● OpenAI’s secret weapon 14
● Inside the Battle for the Bird 32
● China’s economy is a problem 22
February 12, 2024
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February 12, 2024
◀ No detail in the
design and construction
of the Clippers’ new
arena is too small
to escape Steve
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PHOTOGRAPH BY PHILIP CHEUNG FOR BLOOMBERG BUSINESSWEEK
1
FEATURES
26
A Herculean Task for AI
Can machine learning unravel the secrets of ancient Rome?
32
The $44 Billion Battle for the Bird
A book looks at Jack Dorsey’s failed plan to get Elon Musk to save Twitter
38
Basketball! Basketball! Basketball!
Steve Ballmer pours his passion for the LA Clippers into a $2 billion arena
46
AeroVanti’s Tailspin
Clients of the private jet startup accuse its CEO of flying off with their cash
◼ CONTENTS
Bloomberg Businessweek
◼ IN BRIEF
◼ OPINION
◼ AGENDA
4
5
5
Trump’s not immune ● WeWork déjà vu? ● Dengue hits Rio
The US needs more Americans studying in China
Black History Month ● UK jobs and GDP data
◼ REMARKS
6
Will the economy fuel a Reagan-like turnaround for Biden?
8
11
Falling birthrates are making diaper companies fussy
Las Vegas is finally a big league sports town
TECHNOLOGY
14
16
COO Brad Lightcap quietly leads OpenAI’s charm offensive
Job cuts show that tech has joined the regular economy
FINANCE
18
20
Money transfers: Big banks and fintech upstarts square off
A bear looks at bond maturities—and starts shorting
22
▼ China faces old and new problems in the Lunar New Year
1
2
3
4
BUSINESS
ECONOMICS
February 12, 2024
◼ COVER TRAIL
How the cover
gets made
①
“So this week’s story
is about the latest AI
breakthrough—reading
ancient scrolls!”
“Wow! What made them
so hard to read in the
first place?”
“Let’s just say they were
victims of a volcano.”
“Interesting. Have any
photos I can see?”
“I do!”
“We’re sure this isn’t
petrified poop?”
“It’s definitely not poop.
In fact, it might be the
long-lost work of one of
Rome’s great thinkers.”
2
“When is this long-lost
text going to drop?
I’m looking for some new
reading material.”
“Hard to say. So far
they’ve deciphered the
word ‘purple’ and some
stuff about food. AI is
so cool, right?!”
“Just think—thousands
of years from now, after
the apocalypse, when AI
will be the only thing left,
it will still be able to read
this Cover Trail from
a rolled-up, fossilized
Businessweek.”
24
The political minefield gets trickier for Fed Chair Powell
◼ PURSUITS
56
58
60
62
63
Could this be the best fly-fishing rod ever made?
Fashionable footwear for ugly, slushy weather
Turning a swampy Florida county into a golf oasis
Demand from Gen Z spurs a fine fragrance revival
Piaget turns the clock back to bold, gold 1980s chic
◼ LAST THING
64
News flash: The Fourth Estate is in a state of upheaval
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“Print—it’s future-proof!”
Stay in touch with
the world, even
on the road.
The Bloomberg app now features Apple CarPlay and
Android Auto. Update to get the latest live radio, podcasts
and audio articles, anywhere.
Context changes everything.
◼ IN BRIEF
The unanimous decision on Feb. 6
by a three-judge panel moves the
former president closer to trial before
November’s election. The judges
wrote they couldn’t sanction Trump’s
“contention that the Executive has
carte blanche to violate the rights of
individual citizens to vote and to have
their votes count.”
● Adam Neumann
is exploring
an offer to buy
WeWork out of
bankruptcy.
4
The co-working company’s
co-founder has been
formulating a bid with Dan
Loeb’s Third Point and other
investors since December, according to
a letter sent to WeWork’s lawyers seen
by Bloomberg News. The letter didn’t
include details of how much Neumann
was ready to offer for the business. He
stepped down as CEO in 2019 amid a
botched IPO.
● War in the
Middle East
▶ In the wake of Joe Biden’s decision
on Feb. 1 to sanction several Jewish
settlers involved in violence against
Palestinians in the West Bank, Israeli
Minister for National Security Itamar
Ben Gvir said the US president was
hindering the offensive against Hamas
and focusing too much on aiding Gazan
civilians. Finance Minister Bezalel
Smotrich went further, calling the
sanctions an “antisemitic campaign.”
▶ US forces struck two Houthi sea
drones in Yemen on Feb. 5, as the Iranbacked group’s attacks in the Red Sea
continue to disrupt global shipping. The
Houthis, a militant group that controls
much of Yemen, say their assaults are
in support of Hamas as its war against
Israel in Gaza continues.
● The EU issued its most
ambitious climate target
yet, despite mounting anger
from farmers and increasing
alarm from industrial
interests at the high cost
of the green transition. On
Feb. 6, Wopke Hoekstra, the
EU climate commissioner,
pitched a
90%
net reduction in emissions
by 2040 as the best way
for Europe to reach climate
neutrality by 2050.
● “All indications are this bill
won’t even move forward to
the Senate floor. Why?
A simple reason.
Donald Trump.”
President Joe Biden, at the White
House on Feb. 6, acknowledged
that a package to beef up security
at the US southern border and
to get funding to Ukraine and
Israel was dead. Trump had
rallied Republican legislators
to oppose the bill—which
they helped write—rather
than give Biden a win.
By Mark Leydorf, with Bloomberg News
● A man flees a forest fire in Vina del Mar, Chile, on Feb. 3. The fires ravaged the
Valparaiso region for several days, killing at least 131 people, with hundreds more
still missing. Officials say they believe some of the blazes were set intentionally.
● Dengue strikes
Rio on the eve of
Carnival.
● Media entrepreneur
Byron Allen said on Feb. 5
that he’s begun talks
with Paramount on a
$14.3b
With case numbers of the mosquitoborne viral disease spiking, the city
declared a public-health emergency
on Feb. 5. Officials said the outbreak
wasn’t expected to derail Carnival,
which runs through Feb. 14, but it has
prompted a slew of special measures.
City Hall is opening care centers,
allocating more hospital beds
for patients and deploying
insecticide-diffusing “smoke
cars” to neighborhoods
with lots of cases.
proposal to acquire the
film and TV giant. Allen is
up against David Ellison,
who’s proposed merging his
Skydance Media with the
company.
● The American Gaming
Association estimates that
68 million Americans will
bet a record total of
● The US trade deficit shrank in 2023
by the most since 2009. The deficit
with China fell sharply, to $279.4 billion,
while its shortfall with Mexico widened,
to a record $152.4 billion.
$23.1b
Annual US trade balance
$0t
on Super Bowl LVIII, an
increase of 35% from last
year. The AGA says about
42.7 million American adults
will place a sports wager
online, while 36.5 million will
bet casually with friends or
as part of a pool. ▷ 11
-0.5
-1.0
2008
2023
CHILE: ESTEBAN FELIX/AP PHOTO. NEUMANN: SHAHAR AZRAN/GETTY IMAGES. MOSQUITO: GETTY IMAGES. BIDEN: ANNABEGLE GORDON/BLOOMBERG. DATA: US BUREAU OF ECONOMIC ANALYSIS
● An appeals
court rejected
Donald Trump’s
claim that
presidents are
always immune in
criminal cases.
Bloomberg Businessweek
◼ BLOOMBERG OPINION
ILLUSTRATION BY REYA AHMED
To Deal With China,
The US Needs More
China Experts
One sign of the erosion of US-China relations has been a steep
drop in Americans studying in China. Although it hasn’t
grabbed headlines, this trend could prove detrimental to US
interests, shrinking the pool of future business leaders and
national-security experts with knowledge of Mandarin and
firsthand experience in China. To strengthen the US’s ability
to both compete and cooperate with China, Joe Biden’s administration should reinvigorate efforts to send students there.
Only 211 Americans studied in China during the 2021-22
academic year. That’s down from almost 15,000 a decade earlier, when China was the second-most-popular destination for
US students after Europe. By comparison, more than 289,000
Chinese attended US colleges and universities last year, the
biggest cohort of international students in the country.
Pandemic-era travel restrictions have contributed to the
absence of American students in China, but they’re not
the sole cause. As friction between China and the West has
increased, so have reports of heightened scrutiny, surveillance and harassment of foreigners by Chinese authorities.
In response to the risk of arbitrary detention, several US universities have closed their China-based study programs or
moved them to Taiwan. Meanwhile, funding restrictions that
Congress has imposed have led to the shuttering of almost
all government-funded Confucius Institutes on US campuses,
reducing the availability of courses in Chinese language, culture and history. Since 2016 the number of US college students learning Mandarin has fallen 20%.
Over time, this trend will weaken the US’s ability to deal
with its chief rival. The Department of State has set a goal of
recruiting additional diplomats as well as “military strategists, economists, technologists, political theorists” and other
experts “well-versed” in Chinese language and history. CIA
Director William Burns has said that the agency needs to double its Mandarin-speaking employees. Those ambitions are
unachievable without a surge of educational exchanges.
There’s also some reason to believe that greater engagement would help to lessen the risks of conflict. One recent
study found that, even though opinions of the US were largely
negative among Chinese, those with “close contacts or experiences” with Americans through work or study were more
likely to report confidence in US political leaders.
It’s encouraging that China’s leaders appear open to
expanding such contacts. During his visit to San Francisco
in November, President Xi Jinping said China would welcome as many as 50,000 US students over the next five
years. Biden should test Xi’s sincerity. The first step should
be to reinstate the Fulbright China program, the biggest
February 12, 2024
US-government-funded educational exchange, which former
President Donald Trump suspended in 2020 after the
Communist Party’s crackdown in Hong Kong.
The Biden administration should press its Chinese counterparts to speed up student-visa processing and look for ways to
ease restrictions that block students from some Chinese universities from coming to the US, provided they’re not deemed
as a threat to national security. The US should also make clear
that any hostile action against students or instructors will
result in a forceful response, such as curbing tourist visas,
expelling researchers or canceling scientific cooperation.
The US needs to remain vigilant about China’s ambitions
while continuing to seek opportunities for engagement—all of
which requires experts familiar with China’s language and its
people. Opening more paths for Americans to travel to and
study in China would be a wise investment in US security. <BW>
For more commentary, go to bloomberg.com/opinion
◼ AGENDA
5
▶ Black History Month
The National Museum of African American History
and Culture in DC is hosting special events throughout
February exploring this year’s theme: African Americans
and the Arts.
▶ The US releases its
most recent inflation
data on Feb. 13; the UK,
on Feb. 14; Canada, on
Feb. 20; and Japan, on
Feb. 26. Central bankers
worldwide will be keen to
see how they’re doing.
▶ The UK reports
unemployment on
Feb. 13 and GDP
growth on Feb. 15.
Prime Minister Rishi
Sunak, who must call an
election before yearend,
will be watching.
▶ The Reserve Bank
of Australia publishes
the minutes of its last
meeting on Feb. 19. The
US Fed follows suit on
Feb. 21. Both banks left
interest rates unchanged
at their last meetings.
▶ Coca-Cola, Shopify
and Airbnb report
earnings on Feb. 13;
Cisco and Sony,
on Feb. 14; Applied
Materials, Deere and
Stellantis, on Feb. 15.
▶ The US Census
Bureau publishes its
January estimate for
building permits on
Feb. 16. Housing starts
continue to climb across
the country, except in
the West.
▶ The next Republican
presidential primaries,
pitting former President
Donald Trump against
his first UN ambassador,
Nikki Haley, are in South
Carolina (Feb. 24) and
Michigan (Feb. 27).
◼ REMARKS
6
Is It Morning in
Joe Biden’s America?
● Forty years ago, a strong economy
lifted Ronald Reagan to a second term
● By Joshua Green
Right now, nobody would mistake Joe Biden for a popular
president. His approval rating hovers in the high 30s. People
are angry about the US’s recent economic turmoil, particularly
the painful bout with inflation. As Biden’s campaign gears up
for the reelection race, his opponents have also seized on his
advanced age as an electoral liability. Plenty of White House
officials privately agree.
But for all that’s gone wrong, Biden has one big thing that’s
suddenly going right. “Let’s be honest,” Federal Reserve Chair
Jerome Powell said on Jan. 31. “This is a good economy.”
The blockbuster jobs report on Feb. 2 showing that US companies boosted payrolls by 353,000 the previous month was
just the latest confirmation of a positive trend. Consumer sentiment surged by the most in almost 20 years. Real wages are
growing. Inflation is steadily falling. “And that sting is going
to become less painful with each passing month as inflation
drops and income stays strong,” says Mark Zandi, chief economist of Moody’s Analytics.
Gas prices have come down, too. The Standard &
Poor’s 500 has hit a series of new highs. And though Powell
and the Fed seem likely to push back a March rate cut, Biden
can still look forward to an incumbent president’s dream
scenario of running for reelection with a growing economy
and an accommodative central bank. A Goldman Sachs
Group Inc. note from Jan. 31 forecast five quarter-point rate
PHOTO ILLUSTRATIONS BY 731; PHOTOS: BLOOMBERG (1); GETTY IMAGES (1)
◼ REMARKS
Bloomberg Businessweek
cuts in 2024, with four of them coming before Election Day.
Forty years ago, another incumbent president was wrestling with lousy poll ratings, a recent recession and serious
doubts about his age and electoral viability. Ronald Reagan
wound up winning the 1984 election in a landslide, carrying
49 of 50 states and trouncing Walter Mondale. But midway
through his first term, he looked anything like the colossus
history now remembers him as.
Reagan took office in 1981 amid staggering inflation and then
had to endure Fed Chair Paul Volcker’s brutal campaign of rate
hikes to bring it under control. This plunged the US economy
into a deep recession that reached its nadir in December 1982,
with unemployment hitting 10.8%, its highest level since the
Great Depression. Reagan’s political standing suffered along
with the economy: In 1983 his popular support bottomed out
at 35% in a Gallup poll (a level Biden hasn’t yet reached). At
the time, Washington was buzzing with conviction that Reagan
was likely to be a one-term president. In polls with potential
Democratic opponents, he lost to both Mondale and Ohio
Senator John Glenn.
But as the economy recovered, so did Reagan’s standing.
Once unemployment began to fall in February 1983, his popularity started to climb and did so steadily through the following
year’s election. Reagan was no passive observer, either, but a
skilled pitchman expert at shaping public sentiment and cheering along the nascent recovery. Biden could draw a lesson. In
the depths of the recession in January 1983, Reagan announced
to Congress without qualification that “the long nightmare of
runaway inflation is now behind us.”
Reagan also had the good fortune to have had a helping
hand from the Fed heading into election season (though many
of his top aides loathed and distrusted Volcker, and some even
plotted to engineer his ouster). Those critics quieted down
when the economy turned around and consumer sentiment
soared. By the fall, Reagan’s campaign captured the improving
national mood in its iconic ad: “It’s Morning Again in America.”
History tends to attribute the turnaround to Reagan’s sunny
disposition and optimistic, can-do spirit. No doubt that helped
him. But at the time, many didn’t regard him as the heroic figure in the recovery. A Gallup survey of major corporate executives found that they ranked Volcker much more highly than
they did Reagan, with 51% expressing “great confidence” in
the Fed chair, versus only 27% for the president. Indeed, as
the journalist William Greider noted in Secrets of the Temple,
his magisterial history of the Reagan-era Fed, a month before
the 1984 election, one Merrill Lynch analyst joked in a client
note, “They should call it the Federal Open Market Committee
to Re-elect Reagan.” But Reagan got plenty of credit where it
mattered—at the ballot box. He even managed to carry 33% of
Democratic voters.
Can Biden, too, despite his political struggles, hope that a
strong election year economy will deliver him a second term?
He has his believers. A new Moody’s Analytics election model has him narrowly edging out Donald Trump in
November, propelled by economic tailwinds. “Once you
February 12, 2024
Partisan Economics
US adults who say economic conditions in the country are excellent or good
Republican or leaning Republican
Democrat or leaning Democrat
80%
40
0
11/8/2016
11/17/2020
1/21/2024
DATA: PEW RESEARCH CENTER
control for the political factors,” Zandi says, “it’s the economy
and how people feel about their own financial well-being that
matters to independents and people on the political margin.”
Biden can’t hope to match the scale of Reagan’s turnaround.
Political polarization has intensified to such a degree in the
decades since that opinions about the president have become
much more rigid. “We’re in a different era now when it comes
to presidential approval,” says Jeffrey Jones, senior editor at
Gallup Inc. People’s views on the economy have also become
more anchored to their political outlook—Biden won’t be winning 33% of Republican voters. “Democrats are certainly a lot
more positive about the economy right now,” Jones says. “The
key this year is whether the other groups will come along.”
They certainly aren’t yet. In a Feb. 4 NBC News poll, Trump
holds a commanding 22-point lead over Biden on the question of who would do a better job handling the economy. That
mirrors Trump’s 18-point lead in a recent Bloomberg NewsMorning Consult poll of swing-state voters.
But with economic confidence trending upward, it wouldn’t
be surprising if independents and Republicans started warming to Biden, at least a bit. A booming economy can have a clarifying effect that overrides—to a degree—partisan instincts. “The
more ambiguity there is in the economy, the more it allows
people’s partisanship to affect their perceptions,” says John
Sides, a political scientist at Vanderbilt University.
The prospect of a strong economy galvanizing voters to
believe that it’s morning again in America, after the bleak years
of the Covid-19 crash and spiking inflation, hasn’t materialized
yet. But Trump perceives enough of a threat that he’s begun
predicting a crash and criticizing Powell for allegedly trying to
aid his opponent. “I think he’s going to do something to probably help the Democrats,” the former president told Fox News
on Feb. 2. “It looks to me like he’s trying to lower interest rates
for the sake of maybe getting people elected.”
Modern politics precludes election blowouts, but luckily for
Biden, even a narrow win will suffice. With voters expressing
persistent concerns about his age and ability, a booming election year economy may be less a magic bullet than a necessary
precondition for any hope of a second term. <BW>
7
Bloomberg Businessweek
February 12, 2024
8
B
U
S
I
N
E
S
S
Edited by
James E. Ellis
Demand for
Diapers
Is Drying Up
The stagnating US birthrate
could be a warning sign
for consumer businesses that
depend on more children
Disposable diapers came to be in the US around
the same time that large numbers of women joined
the workforce during World War II and no longer
had time to wash the cloth versions. These tiny
work savers soon became a staple and for decades
were a reliable source of growth for some of the
biggest consumer products companies. No longer. The US birthrate has stagnated in recent years,
damping the prospects of a business that takes in
$5.9 billion a year and had long been considered
almost an annuity.
America’s nascent baby bust is a never-seenbefore problem for the diaper duopoly of
Procter & Gamble Co., which makes Pampers and
Luvs, and Huggies maker Kimberly-Clark Corp. To
make matters worse, outsize inflation for baby-care
items since the pandemic—data from consumer
researcher Circana say the retail price of a pack of
diapers rose 35% from 2019 to 2023—is forcing some
parents to cut back diaper purchases. They’re managing this by switching to reusable options, potty
training earlier and even changing kids’ diapers
less. These changes are prompting companies to try
all sorts of tactics to boost sales, including developing diapers for older kids and persuading parents
to keep their children in overnight pants for longer.
“I don’t think we’ve ever seen a situation
where birthrates are declining and we’ve seen
this same level of inflation,” says Nik Modi, an
analyst with RBC Capital Markets. Price increases
have been “so significant that we’re kind of in
uncharted territory.”
To understand why child-focused businesses
have good reason to worry, one need only look at
America’s declining fertility rate, which is the number of births in a year per 1,000 women age 15-44.
It last peaked in the 1950s, during the Baby Boom,
at about 120. By 2020 it had fallen to less than 60.
For years, consumer businesses could still count
on Americans of color or immigrant moms to
account for a disproportionate amount of demand.
But recently those groups have seen their fertility
rates plummet, too. In 1990 foreign-born Hispanic
women, for example, had a fertility rate of almost
150—about double the national rate then. By 2019
their fertility rate had fallen to roughly 85, according to a US Census Bureau analysis.
It’s not only America’s declining birthrate that’s
giving makers of diapers and other children’s
products pause. Women in the US are also having
babies later. Of course, society considers one facet
of that trend as particularly beneficial: The fertility rate for teen girls (age 15-19) plunged 73% from
1990 to 2019. But the fertility rate of American
women age 20-24 fell 43% during the same period,
BABY: GETTY IMAGEES. ILLUSTRATION BY CHRIS PHILPOT
1
◼ BUSINESS
Bloomberg Businessweek
while those age 40-44 saw their rate soar by 132%.
That shift toward later childbearing could
be problematic for companies that traditionally
counted on parents to generate multiple rounds of
demand for products like diapers, infant formula,
toys and sneakers as they had additional children,
which many families today are choosing to forgo.
“I wouldn’t count on the birthrates suddenly
changing direction,” says Pricie Hanna, managing
partner at Price Hanna Consultants, which advises
businesses about hygiene and nonwoven products.
“It’s really a cultural fact.”
This cultural shift has implications far beyond
diapers, says Gary Stibel, chief executive officer of
New England Consulting Group. The recent years
of declining US fertility portend increased competition for makers of all sorts of child-centered
goods, he says.
“When Americans are having more children,
there’s plenty there for everybody,” Stibel says,
referring to dollars spent by parents on kid goods.
“When the market starts to decline, it becomes
a market share war, and the only way to benefit
is to take share from someone else. The implications are huge. What used to be a land grab now
becomes a share war.”
Other categories will be affected by the demographic shift, Stibel predicts. “The most obvious is
infant formula, but right around the corner are children’s clothing, infant clothing,” he says. “If there’s
less children, there is less need for child care.”
Diaper retail unit sales dropped 1% last year,
marking the fourth straight year of declines amid
inflated price tags, according to Circana.
“The industry has clearly a situation with the
declining birthrate that has caught the attention of everyone,” says Jim Robinson, principal of
Absorbent Hygiene Insights and consultant to the
diaper industry. “It will impact future growth.”
That’s a troubling prospect for P&G and KimberlyClark, which together claim more than half of the
US diaper market. P&G’s yearly sales for Pampers
alone are more than $7 billion globally, almost 9% of
company sales. But the volume of baby-care products sold declined in the fourth quarter amid higher
prices. The category is also large for Kimberly-Clark,
which gets more than a third of its revenue, or about
$7 billion, from baby- and child-care items.
P&G is adding new diaper features that it says
even penny-pinching parents might value. The
company says it’s been able to expand North
America sales of its extra-soft Pampers Swaddlers
line from $700 million five years ago to more than
$1 billion now, in part thanks to creating diapers
with innovations such as an umbilical cord notch to
Avoiding a Bum Wrap
February 12, 2024
Diaper makers are continually adding features to keep babies
comfy—and parents spending more
⑦
1. BLOWOUT BARRIER
An inverted pocket at the
waist stops poop from
running up a child’s back—
every parent’s nightmare
2. INNER LEG CUFF
These flaps keep
moisture inside a
diaper. But placing
them improperly
can result in leaks
3. ELASTIC LEG
OPENING
Correct sizing is key to
keeping these just tight
enough to hold moisture
and waste inside
4. UMBILICAL CORD
CUTOUT
This notch avoids irritating
newborns’ skin
5. DESIGNS
Colorful patterns are in.
Pampers says it uses
pigments rather than dyes
to avoid skin allergies
6. WETNESS INDICATOR
This pH strip indicates when
it’s time for a change
①
④
②
⑤
③
⑥
7. FASTENER STRIPS
Some brands are adding
stronger, wider or stretchier
closure areas to provide better
sealing against leaks
⑧
8. ABSORPTION LAYERS
The diaper body can include
a top sheet next to skin; layers
that absorb, distribute and
store moisture; superabsorbent
gel to hold liquid; and a
back sheet
protect a newborn’s belly button and what it’s calling a blowout barrier—an inverted pocket on the
diaper waistband designed to prevent messy poop
nightmares—which was introduced last year.
The consumer products giant is also producing diapers for larger kids. In the past year,
Pampers introduced a size 8, for children weighing 46 pounds or more. “The diaper makers have
been finding ways of extending the lifetime of their
customer—overnight pants for toddlers, overnight
pants for even older kids,” Hanna says. “So that’s
helped a bit.”
Adult diapers are also a brighter spot for
the industry as the boomer population ages.
Incontinence items for grown-ups are set to remain
among the fastest-growing personal-hygiene categories in coming years, according to Bloomberg
Intelligence analyst Diana Gomes.
But even though adult incontinence retail sales
volumes have grown for the past three years,
they’re still less than half the size of the baby diaper market, Circana data show. So companies have
focused heavily on new products for kids.
P&G, for instance, is trying to sell more training
pants with bed-wetting underwear for youngsters
as old as age 12, says P&G Chief Financial Officer
Andre Schulten. “When you think about bed
9
● Share of US
households with young
kids that said they
don’t have enough
money for diapers
47%
Bloomberg Businessweek
February 12, 2024
wetters—that’s young children who have trouble
staying dry at night—we’re addressing a consumer
need that has not yet been met,” he says.
Schulten says getting caregivers to use more
wipes is another way for the company to boost
its baby business. P&G, which now sells multi-use
wipes for not only bottoms but dirty faces and
kitchen counters, is trying to build a “regimen”
with parents, he says. “With every diaper change
is not only the diaper, but is [also] the wipes.”
Meanwhile, rival Kimberly-Clark is betting that
its new moisturizing baby wipes and its multiple lines of fragrance-free diapers will win over
parents who worry about protecting their tot’s
sensitive skin.
“The diaper of the future is relentlessly focused
on better and better meeting consumer needs,”
says Matt Barresi, general manager of KimberlyClark’s diaper business. Shoppers are increasingly demanding fragrance-free products, he says:
“We’re really seeing consumers resonate with that.”
And the company says its new calming and nourishing wipes—which promise to clean, hydrate and
soothe delicate baby skin—are meeting internal
expectations, thanks to repeat purchases by parents despite their higher cost.
Still, new products with advanced features don’t
always succeed. P&G’s Pampers Lumi system, introduced four years ago, included a video camera plus
a sensor that attached to diapers to notify caregivers via a mobile app when a diaper was dirty.
The $349 Connected Care System didn’t catch on
and was discontinued.
The big price hikes for diapers, as well as
other food and household product items, over
the past couple of years occurred largely because
shoppers were stocking up during Covid-19 lockdowns, just when there were shortages of raw
materials and workers to keep up with the surge
in demand. Besides offsetting the supply chain cost
and wage increases, manufacturers have tried to
recover and maintain profitability they lost during
the pandemic.
“Companies were feeling pressure from all
angles,” says Edward Jones analyst Brittany
Quatrochi. “It wasn’t just a lack of labor, it was
higher commodities costs, it was higher gas costs.
Sometimes they had to pay up for those materials before anyone else could buy them. A lot of
those prices have been pretty sticky, and that’s
when you’ve seen the prices being pushed on to
the consumer.”
Although manufacturers are promoting expensive, feature-laden diapers to keep up profits,
affordability is a growing problem across America.
Almost half, or 47%, of US households with young
kids said they don’t have enough money for the
diapers needed to keep their children clean, dry
and healthy, according to a study by the National
Diaper Bank Network, comprising local banks and
sponsors such as Huggies that help needy families
obtain diapers. As recently as 2017, the need was
much less, at about one-third of families.
“Inflation is making it very, very difficult for families to meet their basic needs,” says Joanne Samuel
Goldblum, NDBN’s CEO. People may use the same
diaper for too long or “use things that aren’t meant
to be diapers as diapers—T-shirts or other absorbent
materials,” she says.
In Chicago, families that can’t afford necessities often add paper towels to diapers to stretch
them longer, says Rikki Ray, founder of the Diaper
Bank of Chicago, which in 2023 received more than
double the requests for diapers than it had in the
prior year. “We’ve heard that people are trying to
potty-train, that they’re waiting longer to change
the diaper,” she adds.
Parents definitely feel the financial pinch.
Richard Dixson, a 62-year-old in Kansas City,
Missouri, who, with his wife, is raising four of
their grandchildren, says brands like Pampers
and Huggies are out of reach. A package of midtier training pants for his twin 5-year-old grandsons
costs him about $30. A few years back, it used to be
more like $24, he says.
That sticker shock likely won’t fade anytime
soon. Inflation in other parts of the economy is
starting to moderate, but diaper makers haven’t
gotten much relief. Kimberly-Clark said last year
that resin prices, which influence the cost of polypropylene materials used for several parts of diapers, were moving up. And consultant Hanna says
that fluff pulp prices are set to increase as one of
the largest producers, International Paper Co.,
permanently stops production at two of its pulp
machines in Florida and North Carolina. “We have
particular materials important to these products
that are still troublesome,” she says.
In the longer term, however, material costs
may be the least of the challenges for diaper makers and other US businesses as they are forced
to adapt to a changing demographic outlook
that could slowly sap demand for their products. “This has a huge ripple effect,” says New
England Consulting Group’s Stibel. “It’s a domino effect over multiple categories and over time.”
�Leslie Patton, with Alex Tanzi
▼ Annual US births
THE BOTTOM LINE The number of diapers sold at retail in the US
has fallen for four years. This decline could be a worrisome omen
for consumer businesses that depend on birth-rate gains.
4.0m
3.8
3.6
2010
2022
▼ US retail price
per package of
disposable diapers
$20
10
0
2018
2023
ETHAN MILLER/GETTY IMAGES. DATA: CDC NATIONAL CENTER FOR HEALTH STATISTICS, CIRCANA
10
◼ BUSINESS
◼ BUSINESS
Bloomberg Businessweek
February 12, 2024
Sports Leagues Bet on Las Vegas
● A booming population and the legalization of sports betting have drawn teams to the Super Bowl host city
When Las Vegas hosts its first Super Bowl on Feb. 11,
it will mark a kickoff party that few saw coming.
For decades, the major US sports leagues shunned
Nevada’s most populous city, despite its status as
a tourism epicenter. Gambling was taboo, especially after a basketball referee betting scandal in
the mid-2000s. And no place on earth has embodied that unsavoriness more than Sin City.
“You go back 10 years, and we couldn’t say the
words ‘Super Bowl,’ ” says Sean McBurney, regional
president at Caesars Entertainment Inc., which
owns eight resorts on the Strip. “How sports has
embraced Las Vegas has changed dramatically.”
The players and fans traveling to see the San
Francisco 49ers square off against the Kansas City
Chiefs for pro football’s biggest prize will converge
on a city that over the past eight years has been busy
collecting sports franchises. The National Hockey
League’s Golden Knights arrived in 2017, just as the
National Football League finalized the relocation
of the Oakland Raiders. The Aces of the Women’s
National Basketball Association showed up next,
coming over from San Antonio a year later. And
in November 2023, Major League Baseball’s owners unanimously approved the Oakland Athletics’
move to the Las Vegas valley. “We’re trying to build
a world-class city in Las Vegas, and sports are now
an integral part of that,” says Las Vegas Mayor
Carolyn Goodman. Investors have committed
almost $7 billion, turning Vegas into a global sports
capital, pumping money into venues and negotiating deals with both the NFL and MLB among other
leagues—calling to mind the mass migration of franchises to Southern California in the 1950s and ’60s.
Some of Vegas’ biggest advocates are the celebrities and athletes who live and party in the city.
Former Patriots quarterback Tom Brady purchased
a stake in the Aces and is looking to own a portion
of the Raiders; retired baseball star José Bautista
bought a minor league soccer team, the Las Vegas
Lights; and NBA superstar LeBron James, an equity
partner in Boston Red Sox owner Fenway Sports
Group, has been vocal about owning an NBA expansion team in the city. “They have everything here,”
he said in December, after the league’s inaugural
In-Season Tournament in Las Vegas.
But for some Las Vegas locals, living in a sports
boomtown has been a mixed bag. The Strip and
its surroundings have been covered in construction sites, tangling roadways and annoying residents and visitors alike. In only a few years, the city
added more than 100,000 seats at new venues,
“We’re trying
to build a worldclass city in
Las Vegas, and
sports are
now an integral
part of that”
◀ Ready for the
big game outside
Caesars Palace
11
February 12, 2024
been eclipsed by the Tennessee Titans, who are
collecting $1.26 billion in taxpayer funds.) But
local boosters say this first Super Bowl will bring
$500 million in economic activity to the area.
The big game also cements Las Vegas’ entry
into the fierce global competition for golf tournaments, Formula One races and other sporting
mega-events. Las Vegas hosted its Grand Prix in
November 2023, the city’s biggest sporting event
to date, with more than 300,000 people attending
over four days. The sight of F1 cars howling down
the Strip at 200 mph made for a quintessentially
Vegas kind of spectacle, but it brought plenty of
traffic headaches, too.
Despite the challenges, race executives and
tourism officials said the effort paid off with an
economic impact of $1.2 billion. The city’s hospitality industry sponsored hundreds of events,
even building its own temporary grandstands
for the race. “That was something that really
appealed to local stakeholders,” says Las Vegas
Grand Prix CEO Renee Wilm.
So far, the casinos couldn’t be happier about
the town’s makeover. “Sports and the business
that sports brings has been wildly successful for
us,” says MGM CEO Bill Hornbuckle.
With the Las Vegas Super Bowl Host Committee
estimating that 450,000 tourists will head to town,
Raiders owner Davis says it’s quite a turnabout
from eight years ago, when the NFL was so antiVegas that the league canceled a fantasy football
convention here. “They’re talking about the NBA
and MLB coming,” Davis says. “What I’ll say about
Nevada is, the first word out of people’s mouths
is not ‘no.’ ” �Kim Bhasin and Randall Williams
▲ A massive three-story
sportsbook will greet
game-day bettors at the
Circa Resort & Casino in
downtown Las Vegas
Team announced
or approved
● Season played
● Conference title
● Championship
2016
2018
2020
2022
Athletics (MLB)
Desert Dogs (NLL)
Aces (WNBA)
2024
BRIDGET BENNETT/BLOOMBERG. DATA: SPORTS LEAGUES, NEWS REPORTS
THE BOTTOM LINE Super Bowl LVIII will be a coming-out party
for Las Vegas as a sporting hub. And new $1.9 billion football and
$1.5 billion baseball stadiums will only boost its sports cred.
▼ Major sports teams
in Las Vegas
Raiders (NFL)
12
and more are on the way. The classic Tropicana
hotel, for instance, will close in April to make
room for a more wholesome emblem of the new
Las Vegas: a $1.5 billion baseball stadium, which
will likely prolong the area’s construction hassles.
“Let’s not talk about traffic,” Mayor Goodman
says. “It is a total nightmare.”
Sin City’s latest reinvention would have been
impossible if America hadn’t suddenly become
cool with sports gambling. The floodgates opened
in 2018 when the US Supreme Court struck down a
federal ban on commercial sports betting. Online
sportsbooks—which allow people to bet on games
right on their phones—proliferated, and the
leagues wanted in on the action. Americans have
legally bet more than $220 billion on sports since
the court’s decision, according to the American
Gaming Association.
For decades, Las Vegas was mostly a fight town.
Casinos began funding boxing bouts in the 1950s.
Marvin Hagler rocked Thomas Hearns at Caesars
Palace in 1985, and Floyd Mayweather Jr. outmaneuvered Manny Pacquiao over 12 rounds at
the MGM Grand in 2015.
Vegas made a natural home for the Ultimate
Fighting Championship, and the city has hosted
a third of the UFC’s events since 2001. “We
would never have come as far as we have without the platform Las Vegas has provided us,” says
Lawrence Epstein, chief operating officer of the
mixed martial arts company. “If we were based in
Omaha—I love Omaha, but we wouldn’t have the
platform that we have here in Vegas.”
With the state’s population swelling over the
past three decades, the major leagues were destined to look Nevada’s way. Las Vegas’ Clark County
grew from 1.4 million residents in 2000 to 2.3 million at the end of 2023. In 2016 the NHL awarded
an expansion team to the billionaire chairman of
Fidelity National Financial, Bill Foley, who paid
a $500 million fee for the Golden Knights. The
team’s home, the 20,000-seat T-Mobile Arena, was
funded entirely by MGM Resorts International and
Anschutz Entertainment Group.
The arrival of the NFL signaled an escalation
of the city’s sporting ambitions. Originally, Las
Vegas wasn’t on the list of potential new homes
for the Oakland Raiders. But local officials gave
owner Mark Davis a lucrative deal: The team
spent $1.2 billion to build the 65,000-seat Allegiant
Stadium, and Clark County chipped in the remaining $750 million via hotel room taxes.
Stanford University economist Roger Noll
called that arrangement the worst deal for a city
he’d ever seen. (The record-large subsidy has since
Bloomberg Businessweek
Golden Knights (NHL)
◼ BUSINESS
MAKE SURE CUTIE
PIE IS IN THE
RIGHT SEAT.
NHTSA.gov/TheRightSeat
Bloomberg Businessweek
February 12, 2024
2
Edited by
Joshua Brustein
The Man Behind
The Machine
It’s OpenAI COO Brad Lightcap’s job to turn the
startup into Silicon Valley’s next tech giant
PHOTOGRAPH BY JESSICA CHOU FOR BLOOMBERG BUSINESSWEEK
14
T
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C
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◼ TECHNOLOGY
Bloomberg Businessweek
In late 2022, just a few months after OpenAI released
ChatGPT, the company received an inquiry from
Axel Springer SE, the German media conglomerate
that owns Politico and Business Insider. It was interested in talking about how the chatbot would affect
the future of news, and whether the two companies
could find a way to work together.
The tension caused by OpenAI’s practice of
ingesting material on the internet to build the large
language model powering ChatGPT was already
evident. It was facing a lawsuit alleging that GitHub
Copilot, which uses OpenAI’s tech to write computer code, violated copyright by using existing code
repositories as training data, a claim that OpenAI
disputed. Visual artists were suing other artificial
intelligence companies such as Midjourney and
Stability AI Ltd. for copyright infringement, which
the companies also contested. It wasn’t hard to foresee similar legal action coming from media companies, whose businesses had already been disrupted
by the internet, and which were concerned that AI
chatbots built in part on their own content could
siphon away readership without compensation.
Working with Axel Springer presented a major
opportunity for OpenAI to get started on a new
class of partnerships that could make allies out of
media companies rather than alienate them from
the start. It seemed like an obvious assignment for
OpenAI Chief Executive Officer Sam Altman, the
38-year-old who was earning a reputation as the
spokesperson-in-chief for the entire AI industry.
Instead, Altman asked Brad Lightcap, the company’s chief operating officer, to handle the negotiations, giving him full control over the talks. “When I
delegate, I really delegate,” Altman says.
At 33, Lightcap makes even Altman seem kind
of old. He started his career in finance before moving to San Francisco to work for Dropbox Inc. in
2013. Lightcap worked for Altman as an investor
at the startup incubator Y Combinator, then followed him to OpenAI in 2018, when it was a small
nonprofit research lab without a business plan or a
working product. Lightcap—who over the years has
become one of Altman’s most trusted lieutenants—
is now tasked with transforming the most intriguing
tech startup in recent memory into a commercial
powerhouse that can compete with Alphabet Inc.’s
Google and Meta Platforms Inc.
People who work with Lightcap describe him as a
good listener who’s fixated on the needs of OpenAI’s
customers—he spent three hours on Christmas Eve
having brunch with a prospective client—and who’s
helped create structure within a rapidly changing
organization. “He doesn’t say a lot, but he says very
incisive things when he does talk,” says Altman.
After months of discussions with Axel Springer’s
point person on the deal, Chief Information Officer
Samir Fadlallah, Lightcap invited a handful of its
executives to visit OpenAI’s headquarters in May.
He says he was “admittedly a little intimidated”
about designing media deals. “I was thinking, ‘This
isn’t a world I know super well,’ ” he says. “I don’t
come from it. I don’t have deep contacts or a network here.”
People in media often see the tech industry as
arrogant and unappreciative of the importance
of so-called legacy companies, but Lightcap’s
guests were pleased by his humility. Fadlallah says
Lightcap told him that OpenAI “cares about journalism” and that it’s “important to foster democracy.”
Lightcap “was really listening to our perspective
and listening to our fears,” says Fadlallah, adding
that “the fear was that they are providing a content creation machine that is really threatening our
business model.”
In December the two companies reached a
broad agreement whose terms, Bloomberg News
reported, include OpenAI paying Axel Springer
tens of millions of dollars over three years to
license content that it can use to train its AI models. OpenAI will also feature the summaries of Axel
Springer’s news articles directly in ChatGPT, along
with attribution and links to full articles.
The deal provides a road map for additional
media deals. OpenAI says it’s in talks with dozens
of other publishers; Bloomberg reported that those
include CNN, Fox and Time. OpenAI also says it will
change the user interface of its current ChatGPT
app to show more summaries and links to news
from Axel Springer and other media partners.
Lightcap hasn’t convinced everyone that the
deals OpenAI is offering are good ones. The New
York Times had been engaging with OpenAI in what
the startup had called “productive” conversations
last year, but on Dec. 27 the newspaper sued OpenAI
and Microsoft Corp., OpenAI’s largest investor, saying that their copyright infringement was causing
billions of dollars in statutory and actual damages.
OpenAI is contesting the claim; Lightcap describes
the Times dispute as an anomaly and says the rest of
the company’s talks with publishers are going well.
Media deals and copyright litigation will likely
remain among the central challenges in building
OpenAI’s business, but they’re not the only ones.
Altman has described the company as “the most
capital-intensive startup in Silicon Valley history.”
The computer hardware costs to keep ChatGPT running could exceed $500 million annually, according to an estimate by Dylan Patel, chief analyst at
consulting firm SemiAnalysis. He estimates that
February 12, 2024
15
Bloomberg Businessweek
OpenAI’s annual costs to train its next model
are in the “lower billions.” OpenAI has an estimated annual revenue of $1.6 billion, according to
a December report from the Information. The company declined to comment on its revenue and costs.
Patel says that as OpenAI seeks to build bigger
models with even more data, its computing costs
are only increasing. “If their mission wasn’t literally to make the machine God, to make artificial
superintelligence that’s smarter than humans,
then I think they could be profitable sooner,” he
says. “But because they want to make something
smarter than humans in every way possible and
then deploy that rapidly in every way possible, that
takes so much money.”
OpenAI’s business plan centers on charging
customers for special versions of its products. In
the past six months, Lightcap has helped oversee
the expansion of new lines of revenue, including
a business version of its consumer app, ChatGPT
Enterprise, which now has more than 260 paying customers and 100,000 registered users. It’s
also built an online store—akin to Apple Inc.’s
App Store—through which developers can distribute customized apps, or “GPTs,” that use
OpenAI’s software.
But competition is stiff and likely to get even
more so. Google, for instance, has its own large language model, a cloud computing network to support it and a large team with years of experience
in enterprise sales. Lightcap says OpenAI’s main
advantage is its ability to get products to market
and incorporate feedback quickly.
Like many startups, OpenAI says developing its
technology takes priority over short-term revenue.
But the outcome of the AI arms race also hinges
on how the company and its competitors develop
the businesses around their technologies. Lightcap
acknowledges that he hasn’t figured it all out.
“There’s a lot of areas where there’s huge opportunity, but we still don’t quite know what the implementation model looks like,” he says. “Nothing is
super predictable for us at this point. And I suspect
that’ll be true for a while.”
Lightcap’s ability to endure uncertainty was on
display in November, when OpenAI’s board briefly
ousted Altman, a period some at the company now
refer to as “the blip.” While working with other
executives to soothe employee anxiety, he also
attempted to reassure customers by personally calling about 40 of them over the course of two days.
“I didn’t want time to pass between the things
that people were reading in the news and when
they heard from us,” Lightcap says. “Our priority
was making sure people know we’re here, we’re
on top of it—that our services are stable and the
company is in good shape.” He says the business
didn’t lose a single customer. “I really saw the best
of Brad through that,” Altman says.
One of OpenAI’s newer areas of focus is semiconductors. Bloomberg reported that Altman has traveled to South Korea to tour manufacturing plants as
the company considers expanding its partnerships
in the chips business, including potentially setting
up a network of factories to manufacture semiconductors. This could take years and is arguably
an even more complicated challenge for Lightcap
than his recent endeavors into the media industry.
Lightcap declines to comment on OpenAI’s
hardware plans, saying they’re trade secrets. But
juggling so many projects in an industry that his
company is essentially willing into existence is “the
fun of the job,” he says.
“Some of those things are things that we have to
do today. Some of those things are one-year things,
some of them six- or five-year things,” Lightcap says.
“And I’d like to think I’m good at being able to translate that into concrete action.” �Shirin Ghaffary
February 12, 2024
“If their
mission wasn’t
literally to
make the
machine
God … then
I think they
could be
profitable
sooner”
THE BOTTOM LINE To become a real business, OpenAI has to
sort out media partnerships, earn enough to offset its massive
costs and maybe even get involved in making semiconductors.
Tech Acquires a
Taste for Layoffs
● Significant job cuts this year show how
an industry taboo has fallen
For Sydney Russakov, it’s been a year of
transitions. In March 2023 she lost her job at a
startup called Universe, which offers “no-code”
software design tools, when it cut her product
manager role. She took a new position at Nextdoor
Holdings Inc., the hyperlocal neighborhood social
networking service, in June, but was let go again
in November, when Nextdoor conducted its own
round of layoffs.
Losing a job is an experience Russakov, 31, is
learning to live with. There was “an element of
discomfort and surprise that first time,” she says.
“The second time around, I think I was in a better
place to deal with it.”
The tech industry is also getting used to job cuts.
Starting in late 2022, technology companies began
ILLUSTRATION BY YANN BASTARD. DATA: LAYOFFS.FYI
16
◼ TECHNOLOGY
◼ TECHNOLOGY
Bloomberg Businessweek
February 12, 2024
▼ Tech companies
laying off employees
conducting rounds of layoffs that were deeper and
broader than anything in recent memory. So far
this year, more than 32,000 tech workers have lost
their jobs, according to Layoffs.fyi, a startup that’s
been tracking the metric in the industry since the
pandemic. Alphabet, Amazon.com, Microsoft,
Salesforce, Snap and Zoom have all announced
head count reductions in recent weeks.
The cuts have caused a sense of unease throughout tech, which has long been one part of the
economy where work has been easy to come
by, well-paid and safe. The situation is far from
dire. Unemployment is below 4%, the economy
continues to add jobs, and the latest government
data show that “layoffs and discharges” are at the
same low levels where they spent much of 2023.
The tech industry ended January with 18,000 more
employees than the month before, according to
CompTIA, which tracks tech industry trends. Still,
the latest round of cuts does suggest something has
changed. The long-standing taboo around layoffs in
Silicon Valley, where companies compete intensely
for talent, has been broken. “The shine of tech jobs
is wearing off a bit with these layoffs,” Jeff Shulman,
professor at the University of Washington Foster
School of Business, wrote in an email.
Some industry leaders have characterized the
shift as a return to a purer kind of tech enterprise.
As Mark Zuckerberg, Meta Platforms Inc.’s chief
executive officer, said in an internal Q&A quoted
by the newsletter Command Line, he doesn’t want
to have “managers managing managers, managing managers, managing managers, managing the
people who are doing the work.”
However, there’s another interpretation: The
industry is becoming more like the rest of the
economy. Tim Herbert, chief research officer
at CompTIA, says that tech has regularly gone
through “periodic pendulum swings between
‘all in’ on innovation to ‘all in’ on business fundamentals.” During the pandemic, tech seemed
to inhabit its own reality. Profits were fat, and
companies hired furiously. The job cuts are a sign
that things are swinging the other way. Growth
at tech companies has slowed, and higher interest rates have choked off much of the money that
for years fed startups, even as the broader economy continues to expand at a healthy clip. And so
Silicon Valley is settling into a pattern familiar in
many industries: Companies hire when times are
good, let people go when they’re not—and sometimes let people go even when they’re not so bad.
�Antonia Mufarech and Drake Bennett
THE BOTTOM LINE Tech companies that once mostly avoided
layoffs have begun to hire in good times and fire in lean times, just
like their peers in many other industries.
17
250
125
0
8/2022
1/2024
▼ Tech employees
laid off
80k
40
0
8/2022
1/2024
Bloomberg Businessweek
February 12, 2024
3
Edited by
Laura Bliss and
David Rocks
● Wise and other fintechs
slashed fees on money
transfers. Now HSBC and
others are striking back
In the early 2010s, a pack of financial technology
startups hit the market with an offer that many consumers found hard to refuse: international money
transfers for a fraction of what banks charge. For
decades, banks had used their grip on international transactions to impose fees as high as 3%
to 4% for sending cash abroad. The newcomers—
Wise, Revolut, WorldRemit—did the same thing for
practically nothing, instead making money from
the sheer volume of transfers.
Now the banks are fighting back. In January,
HSBC Holdings Plc introduced in the UK a service
it calls Zing, which promises to match what the fintechs are offering but with the backing of one of the
world’s largest financial institutions. HSBC hopes to
use its pitch of greater stability to win back wealthy,
internationally mobile customers.
HSBC’s attack on foreign exchange fintechs
began about 18 months ago, when it asked James
Allan, head of FX and payment systems in the
bank’s wealth and personal banking arm, to spearhead the Zing project, which it code-named Marco
Polo. Allan’s small team built the new service
in-house under strict secrecy, buying off-the-shelf
technology from other fintechs where necessary,
according to HSBC executives who asked not to be
named discussing internal matters. HSBC hasn’t
said how much it cost to create Zing, but UK corporate records show the bank plowed almost $74 million into MP Payments Group Ltd., the subsidiary it
set up to develop the service. Some managers have
referred to the project as the “Wise killer,” according to one person familiar with the initiative who
asked not to be named.
HSBC’s plan is to begin the worldwide rollout of
Zing within months, with launches in other major
European countries, as well as in Asian and Middle
Eastern markets, also in the works. The Zing website makes a virtue of its big bank origins, stating,
“Get the flexibility of a fintech that’s part of the
HSBC Group.” But with fees broadly comparable
to its rivals, which generally charge less than 1%,
the question is whether HSBC’s offering is distinctive enough to lure customers away.
Kunal Jhanji, leader on payments and fintechs
at Boston Consulting Group (BCG) in the UK,
says that big banks wanting to take on fintechs
will need to rely on more than just their name.
Typical pain points for bank customers, Jhanji
says, include a lack of transparency on payment
ILLUSTRATION BY MARCO QUADRI. DATA: BCG GLOBAL PAYMENTS MODEL
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F
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Big Banks
Take On
The FX
Upstarts
◼ FINANCE
Bloomberg Businessweek
February 12, 2024
▼ 2022 global crossborder payments
revenues
◼ Transaction fees
$20b
$28b
Business to
everywhere
$39b
Consumer
to anywhere
◼ Foreign exchange
fees
$78b
19
status, unpredictable transaction speeds and high
fees. “The new players will need to ensure that the
improvements in value propositions for customers
deliver true differentiation,” he says.
Wise itself shows how big a challenge even
the largest banks face in trying to take on a wellfunded, successful fintech. The company has spent
13 years honing its product and employs 800 engineers who push out more than 5,000 incremental
improvements to its app every month, says Harsh
Sinha, chief technology officer at Wise.
Revolut Ltd., another fintech offering transfers,
has also come a long way since its 2015 founding.
Today it employs about 8,000 people to cater to
its 40 million customers, and its services, which
include cryptocurrency and share trading services,
stretch well beyond the low exchange fees that
made its name.
London-listed shares of Wise PLC dropped 7.5%
on Jan. 2 as investors reacted to HSBC’s announcement. But now Wise is striking back. In full-page
ads in British newspapers, it offered a tonguein-cheek welcome to its new competitor. “Your
app is a great step forward to make international
transfers and currency conversion more transparent,” the ad stated. “So thanks, HSBC, for
launching Zing. For telling us ours is a mission
you believe in too.”
BCG says global cross- border payments
reached $180 trillion worldwide in 2022, with revenues of $165 billion expected to grow from 6%
to 7% annually over the next five years. Wise,
“This is a bit of
a shot across
the bows of the
competitor
banks”
Bloomberg Businessweek
in its marketing, has accused banks of fleecing
customers with high and hidden fees, issuing a
recent report singling out HSBC as one of the worst
offenders. A spokeswoman for HSBC said Wise’s
research excluded the bank’s Global Money service, which lets customers send foreign currencies
at a lower cost compared with standard accounts.
She added that HSBC fees include FX risk managed by the bank.
Meaghan Johnson, a fintech consultant, says
Zing would have to get better quickly if HSBC wants
to catch up. “The track record isn’t great for incumbent banks launching standalone international payment platforms,” she warns, pointing to PagoFX,
Santander Bank’s answer to Wise, which was shuttered just 15 months after its 2020 launch. US banking giant JPMorgan Chase & Co. made its own, more
successful foray into fintech when it introduced
Chase UK three years ago. Like Zing, Chase UK has
a foreign exchange offer priced at the same level
as the fintechs, but as an all-around digital bank, it
offers checking and savings services as well.
Nizam Uddin, chief strategy officer at fintech
Algbra, which focuses on serving socially excluded
banking customers, believes HSBC still has time to
tweak features to make it competitive.
Tim Levene, founder of Augmentum Fintech
PLC, a UK-based specialist fintech investor, says
HSBC’s move is likely to raise questions on the
boards of other major financial institutions about
whether they need to be more innovative. “This is
a bit of a shot across the bows of the competitor
banks,” he says. ——Harry Wilson and Aisha S. Gani
That wager is at the heart of the $40 million
Black Bear Value Partners fund that Schwartz, a
former director at Fir Tree, runs from Boca Raton,
Florida. The bulk of his portfolio is given over to
a handful of companies bucking the overall trend
and holding very little—or no—debt. The rest is in
short positions against parts of credit markets that
Schwartz thinks are due for a correction.
The notion that defaults will rise as ultracheap
bonds issued in the Covid-19 era expire is nothing
new. But Schwartz says yields aren’t pricing in the
potential for a bigger-than-expected jump in bankruptcies. Things look especially bad, he says, when
you consider that much of the debt was borrowed
on terms that minimize the amount that investors
are able to recover if companies default.
“You have this environment where nobody
defaulted forever,” Schwartz says, referring to the
past 15 years of historically low interest rates. “It’s
like a doctor’s waiting room. A lot of companies
were able to leave and buy themselves some time,
but at the end of the day they’re going to need to
refinance at higher rates.”
The impact of a pandemic-era borrowing spree is
set to hit companies hard this year, and many hedge
funds are betting it will spur a culling of indebted
companies. By some counts, the debt maturity wall
has never been bigger: In the next three years, US
and European companies face maturities of some
$3 trillion in debt, about 26% of the global total, data
compiled by Bloomberg show. Just under a third of
that total was issued in 2020-21.
Yet markets are trading as if none of this matters. US companies with investment-grade ratings
sold $189 billion in debt in January, a record for the
month. Average spreads for their bonds stand at
around 95 basis points over Treasuries, approaching the lowest level since the Federal Reserve started
hiking rates. Most investors are betting that Fed rate
cuts this year will create a window of opportunity
for refinancing, and part of the January surge was
due to companies doing just that as a sudden wave
of optimism pushed down borrowing costs.
But Schwartz and other bears say that rates
may not come down as quickly or as far as markets expect, because of either lingering inflation
or an economic downturn. This argument got
some vindication on Feb. 1 when Fed Chair Jerome
Powell dashed hopes that rate cuts would begin as
early as March, sending bonds tumbling.
The bull case doesn’t take into account that a lot
of today’s outstanding debt was issued at such historically low rates that any refinancing will cost far
more, even if the Fed cuts this year. More than 40%
of the junk-rated bonds due between 2024 and 2026
THE BOTTOM LINE HSBC’s new foreign exchange app aims to
claw back customers from upstart Wise. But the bank may face
an uphill battle.
Shorting the Debt
Maturity Wall
● One financier is betting his own money on a
wave of defaults as ultracheap bonds expire
Hedge fund manager Adam Schwartz got rich
in 2020 predicting the corporate bond market’s
boom and bust. Now he’s staking most of his fund—
and his own cash—on another bet that companies
coming up against record debt maturities will spark
a wave of defaults.
February 12, 2024
“Everyone
thinks that just
because the
last couple
years have
gone smoothly,
the next five
years will go
smoothly”
PHOTOGRAPH BY SAUL MARTINEZ FOR BLOOMBERG BUSINESSWEEK. DATA: BLOOMBERG. INCLUDES INVESTMENT-GRADE AND HIGH-YIELD BONDS ISSUED IN THE US AND EUROPE
20
◼ FINANCE
◼ FINANCE
Bloomberg Businessweek
were taken out during the pandemic, when the Fed
made credit cheap and easy for vulnerable companies, even pledging to buy certain types of high-yield
debt. With inflation raising costs for most businesses, the environment is ripe for defaults.
Schwartz isn’t alone in seeking to short the
looming maturity wall. Hedge funds such as Hamza
Lemssouguer’s Arini profited last year with bets
that borrowers who raised money during the easymoney era would struggle to refinance their debt.
Some signs hint that the bears could be right.
Over 200 large US companies went bust in 2023, the
worst year since the global financial crisis, not including the first 12 months of the pandemic. Speculative-
Overall, though, Schwartz’s shorts have
not generated much profit for his fund,
which returned 18% last year, versus 24% for
the S&P 500 Index. Bets last year against Silicon
Valley Bank and First Republic paid off when
the lenders collapsed after an exodus by depositors. But investors have to pay interest on short
positions, so they can be costly to hold over an
extended period. The hope is that when they
do pay out, the profit will cover those costs, but
there’s no guarantee.
Schwartz offsets the cost of the short positions
with a handful of holdings in companies with little debt, in some cases because they’ve undergone
February 12, 2024
◀ Schwartz
21
▼ Corporate bond
maturities
$300b
200
100
grade companies are defaulting at the fastest rate
since May 2021, and there’s been a surge in paymentin-kind arrangements by companies that lack the
cash to cover their debts.
Schwartz sees big opportunities for those willing
to play the long game. He declines to name stocks
he’s shorting, but there’s a mix of private equity
firms that have loaded up on over-leveraged companies and online retailers with scant cash flow.
That was fine when low rates meant low costs, “but
you can’t grow like that if what you’re offering is
a partly subsidized product dependent on low
rates.” He’s also reinstated a short on exchangetraded funds that track major investment-grade
and emerging-market credit indexes, which paid
out handsomely when corporate bonds slumped
at the start of the pandemic, helping his fund grow
almost fourfold.
recent restructurings, in others because they
operate in sectors that lenders eschew because of
poor environmental credentials. He’s invested 87%
of his portfolio in just seven companies, including
a coal producer, a building materials supplier and
an owner of auto dealerships. He says that as higher
interest rates and inflation hammer weak balance
sheets, companies with good management and low
debt will benefit.
“Everyone thinks that just because the last couple years have gone smoothly, the next five years
will go smoothly,” Schwartz says. “It’s a lot better to
be skeptical and cautious, given the sheer amount
of debt that’s out in the system.” �Natasha Doff
and Cecile Gutscher
THE BOTTOM LINE Schwartz and other bearish investors see
opportunity in expiring bonds issued in the heyday of ultralow
interest rates. But the short position comes with risk.
0
Q2 ’24
Q4 ’26
Bloomberg Businessweek
February 12, 2024
4
22
E
C
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M
I
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Edited by
Cristina Lindblad
China Limps Into
The Year
Of the Dragon
Beijing hasn’t hit on the right mix of policies
to reawaken the animal spirits
PHOTO ILLUSTRATION BY 731; PHOTOS: GETTY IMAGES (2). *EXCLUDES OFF-BALANCE-SHEET SPENDING. DATA: NATIONAL BUREAU OF STATISTICS COMPILED BY BLOOMBERG AND BLOOMBERG CALCULATIONS;
CITIGROUP DATA COMPILED BY BLOOMBERG; PEOPLE’S BANK OF CHINA AND CHINESE MINISTRY OF FINANCE FIGURES COMPILED BY BLOOMBERG
◼ ECONOMICS
Bloomberg Businessweek
As China heads into the lunar Year of the Dragon,
traditionally seen as one of the most auspicious creatures on the zodiac, the country’s leaders are struggling to restore confidence at home and abroad.
The economy is besieged by deflation, a persistent housing market slump and a stock selloff.
And Beijing’s piecemeal stimulus policies—such as
lowering bank reserve requirements to encourage
more lending and issuing more government bonds
to fund construction projects—don’t seem to be
improving sentiment.
A key issue is the government’s focus on promoting what President Xi Jinping calls “high-quality
development,” an umbrella term for a variety of
policy goals, from boosting China’s high-tech
capabilities to combating social inequality. That’s
a more complex ambition than officials’ earlier
single-minded fixation on achieving high levels
of economic expansion. “The biggest challenge is
Beijing’s inattention to deteriorating growth, which
exacerbates all the structural and secular problems
China faces,” says Houze Song, an economist at the
Paulson Institute, a think tank focused on US-China
relations. “And the solution is to assign a bigger
weight to growth in government policy.”
Here are five charts that zero in on China’s pain
points in 2024.
The GDP deflator, the widest measure of prices
in the economy, has fallen for the last three quarters, the longest streak since 1999. Manufacturing
is leading the price drops—a side effect of Beijing’s
approach to economic stimulus. Officials are channeling credit to manufacturers to boost output. But
with growth in consumer spending on goods weak
at home and demand for Chinese exports also flagging overseas, businesses are left with little choice
but to mark down their products.
① DEFLATION NOW TOPS LIST OF WORRIES
The term “deflation” describes a situation in which
prices for goods and services fall across a large swath
of the economy. (Not to be confused with disinflation, which signifies prices are still rising, though
more slowly. That’s what’s happening in the US.)
Adjusted for inflation, China’s gross domestic
product expanded 5.2% in 2023. But in nominal
terms the world’s No. 2 economy grew 4.6%, the
slowest pace in almost four decades, not counting
the years when pandemic restrictions were in place.
① China GDP deflator, year-over-year change
February 12, 2024
② WHILE OLD PROBLEMS PERSIST
China’s economy grew faster than the US’s last year,
but relative to expectations at the start of 2023, the
former underperformed, while the latter consistently beat estimates.
Blame it on China’s property market crisis. It’s an
old story by now—the slump began in 2021—but it’s
making headlines again thanks to a Hong Kong judge’s
ruling ordering the liquidation of China Evergrande
Group, one of the many distressed developers.
Despite Beijing’s efforts to deter real estate speculation, construction still represents a huge chunk
of the economy, driving demand for goods and
services worth around 20% of GDP, according to
Bloomberg Economics. Related sectors such as
household furnishings and cement are also being
dragged down. And there’s a spillover effect to
other areas, as falling home prices make many
households reluctant to spend on everything from
electronics to luxury goods.
After a few mistaken calls of a turn in the property market, Wall Street analysts have arrived at the
consensus that conditions won’t stabilize until 2025.
23
③ NEED MORE, BETTER STIMULUS
Chinese government advisers’ calls for more
stimulus reached a fever pitch last summer, and
Beijing responded with an unusual midyear dose
③ China’s monetary and fiscal stimulus
as a share of GDP
② Citi Economic Surprise Index
US
“The biggest
challenge
is Beijing’s
inattention to
deteriorating
growth”
China
◼ Central bank balance-sheet increase
◼ Government deficit*
9%
Q1 ’98
Q2 ’09
Q4 ’23
9%
180
6
90
6
3
0
3
0
-90
0
-3
-180
-3
2/2/23
7/17/23
2/2/24
2014
2020
2023
24
◼ ECONOMICS
Bloomberg Businessweek
of deficit spending. While the timing signaled a
welcome flexibility, the scale of the effort, at 1 trillion yuan ($13.9 billion), paled compared with
past interventions. Government officials channeled funds into construction, a tried-but-less-true
method of spurring the economy, ignoring recommendations that directing assistance to households
might yield better results.
The Communist Party’s Politburo unveiled two
slogans in December that hinted at more support
for the housing market and a greater focus on economic growth. But neither should be interpreted
as a return to the past.
Perhaps it’s time investors take Beijing at its word
when it says it will never again unleash “floodlike”
stimulus (a reference to the government’s response
during the global financial crisis) or massively
increase demand for housing (as it did after a downturn in 2015). Policymakers will instead prioritize
industries such as high-tech manufacturing that are
central to Xi’s revamp of China’s economic model.
④ China consumer confidence index
④ FEELING LOW
Stubbornly low confidence among households and
businesses is blunting the impact of stimulus. That
may be a hangover from the past few years, which
along with the housing slump have been marked
by unpredictable pandemic restrictions, sudden
crackdowns on sectors including education and
tech, and rising US-China tensions.
One sign Chinese families are feeling less secure:
Rather than investing in housing or stocks, they’re
socking money away in savings accounts at banks.
Companies are being showered with credit, but outside of growth sectors such as electric vehicles and
cleantech, business owners appear to be reluctant to
expand amid weak demand and falling prices.
The optimistic view is that confidence will recover
as recent traumas recede further into the past and
China’s relations with the US and other key markets
improve. The pessimists see the property slump
continuing to drag on confidence. The prospect of
a Donald Trump reelection won’t ease nerves either.
⑤ FINDING THE FLOOR
Worries about China’s future are reflected in prices
of stocks traded at exchanges on the mainland and
in Hong Kong. A yearlong rout has wiped away about
$6 trillion in market value, from a peak in 2021.
Although the stock market isn’t a reliable
tracker of China’s economy over the long term, in
the medium term it’s sensitive to trends in nominal growth because they affect profits. So Beijing’s
efforts to boost valuations by tweaking market rules,
such as restricting short selling, and possibly using
February 12, 2024
⑤ Change in benchmark stock index
since Dec. 30, 2022
Government eases
Covid restrictions
China (CSI 300)
India (S&P BSE Sensex)
US (S&P 500)
12/2017
12/2023
120
30%
110
15
100
0
90
-15
80
-30
12/30/22
2/2/24
DATA: NATIONAL BUREAU OF STATISTICS DATA COMPILED BY BLOOMBERG, BLOOMBERG
government funds to buy stocks at scale—an idea
that was floated last month—are unlikely to produce
a lasting upswing. “Without a growth rebound, I
see little chance policy can sustainably boost the
stock market,” says Song of the Paulson Institute.
�Tom Hancock
THE BOTTOM LINE China’s economy is battling an assortment of
ills, some chronic and others new. Sporadic doses of government
stimulus have proved an ineffective treatment so far.
Politics and the Fed
● Powell hopes to stay out of the crosshairs of the US
presidential election. It won’t be possible
Federal Reserve Chair Jerome Powell would no
doubt prefer that the central bank not be dragged
into the middle of what’s likely to be a highly contentious presidential election campaign. But he’s
finding that may be near impossible.
In a rare interview, on CBS’s 60 Minutes, which
aired on Feb. 4, Powell insisted the Fed wouldn’t
take politics into account in deciding when to
reduce interest rates as inflation ebbs. “It just
doesn’t come up in our thinking,” he said.
But such assertions didn’t stop former President
Donald Trump from accusing him of doing just that.
“I think he’s political,” the likely Republican presidential nominee said in an interview that aired on
Fox Business’ Sunday Morning Futures, also on Feb. 4.
“I think he’s going to do something to probably help
the Democrats, I think, if he lowers interest rates.”
SAMUEL CORUM/BLOOMBERG
◼ ECONOMICS
What’s more, even as Powell emphasized the
Fed’s nonpartisan bona fides, he ended up commenting in the 60 Minutes interview on issues that
will be hotly debated in the campaign—such as
immigration—though he stopped well short of offering specific policy prescriptions. “It underscores
just how treacherous the road is in an election year
for the Fed,” says Diane Swonk, chief economist at
KPMG LLP. “It’s hard for them not to accidentally
stumble on political land mines even as they’re trying to do the best economic policy.”
Trump elevated Powell to Fed chair in
February 2018, then spent much of that year and
the next castigating him for keeping interest rates
at levels he considered too high. “The only problem
we have is Jay Powell and the Fed,” Trump groused
in an August 2019 post on Twitter (now X). “He’s
like a golfer who can’t putt, has no touch. Big U.S.
growth if he does the right thing, BIG CUT - but
don’t count on him!”
At one point, Trump even explored the possibility of firing the Fed chair. He told Fox Business on
Feb. 4 that he wouldn’t reappoint Powell if elected
in November.
President Joe Biden, who backed Powell for a
second four-year term in 2022, has refrained from
giving the Fed public policy advice, though some
of his Democratic colleagues haven’t been so shy.
Several prominent lawmakers, including Senate
Banking Committee Chairman Sherrod Brown and
Massachusetts Senator and former presidential candidate Elizabeth Warren, wrote separately to Powell
last month urging him to lower interest rates.
In his 60 Minutes appearance, Powell pushed
back on pressure for a quick turn to easier credit,
even though inflation is cooling quickly. The “danger of moving too soon is that the job’s not quite
done and that the really good readings we’ve had
for the last six months somehow turn out not to be a
true indicator of where inflation’s heading,” he said.
That didn’t come as a surprise to Fed watchers.
After all, Powell had said as much at his Jan. 31 press
conference after policymakers held rates steady for
the fourth straight meeting. What did take some
analysts aback was his willingness to comment on
some potentially highly charged political issues not
directly tied to monetary policy.
The Fed chair extolled the advantages of
America supporting global democracy and the
economic and security framework behind it.
He called the federal government’s debt unsustainable in the long run and urged lawmakers to
tackle the issue. And while he said immigration
policy isn’t the Fed’s job, Powell did argue that
immigrants have benefited the US economy over
Bloomberg Businessweek
February 12, 2024
time. Although he stuck to broad principles and
eschewed specific policy recommendations, seasoned Fed observers took note. “I don’t think I’ve
ever seen Powell so forcibly insist the Fed stays in
its lane and then make strong pronouncements”
like those, Sarah Binder, a senior fellow at the
Brookings Institution, posted on X.
The Fed is no stranger to feeling the political
heat in an election year. In 2016, then-presidential
candidate Trump repeatedly accused former Fed
Chair Janet Yellen of keeping interest rates low to
help Hillary Clinton win the White House.
But several things set the coming campaign
apart. The post-pandemic surge in inflation—along
with the Fed’s big rate increases to contain it—has
made voters more aware of Powell and the central
bank. And they don’t like what they see. Just 43% of
Americans in a Gallup Poll in December gave him
a favorable job rating, down from 53% in 2021, the
last time the company asked that question.
The election is also coming at a particularly delicate time for the economy and the Fed. Powell told
reporters on Jan. 31 that the central bank is trying
to navigate two competing risks. If it cuts rates too
soon, it runs the danger of allowing inflation to settle
at levels well above its 2% goal. If it delays reducing
rates too long, it could end up driving the US into a
recession. “Powell was trying to get ahead of a presidential campaign in which he and the Fed will be
in the crosshairs,” says Mark Spindel, chief investment officer at Potomac River Capital. �Rich Miller
▲ Powell
THE BOTTOM LINE Federal Reserve policymakers like to stay
above the fray when it comes to politics, but that will be difficult as
the presidential election nears.
25
“It’s hard for
them not to
accidentally
stumble on
political land
mines even as
they’re trying
to do the best
economic
policy”
Bloomberg Businessweek
26
February 12, 2024
February 12, 2024
A piece of a Herculaneum papyrus
few years ago, during one of California’s steadily
worsening wildfire seasons, Nat Friedman’s family home burned down. A few months after that,
Friedman was in Covid-19 lockdown in the Bay
Area, both freaked out and bored. Like many a
middle-aged dad, he turned for healing and
guidance to ancient Rome. While some of us
were watching Tiger King and playing with our
kids’ Legos, he read books about the empire and helped his daughter
make paper models of Roman villas. Instead of sourdough, he learned
to bake panis quadratus, a Roman loaf pictured in some of the frescoes
found in Pompeii. During sleepless pandemic nights, he spent hours
trawling the internet for more Rome stuff. That’s how he arrived at the
Herculaneum papyri, a fork in the road that led him toward further
obsession. He recalls exclaiming: “How the hell has no one ever told me
about this?”
The Herculaneum papyri are a collection of scrolls whose status among
classicists approaches the mythical. The scrolls were buried inside an
Italian countryside villa by the same volcanic eruption in 79 A.D. that
froze Pompeii in time. To date, only about 800 have been recovered from
the small portion of the villa that’s been excavated. But it’s thought that
the villa, which historians believe belonged to Julius Caesar’s prosperous
father-in-law, had a huge library that could contain thousands or even tens
of thousands more. Such a haul would represent the largest collection
of ancient texts ever discovered, and the conventional wisdom among
scholars is that it would multiply our supply of ancient Greek and Roman
poetry, plays and philosophy by manyfold. High on their wish lists are
works by the likes of Aeschylus, Sappho and Sophocles, but some say it’s
easy to imagine fresh revelations about the earliest years of Christianity.
“Some of these texts could completely rewrite the history of key periods of the ancient world,” says Robert Fowler, a classicist and the chair
of the Herculaneum Society, a charity that tries to raise awareness of
the scrolls and the villa site. “This is the society from which the modern Western world is descended.”
The reason we don’t know exactly what’s in the Herculaneum papyri
is, y’know, volcano. The scrolls were preserved by the voluminous
amount of superhot mud and debris that surrounded them, but the
knock-on effects of Mount Vesuvius charred them beyond recognition.
The ones that have been excavated look like leftover logs in a doused
campfire. People have spent hundreds of years trying to unroll them—
sometimes carefully, sometimes not. And the scrolls are brittle. Even
the most meticulous attempts at unrolling have tended to end badly,
with them crumbling into ashy pieces.
In recent years, efforts have been made to create high-resolution, 3D
scans of the scrolls’ interiors, the idea being to unspool them virtually.
This work, though, has often been more tantalizing than revelatory.
Scholars have been able to glimpse only snippets of the scrolls’ innards
and hints of ink on the papyrus. Some experts have sworn they could
see letters in the scans, but consensus proved elusive, and scanning the
entire cache is logistically difficult and prohibitively expensive for all
but the deepest-pocketed patrons. Anything on the order of words or
paragraphs has long remained a mystery.
But Friedman wasn’t your average Rome-loving dad. He was the chief
executive officer of GitHub Inc., the massive software development platform that Microsoft Corp. acquired in 2018. Within GitHub, Friedman
27
COURTESY VESUVIUS CHALLENGE
Bloomberg Businessweek
Bloomberg Businessweek
efore Mount Vesuvius erupted, the town of
Herculaneum sat at the edge of the Gulf of
Naples, the sort of getaway wealthy Romans
used to relax and think. Unlike Pompeii, which
took a direct hit from the Vesuvian lava flow,
Herculaneum was buried gradually by waves of
ash, pumice and gases. Although the process
was anything but gentle, most inhabitants had
time to escape, and much of the town was left intact under the
hardening igneous rock. Farmers first rediscovered the town
in the 18th century, when some well diggers found marble statues in the ground. In 1750 one of them collided with the marble floor of the villa thought to belong to Senator Lucius
Calpurnius Piso Caesoninus, Caesar’s father-in-law who’s
known to historians today as Piso.
During this time, the first excavators who dug tunnels into
the villa to map it were mostly after more obviously valuable
artifacts, like the statues, paintings and recognizable household objects. Initially, people who ran across the scrolls,
some of which were scattered across the colorful floor mosaics, thought they were just logs and threw them on a fire.
Eventually, though, somebody noticed the logs were often
found in what appeared to be libraries or reading rooms and
realized they were burnt papyrus. Anyone who tried to open
one, however, found it crumbling in their hands.
Terrible things happened to the scrolls in the many
decades that followed. The scientif-ish attempts to loosen
the pages included pouring mercury on them (don’t do that)
and wafting a combination of gases over them (ditto). Some
of the scrolls have been sliced in half, scooped out and generally abused in ways that still make historians weep. The person who came the closest in this period was Antonio Piaggio,
a priest. In the late 1700s he built a wooden rack that pulled
silken threads attached to the edge of the scrolls and could
be adjusted with a simple mechanism to unfurl the document
ever so gently, at a rate of 1 inch per day. Improbably, it sort
of worked; the contraption opened some scrolls, though it
tended to damage them or outright tear them into pieces. In
later centuries, teams organized by other European powers,
including one assembled by Napoleon, pieced together torn
bits of mostly illegible text here and there.
Today the villa remains mostly buried, unexcavated and
off-limits even to the experts. Most of what’s been found there
and proven legible has been attributed to Philodemus, an
Epicurean philosopher and poet, leading historians to hope
there’s a much bigger main library buried elsewhere on-site.
A wealthy, educated man like Piso would have had the classics of the day along with more modern works of history,
law and philosophy, the thinking goes. “I do believe there’s
a much bigger library there,” says Richard Janko, a University
of Michigan classical studies professor who’s spent painstaking hours assembling scroll fragments by hand, like a jigsaw
puzzle. “I see no reason to think it should not still be there
and preserved in the same way.” Even an ordinary citizen
Seales and Friedman
28
had been developing one of the first coding assistants
powered by artificial intelligence; he’d seen the rising power
of AI firsthand. He had a hunch that AI algorithms could find
patterns in the scroll images that humans had missed.
After studying the problem for some time and ingratiating himself with the classics community, Friedman, who’s left
GitHub to become an AI-focused investor, decided to start a
contest. Last year he launched the Vesuvius Challenge, offering $1 million in prizes to people who could develop AI software capable of reading four passages from a single scroll.
“Maybe there was obvious stuff no one had tried,” he recalls
thinking. “My life has validated this notion again and again.”
As the months ticked by, it became clear that Friedman’s
hunch was a good one. Contestants from around the world,
many of them twentysomethings with computer science backgrounds, developed techniques for taking the 3D scans and
flattening them into more readable sheets. Some appeared to
find letters, then words. They swapped messages about their
work and progress on a Discord chat, as the often much older
classicists sometimes looked on in hopeful awe and sometimes slagged off the amateur historians.
On Feb. 5, Friedman and his academic partner Brent
Seales, a computer science professor and scroll expert,
revealed that a group of contestants had delivered transcriptions of many more than four passages from one of the scrolls.
While it’s early to draw any sweeping conclusions from this
bit of work, Friedman says he’s confident that the same techniques will deliver far more of the scrolls’ contents. “My goal,”
he says, “is to unlock all of them.”
February 12, 2024
PHOTOGRAPH BY HELYNN OSPINA FOR BLOOMBERG BUSINESSWEEK
Bloomberg Businessweek
February 12, 2024
from that time could have collections of tens of thousands
of scrolls, Janko says. Piso is known to have corresponded
often with the Roman statesman Cicero, and the apostle Paul
had passed through the region a couple of decades before
Vesuvius erupted. There could be writings tied to his visit
that comment on Jesus and Christianity. “We have about 800
scrolls from the villa today,” Janko says. “There could be thousands or tens of thousands more.”
In the modern era, the great pioneer of the scrolls is Brent
Seales, a computer science professor at the University of
Kentucky. For the past 20 years he’s used advanced medical
imaging technology designed for CT scans and ultrasounds
to analyze unreadable old texts. For most of that time he’s
made the Herculaneum papyri his primary quest. “I had to,”
he says. “No one else was working on it, and no one really
thought it was even possible.”
types get together and share big ideas. Seales gave a short
presentation on the scrolls to the group, but no one bit. “I
felt very, very guilty about this and embarrassed, because
he’d come out to California, and California had failed him,”
Friedman says.
On a whim, Friedman proposed the idea of a contest to
Seales. He said he’d put up some of his own money to fund
it, and his investing partner Daniel Gross offered to match it.
Seales says he was mindful of the trade-offs. The
Herculaneum papyri had turned into his life’s work, and he
wanted to be the one to decode them. More than a few of his
students had also poured time and energy into the project
and planned to publish papers about their efforts. Now, suddenly, a couple of rich guys from Silicon Valley were barging into their territory and suggesting that internet randos
could deliver the breakthroughs that had eluded the experts.
Progress was slow. Seales built software that could
theoretically take the scans of a coiled scroll and unroll it
virtually, but it couldn’t handle a real Herculaneum scroll
when he put it to the test in 2009. “The complexity of what
we saw broke all of my software,” he says. “The layers inside
the scroll were not uniform. They were all tangled and mashed
together, and my software could not follow them reliably.”
By 2016 he and his students had managed to read the
Ein Gedi scroll, a charred ancient Hebrew text, by programming their specialized software to detect changes in density
between the burnt manuscript and the burnt ink layered onto
it. The software made the letters light up against a darker background. Seales’ team had high hopes to apply this technique
to the Herculaneum papyri, but those were written with a different, carbon-based ink that their imaging gear couldn’t illuminate in the same way.
Over the past few years, Seales has begun experimenting with AI. He and his team have scanned the scrolls with
more powerful imaging machines, examined portions of the
papyrus where ink was visible and trained algorithms on
what those patterns looked like. The hope was that the AI
would start picking up on details that the human eye missed
and could apply what it learned to more obfuscated scroll
chunks. This approach proved fruitful, though it remained
a battle of inches. The technology uncovered pieces of the
scrolls, but they were mostly unreadable. He needed another
breakthrough.
More than glory, though, Seales really just hoped the
scrolls would be read, and he agreed to hear Friedman
out and help design the AI contest. They kicked off the
Vesuvius Challenge last year on the Ides of March. Friedman
announced the contest on the platform we fondly remember as Twitter, and many of his tech friends agreed to
pledge money toward the effort while a cohort of budding
papyrologists began to dig into the task at hand. After a couple of days, Friedman had amassed enough money to offer
$1 million in prizes, along with some extra money to throw
at some of the more time-intensive basics.
Friedman hired people online to gather the existing scroll
imagery, catalog it and create software tools that made it easier
to chop the scrolls into segments and to flatten the images out
into something that was readable on a computer screen. After
finding a handful of people who were particularly good at this,
he made them full members of his scroll contest team, paying them $40 an hour. His hobby was turning into a lifestyle.
The initial splash of attention helped open new doors.
Seales had lobbied Italian and British collectors for years to
allow him to do his first scans on their scrolls. Suddenly the
Italians were offering up two new scrolls for scanning to provide more AI training data. With Friedman’s backing, a team
set to work building precision-fitting, 3D-printed cases to protect the new scrolls on their private jet flight from Italy to a
particle accelerator in England. There they were scanned for
three days straight at a cost of about $70,000.
Seeing the imaging process in action drives home both the
magic and difficulty inherent in this quest. One of the scroll
remnants placed in the scanner, for example, wasn’t much bigger than a fat finger. It was peppered by high-energy X-rays,
much like a human going through a CT scan, except the resulting images were delivered in extremely high resolution (for the
real nerds: about 8 micrometers). These images were virtually
carved into a mass of tiny slices too numerous for a person to
count. Along each slice, the scanner picked up infinitesimal
riedman set up Google alerts for Seales and the
papyri in 2020, while still early in his Rome
obsession. After a year passed with no news, he
started watching YouTube videos of Seales discussing the underlying challenges. Among other
things, Seales needed money. By 2022, Friedman
was convinced he could help. He invited Seales
to California for an event where Silicon Valley
29
Bloomberg Businessweek
February 12, 2024
changes in density and thickness. Software was then used
to unroll and flatten out the slices, and the resulting images
looked recognizably like sheets of papyrus, the writing on
them hidden.
The files generated by this process are so large and difficult
to deal with on a regular computer that Friedman couldn’t
throw a whole scroll at most would-be contest winners. To be
eligible for the $700,000 grand prize, contestants would have
until the end of 2023 to read just four passages of at least 140
characters of contiguous text. Along the way, smaller prizes
ranging from $1,000 to $100,000 would be awarded for various milestones, such as the first to read letters in a scroll or to
build software tools capable of smoothing the image processing. With a nod to his open-source roots, Friedman insisted
these prizes could be won only if the contestants agreed to
show the world how they did it.
uke Farritor was hooked from the start.
Farritor—a bouncy 22-year-old Nebraskan who
often exclaims, “Oh, my goodness!”—heard
Friedman describe the contest on a podcast in
March. “I think there’s a 50% chance that someone will encounter this opportunity, get the
data, and get nerd-sniped by it, and we’ll solve
it this year,” Friedman said on the show.
Farritor, a computer science undergrad at the University of
Nebraska-Lincoln, thought, “That could be me.”
The early months were a slog of splotchy images. Then
Casey Handmer, an Australian mathematician, physicist and
polymath, scored a point for humankind by beating the computers to the first major breakthrough. Handmer took a few
stabs at writing scroll-reading code, but he soon concluded he might have better luck if he just stared at
the images for a really long time. Eventually he began
to notice what he and the other contestants have come
to call “crackle,” a faint pattern of cracks and lines
on the page that resembles what you might see in the
mud of a dried-out lakebed. To Handmer’s eyes, the
crackle seemed to have the shape of Greek letters and
the blobs and strokes that accompany handwritten
ink. He says he believes it to be dried-out ink that’s
lifted up from the surface of the page.
The crackle discovery led Handmer to try
identifying clips of letters in one scroll image. In the
spirit of the contest, he posted his findings to the
Vesuvius Challenge’s Discord channel in June. At
the time, Farritor was a summer intern at SpaceX in
A cross-section of the scroll
analyzed by Farritor
30
California. He was in the break room sipping a Diet Coke
when he saw the post, and his initial disbelief didn’t last long.
Over the next month he began hunting for crackle in other
image files: one letter here, another couple there. Most of
the letters were invisible to the human eye, but 1% or 2% had
the crackle. Armed with those few letters, he trained a model
to recognize hidden ink, revealing a few more letters. Then
Farritor added those letters to the model’s training data and
ran it again and again and again. The model starts with something only a human can see—the crackle pattern—then learns
to see ink we can’t.
Unlike today’s large-language AI models, which gobble up
data, Farritor’s model was able to get by with crumbs. For
each 64-pixel-by-64-pixel square of the image, it was merely
asking, is there ink here or not? And it helped that the output was known: Greek letters, squared along the right angles
of the cross-hatched papyrus fibers.
In early August, Farritor received an opportunity to put
his software to the test. He’d returned to Lincoln to finish
out the summer and found himself at a house party with
friends when a new, crackle-rich image popped up in the contest’s Discord channel. As the people around him danced and
drank, Farritor hopped on his phone, connected remotely
to his dorm computer, threw the image into his machinelearning system, then put his phone away. “An hour later, I
drive all my drunk friends home, and then I’m walking out
of the parking garage, and I take my phone out not expecting to see anything,” he says. “But when I open it up, there’s
three Greek letters on the screen.”
Around 2 a.m., Farritor texted his mom and then
Friedman and the other contestants about what he’d found,
Bloomberg Businessweek
February 12, 2024
scholars have their hopes for what might be next.
There’s a chance that the villa is tapped out—that there are
no more libraries of thousands of scrolls waiting to be discovered—or that the rest have nothing mind-blowing to offer.
Then again, there’s the chance they contain valuable lessons
for the modern world.
That world, of course, includes Ercolano, the modern town
of about 50,000 built on top of ancient Herculaneum. More
than a few residents own property and buildings atop the villa
site. “They would have to kick people out of Ercolano and
destroy everything to uncover the ancient city,” says Federica
Nicolardi, a papyrologist at the University of Naples Federico II.
Farritor at home in Lincoln with a papyrus scan
CLOCKWISE FROM TOP: COURTESY VESUVIUS CHALLENGE. PHOTOGRAPHS BY SHAWN BRACKBILL FOR BLOOMBERG BUSINESSWEEK (2)
Image of Greek text
produced by Farritor,
Nader and Schilliger
fighting back tears of joy. “That was the moment where I was
like, ‘Oh, my goodness, this is actually going to work. We’re
going to read the scrolls.’”
Soon enough, Farritor found 10 letters and won $40,000
for one of the contest’s progress prizes. The classicists
reviewed his work and said he’d found the Greek word for
“purple.”
Farritor continued to train his machine-learning model
on crackle data and to post his progress on Discord and
Twitter. The discoveries he and Handmer made also set
off a new wave of enthusiasm among contestants, and
some began to employ similar techniques. In the latter
part of 2023, Farritor formed an
alliance with two other contestants, Youssef Nader and Julian
Schilliger, in which they agreed
to combine their technology and
share any prize money.
In the end, the Vesuvius
Challenge received 18 entries for
its grand prize. Some submissions were ho-hum, but a handful
showed that Friedman’s gamble
had paid off. The scroll images that
were once ambiguous blobs now
had entire paragraphs of letters
lighting up across them. The AI systems had brought the past to life.
“It’s a situation that you practically
never encounter as a classicist,”
says Tobias Reinhardt, a professor
of ancient philosophy and Latin literature at the University of Oxford.
“You mostly look at texts that have been looked at by someone before. The idea that you are reading a text that was last
unrolled on someone’s desk 1,900 years ago is unbelievable.”
A group of classicists reviewed all the entries and did,
in fact, deem Farritor’s team the winners. They were able
to stitch together more than a dozen columns of text with
entire paragraphs all over their entry. Still translating, the
scholars believe the text to be another work by Philodemus,
one centered on the pleasures of music and food and their
effects on the senses. “Peering at and beginning to transcribe the first reasonably legible scans of this brand-new
ancient book was an extraordinarily emotional experience,”
says Janko, one of the reviewers. While these passages aren’t
particularly revelatory about ancient Rome, most classics
Barring a mass relocation, Friedman is working to refine
what he’s got. There’s plenty left to do; the first contest
yielded about 5% of one scroll. A new set of contestants, he
says, might be able to reach 85%. He also wants to fund the
creation of more automated systems that can speed the processes of scanning and digital smoothing. He’s now one of the
few living souls who’s roamed the villa tunnels, and he says
he’s also contemplating buying scanners that can be placed
right at the villa and used in parallel to scan tons of scrolls per
day. “Even if there’s just one dialogue of Aristotle or a beautiful lost Homeric poem or a dispatch from a Roman general
about this Jesus Christ guy who’s roaming around,” he says,
“all you need is one of those for the whole thing to be more
than worth it.” <BW>
31
Bloomberg Businessweek
TARRED
An excerpt from Battle for the
Bird shows how Jack Dorsey
tried to hand Twitter off to Elon Musk
and everything went south
32
AND
By Kurt Wagner
Illustrations by Alex Kiesling
FEATHERED
February 12, 2024
February 12, 2024
lon Musk was growing irritable
on Friday evening, Nov. 4, 2022.
It had been just over a week since
he’d closed his $44 billion deal
for Twitter, and advertisers were
bailing on the company in droves. Many
brand-conscious marketers were worried that Twitter’s historical reputation for nastiness would return as a
result of Musk’s pledge to defeat the
“woke mind virus,” his derisive
term for the censorious attitude he felt had sucked
the joy out of his favorite social network.
E
34
Musk said the way to save Twitter
was to restore what he saw as freedom
of speech. He hadn’t actually changed
any of Twitter’s speech policies by that
Friday, but the list of advertisers who
had paused their Twitter ads already
included United Airlines, REI and
Volkswagen and was steadily growing.
This was a major concern, considering
Twitter made roughly 90% of its revenue from advertising.
Musk told his staff he couldn’t understand why things had already gone sideways. He’d spent his first full week as
Twitter’s “Chief Twit” kowtowing to its
most important advertising partners.
He’d flown his Gulfstream to New York
for a slate of meetings that included
advertising industry heavy hitters like
WPP’s Mark Read and Horizon Media’s
Bill Koenigsberg. NFL Commissioner
Roger Goodell had visited Twitter’s
office in Chelsea, where Musk promised him in person that Twitter would
still be a safe place for the league’s valuable highlight videos.
Now Musk was demanding answers.
He called Robin Wheeler, his top sales
executive, and asked
how bad the business
was. Wheeler had to be delicate. In a
meeting a few days earlier, her predecessor had pushed back on Musk’s
decision to tweet a joke about Donald
Trump, and had been escorted out of
the building by security just 24 hours
later. It was clear Musk still didn’t appreciate just how anxious advertisers were
about the new direction he was taking
Twitter. He also seemed oblivious to
how his own behavior was contributing to this feeling. One of the things that
made Musk such a popular Twitter user
was his lack of filter, but that was proving to be a liability now that he was the
face of the operation.
Wheeler tried to explain this to her
new boss by bringing up a tweet he’d
posted just a few hours earlier in which
he’d threatened to go “thermonuclear”
on advertisers who stopped spending money on Twitter ads. “You don’t
want to go to war with advertisers,”
she warned.
“Oh, I will go to war,” he replied.
“And I win wars.”
Wheeler also told Musk
some Twitter users had
begun harassing advertisers
who were still running ads
on the service in an
attempt to get them
to stop. Musk was
incensed. Soon
after his call with
Wheeler ended,
he sent her a text
and included Yoel
Roth, Twitter’s
head of Trust and
Safety, who managed the teams in
charge of enforcing
Twitter ’s rulebook .
“Yoel, please suspend all
Twitter accounts that are
engaged in harassment of our
advertisers to get them to stop
advertising on Twitter,” he wrote.
“That is not OK.”
Pressuring an advertiser to stop
spending money was certainly not
against Twitter’s rules—it wasn’t even
unusual. Suspending Twitter users for
doing so would be impossible to justify
under the company’s rules, and it certainly didn’t align with Musk’s stated
pledge to uphold free speech. But Musk
made clear that if the company didn’t
have the rules he needed to exert his
will, he’d create them. He then called
Roth shortly after sending the text and
spent the brief conversation ranting that trolling Twitter’s advertisers was akin to blackmailing the
company. “Blackmail is against
our rules now,” he declared.
Roth hung up and contemplated quitting right then and there.
Instead, he called Wheeler and asked
her to talk Musk off the ledge. Wheeler
succeeded, and Musk quickly moved on
to other problems. But the strains that
have defined Musk’s tenure ever since
were already emerging in those first few
weeks on the job, according to several
people familiar with Musk’s interactions
and decisions at the time, who spoke
on the condition of anonymity to avoid
retaliation. Within that first week, he
was learning how his stated principles
PHOTOS: BLOOMBERG (4), ALAMY (2), GETTY IMAGES (1)
Bloomberg Businessweek
Bloomberg Businessweek
February 12, 2024
of absolute free speech didn’t mix well
with an advertising business. And the
people trying to help him implement
his vision were learning how quickly the
new boss would abandon those principles once they didn’t
work in his favor.
Nobody under-
entity behind it, it will be attacked.”
Dorsey’s own tenure at Twitter
hadn’t always gone smoothly, and
he believed that if anyone could fix
Twitter’s problems, it was Musk. But
if Dorsey’s analysis of Twitter’s flawed
business model was spot on, his solution has missed the mark. Musk
engulfed Twitter in chaos even before
he took over. After agreeing to buy the
company in April 2022, Musk had a
change of heart
and tried to tor-
“You
don’t want
to go to war
with advertisers.”
stood the tension
inherent in running Twitter
better than Jack
Dorsey, who’d
helped start the company, served two
stints as chief executive officer and
played a role in orchestrating Musk’s
acquisition. As the deal with Musk
came together, Dorsey, who still sat on
Twitter’s board, texted and spoke with
him regularly,
according to private messages
included in court documents related
to litigation over
the acquisition.
Dorsey shared his
concerns about Twitter’s reliance on
advertising revenue and told Musk the
company would be better served if it
was no longer publicly traded. “It can’t
have an advertising model,” Dorsey texted in March 2022, weeks before Musk
first made his offer. “Otherwise you
have a surface area
that governments
and advertisers will
try to influence
and control. If it
has a centralized
pedo his own deal. He spent much of
the year fighting with Twitter in court.
When he abandoned his legal fight and
reluctantly closed the deal that October,
he immediately fired half the employees, including most of the executive
team Dorsey
had hired and
worked with
for years.
“Oh, I will go
to war.
And I win wars”
This bumpy start was a taste of
things to come. About 16 months into
the Musk era, the company’s revenue is
now just a fraction of what it was before
he arrived. Musk’s plan to restore free
speech to the service—which he presented as a straightforward hands-off
policy—has come with all kinds of asterisks and stumbles.
Dorsey has acknowledged that his
attempt to hand off the company has
been bungled. In April 2023, he spent
some time responding to questions
about Twitter on Bluesky, a competing
social network he’d helped envision long before Musk ever entered
the picture. Jason Goldman, an early
Twitter board member, asked Dorsey
a simple but loaded question: “Do you
think Elon has proven to be the best
possible steward” for Twitter?
Dorsey, as he tends to do, answered
earnestly. “No,” he wrote back. “Nor do
I think he acted right after realizing his
timing was bad. Nor do I think the board
should have forced the sale.
“It all went south.”
T
here was already plenty of
upheaval at Twitter by the
time Musk showed up with
$44 billion in early 2022. In
the two years leading up
to the acquisition, activist investors tried to push Dorsey out;
Twitter permanently banned a sitting
US president; the company set a series
of lofty financial goals it never came
close to hitting; and Dorsey mentally
checked out before resigning as CEO in
November 2021. The conditions were
ideal for someone like Musk to swoop
in and take advantage.
Dorsey was eager to woo Musk, a
business leader he greatly admired—
and someone he often referred to as
his favorite tweeter. Dorsey had tried
unsuccessfully to get Musk to give a
companywide pep talk in 2018, and
then succeeded in getting him to do so
in 2020. In 2021 Dorsey visited Musk
at his Texas rocket launch facility,
Starbase, and brought along his friend,
the music producer Rick Rubin.
Dorsey and Musk kept an open
WHO’S HELD THE TOP SEAT AT TWITTER
Jack Dorsey
2007-2008
Ev Williams
2008-2010
Dick Costolo
2010-2015
Jack Dorsey
2015-2021
Parag Agrawal
2021-2022
Elon Musk
2022-2023
Linda Yaccarino
2023-present
35
Bloomberg Businessweek
dialogue as the
acquisition was
coming together,
and Dorsey ultimately retained
his nearly $1 billion
stake in Twitter when Musk took it private. When the terms of the deal were
finalized, Dorsey cheered publicly, and
congratulated Musk privately. “I basically followed your advice!” Musk texted Dorsey just minutes after the deal
was announced in April 2022. “I know,”
Dorsey replied, “and I
appreciate you.”
The day after, Dorsey
sent Musk a private message in hopes of setting
up a call with Parag Agrawal,
whom Dorsey had hand-picked
as his own replacement as CEO
a few months earlier. “I want to make
sure Parag is doing everything possible to build towards your goals until
close,” Dorsey wrote to Musk. “He is
really great at getting things done when
tasked with specific direction.”
Dorsey drew up an agenda that
included problems Twitter was working
on, short-term action items and longterm priorities. He sent it to Musk for
review, along with a Google Meet link.
“Getting this nailed will increase velocity,” Dorsey wrote. He was clearly hoping his new pick for owner would like
his old pick for CEO.
This was probably wishful thinking. Musk was already peeved
with Agrawal, with whom he’d
had a terse text exchange
weeks earlier after Agrawal
chastised Musk for some
of his tweets. Musk had
also unsuccessfully
petitioned Agrawal
to remove a Twitter
account that was
tracking his private
plane; the billionaire started
buying Twitter
shares shortly after
Agrawal denied
his request.
So it was no surprise
that the call Dorsey arranged
was a disaster. Agrawal’s vision for
Twitter fell flat with his soon-to-be boss.
There was a particularly uncomfortable
moment that centered on Vijaya Gadde,
The phone call telegraphed Musk’s
willingness to clean house. Once he formally took over, he fired people on a
whim, bad-mouthed Twitter’s business
and publicly attacked those employees
who disagreed with him. Musk eliminated the Covid-era policy of granting
mental health days and required everyone to be back in the office full time.
He also abandoned the system
Twitter used to verify prominent users and eliminated
many of the company’s factchecking operations. Twitter had
leaned hard into fact-checking and
other content moderation policies
in 2020 as the rise of Covid-19 and
the contentious US presidential election led to widespread misinformation on the service;
Musk quickly reversed that
approach, offering users more freedom
to say whatever they wanted but damaging Twitter’s reputation as the go-to
place for breaking
news in the process.
“Products that
facilitate human
connection and
communication
require a
different type of
social-emotional
intelligence”
Twitter’s top lawyer and policy exec, who had been deeply
involved in decisions to ban
Trump and block a news story about
Joe Biden and his son Hunter in the
final days of the 2020 presidential election. Musk saw Gadde as representing
everything he disliked about Twitter’s
speech policies, and he demanded
that Agrawal fire her. Agrawal refused.
It wasn’t clear if such an action would
be appropriate, given that Musk didn’t
own the company yet and wasn’t supposed to be making demands.
Dorsey didn’t jump in to defend
Gadde, with whom he’d worked for
the better part of a decade, nor did
he advocate for his colleagues afterward. “You and I are in complete agreement,” Musk wrote to Dorsey after the
call ended. “Parag is just moving far
too slowly and trying to please people
who will not be happy no matter what
he does.”
“At least it became clear that you
can’t work together,” Dorsey replied.
“That was clarifying.”
For all his flaws as a businessman,
Dorsey had made working at Twitter
feel special, preaching to employees
the power of the service and its place
in the world. Many Twitter employees
accepted less money than they could
have made at other major tech companies such as Meta Platforms Inc. or
Alphabet Inc.’s Google because Dorsey
helped instill the sense that Twitter
was more than another company selling targeted ads. Dorsey routinely
told Twitter employees that he loved
them, and for many years those feelings were reciprocated.
That connection was essentially severed as Dorsey held firm in his support
for Musk while the new owner dismantled the company. While Dorsey didn’t
directly object to Musk’s approach, he
acknowledged its impact. Shortly after
Musk fired half of Twitter’s employees
just one week after taking over, Dorsey
sent a melancholy tweet of apology. “I
COURTESY SIMON & SCHUSTER
36
February 12, 2024
Bloomberg Businessweek
am grateful for, and love, everyone who
has ever worked on Twitter,” he added.
“I don’t expect that to be mutual in this
moment … or ever … and I understand.”
lot has happened since
Musk first walked into
Twitter’s San Francisco
headquarters carrying
a porcelain sink and a
plan to turn the company
inside out. Working with the skeleton
crew that remains after laying off or
running off most of the nearly 8,000
employees, he’s aiming to transform
Twitter into an “everything app” where
people can shop, tweet, find dates and
manage their money.
Musk changed Twitter’s official name
to X in July 2023. “The Twitter name
made sense when it was just 140 character messages going back and forth—like
birds tweeting,” he wrote that month.
As an everything app, X will be something different entirely, Musk has said,
and “so we must bid adieu to the bird.”
In the meantime, X’s advertising
business continues to suffer from his
commitment to tweeting whatever he
wants whenever he wants. In April,
Musk changed his Twitter username
to “Harry Bolz.” In July he called Meta
CEO Mark Zuckerberg a “cuck” and
then challenged him to a “literal dick
measuring contest.”
In November he posted support for
an antisemitic tweet, which was the
final straw for some major advertisers
including Apple Inc. and Walt Disney
Co. Musk offered an apology from the
conference stage at DealBook a few
days later, but didn’t put much effort
into coming off as particularly apologetic. “Go f--- yourself,” he announced
to boycotting advertisers just minutes
later from that same stage.
Musk’s approach seems selfdefeating, given that advertising
still makes up roughly 75% of his
company’s revenue. Unlike Meta
and Google, which have enormous
direct-response advertising businesses
whose clients are often small businesses, Twitter is mostly dependent
on brand advertising—the type of ads
A
February 12, 2024
that stalwarts such as Coca-Cola, Apple facilitate human connection and
and Disney use to shape their public communication require a different type
image without necessarily expecting of social-emotional intelligence.”
immediate sales.
Before the antisemitic tweet and
orsey rarely t weets
the DealBook conference, X’s target
anymore, and when he
for advertising revenue in 2023 was
does, it’s often related
about $2.5 billion, or just over half
to his personal interests,
what the company made in the last
which include Bitcoin,
music and supporting the
full year before Musk bought it, according to people familiar with X’s busi- presidential campaign of Robert F.
ness, who didn’t want to be named as Kennedy Jr. It’s easy to see, though,
they weren’t authorized to speak pub- that he hasn’t gotten what he envilicly for the company. At the DealBook sioned when he encouraged Musk to
conference, he
buy his company.
blamed advertisDorsey made a lot of the idea that
one of Twitter’s flaws was it had too
ers who were relucmuch power and control over global
tant to spend on X for
speech, and that the world would run
the company’s finanbetter if such power was distributed.
cial issues. “What this
advertising boycott is
When it comes to what is said on
gonna do is it’s gonna kill
X, there’s still a company holding
the company,” Musk said.
the power, but that company is
“And the whole world will
controlled by the richest man
know that those advertisers killed
in the world with no board of
the company.”
directors, no public shareOf course, it won’t be Disney’s fault
holders and seemingly no
concerns about creating
if X fails. That will fall on Musk’s shoulglobally significant speech
ders, because of his unwillingness to
adjust to the realities of running an
policies on a whim.
advertising business. X operates difIn an interview with
the online political show
ferently from companies such as Tesla
Breaking Points in June,
Inc. and SpaceX, where he’s had such
Dorsey admitted that the
success. A global speech platform can’t
Musk era had gone wrong
be fixed or perfected simply by writing better code, improving manufac- even before it officially started, when
turing processes or pushing employees Musk accused the company of lying
to work longer hours.
about how many users it had and Twitter
“I learned a ton from
responded by suing him.
“I think it set up a dynamic
watching Elon up close—the
where he had to be very
good, the bad and the ugly,”
tweeted Esther Crawford, a
hasty, he had to be impatient,
product executive who surhe had to move as quickly as
possible with features even
vived a few months under
if they weren’t fully thought
Musk before she was laid off
out,” Dorsey said. “It all
in a round of cost cuts last
February. “His boldness,
looked fairly reckless.”
passion and storytelling is
Still, Dorsey maintained
something that many of his
inspiring, but his lack of proAdapted from Battle for
cess and empathy is painful.
former colleagues have long
the Bird: Jack Dorsey,
“Elon has an excepsince abandoned: hope. “I do
Elon Musk, and the
$44 Billion Fight for
tional talent for tackhave confidence that he’ll figTwitter’s Soul, published
ling hard physics-based by Atria Books, an imprint ure it out,” he continued. “I
of Simon & Schuster
problems,” she continown 3% of this new company,
LLC. Copyright © by
J. Kurt Wagner
so I’m supportive.” <BW>
ued, “but products that
D
37
HOW TO BUILD A
38
Ballmer tours
the Intuit
Dome, which
will open for
the 2024-25
NBA season
$2 BILLION
THE FUTURE
HOME OF THE
LA CLIPPERS
WILL BE STEVE
BALLMER’S ODE
TO BASKETBALL.
IT WILL ALSO
HAVE MORE
THAN 1,000
TOILETS
BY IRA
BOUDWAY
NBA PALACE
PHOTOGRAPHS
BY PHILIP
CHEUNG
39
STEVE
40
Ballmer’s suite at Crypto.com Arena in Los Angeles is a bunker
beneath the stands, across the hall from the locker room for
the Clippers, the NBA team he bought for $2 billion in 2014.
It’s a low-lit room with a high-top table, a row of dark couches
and three TVs along the far wall. There’s no view of the court,
which is fine with Ballmer. During games he rarely strays from
his first-row seat along the baseline. On a Tuesday night in
December, two hours before tipoff against the Sacramento
Kings, Ballmer is sitting at the table explaining how happy he
is to be leaving this place next season.
“We can’t establish a sense of identity around here,” he
says of the arena, which the Clippers share with the NBA’s
Lakers, the NHL’s Kings and the WNBA’s Sparks, as well as
about 50 concerts per year. On game nights the Clippers hang
portraits of their current players over the Lakers’ championship banners. (There’s a lot to cover: The Lakers have won
17 NBA titles, tied for the most with the Boston Celtics. The
Clippers have won zero.) “I think most people would say we’re
in the Lakers’ building,” Ballmer says.
Many might also say they’re in the Lakers’ city. For three
decades after former owner Donald Sterling moved the Clippers
from San Diego to LA in 1984—a span in which the Lakers won
eight championships with Hall of Famers including Magic
Johnson, Shaquille O’Neal and Kobe Bryant—the team was a
punchline, with just five winning seasons and mostly anonymous players. The franchise had begun to improve by the
time Ballmer took over, with the “Lob City” era of Blake Griffin
and Chris Paul underway. But in the popular imagination, the
Clippers remain LA’s “other” team.
Since moving into Crypto.com, then known as the Staples
Center, in downtown LA in 1999, the Clippers have also been
the third tenant in the building, often left to make do with
weekend matinees and other suboptimal slots in the schedule after the Kings and Lakers have taken dibs. That’s set
to end next season, when the Clippers move into the Intuit
Dome, a 17,500-seat arena under construction about 10 miles
southwest, in Inglewood.
For the past nine years, since he began scouring LA for
a plot of land, Ballmer has poured thousands of hours into
building a home for the Clippers. He’s finessed state and local
politicians, paid hundreds of millions of dollars to brush aside
a legal challenge from a rival NBA owner and labored over
every detail, from legroom and acoustics to locker rooms
and toilets. The result is a venue, set to open in August, that
Ballmer calls an “homage to basketball.”
Everything about the Intuit Dome—its dramatic exoskeleton, designed to evoke a basketball net as a ball swishes
through it; the 1,160 toilets and urinals; the 199 countdown
clocks throughout the concourses; the 44,000-square-foot,
February 12, 2024
halo-shaped LED board; a floor-to-ceiling bank of 4,500 seats
on one baseline known as the Wall—is intended to create an
environment where fans pay rapt attention to the game and
lend frenzied support to the home team.
The most expensive basketball arena ever built, the dome
is both an embodiment of Ballmer’s lifelong passion for the
sport and a large-scale experiment in behavioral psychology.
“There are stadiums that are built more as places for casual
conversation,” he says, “but I’m saying, ‘Hey, this is where
you go if you’re about the game.’ ”
As anyone who’s attended a game or concert in the past
15 years can attest, the smartphone has had a profound effect
on how people interact—or don’t—at live events. The show on
the floor struggles to compete with screens in hands. Over that
same span, sports teams have ramped up efforts to entice big
spenders with lavish dining options and private spaces. The
result, between the fans buried in their phones and those
ensconced in clubs, is often a lifeless space. The Intuit Dome
is Ballmer’s attempt to make arenas rock again.
“It’s a stark departure from what has become the status
quo,” says Ryan Sickman, global leader for the sports practice
at architecture firm Gensler, which wasn’t part of the project.
“It could almost bring a hearkening back to the yesteryear of
fandom in a modern building.”
Since voters in California have repeatedly proved unwilling to fund arena and stadium projects with taxpayer money,
Ballmer is shouldering the cost of his basketball Xanadu himself. “I’ll just say it’s well north of $2 billion,” he says when
a Bloomberg Businessweek reporter asks about the cost so far.
“And that’s primarily your money?”
“No, no, it’s not,” he deadpans.
“It’s all my money.”
At 67 years old, almost a decade
into his tenure as Clippers owner,
Ballmer hasn’t changed much
from the big, boisterous, bald-ontop software executive who spent
34 years at Microsoft Corp., the last
14 as chief executive officer, helping
to build the company into a tech
colossus and amassing a personal
fortune now worth about $140 billion. He bought the team as a (very
expensive) retirement hobby a few
months after stepping down from
Microsoft. While he leaves most
of the day-to-day decisions to the
Clippers’ front office, he’s devoted
himself to the arena project in all
of its minutiae. “I had a real view of
what I wanted it to be,” he says, “as
clear a view as anything I worked
on at Microsoft.”
At the groundbreaking in 2021,
in a variation on his infamous
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“Developers! Developers! Developers!” chant from the stage
at a 2006 Microsoft conference, Ballmer waxed lyrical about
the Intuit Dome’s copious plumbing. “I’ve become a real
obsessive about toilets,” he told the assembled grandees.
“Toilets, toilets, toilets.”
February 12, 2024
He’s only slightly more subdued in his suite at Crypto.com
as he describes the project. Dressed in a gray, microchecked
business-casual shirt that wouldn’t be out of place at a Microsoft
product launch, he punctuates his sentences with staccato
bursts of volume, arm waves, hand claps and table pounds:
“We got to have a
point of view,” he
says. “What do we
stand for? What are
we about [pound]?
We’re about basketball [pound].
Hardcore [pound].
We’re [pound] about
basketball [pound].”
THE INTUIT DOME
sign—big, blue, sansserif letters hung on
the exterior of the
arena—went up in
early December, a
few days before this
reporter donned a
safety vest, boots
and a helmet for
a tour. (The financial software company spent more
than $500 million in
2021 for the buildThe exterior of the Intuit
ing’s naming rights
Dome (above) is designed
to evoke a basketball net
for 23 years.) About
as a ball swishes through
it; the Clippers’ center
eight months from
court logo (left)
opening day, the
site is a cacophony
of hammer blows, forklift beeps and metal sizzling under welding torches. Although it isn’t
finished, with no court, seats or toilets in sight,
it’s far enough along to imagine what it will be.
The NBA has already decided to bring its All-Star
Game to the arena in 2026, the first time the
event has been awarded to an unopened venue,
and organizers of the 2028 Summer Olympics
plan to use it for basketball.
With the court level set below ground, the
dome’s roof strikes a low profile beneath the
swirling basketball-net membrane. Out front,
still mostly a dirt lot, will be the plaza, with
a full-size outdoor basketball court, a 75-foot
video screen beneath a band shell, a team store
and an amphitheater-style staircase for selfies.
From the plaza fans will split, with those who
have seats in the lower bowl entering from
street level and those in the upper bowl
41
Bloomberg Businessweek
taking a long escalator that overlooks the Clippers’ on-site
practice facility to the terrace level.
Intuit is designed so fans in every section walk down to their
seats, rather than making those in the nosebleeds turn away
from the court to go up, a concept the Clippers borrowed from
European soccer stadiums. “Even if you’re sitting in the very
last row, you’re walking toward what you are here for,” explains
the day’s tour guide, Gillian Zucker, the Clippers’ president of
business operations, as she navigates the construction debris
and takes a spot in what will be one of the back rows.
Zucker, a 54-year-old New Jersey native, came to the
Clippers in 2014, shortly after Ballmer took over. She’d spent
most of her career in auto racing, including nine years running the Auto Club Speedway east of LA. During one of her
job interviews with Ballmer, he told her the Clippers weren’t
the place to come if she was looking for infrastructure projects. “If you think we’re building an arena, and that is why
you want this, forget it,” she
Ballmer and Zucker
recalls him saying.
February 12, 2024
Ballmer’s purchase of the team had come together
suddenly. In spring 2014, gossip site TMZ published an audio
recording of then-owner Sterling making racist comments to a
mistress. Within days, NBA Commissioner Adam Silver issued
a lifetime ban and urged the league’s other owners to force a
sale of the team. Ballmer, recently retired from Microsoft, presented Sterling’s wife, Shelly, with a $2 billion bid—almost four
times the previous record for an NBA team—and she accepted.
By August, after her husband’s attempt to block the sale had
failed, the Clippers belonged to Ballmer.
A lifelong basketball fan who coached one of his sons’
third-grade youth teams and played in pickup games at
Microsoft, Ballmer had pursued previous attempts to buy
into the NBA—in Seattle, Sacramento and Milwaukee—all of
which hinged upon building or renovating an arena. When
the Clippers became available, he was excited to nab a team
without such complications. “The Sterling stuff happens,”
he says, “and I said, ‘Hey! I get to go where I don’t have to
worry about arenas.’ ”
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But after a few months of sharing the Staples
Center, he told Zucker it was time for the Clippers
to find a place of their own. By summer 2015 they
were hunting for property. Zucker began traveling the world, visiting almost a hundred sports
and music venues—from college field houses
to NFL stadiums to Australian rules football
pitches—to bring back the best ideas.
February 12, 2024
“ANYTIME HE
STARTS A SENTENCE
WITH ‘WOULDN’T
IT BE COOL,’ YOU
KNOW THAT YOU’RE
IN FOR SOMETHING
AMAZING”
THE INTUIT DOME SITS ON A 22-ACRE
plot about 2 miles east of Los Angeles
International Airport, in south Inglewood. The
city bought a piece of the land decades ago, with
the help of grant money from the Federal Aviation
Administration, and demolished the houses there
as part of a program to move people away from
noise pollution. When Ballmer and the Clippers
came across it, the city was leasing some of the lot
to the Madison Square Garden Co. to use as overflow parking for the Forum, its
newly renovated concert venue a mile north.
“I said to myself, ‘This is going to be
good,’ ” Inglewood Mayor James Butts Jr.
remembers thinking when the Clippers
called. Since taking office in 2011, Butts has
made sports the centerpiece of Inglewood’s
redevelopment. The Forum, home to the
Lakers and Kings from its opening in 1967
until their move downtown 32 years later,
was dormant and in disrepair. MSG bought
it in 2012 for $23.5 million and spent two
years and $100 million renovating it. Shortly
thereafter, Stan Kroenke, owner of the NFL’s
recently relocated LA Rams, broke ground on
SoFi Stadium, a more than $5 billion venue
just to the south that would become home to
both the Rams and Chargers.
When the Clippers inquired about building an arena on the south side of SoFi, Butts
saw a chance to further Inglewood’s renaissance as the “City of Champions.” MSG,
with New York Knicks owner James Dolan
as chairman, was less thrilled about the
idea of another venue going up a few blocks
away from the Forum. Since Ballmer and the
Clippers planned to book concerts on nights
when the team was away, MSG saw it as an
invasion of its turf.
After the Clippers and Inglewood formally announced their plan in 2017, MSG
unleashed a barrage of lawsuits seeking to
block it. In one the company accused Butts
of tricking it into giving up its lease by saying
he wanted the land for a technology park—
an allegation he denied. Butts’ successful
reelection bid in 2018 became a proxy war in the arena fight,
with Ballmer and his development company, Murphy’s Bowl,
donating more than $440,000 to his campaign and to a political action committee supporting him, while MSG backed his
challenger with more than $700,000.
MSG also sued California Governor Gavin Newsom and
the state’s budget committee over a bill that fast-tracked the
environmental review process for the Clippers’ arena and
backed a pair of lawsuits brought by a renters’ rights group.
Whatever the merits of those challenges, MSG appeared to
be trying to run out the clock on the Clippers, whose lease
with Crypto.com Arena owner AEG expires later this year.
(MSG declined to comment.)
Instead of waiting for the legal process to play out, Ballmer
made MSG an offer it couldn’t refuse. In May 2020, a moment
when its parking lot was being used as a Covid-19 testing site,
he paid $400 million to buy the Forum. As part of the deal,
MSG withdrew its legal challenges to his arena plans. “It was
a part of making sure we could be in [the new arena] in 2024,”
Ballmer says of buying the almost 60-year-old venue for more
than 15 times what MSG had paid.
Still, he says, the deal wasn’t purely a matter of removing roadblocks to a new home for the Clippers. The Forum—
which became the Kia Forum in 2022 after a naming rights
deal with the Korean automaker—gives Ballmer the ability to
book concerts on nights when the Clippers are in town. “It’s
a good enough profit stream that it might have made sense,”
he says, “even despite the high price.”
As the wealthiest owner in US sports, and currently the
sixth-richest person on the planet according to the Bloomberg
Billionaires Index, Ballmer can afford to overpay for what he
wants. Plenty of pundits suggested he’d done as much when
he bought the Clippers for $2 billion. The then-record sum
has been eclipsed four times in the decade since, however, by
buyers of the Houston Rockets ($2.2 billion), Brooklyn Nets
43
44
($3.3 billion), Phoenix Suns ($4 billion) and Dallas Mavericks
($3.5 billion). The Clippers are now worth almost $4.6 billion,
per the latest NBA franchise valuations from news site Sportico.
Does Ballmer feel vindicated? “Yes,” he says with a shrug,
taking out his phone (an iPhone, for the record) and opening the calculator app to explain how he evaluates his
investment. A typical index fund, he estimates, would have
returned about 8% annually over the last 10 years—he plugs
in “1.08^¹0,” taps the equal sign and gets 2.15—meaning a dollar invested then would be $2.15 today. At a $4.6 billion valuation, the Clippers have only slightly outperformed the
market. “Microsoft stock sure would have done better,”
Ballmer says, erupting in laughter. “I’m not saying I did badly.
I clearly didn’t overpay. But you can’t look at it as the steal
of the century.”
With the Intuit Dome, Ballmer is once again spending whatever it takes. In addition to the $400 million for the Forum,
he’s committed $100 million to a community benefit plan for
Inglewood to fund affordable housing, youth programs and
other civic needs. Throughout the arena’s design and construction, he’s spent extra to fulfill his vision of a hoops cathedral.
After seeing a full-size basketball court in the lobby of the
Gainbridge Fieldhouse in Indianapolis, where the NBA’s Pacers
and WNBA’s Fever play, Ballmer decided that his arena needed
one, too, and that it should have wooden bleachers. “Turns
out they don’t make wooden bleachers anymore,” Zucker says,
pointing out the space where Intuit’s indoor fan court, with
custom-built wooden bleachers, will go. “You could have a
prom or graduation or unveil a new product in here, or play
your Tuesday night pickup game.”
The line between thoughtful detail and extravagance
is always thin. At times the Intuit Dome seems to cross it.
“Anytime he starts a sentence with ‘Wouldn’t it be cool,’ ”
Zucker says of Ballmer, “you know that you’re in for something amazing.” But the arena is more than an exercise in
wish fulfillment for a basketball-obsessed billionaire; it’s a bet
that the Clippers can find about 17,500 more Angelenos like
Ballmer—and teach them the Tao of Steve—to create a competitive advantage.
Take, for instance, the Wall, an uninterrupted bank of
4,500 seats in 51 rows from floor to ceiling behind one of the
baskets. “It’s built for people to channel their inner Steve
Ballmer,” says Zucker. To fill the section with those who
share in Ballmer’s mania, the Clippers plan to restrict access
through a loyalty program. Fans will be required to complete
a handful of actions, such as sharing photos of themselves in
Clippers gear on social media or answering trivia questions,
to earn a “Chuckmark”—named for the team’s mascot, Chuck
the Condor—before they can buy tickets for seats in the Wall.
“It’s about bringing fans closer,” Ballmer says, “but it’s also
to say, ‘Hey … you got a purpose here. Your job is not just to
enjoy [clap, clap]. You’re here to contribute. You gotta [clap,
clap] help our team out.”
While the Wall, modeled after the stands at San Diego State
University’s Viejas Arena, may help re-create the atmosphere
February 12, 2024
of a college field house, it leaves less room for corporate
suites. Intuit has only 46 of them around its bowl, compared
with 178 at Crypto.com. And even these premium spaces are
engineered for maximum intensity, with the top row of seating for each suite set near the ceiling, so fans won’t have a
view of the court from the dining areas. They’ll have to go
back out to their seats.
Underneath the stands on the baseline opposite the Wall
are four subterranean luxury boxes, cabanas, as the Clippers
call them, where fans can nosh a few steps from their thirdrow seats—not unlike Ballmer’s bunker arrangement at
Crypto.com. Fans in some sideline sections of the lower bowl
will likewise be able to retreat down to private, floor-level
dining spaces called bungalows. The suites, cabanas and bungalows will all be outfitted with countdown clocks to show
fans when a timeout or other break in the action is set to end,
so they can hustle back to their seats. Clocks will also be put
up throughout the concourses. “Always clock, clock, clock,
clock everywhere,” Ballmer says.
His fixation on toilets? Also about keeping fans in their
seats, rather than standing in line, during the game. Intuit
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RENDERING: COURTESY LA CLIPPERS
will have roughly one toilet for every 15 seats, more than
double the typical ratio at an NBA arena.
Intuit’s concessions have also been designed for maximum throughput. The menu will be small and identical at
every stand, so fans don’t waste time wandering in search of
their favorite items. And the Clippers are planning a checkout
system in which customers simply take what they want and
get charged automatically as they walk out, without so much
as a tap or swipe.
Even the halo board, ostensibly a huge overhead distraction, is intended to help keep people locked in with carefully
programmed stats and analysis. “We put up that big scoreboard,” Ballmer says. “Why? We can teach [clap] you more
of the game. We can tell [clap] you more about the game, the
game [clap], the game.”
Ballmer knows his gonzo style isn’t for everybody. Some
people want to eat, drink, lounge and, especially in LA, be
part of a scene. But there’s already an NBA team in town
for those people: the “Showtime” Lakers. The Clippers, as
Ballmer sees it, need to cultivate an alternative identity—
in the model of their owner—as the team for hoops purists.
At the team’s offices a few blocks from Crypto
.com
Arena in downtown LA, the Clippers
A rendering
of the new
have dedicated a floor to a model of the Intuit
arena (left);
Dome, along with full-size replicas of the suites,
the interior
under
cabanas and bungalows, where salespeople
construction
(below)
bring season ticket holders to entice them
to follow the team to Inglewood. “Not everybody’s gonna move over with us,” Ballmer
says. “If you live up in Pasadena or Burbank,
that’s a big move.” The Clippers are also raising ticket prices, which is a sticking point for
some. But Ballmer is confident the team will
pick up at least as many fans as it loses. “LA is
a huge place,” he says. “We can fill the building with our point of view, as long as we have
a good team.”
With the success of the building tied to the
team’s fortunes on the court, the Clippers have
gone all in on a win-now approach and assembled a roster of veteran stars led by 32-year-old
forward Kawhi Leonard. So far this season, it’s
paid off. As of Feb. 7 the Clippers had compiled
a 34-15 record, good enough for first place in
the Western Conference, eight spots ahead of
the Lakers, and—more important—a berth in the
playoffs, where oddsmakers give them a strong
chance to win it all.
At the Kings game in December, Ballmer
takes his customary seat on the baseline at
Crypto.com—with Walt Disney Co. CEO Bob Iger
as his guest—to watch his Clippers cruise to a
20-point victory, part of a nine-game winning
streak that month. He chats with Iger during
lulls, but his attention never wavers from the
floor. When the Clippers’ 7-foot center, Ivica
Zubac, dunks one-handed over a Kings defender
in the third quarter, Ballmer pumps his fists and
throws himself into the back of his seat in a fullbody spasm of excitement—the happiest fan in
a building he can’t wait to leave. <BW>
45
Your Flight Has
Bloomberg Businessweek
46
AeroVanti promised clients private jets
on demand. It didn’t deliver
Month 00, 2023
Been Canceled
Bloomberg Businessweek
February
12, 2023
2024
Month 00,
47
By Brent Crane
Illustration By Stephen Bliss
B
48
y the time he came to work for AeroVanti, a private
jet startup in Sarasota, Florida, Daniel Marchick had
worked in aviation for 20 years. In the US Air Force,
he flew AC-130 gunships and UH-1N Hueys, then moved to
a desk job, helping to coordinate plane takeoffs and landings. Aviation enterprises require a complex symphony of
skilled actors—not just pilots but mechanics, fuel suppliers, air traffic controllers, schedulers. If one node fails, the
whole system can implode. There’s little room for innocent error, even less for outright deception.
Marchick was hired to run AeroVanti’s scheduling for
$100,000 a year. It was his first job in the civilian sector. He
was excited. AeroVanti looked like an all-American disruptor, out to shake up the staid, cloistered world of private flying. “Private aviation does not have to be this expensive,”
founder Patrick Britton-Harr told an interviewer soon after
launching the business in 2021. “The way that we set up our
model is to have power in numbers. The more members we
have under our program, the more cost-efficient it will be.”
Members had to pay only $1,000 per month plus
$1,500 per flight-hour, a steal compared with the industry average of nearly $7,000 per hour for comparable twinengine turboprops. Britton-Harr framed this pay-as-you-go
approach as “management light.” Flights on his five leasedto-buy, twin-engine Piaggio P.180 Avantis would come with
catering and Wi-Fi and allow for pets. There would be 24/7
customer service. After signing up 300 members, he said,
the company would acquire more planes. From then on,
new members would need referrals.
Private aviation was booming. In 2021, Wheels Up, a
company backed by Delta Air Lines that runs on a similar
membership model, had raised more than $650 million in
the private aviation industry’s first-ever initial public offering. Britton-Harr, a self-described serial entrepreneur, said
a revolution was coming and he wanted to be a part of it.
Britton-Harr founded AeroVanti in his late 30s. Wideshouldered and big-jawed with short-cropped hair and a
beaming smile, he communicated with the quick, confident
◼ A photo of an AeroVanti aircraft that the company released in 2022,
saying it was “in the midst of redefining the entire charter aviation industry”
February 12, 2024
diction of a QVC host. Fluent in boardroom jargon, he could
sound like an artificial intelligence program trained on
corporate PowerPoints. He preferred fist-bumps to handshakes. Most often he came to work wearing shorts, flipflops, a visor, dark aviators and a Rolex.
AeroVanti divided its operations between Sarasota and
Annapolis, Maryland. Britton-Harr, a licensed pilot, had
grown up in Florida and Maryland with four brothers.
The company’s accounting division was in Annapolis.
Flight operations were handled at Sarasota Bradenton
International Airport, in a rented office building on the
tarmac. There, a propeller-shaped clock hung on the wall
alongside photos of soaring Avantis, the plush, speedy
Italian aircraft that gave AeroVanti its name. A custom drawing hung on the wall of Britton-Harr and Chief Operating
Officer Robert De Pol, a former Navy pilot, clutching beers
beside Britton-Harr’s two chocolate labs.
In marketing the company, Britton-Harr often invoked
his family. One reason he decided to use Piaggio planes,
he told a reporter, was that his wife liked them. (Like many
private jets, they fly at 41,000 feet, comfortably above
weather systems.) His mother enjoyed the fully enclosed
rear lavatory. His father, Steve Harr, was on board as chief
pilot. While Britton-Harr was growing up, the family had
moved around a lot to follow Steve’s job. He flew for the
US Navy before going to work for American Airlines. Now,
he’d be flying the family business.
At first, Marchick was impressed. The administrators
and mechanics in Sarasota were competent and gung-ho.
Steve Harr had decades of flight experience. AeroVanti had
announced investments totaling about $110 million. And
the business was growing rapidly. In its first year, it signed
up more than 300 members and recorded $20 million in
revenue, according to Britton-Harr. Twenty members had
paid a lump sum of $150,000 for a special “Top Gun” tier,
entitling them to priority booking and other perks.
The cracks, however, soon began to show. Customers
started experiencing frequent last-minute cancellations,
which the company often blamed on vague mechanical issues or “supply chain” problems. Several customers found themselves stranded in far-flung destinations,
forced to make abrupt arrangements to get home. Others
missed weddings and graduations. “This is not what I had
in mind when I signed up for this,” one client wrote on an
email chain of about 100 people who’d experienced similar treatment. “Constant scramble versus relaxed luxury.”
“Bernie Madoff could learn a few things from these
clowns,” wrote another.
“Imagine the worst person you can have to be in charge
of anybody’s lives or money and not having anybody to
stand in their way,” Marchick says. “That’s what happened.”
AeroVanti has since gone into a tailspin. The company faces multiple lawsuits from members and aircraft
PLANE: BUSINESS WIRE. BRITTON-HARR: MARK WEMPLE
Bloomberg Businessweek
Bloomberg Businessweek
February 12, 2024
◼ Britton-Harr photographed with his
leasers. In interviews with Bloomberg
fast small jets began to appear in
wife, Tracy Deckman, for Business
Observer’s 40 Under 40 Issue in 2022
Businessweek, a dozen employees and
the ’60s. There was the eight-seater
more than two dozen people associLearjet 23 produced in 1963, which
could reach 500 mph. Then the
ated with the company describe a litany
big-cabined Gulfstream II, released
of abusive behavior and malfeasance.
in 1966, brought high comfort to
(Most of the employees spoke on condithe skies. In 1980, Paris-Le Bourget
tion of anonymity because they signed
Airport became the first-ever facilnondisclosure agreements and are afraid
of retaliation.) The Federal Aviation
ity dedicated solely to private jets.
Administration is actively investigating
Hundreds more followed.
the company, and the US Department of
Early on, most private aviation
operations were charter-based.
Justice is targeting some of its assets in a
complaint related to Britton-Harr’s preCustomers paid for flights à la carte.
vious business. Opposing counsel have
In the late ’80s, NetJets Inc. started
a “fractional ownership program,”
alleged in court filings that he absconded
with $40 million of members’ money.
wherein customers purchased shares
AeroVanti hasn’t responded to the
of a plane in the same way one would
lawsuits against it. Neither Britton-Harr
buy shares in a company. Each partnor his relatives responded to inquiries
owner was allotted a certain number
for this story.
of flight-hours per year. Today, the
Compared with the highly regulated
$25 billion industry remains divided
realm of commercial airlines, private avilargely among three models: fracation has long been a kind of Wild West.
tional jet ownership, private jet ownOn paper, operators must follow stringent regulations. But
ership and membership clubs.
AeroVanti billed itself in the latter category. It operated
in practice, there is scant oversight. “This industry attracts
some scummy people,” says Craig Picken, a veteran aviaunder Part 91F, a federal regulation that allows cost-sharing.
tion recruiter. “Ninety-nine percent of operators are really
It built its image around luxury and promised in its memgood, but there’s always that 1 or 2% who screw it up for
ber agreement that customers could also expect to forge
everybody.” There have been cases of fraud and gross mis“business development relationships” with their elite peers.
management before, especially during the pandemic boom,
Business development was Britton-Harr’s forte. Before
when new customers overwhelmed the industry. But to
AeroVanti, he’d founded several ventures in health care,
insiders, the AeroVanti fiasco has been on another level.
despite having no formal training: a mobile dentistry com“The brazenness of it to me is just unbelievable,” says
pany called ProHealth Dental Inc. and several medical
David Guzman, who owns a Piaggio charter company in
testing lab companies that catered to retirement homes.
Tulsa that leased planes to AeroVanti. (He isn’t involved
To a person, everyone who spoke with Businessweek
in the lawsuits.) “Patrick’s an intelligent guy. It’s not willpraised his uncanny mastery of the art of the sale.
“He’s very personable, very enthusiastic, passionate,”
ful ignorance. I believe it’s purposeful. I believe they knew
what they were doing.”
says Guzman, the Tulsa charter lessor. “To the layperson,
he could come up with just enough subject matter knowlver since the Wright Brothers soared over Kitty Hawk,
edge to appear as an expert.”
the American aviation community has longed to put
“He could sell ice to Eskimos,” says John Galdieri, an avian airplane in every garage. In the interwar period,
ation consultant who gave advice to Britton-Harr early on.
the US Department of Commerce launched a campaign to
And at first, some members were happy with the serencourage the design of a $700 “airplane for everyman.”
vice. “The plane was fantastic,” recalls Mark Israel, a Top
The automobile, once technically infeasible or prohibitively
Gun member who signed up after seeing that AeroVanti
was an official sponsor of the Tampa Bay Buccaneers.
expensive, had become ubiquitous. Why not flying, too?
Of course, airplanes are more complicated than cars.
“It was big and comfortable.”
But it soon became clear there weren’t enough planes
And the world owes mass air travel not to private flyers but
large commercial airliners. Yet the dream of solo flight, of
to go around. Although Britton-Harr and his sales team
Americans taking off at a moment’s notice into the skies
assured members they had a dozen in operation, in reality
with their loved ones and nobody else, persisted. The
only two or three were airworthy at any one time, accordinvention of the jet engine in the ’50s enabled small airing to one of the lawsuits, and AeroVanti started routinely
canceling reservations. Employees and members say it
craft to travel much farther without refueling, and truly
E
49
Bloomberg Businessweek
hangar. At a member recruiting event on a yacht in Fort
Lauderdale, he provided $50,000 worth of caviar, according to Scott Hopes, who briefly succeeded him as CEO.
But AeroVanti had no company credit card or shared
account; Britton-Harr controlled all of its finances.
Assuming they’d be compensated, employees often
paid for company expenses using personal funds. Even
Philip Welborn, the senior finance manager for Air Club,
AeroVanti’s membership program, griped to co-workers
that he spent $58,000 of his own money and wasn’t reimbursed. Welborn didn’t respond to requests for comment.
At one point, Britton-Harr stopped paying AeroVanti’s
bills. The office became inundated with calls from fuel
companies, mechanics, parts suppliers and the people
whose planes they’d leased. One of these callers was a
Florida entrepreneur named Scott Levine, who’d leased
AeroVanti his LearJet in 2021. The three-year contract was
supposed to net him $1 million in profit, plus four free
years of AeroVanti membership, but after two payments,
AeroVanti defaulted.
Britton-Harr didn’t respond to requests for an explanation, Levine says, so he started texting other employees whose numbers he had, asking for help. The next day,
AeroVanti canceled his membership and said it wouldn’t
make any more payments because his plane was “not airworthy,” which Levine said wasn’t true. When he went to
repossess it, there was a mechanic’s lien on the plane citing unpaid bills, and Levine had to sue to get it back. When
he eventually did, four months after first leasing it, several
parts were missing: tires, a landing beacon, a hose under
a wing cover. Fellow lessors told him they’d been installed
on other AeroVanti planes.
After Levine unloaded on AeroVanti and its CEO in a
LinkedIn post, Britton-Harr’s attorney threatened to sue
him for libel. Instead, Levine sued Britton-Harr for unpaid
bills. He received a default judgment of $2 million, though
Britton-Harr never responded. Levine says that hubris
tracks. “When you’re pretending to have all that money
but you’re spending other people’s money, it just kind of
inflates you,” he says. Several other owners have repossessed planes from AeroVanti.
B
ut all of that was still behind the scenes. Outwardly,
at least, AeroVanti’s second year looked like a story
of expansion. In July 2021 it announced it had raised
about $10 million in venture capital from Network 1 Financial
Securities. (US Securities and Exchange Commission filings
indicate that Network 1, which didn’t respond to requests
for comment, paid only about one-third of it.) Originally,
Britton-Harr’s business model for AeroVanti relied on outsourcing some flights and services to other operators. Now
he was focused on what he called “vertical integration,”
doing everything in-house, from flying to maintenance.
DAVID JENSEN/GETTY IMAGES
50
assured disgruntled customers it would reimburse them
for market-rate rebookings through another charter company, which could cost tens of thousands of dollars per leg.
Often, though, it didn’t.
Employees say Britton-Harr’s sales pitches, which
often included free test flights, were part of the problem. “Patrick would add flights in and destroy the schedule,” Marchick says. “If employees pushed back, he would
be like, ‘I’m the CEO. This is my company. This can be
done. There are no real rules.’ ” Despite the overload,
AeroVanti’s sales team was ordered to add $5 million in
revenue every two weeks.
Under these conditions, safety sometimes took a back
seat. Someone had written “Minimum ten hours of rest”
on an office whiteboard, in reference to federal guidelines
that dictate how long pilots can fly per day. Marchick says
that one day, Britton-Harr pointed at the board. “Erase
that number,” he said. “That doesn’t exist.”
He insisted that his two dozen pilots fly more frequently
to accommodate the surprise extra flights he added to the
schedule. When employees balked, he’d say, “This is an
at-will state!”—implying that anyone who complained
could be easily fired, according to Marchick. At one point,
Britton-Harr fired his father, who had protested his management style. “NO ONE IS TO CONTACT Steve Harr anymore for any reason,” pilots were warned in a company
email last May. De Pol, whom many employees regarded
as the company’s one responsible executive, also left without warning. (De Pol declined to comment beyond saying he wants to distance himself from AeroVanti.) Now
Britton-Harr had total control of the company, according
to Marchick and other employees. He began flying by helicopter to the Sarasota office from his home on Tampa’s
glitzy Davis Islands.
During this time, Britton-Harr continued to court new
sources of cash for AeroVanti, and the planes were a useful
prop, Marchick says. Prospective investors often received
free flights, even at the expense of paying members. He
and other employees say many of these flights were kept
off official logs, a violation of FAA regulations. Britton-Harr
referred to these free flyers with the abbreviation “D.N.S.,”
meaning “do not screw.” “He had his pecking order of people,” Marchick says.
One regular D.N.S. was businessman Alexander
Nistratov, who fled Russia some years ago after being
indicted for real estate fraud while working for that government’s property management agency. Businessweek
viewed a screenshot of his page in AeroVanti’s scheduling system that notes, “Per PBH, flights for Mr. Nistratov
are gratis.” Nistratov declined to comment on AeroVanti
beyond confirming that he had chartered flights.
Britton-Harr was a big spender known to throw lavish,
boozy parties. Some took place in AeroVanti’s Sarasota
February 12, 2024
Bloomberg Businessweek
In March 2022, AeroVanti purchased a small Arizona
aviation company called Marjet. It said in a press release
that it did so to acquire Marjet’s FAA Part 135 certification, something Guzman and other aviation experts say
AeroVanti should have had all along. (Part 135, earned
through rigorous inspections of a company’s safety practices, is required for an airline to perform charter flights
on demand.) AeroVanti said the deal upgraded its operations and would allow the company “to rapidly scale.”
Around this time, its fleet grew to include an Embraer
Phenom 100, at least nine Piaggios, three Learjet 31As,
a Gulfstream GIII and a helicopter. The company hired
in-house mechanics. After De Pol resigned, Britton-Harr
brought in former Piaggio America CEO Paolo Ferreri as
interim COO. It was a time of “incredible momentum and
record growth of more than 400% year-over-year,” the
company said in a press release. AeroVanti’s client list
soon included athletic departments at the University of
Maryland and the University of Central Florida.
Meanwhile, Britton-Harr was spending jet-loads on marketing. He signed multimillion-dollar sponsorship deals
with the Chicago Cubs, USA Sailing, the Florida Panthers
and the Tampa Bay Buccaneers. (The “AeroVanti Lounge”
at Raymond James Stadium in Tampa promised “luxury at
every step.”) For the Coca-Cola 600, the company sponsored a Nascar driver named Corey LaJoie. For the 2023
Preakness Stakes, it sponsored 10 suites. It co-hosted
events with the Blue Angels Foundation, raising money
for veterans. One Christmas, it flew a low-income Navy
family from Florida to Maryland to see relatives and posted
a video of the reunion to YouTube.
The company even started an offshoot yacht club that
required a $100,000 deposit. The AeroVanti Yacht Club was
run by Britton-Harr’s younger half-brother, Liam Harr, a
College of Charleston sailing ace with elite connections.
(He’d once raced to Bermuda on a sailboat financed by
◼ AeroVanti’s car at the Coca-Cola 600 in North Carolina last May
February 12, 2024
Amway Corp. scion Doug DeVos.) Its website notes that one
of its vessels, the 108-foot Casino Royale, had been used in
the James Bond film “as the floating lair of the villain.”
At the same time, AeroVanti struggled to pay employees. In late 2022, every employee interviewed for this
story says, paychecks started appearing late, then not at
all. One day, office workers heard they’d be paid by wire
transfer instead of their usual payroll vendor, ADP. There
had been “issues” with ADP, they were told. In fact, the
vendor had dropped AeroVanti because of unpaid bills,
according to a former members services staffer. ADP
declined to comment beyond confirming that AeroVanti
is no longer a client.
Pilots were getting skimped, too. They were upset with
a sudden switch from an hourly rate to a flat salary of
$12,000 a month. Then the payments started arriving late.
One pilot says they were more than a month behind at one
point. On a single day in June, four pilots quit, and a dozen
or so more left soon after, leaving AeroVanti with maybe
six. “They could see the writing on the wall,” says the pilot,
who stayed through that period. “They said, ‘We’re done.’ ”
Then a pilot who was ferrying New Orleans Saints
kicker Wil Lutz accidentally drove a plane off a runway in
Destin, Florida. Other pilots had warned Britton-Harr that
this pilot wasn’t qualified to operate a Piaggio’s notoriously
finicky controls. But with so many pilots gone, and desperate to please a VIP like Lutz, Britton-Harr had pressured
the pilot to fly. “It could have been much worse,” says an
AeroVanti flight scheduler. “They pleaded with Patrick not
to let this guy fly, and Patrick didn’t care.”
In an interview with Businessweek, the pilot who
crashed blamed mechanical issues, though he acknowledged that AeroVanti didn’t find evidence of any. He says
Britton-Harr pushed him to keep flying Piaggios after the
accident but he refused, worried they were unsafe.
In June 2023, Joey Giordano, the vice president for
operations, emailed employees to say that compensation
was stopping completely. AeroVanti was not closing but
merely “awaiting some capital in order to get back on track
and continue on a path of success,” he wrote. “There are
no hard feelings if you decide that AeroVanti isn’t the right
path for you. For those that stay, there could be very green
valley’s [sic] ahead to enjoy!” Giordano didn’t respond to
requests for comment.
Beyond being ticked off and anxious about paying their
own bills, employees were confused. How could a company with such a massive marketing budget fail to make
payroll? It wasn’t as if AeroVanti had been crying poverty
all along. It had been less than a year since the company
announced raising a fresh $100 million in capital led by
Lafayette Aircraft Leasing LLC.
The announcement turned out to be hot air. Lafayette
says it never raised any money for AeroVanti. It had only
51
Bloomberg Businessweek
February 12, 2024
“I was unaware h
affect oth
leased AeroVanti a Phenom 100 jet, which it repossessed
soon after because AeroVanti didn’t pay its bills.
52
of $7 million by submitting false claims for pandemic-era
tests that never occurred. Some of these were billed to
Medicare for diseases that are only found in animals. At
least two AeroVanti airplanes and a sailboat had been
purchased with these ill-gotten funds, the DOJ claimed.
A default judgment later found Britton-Harr liable for
$30 million in damages.
For many members and employees, news of the federal
complaint made them wonder what else might be lurking in Britton-Harr’s past. Online searches revealed a long
history of negligence. In a 2006 drunk driving accident in
Maryland, he’d killed his passenger, a 20-year-old Naval
Academy midshipman; weeks before the tragedy, he was
ticketed for driving 120 mph on the Baltimore Beltway in his
BMW. “I was unaware how my actions affect other people,”
he told a judge. He was sentenced to five years in prison
for vehicular manslaughter but had all but nine months
suspended in favor of probation and community service.
After the DOJ complaint, Britton-Harr stopped appearing at the AeroVanti office. Employees learned he’d been
evicted from two Sarasota luxury properties for unpaid
rent. His brother Troy Britton-Harr, who often handled miscellaneous tasks for him, had collected Patrick’s belongings.
The founder appeared to have flown the coop.
I
n October, neither Britton-Harr nor his four brothers
were responding to inquiries, but Hopes was keen to
talk. The new CEO envisioned a tremendous resuscitation. That month, he’d brought in Piaggio mechanics from
Italy to get four planes airworthy, he says. Most of his time,
though, was spent dealing with lawsuits and other problems
that had piled up during “the Patrick era.”
Hopes, a retired doctor, wore a striped collared shirt
with a Presidents Cup logo on the chest. Tiny palms lined
his shorts. Bespectacled, with salt-and-pepper hair and
a smartwatch, he exuded the easy, well-practiced charm
of a Southern man of means. In the ’90s he’d run a medical firm, HMD Healthcare—this was why he’d acquired a
pilot’s license, he says, to fly between various business
matters in Florida.
Hopes first met Britton-Harr in late 2022, he says,
at an event hosted by the Sarasota newspaper Business
Observer. Britton-Harr had made the paper’s annual
40 Under 40 list (the Observer: “Who would play you in
SARASOTA BRADENTON INTERNATIONAL AIRPORT
L
ate last spring, like a bout of bad turbulence, the
lawsuits arrived. The first two each consisted of
20 members who paid $150,000 apiece for Top Gun
memberships. In the Top Gun arrangement, the money
invested was supposed to go into an escrow account to
purchase a jet in the fractional ownership vein. The suits
claim this money never went into escrow and the planes
were repossessed.
“It was a mess,” says Kristin Vogel, a Top Gun member
who’s not involved in the litigation. “We’d get confirmations
all week, then wake up that morning and get a cancellation.” On her third canceled flight, Vogel called Britton-Harr
directly. She told him she felt she was being scammed. “He
screamed at me, ‘If you say the word scam one more time,
I’m going to remove you as a member!’ ” she recalls. The
outburst freaked her out. She says she thought, “If this company is not doing well and they’re cutting corners and we’re
getting on a plane that they own—it just didn’t feel safe.”
Shortly after the Top Gun lawsuits were filed, BrittonHarr issued a public statement decrying the plaintiffs as
opportunists. “They believe in cancel culture,” he said. “We
have a tremendous amount of support. We are continuing
to move forward and will not be blindsided by a few toxic
individuals.” At least 10 cases have now been filed against
Britton-Harr, some of them arguing that the real cancel culture was his scheduling shell game.
In June, as the suits began to pile up, AeroVanti
announced that Britton-Harr was stepping down as CEO,
though he would remain chairman. Replacing him was
Hopes, an entrepreneur, certified pilot and former Manatee
County, Florida, administrator with a controversial past.
As the outside world encroached upon AeroVanti, the
company had already begun to crumble from within.
Former employees say they could be fired if they told
angry members the truth about their cancellations. But
by this time, FAA investigators had spent close to a year
interviewing AeroVanti associates. After landing at airports, pilots found themselves subjected to frequent
“ramp checks”—stops for inspection—even as far afield as
the Bahamas. Ramp checks are a sign, according to pilots,
that authorities have received complaints about a company. The FAA declined to comment.
All of this pressure further inflamed Britton-Harr’s paranoia. One day last spring, he demanded that employees
stop using Slack to communicate. He was concerned that
“the feds” might be trying to infiltrate the messaging platform, Marchick recalls. The feds were, in fact, interested
in Britton-Harr. In July the Justice Department filed a complaint against him for his conduct at a previous lab testing
venture. The DOJ alleged that he’d defrauded Medicare out
Bloomberg Businessweek
how my actions
er people”
the movie of your life?” Britton-Harr: “Ryan Gosling”) and
it threw a gala with the recipients. Hopes, then the county
administrator, had come to the event with another honoree, Courtney De Pol, his deputy. She had recently relocated to Sarasota for her husband Robert’s new job as
COO of AeroVanti. She’d listed Hopes as a mentor, he said.
When Hopes took over, many AeroVanti members and
employees harbored misgivings. For starters, they wondered why he would have agreed to run such a troubled
company. And there was his resignation from his government job, where he’d been accused by the Florida Center
for Government Accountability of violating public records
laws and the county sheriff’s office recommended criminal charges. (In his defense, Hopes notes that no charges
were ever filed.) Some wondered if he and Britton-Harr
were in cahoots. Was their plan to plunder the dying company, declare bankruptcy and split the remaining assets?
Three months after putting Hopes in charge,
Britton-Harr fired him and replaced him with his older
brother, Todd Britton-Harr. Hopes said he believes he was
forced out of AeroVanti because Britton-Harr wanted personal access to new investment capital AeroVanti seemed
about to receive. He laughed at the suggestion that he was
in on any of it. “Had I known more about Patrick,” he said,
“I probably would not have taken this up.”
Todd had his own problems. In 2013 he’d been convicted of smuggling over a thousand pounds of marijuana
from Mexico into Texas. In court he claimed he’d been
a confidential informant for the US Drug Enforcement
Administration, which the agency denied. Around the
◼ The terminal at Sarasota Bradenton International Airport
February 12, 2024
same time, Todd had been convicted of real estate fraud in
Florida. He served several years in prison. Now he was running a construction business in Tampa called Britton-Harr
Contracting. “I believe these people are just creating cash
flow to support their lifestyles,” Hopes said at a cafe beside
Sarasota International. “What they’re doing has nothing
to do with building a successful company.”
Where did all that cash go? Some may have gone
toward property for Britton-Harr, who maintains at least
six bank accounts and a dizzying array of holding companies, according to the DOJ complaint. In September 2021
he purchased a $554,000 home in Annapolis. A year
later, he bought two vacant lots in Myrtle Beach, South
Carolina, for $60,000 each. Contractor Andy Amrhein of
Thomasville Restoration recently sued Britton-Harr for
unpaid work on his Annapolis house. Britton-Harr hasn’t
responded. Reached for comment, Amrhein asked, “Do
you know where I can find him?”
Much of the money likely went into AeroVanti, employees say. A single bill for airplane maintenance can run to
hundreds of thousands of dollars. Leasing them isn’t cheap,
either. Neither is fuel. Or payroll. Or athletic sponsorships.
Of course, Britton-Harr was stiffing people on many of these
bills. “He paid the bare minimum to keep things moving,”
Marchick says. But the ones he was paying still added up.
Believe it or not, Britton-Harr is back. Three days into
the Todd era, the older brother stepped down after learning of a $750,000 default judgment against AeroVanti
in one of the lawsuits, he told the Observer. There was
also a $25 million infusion from a Las Vegas investor that
had been rescinded at the last minute. So Britton-Harr
returned to the corporate cockpit.
This Halloween, the prodigal CEO emailed flabbergasted
members about AeroVanti’s “revitalization.” Given the circumstances, his tone was remarkably business-as-usual.
Monthly dues had increased to $2,500, he wrote. But Air
Club members now had access to two yachts (the Casino
Royale and the En Garde, for daily rates of $4,995 and
$3,995, respectively), a fishing boat (the Permit, $2,995
a day) and a 50-foot sailboat (Sweet Caroline, $6,995). A
mobile app was in the works, he wrote, and the club was
already “back up and flying.” He cited a single airplane, a
Learjet 31A, which Hopes says Britton-Harr doesn’t own
and Marchick calls a “freaking mess.”
Those hoping for a reckoning with AeroVanti’s turmoil
were left wanting. In his email, Britton-Harr acknowledged only that the company’s “massive support and
growth” had “outpaced the operational capacities
and overall needs of our members.” It was one of just
three statements that gestured ever so vaguely toward
the past. The rest was focused on AeroVanti’s “reset,” its
“renewed shot at success” and the smooth, glorious takeoff that was surely on its way. <BW>
53
Orvis tries to win back lapsed anglers by improving
on its legendary Helios 3 rod. By Kyle Stock
FI
GHTING
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The best boots for
slushy season
60
Florida’s golf gold rush
62
Who’s driving the fine
fragrance sales boom?
Anita Colton fishes
for trout on the Upper
Delaware with the
newest Helios
63
Piaget returns to prep
February 12, 2024
Edited by
Chris Rovzar
Businessweek.com
55
ly anglers like to test themselves by attempting
to hook a glorious ocean fish, like a 100-pound
tarpon. But if you want to put a rod to a real
test, it’s best to try it in a situation that’s more
fussy and technical: casting tiny, buggy flies
at tiny, cagey brook trout. The surrounding
branches and bushes leave little margin for error, as do the
shoe-size pockets of water where you must land the fly. The
trout themselves are easily spooked—they’re as skittish as
mice, and usually not much larger.
That’s why I found myself along a trickle of a creek in
Manchester, Vermont, with two of the high priests of flyfishing: Shawn Combs and Tom Rosenbauer. Combs is head
of fishing research and development at Orvis Co., which
started making fly rods in 1856 and has since expanded into
a retail giant selling outdoor apparel and ephemera such as
dog beds and flasks. He’s been locked in his lab for almost
seven years trying to come up with a rod to improve upon the
Helios 3—regarded by many as the finest fly rod ever made.
Rosenbauer, meanwhile, is the guy who helps sell Combs’
creations through the homespun media empire he’s cobbled
together in 48 years at Orvis, which includes a hit podcast
and a stream of how-to videos and books. Combs hands me
a wisp of a fly rod—the future of the 168-year-old enterprise—
with the restrained giddiness of an engineer about to pitch
a killer app. “Go ahead, give it a try,” he says.
Much has happened in the fly-fishing world since the
summer of 2017, when Orvis rolled out the third iteration
of its celebrated Helios line of rods—the H3 for short. The
product was hailed as a breakthrough (in these pages no
less) for its uncanny combination of power and
accuracy. By manipulating graphite sheets and
a proprietary resin, Combs created a rod that
was both strong and calm. Small vibrations at
the tip, which can send a cast off course with
other rods, all but disappeared. Eventually its
remarkable accuracy became a cheat code for
anglers of all abilities.
A couple of years later, Orvis found itself
on the receiving end of a Covid-sparked avalanche of interest, alongside Netflix, Zoom
and Amazon. Suddenly the world had ample
free time and money, and a fancy fishing rod
became an $850 ticket to social distancing.
Orvis’ Helios went from esoteric invention to
mass-market blockbuster. In 2020 some 7.8 million Americans whipped a fly rod around,
1 in 5 of them for the first time, according to a
report from the Outdoor Foundation and the
Recreational Boating & Fishing Foundation.
Scores of independent fly shops ordered
Orvis rods for the first time,
The new Helios specifically the H3. While it
rod is the fourth
was among the finest and most
in Orvis’ most
popular line
expensive available, its greatest
F
56
Bloomberg Pursuits
February 12, 2024
strength may have been that
it bent the learning curve for
thousands of rookie fly anglers.
The company’s share of
the premium fly-rod market
surged from an estimated 15%
before the H3 to almost double that at the height of the
pandemic. And for the first
time in decades, fly-fishing
accounted for roughly 30%
of Orvis’ business, according
to President Simon Perkins,
a share on par with men’s
apparel. For Combs, the success of the H3 was both validating and nerve-wracking.
Every order prompted an
internal question: Could he
do it again?
By the time Combs was
nearing completion of the
new Helios—the fourth iteration—there was a Covid hangover. From 2020 to 2021, the
number of people fly-fishing
fell 4% in the US, the first dip
in almost a decade. Scores of
pandemic anglers had stored
their gear for good, and those
who stuck with it were no longer so flush with either money
or time. “Honestly, it’s a really
leaky bucket,” Rosenbauer says
of all the anglers who got away.
Combs’ latest creation
would have to be not only better than his last—it would have
to be significantly so to persuade customers to upgrade.
I probably can’t cast nearly
as well as Perkins, but I’ve been chasing trout (and other
fish) for 35 years, and my garage holds more rods than I’d
like to admit. I’m about to the level of hobbyist Combs is
trying to win over.
The first impression the fourth generation of the Helios
makes is with its weight, or rather the lack thereof. Scurrying
down to the creek, I whack the tip into one tree after another,
in part because it doesn’t feel like I’m carrying much of anything. On the water, in a tunnel of foliage, a quick flick of the
wrist sends a small, fuzzy fly 35 feet, dropping gently into a
still pool of water.
With fly-fishing, as with food, there’s been a recent cultural
shift toward the traditional, the organic. For decades the industry cranked out stiff—so-called fast—graphite rods that could
PREVIOUS PAGE AND THIS SPREAD: COURTESY ORVIS CO.
FISHING
FISHING
Bloomberg Pursuits
February 12, 2024
57
The author fly-fishing in Vermont
catapult a line 100 feet or more. Lately, though, many fly fishers
are more pragmatic: They realize they seldom need to cast that
far. They want a tool that’s more sensitive, less turbo.
Bendier—or slower—rods have made a comeback. There’s
even been a renaissance in fiberglass, for example, a heavier,
whippier material that was ubiquitous in the 1960s and ’70s
before Orvis and its rivals discovered graphite.
The magic in Combs’ creation is that it’s softer and slower
than its predecessor but no less powerful and accurate. It’s a
bit of a paradox—a 200 mph supercar with 1960s steering, a
robot with emotions. It does all the things the H3 manages,
with more finesse, “more feel,” as Combs puts it. It seems
perfectly weighted to where fly-fishing culture is right now.
Orvis is still a private company and, as such, fairly
tight-lipped. We may never know how the H4 performs
financially. Perkins, the top executive, does share one estimate:
The new rod, which goes on sale this month for $1,098 to
$1,198, is four times better in quality than its predecessor.
After plucking a few fish out of remote eddies of the
stream, I hand the rod to Rosenbauer. For months he’s been
casting it at striped bass and other megafauna, but he’s yet
to give it the tiny-water test. He quickly works out some line,
the rod bending deeply—down almost to his hand—before
it slings straight and tucks the fly under a log. The bug disappears in a splash.
Rosenbauer isn’t an effusive guy and doesn’t consider
himself a great caster. Nevertheless, he cackles gleefully.
“Shawn!” he gushes. “I love it.” <BW>
STYLE
Bloomberg Pursuits
Only Fools
Slush In
A stylish class of boot rises to handle
wet winters and muddy springs
By Matthew Kronsberg
Photographs by Audrey Melton
February 12, 2024
After more than 700 days without significant snowfall, New
York City was blanketed in white in January, just as the 2024 Old
Farmer’s Almanac predicted. It was a welcome development for
footwear makers: Sales of cold- and all-weather boots in 2023
were down 18% from 2022, according to Beth Goldstein of consumer research company Circana. Nora Kleinewillinghoefer, a
partner in the consumer practice of consulting firm Kearney,
says milder falls and winters are reshaping the snow boot
industry, “steering the market toward lighter, versatile styles.”
Phyllis Leibowitz, a personal stylist who’s dressed the
likes of Marisa Tomei and Lou Reed, says most people want
water-resistant options that are light enough to leap over an
icy puddle but grippy enough to stick the landing. We call
them slush boots; here are seven that stand out.
58
DANNER CLOUD CAP
Stylist Leibowitz is drawn to this roasted pecan and
apricot color, a design she likens to “a ’70s parka.”
The ankle-high women’s boots come with a specially
formulated sole and split heel for superior traction. It’s
available in two other color combos and in black. $210
SNOW PEAK TDS NIOBIUM CONCEPT 3
This collaboration between Japanese outdoor outfitters Snow Peak and dad-chic
sneaker brand New Balance brings together two distinct currents of cool. A
removable PrimaLoft-lined inner boot, with a design “inspired by the winter sky,”
sits inside Vibram soles working in tandem with a breathable waterproof shell to
keep feet warm and dry. $300
AURÉLIEN SNOW BOOT
There’s a hint of office-friendly formality in these men’s
slush boots. Made of a waterproof technical fabric that’s
also available in brown, they have a Velcro band rather
than laces, and a knit cuff sits at the ankle, above chunky
white lug soles. €495 ($534)
STYLE
Bloomberg Pursuits
February 12, 2024
CAMPER PIX
Frigid climes were probably not the first thing on
Lorenzo Fluxa’s mind when he created Camper shoes
on the island of Mallorca in 1975. Since then the label
has built a reputation for bold designs suited to all
sorts of wintry conditions, such as these red and brown
leather Chelsea boots, which sport daring colors (and
textures) on a wraparound EVA outsole that gives
premium puddle protection. $225
59
ADIDAS ASMC X TERREX HIKING BOOT
For getting off the sidewalk and onto the trail in style, Stella McCartney
collaborated with Adidas on a slush boot featuring the shoemaker’s custom
insulation that uses a minimum of 50% natural and renewable materials. Vivid
color options include solar lime (above). $250
CANADA GOOSE CYPRESS PUFFER BOOT
Best known for keeping torsos toasty, Canada Goose
brings the power of the puffer down to ground level. A
gusseted front zipper makes these women’s boots easy
to slip into and out of, while the grooved outsole has
more texture on the heel and toe to make them extra
grippy in slippery conditions. $525
DIEMME BALBI
Made in a village
within sight of the
Dolomite Mountains
in northeastern
Italy, these turn the
mere functionality
of the duck boot
into a high-fashion
statement. The
sturdy rubber sole
is offset by a white
nappa leather
upper, which
Leibowitz calls “a
superfun cross
between Gene Kelly
and L.L.Bean.” €339
Bloomberg Pursuits
Golf’s Next
Paradise Is
In a Swamp
Developers have anointed a sleepy
Florida county as the next big thing
By Michael Croley
60
Florida is often considered an underwhelming place to play
golf. Sure, it’s fun to wear shorts in February, but good golf
terrain has movement, and bland, flat marsh doesn’t have the
same cachet as wind-swept cliffs overlooking the Pacific. The
Sunshine State stereotype is a course surrounded by retirement homes that looks as if it just rolled off the production
line. The state has more than 1,200 courses, the most in the
US, but just three on Golf Digest’s 100 Greatest Golf Courses list.
That’s a lot of mediocre links—and yet it isn’t enough. More
courses opened in the US last year than any time in over
a decade, according to the National Golf Foundation, and
almost a third of them were in Florida. Membership queues
at Emerald Dunes Club in West Palm Beach and the Bear’s
Club in nearby Jupiter are estimated to be as long as seven
years, despite fees of $500,000 or more. A little farther north,
the Medalist and Floridian clubs have upped their initiation
fees and expanded their member ranks to 300, but they still
have as many as 50 people on standby.
These wealthy waitlists have cropped up since the state
became the biggest beneficiary of the finance industry’s exodus from New York. To capitalize on the influx, real estate
developers have set their sights inland, in Martin County,
north of West Palm
Beach, even though terrain around Interstate 95
is flat and mostly
wetlands. “Honestly, the
land is probably some
of the least desirable
to build a golf course
on,” says Gary Pohrer,
a Douglas Elliman broker in the area. “They’re
going to have to move a
lot of dirt.”
The area does contain one component
critical to building a golf
course, however: sandy
February 12, 2024
soil, which is easier to manipulate into interesting shapes. It
also helps create firmer conditions so the ball rolls farther.
To transform their sites, these developers have hired some
of the world’s best golf course architects to work their magic.
Over the next three years, an Avengers-like constellation of the
biggest names in golf design will create a total of eight private,
upscale courses at five properties, bringing 144 new holes to
a 10-mile stretch about 35 minutes from West Palm Beach.
Bill Coore and Ben Crenshaw, whose credits include the
world-famous Sand Valley in Nebraska and Bandon Trails in
Oregon, took on the challenge of adding a course at McArthur
Golf Club, where 275 members already pack a highly regarded
Tom Fazio-designed course. But the available land lacked the
drama the duo usually starts out with. “We kid the owners
that it was just a horrible site,” Coore says with a laugh. “It’s
just flat sand, a couple of feet above the water table, and a
lot of isolated wetlands.” They focused on the greens, engineering contours and variety to eliminate the “18 parking
lots” Coore says they were left with after clearing the land.
In December, Gil Hanse, who oversaw the creation of Rio
de Janeiro’s Olympic Golf Course for the 2016 games, finished the first of three proposed courses at Apogee Club.
It’s the $400 million brainchild of Miami Dolphins owner
Stephen Ross and Michael Pascucci, who developed the
Sebonack Golf Club in Southampton, New York. In some
ways, the lack of inspiring terrain has allowed Hanse to let
his imagination go wild with intimidating bunkers and fast,
firm greens on tricky angles.
Tom Doak, whose résumé includes Pacific Dunes on
the Oregon coast and Tara Iti in New Zealand, is taking
on the course at Sandglass. It’s being developed by Chris
Shumway, who runs an eponymous investment firm in
Stamford, Connecticut. Sandglass will be a links-inspired
course; Shumway says its terrain is “high, dry and sandy,”
a rarity in Florida.
A little to the east, yet another development comes
from Ken Bakst, owner of Friar’s Head on New York’s Long
Island. The nearly 4,000-acre site, called the Ranch, will
have two courses built
The Back Yard at
by the design team of
McArthur Golf Club
Whitman, Axland &
Cutten, who were longtime associates of Coore
and Crenshaw.
All the competition in
the area doesn’t seem to
concern Bakst. Each of
the new clubs, he notes,
offers something different for its members.
“Those courses don’t
hurt one another,” he
says. “They feed off each
other. None of us think
this is a zero-sum game.”
LARRY LAMBRECHT
GOLF
GOLF
If You Drain It,
They Will Come
Five properties aiming to add
world-class golf to the already
saturated Sunshine State
Apogee Club
This 1,220-acre property, which has set the
initiation fee at $500,000, plans to have
1,000 members, according to Pascucci. It’s
a “pure golf” club, meaning there are no
homes to build a course around.
Bona fides: The West course, the
property’s first, is by Gil Hanse and Jim
Wagner; Tom Fazio II and Mike Davis
(formerly of the United States Golf
Association) are designing the second,
and Kyle Phillips, who did Kingsbarn in
St. Andrews, Scotland, will build the third.
Amenities of note: There will be two Hart
Howerton-designed clubhouses, as well
as a 360-degree 50-acre practice range,
with another eight acres dedicated to the
short game and 10 air-conditioned hitting
bays. The club will also have padel and
pickleball and a 160-acre lake stocked
with fish.
Completion date: The West course
opened in December; the second is due
in December 2025; and the third and final
course is estimated for December 2026.
The Ranch
Bakst was skeptical about a site in
Florida until he visited. With coaxing
from his wife, Suzanne, he’s embarked on
building the Ranch, which will have two
courses and 175 homes located discreetly
away from the links. They’re clustered
on 250 acres of the roughly 6.1-squaremile property.
Bona fides: Bakst made his name with
Friar’s Head, a fixture on Golf Digest’s list
of the 100 best US courses since it opened
in 2002. The Ranch’s two courses will be
built by Whitman, Axland & Cutten.
Amenities of note: Practice facilities will
sit on 175 acres between the two courses
and will include a 12-hole par-3 course and
a full-length 10-hole practice course.
Completion date: The first course is
scheduled to open in fall 2025; the second
course, in fall 2026.
Atlantic Fields
On 1,500 acres next door to the Hobe
Sound Polo Club and Michael Jordan’s
Grove XXIII course, Discovery Land Co. is
Bloomberg Pursuits
building more than 300 homes
on the site of a former tree
farm. The developer, which
was behind Baker’s Bay in the
Bahamas and a new $1 billion
private community in Dubai,
intends to reconstruct a
nearby marsh and preserve
much of the original wetlands
and farm.
Bona fides: An 18-hole course
will be designed by Tom
Fazio II, who builds all of DLC’s
courses, including the one
at Gozzer Ranch in Coeur
d’Alene, Idaho. Also Fazio’s: the
course at nearby PGA National
Resort in Palm Beach Gardens
and the Tranquilo at the Four
Seasons in Orlando.
Amenities of note: Atlantic
Fields will include an
equestrian center with
a stable, riding rings, a
lounge and viewing area;
an organic farm; and a
clubhouse whose full health
center includes hot tubs, cold
plunge pools, a sauna and
steam rooms.
Completion date: A short
course opened in December,
with an 18-hole course
estimated to be ready this fall.
February 12, 2024
Port St. Lucie
Fla.
McArthur
The Ranch
Apogee Club
Atlantic Fields
Sandglass
(approximate)
Sandglass Golf Club
Shumway says he’s “chosen
the simplest lane” by
whittling his club down to the
essentials. His goal is to have
150 members: “We want a
world-class golf course, with no housing,
that’s pure golf.” That said, there may be
some on-site cottages for lodging.
Bona fides: Like his mentor, the late
billionaire developer Julian Robertson
Jr., Shumway has hired Doak to build his
course. Sandglass will require moving a
lot of dirt, a rarity for the designer and
his team, who prefer to use naturally
occurring hills to create the undulations
you see in his work at Colorado’s Ballyneal
and Ireland’s St. Patrick’s.
Amenity of note: The club will shut
down in the summer, allowing the turf
to repair for three months instead of
being punished by foot traffic in the heat.
Doak says if a club isn’t closed for an
extended period each year, there’s no way
to make major repairs to the turf. “After
three years the ball doesn’t bounce and
roll at all anymore,” which is essential to
Bears Club
Seminole
Golf Club
61
Emerald Dunes
Palm Beach International Airport
links-style play.
Completion date: Opens in December.
McArthur Golf Club
Unlike most brand-new developments in
Martin County, McArthur is a relative senior
citizen at 22 years old. General manager
Kevin Murphy says there are no plans
to expand its membership, despite the
increased demand for golf in the area.
Bona fides: The club already has had a
Tom Fazio-designed course that architect Bill
Coore says is “just impeccably maintained.
It’s very beautiful.” The club’s new course,
the Back Yard, by Coore & Crenshaw, is
unlike many of the architect duo’s more
famous courses, which sit in stunning natural
settings. But the challenges intrigued them,
and the result is a course that weaves
through the wetlands and uses the existing
trees and water features to frame the holes.
Completion date: Opened in November.
CRITIC
Bloomberg Pursuits
February 12, 2024
Gen Z Wants to Smell Rich
Fine fragrance makes a comeback among young people seeking a mood lift
By Aja Mangum
Creed Queen of Silk
This floral, amber, fruity creation from the
House of Creed has a timeless elegance—and
the bottle doubles as a vanity showpiece.
$445 for 75ml
Ourside Dusk
In a space that lacks diversity, Ourside, a
series of unisex scents, is the brainchild
of Bronx-based Harvard Business School
grad Keta Burke-Williams. Dusk leads
with succulent berries, fig, bergamot and
grapefruit before drying to a warm cloak of
amber, vetiver, patchouli and frankincense.
$196 for 50ml
Boadicea the Victorious 1907
This British house teamed up with Neiman
Marcus to create a timeless aroma that will
appeal to women and men. The red bottle and
gold shield have a regal quality, but the scent
is lighthearted: Its cheery blend of lemon
zest, pink pepper and black currant top notes
strikes a delightful balance with the tobacco,
cedarwood and amber base. $695 for 3.3 oz
appeal to others,” Madar says.
Robin Mason, president of
fine fragrance North America
for DSM-Firmenich AG, says
the pandemic spurred the
change in perspective. “Before
Covid, Gen Z was disengaged
from fine fragrance,” she says.
Now they’re buying in bulk.
“We’re noticing that collecting
fragrances has been popular
on social media like TikTok,”
says Autumne West, national
beauty director at Nordstrom.
Today, #perfumetok has 2.3 billion views. “There is a reinvigorated curiosity surrounding scent with a newer generation.”
Smaller companies are reaping the benefits, too. Nyakio
Grieco, co-founder of beauty retailer Thirteen Lune and
founder of skin-care brand Relevant: Your Skin Seen, noticed
an uptick in fragrance sales on her site and at her flagship store
in Los Angeles. The brand’s 13 Stems has been a top seller since
its introduction last year, and the Golf le Fleur line Grieco carries from musician Tyler, the Creator is also extremely popular.
Here are 10 premium indulgences to add to your collection.
Memo Paris Cappadocia
Inspired by the ancient region in Turkey,
Cappadocia offers an intoxicating olfactory
experience. The spice and warmth of
saffron and sandalwood oil complement
the sweetness of vanilla, white jasmine and
Turkish rose. $310 for 75ml
Glasshouse Fragrances Sunsets in Capri
The bright combination of mandarin, white
peach, jasmine and marine accord is simple
and straightforward, but it’s also playful
and pretty. As the name suggests, it smells
just like a beach vacation. $140 for 3.4 fl oz
Parfums de Marly Althaïr
A refined take on the gourmand trend:
Inside the handsome bottle is a sweet
blend of cinnamon, bergamot and bourbon
vanilla with a base of praline and musk.
$365 for 125ml
Christian Dior New Look
Dior Parfums Creative Director Francis
Kurkdjian used aldehydes, compounds that
add zing to a fragrance (akin to seasoning
food) to amp up frankincense and amber in
this full-bodied, unisex scent. $330 for 4.25 oz
Arquiste L’Or de Louis
An initial spray explodes with orange blossom
and melts with honey and musk accords
before settling into a smoky base. It’s heady
and complex—worthy of the 24-karat gold
flakes floating inside. $245 for 100ml
Mizensir For Your Love
The latest from master perfumer Alberto
Morillas—the nose behind Acqua di Giò,
Gucci Bloom and Marc Jacobs Daisy—is a
cozy, powdery scent. The patchouli heart
and benzoin essence base grounds the
sweetness from the raspberry top note.
$235 for 100ml
H24 Herbes Vives
Herbaceous, without morphing into a
generic “manly” cologne, this fragrance
uses sorrel, hemp, parsley and pear granita
to deliver a sophisticated outdoorsy
scent—even for a man who enjoys more
indoor comforts. $155 for 100ml
ILLUSTRATION BY ANA MIMINOSHVILI
62
Buffeted by bad news on all
sides, teenagers and young
adults are finding comfort in
cologne. Sales of fine fragrance
at Givaudan, which makes popular scents for brands such as
Dior, Diptyque and Tom Ford,
were up 14% in 2023 from the
year before. In its first quarter
in fiscal 2024, Coty saw its prestige fragrance revenue grow
25%. That’s as luxury across
the board has softened globally.
Circana’s 2023 Fragrance
Consumer Report found youngsters age 13-26 had fueled an
increase across all of fragrance and beauty in 2023. “Mental
health is so important to this generation,” says Jean Madar,
chairman and CEO of InterParfums Inc. “Fragrances that create
mood-boosting, positive emotions are a big purchase driver.”
InterParfums’ sales across its portfolio—which includes
scents from Ferragamo, Oscar de la Renta and Van Cleef &
Arpels—rose 21% year over year, to $1.318 billion in 2023. “Gen Z
considers fragrance to be part of their core identity, worn for
their personal enjoyment and self-expression rather than to
THE ONE
Bloomberg Pursuits
February 12, 2024
Golden Hour
Piaget rereleases a classic watch that
defined the decadence of the 1980s
By Chris Rovzar Photograph by Rene Cervantes
Dress watches from the 1960s and ’70s have
been the rage for a couple of years now—
whether it’s a vintage ’60s Omega Genève
with a linen-textured gold dial or a new
release such as the Heritage Chronometer
Celebration line from Carl F. Bucherer, which
indulges in the metal mesh bracelets of the
era. So what’s next in the retro rotation? The
bold, bright chic of the 1980s, of course.
Back then, Piaget’s Polo watches were worn
alongside G.H. Bass Weejuns penny loafers
and colorful polos from Ralph Lauren; they
were all proud hallmarks of New England
country club elitism and laid-back California
cool. This month, the brand is rereleasing its
most recognizable watch of the period as the
Polo79, with a banded construction that looks
like it was carved from one contiguous hunk
of 18-karat yellow gold.
THE COMPETITION
• A few weeks before Piaget announced the
Polo79, Bulgari reintroduced an ’80s watch
of its own, the simple yellow-gold Bulgari
Bulgari worn by George Michael in the Faith
years, for $13,200.
• The word “Rolex” is mentioned 26 times in
Bret Easton Ellis’ American Psycho; it was
the brand of choice for his decade-defining
psychopath, Patrick Bateman. The current
GMT-Master II doesn’t come in Bateman’s
preferred color, bone, but the $38,900 gold
version does scream “Eighties!”
• For a discount slice of the decade, go for
the $395 Bulova Computron—a gleaming,
gilt box that shows the time on an oldschool, red seven-segment display.
THE CASE
The original Polo came out in 1979 in
response to customers who were used
to Piaget dress watches but wanted
something more sporty—you know,
for riding horses and going out to
nightclubs such as Studio 54. The
case and the bracelet are joined
together in a series of alternating
brushed-gold blocks and polished
gadroon links, allowing the heavy
watch to snugly hug the wrist. Like
many timepieces of the ’80s, most
versions of the Polo were batterypowered. Now, in honor of the brand’s
150th anniversary, Piaget has slipped
one of its ultrathin movements—the
1200P1 in-house self-winding caliber—
into the new, 38mm version. A sapphire
caseback is a fresh addition, allowing the
mechanics to be easily admired. But then
again, you’re not wearing a fat gold watch
because of the mechanics, are you?
$73,000; piaget.com
63
● YOUNG PEOPLE TRUST SOCIAL MEDIA ALMOST AS MUCH AS
TRADITIONAL NEWS
The New News
In democracies, big election years such as this provide
convenient moments to assess the health of the fourth estate.
News flash: Much of the industry is in upheaval. As public trust
in and consumption of mainstream outlets decline, Instagram,
TikTok and YouTube have become the new juggernauts.
These platforms draw right- and left-leaning news consumers
far more evenly than any national media outlet, yet hyperpersonalized feeds can create fragmented views of the world.
Young people in particular are tuning in to influencers and
peers for current affairs. Meanwhile, social media companies
have slashed fact-checking and moderation, and media layoffs
keep piling up. �Laura Bliss and Minh-Anh Nguyen
Share of US adults
who say they have
some or a lot of trust
in the information
from each, 2016-22
100%
Local news
organizations
50
National news
organizations
Social media
0
18-29
30-49
Where global news consumers on each platform generally pay attention to get information
①
Under 35
65 and
older
● PARTISANSHIP ON
THE PLATFORMS
● PERSONALITIES ARE EDGING OUT PUBLISHERS
◼ Overall Age:
50-64
US adults by
political leaning
35 and older
Facebook
YouTube
Instagram
TikTok
X/Twitter
Mainstream news
Mainstream news
Mainstream news
Ordinary people
Mainstream news
◼ Left
◼ Center
◼ Right
43%
②
Ordinary people
42
42
Independent news
44
Celebrities
Influencers
55
Politicians
Share getting news from
each platform in the
past week
Facebook
64
③
Independent news
Influencers
Influencers
Celebrities
31%
Independent news
YouTube
28
④
Celebrities
Ordinary people
Ordinary people
Mainstream news
Ordinary people
Instagram
16
TikTok
⑤
Politicians
Celebrities
Independent news
Independent news
Influencers
8
X/Twitter
20
PAGE: GETTY IMAGES. DATA: PEW RESEARCH CENTER; REUTERS INSTITUTE AND YOUGOV SURVEY
CONDUCTED IN JANUARY AND FEBRUARY 2023; CHALLENGER, GRAY & CHRISTMAS; TIKTOK; FREE PRESS
⑥
Influencers
Politicians
Politicians
Politicians
Celebrities
Share getting news from
these news outlets in
the past week
Local TV
● NEWS CONSUMPTION IS RISING ON YOUTUBE, INSTAGRAM AND TIKTOK
37%
Share of any social media users in the US getting news from each platform, 2020-23
Facebook
YouTube
Instagram
TikTok
X/Twitter
Fox News
30%
52
CNN
38
20
NBC/MSNBC
10
37
CBS
0
● MEDIA LAYOFFS
Some 528 journalists were laid off
in January after the loss in 2023 of
3,087
print, digital and broadcast jobs,
the most annually since 2020.
28
● NEXT-GEN NEWS
ANCHORS
Creators Dylan Page, aka
News Daddy, and V Spehar, of
UnderTheDeskNews, draw
10.4 million and 3 million
followers on TikTok, respectively.
The New York Times: 595,600.
● TECH ROLLS BACK MODERATION
From Nov. 1, 2022, to Nov. 1, 2023, Meta,
X/Twitter and YouTube eliminated
17
▲ Page
policies aimed at reducing hate speech,
misinformation and harassment.
ABC
27
Local radio
25
New York Times
33
B l o o m b e r g B u s i n e s s w e e k ( U S P S 0 8 0 9 0 0 ) Fe b r u a r y 1 2 , 2 0 2 4 ( I S S N 0 0 0 7- 7 1 3 5 ) H I s s u e n o . 4 8 1 2 P u b l i s h e d b i - w e e k l y b y B l o o m b e r g L . P. P e r i o d i c a l s p o s t a g e p a i d a t N e w Yo r k , N .Y. , a n d a t a d d i t i o n a l
m a i l i n g o f f i c e s . E x e c u t i v e , E d i t o r i a l , C i r c u l a t i o n , a n d A d v e r t i s i n g O f f i c e s : B l o o m b e r g B u s i n e s s w e e k , 7 3 1 L e x i n g t o n A v e n u e , N e w Yo r k , N Y 1 0 0 2 2 . P O S T M A S T E R : S e n d a d d r e s s c h a n g e s t o B l o o m b e r g
B u s i n e s s w e e k , P.O. B ox 3 7 5 2 8 , B o o n e , I A 5 0 0 3 7- 0 5 2 8 . C a n a d a P o s t P u b l i c a t i o n M a i l A g r e e m e n t N u m b e r 41 9 8 9 0 2 0 . R e t u r n u n d e l i v e r a b l e C a n a d i a n a d d r e s s e s t o D H L G l o b a l M a i l , 3 5 5 A d m i r a l B l v d . , U n i t 4 ,
Mississauga, ON L5T 2N1. Email: contactus@bloombergsupport.com. QST#1008327064. Registered for GST as Bloomberg L.P. GST #12829 9898 RT0001. Copyright 2024 Bloomberg L.P. All rights reserved. Title registered in the
U.S. Patent Office. Single Copy Sales: Call 800-635-1200 or email: bwkcustserv@cdsfulfillment.com. Educational Permissions: Copyright Clearance Center at info@copyright.com. Printed in the U.S.A. CPPAP NUMBER 0414N68830
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