululemon’s employees and not its customers. With late-night
TV hosts mocking him and the company’s share price plummeting, he resigned his post as chairman. Two years later he sold
half his shares and gave up his seat on the board.
Throughout this time, Wilson’s muscles continued to deteriorate, though at a slow enough pace that his life felt manageable.
He’d given up yoga when balance became too difficult, then
squash when he couldn’t raise his racket above his head. But
by the time he left Lululemon, he could still tackle a grueling
mountain hike near Vancouver multiple times a week. He was
looking forward to walking around Europe with his wife after
retirement, and he drew comfort from genetic tests showing
he hadn’t passed the disease to any of his five sons. Flush with
cash after his sale of Lululemon stock, he invested in a Dutch
biotech startup working on the type of muscular dystrophy he
has, but he felt no real sense of urgency to find a cure. That all
changed on a trip to China around New Year’s 2019.
Wilson was in the process of closing his biggest deal since
leaving Lululemon, teaming up with the Chinese
apparel giant Anta Sports Products to buy Amer
Sports Oy, the owner of Wilson, Salomon, Arc’teryx
and other sporting and outdoor goods brands.
He’d just stepped past Chinese customs when
he fell on the polished marble floor. Picking himself up, embarrassed and unable to explain what
had happened, Wilson walked another 20 feet,
then fell again. He realized his legs were finally
October 23, 2023
Bloomberg Businessweek
October 23, 2023
set aside $100 million and hired Eva Chin, a veteran pharma targeting the gene using RNA technology similar to what was
executive with a doctorate in physiology, to distribute it through used to create Covid-19 vaccines. An initiative to develop ways
Solve FSHD, a funding body he unveiled in 2022. An elegant to measure if potential drugs are effective and recruit patients
woman of 61 years with a runner’s air of healthful spryness, Chin for potential trials got $2.8 million. And Solve put $10 million
had spent her career in early-stage drug development, essen- into Vita Therapeutics, which was working on a way to replace
tially trying to shepherd therapies through the Valley of Death. defective cells with working ones in patients who have another
Nowhere was the problem more starkly illustrated than during form of muscular dystrophy—potentially both curing their disan early stint at Pfizer. “People in marketing would shoot down a ease and regenerating the muscle they’d lost. After receiving
lot of the things we would work on in rare diseases,” she recalls. the investment from Wilson’s organization, Vita announced
“They just wouldn’t merit the business case on the other end.” it would develop a drug for FSHD as well. So far, Solve has
Chin came to suspect this was
­distributed more than $30 million.
a problem money could solve.
“If you’re going to be in a foxhole, being in one
Because pharma companies and
with Chip Wilson feels a little less suffocating,” says
investors who seed small bioCraig Kelley, a 53-year-old FSHD patient. Kelley,
tech startups often have a dozen
who has difficulty going up stairs and can’t take off
or more potential therapies to
a T-shirt without bracing himself, guesses the odds
choose from each year, ones
of a cure have “tripled” since Wilson got involved.
that fail early-stage animal trials
“I hope anybody with any kind of long-term disabilfor toxicity and effectiveness are
ity can have a bit of a game changer like Chip.”
frequently abandoned. Chin surmised that some of these ideas
ilson’s house is the most expensive in
could work given more time to
Vancouver. It’s a low-slung, brutalist strucfine-tune details such as chemture stretching over a wide lot in a tony area of the
istry, dosage or delivery mechacity. Floor-to-ceiling windows and glass doors take
“People in marketing would shoot
nism. And sometimes a therapy
up practically its entire north side, opening almost
down a lot of the things we would
was dropped simply because the
every room to views of English Bay and the Strait of
work on in rare diseases. They just
basic scientific infrastructure
Georgia beyond. The grounds feature a sculpture by
wouldn’t merit the business case
needed to test it, such as a regKaws, one living room has a green waterfall, and a
on the other end”
istry of potential trial patients,
staff of three keeps things running smoothly.
didn’t exist. Wilson gave Chin a chance to lay some of this Chin
At the mansion’s eastern end, Wilson has an office
groundwork and be more patient than ­others, if the therapies
decorated with family photos, including a few of his
were applicable to his disease.
younger self at the beach, showing off a full head of hair and
The two of them modeled their efforts after a precedent an athlete’s physique. On this day a massage table was set up
that had shown spectacular results. Between 2016 and 2020, in the room, with Wilson lying on it facedown, having electric
the number of drugs available for a rare disease called spinal currents pumped directly into his muscles through a network of
muscular atrophy had gone from zero to three. Most infants acupuncture needles stuck in his back—another of the unproven
who’ve been diagnosed with it now see drastically improved treatments he’s pursuing. He also goes for IV drips of the natuoutcomes, which has led some to consider the disease effec- rally occurring metabolic enzyme NAD, which he’s hoping will
tively cured. This progress is largely credited to the work of supercharge his cells’ energy-producing mitochondria to keep
the SMA Foundation, which was founded, funded and run by them from breaking down or even help them regenerate. And he
a single wealthy couple, Loren Eng, a former Morgan Stanley takes testosterone daily, as well as weekly doses of the drug rapabanker, and her husband, Dinakar Singh, co-founder and chief mycin, which is usually given to recipients of organ transplants
executive officer of hedge fund TPG-Axon Capital Management. and has recently been shown to reduce age-related muscle loss.
The two started the foundation in 2003, after their daughter
Chin acts as a sort of informal scientific adviser on these perwas diagnosed with SMA. It dedicated more than $100 million sonal experiments. Mainly she tries to make sure Wilson isn’t
to exactly the kind of early-stage grunt work McKinsey rec- doing anything outright dangerous, talking him out of the more
ommended to Wilson: funding as many preclinical trials for pie-in-the-sky ideas and pushing him to be rigorous about the
promising drugs as possible, building up patient registries and more plausible ones. She’s philosophic about this part of her
establishing clear models to test if a therapy worked. These job, pointing out that, with other diseases, some good ideas have
advances attracted partnerships with the pharma industry, come from patients, and that elite athletes and other people of
eventually resulting in breakthroughs.
means have long pushed the boundaries of medicine, testing
With Wilson wanting the same kind of success in less than things out on themselves. And some result in therapies. Solve is
a third of the time, Chin got to work investing. She put $3 mil- now working on staging a clinical trial of Matt Cook’s stem cell
lion into a company exploring ways to inhibit the gene widely injections in the US, the first step to determining whether they
believed to cause FSHD, and another $1 million into a company work and making them available to anyone without a private jet.
42
PHOTOGRAPH BY ALANA PATERSON FOR BLOOMBERG BUSINESSWEEK
W
Bloomberg Businessweek
But when I suggested to Wilson that trying so many ­therapies
at once might make it harder to know which is working, and in
turn to reproduce the results in other people, he dismissed the
alternative. Testing them one at a time “would take too long,” he
said. This emphasis on what works for him versus what might
work for others (and what others might be able to afford) is a
core ethical quandary of Wilson’s pursuit.
It’s a conflict some have observed in the SMA Foundation
as well. In 2021, Harvard Business School published a case
study praising its effectiveness while also noting that, after its
initial successes developing therapies that could cure newly
diagnosed infants, the founders had continued pouring money
into treatments for older patients such as their daughter. Some
physicians, the study said, questioned this decision. With SMA
effectively cured, and only a smaller subset of an already small
patient pool likely to benefit, the physicians argued that the
foundation could do more good by shifting its expertise to
tackling other underserved rare diseases or focusing on bringing down the prices of the drugs it had already helped create. (When asked about the criticism, SMA Foundation CEO
Karen Chen stressed in a statement that older patients still have
“­significant unmet needs” and that some of the foundation’s
work could benefit people with diseases such as FSHD and ALS
as well. She told the Harvard study’s authors that the best way
the foundation could lower prices was to increase competition
by bringing more therapies to market.)
For Millan Patel, research director of the Rare Disease
Foundation in Vancouver, this kind of funding compounds
what’s already the biggest frustration in his field. Patel holds
that many rare conditions could be easier to cure than diabetes,
cancer, heart disease and others. But they don’t get a fraction of
the money and brainpower because they carry the same costs
and risks associated with crossing the Valley of Death while
offering pharma companies fewer potential customers. Patel
agrees with Wilson and Chin that billionaires can provide a solution, but he points out that if they spend their money only on
the most intractable rare diseases, and only because they or
a family member has one of them, the greater good is underserved. “At Rare Disease Foundation, we fund the best ideas that
are most likely to make a major improvement in a rare disease
over a limited period,” he says. Wealthy patients, by contrast,
“will put money toward something and just go at it for as long
as they have to. That’s a misallocation of resources.”
In the case of Wilson’s condition, the McKinsey report
noted that researchers had so far tended to eschew working
on it in favor of “easier” diseases. Even Chin acknowledges
FSHD isn’t one of those. With SMA, there had been widespread
scientific agreement that manipulating one gene could bring
a relatively straightforward cure, but FSHD appears to arise
from variations of a gene’s expression over time—an epigenetic cause as opposed to a straight genetic one, which requires
a more complicated fix. Wilson’s focus on Type 2 FSHD may
make that harder still and potentially benefit fewer people
if he’s successful. Yet the more money he sinks into it, the
more likely other research dollars, whether from investors,
October 23, 2023
com­panies or government granting agencies, will follow.
That, too, raises questions about the influence of ­billionaires.
If wealthy patients become “a major way for money to flow into
funding research, that’s where institutions and scientists will
have to go, into researching diseases that affect the very richest,” says Monica Magalhaes, associate director of the Center
for Population-Level Bioethics at Rutgers University. “Donors
may have self-interested or altruistic motivations, or both, but
the result is still that donations to specific diseases that affect
them will distort research priorities more generally.”
I put these points to Wilson as he lay on the massage table,
the needles in his back twitching and quivering with electricity.
I expected him to be evasive, but illness hadn’t dulled his propensity for speaking his mind. I’d inquired about his departure
from Lululemon, and he blamed it on an early form of online
cancellation, driven by women “whose life isn’t working for
them.” He was similarly brash addressing the ethical questions
around his research initiative. “If the very rich are putting their
money into it, they’re going to have the most access to where
the medicine is, what the drugs are,” Wilson said. “They’re willing to take the risks which are outside of pharma. Pharma has
to assess risk in terms of return for their shareholders, where
a high-net-worth individual solving it for themselves, or their
family, is an incredible motivator.”
He explained that he thinks the very rich, motivated not by
money but by survival, can create more effective funding and
research organizations than the ones that currently exist. Their
resources allow them to attract top talent with more ­generous
salaries, while the entrepreneurialism that made them rich in
the first place—not to mention the highly personal stakes—brings
a discipline and focus on results that’s missing from charities
and government organizations.
Wilson isn’t just a successful capitalist, he’s a true believer.
He’d earlier told me capitalism has “created everything good in
the world.” And he argued bluntly for the prerogatives of those
who’ve won at it. It’s his money, he pointed out, and who could
fault him doing whatever it takes to cure himself?
Even among those who’ve thought about these issues most
deeply, it’s a position that evokes some sympathy. “I promise
you, if it was my family member who had the rare disease, I’d
of course be out there arguing you should allocate that money
to the rare disease,” says Alison Bateman-House, an assistant
professor and ethicist at the Grossman School of Medicine at
New York University. And she says that, as long as the results are
made public, there’s a moral case for narrowly self-­interested
medical research. “Even if this is all focused on one form of
muscular dystrophy, there are going to be other things you can
learn about it that would potentially be of use to other muscular diseases, or how genes work in general, or what side effects
to look out for. I’m of the belief that research is a public good.”
Like any good capitalist, Wilson asks only that he be judged
on his results. “The beautiful thing about it is that by taking care
of it for themselves or their family, it solves it for everyone,” he
said. “Where’s the incentive for all the hard work they’ve done
if they can’t do that?” <BW>
43
Bloomberg Businessweek
October 23, 2023
The Indian Premier League turned a
once-staid sport into global ratings gold—
and a magnet for controversy
44
It’s
Cricket Night
in India—
and Maybe
Soon in
America, Too
By Chris Kay
Illustration by Cleon Peterson
E
arlier this year, a churning crowd streamed into
Narendra Modi Stadium, in the western Indian city of
Ahmedabad. Electronic beats pounded from speakers,
competing with police officers’ whistles. As the 100,000-plus
spectators took their seats, a succession of Bollywood stars
appeared on the field, performing pregame dance routines.
Then a salvo of fireworks arched overhead, marking the start
of the main event: the first game of the 16th season of Indian
Premier League cricket.
“IPL is a festival,” said Rajat Tiwari, one of the fans who’d
come to watch the showdown between the Gujarat Titans,
then the league’s defending champions, and the equally
formidable Chennai Super Kings. A marketing manager in
his 20s who was drinking can after can of Predator energy
drinks, Tiwari is one of the millions of Indians, many of
them professionals in its growing middle class, who’ve
helped turn the IPL into one of the world’s most lucrative sports competitions. He was transfixed by the spectacle around him, as a booming announcer led the crowd in
chants. During quiet moments in play, trumpet calls blasted
across the stands. After Moeen Ali, an English batter for
the Super Kings, was apparently caught out by the Titans,
the game was stopped, and the stadium’s speakers played a
thumping-heartbeat sound effect, signaling that off-field officials were reviewing the tape. A few tense moments later,
Gujarat fans began to roar: Ali was indeed out.
45
Bloomberg Businessweek
Super Kings captain ­Dhoni at bat
last-­minute heroics weren’t enough to clinch victory, the next
day the batsman would be mobbed by fans at Ahmedabad airport, chants of “Dhoni, Dhoni” echoing through the terminal.
Dhoni didn’t have much time to linger. The Super Kings
were due to play three days later in Chennai, the next stage
in a run that would take them all the way to a victory in the
championship final in May—the most-watched game in IPL history. In all, between TV and streaming platforms, the season
attracted almost a billion viewers.
F
or Americans, the closest analog to cricket is ­baseball,
which cricket may have partly inspired in the 19th century. In cricket, two batters at each end of a central strip
scramble back and forth to score runs, which they can also do
by hitting the ball to the edge of the ground or beyond. Behind
each batter are the wickets: three upright poles topped with
removable wooden cylinders. If a bowler—cricket’s equivalent
of a pitcher—­succeeds in knocking over one of the wickets with
the ball, the batter is “dismissed,” or out. As in baseball, batters are also dismissed if they hit a ball that’s caught by a member of the fielding team. An “innings” ends when 10 batters
have been dismissed. (Confusingly for baseball fans, cricket
uses the plural.)
After the British introduced the game to the subcontinent,
Indians embraced it with unparalleled fervor. Today cricket
is played everywhere from manicured grounds in Mumbai’s
poshest quarters to open patches in slums, where children
use weathered planks of wood as bats. But until surprisingly
recently, no one had managed to create a big-money Indian
professional league.
Instead, the focus of popular attention was the national
squad and the matches—multiday “tests” and shorter “oneday internationals”—it played against other major cricketing
powers, which include Australia, England, Pakistan and South
Africa. Despite the prestige of these games, many struggled
to attract big crowds, in part because of shoddy organization.
For example, at this month’s Cricket World Cup, which India
is hosting, fans have complained of ticketing chaos, with last-­
minute venue changes, tickets put on sale only on the day of
a match and banks of empty seats.
England does have a domestic league, known as “county
cricket.” But by the early 2000s, it was struggling with a
shrinking fan base. Stuart Robertson, then a young marketing manager at the England and Wales Cricket Board, commissioned surveys to pinpoint the causes. “The people who
were then coming to domestic cricket—not rocket science—
were middle-aged, middle-class White men,” Robertson
says. Women, young people and members of ethnic minorities reported being put off by the length of games and the
­tea-and-­cucumber-sandwiches vibe of cricket grounds. “It’s
also really boring for a lot of people,” he adds.
Robertson had an idea: compressing games into just
two sets of 20 “overs.” (An over is a sequence of six bowled
deliveries to an opposing team.) His proposal succeeded,
and England’s first professional T20 tournament was held
SURJEET YADAV/AP.JERSEYS: COURTESY TEAMS
46
Since its creation in 2008, the IPL has married Americanstyle marketing with the glitz of Bollywood and the energy of
India’s vast population, turning a sport that was long a financial laggard into a corporate juggernaut. Despite a season that
runs for just eight weeks each spring, bidders recently paid
a total of $6.2 billion for the right to broadcast IPL games
through 2027. That works out at $15.1 million per match,
more than soccer’s English Premier League and just behind
the $17 million networks pay for each game in the National
Football League in the US.
The IPL’s central strategic move was to discard cricket’s
traditional format, involving five-day matches with breaks for
players to have tea, and adopt a simplified set of rules known
as Twenty20, or T20. Lasting a broadcast-friendly three or
four hours, T20 encourages big, risky swings and frequent
“sixes,” cricket’s equivalent of a home run. The IPL appalled
traditionalists by adding charismatic announcers, NFL-esque
team names—the Kolkata Knight Riders, Delhi Capitals and
so on—and even cheerleaders.
The model has inspired a wave of copycat tournaments
in other countries, including the US. Some of the IPL’s other
attributes, however, are less worthy of emulation. Since its
founding, the league has been dogged by corruption scandals,
including allegations of bid-rigging, tax evasion and insider
deals. Entire teams have been sanctioned and even suspended
for conflicts of interest and involvement in illegal gambling.
The IPL has nonetheless proved irresistible in India,
where cricket inspires intense devotion. Toward the end of
the Ahmedabad match, the Super Kings’ captain, Mahendra
Singh Dhoni, stepped into the crease for his turn to bat. With
his side trailing, the pressure on the 42-year-old veteran, who’s
led India to multiple international victories, was intense. With
moments to go, Dhoni sent the leather ball soaring beyond
the pitch, delivering a six for the Super Kings. The crowd
erupted; a giant screen flashed “MAXIMUM.” Even though his
October 23, 2023
Bloomberg Businessweek
in 2003. Four years later the Indian
national team played in the inaugural T20 World Cup. The matches were
a sensation, not least because India
defeated its archrival, Pakistan, in a contest that drew 48 million viewers.
One of the Indians most impressed
by the tournament was Lalit Modi, the
chain-­smoking, name-­dropping scion
of a family with interests in chemicals,
tea and tobacco. (He’s not related to
India’s prime minister, Narendra Modi.)
Partial to Armani suits and flashy cars,
Modi was ostentatious even by the standards of the Indian business elite. He
had attended Duke University in the
mid-1980s, where he was struck by
the mass appeal of the NFL. “Fat guys
running around a field chasing a ball.
Everybody was glued to it,” he marveled
later. But Modi’s time in the US took a
dark turn after he and some fellow students were robbed at gunpoint by a man
they thought was about to sell them half
a kilo of cocaine. They then attacked
the person they suspected of setting
them up. Modi pleaded guilty to a drug
charge as well as misdemeanor assault
and false imprisonment, and received a
two-year suspended sentence.
He later returned to India, where he
joined the family business and set up a
TV network. On the side he eventually
secured a position as the vice president
of the Board of Control for Cricket in
India (BCCI), a powerful, opaque body
that regulates the national team and all
domestic tournaments. There he spotted the commercial opportunities of
creating a major T20 league. Modi hired
IMG, the global talent agency, to entice
the world’s best cricketers with salaries
as high as $1.5 million—­unprecedented
for the sport. He negotiated a $2 billion
TV deal with Sony Corp., which has an
Indian broadcasting operation, for the
first 10 tournaments. And he pitched
relentlessly to wealthy acquaintances
such as Ness Wadia, whose family controls a major industrial conglomerate,
during holidays together in Thailand.
(Modi did not respond to multiple interview requests.)
In January 2008, the great and
good of Indian business convened at
October 23, 2023
IPL Team Owners 2023
Punjab Kings
Consortium including
Mohit Burman, Ness
Wadia and Preity Zinta
Rajasthan Royals
Emerging Media,
RedBird Capital
Partners
Mumbai Indians
Reliance Industries Ltd.
Lucknow Super Giants
RPSG Group
Chennai Super Kings
India Cements Ltd.
Gujarat Titans
CVC Capital Partners
Royal Challengers
Bangalore
Diageo Plc/United
Spirits Ltd.
Sunrisers Hyderabad
Sun Group
Delhi Capitals
GMR Group,
JSW Group
Kolkata Knight Riders
Shah Rukh Khan,
Mehta Group
Wankhede Stadium, Mumbai’s premier
cricket ground. Vijay Mallya, a mulleted
beer baron who called himself India’s
“King of Good Times,” arrived in a red
Bentley, others in a procession of limousines. Petrochemicals tycoon Mukesh
Ambani, now Asia’s richest man, was
also present. Wadia had come with his
then-­girlfriend, actress Preity Zinta;
even more star power was supplied
by Bollywood heartthrob Shah Rukh
Khan. Modi had promised a series of
sweeteners to reassure potential bidders for teams. Unlike European soccer, the usual target of sports-curious
international billionaires, the IPL would
have a single-tier structure, avoiding
the risk of a financially ruinous relegation to a lower division. Revenue from
media rights and league-level sponsorships would go into a shared pool,
while teams retained control over ticket
sales, merchandise and local sponsor
revenue. And a salary cap (­currently
$11.5 million per team), as well as a limit
of four foreign players in each starting
lineup, would keep expenses down and
foster local talent.
In the stadium boardroom, the
bidders submitted sealed envelopes
containing offers for the eight IPL franchises up for grabs. Ambani, prepared
to write the biggest check, secured the
Mumbai Indians for $112 million. Mallya
claimed Royal Challengers Bangalore,
while Khan acquired the Kolkata Knight
Riders. Wadia, bidding with Zinta,
bought Kings XI Punjab. The cheapest team to be sold, at $67 million, was
the Rajasthan Royals, representing the
vast, arid state on India’s northwestern
plains. It went to London-based venture
capitalist Manoj Badale and his partner
Lachlan Murdoch, who was on hiatus
from his father Rupert’s media empire.
The first-ever IPL match was held
three months later, between Kolkata
and Bangalore. Playing for Kolkata, New
Zealand’s Brendon McCullum smashed
an astonishing 13 sixes, a perfect example of the excitement that IPL cricket
could deliver. Off the field, the league
became a focus of India’s high-society
party c­ ircuit—with Modi, who zoomed
from game to game in a private jet,
47
Bloomberg Businessweek
October 23, 2023
serving as master of ceremonies. He orchestrated soirees
in fancy hotels, where guests paid $1,000 each to rub shoulders with star cricketers and cheerleaders.
Badale and Murdoch had taken a Moneyball-style
approach to selecting players for the Royals, focusing on
those they believed were undervalued and spending less
on salaries than any other franchise. The strategy worked.
Captained by the late Shane Warne, a legendary (and legendarily hard-­drinking) Australian bowler who Rajasthan had
scooped up for just $450,000 after he received no other
offers, the Royals defeated the Super Kings in the league
final. The IPL had its first champions. Not long after, it had
its first major scandal, too.
E
48
ven as he climbed to the top of the Indian business
world, Modi had an abrasive edge, getting into periodic feuds on social media and beyond. The most consequential was with Shashi Tharoor, an erudite lawmaker from
the then-ruling Congress party. In a series of tweets in 2010,
Modi accused Tharoor, at the time a junior foreign minister,
of improperly helping his girlfriend win a stake in a newly created franchise in Kochi. Tharoor, in turn, alleged that Modi had
tried to rig an auction for new teams.
An uproar ensued. India’s tax department opened an
investigation into IPL franchise sales, questioning Modi and
raiding some teams’ offices. (Tharoor also resigned from
his cabinet position.) Next came allegations that the league
founder had accepted kickbacks and arranged cozy deals for
friends and relatives.
After arriving by helicopter to the IPL final in Mumbai,
Modi gave a defiant speech to fans, calling his situation “a trial
by the media. Nothing has been proved.” His remarks failed to
sway the BCCI, whose remit includes governing the IPL. A few
days later, it suspended Modi as IPL commissioner and promised a wide-ranging inquiry. He denied ­wrongdoing, arguing
that his relatives bought into the IPL through open tenders
at a time when other investors were hanging back. Then he
claimed he was being targeted by Mumbai’s notorious organized crime groups for refusing to pay protection money.
Modi soon fled to London, moving to Belgravia, a central
district populated by emerging-market oligarchs, and assembling a fleet of luxury vehicles, including a Ferrari with the
license plate “CRI3KET.” The BCCI eventually barred him from
organized cricket in India for life after accusing him of “serious
misconduct” related to allegations of bid-rigging and financial
irregularities. (The BCCI disciplinary process is not a judicial
proceeding, and the finding didn’t carry legal weight; a police
investigation into Modi didn’t lead to charges.)
Modi’s removal didn’t end the IPL’s troubles. Three years
later, Badale was in London, watching on TV as the Royals
lost a closely fought match with Ambani’s Mumbai Indians.
His team was having an otherwise excellent s­ eason, so
Badale was little bothered as he turned in for the night. The
next morning, he picked up his phone and saw 16 missed
calls from India.
Three of Badale’s players had been arrested in overnight
raids, along with 11 bookmakers. Their arrests were part of
an Indian police investigation called “Operation U-turn,”
which probed “spot-fixing”: the rigging of minor plays that
were unlikely to affect a game’s outcome but significant
enough for gamblers to bet on. Players allegedly received
tens of thousands of dollars to facilitate wagers by high-end
bettors and criminal syndicates, communicating through
hand signals and prearranged gestures such as tucking towels into their waistbands. (There is no suggestion that Badale
was involved.)
The scandal expanded when a man named Gurunath
Meiyappan was arrested on allegations that he’d passed on
inside information about the Chennai Super Kings’ strategy. That would be bad enough. But Meiyappan happened
to be the son-in-law of then-BCCI President Narayanaswami
Srinivasan, who also owns the team. The matter ultimately
reached the Indian Supreme Court, which ordered Srinivasan
to step down and suspended the Royals and Super Kings from
the IPL for two years.
To signal that it was serious about dealing with graft, the
BCCI hired Neeraj Kumar, a former Delhi police commissioner
who’d overseen Operation U-turn, to head an in-house anti-­
corruption unit. But his work was “totally ignored,” Kumar
tells Bloomberg Businessweek, and he was given few resources.
“I was just there to tick a box,” he says. Later the Supreme
Court stepped in again, ordering the firing of BCCI officials it
said were delaying reforms. It also appointed an independent
committee of auditors to oversee a further cleanup. Kumar
argues that those changes didn’t go far enough, making further scandal inevitable. “It’ll come sooner rather than later
and catch everybody napping,” he says. (The BCCI didn’t
respond to requests for comment.)
It appears, however, that no amount of perceived wrong­
doing can shake the appeal of the IPL. “It is one of the most
powerful brands in our portfolio,” says Hina Nagarajan, head
of India at liquor giant Diageo Plc, which took over Royal
Challengers Bangalore after buying Mallya’s spirits business. Even as the Covid-19 pandemic forced games into a
­spectator-free bubble in the United Arab Emirates for two
seasons, the BCCI created a pair of new teams, the Lucknow
Super Giants and Gujarat Titans. Indian conglomerate RPSG
Group paid $940 million for the Lucknow franchise, while
CVC Capital Partners, the buyout firm that formerly owned
Formula One, bought the Titans for $750 million. The BCCI
also set up a women’s T20 league, whose five teams sold for
a combined $580 million.
SUPER KINGS: ZUMA PRESS/ALAMY
“Any startup that scales as rapidly as
the IPL is going to have turbulence”
Bloomberg Businessweek
A larger IPL meant more games, and thus bigger media
contracts. In an auction last year, Viacom18—a joint venture
between entertainment group Paramount Global and Ambani’s
Reliance Industries Ltd.—paid about $3 billion for five years
of streaming rights. Walt Disney Co. spent roughly the same
for traditional TV. Sports industry veterans were stunned; the
total was three times higher than in the previous IPL auction.
The rising tide has lifted even the previously suspended
Rajasthan Royals, who finished second in the 2022 season.
According to Badale, they’ve been an “outstanding” investment, with a 30% profit margin. RedBird Capital Partners, the
New York-based owner of soccer club AC Milan, now has a 15%
stake, and the team is branching out internationally, setting
up subsidiary squads in Barbados and South Africa. Badale
says the problems of the IPL’s early years are now firmly in the
past. “Was the tournament and was the league slow to professionalize and ensure complete transparency around its governance?” he asks. “Of course. Any startup that scales as rapidly
as the IPL is going to have turbulence.”
I
n a remote valley in the foothills of the Himalayas,
Dharamshala is an improbable, if spectacular, location
for a major sporting event. The city is best known as the
home of the Dalai Lama, and outside the cricket ground on
a recent evening, red-robed Buddhist monks shared the narrow, winding roads with bumper-to-bumper car traffic.
In the stadium, IPL Chairman Arun Singh Dhumal stroked
his pointed beard as he looked over the crowd from a corporate box. About 23,000 people had come to watch one of
the last games of the season, between Rajasthan and Punjab.
Slim and dressed in a purple batik shirt, Dhumal was joined
for the occasion by his brother Anurag Thakur, a sports minister in India’s federal government. Even though neither team
was likely to secure a playoff spot, Dhumal noted approvingly
that the stadium was packed.
Constructed two decades ago, the facility was a passion
project for Dhumal and Thakur’s family, which is a prominent
political dynasty in the region. “Everybody laughed” when
the idea was first proposed, said Thakur, who before entering the cabinet was among the BCCI officials ordered to step
down by the Supreme Court for failing to implement reforms.
(At the time, Thakur said he accepted the decision.) Theirs is
one of several powerful, politically connected clans that are
deeply rooted in the running of Indian cricket. This alignment
between politics and sport is no coincidence. “For anything
that you need to do in this country, you need some political
support or administrative backing,” Dhumal said.
Nightfall soon obscured the mountains above the floodlit pitch, and the game unfolded in classic IPL fashion. With
each wicket taken, the crowd cheered with such energy that
a spectator’s smartwatch dinged repeatedly with alerts that
the noise exceeded safe limits. As the fifth Punjab batter was
caught out, Thakur—who’d been posing for endless rounds
of selfies and talking with various dignitaries—­grumbled
that the team had lost too many wickets. Batting second, the
October 23, 2023
The Super Kings celebrate after winning
the IPL championship in May
Royals were set back when star English batter Jos Buttler was
­dismissed for a “duck”: an innings with no runs. But they rallied with a pair of 50-run performances from Yashasvi Jaiswal
and Devdutt Padikkal. Then Dhruv Jurel, a 22-year-old phenom from Uttar Pradesh, bashed out a final six, securing a
win for the Royals with just two balls left.
The IPL final, between Gujarat and Chennai, was held a
couple of weeks later. Many expected his team’s victory to be
the last professional game for Dhoni, the storied Super Kings
captain. But the fame and fortune the IPL brings is hard to
give up. “The tough thing for me is to work hard for another
nine months and come back and play at least one more season of IPL,” the adored cricketer said during the post-match
trophy ceremony. “It won’t be easy for me, but the way they
[fans] have shown their love and affection, it’s something I
need to do for them.”
Attempts to replicate the IPL formula overseas are getting
more serious. Major League Cricket, a US upstart part-funded
by Satya Nadella and Shantanu Narayen—the chief executive officers of Microsoft Corp. and Adobe Inc., respectively—­
concluded its first season in July, with MI New York defeating
the Seattle Orcas for the championship. IPL franchises are
part-owners of four of MLC’s six teams, and several top IPL
players, including South African batsman Faf du Plessis,
are playing in both leagues. MLC is counting on the US’s
5 ­million-strong Indian diaspora to generate initial interest.
In the longer term, it hopes to develop a cohort of American
stars who’ll build up cricket’s stateside appeal.
Still, even wild success for MLC, or the new T20 contests in
South Africa, the UAE and other countries, would hardly dent
the IPL’s commercial dominance. Many of the world’s top players are already booked up, posing hurdles for new leagues.
Just as important, the BCCI essentially bars Indian cricketers
from joining overseas competitions. Some officials and players
elsewhere complain that India is monopolizing global cricket,
with no one else able to match its resources. But for the IPL’s
backers, all this is a welcome reversal of post-colonial history
and a reflection of the country’s growing financial and geopolitical weight. “Why should that be criticized?” Dhumal asks.
“We are proud that we’re an economic powerhouse.” <BW>
49
For years the ski industry
has been dominated by
corporate consolidation.
Now independently owned
mountains are having their
moment in the sun
By Gordy Megroz
The Rise of
The Indies
P
U
R
S
U
I
T
S
The Ski
Issue
55
New essentials in case
of avalanche
56
This season’s best
puffer coats
58
Resort expansions you
need to ski to believe
59
A perfectly useless tote
for the après hours
October 23, 2023
Edited by
Chris Rovzar
Businessweek.com
The aerial tram
at Jackson Hole
climbs 4,139 feet
and offers access to
backcountry skiing
51
Bloomberg Pursuits
I
52
n the ski industry in recent years, the murmurs around
every independent resort have been the same: How long
until Vail Resorts Inc. or Alterra Mountain Co. comes
and plants its flag? In 2008, Alterra didn’t exist, and Vail
owned just five mountains. Today the two represent more
than half the skiable terrain in the US—and counting.
But in 2023 it’s looking likely that independent mountains
will have a moment to shine. While residents around many
newly acquired Alterra and Vail resorts criticize the corporate tendency to put profit above community, and visitors
grow frustrated with the massive crowds driven by the companies’ respective Ikon and Epic passes, indies are drawing
new customers. And crucially, they’re also finding lifelines
in prominent investors.
This year the number of resorts included in the Indy Pass,
which for $399 offers two days of skiing at each of its independently owned member ski areas, grew from 34 to 120.
Demand was so overwhelming that sales were halted by
April. The pass went back on sale in October, when another
54 resorts were added. “People want more choices beyond
what they’re getting from Vail and Alterra,” says entrepreneur Doug Fish, who founded the pass in 2019.
Financial backers are lining up, too. Sure, they see ski
areas as good buys—but just as important, they also say they
want to protect them from becoming corporate assets. In
recent months, some of the country’s largest indie mountains have been acquired by new majority owners—all of
whom come from outside the ski industry, including former Citigroup Inc. Chief Executive Officer Mike Corbat and
Netflix Inc. co-founder Reed Hastings.
Here are three stories of recently acquired independent mountains and how their owners are taking on the
industry’s Goliaths.
A Unicorn Goes to Utah
Hastings never intended to end up at Powder Mountain, but
one snowy day in 2016, after setting out in pursuit of fresh
tracks at Park City Mountain Resort, the Utah resident knew
it was time to try something new. “There were so many people that the trails were skied off and the powder was gone in
under an hour,” he recalls. “It was like ants on a sugar cube.”
It wasn’t his first experience of that disappointment. But
this time he wasn’t going to settle for it. He’d heard of a ski
area 90 minutes north of Park City, one with 8,484 acres of skiable terrain where skiers and snowboarders could sometimes
still find powder turns days after a storm. Hastings piled his
family into the car; by lunchtime they’d found the fluffy snow
and well-spaced trees of the aptly named Powder Mountain.
That day, they discovered what relatively few others have:
Powder Mountain is a special kind of ski experience. During
good winters, it gets about 500 inches of snow, which blankets
steep shots and open meadows. To access some runs, you ride
a Sno-Cat. To get back to the lifts from other trails, you take
an old-school bus. Because it’s a bit off the beaten path and
lacks hotels and amenities, Powder gets about a quarter of the
October 23, 2023
traffic the Park City resorts receive. Hastings quickly decided
to buy land, build a home and settle in. “We weren’t looking
to move” from Park City, he says. “But the ski experience was
so much better that we decided to buy a lot.”
This was two years after Summit Series, a company that
organizes conferences all over the world, had bought Powder
Mountain, hoping to build 500 homes, as well as restaurants,
bars and possibly even a neuroscience lab and high-altitude
performance center to cater to its A-list patron community
(think Bill Clinton, Richard Branson and Mark Cuban). But the
ski infrastructure was old, and Summit struggled to maintain it.
“Where we came head-to-head with reality is how difficult and
capital-intensive it is to build in a mountain environment,” says
Elliott Bisnow, one of the founders of Summit. “In order for
Powder Mountain to move forward, it needed more capital.”
Bisnow approached Hastings, whose net worth is around
$4.6 billion according to the Bloomberg Billionaires Index,
about buying Powder—and it took Hastings just a few weeks
to say yes. His majority ownership stake was announced in
September, along with a $100 million investment; Hastings
tells Bloomberg he plans to direct those funds toward new
lifts, lodges, roads and an improved sewer system.
Bisnow says he turned down several offers from conglomerates to buy the resort. “If a big private equity company or
real estate group buys Powder Mountain, by ­definition they
have investors in their funds, and the investors expect certain returns,” he says. “So therefore, they want to develop
as much as humanly possible. That’s not good for Powder
Mountain, and it’s not good for skiers.”
Hastings agrees. “I’m interested in preserving the
uncrowded experience,” he says, adding this would have been
impossible if Powder had been purchased “by one of the big
companies.” (Powder Mountain is currently part of the Indy
Pass, but Hastings says that could change if crowds come.)
Remaining independent also means there’s no board to
answer to—“no quarterly pressure,” as Hastings puts it, which
allows him to “invest for the long term.” He’ll veer somewhat from Summit’s original master plan—­a neuroscience lab
won’t be built—and instead focus on polishing up the ski area
without creating attractions that might draw massive crowds.
(When asked whether a hotel would be built at the ski area,
Hastings said he doubted it.)
And with plenty of capital, Hastings can extend bargains
other ski areas probably can’t. This winter, Powder will offer
one of the best lift ticket deals out there: $19 for night skiing,
available to anybody, every night of the season.
Keeping Jackson Hole Private
On April 1, 2015, a group of snow-obsessed, Jackson Hole-based
filmmakers posted a story online announcing that Jackson
Hole Mountain Resort had been sold to Vail. The news sent
skiers and snowboarders—as well as the local community—into
a tizzy. On social media, commenters proclaimed that JHMR
was finished and that it was the worst thing ever to happen
to skiing. Most, it seemed, hadn’t noticed what day it was.
PREVIOUS PAGE: COURTESY AMY JIMMERSON/JACKSON HOLE MOUNTAIN RESORT. THIS SPREAD: COURTESY POWDER MOUNTAIN
SKI SPECIAL
SKI SPECIAL
Bloomberg Pursuits
The April Fool’s prank revealed a deep sentiment: People
didn’t want to see JHMR sold to a large corporation. Nobody
heard that message clearer than Jay Kemmerer, whose family
had owned the Wyoming ski area since 1992 and who’d since
served as chairman. “Everybody was interested in buying
Jackson,” says Kemmerer, who remembers getting dozens of
inquiries from around the world every year. “But if I was to
sell, it was very important I sell to another private owner, not
a corporation.” Kemmerer says he would entertain an offer
only from a buyer who’d protect the interests of Wyomingites,
the community and skiers and snowboarders.
Already famous for its steep skiing, daring couloirs, cliff
drops and deep powder, the area’s been transformed from
underdeveloped to one of the snow sports capitals of the
world. The Kemmerers have added fine dining restaurants,
overseen the opening of a Four Seasons hotel and upgraded
lifts—including, in 2008, replacing the mountain’s signature
red trams with two larger, 100-person models. In recent years
they’ve also provided more beginner and intermediate terrain
and built infrastructure to expand JHMR’s ski school.
During 2020’s pandemic closures, though, the Kemmerers
wondered if their time was up. “We were forced to shut down
the ski area, and it made me think, ‘Are we gonna survive
Covid?’ ” Kemmerer says. “It added a lot of stress, to the point
where I thought about selling.”
October 23, 2023
In April 2022, after JHMR had concluded its 60th ski
s­ eason, he approached former Jefferies Financial Group Inc.
banker Eric Macy, who’d spent about a year serving on the
JHMR board of directors, and floated the idea of a sale. Macy
was interested, and he quickly persuaded Corbat, who’d
recently left his post as CEO of Citigroup, to join him in the
venture. Macy says the deal, inked in August 2023, was “put
together by three very close friends, getting together to figure out what’s in the best interest of the mountain.”
First up for Macy and Corbat: installing a high-speed chairlift to get to some of the mountain’s most challenging terrain,
which is currently accessible only by an old, slow quad. They
also intend to develop the base village area, which Corbat
describes as “a pretty uncrowded palette.”
Teton Village, the area at the base of the mountain, has
10 hotels and a handful of dining options, but there are still
hundreds of acres that can be developed. “Over time we can
continue to build that out,” Corbat says. Whether that means
additional grungy après-ski watering holes such as the Mangy
Moose or upscale digs such as the Four Seasons—two Jackson
Hole fixtures—remains to be seen.
But the decisions will be made by nearby families who have
no intention of going anywhere else. “Next time you hear the
rumor of somebody buying Jackson Hole Mountain Resort, you
can flatly deny it,” Macy says. “Our kids will run it someday.”
Powder Mountain
53
Bloomberg Pursuits
The rebranded Windham Mountain Club
New York Gets a Mountain Club
54
Roughly 140 miles from New York City in the Catskills,
Windham Mountain is used to being overlooked and
­underestimated—typically in favor of Hunter Mountain just
next door, where the slopes are steeper and lined with more
snowmaking cannons. But when Windham’s lift ticket prices
rose to $175 a day last season, it set off loyalists, who felt protective of the mountain’s family-friendly terrain and laid-back
vibe. At Windham, winding blues and greens land at a vibrant
base area that’s often filled with live music.
The resort’s owners at the time—the executives at
Connecticut-based private equity firm North Castle Partners
LLC—had tried and failed to make the mountain’s economics
work a few times before, including with mountain biking and
concert programming to stoke business in the summer months.
When they decided to rethink food and lodging, they roped in
expert reinforcements. In came Kemmons Wilson Jr., whose
father founded Holiday Inn, and Sandy Beall, who started the
restaurant chain Ruby Tuesday but may be best known in the
hospitality world for creating one of the country’s standard-­
setting luxury resorts, Blackberry Farm in Tennessee.
Instead of consulting on the deal with North Castle, Wilson
and Beall bought out the majority stake. “We spent over two
years talking, learning, planning and negotiating before closing the deal in April,” Beall says. He adds that they beat out
“one of the large ski companies, who were only interested in
leveraging Windham for winter skiing.” A year-round focus,
he says, will create jobs, encourage longer stays and be lucrative for the community and local businesses.
A unique aspect of Wilson and Beall’s initial $70 million
capital improvement plan is culinary experiences—for which
October 23, 2023
Blackberry Farm is known.
This season will see a new
Mediterranean ­r estaurant
in the base lodge and an
Italian Alps-style restaurant
at midmountain. The Beall
and Wilson families plan to
improve lift and ­snowmaking
infrastructure, expand the
golf course and add pools
and r­acket-sports courts.
Eventually they want to build
a resort and a sister property
nearby in the Catskills, where
many New Yorkers summer.
All this was announced as
part of a complete rebranding in October; the new owners changed the name of the
ski area to Windham Mountain
Club—a reflection of their
­membership-driven business
model. A $175,000 initiation fee
and annual dues of $4,500 will cover perks such as ski valets,
access to ­members-only restaurants and preferential reservations for skiing and dining. (Membership won’t be tied to
mountainside condo ownership, and skiing will continue to
be open to the public.)
“Skiing needs to be very good, with few lines and great
snow,” Beall says. “But even more important is creating a
wonderful experience over two or three days of skiing, including great dining and après-ski moments.”
The turn to luxury will attract certain New Yorkers, who will
no doubt enjoy having a Blackberry Farm-like experience in
their backyard. But the announcement was not well received
by Windham die-hards, many of whom thought the new owners were pricing them out. On social media, they railed against
the Bealls and Wilsons for turning Windham into an exclusive
resort. In a letter, Chip Seamans, the longtime president and
general manager of Windham, pushed back. “The overriding
goal of all upcoming improvements is to provide a phenomenal experience for guests, a great place to work for employees,
and support for a thriving local economy,” he wrote.
“I’ve watched changes made at the other ski areas as they
were acquired,” Seamans says, referring in part to his experience managing Maine’s Sunday River amid an acquisition that
left him somewhat sour. “Sometimes that’s done with great
success, sometimes with much less success,” he says. “There
isn’t a one-model-fits-all approach to running a ski area.”
At Windham, the Bealls and Wilsons are pioneering a
new model, but Seamans is confident about the next chapter. “Independent ownership gives you total flexibility,” he
says. “We’re not beholden to a corporate formula, and we’ll
be able to make decisions that we think are best for our guests
and our community.” <BW>
COURTESY WINDHAM MOUNTAIN CLUB
SKI SPECIAL
SKI SPECIAL
Alpine
Assistants
The latest backcountry
gear will help you
stay safe off-piste
By Jen Murphy
A Mountain Smartwatch
Designed specifically for outdoor expeditions,
the Suunto Vertical is a failproof backup
for your smartphone—with a compass,
barometer-based altitude readings, advanced
weather forecasting, storm alerts and a
detailed network of offline maps to help you
navigate in the absence of network coverage.
Tap into it all from a 1.4-inch screen that
stays powered for as long as 60 days without
a charge. A titanium solar model can stay
powered for a year. From $629; suunto.com
A beacon, shovel and probe have long
been considered the nonnegotiable trio
of backcountry safety gear—things that,
along with information from an avalanche education course, you should
keep handy if you plan to leave the
boundaries of any ski resort. Consider
these following products as new ways to
take your safety to the next level.
COURTESY COMPANIES
55
Assisted Breathing Vest
Research shows that it takes as little as
10 minutes to start running out of air when
you’ve been trapped in an avalanche; after
35 minutes, a victim has only a 10% chance
of survival. Enter DB’s Snow Pro Vest, the
first wearable product to incorporate an
innovative breathing assistance system
called Safeback SBX. It looks like a normal
puffer, with a thin, integrated 8-liter
backpack. But pull an activation handle from
its left shoulder strap, and it can release
two liters of oxygen per minute into the
victim’s vicinity—allowing for 90 minutes of
breathing time. If the avalanche transceiver
is on send mode, that extra time will
drastically increase the chance of rescue.
$699; us.dbjourney.com
Electronic Avalanche Airbags
If you get caught in a slide, avalanche airbag
packs—widely considered backcountry safety
essentials—can inflate to keep you afloat
and more visible to rescuers. These typically
require heavy canisters of pressurized
gas, which are single-use and a pain to fly
with, because full ones can’t be taken on a
plane. New electronic bags do away with
those hassles. POC’s Dimension Avalanche
Backpack is TSA-approved and reusable,
and it employs a supercapacitor-powered
fan to fully inflate its airbag in less than four
seconds. But it does weigh 7 pounds, which
is more than traditional options. At just
4.3 pounds, Ortovox’s Avabag LiTRIC Zero
is a lighter option if you’re ski-touring versus
heli-skiing. It uses both supercapacitors and a
lithium-ion battery—which means it can hold
up to 60 hours of charge, inflate twice and
recharge in 25 minutes. But you can’t put it in
checked luggage with your other gear. $1,300;
pocsports.com; $1,200; ortovox.com
The Essential App
When it launches on iOS in November,
AspectAvy will predict the safest
backcountry routes down any mountain in
the lower 48 by weighing historical predictors
of avalanche risk, such as snowpack stability
and slope angles, against the daily forecast
in your location. The app draws data from
Lidar maps, which use light sensors to record
everything from tree density to foot traffic
and deeper-powder areas along slopes. Its
creators plan to expand into other regions
as Lidar technology becomes more available.
After the app helps you decide which way
to go, a coaching feature can monitor your
route in real time. Feedback on your decisionmaking arrives at the end of the day. $50
annual subscription; aspectavy.com
SKI SPECIAL
Bloomberg Pursuits
October 23, 2023
Down Is Up
There’s a reason everyone’s high on puffers this season
By Matthew Kronsberg
②
③
①
56
1
Bankable
Long removed from its origins
making workwear on the edge
of the French Alps, Moncler now
produces puffers for people who
don’t need to spend any more
time out in the cold than they
absolutely want to. Its men’s
Saulx short down jacket is boldly
monogrammed on the sleeve and
made with nylon laqué that’s as
shiny as a new Maserati. It comes
in the inevitable black, as well as
a Barbie-bright pink that’s more
Malibu than Matterhorn. $1,930
2
Biodegradable
Designing a winter jacket that
will remain stylish and functional
long term is the goal for most
brands, but Italian label Herno
has a more ambitious five-year
plan. Its Globe line is made with
Fast5 nylon, which, after being
landfilled, can break down into
organic matter in a half-decade,
compared with 50 years for
typical nylon. The diamondstitched short-sleeved cape and
muff is also available in green,
orange and other colors. $990
3
Technological
Rest assured that whatever
you’re wearing from Londonbased fashion futurists Vollebak
Ltd., it will include technology
that sounds straight from the
mind of James Bond’s Q. The
namesake item in its Aerogel
puffer, for instance, is the lightest
solid material ever created and
an effective enough insulator
that NASA uses it in spacesuits.
Here, Vollebak infuses PrimaLoft
insulation for more warmth
without adding weight. $1,295
4
Packable
Started in 1981 by a former
nuclear physicist, Outdoor
Research LLC takes a functionbefore-flash approach. Its men’s
Coldfront down hoodie is mostly
filled with responsibly sourced
700+ down. The shoulders and
cuffs use a blend of down and
VerticalX ECO insulation for extra
warmth. Even though this wellstuffed jacket is cut spaciously,
to leave room for base layers, it
can fold down into a compact
zippered pocket. $279
COURTESY COMPANIES
④
SKI SPECIAL
Bloomberg Pursuits
When an AI-generated image of Pope Francis wearing a
­full-length white puffer coat ricocheted around the internet
in March, the primary reaction was to fret over how susceptible society is to photo fakery. But perhaps another lesson
from the incident: The right puffer can make even the pontiff look cool. “Puffers are literally huge at the moment,” says
Hannah Kane, author of The Style Thesaurus ($35, Laurence
King). “They are easy to wear because they’re practical,
light and warm, but they’re also very voluminous. So they
are obviously a big statement.”
October 23, 2023
The growth of this ever-puffing universe can be seen
not only on the streets of New York, where Uniqlo’s standard coats are the keystone piece of many urbanites’ winter uniform, but also in the financial reports of brands
such as Moncler SpA, whose revenue in the first half of
2023 rose 29% from the same period last year. The company just completed a significant expansion of its factory
in Bacau, Romania. Moncler’s opulently styled (and priced)
winter wear isn’t for everyone, but it won’t take a papal miracle to find a puffer to fit your taste, geography and lifestyle.
⑧
⑤
⑦
57
⑥
5
Durable
While trends come and go,
Canada Goose continues to
produce gear made to last. The
new Cypress cropped puffer
combines practicality with
contemporary design—recessed
cuffs hold in warmth, as does an
interior drawstring on the highhip hem. Its responsibly sourced
750-fill power duck down is
encased in a shiny, waterrepellent, wind-resistant shell
available in black, silverbirch or
turquoise-y boulevard blue. $895
6
Noticeable
Nobis, founded by a former vice
president of Canada Goose,
strikes a balance between Arctic
adventure ruggedness and
urbane styling. Its Dyna chevron
quilted puffer jacket for men is
packed with enough Canadianorigin white duck down to
be rated for temperatures as
low as 5F. Sealed seams and
windproof technical taffeta
fabric help keep the cold out,
while pit zipper vents prevent
overheating. $895
7
Venerable
It’s been more than 30 years
since North Face’s Nuptse jacket
made the puffer a streetwear
staple. This year, Japanese
designer Jun Takahashi’s
Undercover label teamed up
with the vaunted brand for the
North Face x Undercover SouKuu
Cloud Down Nuptse, available
in three colorways. All sport
800-fill ProDown for the coldest
conditions, as well as hiddenzipper removable sleeves when
things warm up. $825
8
Sustainable
The midweight, midthighlength women’s Radalie parka
from Patagonia upholds the
company’s reputation for
functional, eco-friendly gear
made in fair-trade factories.
It’s available in black and four
additional, muted colors, and
the outer shell is composed
of 100% recycled polyester
taffeta treated with a PFC-free
water-repellent coating. Inside
is Thermogreen 100% recycled
polyester insulation. $249
SKI SPECIAL
Bloomberg Pursuits
October 23, 2023
Bigger Is Better
The major
improvements
you need to know
about at top US ski
destinations
By Jen Murphy
Aspen Snowmass, Colorado
The upgrade: A terrain expansion called
Hero’s is adding chutes, three gladed areas
and four cut trails on the upper eastern
aspects of the ski resort, marking Aspen
Mountain’s first major update since 1985.
Additional acres: 153 (+22%)
The investment: $14 million
Why we care: The new area faces north at
a high elevation (all above 10,000 feet), so
these slopes are more likely to stay blanketed
in powder even in low-snow years—never
mind the epic views toward Independence
Pass and the Roaring Fork River.
Steamboat Ski Resort, Colorado
The upgrade: Mahogany Ridge and Fish
Creek Canyon—two areas previously
considered out of bounds—have been
properly built out, including a new high-speed
quad to serve some of the mountain’s most
beautiful gladed slopes.
Additional acres: 655 (+22%)
The investment: $220 million
Why we care: The expansion makes
Steamboat the second-largest ski resort in
the state. Its reputation as an “intermediate”
mountain is also being broadened: It
A trail map of the Hero’s expansion at Aspen
introduced a new beginner’s area last year,
and the added expert-only terrain includes
challenging rock cliffs, chutes and glades.
Sun Valley Resort, Idaho
The upgrade: The chairlifts at this resort
have needed love for years; most were built
in the late 1980s and ’90s. The Warm Springs
Enhancement adds modern infrastructure
that will transport skiers from the base to the
summit of Bald Mountain in eight minutes—
making the trip 35% faster and vastly
improving access to midmountain and
recently expanded summit trails.
Additional acres: 200+ (+21%)
The investment: Undisclosed
Why we care: These changes will smooth out
skier circulation and make it easier to access
popular parts of the mountain, such as the
glades of Frenchman’s and local favorite run
Picabo’s Street—named after the Olympic
gold medalist who calls the resort home.
Sugarloaf, Maine
The upgrade: New England’s largest ski
terrain enhancement since the 1970s is
unfolding in Maine, where the West Mountain
expansion will add a Doppelmayr high-speed
quad that can transport 2,400 skiers and
riders per hour from the base to the beloved
ski-in, ski-out Bullwinkle’s Bistro—plus 12 new
trails around the restaurant.
Additional acres: 120 (+10%)
The investment: $104 million
Why we care: The development increases
West Mountain’s total terrain to almost
300 acres and creates a pod of beginner and
family-friendly trails in the area that will rival
entire ski areas in its size.
Keystone Ski Resort, Colorado
The upgrade: In the past you had to be willing
to hike or pay to take a snowcat if you wanted
to reach the powder stashes in the resort’s
back bowls. Now the Bergman Bowl Project
provides high-speed lift access to 16 runs—
mostly blue—in that coveted terrain.
Additional acres: 555 (+17%)
The investment: Undisclosed
Why we care: With lift service to some back
bowls, ski patrollers predict other hike-to
areas, such as the Outback and Independence
bowls, will be less frequented. And fresh
powder in Bergman and Erickson will be less
prone to thinning from wind with more skiers
packing it down.
COURTESY ASPEN SNOWMASS
58
American ski resorts reported
a record 65.4 million s­ kiers and
riders during the 2022-23 season, according to the National Ski
Areas Association—and with that
came record capital investments
in excess of $810 million. This
season should surpass both those
highs. The good news for skiers?
All that money is paying for an
array of mountain enhancements
that will shorten lift lines, cater to
new and intermediate skiers and,
yes, spread out those crowds.
THE ONE
Bloomberg Pursuits
Après Arm
Candy
PROP STYLIST: CAYLAH LEAS
When the skis have been racked,
the snowy clothes peeled
off and the boots deliriously
unclenched, that’s when Part 2
of a great ski day begins.
Whether you’re meandering
through a resort town browsing
boutiques or meeting a rowdy
group for raclette, you’ll
doubtlessly be lugging some
cold-weather gear with you.
Berluti’s new Toujours XL leather
and shearling tote bag ($5,350,
cross-country skis and goggles
not included) will store all your
sundries in effortless style while
keeping your arms free in case
of slips—or errant snowballs
from the kids.
THE COMPETITION
• The silky-soft Ralph Lauren
Purple Label Welington
burnished calfskin tote
($2,495) has stirrupinspired hardware on
a buckle that closes
the top of the bag,
along with a helpful
shoulder strap.
• Loewe’s medium puzzle
fold shearling tote ($2,500)
covers the brand’s instantly
recognizable bag design with
dark khaki green fluff.
• Need something that can
seriously handle the elements
on the outside—and even on
the inside, when you toss in your
helmet and mucky ski boots?
Fine. Rossignol’s unisex tote bag
30L ($80) is made of waterresistant recycled polyester, has
tons of room and even includes
a sleeve for your laptop.
Berluti’s
shearling tote is a
cozy carryall for
your post-slope
schlepping
By Chris Rovzar
Photograph by
Ryan Jenq
October 23, 2023
THE CASE
Inspired by Berluti’s leatherand-shearling Ultima boots—
themselves inspired by the
traditional bomber jacket—this
latest handsome iteration of
the Toujours tote combines
textured leather with bands of
patinated brown. The open top
can be cinched using belts on
each side, and though there are
no pockets in the soft, shearling
interior, a zipped pouch (also
shearling) for your small
valuables tethers to the exterior
with a strap for easy rummaging.
Unlike that of many totes, the
structure is strong enough to
keep the bag upright when
you plop it on the floor by the
hearth, and a flat leather bottom
can handle some snow and grit
while you put your sore feet up
by the fire. $5,350 berluti.com
59
The Businessweek Show airs on Thursday evenings.
Watch on Bloomberg Television and Bloomberg Originals
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Taking a Risk
On Risk
By Max Abelson
DuV
ally
Cha
Rog
ozin
s
ng
ki
BLOOMBERG
60
Once my colleagues and I began thinking about how to turn
this magazine into a television show, the risk was glaring:
What works well in Bloomberg Businessweek might not fly
on screen for The Businessweek Show. After all, the pivots we
report on in these pages don’t always go smoothly. When
we sat down to film our first interviews, I discovered a more
personal risk. When reporters write, we get to maintain a
sense of control: To open a quote is to pass the microphone
to somebody else, and to end that quote puts us back in
charge. But on a talk show, guests aren’t just expected to get
more airtime than the host; they’re also empowered to talk
when and how they want. To nudge, disagree or interrupt
looks heavy-handed, foolish or just tedious—and it risks the
interview’s momentum and the audience’s goodwill.
So it only made sense to interview risk-takers about their
choices. Jaime Rogozinski, who created WallStreetBets on
Reddit, helped change the very idea of who gets to take
risk in the markets for equities and derivatives. He told
me he has no regrets about all the money his community
members wagered on high-risk options and stocks—“I can’t
make myself responsible”—or the “tons of money” he lost
himself. Eventually, after he tried to trademark the forum’s
name, Reddit removed him as a moderator. He took
another risk this year by suing Reddit; a judge has tossed
the suit, at least for now. “I walked away,” Rogozinski told
me, “with so much knowledge and understanding and
hands-on experience that a textbook can never explain.”
Guest Maeve DuVally, until recently a managing ­director
of public relations at Goldman Sachs Group Inc., took a
different kind of chance when she became one of the first
prominent Wall Street figures to come out as transgender.
“The kind of risk that I manage, and incidentally, everybody at Goldman Sachs is taught they have to manage,
is reputational risk,” she said. One day, before a gala, she
found herself running out of the office to buy makeup. It’s
not that she thought it was safe; it’s just that she felt she
had to. Then, later, she came out at work. Some people
were warm—traders sent bouquets—but she didn’t hear
from the firm’s famed mergers-and-acquisitions bankers.
“I think investment bankers are very good at having really
expansive relationships, kind of across a wide group of
people,” she said. “But maybe some of those relationships
aren’t as deep as they would appear.”
In the 1990s, Sophia Chang joined the orbit of hip-hop
collective Wu-Tang Clan, becoming Ol’ Dirty Bastard’s
manager, a position she took without any experience as
a manager. She also ran RZA’s record label without any
experience of running a label. “We all live with a real fear
of humiliation, embarrassment, excommunication, reprisal,” she said. “I have gotten to the point where I just don’t
care. I mean, it’s so incredibly liberating not to care what
other people think.”
That kind of liberation can only come from taking a
risk. <BW> �Abelson is the host of The Businessweek Show
Bloomberg Businessweek (USPS 080 900) October 23, 2023 (ISSN 0007-7135) H Issue no. 4802 Published weekly, except one week in February, April, May, June, July, August, September, October and November by Bloomberg L.P.
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