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 May 30, 2022

 Malcolm and Simone

Collins are expecting a
little girl (who’ll have an
unusually good chance
of avoiding cancer,
diabetes, heart disease,
and schizophrenia)

1
PHOTOGRAPH BY BRAYLEN DION FOR BLOOMBERG BUSINESSWEEK

THE TECH ISSUE 42 What comes after the Great Tech Rout of 2022?
46 Sorry, Instagram, you will never be TikTok
50 Elon Musk has lost the plot
52 Will we curb inflation? Go to Mars? Cure cancer? Place your bets
58 Saving the internet from Chrome and Safari
62 Scooters are the (sadly, not likely to be very profitable) future
64 Nudge theory: Uber, Lyft, and the human-machine relationship
68 The brave, new, ethically ambiguous world of embryo engineering
72 Big Ag doesn’t need more tech—just better policing
  CONTENTS Bloomberg Businessweek May 30, 2022

 IN BRIEF 5 Tragedy in Texas ○ Next, monkeypox ○ NYC hangs up  COVER TRAIL

 OPINION 6 No, Bitcoin in 401(k) accounts is not a smart idea How the cover
 AGENDA 6 First-quarter fear ○ Brexit, the sequel ○ Dinosaur season gets made

①
“So this week is our
 REMARKS 8 Parts of India and Pakistan now regularly hit 120F. Tech Issue—”
The future looks even hotter “You’re having technical
issues?”
BUSINESS / 10 It may be a bad trip. Airfares are up, and Europe’s a mess. “No, no, like, technology!
1 SUMMER VACATION You can forget that house in the Hamptons. Hotels are I’m all nostalgic.
Remember when you
a fortune, and you’ll never get a dinner reservation. Car were in Karl Ross’s
rentals are nuts—not to mention gas! And cruises are no basement and first
heard about this thing
picnic either … . But it’s a great time to be a travel agent! called the internet and
were like, ‘Holy crap!
Everything’s gonna be
TECHNOLOGY 20 Texas v. Social Media so much easier from
2 22 The brothers who are reinventing office networking now on.’”

“I got my first AOL

account when I was 7.
FINANCE 27 Is real estate finally starting to calm down?
3 29 2022 has been terrible for Tiger Cubs
Facebook lasted about
three years before my
parents were on it—and
30 The legal theory that may stymie the SEC then I wasn’t. Now I can’t
even look at Instagram
without going into an
ECONOMICS 32 New Mexico spins black gold into higher ed and child care
4 34 Keeping cool this year is really going to cost you
existential spiral.”

“Well, when it all started

35 For a change, some good news about Black employment it was a very optimistic
time. The joy of
GeoCities! The utopia of
SOLUTIONS / 36  Your health insurance may not cover this Wikipedia! Cat videos!”
5 PROGNOSIS
2 “Now it’s bots,
conspiracy theories,
hate groups, and … yeah,
I guess, still cats.”

“What’s your point?”

“Like I was saying,

we might as well just
publish the number for a
universal IT. We’re living
in a dystopia—there are
too many tech issues
to count.”

SOLUTIONS: COURTESY BECKLEY RETREATS

38 A cardiac treatment shows promise in long-Covid patients

40 How to fund desperately needed new antibiotics

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 Am I ready
for a constantly
changing world?
Does my strategy embrace it?
And my portfolio reflect it?

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  IN BRIEF Bloomberg Businessweek By Mark Leydorf

○ There have now been

○ War in Ukraine

528m
Covid-19 cases worldwide
 President Volodymyr Zelenskiy said
Ukraine wouldn’t enter peace talks
until its pre-invasion borders have
been restored.

and almost 6.3 million  As of May 25, US individuals and

deaths. The sudden banks are barred from accepting
bond payments from Russia’s
appearance in late May of government. The move is designed to
another exotic disease— nudge the country closer to default.

monkeypox, a mild relative  Responding to accusations that

of smallpox—has caused its blockade of Ukraine has sparked
a global food crisis, Russia said it
some alarm. But officials would open sea corridors to seven
monitoring the as-yet- Ukrainian ports.

isolated case clusters say

there’s no reason for panic.
○ New York removed its last working phone booth, located in Times Square,
on May 23, a bittersweet reminder of technology’s march.  42

○ President Joe Biden ○ China is said to have

○ Biden said on ○ Donald Trump
issued an executive order ramped up its spending on
revising use-of-force May 23 that the solar power projects, to apparently
policies for federal law US would defend agreed with the
enforcement on May 25,
the second anniversary
of George Floyd’s death
Taiwan against an
attack by China.
29b
yuan ($4.3 billion), in the
Jan. 6 rioters
that Mike Pence
at the hands of the first four months of 2022, should have 5
Minneapolis police. double what it
been hanged.
spent in the
same period a
year earlier.
NYC: NDZ/AP IMAGES. FLOYD: STEPHANIE KEITH/GETTY IMAGES. SOLAR PANELS: GETTY IMAGES. O’ROURKE: CHANDAN KHANNA/GETTY IMAGES

White House officials later said Biden The New York Times reports that Mark
meant the US would provide military Meadows, White House chief of staff
equipment to Taiwan, not send at the time, heard the former president
troops—but not before diplomats in express approval of the sentiment as
Beijing had issued a rebuke. they watched the insurrection on TV.

○ Joyce Beatty, chair of

○ “You are doing nothing. the Congressional Black
Caucus, requested a
You are offering up nothing. meeting with President
Biden to urge him to cancel
You said this was not student loan debt. Biden
has said he’ll forgive at
predictable. This was totally most $10,000 per student,
but the caucus and other
predictable when you lawmakers have called on
him to cancel as much as
choose not to do anything.”
$50k
Beto O’Rourke, Democratic candidate for governor of Texas, interrupted a press
conference held by Republican incumbent Greg Abbott the day after the mass shooting
at an elementary school in Uvalde. The 18-year-old gunman murdered 19 children and two
teachers before being killed himself by responding officers.
 May 30, 2022
 BLOOMBERG OPINION

most part, companies seem perfectly willing to comply: In

Bitcoin in Your 401(k)? one recent poll by the Plan Sponsor Council of America trade
group, less than 2% of 401(k) plan sponsors said they were
Better Retire That Idea considering adding cryptocurrency as an investment option.
Yet the industry and its supporters keep trying.
Right Now Congressional Republicans, for example, have introduced
legislation that would prohibit the Labor Department from
restricting 401(k) investment options, opening the way for
Cryptocurrencies are the exact opposite of a prudent crypto and much more. If lawmakers have a modicum of
investment: They are volatile, have little practical use responsibility, they’ll let such initiatives die quietly. If not,
beyond speculation and crime, often get lost or stolen, and one must hope employers will hold the line.
lack the real-world cash flows that underpin the values of Of course, people should be free to invest their money
stocks and bonds. as they please—outside of their tax-advantaged retire-
It should thus go without saying that they have no place ment accounts. Someday, cryptocurrency may prove to
in a retirement savings plan. Unfortunately, it appears to be something more than a purely speculative instrument.
require saying. It’s nowhere near that now.  For more commentary, go to
Increasingly, financial institutions are seeking to get crypto bloomberg.com/opinion
into the employer-sponsored 401(k) plans where workers
set aside pretax earnings for retirement—and which, as of
December, contained about $11 trillion in assets. Last year  AGENDA
the plan provider ForUsAll announced a partnership with
Coinbase Global Inc., the largest US crypto exchange, that
would allow employees to put as much as 5% of their accounts
into cryptocurrencies via a so-called brokerage window.
This year, Fidelity Investments, among the country’s largest
6 401(k) providers, said it would soon let participants invest
as much as 20% in Bitcoin, if employers choose that option.
MicroStrategy Inc. Chief Executive Officer Michael Saylor, an
outspoken Bitcoin advocate, immediately said he’d be in.
Advocates offer various justifications for this misguided
idea. They say Americans deserve more choice, citing sur-
veys showing that millennials in particular tend to see crypto
as a desirable investment. They say digital assets can diver-
sify a given portfolio, because their price fluctuations aren’t
synced with other markets. Proper financial education, they
insist, can help people understand the risks.
Please, no. People have a hard enough time navigating
 How Bad Is It?
the US retirement savings system—and merely saving enough Brazil, Canada, India, and Turkey report their first-quarter
for old age—without adding an option that even professional GDP figures starting May 31, giving the first reading of how
investors struggle to grasp. As of 2019, almost half of people much the global economy has slowed in response to rising
approaching the end of their working life had no money saved inflation and interest rates and Russia’s invasion of Ukraine.
in a 401(k) plan or individual retirement account. Those who
did had a median balance of only $144,000.  After June 6, the UK  Beginning June 8,  Memorial Day, May 30,
is set to debate a bill China reports balance kicks off the US vacation
And the diversification argument is specious at best: overriding parts of its of trade, inflation, and season. AAA forecasts
Crypto has a limited track record, and Bitcoin has lately Brexit deal with the EU industrial production an 8.3% annual
to ease trade in Northern figures. Economists will increase in travelers,
plunged even more than other markets, down more than Ireland. The EU says it be watching to see the despite high gas prices
50% from its November 2021 peak. Not to mention techni- may suspend the entire effect of the country’s and the pandemic’s
pact if the bill passes. drastic Covid lockdowns. persistence.  10
cal difficulties such as obtaining reliable pricing and ensur-
ing safe custody in a largely unregulated realm.
To their credit, regulators aren’t buying the idea. The US  “The Ocean: Life and  Jurassic World  Sports fans who
ILLUSTRATION BY MEGAN DU

Livelihoods,” the theme Dominion roars into US don’t want to watch the
Department of Labor, which oversees 401(k) plans, issued for World Oceans Day theaters on June 10. French Open tennis
guidance emphatically reminding employers of their fiduciary on June 8, is especially Laura Dern, Sam Neill, finals in Paris on June 5
apt. The UN says 90% of and Jeff Goldblum can instead take in the
duty to participants and warning that including crypto among big fish populations have can never get enough WWE’s 14th annual
investment options will invite investigation. People should be been depleted and 50% dinosaurs—filmgoers Hell in a Cell wrestling
of coral reefs destroyed. may prefer Dr. Strange. tournament in Chicago.
free to squander their money, but not in their 401(k)s. For the
 Delivering for Innovators

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  REMARKS

Killer Heat Is Here

T. NARAYAN/BLOOMBERG

○ A farmer in
Punjab’s Ludhiana
District tries to
cool off on May 1
 REMARKS Bloomberg Businessweek
○ The record temperatures
ravaging India are a warning of
global catastrophes to come
○ By Chris Kay and Pratik Parija
Even after three decades of growing wheat and rapeseed on his
small plot in Punjab, India’s traditional breadbasket, Inderjit
Singh was caught off guard by the heat wave that began rolling
across South Asia early this spring. Temperatures in India typ-
ically peak in May before the start of monsoon rains. But this
year they began hitting searing highs in March, with some days
well above 40C (104F). Singh’s crops were ravaged. “There’s no
way out for us,” says Singh, 58. “We can’t do anything about it.”
By now, people in developed countries are used to dire
predictions of the catastrophes that scientists say will become
routine in a warmer world. In India and neighboring Pakistan,
some of the worst scenarios are playing out already—and pro-
viding an unsettling window into what may await the rest of us.
Temperatures in some areas hit 49C in May, and in one
Pakistani city, Jacobabad, they’re regularly breaking the 50C
mark. In the western Indian state of Gujarat, dehydrated birds
are falling out of the sky; in Delhi, a mountain of garbage
combusted into a noxious blaze. Pakistan’s 7,000 glaciers are
thawing rapidly; the glacial melt has been so forceful that a
recent flash flood washed away a bridge. “What is shocking is
the rapid speed of this change. We didn’t expect the tempera-
tures to increase so much, so fast,” says Zahra Khan Durrani,
a climate researcher in Islamabad.
Heat has always been part of life in India. During the
British Raj, colonial administrators found the warmer months
so uncomfortable that they would move to the slopes of the
Himalayas for the summer, running the country from “hill
stations.” What’s happening now is different. According to
research by the Met Office, the UK’s national weather agency,
climate change has made record-breaking hot spells 100 times
more likely in India’s northwest and Pakistan. Other studies
predict longer and more intense droughts and more erratic
monsoons, disrupting weather patterns that have sustained
commerce and agriculture for millenniums.
The Ministry for the Future, a novel by the science fiction
author Kim Stanley Robinson, opens with an Indian heat-
wave so severe it kills millions of people. In the book, that
event and other climate disasters eventually shock the world’s
governments into dramatically reducing carbon emissions—a
vision of global solidarity in the face of an existential threat.
The reaction to this year’s real-life temperature spike, by con-
trast, has been one of indifference, with US and European
politicians more focused on reducing energy prices.
The people now feeling the full force of climate change
are trying to cope any way they can. Those with the means,
perhaps a tenth of India’s 1.4 billion citizens, are seeking refuge
May 30, 2022
in air-conditioned cocoons. This month the chief financial
officer of Voltas Ltd., a Mumbai-based manufacturer of AC
units, told investors that hot weather would drive “exponential
growth” in demand. Farmers and low-wage laborers who work
outdoors are forced to choose between risking heatstroke or
worse and eking out a living. Being outside can be fatal; more
humid regions of India have recently recorded “wet bulb” tem-
peratures over 30C, close to the point where sweat no longer
evaporates, making it impossible to cool down.
Indian companies are stepping up renewable energy
investments, with a record 4.1  gigawatts of ground-
mounted solar panels installed in only the first quarter of
2022—equivalent to 1% of the country’s total electrical capac-
ity. But Prime Minister Narendra Modi is also increasing bets
on the dirtiest fuel available, coal, which accounts for half of
India’s power. The government recently rolled back restric-
tions on coal mines, allowing them to increase production
without undergoing impact assessments. The national climate
blueprint calls for India to not reach net-zero emissions until
2070, 10 years after China and two decades behind Europe.
Modi and other politicians point out, correctly, that the bulk
of the carbon in the atmosphere was emitted by rich countries
and well before India was developed enough to make a large
contribution to climate change. Yet that argument obscures as
much as it clarifies. The country is now the world’s third-largest
emitter, after China and the US, and far ahead of fourth-place 9
Russia, and its share is likely to rise as the Indian economy
grows. It also has the benefit of solar and wind technologies
that weren’t available when North America and Europe were
industrializing. Indeed, India’s continued reliance on coal may
have as much to do with who provides it as its affordability.
State-owned Coal India Ltd. is responsible for 82% of domes-
tic production, and billionaires such as Gautam Adani, India’s
richest man, have large investments in the industry. (Adani
also operates a substantial renewables business.)
If nothing else, the economic damage from intense heat pro-
vides a compelling reason for India and other countries to accel-
erate climate action. Indian wheat yields have plunged by as
much as half in some regions, threatening domestic supplies;
in response, Modi’s government banned exports of the crop,
exacerbating supply constraints that are driving up food prices
around the world. Open-air activities such as construction can’t
continue in the hottest conditions, and McKinsey & Co. has
estimated that temperature-related work stoppages could cost
India as much as $250 billion a year by the decade’s end.
Indian policymakers and citizens are having increas-
ingly sophisticated discussions about climate, says Chandni
Singh, a senior researcher at the Indian Institute for Human
Settlements. No one denies that the problem is real or that
the country needs to think seriously about how to adapt. But
fundamental decisions, such as a decisive move away from
coal, are still too far from serious consideration, whether in
India or other countries. “I hope it serves as a wake-up call,”
Singh says of India’s heat. “I do not think it’s too late. We need
urgent and deep action.” 
 If you’re one of the 73% of Americans planning to travel this summer,
brace yourself for a turbulent trip. Almost all facets of the industry—
from airlines to rental cars, cruises to hotels—are facing global service
disruptions, a result of the same supply chain and labor shortage issues
upending all businesses. There are also price spikes aplenty and some
record demand crunches, because so many people are desperately
eager to be on the move after two years of pandemic confinement.
There’s good news, to be sure. Borders have largely reopened around
the world, with Covid-19 restrictions dropping by the day. And travelers
are still reaping the benefits of remote work. According to a report from
Deloitte, 1 in 5 of them plan to take their longest-ever trip this summer,
albeit with a laptop in tow.
Thanks to inflation, it’s finances, not a virus, that travelers are most
worried about these days. Where are they all heading in the warm-
weather months ahead? According to Skyscanner Ltd., an exact
location is almost beside the point, with 75% of American vacationers
saying they’re open to changing their destination. Going somewhere—
ILLUSTRATION BY JORDAN SPEER

anywhere—is good enough.
This summer may be the most challenging one on the books for many
Edited by
James E. Ellis, travelers, with potential problems at every turn. That doesn’t mean it has
Nikki Ekstein, and
Chris Rovzar to be a nightmare. The key will be staying flexible along the way.
Bloomberg Businessweek May 30, 2022

on long-haul international routes; prices have risen

20% since 2019, to an average of $797.
Among the most popular routes, a Los Angeles
to New York ticket is selling for an average of $569
round trip, up 69% from 2019, and New York to San
Francisco is almost double, at $662, Hopper shows.
The jump is even larger in markets where service
has been reduced: St. Louis to Decatur, Ill., for one,
has soared 815%, to $609, and Seattle to Houston is
up 541%, to $1,383. In addition to fewer flights and
high demand, a major culprit is the price of jet fuel,
which spiked after Russia invaded Ukraine, making
some routes too expensive to fly.
Although several airline executives have said
higher fares and inflation across the economy
haven’t discouraged summer travel plans, some  It’s the
economy, stupid
outside sources disagree. Researchers at Adobe
○ Share of travelers
Digital Insights say domestic online bookings for canceling at least
Memorial Day weekend were down 13% through the some of their summer
travel plans because
end of April from the same point in 2019. A survey of inflation, according
released by travel site the Points Guy in early May to consumer insights
tracker Zeta
showed that 41% of US adults cited cost as the larg-
est disruption to their summer plans.
Scott Keyes of Scott’s Cheap Flights, a discount
62%
fare alert service, advises that sticker-shocked fly- ○ Among people who
ers postpone vacations rather than cancel them. He told Deloitte they won’t
11
travel this summer, this
says fares fall as much as 30% in August from the share cited financial
midsummer crunch. —Mary Schlangenstein concerns for staying
home—almost double
the percentage who
said they were waiting
for the pandemic to end

44%
○ Percentage of would-
be travelers choosing
a “staycation” because
of inflation worries,
according to Bankrate

28%
  BUSINESS Bloomberg Businessweek May 30, 2022

Europe’s Travel
Rebound Wobbles ○ A staffing crisis at airlines, airports, and even
the Chunnel left some operators overwhelmed

The flood of travelers has brought problems

aplenty. Manchester Airport in northern England
made news over Easter as waiting times for some
flights reached seven hours. Baggage collection for
No Summer
returning holidaymakers surpassed three hours. Home
London Heathrow, Europe’s busiest hub before Bargains
the pandemic, has been another pinch point. The
In April two of the
airport has struggled to fill security and clean- megamansions in
ing posts, while No. 1 operator BA reports a short- Bridgehampton, N.Y.,
that hadn’t yet been
fall in “below-the-wing staff” engaged in activities rented for the summer
such as ground services and maintenance. The typ- were listed with eye-
watering price tags for
ically 10-week period for so-called airside recruits the month of July: one
to complete training and clear vetting procedures at a “reduced” rate of
$1.25 million and the
European travel businesses have been eagerly has also frustrated attempts to rebuild its ranks. other at $1.65 million.
awaiting the scrapping of border curbs since the BA, with almost 350 daily departures from The inflated prices tell
a story of supersize
pandemic started. Now that restrictions are lifting, Heathrow, has struck 10% of flights from its time- demand from the well-
they’re creaking under the strain of surging demand. table through the end of October to boost “opera- heeled for coastal digs.
People on more
12 Delays and cancellations at airports, turmoil tional resilience.” That comes after BA fired 10,000 modest budgets also
at ferry ports, and issues with trains connecting workers at the height of the Covid crisis rather than face a competitive
and expensive market.
Britain and France have turned the exodus from furlough them—a move the carrier said was neces- According to data
northern Europe to the sunnier south into an obsta- sary after it received only limited government aid. from AirDNA, which
tracks the short-term
cle course for millions of tourists. Staff shortages UK-based EasyJet Plc has reduced flights as it rental industry, daily
have been the chief trigger for the chaos, with rushes to hire cabin crew. It’s also taken the drastic rates for US vacation
properties are up 25%
companies that dismissed workers or lost them to step of removing seats from its Airbus SE A319 jets, on average from 2019.
other sectors during the Covid-19 crisis struggling capping their capacity at 150 passengers—reducing Inventory remains
uncharacteristically low,
to make up the gap as bookings have rebounded. the required cabin crew from four to three. according to AirDNA,
Carrier disruptions at Easter, the start of Some continental airlines and airports have with remote work
allowing owners of
Europe’s main travel season, were so widespread faced similar issues, with cancellations at the Dutch vacation homes to use
that airlines are now looking toward the sum- arm of Air France-KLM surpassing 225 in May as its them more frequently.
Data from home-
mer peak with trepidation about their ability to hub at Amsterdam Schiphol Airport was hobbled sharing service Vrbo
cope with higher passenger loads. Some have cut by labor shortages and work stoppages. indicate inventory in July
for prime East Coast
schedules, especially in the UK, where hiring at Efforts to cut costs have led to chaos on the beach destinations,
companies including British Airways has proved Dover-Calais sea crossing—the ferry connection including North ILLUSTRATIONS BY JORDAN SPEER. CAMPING: GETTY IMAGES (4). NEGRONI: ALAMY
Carolina’s Outer Banks
particularly tough. That limits their ability to tap is the main exit point for Britons taking their cars and Cape May, N.J., was
the vacation boom ahead of what may be tougher to France and beyond. P&O Ferries is locked in a already 85% booked
by March; normally that
economic times later in the year. standoff with the British government after firing figure would be closer
“It’s a setback for carriers such as BA and 800 seafarers without notice. Increased scrutiny to 70%.
There are still
EasyJet to be forced to pare down capacity and of P&O’s fleet and safety procedures after it hired vacancies to be found,
not be able to cash in fully on the massive pent-up replacement crews on wages below the UK mini- though. Mountain towns
Steamboat Springs,
demand this summer,” says aviation analyst John mum have left it with only half its usual fleet oper- Colo., and Park City,
Strickland of JLS Consulting. ating across the English Channel. Utah, have seen booking
rates and prices wilt
European airspace manager Eurocontrol fore- The Eurostar International Ltd. cross-channel in comparison to
cast in early April that summer traffic would hit at express says it’s capping capacity at 80% of pre- 2021. And in the US
Virgin Islands, summer
least 90% of pre-pandemic levels. Since then, carri- Covid levels due to limited staff at the border. reservations declined
ers including Ryanair Holdings Plc have reported a Eurostar’s timetable will be revisited in September. 16% from a year earlier
as Americans shift back
jump in sales, many coming very close to the date Until then, travelers are in for a long, hot summer. to international travel.
of departure as people make last-minute bookings. —Christopher Jasper and Siddharth Philip —Nikki Ekstein
 BUSINESS Bloomberg Businessweek May 30, 2022

prices. For years before Covid, hotels failed to adjust

The Rising their rates to keep pace with inflation, he says. Now  Camping’s hot!

they’re taking advantage of a moment when there

Price of a Good
Night’s Sleep
○ Hotels are making up for lost pandemic
business on the strength of leisure travel
In 2019 you could get a room at the Breakers, a
five-star resort in Palm Beach, for $350 a night
in June—proof that, once upon a time, Florida’s
unbearable summer humidity made for outstand-
ing deals. Check a weekend in June 2022, and you’ll
find that the prices have quadrupled, with entry-
level rooms going for $1,450.
Demand has flooded the country’s leisure-driven
markets—not just South Florida, but also Hawaii and
Southern California—where Americans can soak up
sun without needing a Covid-19 test to return home.
Hotel market data provider STR says average daily
rates from mid-April to mid-May in greater Miami,
where the demand has been strongest, exceeded
2019 levels by 55.1%. Across the US, resort prices
were up 33% in the same period. The most luxurious
properties seem almost unconstrained by inflation
worries, with go-to spots such as the Breakers and
are fewer business travelers on stricter budgets.
Although leisure demand is 140% of what it was in
May 2019, the business share of lodging spending
remains less than half of its pre-pandemic level.
Increased room rates are also partly a result of
labor shortages. “Busing tables, being a porter, work-
ing in housekeeping—these are viewed by younger
Summer reservations
workers less as service positions than as servitude,” grew 49% over last
Hanson says. Hotels are unable to find and hire year at Campspot, a
digital marketplace
people, even with cash incentives for interview- for campsites that’s
ees and hourly wages up 30% to 50% since 2019. A made $1 billion in
gross bookings since
recession could draw more people back into jobs, May 2021.
but for now, hotels will continue to run with fewer
back-of-house staffers to avoid driving up payrolls.
Costs for almost everything else are skyrocketing.
Instead of receiving orders for linens or toilet paper
within days from bulk suppliers, hoteliers are being
told delays will range from weeks to months, forcing
them to buy retail. That means purchasing, usually
15% of a hotel’s revenue, has surged to almost twice
as much. So Hanson says hoteliers have plenty of
Sleeping under the
cost worries, too. Just don’t tell that to the Florida stars isn’t always
traveler paying $1,450 a night. —Nikki Ekstein roughing it: The average
13
nightly rate for Tentrr,
a luxury campsite
booking platform whose
business has increased
10% since last summer,
is $135 a night.

Rosewood Miramar Beach in Santa Barbara, Calif.,

able to charge sky’s-the-limit rates. But it’s not only
luxe spots that are cranking up prices: Hotels.com
is seeing a 15% increase from 2019 in average rates
for hotels across the US.
Gouging could be blamed for some of that increase,
but hospitality consultant Bjorn Hanson, an aca-
demic researcher and investor in the industry, says
there are plenty of business reasons for the higher

packed. “I’ve worked as many as 10 times the as a money-saving

here 24 years. There’s seats we have available.” measure.
Table for Two? Try Table for None never been a time
where I couldn’t get
Tables are scarce in
part because restaurants
Richie Romero has
started closing earlier
someone into our own can’t find staff and at his Zazzy’s Pizza
Restaurants, facing staff shortages, are cutting restaurant,” he says. have decreased locations in the West
hours—which makes tables harder to come by “Now it is impossible.” their operating hours Village and on the Upper
In Atlanta, in response. As of East Side of Manhattan,
reservations go quickly April, there were cutting hungry diners
Count restaurant been a huge increase group saw a more at the 15-seat sushi 794,000 fewer jobs off at 11 p.m. instead
reservations among the in 2022 alone that’s than 30% jump in calls to restaurant Mujo, which compared with pre- of the previous 2 a.m.
shortages Americans will ticking higher. According its reservation lines from opened in February and pandemic levels, or 3 a.m. He bemoans
undoubtedly experience to Resy’s latest data, January to April. where the omakase a 6.4% decrease, the shortened hours
this travel season. The national bookings for For the first time, goes for $205. according to the National at other New York
American Express- May are trending 5% to Jeffrey Thoennes, the “Reservations in our Restaurant Association. staples—such as the
owned booking platform 10% higher than April. longtime concierge at first month were sold Because fewer people storied Chinatown
Resy reported that April Danny Meyer’s Union the Carlyle Hotel in New out within 24 hours, and want restaurant jobs, canteen Wo Hop, which
was the busiest month Square Hospitality York, says he’s having subsequent months wages have increased was long open 24 hours
in its eight-year history. Group, which includes difficulty getting tables have sold out in less than in some places. That a day. “I never went to
It’s not just a bump since Ci Siamo and Union for guests at the hotel’s 10 minutes,” says owner puts another strain on Wo Hop before 4 a.m.,”
the hardest days of Square Café, reports swanky restaurant Fred Castelluci. “The restaurateurs, who may he says. “Now it closes
the pandemic—there’s a similar increase. The Dowling’s, because it’s wait list is sometimes trim low-traffic hours at 10.” —Kate Krader
  BUSINESS Bloomberg Businessweek May 30, 2022

Rental Car Rates

Will Shock You
○ Agencies are beginning to see the upside of offering fewer cars at higher prices

three times that amount but can’t now because car

dealers are demanding that they get most of auto
manufacturers’ production, Healy says.
So the teeming demand could send rental rates
even higher. The rental companies may not want
to stock up much more on vehicles, which are at
record prices but are likely to moderate when auto
production normalizes. Plus, having fewer rental
cars means they won’t have to discount rates to
keep cars rented. Hertz, for example, enjoyed
40% margins in the first quarter compared with
just about breaking even before the pandemic.
“The industry,” Healy says, “is realizing that it’s
Two years ago, Hertz Global Holdings Inc. had a more profitable at $70 a day than it was at $60.”
14 near-death experience and filed for bankruptcy —David Welch
protection. A year later its profits are soaring, and
rival Avis Budget Group Inc. had a record first quar-
ter. That’s great news for investors, but it’s not so
great for travelers this summer.
Gas Prices May Stall Road Trips
Rising prices at the rental counter are what More vacationers may be forced to staycation, with fuel averaging
brought back profits. Both Hertz and Avis say their $4.59 a gallon nationwide
rates rose at least 25% in the first quarter compared
Joseph Jones, a 52-year-old to rise even more because future transition to cleaner
with the same quarter in 2021, which typically has history buff, had planned a of inadequate supply. The forms of energy makes such
lower travel activity than summer months. Hertz summer drive from his home US lost more than 1 million investments unattractive in
in Dallas to Nashville to visit barrels a day of refining the long term. This is in part
charged on average $59 a day, and Avis charged Civil War sites along the way. capacity during the pandemic, why the Biden administration’s
almost $54. Avis’s revenue per day is on par with But after spending $60 to when fuelmakers shut down efforts to release crude oil
fill up his 2019 Ford Escape some of their least-profitable from the country’s emergency
pre-pandemic levels; Hertz’s was up 40% over the recently, he nixed the idea. crude processing plants. The reserves have failed to
same period in 2019, when cars rented for $40 a “I thought, ‘This is insane,’ ” world is now calling on that halt the sharp rise in pump
Jones says. shrunken capacity to meet prices: Refineries are already
day. That’s before all the travel taxes, too. Add in It’s going to be a rough growing demand spurred by processing all the oil they
those and travelers could be paying $90 a day on summer for US drivers. the post-pandemic economic can handle.
Gasoline prices typically recovery and efforts to The price shock at the
average, says Neil Abrams, president of Abrams rise from April through sidestep Russian oil after gas station led Jones to
Consulting Group, which tracks rental car activity. September: Demand is higher, Russia’s invasion of Ukraine. calculate that his Memorial
and fuel grades that are US refiners are running Day Civil War trek would
It could get worse this summer. With more less prone to evaporation— at or near capacity—higher cost more than $1,500
travelers heading to airports, prices could rise at required by environmental than normal for this time of with gas, food, and lodging.
regulations—are slightly more year—and still struggling “I really wanted to get out
ILLUSTRATIONS BY JORDAN SPEER. GAS: GETTY IMAGES

least $4 or $5 a day, says John Healy, an analyst expensive to make.
with Northcoast Research. A dearth of cars is a big Gasoline typically costs
50¢ to $1 more per gallon at
culprit: When the companies have 75% or less of the summer high compared
their fleets rented out—as Hertz and Avis did in the with the depth of winter. This
year prices have
first quarter—travelers can find something for their jumped 40% since
needs. But just as summer travel is ramping up, January, to a record
of $4.59 a gallon
rental companies are unable to get enough cars to one week before
stock their lots. Over the past three to four months, Memorial Day, the
traditional start of the
the industry has been buying 60,000 to 100,000 peak driving season.
cars a month. Usually rental operators get two to Prices are set
to replenish the country’s somewhere,” says Jones, who
depleted stockpiles. On hasn’t vacationed since 2019.
the East Coast, one of the But “the combo of Covid and
regions most vulnerable to inflation has been a disaster.”
supply disruptions, stockpiles He now plans to take a
of diesel and gasoline staycation in the Dallas area.
fell to their lowest level Sticking with the historical
in decades in April. theme, he says he’ll be
Refiners are making watching the new Downton
plenty of money, but Abbey movie and cracking
they’re not using their open a Frederick Douglass
profits to expand biography rather than trekking
capacity because old battlefields. —Chunzi Xu
the all-but-certain and Julia Fanzeres
 BUSINESS Bloomberg Businessweek May 30, 2022

cancellations for customers. Covid-related flight

For Cruising, disruptions for returning crew were to blame for
Carnival Corp.’s decision to limit capacity on its
Waters Are Still Cunard luxury line through July, forcing it in May to
turn away customers already booked on its Alaska-
Travel
Choppy and Europe-bound summer sailings. Same goes for Agents Are
Norwegian Cruise Line Holdings Ltd., which unex- Having a
pectedly announced it will sail its 2,186-passenger,
○ With many seafarers stuck on land, ships are Hawaii-bound Pride of America at just 40% to 50%
Moment
limiting the number of paying guests capacity due to staff deficits. And the industrywide With pricing, lodging
availability, and health
inability to obtain enough visas for crew amid a US requirements so
State Department backlog led Carnival Cruise Line unpredictable this
summer, travel advisers
Cruising, one of the hardest-hit sectors of the travel this month to temporarily close two restaurants on are emerging as heroes
economy during the pandemic, is set to face tough every ship in its fleet. for many vacationers.
They’re being called
times again this summer. It’s not just because of con- Even the most reliable perk of cruising—unlimited upon to help find options
tinued waves of Covid-19—though as of May 23, the food and booze—has been threatened, with passen- and availability in clients’
chosen locales, or
Centers for Disease Control and Prevention was moni- gers complaining that ships are running out of adult alternatives that might
toring outbreaks on 84 of 93 cruise ships in US waters, beverages or certain ingredients. And that’s the least offer more value, in a
year when demand has
all with the majority of passengers and crew vacci- of the industry’s supply chain woes: Shortages can sent costs skyward.
nated. Instead, difficulty reassembling staff plus infla- hamper routine maintenance, too. “It’s not going Virtuoso, a global
consortium for luxury
tion and war have knocked the industry off balance. to stop a cruise if they run out of avocados, but it travel specialists,
Russia’s invasion of Ukraine has upended many may stop a cruise if they can’t install your decking,” reports a 50% increase
from a year earlier in
European voyages. St. Petersburg, traditionally the McDaniel says. the number of people
marquee destination on Baltic Sea itineraries, was Entirely new lines, including the highly anticipated seeking its services.
Jack Ezon, co-founder
largely dropped from routes by March. Now the ports Ritz-Carlton Yacht Collection, have been ensnared by of agency Embark
in Sweden and Finland that replaced it face geopolit- construction delays during the pandemic. And now Beyond, says his
15
business is 240% above
ical unknowns of their own, while cruise operators rising fuel costs could hinder cruise operators’ plans pre-pandemic levels and
anxiously await President Vladimir Putin’s response even further. So far, Greek line Celestyal Cruises is has a staff that’s grown
from 20 in 2019 to 150
to those countries’ NATO aspirations. Routes may one of two companies to add a last-minute fuel sur- today. Paul Tumpowsky,
soon have to change again—or get nixed altogether, charge, of $8 per person per day. But other lines have whose Skylark offers a
mix of online booking
according to Colleen McDaniel, editor-in-chief of the that option in passenger contracts and can impose and 24/7 human
website Cruise Critic. charges right up until departure. How’s that for a support, reported a
240% increase over
Staffing shortages have resulted in a slew of “Bon voyage!” surprise? —Fran Golden 2019 figures last year,
and is forecasting his
company will double or
triple those numbers
in 2022. “People are
learning to distinguish
proper advisers from
simple hotel-bookers—
there’s a big difference,”
Tumpowsky says.
Other winners are
travel insurance issuers,
luggage shipping
companies, and airport
greeting services—three
categories Ezon reports
are up 150% in sales
this year. “It’s all about
making people’s lives
a little easier at a time
when there are so many
question marks,” he
says. —Nikki Ekstein
  BUSINESS Bloomberg Businessweek May 30, 2022

Have a As travel demand has come roaring back this summer, so have airfares, hotel
rates, and gasoline prices. Meanwhile, staff shortages and inflation fears are
Nice Trip crimping the plans of many travelers

○ US AIRPORT TRAFFIC ○ AIRFARE INFLATION ○ HOTEL STAYS

Passengers passing through TSA checkpoints daily US airline fares, consumer price index US lodging away from home, including hotels

*FOREIGN-FLAGGED CRUISE SHIPS CURRENTLY OPERATING OR PLANNING TO OPERATE IN WATERS UNDER US JURISDICTION, OR US-FLAGGED SHIPS CHOOSING TO PARTICIPATE IN THE CDC’S TRACKING PROGRAM. DATA: TRANSPORTATION SECURITY ADMINISTRATION, US BUREAU
and motels, consumer price index

2m 300 375

1 250 325

OF LABOR STATISTICS, HOPPER, TRIVAGO, IMRIX, AMERICAN AUTOMOBILE ASSOCIATION, RV INDUSTRY ASSOCIATION, WORLD TRAVEL & TOURISM COUNCIL, BANKRATE, CENTERS FOR DISEASE CONTROL AND PREVENTION
0 200 275

1/1/20 1/1/21 5/23/22 4/2016 4/2022 4/2016 4/2022

○ TICKET COSTS ○ HOTEL RATES ○ CRUISE SHIPS

Average summer fares for popular domestic and international routes Average overnight price for a standard double room WITH COVID-19
CASES
2019 2022 Increase May 2021 May 2022 Increase
As of May 23, among
New York  San Francisco $334 $662 99% New York $222 $375 69% ships the CDC has
Los Angeles  Washington $380 $651 71 São Paulo $44 $73 66 tracked*
16 Los Angeles  New York $337 $569 69 Vancouver $191 $315 65  No cases

Washington  Los Angeles $383 $646 69 London $171 $249 46  Cases under
threshold for CDC
New York  Los Angeles $339 $563 66 Dublin $171 $248 45 investigation
Barcelona $154 $221 44  Cases above
New York  Seoul $1,171 $1,881 61% Chicago $198 $280 41 threshold for CDC
investigation
New York  Paris $661 $878 33 Amsterdam $176 $245 39
New York  Mexico City $403 $524 30 Istanbul $77 $106 38
Los Angeles  Paris $823 $1,031 25 San Francisco $190 $260 37
Los Angeles  London $795 $977 23 Rio de Janeiro $55 $75 36

○ HIGHWAY ○ GASOLINE ○ STAFF SHORTAGES ○ COST CONCERNS

CONGESTION Price per gallon, As a share of travel and tourism labor Share of respondents to a Bankrate
US average demand, second half of 2021 survey who reported that they’re
changing their summer vacation plans

49.6%
Average projected
$4

Portugal 18%
in response to inflation by …

Taking fewer trips

increase in travel 25%
time above normal for 3
the Thursday before Italy 15 Traveling a shorter distance
Memorial Day weekend, 25
up from 27.1% last year
France 15 Engaging in cheaper activities
2
23
1/1/19 5/23/22 UK 12 Booking cheaper accommodations
or destinations

○ RV SHIPMENTS 22
US 11
Traveling for fewer days
2019 19
Spain 9
406k
Driving instead of flying
2020 16
430k
Flying instead of driving
2021
600k 13
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 2

T
E
C
H
N
20
O
L
O
G
Y
Opening the ILLUSTRATION BY BAPTISTE VIROT. DATA: META TRANSPARENCY CENTER

Spigot
Conservatives want to limit social media companies’
Edited by
Joshua Brustein power to control content
 TECHNOLOGY
The right-wing crusade to punish social media
companies for supposedly discriminating against
their conservative users is reaching a major inflec-
tion point, with the US Supreme Court weighing
whether to temporarily block a Texas law reg-
ulating how the companies can moderate the
content on their services. If it ultimately stands
up, the law would represent a fundamental shift
in how the US legal system interprets the First
Amendment. It would also rewrite the rules of the
modern internet.
The legal battle emerges from the intensifying
dispute over the role of tech in American political
and cultural life. Last year lawmakers in Texas and
Florida passed similar bills attempting to limit the
ability of web services to ban users or remove con-
tent they say violates their standards, saying com-
panies apply their rules unfairly.
Historically, the right of private companies to act
in this way has not been in question. Although the
First Amendment prohibits censorship by the gov-
ernment, it does nothing to restrict the actions of
private companies. In fact, the right of newspapers,
book publishers, and other media outlets to decide
what to disseminate—or not to disseminate—has
generally been considered a critical aspect of free
speech law.
Internet companies have further protection
to make decisions on content moderation under
Section 230 of the Communications Decency Act of
1996, which guards them from lawsuits related to
user-generated content, even if they make editorial
decisions about what kinds of posts they allow.
Many legal experts dismissed the laws as laugh-
ably unserious at the time they passed. A court
blocked Florida’s law, known as SB 7072, almost
immediately, and on May  23 the US Court of
Appeals for the 11th Circuit unanimously reaffirmed
the major parts of the earlier decision.
Texas’ law, generally referred to as HB 20, is
substantially similar. It requires social media plat-
forms with at least 50 million users to produce reg-
ular reports about the content they’ve removed,
create a complaint system, disclose their content
regulation procedures, and refrain from removing
posts because they convey a certain viewpoint.
But HB 20 has fared better in court. After a district
court blocked it, the 5th Circuit Court of Appeals
issued an unsigned ruling on May 11 allowing the
law to take effect while the court deliberated, offer-
ing no specific rationale.
Opponents of the law immediately appealed the
Texas ruling to the US Supreme Court, asking it to
reinstate an emergency stay until a full decision
from the 5th Circuit. The Supreme Court is more
Bloomberg Businessweek May 30, 2022
likely to hear cases when there’s a split between  Number of pieces
of content Facebook
lower courts, meaning the entire issue could end took action against for
up in front of the justices at some point soon. violating its standards,
by category, first
If that happens, Texas’ argument could have quarter of 2022
at least one supporter on the high court. Justice
Clarence Thomas wrote last year that higher courts
might uphold a state or federal statute that restricts
the right of social media platforms to remove con-
tent on their systems based on political viewpoints Spam 1.8b
if the measures treated the platforms as com-
mon carriers or places of public accommodation.
Lawmakers could use the scale and public nature of
social media sites to justify new moderation rules,
similar to the way the Telecommunications Act of
1996 prevents phone companies from blocking spe-
cific people from phone service, Thomas argued. Fake accounts 1.6b
(His wife supported efforts to overturn the 2020 elec-
tion, a subject at the heart of the dispute over the
handling of politically charged disinformation.)
“I think that these bills create a battle for the
soul of the internet,” says Eric Goldman, a law pro- Adult nudity and sexual
fessor at Santa Clara University. “I honestly believe activity 31m
this legislation is going to determine what kind of
internet we’re going to have.” Violent and graphic
Goldman says HB 20 would make the business content 26m
model of sites that rely on user-generated con- 21
tent untenable. He and other critics of Texas’ law Violence and incitement
also say it’s written so broadly that it would make 22m
it difficult for social media companies to moderate
extreme content such as hate speech, coordinated Sexual exploitation of
disinformation campaigns, and violent rhetoric, children 17m
none of which can be curtailed by the government
under the First Amendment. The law “strips pri- Terrorist organizations
vate online businesses of their speech rights, forbids 16m
them from making constitutionally protected edito-
rial decisions, and forces them to publish and pro- Hate speech 15m
mote objectionable content,” says Chris Marchese,
counsel for NetChoice, a plaintiff in the Texas case. Bullying and harassment
On a more prosaic level, business groups worry 10m
advertisers will pull back if they don’t have confi-
dence their marketing won’t appear alongside con- Suicide and self-injury
7m
tent they deem offensive.
Supporters of the laws argue that social media
Illegal drugs 3m
companies don’t fit neatly into the category of
purely private actors, comparing them to utilities
Hate organizations 3m
such as phone companies, or railroads, or to the
public squares that once hosted the great debates
Nudity and physical
of American lore. “Social media companies are like abuse of children 2m
the toll bridge. They’re the only game in town,”
says Bryan Hughes, a Texas state senator who’s a Firearms 1m
co-sponsor of HB 20. “No one would tolerate a tele-
phone company denying you service based on your
politics, and no one in America would tolerate a
cable television company cutting you off because of
your religion.” Philip Hamburger, a law professor
  TECHNOLOGY
at Columbia who filed an amicus brief with the
Supreme Court in support of the Texas law, also
argued that a state can apply common carrier rules
to social media companies, and therefore HB 20
passes constitutional muster.
The 11th Circuit explicitly rejected the common
carrier argument. Its decision argued that social
media companies have traditionally exercised edi-
torial judgment in a way that shows they haven’t
acted as common carriers in the past, and that the
government can’t simply assign them the label to
meet its own ends. “Neither law nor logic recognizes
government authority to strip an entity of its First
Amendment rights merely by labeling it a common
carrier,” the court wrote.
But there’s also a sense that the current applica-
tions of the First Amendment are struggling to hold
in the social media era. In a May 18 essay on the web-
site of Columbia’s Knight First Amendment Institute,
Evelyn Douek and Genevieve Lakier wrote that the
First Amendment was a “mess of contradictions and
ambiguities” and that the current debates around
social media are often based on false assumptions
about how it works.
Eventually the Supreme Court will have to clear
22 up the matter, they wrote. “The existing precedents
will not—cannot—determine what the Court will
decide then. What will decide the matter will be the
politics of the moment, and the prevailing political
and cultural understanding of ‘freedom of speech.’ ”
But does such an understanding exist?
According to a 2020 Pew Research study, 69% of
Republicans or GOP-leaning independents think
tech companies favor liberals over conservatives,
while only 25% of Democrats or Democratic-leaning
independents agree. (A slight majority of the lat-
ter group said the companies were evenhanded in
terms of political ideology.)
At this point there’s little love for Silicon Valley on
either side of the political divide, and the drumroll
has grown louder for new regulations on large tech
companies. But the differing diagnoses have led to a
partisan split in political priorities. While Democrats
have focused largely on issues of market power, dis-
information, and privacy, many Republicans are
most concerned with what they say is the partisan
bias of content moderation on Facebook, YouTube,
Twitter, and other social media networks. When it
comes to determining how the politics or culture
of free speech fits into those differing convictions,
any prevailing understanding will be very difficult
to come by. —Maxwell Adler
THE BOTTOM LINE State laws targeting the moderation policies
of social media companies could have a major impact on the way
the internet works, if courts let them stand.
Bloomberg Businessweek May 30, 2022
The Thrill of Better
Office Wi-Fi
○ A startup aiming to shake up a sleepy corner of tech
draws some big industry names
Anil and Sunil Varanasi could have done whatever
they wanted. The brothers, born in India, moved to
Virginia when they were 12 and 14, respectively, then
sped through high school and graduated at 16 and 17.
For fun they hacked into their Xbox to make it do
their bidding, and built and sold custom PCs. Once
in college at George Mason University, the Varanasis
thrived in classes ranging from biochemistry to eco-
nomics to computer engineering. They seemed set
for a bright future in a buzzy field such as crypto-
currency or smartphone-enabled food delivery.
Instead, the teenagers chose to focus on
improving office internet and Wi-Fi networks. While
still in college, they started a company to install
networking equipment for businesses, and had
50 employees and 100 customers by the time they
graduated. That experience convinced them that
what really had to be done was a redesign of the
entire idea of networking equipment and the soft-
ware that runs it. “We think internet service should
be exactly like electricity and telephones,” says Anil,
the chief executive officer of Meter Inc., the com-
pany that resulted from their insight.
People who’ve never had to install an office
internet network might be surprised to learn it isn’t
already that simple. Networking generally requires
a company to buy its own complicated gear, then
manage that equipment along with a relationship
with one or more internet service providers. This sit- “We think
uation has persisted even as computing, data stor- internet
age, and other aspects of digital life have evolved to service should
be sold via the cloud on a rental basis. be exactly like
Meter offers to charge customers a monthly fee electricity and
of 15¢ per square foot of office space. A customer telephones”
sends a floor plan; Meter determines what gear the
office will need—it says it’s uniquely equipped to do
this because it makes all of its own hardware and
software—and sets up the connections through its
relationships with internet providers.
This pitch has suggested enough of an innovation
that the startup has raised $50 million in funding
from some of Silicon Valley’s biggest names, includ-
ing Patrick and John Collison (Stripe); Sam Hinkie
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  TECHNOLOGY
(87 Capital); Sam Altman (OpenAI); Diane Greene
(co-founder of VMware); Egon Durban (Silver Lake);
and Sequoia Capital. Meanwhile, Meter has acquired
hundreds of customers in the US, despite operat-
ing in relative obscurity. (This article marks the first
time it’s discussed its business with the news media.)
Because companies generally manage their own
office networking, handing control to a startup has
sometimes been a tough sell. “I was very skeptical
and told them that I couldn’t imagine using their
service,” says the head of security at a business soft-
ware maker, who requested anonymity because his
company sees disclosing details about its technology
24
use as a security concern. When his company tri-
pled its office space, he decided to work with Meter
because it seemed like it would be cheaper and less
of a hassle. “I would have had to hire someone to
install all the stuff and would have been on the hook
for running it myself again, which I didn’t really have
the time or interest in doing.”
The deceptively simple idea required a sig-
nificant technological undertaking. In 2014 the
Varanasis sold their first networking company and
moved into a single room in a hostel in Shenzhen,
China, where they sought manufacturing partners
to build the routers and switches they’d need.
“We’d spend all day at the factory and sleep on the
factory floor, because we wanted to learn every-
thing about the manufacturing process,” Sunil
says. “I didn’t have a bed, because it was covered in
Bloomberg Businessweek May 30, 2022
circuit boards, so that we could test our software.” 
When they returned to the US in 2016, the broth-
ers first catered to other startups, which were easier
targets than more established companies that had
already bought a lot of networking equipment. Over
time, Meter managed to attract larger businesses,
offering to buy and replace their existing gear to help
seal deals. Meter now says it manages “millions of
square feet” of space for a variety of companies.
But it will likely struggle for some time to persuade
larger companies that have already made huge net-
working investments to buy its service. “I don’t think
there are any crisis meetings taking place right now
at Cisco,” says the once-skeptical customer at the  Anil and Sunil Varanasi
at a Meter warehouse
business software company.  in Brisbane, Calif.
The widespread pandemic-era reassessment of
how offices function should work to Meter’s advan-
tage. Because it makes all the upfront investment
in equipment and setup, there’s less financial risk
PHOTOGRAPH BY JASON HENRY FOR BLOOMBERG BUSINESSWEEK
in hopping from office to office. Real estate compa-
nies such as Tishman Speyer have started to team
with Meter so tenants who move into a new office
can simply say they’d like internet service as part
of their contract and have it turned on right away.
“The infrastructure really should go with the build-
ing,” says OpenAI’s Altman, who invested in Meter,
“and not the customer.” —Ashlee Vance
THE BOTTOM LINE Meter set out to develop a business model
offering internet service in offices, a plan that required it to build its
own equipment and software systems.
YOU GO T HE DISTAN CE
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 Bloomberg Businessweek
Housing Hits the
Affordability Wall
○ Rising mortgage rates and
economic fears are pinching
buyers and foiling sellers
The US pandemic housing boom, marked by record
price gains and coast-to-coast bidding wars, is finally
reaching its limit. After the fastest rise in mortgage
rates for any four-month period since 1981, hot mar-
kets such as Austin, Texas, and Riverside, Calif., are
suddenly slowing. Buyers who once had to make
on-the-spot offers now have time to shop and even
negotiate. And some sellers are doing something
unthinkable just months ago: slashing prices.
It’s all a sign that the Federal Reserve’s interest-
rate hikes are starting to cool the overheated hous-
ing market, one of the central bank’s key goals as
it tries to tamp down inflation. After the explo-
sive growth in home prices, particularly in Sun
Belt boom areas, the surge in monthly mortgage
payments is slamming already strained would-be
buyers. Now, swooning financial markets and
recession fears threaten to further diminish confi-
dence, raising the prospect that housing’s decade-
long bull run may be ending.
And it’s coming during the spring sales sea-
son when market momentum normally peaks.
“Mortgage rates have quickly gone from being a
massive tailwind to the housing market to a mas-
sive headwind,” says Mark Zandi, chief economist
of Moody’s Analytics, who expects prices to flat-
ten over the next 18 to 24 months, with potential
ILLUSTRATION BY 731
May 30, 2022
F
declines in high-flying parts of the South and West.
I
“The higher rates are conflating with the extraor-
dinarily high house prices and crushing afford-
ability.” The market for new homes is also turning
with single-family sales plummeting in April to
N
A
the weakest level since the pandemic lockdowns
began two years ago.
In most areas, housing remains strong relative
to pre-pandemic levels, and the market is slow-
ing from a frenzied pace rather than heading for a
crash. In Austin, home to a wave of Covid-inspired
migration and the influx of companies such as Tesla
Inc., the median listing price in April increased 28%
N
from a year earlier. But the Texas capital’s market
is cooling fast, with 9.4% of active listings in April
recording price cuts, according to Realtor.com.
That’s up from 2.6% a year earlier, the biggest
C 27
E
increase in the share of price reductions among
the top 50 US metropolitan areas.
Sonia Guardado, a real estate agent who focuses
on Round Rock, an Austin suburb that’s home to Dell
Technologies Inc., says she’s cutting prices for the
first time since 2019. “The month before, it was hot,
hot, hot, with lines out the door, and now we can’t
even get buyers in,” she says. Buyers face affordabil-
ity challenges along with a correlating increase in
appraisals for property taxes: “We’ve got California
prices and Texas salaries, and they don’t mesh.”
Price cuts are also becoming more common
in areas such as Las Vegas, Phoenix, and parts of
California, according to Realtor.com. As in Austin,
it’s a case of big gains that may finally have got-
ten ahead of buyers’ ability to pay. Inventory in
Riverside, an area that was popular for people
fleeing Los Angeles’s high prices, shot up more
than 23% in April compared with the same month
a year earlier, the most in the US, the company’s
data show. Bidding wars in Riverside County still
happen, but they aren’t as frequent or fierce,
according to Peter Abdelmesseh, an agent with
Provident Real Estate in Eastvale.
One of Abdelmesseh’s clients, a tech worker
in his 30s, was interested in buying a home for
about $800,000. But he looked at his shrinking
stock and cryptocurrency portfolio, along with Edited by
surging borrowing costs, and decided to sit it Pat Regnier
 out, Abdelmesseh says, betting that prices and
mortgage rates might drop later this year.
Analysts, including Zandi, are hoping for a
soft landing. The overall dynamics sending prices
28 higher—a shortage of supply and the huge millen-
nial population at peak homebuying age—are still in
place. While inventories are rising, higher borrowing
costs will prevent many new listings because owners
will be reluctant to sell and give up their low mort-
gage rates. And while the frenzy grows less frothy
in Sun Belt boomtowns, places such as New York,
Boston, and Silicon Valley—catching up after getting
in late to the pandemic rally—continue to tighten.
The signs of cooling are showing up in US eco-
nomic data. Existing-home sales, which mea-
sure closings, fell in April to the lowest level since
June 2020, the National Association of Realtors
reported last week. And those figures have yet to
fully reflect the impact of rising rates. Homebuilder
sentiment is at an almost two-year low, and build-
ing permit issuance is declining.
George Ratiu, senior economist at Realtor.com,
says annual price growth nationally will likely slow,
from more than 15% to about 5% by the end of the
year. But the chance of a steeper drop is growing,
with consumers increasingly pinched by inflation
and the Fed’s rate increases potentially leading to a
recession. “That would have a much faster impact,
with downward pressure on both transactions and
prices,” he says. “One silver lining for housing: A
softening in prices could also present an opportu-
nity for a lot of buyers.”
For now, buyers remain stretched. Prices are
still way up relative to a year ago, and inventories
of homes for sale remain too tight, even if listings  Borden cut the price
of his 5,000-square-
linger a bit longer. About 61% of offers written by foot Las Vegas house
Redfin agents faced competition in April, down by $200,000
from 67% a year earlier. Sellers are racing to close
on homes before demand further weakens, accord-
ing to a Redfin report last week.
In the Atlanta area, Keller Williams real estate
agent Lori Hilton has begun advising clients to cut
prices. “It used to be like: List on Thursday, open
house Saturday, offers on Monday,” she says. “Not
anymore. Buyers were frustrated because they  Share of listings in
metro area with reduced
couldn’t get a property with all the multiple bids. prices
Now they just can’t afford it.”  April 2021
Shaun Borden listed his 5,000-square-foot  April 2022
Las Vegas house for $1.1 million in early April. The
home, with a custom kitchen, 65 solar panels, and Austin, Texas
a two-door wrought-iron front entry, attracted an 9.4%
immediate offer that quickly fell apart. It’s only now Las Vegas
getting some interest after Borden cut the price by 12.1
$200,000. “The interest has been tepid,” he says. Sacramento
“A house next door half the size sold for $700,000. 9.7
JOE BUGLEWIZC/BLOOMBERG. CUB: SHUTTERSTOCK. DATA: REALTOR.COM
Like everything in life, it’s about timing.” Riverside, Calif.
Rob Hau, Borden’s agent, says the market 8.2
has lost steam because people relocating from Phoenix
places such as California can’t move until they 9.2
sell homes there. The investors aren’t buying Nashville
quite as much, either. “It’s not just what hap- 8.3
pened to interest rates,” he says. “When people Detroit
hear overall economic concerns—and a boatload 10.7
of them—people tighten up.” —Prashant Gopal,
with John Gittelsohn
THE BOTTOM LINE Sellers in cities where real estate boomed
in the pandemic are suddenly finding they have to cut their
asking prices.
 FINANCE
The Hedge Funds
That Didn’t
○ Changing market sentiment has walloped famous stockpickers like the “Tiger Cubs”
Markets are going through what may be the biggest
mood shift we’ve seen since the financial crisis. This
year the S&P 500 has tumbled 16%. Meanwhile the
tech-focused Nasdaq-100 has plunged almost 27%.
And unlike the short, sharp market decline in the
early days of the pandemic, this one isn’t a response
to an economic shock. Investors seem to be seriously
rethinking what they want to pay for assets.
That means many strategies that worked—for
years and years—are being upended. “Buying the
dip is not being rewarded today,” says John Holton,
assistant vice president of Wilshire Advisors, which
helps wealthy individuals and institutions invest in
hedge funds. “Now volatility is persistent and the
equity market drawdown is more consistent.” It’s a
tough time for all investors, but even some stars of
the hedge fund world are having trouble adapting.
The first high-profile set of victims are the
so-called Tiger Cubs. They’re alumni of investing
legend Julian Robertson’s firm, Tiger Management.
For years they made billions of dollars for them-
selves and their investors by piling into technology
companies, sometimes using debt to increase their
bets. Favorites of this crowd included JD.com, Meta
Platforms, Netflix, and Shopify. As hedge funds they
are allowed to wager against companies, too—giving
investors a shot at making money in tough markets.
But the Cubs’ short bets were fewer and smaller than
their bullish ones. Instead they pushed into venture
capital, getting in on tech companies while they
were still private. Now tech is in free fall.
The main hedge fund run by Chase Coleman’s
Tiger Global Management lost 44% in the first four
months of the year, contributing to a $16 billion loss
across the firm’s investments. Maverick Capital’s flag-
ship fund fell 33% in the same period, while Coatue
Management’s sunk 15%. Dan Sundheim’s D1 Capital
Partners—sometimes called a grand-Cub because
it was spun out from another Tiger descendant—
tumbled 19% in its most popular portfolio. “Live by
the sword and die by the sword,” says Andrew Beer,
managing member of New York-based Dynamic Beta
Bloomberg Businessweek May 30, 2022
Investments. “If you go all in on tech stocks during
a bull market, you’re likely to hold those positions
with a white-knuckle grip well into a bear market.”
Stockpickers flourished after the 2008 crisis, an
era of consistently low interest rates, globalization,
and few credit crunches, and when central banks
were ready to do whatever was needed to support
markets. “That doesn’t seem to be a good breed-
ing ground for skilled managers, and you don’t
know if their success was just disguised beta,” says
Wilshire’s Holton, speaking of money managers
broadly. “Beta” is a Wall Street term for the return
and risk you get just from investing in the market. 29
Many funds prospered simply by being in sync with
market trends—charging typical fees of 2% of assets
a year plus 20% of profits to do so. It worked until it
suddenly didn’t.
Not that betting against the market necessarily
worked out any better. Gabe Plotkin has had an even ○ Tiger Global
Management’s 2022
worse reversal. He’s not a Cub, but he was known losses, through April
as an exceptionally skilled investor with a special
talent for finding stocks to short in a bullish envi-
ronment. The early years of Plotkin’s Melvin Capital
$16b
Management saw huge returns. But then he got
caught on the wrong side of the 2021 meme-stock
frenzy. Retail traders bought up huge swaths of video
game company GameStop Corp., which Plotkin was
shorting. Melvin’s fund fell 55% in January 2021, eras-
ing about $7 billion in one month alone. Ultimately
the fund was never able to dig itself out of that hole,
ending 2021 down 39%. Plotkin decided to trim back
on big, leveraged short bets.
Then came 2022—a year when such a bearish
position might have saved him. After his fund tum-
bled an additional 23% this year, Plotkin decided
to shutter it. “I have given everything I could, but
more recently that has not been enough to deliver
the returns you should expect,” he told investors
on May 19.
“The ‘quit risk’ is increasing for the industry,”
says Kristen VanGelder, deputy chief investment offi-
cer of Evanston Capital, which invests in hedge
  FINANCE
funds. “That’s where a manager decides that the
size of their losses are too large to climb out of.” She
adds that the Tiger Cubs may be able to take advan-
tage of longer-term buying opportunities during this
downturn if their investors stick with them.
There are funds that have found ways to capi-
talize on the market shifts. Some macro-focused
hedge funds—those that play big economic trends
with wagers on things like Treasury markets or
currencies—are some of this year’s biggest winners.
So too are multi-manager, multi-strategy funds,
which invest across a variety of asset classes. The
main fund at Ken Griffin’s Citadel has returned
almost 13% in the first four months of the year. Still,
the steep losses at some of the most glamorous funds
are bound to disappoint many clients. “Given the
fees hedge funds charge, they’re supposed to see the
train coming down the track and nimbly hop off,”
says Dynamic Beta’s Beer. —Hema Parmar
THE BOTTOM LINE It’s been a tough year for ordinary investors,
who’ve seen their index funds drop sharply. But it could have been
worse if you bet on a hedge fund.
30
The SEC Loses a
Big One in Court
○ An appeals panel reins in one of the
watchdog’s powers. It may not be the last time
The US Securities and Exchange Commission has
a lot of complicated new issues on its plate, from
crypto to the aftermath of the meme-stock explo-
sion. Now add this: A movement to cut back on reg-
ulators’ legal authority is making headway in court.
Hedge fund manager George Jarkesy spent almost
a decade battling an SEC in-house judge’s ruling
against him for allegedly misleading investors in two
of his funds. On May 18 two judges with the US Court
of Appeals for the Fifth Circuit agreed that the SEC
violated his constitutional right to a jury trial when
it put its case before what’s known as an adminis-
trative law judge.
The immediate impact of the decision for the SEC
may be limited, since the agency has been sending
fewer cases to these judges in recent years. But the
long-term implications could be sweeping. In addi-
tion to saying Jarkesy was entitled to a jury, the
appeals court leaned on a different, more controver-
sial legal theory called the nondelegation doctrine.
Bloomberg Businessweek May 30, 2022
The doctrine, seldom used since the New Deal
era, is gaining traction among conservative legal
minds. It holds that to keep government branches
separate and accountable, Congress can’t delegate
to executive agencies the right to adopt rules beyond
what lawmakers expressly spell out. The Fifth Circuit
court—one of the country’s most conservative—said
that leaving the decision of when to use in-house
judges up to the SEC amounts to delegation.
The ruling might be appealed and applies only
in Texas, Louisiana, and Mississippi. But that’s one
of the busiest circuits for securities-violation cases.
(An SEC spokesperson says the agency is assessing
its next steps.) The opinion could also provide a road
map for others who want to challenge watchdogs’
powers. Applied broadly, nondelegation could make
it harder to address emerging issues—such as crypto
or new financial products—unless Congress crafts
more specific laws.
The decision could go beyond the SEC. Other reg-
ulators, including the Commodity Futures Trading
Commission and the Federal Trade Commission,
also use in-house courts. “It will inspire a wave of
litigation across all agencies” that use the adminis-
trative proceedings, says John Coates, a professor of
law and economics at Harvard Law School and a for- “It will inspire
mer official and general counsel at the SEC. a wave of
Not everyone thinks the ruling shakes the under- litigation”
pinnings of regulation. “One also needs to look at the
significance of the power the SEC has been claiming
over the years,” says Jennifer Mascott, an assistant
professor at George Mason University’s law school,
referring to the use of in-house judges. “It’s for sure
something Congress should look at more closely.”
The 2010 Dodd-Frank Act, passed after the finan-
cial crisis, gave the SEC more authority to bring
cases to administrative judges. The idea was to lit-
igate cases more efficiently. But they didn’t get to
final judgments faster, and the SEC often had to
defend its use of the process, says Charles Riely, a
partner at Jenner & Block and a former senior SEC
enforcement attorney. The SEC brought six cases to
in-house judges in 2021, compared with 105 in 2015.
The Supreme Court already has two cases before
it raising constitutional objections to the use of
in-house judges by the SEC and the FTC. “This deci-
sion is a mirror of our times,” says Urska Velikonja,
a professor at Georgetown University Law Center
who studies SEC enforcement. “This is where some
of the more aggressive conservative interven-
tions might go, given what the composition of the
Supreme Court is.” —Lydia Beyoud
THE BOTTOM LINE An increasingly influential legal theory
questions the authority of regulatory agencies to make rules not
spelled out by Congress—even if lawmakers want them to.
 Bloomberg Businessweek
E
C
O
N
O
M Ne
ew
ewDDea
ea
32 ○ New Mexico is using a tax
I
windfall to pay for moonshot
social programs
C
New Mexico this year became the first US state to
offer free college to its residents and free child care
to most families, all on the back of soaring revenue
S from royalties and taxes on oil and gas production,
which are booming on its patch of the Permian
Basin. The state now ranks behind only Texas in
energy production.
With support from local legislators, Governor
Michelle Lujan Grisham, a Democrat, is parlaying
the record receipts into programs that could lift
incomes for many of New Mexico’s 2.1 million res-
idents and ultimately reshape its economy. “New
Mexico is so reliant on oil and gas, and these past
couple of years have been very good,” says state
Representative Derrick Lente. “But it’s not going
to last forever, and we have to be smart in regards
to how we invest now and how we prudently use
these types of dollars to make great change that
will last generations.”
Almost 17% of New Mexico’s population lives in
poverty—the third-highest proportion in the US. The
state’s high school graduation rate, at 75%, is the
Edited by
lowest in the nation. Unemployment was 5.3% in
Cristina Lindblad April, compared with 3.6% for the whole country.
May 30, 2022
Free college and child care are policy
moonshots that have eluded progressive
Democrats at the federal level. Provisions that
would have nudged the US in that direction were
part of President Joe Biden’s Build Back Better
proposal, but it stalled because Democratic
Senator Joe Manchin of West Virginia worried
that increased government spending on social pro-
grams would contribute to high inflation becom-
ing entrenched.
In New Mexico, leaders from both sides of the
aisle have looked past those concerns, seizing on
the opportunity provided by surging oil prices
to take steps toward diversifying the economy.
For the fiscal year ending June 30, 2022, revenue
from the hydrocarbon industry will fund 42% of
the budget. “The name of the game is how do we
get to a point where we can start to develop other
industries and have other means of earning rev-
enue that are less volatile,” says Reilly White, a
finance professor at the University of New Mexico
JIM WEBER/ALBUQUERQUE JOURNAL/ZUMA PRESS
in Albuquerque.
At 56.8% in April, New Mexico’s labor force
participation rate is one of the lowest in the
country. The state has trouble attracting busi-
ness, especially since it competes with neighbor-
ing economic powerhouses Texas, Arizona, and
Colorado. It has one of the lowest numbers of
publicly traded companies headquartered within
its borders.
 ECONOMICS Bloomberg Businessweek May 30, 2022

To boost labor force participation, especially Angela Garcia, owner of Toy Box Early Learning  Governor Lujan
Grisham
for women, New Mexico is under taking a big & Child Care Center in Las Cruces, says hav-
expansion of its Child Care Assistance Program. ing the state pick up the entire tab removes the
From May of this year until June 2023 the program uncertainty her business faced when relying on
will subsidize the full cost of child care for families copays from families. Garcia, who’s also presi-
at or below 400% of the federal poverty level, up dent of the New Mexico Child Care and Education
from 200% previously. Association, says the change makes for “a better
At about $720 per month, the cost of infant care system for families, a better system for profession-
for one child in New Mexico is equal to 18.3% of the als who are in the industry.”
median family’s income, according to data from Expanded state support for child care is just one
the Economic Policy Institute. That’s almost tri- half of Lujan Grisham’s “cradle-to-careers” agenda.
ple the 7% of income that the US Department of In February, New Mexico’s legislature passed a law
Health and Human Services considers the thresh- making tuition free at 29 public colleges and uni-
old for affordability. By that measure, only about versities for all state residents who don’t have a
1 in 10 New Mexico families can shoulder the cost bachelor’s degree, regardless of family income.
without government assistance. The law, which passed with bipartisan support,
Elizabeth Groginsky, who heads the state’s Early expands on an existing program that covered tui-
Childhood Education and Care Department, casts tion only for students pursuing a bachelor’s or
the benefits of expanding access to child care in
economic terms. “We know that we’re losing out
on the incredible talents of the women in our state, How New Mexico Stacks Up
and men, and we’re not able to get our businesses
US N.M. State rank State and local revenue
fully reopened,” she says. from the oil and gas
Hispanic or
Lujan Grisham, who’s up for reelection this Latino 18.7% 47.7% 1
industry
year, set up the department in 2019. It’s funded
American Indian and
through the interest earned on an endowment Alaska Native 0.9% 9.5% 2 33
that started with $300 million in 2020 and is pro- $4b
Median household
income $65,712 $51,945 45
jected to grow to $4.5 billion by 2026, thanks to oil
People age 16-64
money. Groginsky was recruited to run the depart- in the labor force 75.2% 69.8% 46
ment because she had experience helping set up 2
High school
a universal pre-K program for Washington, D.C. graduation rate 85.8% 75.1% 50
Making child care more affordable for par- Households receiving
food stamps 10.7% 16.4% 2 0
ents should in theory boost demand, which in the
Households with
short term at least could aggravate long-standing broadband internet 86.4% 78.5% 49
FY ’14 FY ’21
supply-side problems made worse by the pan-
DATA: 2019 AMERICAN COMMUNITY SURVEY, NATIONAL CENTER FOR EDUCATION STATISTICS, NEW MEXICO TAX RESEARCH INSTITUTE
demic. Many child-care centers across the US
have closed permanently in the past two years, two-year degree full time. Eligibility is now open
and the ones that have remained open often strug- to adults enrolling part time and to immigrants,
gle to hire enough qualified workers because they regardless of their immigration status. Groups that
can’t offer competitive pay. Child-care employ- advocate for more equitable access to higher edu-
ment nationally was still down 11% in April from cation have called it the most expansive free col-
pre-pandemic levels. “That’s the immediate top- lege program in the country.
line crisis facing anyone who’s operating a child- Gay Kernan, a Republican state senator from
care business right now,” says Rasheed Malik, the a district that includes parts of the oil-producing
director of early childhood policy at the Center for Lea and Eddy counties, voted for the measure
American Progress. “Under the current labor mar- because it will also pay for vocational training.
ket it’s really, really hard to find enough people to Despite the boom in oil and gas prices, employ-
stay in those jobs.” ment in the industry is still down 27% in New
With the exception of a handful of counties Mexico. “While we have the money, we need to
surrounding Albuquerque and Santa Fe, child- invest it for the future, which means we’re going
care supply is constrained in most of New Mexico. to get students back into the classroom to earn cer-
That will present challenges as more families in tificates, degrees, so that they can get to the work-
the state seek care thanks to the cost-free program. force,” she says.
“It’s going to be a tough road, but it’s much, much New Mexico has grappled with prob-
better than the status quo,” Malik says. lems in education for years. In a landmark
  ECONOMICS
ruling four years ago, a judge found the state
was failing to adequately prepare high schoolers
for college and careers, especially low-income and
American Indian students. New Mexico has the
second-highest share of American Indians of any
state and the highest share of Hispanic Americans.
Lente, the state representative, voted for the
free college measure because he wants others in
his community to have the opportunities he had.
A member of the Pueblo of Sandia, he was the first
in his family to graduate from college. Two genera-
tions ago, the government sent his grandparents to
boarding schools that forced them to cut their hair
and speak only English—part of a scheme to west-
ernize Native Americans. Today he’s spearheading
○ Monthly residential electricity rates could be more than 40% higher than last year
34
US households are going to get some unwelcome
mail this summer: some of the highest power bills
they’ve ever seen.
Residential electricity rates have been surging
for months and are poised to climb even higher
this summer on a combination of tight supplies
of natural gas and coal, an unrelenting drought
in the Western US, and a nationwide forecast for
extreme heat. Barclays Plc calculates that monthly
bills will be more than 40% higher than last year’s,
and projections from the US Energy Information
Administration show this year’s retail residential
rates rising the most since 2008.
It’s all pointing to a summer of pain for
Bloomberg Businessweek May 30, 2022
new legislation to make New Mexico’s education
system more inclusive. One bill the legislature has
already passed equalized pay for teachers of eight
Indigenous languages to that of English teachers.
Lente believes access to education will better
equip New Mexicans to fight for their future:
“Those battles—they’re not waged on the prai-
rie or on the mesas—they’re waged oftentimes
in courtrooms and in state capitol buildings. So
we’re just preparing ourselves so that we can
enjoy this place that our ancestors gave to us.”
—Catarina Saraiva and Olivia Rockeman
THE BOTTOM LINE To boost its workforce, New Mexico is
deploying an oil revenue windfall to broaden access to higher
education and greatly expand a program that pays for child care.
Americans beset by the highest inflation in four  Year-over-year
change in April's
decades. Gasoline prices have reached record household energy
highs, an order of chicken wings fetches $34, prices
housing expenses are soaring, and now the cost
of running the air conditioner could become a Miami
37.6%
make-or-break expense. That’s going to force peo-
ple to make tough choices, especially in places like Urban Hawaii
33.5
Miami, where energy costs have increased more
than in any other US city. Dallas
27.6
“You might be able to drive less,” says Charles
Rehwinkel of Florida’s Office of Public Counsel, Minneapolis
26.6
which carries out advocacy work on behalf of util-
ity customers. “You can’t turn off the air condi- Boston
26.0
tioner when it’s 102 degrees.”
Miami households spent 38% more on energy Philadelphia
ILLUSTRATION BY NICHOLE SHINN. DATA: US BUREAU OF LABOR STATISTICS
24.7
in April than a year earlier, according to consumer
price data compiled by the US Bureau of Labor New York
Statistics. That was partly because higher rates 21.1
kicked in this year from Florida Power & Light, Baltimore
20.1
the NextEra Energy Inc. unit that is the state’s big-
gest power provider. Another key driver has been San Francisco
18.3
higher prices for natural gas—the source of 38% of
electricity generated in the US. Riverside, Calif.
18.0
Utilities have little control over this expense,
which they pass on to customers, and prices are
expected to remain elevated through next winter,
Rehwinkel says.
“Our continued overreliance on gas only sets
 ECONOMICS

Labor Inequality
us up for these burdensome and unnecessary
rate increases,” says Natalia Brown of Catalyst George Floyd’s murder on May 25, 2020,
Miami, a nonprofit consumer advocacy group. sparked nationwide protests and kicked
“This business model is unsustainable, and it’s
hurting people.” off a reckoning on race in the US. On
It’s not just Miami. Spending soared 28% in the two-year anniversary, we look at
Dallas and jumped 27% in Minneapolis. Nineteen how Black workers have fared during
of the 23 metropolitan areas surveyed saw
double-digit hikes in April from a year earlier. the pandemic. —Matthew Boesler,
US residential power bills averaged $122 a month Jonnelle Marte, and Catarina Saraiva
last year, but with natural gas prices above $8 per
million British thermal units, that figure could
rise by $49, according to Barclays analyst Srinjoy
Banerjee. A year ago, gas cost less than $3. The Key Metrics
burden “disproportionately falls on lower-income
groups,” Banerjee says.
Higher bills are a significant issue for older peo-
The employment rate After the 2008-09 recession,
ple living on fixed incomes, says Cristina Martin
for Black Americans of it took nine years for Black
Firvida of the AARP. Many are concerned about
“prime working age”— unemployment to drop to
not only rising costs, but also having their power
25 to 54—jumped to levels that prevailed before
shut off if they can’t afford to pay their bills. “We
the downturn. Following the
have seen some really tragic and deadly out-
comes,” she says.
Moratoriums instituted during the pandemic
77.4%
in April, the highest level in
Covid-induced recession,
it took only two. “What’s
the point of the tight labor
to bar utilities from shutting off power to house-
22 years. That’s still below market?” says Howard
holds for nonpayment have expired. Federal fund- 35
the equivalent measure for University economics
ing for the Low Income Home Energy Assistance
White Americans, but the professor William Spriggs.
Program more than doubled this year, but most
uptick has reduced the gap “It’s the necessary condition
states drained those funds in wintertime, Martin
to the narrowest on record for Black advancement.”
Firvida says. Some states are putting aside addi-
since 1994.
tional funds to help cover rising bills; California
included $1.2 billion for consumer assistance in its
proposed budget this month.
“We in the United States—and California in Black Americans, age 25-54 White Americans, age 25-54
particular—are facing something of a perfect storm
of higher costs for electricity and less reliable elec- 85%

tric grids,” says Cisco DeVries, chief executive

officer of OhmConnect Inc., which helps house-
holds reduce electric bills by remotely adjusting
their thermostats. 75

California utility bills rose 25% in the past year

and are set to rise a further 25% this summer,
DeVries says.
Power costs are already becoming a burden for 65

Kim McDermott of Victorville, Calif., about 80 miles 1/1994 4/2022

northeast of Los Angeles. Summer bills have come NOT SEASONALLY ADJUSTED. DATA: US DEPARTMENT OF LABOR

to about $150 a month in the past, but the 50-year-

old retired property manager is expecting them
to top $300 a month this year. “With everything
else rising, it will begin to cut into our savings,”
she says. —Will Wade and Naureen S. Malik, with
Michael Sasso and Alexandre Tanzi
THE BOTTOM LINE Power bills are poised to rise the most since
2008 on tight supplies of natural gas and coal, a drought in the
Western US, and a nationwide forecast for extreme heat.
Progress for Black workers could stall or be
reversed if the Federal Reserve’s battle against
Danger inflation puts a chill on hiring. “We’re still going
to be the last hired,” Spriggs says, “so if you
Ahead increase the unemployment rate, you just undo
all the gains.”
 +
Prognosis
S
O
L
U
T
36
I
O
N Expanding Access to
Mind Expansion
S
These upstarts are focusing on jurisdictions
Companies offer guided where drugs such as psilocybin and ketamine
drug trips on jungle are legal, betting they’ll be able to expand
retreats, at city clinics, and when more places decriminalize or legal-
ize popular substances like ayahuasca and
in your living room MDMA. Oregon, for example, will introduce
licensed therapeutic use of psilocybin next
ILLUSTRATION BY EMMA ERICKSON. COURTESY NUE LIFE

Even as interest in psychedelics grows, the lack
of formal scientific data on the drugs—and the
fact that they’re illegal in most of the world—
means businesses entering the market typically
seek to create prescription medications for
specific ailments. But a handful of companies
May 30, 2022
are trying to sell mind-expanding substances
to customers ranging from corporate execu-
Edited by
David Rocks
tives to their blue-collar employees.
and Rebecca Penty
year, and several cities have decriminalized
plant-based drugs used for spiritual or reli-
gious purposes.
The offerings from the companies include
sumptuous retreats, visits to day clinics, and
even in-home experiences monitored remotely.
But the thing they all share is a belief that the
treatments will be popular in a world where
countless mental issues go undiagnosed. “A lot
 SOLUTIONS Bloomberg Businessweek May 30, 2022

of the people coming have done well in their lives, but a lot Amsterdam and is planning to introduce the drug and
of times it’s been at the expense of their well-being,” says MDMA elsewhere as they become legal, aims to expand
Neil Markey, chief executive officer of Beckley Retreats. beyond just those with a prescription. “We all have trauma,
The company charges up to $9,900 for an 11-week pro- grief, and issues we’re dealing with,” says Executive
gram of group video calls, self-reflection exercises, and Chairman Ronan Levy.
instruction, the highlight of which is a five-day stay at a Other companies are trying to make ketamine even
resort where participants take psilocybin. more accessible by eliminating the visit to a clinic. New
Beckley contracts with Good Hope, an historic estate York-based MindBloom Inc. offers a $99-a-month program
in the lush hills near Montego Bay, Jamaica, to provide a of treatments at home including a video consultation with a
luxurious location for its retreats, facilitated by about a psychiatric clinician and unlimited messaging with a guide.
half-dozen counselors for each group of 15 to 20 peo- Nue Life Health in Miami Beach, Fla., charges about $1,300
ple, with a medical doctor on staff. About three-quarters for several online sessions with a therapist and a half-dozen
of the customers at its four sessions so far have been pills with a relatively low dose of ketamine to be taken at
stressed-out corporate types seeking relief from high- home. Patients are required to follow safety controls such
pressure lives, says Markey, who served with the US Army
in Iraq and Afghanistan before working as a consultant
When taking
for McKinsey & Co. Beckley will also offer retreats in the hallucinogens, people
Netherlands and is weighing expansion to Costa Rica as need guidance
and a welcoming
well as St. Vincent and the Grenadines. environment to
Across the Atlantic, Synthesis Institute, a four-year-old minimize chances of
a bad trip
Dutch company, offers similar services at locations includ-
ing a 40-acre estate with a meditation garden, a former
furniture factory in a 15th century village, and—if all goes
to plan—a forested property it owns in Oregon starting
next year. About 800 people, typically age 45 to 65, have
participated, says co-founder Myles Katz. “They’re late 37
career and feeling like, ‘I’ve gotten to this stage, and I’m
still looking for something,’ ” he says.
Katz says virtually all participants come from abroad,
which left Synthesis in dire straits during the Covid-19
lockdowns of the past two years. In 2021 the company
introduced a $20,000, nine-month program to train facil-
itators of such programs, giving them their own psilocy-
bin experience to understand what others will go through.
The first group of 60 participants is nearing the end of
the course, and Synthesis aims to enroll another 250 stu-
dents this year.
The problem for the likes of Beckley and Synthesis is
that retreats are expensive. People on hallucinogens need
monitoring and guidance to create a warm, calm environ-
ment and minimize chances of a bad trip. To serve peo-
ple who can’t afford to jet off to a jungle for a week, Irwin
Naturals Inc., an herbal-supplement formulator, is work- as designating a buddy to oversee their experience and
ing to create a chain of clinics offering ketamine, which is snapping a selfie together to prove the helper is present.
illegal as a party drug but can be prescribed to address Nue Life, which has a contract with Field Trip to share infor-
mental health conditions such as depression, anxiety, and mation, currently serves patients in nine states and plans
trauma. Another company, Field Trip, founded in 2019 in to be in almost 30 by yearend. “We don’t just want to heal
Toronto, has a dozen day clinics in the US, Canada, and affluent people,” says co-founder Juan Pablo Cappello. “We
the Netherlands. Its ketamine treatments, for people with want to serve first responders, veterans groups, Indigenous
medical prescriptions, cost $750 to $1,000 for two- to people, the urban poor.” —Tiffany Kary
three-hour sessions and include a supervised injection
of the drug—which some describe as calming or mysti-
THE BOTTOM LINE Psychedelic treatments range in price from a few
cal—and sessions with a therapist to discuss the expe- hundred dollars at home to almost $10,000 for a program that includes a stay
rience. The company, which already offers psilocybin in at a luxury resort topped off with a dose of psilocybin.
  SOLUTIONS Bloomberg Businessweek
Taming
A Racing
Heart
Doctors are using a cardiac drug to treat palpitations
in some long-Covid patients
More than 200 symptoms can afflict those dealing with the
aftereffects of Covid-19. An emerging approach to treating
one of them—heart palpitations—highlights the successes
scientists are having in addressing the symptoms, even if it
may take years to understand how they’re caused.
About 11% of coronavirus patients report experiencing
palpitations or an increased heart rate, according to a
meta-analysis of long-Covid studies published in the jour-
nal Scientific Reports in August. The symptoms are sug-
gestive of a broader condition called postural orthostatic
tachycardia syndrome, or POTS, which affects more than
24 million Americans—a number that’s growing because
38 of Covid. POTS is more prevalent among women of
childbearing age; often coincides with lightheadedness,
brain fog, and gastric upset; and can eventually lead to
chronic fatigue.
To normalize the rhythm of the heart for people with
POTS, cardiologists are turning to the off-label use of
a drug more commonly prescribed for heart-failure
patients: Amgen Inc.’s Corlanor. Pam Taub, a cardiologist
and professor of medicine at the UC San Diego School
of Medicine, says she’s prescribed Corlanor, which goes
by the generic name ivabradine, along with specific exer-
cises, to hundreds of patients with POTS, including many
so-called Covid long-haulers. “Within a month or two,
patients will come back to me and say, ‘I feel better, my
heart rate is now much lower,’ and then I start titrating
them off the drug,” she says.
Ivabradine was effective at lowering the heart rate in
POTS patients in a randomized, controlled clinical trial
involving 22 people whose average age was 32 years,
which Taub conducted just before the pandemic. The
results were published in the Journal of the American
College of Cardiology in 2021. Mitchell Miglis, a clinical
associate professor of neurology and neurological sci-
ences at Stanford University, also prescribes the med-
ication to treat POTS in patients with long Covid. “It
works just as well in post-Covid POTS as in non-Covid
POTS,” he says. Miglis and colleagues showed in a
study in April—based on an online survey of 2,314 adults
with long Covid—that about two-thirds of patients have
May 30, 2022
symptoms suggestive of an impaired autonomic nervous
system, which controls heart rate, blood pressure, diges-
tion, body temperature, and other “automatic” functions
of the body. POTS is the most common manifestation
of autonomic dysfunction. Before Covid, the syndrome
was often seen in patients recovering from influenza or
another viral infection.
Patients with POTS typically experience a heart rate
that increases by 30 or more beats per minute within
10 minutes of standing up after lying or sitting. Noticeable
heart pounding or palpitations are usually accompanied
by poor blood circulation and a spectrum of symptoms
including headaches, nausea, difficulty urinating, and a
loss of sexual function. “It doesn’t usually kill you, but you
can be very miserable,” says Paul LeLorier, professor of
clinical medicine and director of the electrophysiology
service at Louisiana State University Health Sciences
Center in New Orleans. “Some people describe it as being
perpetually hungover or having had 50 Red Bulls.” The
difficulty of focusing and concentrating that often coin-
cides with POTS can disrupt employment or education,
while fatigue can frustrate patients’ rehabilitation through
physical therapy and exercise, LeLorier says.
Although many patients with long Covid recover from
their symptoms within a few months, those with POTS
lasting six months or more begin to resemble patients
experiencing myalgic encephalomyelitis/chronic fatigue
syndrome, or ME/CFS, a more disabling condition that
leaves at least 1 in 4 sufferers bed- or housebound for
long periods, says Akiko Iwasaki, a professor of immuno-
biology and molecular, cellular, and developmental biol-
ogy at Yale. “Once you get to that level, we should really
be considering long Covid a form of ME/CFS,” she says.
It’s important to identify the signs of POTS early and
intervene before patients “go into this downward spiral,”
says Taub. Wearing compression garments, increasing
salt intake, and gradual exercise done initially in a hori-
zontal position, such as recumbent cycling and swimming,
are mainstay treatments for POTS. Heart medications
known as beta blockers and calcium channel blockers
have also been used, though these can lower blood pres-
sure and make patients feel worse, Taub says. Ivabradine
is an alternative that selectively slows the firing rate of the
heart’s sinus node, which regulates the speed at which
the organ pumps blood.
Scientists have yet to pinpoint exactly how Covid
causes persistent or long-haul symptoms in at least 10%
of survivors. “This is such a complex disease,” Taub says.
“The best approach is to say, ‘OK, what are the things that
ILLUSTRATION BY EMMA ERICKSON
we can treat?’ ” —Jason Gale
THE BOTTOM LINE Long Covid can be debilitating. An emerging treatment
for heart palpitations shows how doctors are bringing relief to patients before
they even comprehend the mechanisms of the disease.
 Latin America

Global conversations.
Regional impact.
Connection starts here.
The Inaugural Bloomberg New Economy Gateway
was held in Panama on May 18-19 and featured
discussions with leaders from around the world on
the future of Latin America.

Thank you
to our Host Partner

Watch plenary
sessions on demand
BloombergNewEconomy.com
  SOLUTIONS
Funding the Fight
Against Superbugs
As bacteria become increasingly
resistant to antibiotics, the pipeline
for drugs to counter so-called super-
bugs has virtually dried up. Only a
few dozen are in clinical trials even
as infections impervious to existing
treatments kill more than 1.2 million
people a year. The problem is that
the cost of developing an antibiotic
can reach $1.5 billion, and drugmak-
ers don’t see a sufficient payoff.
Three years after announcing a
strategy to boost investment in antibi-
otics, England is poised to fund a pair
of new drugs by offering companies
a fixed annual fee regardless of how
40 much—or how little—they’re used.
The National Health Service will pay
as much as £10 million ($12.6 million)
a year, or £100 million over a decade,
for each medication. A government
advisory group in April concluded
a review confirming the benefits of
drugs from Pfizer Inc. and Shionogi
& Co., paving the way for the NHS to
finalize contracts with the compa-
nies. “There is an intention to move
forward as quickly as possible,” says
David Glover, assistant head of med-
icines analysis at the NHS.
Drug Earnings
Range of estimated profits in the first
10 years on the market
-2 0 4 $8b
Cancer
Respiratory
Dermatology
Musculoskeletal
diseases
Cardiology
Antibiotics
DATA: BCG ANALYSIS OF EVALUATEPHARMA DATA
FOR SELECT DRUG LAUNCHES FROM 2014-16
Bloomberg Businessweek
But the UK accounts for just 3%
of the world market for antibiotics,
so bolstering incentives for com-
panies to develop new drugs will
require more governments to make
similar commitments. Globally, such
an effort would likely cost more than
$3 billion over a decade, according
to CARB-X, a nonprofit at Boston
University that invests in antibiotic
developers. “I don’t think it’s going to
happen quickly,” says Patrick Holmes,
who leads science policy at Pfizer.
As the yearslong process in
England shows, quantifying the value
of new antibiotics is complex. They
can deliver broad benefits, cutting
the use of older drugs and ensur-
ing continued effectiveness of those
medications during procedures such
as cancer treatments and heart sur-
gery. To provide sufficient sup-
port for the most innovative—and
costly—programs, pharma compa-
nies are asking England to remove
the £10 million cap and spell out how
it plans to extend the initiative.
Developing an antibiotic typically
takes a decade or more at an aver-
age cost of about $1 billion. But suc-
cessful drugs generally generate only
$440 million in sales over 10 years,
according to Boston Consulting
Group. That’s in part because new
antibiotics are prescribed sparingly
to keep bacteria from building up
resistance—a natural process that’s
been accelerated by overuse of anti-
biotics in humans and animals. And
even the most expensive antibiot-
ics are cheap compared with med-
icines for chronic diseases that are
administered over months or years
rather than a few days or weeks. As
a result, the pharmaceutical industry
May 30, 2022
England is
launching a
“subscription”
program to pay
for development of
new antibiotics
has focused on more profitable
areas such as cancer. In 2020, about
1,800 immune-oncology drugs were
in clinical trials, vs. about 40 antibiot-
ics, most of them expected to offer
only incremental advantages over
existing medications.
The search for new funding strat-
egies is shifting to other markets.
In Europe, one proposal calls for
rewarding successful developers
with vouchers that could extend pat-
ents on different products. And like
England’s model, US legislation would
create a subscription system for anti-
biotics, allowing the government to
purchase about a half-dozen drugs at
$750 million to $3 billion each. “One
painful lesson we’ve learned over the
past two years is that we can’t afford
to sit on our hands and wait for the
next crisis,” says Senator Michael
Bennet, a Colorado Democrat and a
co-sponsor of the measure.
Not addressing the problem
would be far more costly, says Sally
Davies, the UK special envoy on anti-
microbial resistance and England’s
former chief medical officer. She
acknowledges, though, that it’s eas-
ier to make the subscription idea
work in Britain’s government-funded
system than in a place such as the
US, with its multitude of buyers, each
with its own agenda and often pay-
ing vastly different amounts for med-
ications. “It’s one thing for a single
purchaser like us to do,” she says.
“The big question is how we mod-
ify this sort of approach for different
ILLUSTRATION BY EMMA ERICKSON
markets.” —James Paton
THE BOTTOM LINE The English antibiotic plan
will pay some $12 million a year for new drugs,
boosting the incentives for pharma companies.
REGISTER NOW
 Bloomberg Businessweek May 30, 2022

u e
I ss
c h
Te
e
Th How It Started

42

How It’s Going

 Bloomberg Businessweek The Tech Issue May 30, 2022

By Brad Stone and Lizette Chapman

c o l l a p s e i s n ’ t
T h e m a r ke t
just the i n e v i t a b l e r e s u l t
c o n o m i c f o r c e s
o f m a c ro e d
l i ke h i g h i n t e r e s t r a t e s a n
s a l s o t h e b e s t
inflation. It’ a
m o r e t h a n
o pp o r t u n i t y i n e
dec ade to r e c k o n w i t h t h
tech indu s t r y ’s e x c e s s 43

Over the past half-century, Silicon Valley has toggled between

two similar-sounding pursuits that are often in conflict: wealth
creation and moneymaking. Wealth creation is the act of
invention and patient, long-term business building. It’s the
rising tide that lifts the boats of employees, shareholders,
and everyone else. Moneymaking is the baser impulse: the
hunt for a quick buck. The technology industry and its risk-
happy patrons have learned, time and again, what happens
when short-term profiteering takes precedence over the devel-
opment of stable companies that can create cool stuff. And
yet, here we are again. Years of wildly inflated valuations,
crypto-flavored pyramid schemes, and all manner of
ALAMY (2)

naked opportunism have led us to the Bust of 2022.

 Bloomberg Businessweek
So far this year, the tech-heavy S&P 500 has lost
just under one-fifth of its value. Among the worst-hit
have been Amazon.com (-36%), Tesla (-38%), Zoom
(-44%), Meta (-45%), and Shopify (-76%). As a whole, venture-
backed companies that have gone public during the pan-
demic are down 48%, according to PitchBook. “The boom
times of the last decade are unambiguously over,” the part-
ners at the venture capital firm Lightspeed Venture Partners
wrote in May, in a representative example of the industry
sentiment making the rounds in presentations to portfolio
companies. “Schadenfreude has set in.”
VC high priests often argue that these downturns are
macroeconomic acts of God, like some 100-year storm, or,
OK, fine, maybe a 15-year storm—anyway, no need for anyone
to moderate their selfishness or learn other pesky lessons.
In this case, the argument goes, two decades of low interest
rates cast tech companies as alluring investments, sending a
flood of capital from public markets their way. Competition
to back the most promising startups then drove valuations to
unsustainable heights, until an unprecedented confluence of
bad news (Covid-19, Ukraine, inflation) brought it all crash-
ing down. It’s comforting to blame the world. But the truer
explanation, one that necessitates a real reckoning, is that
the industry, once again, is facing up to the compounding
impact of its bad decisions.
44 It started with the two things that motivate all venture
capitalists: 1) a paralyzing fear of missing the next big thing,
and 2) greed. A decade ago, new companies began making
their way out of startup schools such as Y Combinator asking
to be valued in the millions of dollars before they’d ever
earned a cent. To attract the most promising startups, certain
VC firms, notably Andreessen Horowitz, eagerly endorsed
this high-stakes grade inflation and often allowed found-
ers to cash out before they’d proved their business mod-
els. High-profile collapses, such as the blood-testing disaster
Theranos and the office-sharing supernova WeWork, led to
some bingeworthy TV but didn’t prompt a serious retreat
from this Monopoly-money mindset. Instead, VC firms and
their new rivals, such as SoftBank Group Corp. and Tiger
Global Management LLC, continued jockeying to invest and
bid up prices every step of the way. “There was so much
money available at every stage and everywhere you looked,”
says Jeff Clavier, managing partner of early-stage investment
firm Uncork Capital.
Understandably, many founders took all the cheap money
they could get. Some major startups raised multiple rounds
of funding per year, with the founders offloading portions of
their personal shares for early paydays and employing risky
financing schemes such as convertible notes, where investors
could buy stakes even as they were clueless about future val-
uations. Given how eagerly many investors crowded toward
the surest-seeming bets, those who resisted these added risks
had to weigh them against the fear of missing out.
The oversight built into the initial public offering process
managed to protect the wider markets from some especially
May 30, 2022
improbable IPO proposals, such as WeWork’s in 2019, which
collapsed following the universal derision that greeted its
financial disclosures. Quickly enough, though, private
companies found a workaround in special purpose acqui-
sition companies, or SPACs. These “blank check” offerings
cleared the way
for businesses,
including lender
“We actually haven’t seen
SoFi, space com- any real carnage yet”
panies Rocket
Lab and Virgin Galactic, pet-product subscription service
Bark, and Grab (the “Uber of Southeast Asia”), to go public.
All are trading well below their offering prices. “Too many
people piled in and diluted the SPAC brand by being unpre-
pared,” says Yelena Dunaevsky, an attorney who specializes
in SPACs at the law firm Woodruff Sawyer. “Some target com-
panies were not in a space where they should have been
going public.”
This bad behavior has been dwarfed by the bubblicious
crypto markets, which have blinded the Valley, its industry
counterparts around the world, and a hell of a lot of other
people to the risks that come with its ferocious gambling.
Speculators piled into digital currencies, shady exchanges,
and virtual assets. The highfalutin pitch for Web3 sounds like
wealth creation—decentralize the internet and put it on the
blockchain, and you can create a set of tools that restores
power to the people and frees them from dependence on
tech giants and traditional banks. But most of the crypto fads
to date tend to involve quick cashouts that leave the other
parties holding a lot of funny money. There are initial coin
offerings, nonfungible tokens, and stablecoin schemes such
as TerraUSD, which recently collapsed in value after suffer-
ing the crypto equivalent of a bank run. Since the start of the
year, the Bloomberg Galaxy Crypto Index, which measures
the performance of the major cryptocurrencies, is down 48%.
The mania seemed to reach its most “something ain’t right
here” moment during this year’s Super Bowl, when NBC
broadcast crypto ads starring LeBron James, Matt Damon,
and Larry David. For techies who aren’t old enough to
remember the infamous sock-puppet commercials that
seemed to signal the popping of the dot-com bubble, the
Super Bowl ads provided a taste of what that felt like.
Despite similarities to past downturns, the Bust of 2022
also feels weirdly unfamiliar, perhaps because it’s been so
long since the last shock on this level. One ominous differ-
ence is that previous boom cycles lasted about eight years.
Like a long-dormant volcano, the pressure has been building
on this one for more than a decade. In 2021, US tech start-
ups raised three times the amount they raised in 2000, but
this bust is also global in a way previous industry downturns
haven’t been. Stock prices and valuations have fallen from
the UK to China, where a campaign by the Communist Party
to curb the power of tech giants such as Alibaba, Tencent,
and Didi has demolished stocks and private company valu-
ations for the past year.
Bloomberg Businessweek The
The tech world also feels more outwardly political and
divided than it has during past downturns, as though
some of the same tools that exacerbated political divisions
elsewhere have now been trained inward. Nowhere is this
more apparent than in Elon Musk’s quixotic acquisition of
Twitter Inc., a purchase that may or may not be on hold
pending an analysis of the prevalence of bots on the social
media site. Over the past month, Musk has declared his fealty
to the Republican Party and accused people who are less
likely to call someone a “pedo guy” of being victims of a
“woke mind virus.”
This feels new. Steve Jobs and Bill Gates received deference
from a shocking range of politicians but kept themselves largely
apolitical for a reason—they needed customers from both sides
of the aisle. Now, the tech monolith that money has mostly
spackled together for a generation is crumbling. First, former
President Donald Trump forced tech companies to take sides
on issues like immigration, free expression vs. disinformation,
and his proposed ban of the video-sharing site TikTok. Even
absent daily Trump tweets (for now), today’s startup founders
and funders still have to reckon with the overt politics of folks
such as Musk, Peter Thiel, and Marc Andreessen on issues like
college-loan relief, taxation, and who should shut up. The acri-
mony has led to a wave of high-profile defections from Silicon
Valley to Miami and Austin, cities promising an even more lais-
sez-faire home base. The industry can no longer even agree on
an issue of once-universal consensus, whether the Bay Area is
the center of its world.
One thing that probably won’t change in this downturn is
who suffers: regular investors and rank-and-file employees.
Like the founders and institutional investors who offloaded
their shares during the good times, VCs earned hefty manage-
ment fees no matter what happened to their portfolio start-
ups. Those investors are still sitting on a record $300 billion in
Instagram × vs. TikTok
Elon × vs. Elon
Markets × vs. Regulators
David × vs. The Goliaths
Two Wheels × vs. Four Wheels
Drivers × vs. Ride-Hailing
Scientists × vs. Parents
Faux Meat × vs Big Ag
Tech Issue May 30, 2022
uninvested capital and will continue to earn management fees
regardless of their track record or the market’s performance.
Meanwhile, more than 13,000 tech workers around the
world have been laid off since the beginning of April, accord-
ing to tracking site Layoffs.fyi, which includes high-profile
cutbacks at Netflix and the stock-trading site Robinhood
Markets. There’s probably much more to come, too, partic-
ularly if the downturn drags into 2023. “We actually haven’t
seen any real carnage yet,” says venture capitalist Elad Gil,
“the things that tend to happen when money really dries
up. I think a lot of people are either uncertain or in denial.”
Denial, of course, is a ticket to catastrophe in any market
downturn. That’s what this edition of Bloomberg Businessweek’s
annual Tech Issue is here to dispel. Our almanac will guide
you through the peaks and valleys of the technology landscape
that’s left standing, including Facebook’s failure to beat TikTok
at its own game (page 46), the costs of Google’s browser suprem-
acy (page 58), a tough reckoning in the gig economy (page 64),
Musk’s latest antics (page 50), and the fate of all those scooter
companies—remember them?—that rose to prominence during
a less fractious time (page 62). And we look at some less-than-
high-tech ways to improve people’s diets (page 72).
There are also examinations of a new kind of online
prediction market (page 52) and the controversial popularity
of polygenic risk scoring, which aims to help parents undergo-
ing in vitro fertilization lower their offspring’s risk of cancer, 45
diabetes, and other maladies (page 68). These technologies,
and others like augmented and virtual reality, are keeping a
lot of industry veterans sanguine even in the steely grip of a
new downturn. “Weirdly, I’m quite optimistic,” says Michael
Moritz, chairman of Sequoia Capital. “This shock will deliver
an almighty colonic to a lot of companies, and some
will be able to tolerate the consequences and others
won’t. The ones that do will be just fine.”
× Why Zuckerberg is Reeling 46
× He just can’t help himself anymore 50
× You can bet on almost anything now 52
× A startup takes on the Big Browsers 58
× Are we still doing scooters? 62
× The gamification of work 64
× Genetic testing opens Pandora’s box 68
× How to fix what’s wrong with food 72
 Instagram × vs. TikTok ×× May 30, 2022

By Sarah Frier and Brad Stone

46 Facebo
succe
succ
newer
time,
and ble
 Bloomberg Businessweek The
“You
Know
What’s
Cool?”
ook has spent a decade
essfully ripping off its
r, hotter rivals. But this
it tried to copy TikTok
ew up Instagram instead
Last year an Instagram representative contacted Justina Sharp,
a 24-year-old with 93,000 followers, and asked for a meeting to
discuss ways she could expand her audience. Sharp thought
it was strange to hear from an actual human there, but knew
better than to say no. The conversation felt, she says, like the
“Facebook gods” coming down from on high to Instagramsplain.
The employee “talked at me for exactly half an hour, because
that’s how corporate and precise they are,” she recalls. “They
gave me all these generic tips that anyone who’s been on social
media for five seconds would know how to do.” How to use
hashtags, what time of day to post, that sort of thing.
Then, at the very end of the conversation, Sharp got the real
pitch. The employee said she’d be most successful if every-
thing she posted was original to Instagram. Suddenly the pur-
pose of the outreach became clear. “Oh, you don’t want me
to post TikToks,” she realized. They wanted her to post Reels.
Reels are a kind of short-form video that influencers like
Sharp see as a lesser copycat of TikTok’s namesake posts.
Instagram owner Facebook (which rebranded in the fall as Meta
Tech Issue May 30, 2022
Platforms Inc.) needs talented users to start posting entertain-
ing Reels to draw young people to the app, and to Facebook
by extension. The main social network’s user numbers have
flatlined, sending investors running and contributing to a 47%
drop in the company’s share price since the start of the year.
Chief Executive Officer Mark Zuckerberg’s strategy to reverse
the trend—and shore up investor support for his long-term
bets on virtual reality—is centered almost entirely on copy-
ing TikTok.
Over 14  years, since the invention of its news feed,
Facebook has become extremely good at one thing: showing
people what they definitely want to see, based on their past
behavior and online activity. Facebook ranks your friends
based on how much you engage with them and orders their
posts accordingly. If you search for cake decorating videos
on Instagram, expect to see more in your suggested follows
the next time you log on. If you shop online for ankle boots,
they’ll turn up in your feed. The upside of that kind of algo-
rithm is a $116 billion advertising business. The downside is,
people get bored.
TikTok delivers a level of algorithmic magic that’s a step
beyond, introducing people to stuff they had no idea they
would be entertained by—which has the effect of boosting
no-name stars into the spotlight as long as they’re creating
great content. Achieving that same effect has become a top 47
priority, Zuckerberg said during a recent earnings call: “I
think about the AI that we’re building not just as a recom-
mendation system for short-form video, but as a discovery
engine that can show you all of the most interesting content
that people have shared across our systems.”
A company as big as Meta, with 3.6 billion users across
Instagram, Facebook, and WhatsApp, has lots of ways to push
features on people. Reels now appear in every Instagram
user’s feed. Once someone clicks on a Reel, they’re suddenly
in a full-screen mode where swiping up or down only gets you
to more Reels. This design tweak can be jarring, like turning
a corner in a quiet art gallery and finding yourself in the mid-
dle of a dance party.
Instagram is planning to take it further, testing a redesign
that starts users in full-screen, TikTok-style video mode
when they open the app. For Facebook’s lifeline to the youth
demographic, this is a major departure. Instagram became
a generation’s go-to social app on the strength of its filtered,
aspirational lifestyle photography. Now the company is
actively killing that identity in the name of beating TikTok,
and it might not even work.
TikTok, owned by China’s ByteDance Ltd., is the
most-downloaded app in the world. Starting in 2020,
Americans spent more time on TikTok than they did on
Facebook or Instagram. This year, the app is expected to
overtake YouTube. TikTok, which declined to comment on
its competition with Reels, instead sent details on its
own creator payment program.
Instagram executives recognize that TikTok is
 Bloomberg Businessweek May 30, 2022

more than its video format. Popularity Contest Facebook passed, this person says, think-
They also want to copy the cre- Share of teens who report their favorite social media ing that it would be tough to get an acqui-
ator culture and, among other platform as being … sition of a China-based company past
TikTok Snapchat Instagram
things, make it easier for video makers Discord Twitter Facebook
regulators. Plus, Facebook executives
to get paid. “One of the big things that didn’t trust the age verification. The per-
we did for Reels was our bonus incen- son familiar says Facebook’s research
tive program,” says Asad Awan, who’s in 40% showed Musical.ly was clearly most pop-
charge of monetizing the feature. “You ular with preteens, and given its history
get invited to this program, and as you of privacy scandals, Facebook didn’t want
create your Reels and more people watch to run afoul of US child data laws.
it, you get incentives.” 20 ByteDance bought the app instead and
Sharp, who never heard any follow-up renamed it TikTok. The preteens grew up
from the Instagram employee who called and became cultural trendsetters. Feeney,
her, at least joined that program. For who started out posting short videos as
700,000 views on her Reels in a recent 0 a Maryland middle schooler, now has
month, she made $150. She’s been using Spring 2016 Spring 2022 6.8 million followers on TikTok and works
it to buy drinks at Starbucks for her best on social media for her hometown NFL
DATA: PIPER SANDLER
friend, who gives a thumbs-up or thumbs- team, the Washington Commanders. She
down on her TikToks before she posts them. Posts that pass uses her personal account to reflect, face to camera, about life
this test usually wind up on Reels, too, just without the TikTok as a college student.
watermark so that Instagram’s algorithm will count it as origi- ByteDance spent heavily on advertising TikTok via Facebook,
nal content. Instagram, and Snapchat. During the pandemic, the app took off.
Like many of her peers, Sharp, who started posting short Researchers expected TikTok’s growth would fade along with
videos during the pandemic, considers herself a TikTok influ- Covid-19 lockdowns, but the opposite happened. Instead, it’s
encer now. “I make more money on TikTok, I have a bigger Facebook that’s having trouble growing. And Instagram, the com-
48 audience on TikTok, and as a creator I like TikTok better, even pany’s center of cool and culture, isn’t starting the trends anymore.
though I’ve been on Instagram since I was 13,” she says. She Instagram employees say they think Reels has a chance of
feels little loyalty to Instagram, and even less to Reels. “It’s such becoming a cultural touchstone, in part because they’ve suc-
a transparent land grab for TikTok,” she says, “without doing ceeded in the just-copy-the-new-kid strategy before. When
any of the work to make their version better.” Snapchat became popular among teens with its unfiltered,
disappearing posts, Instagram researchers realized they
Tech giants agree that 15-second videos are the future of enter- were losing out on growth because people were too anxious
tainment. YouTube has its own copycat, called Shorts, and about presenting themselves perfectly. In 2016 they copied
Snapchat has Spotlight, competing for talented content cre- Snapchat’s “stories” format, for posts that disappear within
ators with their own bonus programs. There’s a version of Reels 24 hours. While the effort didn’t kill Snapchat, it did mean
on the original Facebook app, too. “Everyone’s attention spans older Instagram users wouldn’t have to figure out how to use
are shortening,” says Katie Feeney, a 19-year-old Penn State stu- the newer app, imposing something of a ceiling on Snapchat’s
dent experimenting with all of the services. “It’s what people broader cultural relevance. And it made Instagram more inter-
like.” In her view, the era of the three-minute video—or televi- esting to the masses, putting it on a path to 1 billion users.
sion, for that matter—is over.
The supershort format first gained cultural weight with
Vine, an app Twitter Inc. acquired a decade ago, the same
year Facebook outbid it for Instagram. A generation of inter-
net stars, especially comedians, got noticed through Vine.
PHOTOGRAPH BY LIAM WOODS FOR BLOOMBERG BUSINESSWEEK

Eventually they also banded together to demand the company

find a way to compensate them, according to three people
familiar with the matter, who spoke on condition of anonym-
ity because the negotiations were private. Twitter essentially
told them to take a hike, so they did, to venues where they
could make money more easily. In 2016, Twitter shut down
Vine, unwilling to continue investing in it. Sharp
Later that year, Instagram co-founder Kevin Systrom sug-
gested to the bosses at Facebook that they buy a similar app
called Musical.ly, according to a person familiar with the mat-  After she hit 93,000 followers, Instagram tried to tell her
ter, who spoke on condition of anonymity for fear of retaliation. how to use hashtags
Bloomberg Businessweek The
The same could happen with short-form video. “There’s
a market for people who would enjoy that format but might
never be a key audience for TikTok,” says Liz Perle, who ran
teen community at Instagram and now consults for various
tech companies.
“You can only be prom
queen for so many years”
But Zuckerberg’s lieutenants could fill a graveyard with
once-important projects. Reels could just as easily end up like
IGTV, the app’s YouTube competitor that was launched with
fanfare in 2018 and quickly became an afterthought for creators
and users. Or Facebook Gaming, another 2018 invention that’s
never managed to meaningfully compete with Amazon.com
Inc.’s Twitch. Facebook Gaming started out with exciting part-
nerships but is now overrun with bots and strange e-com-
merce scam videos from Southeast Asia.
Some creators will play along with Meta’s latest priority as
long as it keeps delivering an audience and money. Feeney says
she’s always “struggled to grow on Instagram. Of all the plat-
forms, it was the hardest to grow on. Every creator will agree
on that.” Recently she redoubled her efforts. She started post-
ing several times a day to Reels, and Instagram’s algorithm
rewarded the effort. In contrast to her millions of TikTok fol-
lowers, she had about 500,000 on Instagram six months ago,
then added an additional 400,000 by focusing on short-form
video. “I attribute all my growth to it,” she says.
There’s still plenty of money to be made on Instagram,
whether or not Reels succeeds. “While I think we are seeing
Instagram fall from its spot as the most beloved social platform
by most Americans, that doesn’t mean it will fail or close,” says
Karyn Spencer, who ran creator relationships at Vine. “It just
means that you can only be prom queen for so many years
before someone younger and fresher comes to take your crown.”
TikTok’s algorithm is specifically tuned to avoid showing any-
one the same video twice and to serve up a wide range of mate-
rial, including from somewhat random sources, to keep things
interesting for those who scroll. This has the side effect of mak-
ing it possible for anyone, not just people with an existing fol-
lowing, to achieve a real measure of internet fame in a hurry.
One night in late April 2020, 34-year-old Chris Equale was
having a White Claw on the balcony with his fiancée when his
phone started vibrating and wouldn’t stop. That day, bored
by pandemic lockdown in his Las Vegas home, he’d experi-
mented with the mobile editing tools on TikTok to turn his two
corgis, Hammy and Olivia, into lovable talking characters. He
posted the resulting video on both Instagram and TikTok, but
all the buzz that night was coming from TikTok—250,000 views
in 20 minutes.
He showed his phone to his fiancée and said, “Look, we’re
Tech Issue May 30, 2022
not the only ones struggling to find joy right now.” He com-
mitted to posting a new talking-corgis video online each day.
At the time, “I had no idea what TikTok was or what it could
do,” he says. Now he tells people “you can post something, and
it can be seen by millions of eyeballs even if you have a follow-
ing of zero. It’s the best platform to be discovered.”
Instagram is testing its ability to achieve a similar effect by
developing a sort of behind-the-scenes talent show. “To figure
out what content should get broad distribution, we give a piece
of content a little bit of distribution to see if it resonates with an
audience,” says Tessa Lyons, a product director at Instagram.
Say it’s a corgi video; the test audience doesn’t have to have any
known affinity for dogs, breaking prior rules. “You can imag-
ine someone goes and tries out, and if they do well in Round 1
they go on to Round 2,” getting exposed to a higher percent-
age of Instagrammers each time.
Ideally, Instagram mints stars that way, Lyons says. The
team is especially interested in smaller-scale influencers.
Instagram already has plenty of accounts with tens of mil-
lions of followers, and the top ranks don’t change often. What
Instagram needs is to prove to everyday video makers that it’s
still a place they can become famous and start a career, not
just ride one out until the next platform comes along. In the
meantime, TikTok is starting to copy rivals’ features, too. It’s
incorporating disappearing stories, livestreaming, and videos
as long as 10 minutes. 49
Reels is a defensive move, but Zuckerberg has also been
playing offense. He’s spent years mentioning TikTok’s Chinese
ownership and implying that the platform might threaten users’
rights to privacy and free speech. That’s an awkward argument
to make if you run Facebook. This year the Washington Post
reported that Meta has been paying the Republican consult-
ing firm Targeted Victory to malign TikTok through op-eds and
letters sent to newspapers around the country, calling TikTok
a threat to young people’s well-being. That’s a terrible argu-
ment to make if you run Instagram.
But Zuckerberg might not have time for nuance. About
a year ago his company had a market value of about $1 tril-
lion. Today it appears on its way to losing about half that. In
February, after Meta reported fourth-quarter earnings, its
value fell a record $251 billion in a day. The company is now
cutting spending on its longer-term bets, such as virtual real-
ity hardware and the metaverse, while it waits for Reels to
win over advertisers.
Creators are doing their best to follow the money. Sharp,
who’s been posting about the joys and frustrations of wed-
ding planning, says that with the algorithmic shift to Reels,
she has little choice but to make more short-form videos.
Instagram has become crowded with features meant to attract
young people, and only Reels seems to be getting the atten-
tion from the algorithm, as far as Sharp can tell. “My follow-
ers are not seeing my in-feed content and are not seeing my
stories,” she says.
The advice from Instagram when she brought it
up: Just keep posting.
 Bloomberg Businessweek Elon
By Max Chafkin
t ing
Pivo
Elon Musk’s incessant po
may do wonders for his e ing s t
clout in right-wing c ircle g o and
s ,
has destroyed value pret but it
t y mu c h
50
ever ywhere else
On May 20, Elon Musk flew to
São Paulo to announce an expansion
of his satellite internet service,
Starlink. The moment could, and
perhaps should, have been regarded
as the latest in a list of achievements
that have made Musk the best-known
technologist of his generation and the
richest person in the world.
His rocket company, Space
Exploration Technologies Corp.,
was the first private company to
carry astronauts to the International
Space Station. It now sends so many
rockets to orbit, with such regularity,
that it has put in place a constellation
of thousands of satellites—Starlink—
to provide internet service just about
anywhere on Earth. The business
serves hundreds of thousands
of customers around the world,
including in Ukraine—which has relied
on Starlink-provided connectivity
during the Russian invasion—and,
according to the new announcement,
19,000 rural schools in Brazil.
× vs. Elon
ro ll
to T
Of course, this
wasn’t the only action item on Musk’s
punch list for May 20. He also tweeted
he was going to hire “hardcore
streetfighters, not white-shoe lawyers”
to start a “litigation department” at his
electric car company, Tesla Inc. These
lawyers would be so fearsome, they
would ensure the company never had
to settle “unjust” lawsuits. The same
day he continued to deny a report
in Insider that he’d offered to buy a
contract worker a horse in exchange
for sexual favors. He claimed
the article was a political attack,
challenged the source of the allegation
to describe his nude body, and
tweeted about his “wiener” with the
co-founder of YouTube. He also
signaled his newfound affinity for the
far right, claiming that allegations
×
about former
President Donald Trump’s friendliness
to Russia were an “elaborate hoax”
perpetrated by Democrats and the
mainstream media. In response to a
tweet to this effect from Jim Jordan,
the Ohio congressman and Trump ally,
Musk added, “Makes you wonder what
else is fake.”
In the background of all this was
his semi-serious attempt to buy
his favorite social media service,
Twitter Inc., for $54.20 a share, a
price he arrived at in part to evoke, as
he often does, a marijuana joke. For
years admirers have held Musk up
as a counter-example to the Silicon
Valley tendency to pursue minor (but
lucrative) social media innovations at
the expense of harder tech. As Peter
Thiel, one of his co-founders at PayPal
and a key SpaceX investor, put it,

“We wanted flying
cars, instead we got 140 characters.”
In recent weeks, Musk has seemed
intent on giving up on the former to
focus on the latter.
Musk’s fans—he has 95 million
Twitter followers—have cheered him
on at each ridiculous turn, fantasizing
about his new legal team and sending
him horse memes, all while Musk
plays to the crowd. The Starlink
announcement, meanwhile, treated
the actual satellites as an afterthought
PHOTO ILLUSTRATION BY 731; PHOTOS: GETTY IMAGES (3)
and instead served as a de facto
campaign event for Brazil’s right-wing
populist president, Jair Bolsonaro,
who’s running for reelection in
October. Bolsonaro praised Musk
as a “legend of freedom” and said
the Starlink deal was proof of
Brazil’s commitment to conserving
the Amazon. Musk echoed the
environmentalist message, neglecting
The Tech Issue
to mention that his
host has presided
over record levels
of deforestation.
The effect was
not that of a brilliant
industrialist striding
the global stage, but
rather of an aging
reality show star
(Musk turns 51 in
June) whose act
is getting a little
stale. It was also a
perfect illustration of
the way in which the
mythology around
tech founders
can outrun their
achievements
and obscure
their failings.
How else to
explain why Musk,
who devoted much
of his career to
pursuing ambitious
goals such as
space colonization
and the mass
adoption of electric
vehicles has pivoted to become an
edgelord in the mode of Trump. He
now seems mostly interested in
grinding his enemies into dirt—that
list includes journalists, former
employees, the Biden administration,
and anyone else insufficiently grateful
for the good works he’s bestowed
upon them. We wanted flying cars,
instead we got one character who’s
become the world’s wealthiest troll.
Musk’s stated goal with his
Twitter bid, for which he declined
to do due diligence, is to restore
“free speech” to the platform by
giving conservatives more leeway
to express themselves. Musk once
warned of the existential danger
posed by climate change; now he
rates something called the “woke
mind virus” as a major risk to
civilization. It’s probably best not
to take this too seriously, because
May 30, 2022
it’s clear that Musk himself doesn’t.
Not long after he landed the Twitter
deal—securing, one assumes,
humanity’s inoculum to the woke
mind virus—Musk changed his mind,
claimed that Twitter’s disclosures
about inauthentic accounts were
false, and said he’d buy the company
only at a lower price. Along the
way, he’s periodically attacked its
executives, implying they’ve been
conspiring with Democrats to tilt the
site toward the left.
This has all seemed to do wonders
for Musk’s ego and his currency in
media circles—he’s now an avenger
in the Tucker Carlson cinematic
universe, alongside Kyle Rittenhouse,
JD Vance, and the MyPillow guy—but
it’s destroyed value pretty much
everywhere else. Twitter, which
already seemed unsteady before
Musk agreed to buy it, has seen its
stock price fall 30% since the offer
was accepted, as investors grow 51
increasingly doubtful that Musk will
follow through. Tesla, meanwhile, has
also suffered a stock price collapse—
down 45% since April. Don’t worry
though: It’s about to hire some really
hardcore lawyers.
An earlier version of Elon
Musk—say the Elon Musk of 2014
who announced he was so sick of
patent litigation that he would make
Tesla’s patents available to other
car manufacturers—would have
mocked antics such as these and
focused on the important stuff. For
instance: Tesla’s electric pickup,
which was scheduled to come out
last year but is now delayed to
2023, or the company’s famous “full
self-driving” capability, which was
supposed to land four years ago. Or
the New York to D.C. hyperloop he
announced in 2017.
Of course, it’s possible that Musk,
who’s hit some very low points in his
career before, will be able to refocus
and aim high once again. That would
do more to propel his own
self-mythologizing than even
420 perfect tweets.
 Bloomberg Businessweek Markets × vs. Regulators × May 30, 2022

By Liam Vaughan and Benjamin Bain

52
Bloomberg Businessweek The Tech Issue May 30, 2022

a l l e y - b a c k e d
A Silicon V b r i n g
st ar tup wan t s t o
Wall S t r e e t - s t y l e
e o u t c o m e
t r a d ing to th
u i l d B a ck
o f e v e n t s . S o m e
Will B s a
?
s s a y t h a t ’
re g u l a t o r
r p a s s
Bett e

Yes No
terr ible ide a
On Nov.  3, 2020, Election Day, two young entrepreneurs
received a call from the chairman of the Commodity Futures
Trading Commission with some important news. Luana Lopes
Lara and Tarek Mansour had spent the past 18 months trying
to get permission to start an ambitious and controversial new 53
type of financial exchange—one where, rather than betting on
equity prices or commodity futures, people could trade instru-
Will student debt ments tied to the outcomes of real-world events, such as the
passage of legislation, the weather on a particular day, or the
be forgiven? winner of best actor at the Oscars.
“Congratulations,” boomed Heath Tarbert, a Republican
who’d been appointed by President Donald Trump the previ-
ous year. “You now stand with markets that have been around
since the 1840s. And I have no doubt that in time you’ll grow
Yes No to be a powerhouse, too.”
Companies had been trying to introduce similar so-called
event markets in the US for years, but Tarbert’s agency, the
CFTC, had always said no, arguing they were tantamount to
gambling and vulnerable to cheating. Now the agency had
reversed course, giving its approval to two 24-year-olds who
would enjoy first-mover advantage in what could eventu-
ally become an enormous new asset class. Within weeks of
Tarbert’s call, which a representative for him says was cus-

It
tomary, their startup, Kalshi Inc., raised $30 million from ven-
ture capitalists. “We believe this will be bigger than crypto,”
says Mansour, now 26.
The potential of prediction markets is well known to any-
one who’s read James Surowiecki’s bestseller, The Wisdom
of Crowds. Well-designed markets can help draw out knowl-
edge contained within disparate groups, and research shows
that when people have money on the line, they make bet-
ter forecasts. “It’s a tax on bullshit,” Lopes Lara
says. That explains why Google, Microsoft Corp.,
and even the US Department of Defense have used
 Bloomberg Businessweek
prediction markets internally to guide decisions, and
why university-linked political betting sites such as
PredictIt, where wagers are capped at a few hundred
dollars, sometimes outperform polls.
The size of these markets had been limited because regula-
tors worried that Wall Street-scale trading could create incen-
tives for investors to meddle with reality. If the stakes are high
enough, it’s not difficult to imagine traders leaning on con-
gressional staffers to stall the passage of a bill, or someone
in Kanye West’s orbit betting on whether the rapper’s latest
album will drop this week. These were among the issues that
senior figures within the regulator flagged when Lopes Lara
and Mansour pitched the CFTC. But their concerns were over-
ruled by the agency’s politically appointed commissioners,
one of whom has since joined Kalshi’s board.
That Kalshi prevailed was less a testament to Silicon Valley-
style innovation than it was to persistent lobbying and legal
wrangling. Lopes Lara and Mansour didn’t invent anything
from scratch; they took a well-established concept and forced
a change in the way it’s governed. The result, depending on
whom you ask, could usher in a new era of market-based
enlightenment, or it may push Wall Street’s most destructive
tendencies even further into the real world.
If Kalshi’s founders lacked experience to bolster their
54 application to the CFTC, they’d at least enjoyed an almost
comical amount of youthful success. Lopes Lara studied
ballet at the Brazilian Bolshoi before moving to the US on a
math scholarship. Mansour finished second in France’s math
Olympiad. They met in an advanced computer science class at
MIT, where they bonded over their shared work ethic.
Lopes Lara spent part of her senior year interning at Five
Rings Capital, a hedge fund in New York, when the idea for
Kalshi came to her. Whenever the traders around her weren’t
working, she noticed, they seemed to be gambling with each
other on whatever was going on in the news: Would Apple’s
market valuation hit a trillion dollars? Was Kylie Jenner preg-
nant? “It could have been absolutely anything,” she recalls.
When Lopes Lara suggested to Mansour this might be a
business, he saw the potential right away. He’d interned at
Goldman Sachs Group Inc. on a desk helping investors pro-
tect themselves against the possibility of the UK leaving the
European Union. Goldman sold clients complex combinations
of stocks and derivatives. As he talked it through with Lopes
Lara, they both agreed that surely it would be better to let
investors hedge their risk by betting on Brexit itself rather
than some imperfect proxy.
Over time, Lopes Lara and Mansour found themselves
hypothesizing about how such a marketplace might work
in practice. What they settled on was called an “event con-
tract,” an instrument tied to a question with a binary out-
come, such as “Will inflation hit 5% by the end of the month?”
The contract would eventually settle at either $1 (if the event
happened) or zero (if not), but before that its price would
fluctuate, reflecting how likely the market considered the
May 30, 2022
occurrence. A contract on whether a politician will be elected,
for example, might jump from 50¢ to 55¢ after a particularly
good debate performance. Kalshi would make money by
charging a commission on every trade and potentially by sell-
ing data to traders, political campaigns, businesses, and any-
one else hoping to get a glimpse into the future.
In October 2018, five months after graduation, the pair
flew to California to compete in a hackathon for wannabe
tech founders organized by the Silicon Valley incubator
Y Combinator. Over the course of a day and a night, they built
a website and presented it, bleary-eyed, to a panel of entrepre-
neurs the following day. Their prototype barely worked, but
they still found themselves among the winners, which meant
they’d earned entrance into a three-month mentorship pro-
gram and a $150,000 investment. A Y Combinator managing
director, Michael Seibel, told them their idea was “so unlikely
to succeed, I had to take a chance!”
Seibel’s skepticism—and, paradoxically, also the reason
for his interest—was rooted in America’s historical wariness
of anything resembling gambling. Roulette, poker, and other
online casino games remain largely outlawed, and, until a
May 2018 Supreme Court decision, sports betting was per-
mitted in only a handful of states. Setting up Kalshi as a place
for hedging risk rather than as a bookmaker seemed to be a
possible way forward, but convincing the CFTC wouldn’t be
easy. (Rejecting one proposed exchange in 2012, the CFTC
wrote that trading on politics had no “economic purpose”
and was “contrary to the public interest.”)
One day during their time at Y Combinator, Lopes Lara
PREVIOUS SPREAD: GRADUATES, HOUSES, WEST: GETTY IMAGES; MOON: NASA; BIDEN: WHITE HOUSE; SUBWAY: ALAMY. THIS PAGE: COURTESY KALSHI
and Mansour say, they cold-called 60 lawyers they’d found
on Google. Every one of them said to give up. “It was pain-
ful,” Mansour recalls. Eventually they tracked down a former
CFTC official, Jeff Bandman, who assured them the landscape
was changing; he agreed to help them navigate the agency
and its characters.
When they weren’t busy trying to recruit lawyers, Lopes
Lara and Mansour were meeting early-stage investors. Among
them was Alfred Lin of Sequoia Capital Operations LLC, who
was known for backing companies that eventually overcame
government scrutiny, including Airbnb, DoorDash, and Uber
Technologies. Lin told the founders he saw potential in their
idea, both to capitalize on the explosion in retail trading and,
one day, even to challenge how the financial world manages
risk. “Come back when you’ve got regulatory signoff,” he said.
For a long time, speculation on most events wasn’t possible in
the US, no matter how small the wager. Under the Commodity
Exchange Act, the CFTC has the power to stop exchanges from
listing contracts relating to “terrorism, assassination, war” and
“gaming” if it deems them to be “contrary to the public inter-
est,” which turned out to be the case a lot of the time.
In 1988, as academic interest in the field increased, the
agency granted a legal exemption to the University of
Iowa, allowing it to set up a prediction market for research
purposes—provided it didn’t turn a profit or advertise—and
Bloomberg Businessweek The
Lopes Lara
Mansour
 Kalshi’s founders see huge potential in prediction
markets
it limited bets to $500. PredictIt, the biggest and best-known
political betting platform in the US, also got an exemption
thanks to an association with Victoria University of Wellington
in New Zealand, but it’s been less cautious about expansion.
Today it’s a sprawling marketplace full of professional trad-
ers with their own subculture and lingo. (For instance: “Rules
Cuck Panther” is what PredictIt users call it when a bet goes
against them on a technicality.) PredictIt users trade tips on
Discord and the Star Spangled Gamblers podcast, and major
news outlets cite the website’s odds.
In deference to the CFTC, bets on PredictIt are limited to
$850. But to keep traders happy, PredictIt will often run mul-
tiple variations of the same question—listing separate con-
tracts for two dozen or so Democratic primary candidates, for
example—meaning a trader could have more than $10,000 rid-
ing on a single outcome. The site’s markets are mostly suggested
by the traders themselves, some of whom are current or for-
mer campaign staffers who might be well positioned to answer
questions such as “How many tweets will Donald Trump post
from Nov. 20 to 27?” or “When will Anthony Scaramucci’s role
as White House communications director end?”
According to PredictIt co-founder John Phillips, the prev-
alence of politicos helps explain why the site so often gets it
right. “Prediction markets function as well as they do and
are as accurate as they are … because these markets, like any
markets, attract people with superior information,” he said
on a podcast in 2016. “In the financial stock market, it’s called
inside information.”
Beyond academia, of course, trading on nonpublic
Tech Issue May 30, 2022
information can be illegal, which represented a conundrum
for Lopes Lara and Mansour. On the one hand, they wanted
Kalshi’s forecasts to be accurate. On the other, as a regu-
lated entity, Kalshi would have a responsibility to stamp out
insider trading across its markets. In essence, Lopes Lara
and Mansour wanted to build a vast high-stakes version of
PredictIt, but with none of the anarchy or blurred legal lines—a
“New York Stock Exchange for Events,” as they pitched it.
First, they needed to convince the regulator that event trad-
ing could even be safe.
When Lopes Lara and Mansour approached the CFTC in
the spring of 2019, some officials in the part of the agency
responsible for reviewing their application, the Division of
Market Oversight, were skeptical, according to interviews with
people who were directly involved in the process and spoke
on the condition of anonymity because the details are confi-
dential. There was a sense among the DMO’s seasoned regu-
lators that, for all Kalshi’s talk of revolutionizing finance, this
was just a turbocharged iteration of something that had pre-
viously been rejected, and with good reason.
But it wasn’t the DMO’s job to look at the big picture. The
staff review was supposed to be limited to ensuring Kalshi
could complete a checklist, “23 Core Principles of a Designated
Contract Market,” which included keeping good records and
having the requisite financial resources, among other items.
The five commissioners would then make a decision. With 55
Trump in the White House, three of them were Republicans
ideologically predisposed to the further proliferation of mar-
kets into American life.
For more than a year, Lopes Lara and Mansour, along
with their lawyer Bandman, the ex-CFTC official, answered
the DMO’s questions while lobbying the commissioners on
Zoom about the potential of event markets to help the world
mitigate risks and make better decisions. Before each meet-
ing, they would write a script and memorize it word for word.
Kalshi’s case was bolstered by the emergence of a number of
prediction markets that hadn’t bothered to try to get regulatory
approval. One upstart, Polymarket, let its customers bet hun-
dreds of thousands of dollars anonymously using crypto-
currencies, making it difficult to track. Another market,
Augur, which facilitates private wagers between parties using
the blockchain, couldn’t regulate bets at all and thus hadn’t
stopped users from betting on whether public figures would be
assassinated. Kalshi, by comparison, argued it was doing every-
thing right. (The CFTC would go on to fine Polymarket $1.4 mil-
lion in January 2022 for running an unlicensed exchange.
Polymarket says it’s now complying and is “excited to help
pioneer the next phase of smart contract-based financial solu-
tions in collaboration with regulators.”)
Despite the overriding reservations of some DMO members
about the riskiness of event contracts, Kalshi demonstrated
it could meet the 23 criteria and was approved unanimously.
“Once they check all of the boxes, they’re in,” says
one person with direct knowledge of the CFTC’s
review process.
 Bloomberg Businessweek May 30, 2022

In February 2021, three months after getting CFTC
approval, Kalshi issued a press release announcing
the funding from Sequoia, which was joined by a
group of investors that included Charles Schwab and Henry
Kravis. “Tarek, Luana and team have created an entirely new
model for how we invest in and engage with what’s happening
in the world,” wrote Sequoia’s Lin, who had joined the board.
Up to this point, the CFTC’s process for vetting their
exchange hadn’t involved asking exactly what markets they
planned to run. That discussion came after approval, by
which stage momentum was already firmly on Lopes Lara
and Mansour’s side. When Kalshi sent across a preliminary
list of 30 proposed contracts in March, it unleashed chaos
within the already overworked DMO. The division was set up
to deal with exchanges that might create two or three new
markets a year. Kalshi’s business model called for new ones
practically every day.
Some of the proposals were uncontroversial, such as ques-
tions tied to the weather or gross domestic product. Others,
among the initial list and submitted subsequently, seemed
troubling. DMO officials worried that contracts tied to Covid-19
numbers, for example, amounted to gambling on human
suffering, which is one reason markets on war and terror-
ism are prohibited. (Similar logic doomed ex-admiral John
Poindexter’s Policy Analysis Market, a controversial George
56 W. Bush-era plan to uncover intelligence by getting secu-
rity analysts to bet on events in the Middle East.) Regulators
also couldn’t see how speculating on who would win the
Grammys, say, was any less a form of gambling than betting
on the New England Patriots to win the Super Bowl. Futures
The idea that traders might be tempted to interfere in
prediction markets to influence outcomes wasn’t some para-
noid fantasy. In 2013 academics David Rothschild and Rajiv
Sethi discovered that an unidentified party had lost $7 million
buying Mitt Romney contracts on Intrade, a now-defunct,
unlicensed Irish platform, in the runup to the 2012 election,
even after it was clear that the candidate’s prospects had
faded. The authors speculated that the trader, whom they
dubbed the “Romney Whale,” may have been looking to
boost morale and keep donations coming in.
Kalshi played down such risks, noting that manipulation
and insider trading were concerns for any market. It had built
a surveillance system and said it would hire a team to mon-
itor for anything improper. “People trade on events all the
time—they just use options and other instruments that are
harder to track. This is a way to bring all that into the open,”
Wisdom of Crowds
Kalshi’s founders say their event markets help decision-makers anticipate
future trends. A look at the contracts on offer as of May 23
Price of oil
From March 22–June 6
>$125 Yes 27¢ No 76¢
<$90 Yes 17¢ No 86¢
Investors who bet 17¢
on the price of oil falling

contracts are supposed to allow traders to protect themselves Inflation below $90/a barrel get
$1 if they’re right
against economic risk, and it was hard to understand who, In May
apart from perhaps John Legend, might need to hedge the
winner of best R&B album. >0.6% Yes 46¢ No 58¢
For the dozen or so members of the DMO’s product review >0.5% Yes 62¢ No 41¢
team, event contracts raised novel questions. Under the
Commodity Exchange Act, the regulators could block con-
tracts tied to gaming that weren’t in the public interest, but New Covid-19 wave
no one had taken the time to define what gaming actually
was. Beyond that, it was unclear whether the CFTC had a Before fall
right to consider whether a contract was in the public inter- Yes 66¢ No 38¢
est or if the agency had an obligation to do so in every case.
And how was it supposed to decide what was in the public
interest anyway? “To be honest, the whole thing was a mess,” Unemployment rate
another person with direct knowledge of the CFTC review
says. The agency declined to comment for this story. >6% in any month in 2022
An even bigger worry among CFTC staff was that some Yes 15¢ No 88¢
event contracts might be vulnerable to cheating. Kalshi, for
instance, wanted to run a market on whether bees would
be placed on the endangered species list. The DMO pushed Fed interest rates
back, saying it saw two problems that were symptomatic of
the whole asset class: one, that traders might try to press December 2022 meeting
government officials for information; and two, that the offi- >2.50% Yes 59¢ No 45¢
cials themselves could delay adding the insects to the list so
they could cash in. >2.75% Yes 42¢ No 62¢
Bloomberg Businessweek The
Mansour says, summarizing the argument. Kalshi also didn’t
include contracts on elections, which the Democrats on the
CFTC might have considered a red line.
By that summer, Lopes Lara and Mansour were poised to
introduce kalshi.com, but they remained locked in a stale-
mate with the DMO. Product review staffers, meanwhile,
were exasperated at spending half their time dealing with
an exchange that represented such a minuscule propor-
tion of the total derivatives market. During the impasse,
Lopes Lara and Mansour continued to press the politically
appointed  commissioners.
By now, Tarbert, the chairman, had moved on, but Kalshi
found another advocate in Republican Brian Quintenz, a
crypto-loving former hedge fund manager and staunch free
marketeer. He was unmoved by the DMO’s concerns, arguing
not only that speculation on the kinds of events that Kalshi
proposed was desirable, but also that the agency had no legal
standing to prevent it. Earlier in the year he’d lent his support
to an unsuccessful bid to allow futures tied to NFL games.
Others on the commission were more circumspect, but all
were broadly supportive. And given the ambiguities in the law,
they worried they would be on shaky ground if they ever tried
to block a contract and Kalshi sued. With no permanent chair-
man in place, there was a vacuum at the top of the agency.
To “stay,” or block, a contract, DMO staff required the
backing of a majority of commissioners, and it became
increasingly clear that, in all but a handful of cases, they
didn’t have it. “To paraphrase Hamilton,” one of the people
familiar with the review says, “we didn’t have the votes.” By
the second half of 2021, new contract requests were arriv-
ing at the DMO almost daily, and eventually the division,
demoralized and overrun, accepted defeat and stopped
fighting back, some of the people say. By the end of the
year, three senior DMO officials, including the head of the
division and the head of the product review team, had left
the agency, making it easier than ever for Kalshi to list its
contracts unimpeded.
Today, Kalshi is growing. Its staff of 32 operates out of an
office in New York’s SoHo with big windows and exposed
brick. It’s also added some new names to its board, includ-
ing Quintenz, who left the CFTC 10 months after Kalshi was
approved. He says he joined because of “my interest in the
hedging and risk management opportunities event contracts
could provide the market.”
As of mid-May, there were 75 markets on the company’s
website, such as “Will there be negative GDP growth by Q4?”
and “Will NASA land a person on the moon before 2025?” The
exchange recently reached 2 million contracts traded a week,
a jump from where it started but still a comparatively tiny fig-
ure compared with other futures exchanges. Many of the early
adopters are prediction market enthusiasts, lured away from
PredictIt and Polymarket. Wagers on the site are currently
capped at $25,000, but Kalshi has said it hopes to increase
that to $100,000 and then beyond, depending on the market.
Tech Issue May 30, 2022
“To paraphrase
Hamilton,
we didn’t have
the votes”
Lopes Lara and Mansour understand that, with the
regulatory drawbridge down, they need to move quickly.
CME Group Inc., the Chicago futures exchange, recently
announced it was planning a foray into event contracts tied
to financial indexes. Kalshi’s next step in attracting custom-
ers will be to release a smartphone app. After that it hopes
to announce a partnership with one of the large brokerage
firms. Sequoia is a major investor in Robinhood Markets Inc.,
the retail brokerage phenomenon that now has 22 million
customers. Perhaps one day, Robinhood users could be given
access to Kalshi so that, after picking up their phones to buy
shares in GameStop Corp., they’d be prompted to place a bet
on the Oscars or the next Federal Reserve commissioner. 57
There are those, such as Democratic Representative Sean
Casten of Illinois, who accuse Robinhood and its competi-
tors of deliberately gamifying trading to encourage addiction,
but that kind of criticism isn’t something Kalshi seems overly
worried about. Kalshi’s customers aren’t “at the moment”
able to wager more than they’ve deposited, Mansour says,
which makes it hard to rack up debt. He won’t, however, rule
out introducing leveraged bets at some point down the road.
The tension over event contracts brings to mind another
episode in the CFTC’s history. In 1994, Chairman Brooksley
Born proposed introducing regulations to curb the nascent
market for financial derivatives. She was resisted by Fed
Chairman Alan Greenspan and others within the govern-
ment, who claimed it would stifle innovation and push
capital offshore. Unconstrained, derivatives grew into a
trillion-dollar industry, until 2008, when they were blamed
for playing a central part in the financial crisis.
Today, with a midterm election looming, it seems reason-
able to ask whether Kalshi plans to get involved. A record
125 million shares were traded on PredictIt on the outcome
of 2020, and elections have historically been the biggest draw
in prediction markets. “We can’t discuss specifics,” Mansour
says. “All I can say is, you know, we’re always working on
expanding the universe of things that people can trade on.”
Any contracts on elections would require a green light
from the CFTC, and with three of the five commissioners
currently Democrats, that might be difficult. But the
calculus would quickly change with a Republican in
the White House.
 Bloomberg Businessweek David × vs. The Goliaths × May 30, 2022

By Austin Carr

58

You’re Browsing All

ILLUSTRATION BY 731
Bloomberg Businessweek The Tech Issue May 30, 2022

59

A startup wants to discard

Wrong the standard formula for the
web browser
 Bloomberg Businessweek
Josh Miller, a 31-year-old product developer, spent a recent
Thursday morning at his Brooklyn office, sniping at Google’s
Chrome web browser and its Apple Inc. rival, Safari. The
experiences are “broken,” he says, staring at both brows-
ers running side by side on his computer. They have almost
indistinguishable interfaces, including the gray menus and
wide address bars wasting valuable space across the top of
the screen to display what he calls “URL gibberish.” Then
there are the cluttered tabs that collapse into teeny, inscruta-
ble icons when too many are open, making his laptop scorch
like a just-microwaved Hot Pocket. “Why do I have seven ver-
sions of the same Google Doc tab open across three windows?”
Miller says. “It doesn’t make any sense!”
Power users often exchange laments about their poor tab
management as a way to humblebrag about their freakish
workloads. But in Miller’s view, they shouldn’t be too hard
on themselves. What seems like their organizational short-
coming is actually evidence of the deeply entrenched power
of several large tech companies that, frankly, don’t have much
reason to care about user misery. Maybe it’s time to admit,
Miller says, that the basic assumption of what a browser is—a
rectangle with a topside URL and a row of tabs, each display-
ing a separate web page—could be all wrong.
Miller’s blandly named startup, the Browser Co. of New
York Inc., has raised about $25 million from strategic inves-
60 tors such as Salesforce and big-name founder-CEOs includ-
ing Stripe’s Patrick Collison and Zoom’s Eric Yuan to explore
that possibility. “This is the place where most people spend
most of their time on their computers, but from a building-
blocks level, the browser has not had a lot of brand-new
thinking in a really long time,” says Instagram co-founder
Mike Krieger, another investor.
The first thing a newcomer notices in Miller’s browser,
called Arc, is the lack of menus or tabs across the top.
Navigation tools have been pushed instead to a skinny side
panel hugging the web page vertically. Users are prompted to
tailor this panel to their day-to-day habits by creating spaces,
say, for work or personal interests, each with its own dis-
tinct bookmarks and colors. Swiping will slide through these
mini-libraries.
A grid of buttons pointing toward favorite destinations
remains glued to the top of the panel. Each of these services
operates more like a desktop app than a web page. Clicking
the Gmail icon will take the user back to a single, original
Gmail inbox, rather than reloading gmail.com in tab after tab.
Hovering the mouse over a Google Calendar button will sur-
face a tiny panel of upcoming appointments. Spotify comes
with an embedded player to shuffle through songs. Any tabs
opened throughout the day appear at the bottom of the panel
and—this can take some getting used to—are automatically set
to close and archive in 12 hours.
Miller modestly suggests that these features aren’t only
a matter of design—they’re the tools of reshaping the inter-
net economy. He’s aligning himself with companies such as
Epic Games Inc. and Spotify Technology SA which argue that
May 30, 2022
gatekeepers like Apple and Google are incentivized to keep
consumers confined to their device and software ecosystems
so they can maintain control and extract app-store fees. “If
our vision succeeds, your hardware becomes much more of
a commodity,” he says. “It’s a world in which applications are
decentralized and no one’s taking a 30% cut because no sin-
gle company controls the internet.”
Concern that browsers are wielded for market domination
isn’t new. In the 1990s, Microsoft Corp. preinstalled Internet
Explorer on machines running its Windows operating system.
This strategy allowed the browser to grab a 95% market share,
annihilating an innovative competitor—Netscape—in the pro-
cess, before becoming a central plank of the antitrust case
against Microsoft. The subsequent loosening of Microsoft’s
grip over the web is often credited with facilitating the rise of
Google and other internet giants—an historic shift in the bal-
ance of power within the tech industry. Chrome and Safari
eventually came to dominate about 84% of the worldwide
browser market, according to tracking site Statcounter. Even
major players such as Microsoft and Mozilla Corp. now cap-
ture only single-digit shares.
Miller joined the browser wars about two years ago. A
Princeton dropout, he’d sold an online-conversation tool
named Branch to Facebook in 2014, where he spent almost
two years before leaving to do stints at the Obama White
House’s Office of Digital Strategy and the venture capital firm
Thrive Capital. While searching for a startup idea, Miller and
Hursh Agrawal, his Branch co-founder, became convinced that
browser stagnation presented a big opportunity.
Miller and Agrawal’s view was that all the available products
had failed to innovate for too long. The biggest differentiation
for the market leaders seemed to be just their connections to
other popular products. Chrome was integrated into Google
services like search and into its popular Android phones.
Safari offered an interface similar to Chrome’s and became
the default for Apple’s desktop and mobile devices.
At first glance the converging approaches seemed inevi-
table, proof that the browsers were settled science for how
to navigate the modern internet. Competing browsers Brave,
Firefox, Microsoft Edge, and Vivaldi looked almost identical.
Yet everyone Miller and Agrawal talked with had incessant
complaints about the cookie-cutter interfaces. So starting in
March 2020, they began building Arc. They experimented with
new, sometimes bizarre, approaches to menus, bookmarks,
and customizable components. No familiar browser features
were off-limits.
When they shared a rough Arc prototype with industry
colleagues a year later, Darin Fisher, who was Chrome’s vice
president for engineering until leaving Google in early 2021,
remembers being blown away: “I was like, ‘Oh my God! This
is the stuff I’ve wanted to be able to do for so long!’ ”
The team running Chrome had to contend with one
important factor: Even a slight design tweak to a product
with 2 billion users could have significant financial conse-
quences, according to Fisher. More “pan-galactic” changes,
 Bloomberg Businessweek The
he adds, became almost impossible. During his last decade
at the company, his team was very aware of the tendency
toward tab chaos and even had ideas about how to tweak
their browser to improve it. “The Chrome team has built all
these things but has been unable to ship them” because fea-
tures that sorted out the mess tended to result in fewer google.
com search queries—and fewer Google ads, says Fisher, now
an Arc adviser. (A Google spokesperson declined to comment.)
Apple, meanwhile, has been hesitant to make dramatic
changes to Safari. When the Safari team tested relocating the
address bar to the bottom of iOS screens last summer, users
revolted, forcing the company to backpedal and make the
tweak optional. A former high-level Safari developer, who
asked not to be named because this source was not authorized
 Arc’s side-navigation tools offer applike interactions
to speak about internal issues at Apple, says the team “started
to be more conservative” afterward and didn’t want to do any-
thing that might affect the company’s device sales. An Apple
spokesperson says Safari has introduced many recent innova-
tions including personalized setups, tab groupings, and pri-
vacy protections.
Arc, by contrast, isn’t defending any other business. This
stance means it’s not afraid to serve fewer (or any) ads. By
extension, that leaves it more open to a fundamentally dif-
ferent environment. Arc comes with a built-in ad blocker and
promises not to track users with cookies or log their search
queries. It will be free upfront; the team is looking at develop-
ing premium subscription features for enterprise users, per-
haps somewhere around $12 a month, echoing the freemium
model of Slack Technologies Inc., Dropbox Inc., and other
productivity services.
SCREEN: ARC
Miller describes Arc as a kind of lightweight online operat-
ing system where apps are simply URLs. His company’s larger
Tech Issue May 30, 2022
goal is to tilt the basic computing experience away from app
stores and back to a more open experience. “The center of
gravity is moving back to the web,” he says.
Arc is betting this approach will appeal to developers
increasingly trying to push back on Big Tech. Epic, for exam-
ple, has sued Apple and Google over alleged anti-competitive
practices and now lets gamers play its flagship title Fortnite
straight from a browser. Spotify and Match Group Inc. have
lobbied regulators to allow alternative payments via the web,
bypassing Apple’s and Google’s 15% to 30% commissions.
(Both Apple and Google contend that their fees are fair.)
A skeptic might note that Google’s Chrome OS is also a web-
based operating system and that it has both a colossal head
start and the backing of a trillion-dollar company. Even Miller
realizes his ambitions sound
absurd; he jokes about his com-
pany’s 0% market share. Still, he
“The center of gravity is
moving back to the web”
says, Arc’s waitlist has received
tens of thousands of sign-ups. 61
In anticipation of Arc’s pub-
lic release this fall, Browser Co.
is now signing up thousands of
beta users per week.
In my time using Arc, I’ve
been struck by the product’s
smooth, playful, and at times
disorienting experience. I’ve
enjoyed its clever tab organiza-
tion and found its eclectic fea-
tures refreshing. Screenshots,
instead of remaining static images, come attached with a link
to their source website, for example, while a whiteboarding
tool called Easel allows you to create and share a sketchpad
within the browser.
Other startups have tried to make alternatives to the dom-
inant browsers, and none have gained substantial traction.
Can a product that asks users to radically reconfigure their
browsing routines succeed where they’ve failed? Chrome and
Safari come with significant conveniences, given users have
spent years establishing defaults and loading up password
managers and payment options. Inertia can be a hell of a drug.
But Arc investor Dylan Field, chief executive officer of soft-
ware design startup Figma Inc., says it’s high time browsers
undergo profound innovation rather than only more incre-
mental improvement. His team builds primarily for the web.
As Field says, “You’re not ever going to succeed in a
David-and-Goliath scenario if you’re trying to do the
same thing just slightly better.”
 Bloomberg Businessweek Two Wheels
By Ira Boudway
Are We
Doing S Still
cooter
Lime says people are scooting
more than ever, but providing
urban transit is a hard way to make
unicorn-level profits
When Covid-19 first struck in early
62 2020, it hit Lime hard. The electric-
scooter-sharing startup was forced
to pause service in most of the more
than 100 cities where it operated
worldwide. At one point it was within a
few months of running out of cash.
But for a company trying to get
people to rethink the way they
get around each day, the massive
disruption may have been a blessing in
disguise, according to Chief Executive
Officer Wayne Ting. “When people
change their transportation routines,
usually it’s because they move homes
or change jobs,” he says. “With Covid,
it’s almost as if the whole world
changed homes or moved jobs.”
Scooter sharing became an
unlikely craze among venture
capitalists in late 2017, when Bird,
Lime’s chief competitor, started its
service on the sidewalks of Santa
Monica, Calif. Lime, which began
that year as a bike-sharing company,
added scooters the following year.
After burning through hundreds of
millions of dollars, both companies
were wavering in early 2020. That
January, Lime shut down operations
in 12 markets and laid off about
× vs. Four Wheels
Photograph by Cody Pickens
s?
100 workers, or 14% of its workforce.
The pandemic turned the mounting
crisis into an existential one. In May
2020, Lime announced a $170 million
round of funding led by Uber
Technologies Inc. Ting, a former Uber
executive who’d been at Lime since
2018, became CEO on the same day.
As part of the deal, Lime took over
Uber’s micromobility division, Jump.
Lime got a lifeline; Uber offloaded a
money-losing side business.
In November 2021, Lime raised an
additional $523 million in convertible
debt and term loans. Its ridership didn’t
really begin to recover until this spring
when loosening Covid restrictions, the
return of many white-collar workers
to their offices (at least part time), and
rising gas prices coaxed riders onto
the streets in the more than 230 cities
where Lime now operates. The number
of trips taken in the first three months
of this year is up 75% over the same
period last year, bringing the company
roughly back to where it was in 2019,
though those trips are spread over
more cities. In March, Lime crossed
300 million cumulative trips worldwide.
Last fall, Ting said the plan was to
go public in 2022, but the markets
× May 30, 2022
aren’t playing along. Bird’s share
price has dropped 90% since it joined
the New York Stock Exchange via a
SPAC in November—and Lime’s plans
remain uncertain.
Ting says his company is making
progress. Last year it was profitable
for every month from June through
October, he says, its best performance
to date. Revenue so far this year is up
70%. Lime, he says, should only gain
more traction as it becomes clear to
people that replacing large, privately
owned gas-powered cars with large,
privately owned electric vehicles won’t
be enough to address the climate
crisis. “We have to fundamentally
change our transportation system,”
Ting says.
Climate scientists back him
on this, but it’s less clear whether
scooter-sharing services can
succeed as for-profit enterprises.
“When you are talking about
shared assets,” says Colin Murphy,
research and consulting director of
the Shared-Use Mobility Center, “if
there is a real public value to them,
they usually end up being at
least subsidized, if not fully
run by the public sector.”
 ends
e re comm h loc al
Lim g
lthou The Tech Issue
ets, a May 30, 2022
helm laws vary

Lime’s headcount Lime’s scooter & e-bike

fleet
After a contraction in 2020, Lime is again
 May 2018  May 2022 increasing the number of cities where
it operates, including many smaller
metropolitan areas. “We work incredibly
85 25k well in places like Tulsa, Okla.; or Columbus,
Ohio; or Omaha, Neb.,” Ting says.

750 200k

Lime’s operating cities

32
 North America  Europe  Rest of the world

60 32
2018
2022
5 160

17

Finding a way to replace scooters less often is key to making

the economics sustainable. The off-the-shelf models Lime
first used lasted less than two months on average. It spent
over a year designing its latest model to endure the rigors of
shared use. Powered by a replaceable battery, it’s built to last
five years in the field.
63

Lime scooter life spans

Gen 1
Gen 2
Gen 3
Gen 4

0 5 years
The swappable
battery can also
be used in Lime’s
e-bikes. Monthly average users haven’t returned to pre-pandemic
levels, but they’re creeping up steadily. According to
Lime, those users are also taking more and longer trips,
trends that help it get more revenue out of every scooter.

Global monthly active users of select

e-scooter apps, April of each year
 Lime  Voi  Tier  Bird

12m

2018 2022
 Riding Lime’s most recent scooter model DATA: LIME, DATA.AI
 Bloomberg Businessweek Drivers × vs. Ride-Hailing × May 30, 2022

By Jackie Davalos and Drake Bennett Photographs by Damon Casarez

64
–0:03

Ride-hailing compani
es
are gaming drivers.
Drivers are trying to g
ame back.
It hasn’t been a joyrid
e
The Nudge Conund
 Bloomberg Businessweek The Tech Issue
In 2008, Universit y of Chicago
economist Richard Thaler and Harvard
Law School professor Cass Sunstein
published Nudge: Improving Decisions
About Health, Wealth, and Happiness.
It’s a breezy tour through behavioral
science, especially the ways in which
decision- making can be shaped by
what the authors call “choice architec-
ture.” When a store puts sugary snacks
at eye level so a customer is enticed to
buy them, that’s choice architecture,
and when credit card companies set low
minimum payments to get people to pay
interest, that’s choice architecture, too.
The book’s argument is that we should
enlist so-called nudges to socially bene-
ficial ends, such as automatically enroll-
ing workers in 401(k) plans. In the years
since the book’s release, policymakers
have occasionally adopted the ideas,
with mixed results.
Where nudges have really caught on
is in the part of the tech world that uses
algorithms to mobilize and manage free-
lance workforces. Armed with troves of
data and the quickly improving capabil-
ities of machine learning, online plat-
forms such as Uber Technologies Inc. and
Lyft Inc. use nudges to coordinate mil-
lions of independent workers and extract
maximum productivity. This model let
Uber scale quickly, with the force of a
command-and-control structure, even
while corporate framed its drivers as
independent, self-directed, and entrepre-
neurial. The company’s rapid growth was
seen as proof that the human-machine
relationship could work, and it became
a template for a generation of startups
looking to take a cut of people’s labor
without putting them on staff. The con-
cept of directly connecting customers to
contractors paved the way for market-
places including home-cleaning (Handy),
pet-sitting (Rover), and, of course, food-
delivering (Grubhub, DoorDash, and
Uber again with Uber Eats).
For more than a decade now, gig
economy companies have told work-
drum ers that signing up for ride-share or
delivery side hustles will allow them to
be their own boss, to choose how and
when to work in a way that fits their
lifestyles. Instead, workers have found
May 30, 2022
themselves managed by incentives and
code. Sophisticated software holds real-
time auctions every second, matching
prospective customers with drivers or
couriers in a vast marketplace. This sys-
tem, the businesses tell investors, lets
them grow—and if necessary shrink—
faster and with less friction than a com-
pany reliant on old-economy ideas such
as salaries, employees, and managers. If
the practical applications of nudge the-
ory sound like a win-win, then the com-
panies accomplished their mission.
To many drivers, the flexibility of
their contractor status is indeed a bene-
fit, but many also describe an experience
plagued by uncertainty and arbitrari-
ness. The business model they partic-
ipate in depends on an asymmetry of
power and information: Typically, for
example, they have to decide whether
to accept a ride without knowing where
the pickup or drop-off will be. Unable
to assess how much money a trip will
bring in, they’re at a disadvantage in the
great labor-bidding scrum. “They call us 65
independent workers, as if we have con-
trol over what goes on in the app,” says
Anthony Arnold, who drives in Las Vegas.
“Sure, you can make a bit of money, but
it’s not going to be on your terms.”
Even before Covid-19, in other words,
being managed by a ride-hailing app
felt like competing with a wily, well-
funded operation that knew how to
keep drivers driving, tip the odds away
from them, and take a bit more of their
money. And today the number of vari-
ables has only grown. Drivers say rates
fluctuate more and more now and that
making an informed decision about
what rides to accept is predicated on a
game whose rules are constantly chang-
ing. It’s as if the app that governs their
work life has taken the uncertainty of
the current moment, fed off it, and
supercharged it. In the process, the
whole intricately choreographed sys-
tem built on the software is being put to
an unprecedented test.
Once drivers log on, the platforms
keep tabs on their every move: the
percentage of available pick-
ups that they accept; the time
of day they typically work;
 Bloomberg Businessweek
the neighborhoods they
prefer; the ratings passengers
assign after a ride. For their
part, drivers see a dashboard with bar
charts of weekly earnings, trips com-
pleted, and fare breakdowns. But their
visibility is limited.
Take surge pricing. If demand in an
area outpaces supply, the apps light up
with flashing spots on a heat map, and
fares climb to draw cars. The platforms
send push notifications to drivers who
are about to log off, telling them how
close they are to advancing to the next
performance tier, which unlocks ben-
efits such as the ability to see a trip’s
duration and direction. Or, as in a video
game, bonus offers pop up: $30, say, for
completing 10 consecutive rides.
What should be a straightforward
chance to make more money can be
a Kafka-esque ritual benefiting the
platforms more than the drivers.
Insistent pings prompt them to accept
a fare before they’ve completed the
66 one they’re on. Drivers are also part of
rewards programs. They accumulate
points by being behind the wheel at cer-
tain hours, maintaining high customer
approval ratings, and keeping cancel-
lation rates low. The points help them
reach higher tiers and are redeemable
for discounts on fuel and repairs. But
the thresholds for qualifying for various
perks can be stringent, such as needing
to accept 9 out of 10 rides or keeping
an almost-perfect customer rating. And
after a “qualifying” period (Uber’s is
three months), the score resets.
These measures, Uber and Lyft say,
prevent drivers from cherry- picking
rides and ignoring potentially less prof-
itable customers. (The companies also
say that they’re focused on increasing
transparency by piloting new programs
to improve the driver experience,
though an Uber spokesperson says “we
fundamentally disagree with the prem-
ise” that driver pain points have gotten
worse.) But the lack of clarity also con-
tributes to a sense of futility. “Even with
all the data we can see and track, it’s
hard to know what’s going on inside
the algorithm,” says Surgeet Singh, who
drove for Uber and Lyft for four years
before quitting in February to work as
a courier for GrubHub and DoorDash. A
December Pew Research Center report
found that fewer than half of gig plat-
form workers said they understood
how their pay was calculated. “These
workers have very few ways of know-
ing whether they can count over the
long-term on the level of pay they’ve
achieved,” says Drew Ambrogi, a senior
campaigns strategist at advocacy orga-
nization Coworker.org.
The resulting resentment helps explain
the difficulties ride-hailing companies
have had getting drivers back on the
road. Two years ago, lockdowns crip-
pled demand for ride-hailing and trig-
gered a driver exodus. Many found other
work that didn’t involve sitting in con-
fined spaces with strangers. Some were
better off collecting unemployment ben-
efits. More recently, as life has fitfully
returned to normal, ride-hailing demand
has climbed back. To meet it, Uber and
Lyft have done what the basic laws of
economics would suggest, spending hun-
dreds of millions of dollars in the past
year on incentives and bonuses. Before
expenses, driver earnings averaged a lit-
tle more than $24 an hour in March, a
roughly 56% increase from pre-pandemic
pay. That was, in large part, because of
these perks, according to Gridwise, a gig
worker productivity app.
But wait times and fares remain ele-
vated, suggesting constrained supply.
This situation has boosted revenue for
the companies but also uncertainty
about how reliably they can manage
contractors, raising the possibility that
the mechanism that once subsidized
cheap rides for customers is no longer
tenable. Meanwhile, drivers continue
to leave the industry. A’Maya Davidson
was a long-haul trucker before starting
to drive for Uber and Lyft four years
ago. Now she’s going back to trucking.
“I want more security,” she says. “I’m
just tired of all the games. There’s really
no upside to this job anymore.” Uber,
though its spokesperson, says its US
drivers recently had the highest 28-day
retention rate since the onset of Covid.
The labor shortage has given the
May 30, 2022
remaining drivers new leverage. “The
power dynamic is rebalancing,” says
Mareike Möhlmann, assistant professor
of information and process management
at Bentley University, who co-authored
a 2017 study on drivers and algorithmic
management. It’s a curious moment, she
says. Drivers feel emboldened even as
they’re not getting a commensurate cut
of the inflated prices that customers are
paying, and they’re working for compa-
nies that seem unwilling to disrupt the
model that’s helped them acquire mil-
lions of customers. The shift may be
temporary. But if it’s not, the compa-
nies may have to rethink the manage-
ment model that’s been central to their
growth and without which they may not
be viable.
As the platforms contemplate their
chess moves, so do the drivers. Prices
for gas—long one of drivers’ biggest out-
of-pocket expenses—have spiked almost
50%, devouring take-home pay. That,
along with the stubborn persistence of
Covid itself, has only heightened the
furious gamesmanship that happens
behind the scenes every time a passen-
ger hails a ride.
Even the new bonuses offered to
entice them, drivers say, are gamified
to make them harder to claim. They say
Uber has shortened the time to accept a
ride from 20 seconds to about 5. (Uber
disputes this. Its spokesperson says driv-
ers have as much time now—more than
10 seconds—as they’ve always had.) In
September, Lyft tweaked its surge pric-
ing model by replacing “personal power
zone” heat maps, which rewarded driv-
ers for flocking to high-demand areas by
offering rewards, with dollar amounts
that increased the longer a driver stayed
in the zone. Then came “bonus zones,”
and the dollar amounts stopped increas-
ing. Bonus zones “may update based on
how busy it is in real-time,” according to
Lyft’s website.
The companies have also made
subtle policy changes that, in combina-
tion, can affect income. Last year, Lyft
changed the fee drivers collect when
a rider cancels from a flat $5 to a vari-
able amount—often less than $5—based
on how quickly the cancellation was
Bloomberg Businessweek
“If there’s a way to
beat them, I’m going
to figure it out”
made. Uber tweaked its surge pricing
incentives, which vary by market, by
replacing a multiplier on fares with a set
dollar amount: A $20 fare with a “2x”
bonus was $40; now it’s $22. Recently,
Uber rolled out a feature called upfront
fares that lets drivers see more details
of a prospective ride before accepting
it. The company says this lets drivers
exercise more control. But the update
came with a trade-off. Uber removed the
ability to see how pay—typically based
on fixed time and distance rates—is cal-
culated. Where before drivers had two
data points, they now have only one: the
flat fare.
The difficulty of keeping abreast of
these changes is feeding a niche indus-
try of bloggers, YouTubers, consul-
tants, and even venture-capital-backed
apps—a kind of gig economy economy.
One of the first was the Rideshare Guy
blog, which longtime driver Harry
Campbell started in 2015. It’s since
exploded into a media operation with
newsletters, podcasts, and videos
offering tips for maximizing income
across the gig economy. Other driver-
influencers have emerged as well, such
as Torsten Kunert of Los Angeles, also
known as the Rideshare Professor,
whose YouTube channel has more than
53,000 subscribers. Kunert teaches
courses on identifying earnings pat-
terns and mastering surge bonuses. He
says sign-up rates have doubled in the
past six months.
Some startups are offering to simplify
the calculations behind take-home pay.
Solo, founded in Seattle in 2020 by for-
mer Uber executives, announced last
year that it had raised $5.5 million. Its
app gives drivers hour-by-hour earnings
predictions, and the company has prom-
ised to make up the difference if their
projections mislead drivers.
It’s possible to look at all this and
see signs of hope for drivers. They
The Tech Issue
Avedian
 The ride-hailing coach charges $75
now have a slew of options, says Gad
Allon, a professor at the Wharton
School who studies the gig economy.
His research estimates that about 86%
of drivers work across multiple apps:
driving for Uber and Lyft, for exam-
ple, while delivering for DoorDash and
Instacart. Forty percent of those con-
tractors toggle between platforms in
the course of a day. “It cannot just be
‘We will offer you more flexibility and
will pay you per transaction,’ ” Allon
says. “Even Amazon has realized this
is going to be the issue of the next
decade,” he says, citing its move to pro-
vide free college tuition for select front-
line employees. Walmart Inc. adopted a
similar program.
For their part, Uber and Chief
Executive Officer Dara Khosrowshahi
now talk about being an “earner-centric”
company, tending to the concerns of driv-
ers and couriers. That pledge builds off
an effort that started last year when Uber
introduced a team dedicated to boosting
retention. “Coming out of the pandemic,
we knew it was going to be hard to win
drivers back, and we took that moment
to introspect and reflect as a company,”
says Carrol Chang, senior director and
global head of driver and courier oper-
ations. Chang says that in addition to
May 30, 2022
for a 45-minute session
more transparency around pricing, the
team has tackled issues that have long
rankled drivers, such as outdated maps, 67
payment glitches, and slow chat sup-
port. “The driver experience has to be
at the center of what we do,” she says.
A Lyft spokesperson says the company
is testing upfront pay in select markets
and that, in April, it started letting drivers
take 15-minute breaks without losing their
bonuses on back-to-back rides.
Of course, there are some for
whom the abstruse cat-and-mouse
game is almost the point. “I’m not an
Uber hater or Lyft hater,” says Sergio
Avedian, who’s been driving for five-
plus years and completed more than
5,000  rides combined for Lyft and
Uber in the LA area. “I like the game.
If there’s a way to beat them, I’m going
to figure it out.” The retired deriva-
tives trader tracks data from his trips
in a spreadsheet that includes pickup
locations, destinations, mileage, time
of day, tips, and other earnings. As a
ride-hailing coach, he charges $75 for a
45-minute call and co-hosts a YouTube
show called Show Me the Money Club.
He says it takes about six months to
get good at mastering nudges.
But these days, people don’t
always stick around that long.
 Bloomberg Businessweek Scientists × vs. Parents × May 30, 2022

By Carey Goldberg
Illustration by Min Heo
d d s
t t e r- O
Be
B a b ie s
G enetic te sti
companies p ng
Simone Collins knew she was pregnant the moment she
answered the phone. She was on her sixth round of in vitro
ro m i s e fertilization treatments and had grown used to staffers at Main
t h e y c a n p re Line Fertility starting this kind of call with the words “Oh, hi,

an embr yo’s dic t Simone,” in a subdued tone, voices brimming with sympathy.
This time, though, on Valentine’s Day, the woman on the other
p ro b a b l e end belted out a cheery “Oh, hi, Simone!” Embryo 3, the fer-
f u t u re h e a l t h tilized egg that Collins and her husband, Malcolm, had picked,

S o m e p a re n t . could soon be their daughter—a little girl with, according to their

tests, an unusually good chance of avoiding heart disease, can-
s d
w a n t t o s t o p o n’ t
cer, diabetes, and schizophrenia.
68
t h e re
Bloomberg Businessweek The
This isn’t a story about Gattaca-style designer babies. No
genes were edited in the creation of Collins’s embryo. The
promise, from dozens of fertility clinics around the world, is
just that the new DNA tests they’re using can assess, in unprece-
dented detail, whether one embryo is more likely than the next
to develop a range of illnesses long thought to be beyond DNA-
based predictions. It’s a new twist on the industry-standard
testing known as preimplantation genetic testing, which for
decades has checked embryos for rare diseases, such as cystic
fibrosis, that are caused by a single gene.
One challenge with leading killers like cancer and heart dis-
ease is that they’re usually polygenic: linked to many differ-
ent genes with complex interactions. Patients such as Collins
can now take tests that assess thousands of DNA data points
to decode these complexities and compute the disease risks.
Genomic Prediction, the five-year-old New Jersey company
that handled the tests for her fertility clinic, generates poly-
genic risk scores, predicting in percentage terms each embryo’s
chances of contracting each disease in the panel, plus a com-
posite score for overall health. Parents with multiple embryos
can then weigh the scores when deciding which one to implant.
They just might need to add a few grains of salt to the scale.
In general, the percentage differences from embryo to
embryo are slight and could well be outweighed by the effects
of environmental factors. But Genomic Prediction adds up all
the genetic data into overall health scores that start at a baseline
for average risk of zero, with risk declining as the score rises.
The embryo Collins and her husband selected had a score of
1.9, compared with a –0.96 for their lowest-scoring embryo.
Collins says that doesn’t feel minor to her. “It’s using the cut-
ting edge of science to give your future children every advan-
tage you can,” she says. “It’s giving kids a better roll of the dice.”
This new form of genetic embryo testing appears to move
humanity one step closer to control of its evolution. The $14 bil-
lion IVF industry brings more than 500,000 babies into the
world each year, and with infertility rates rising, the market is
expected to more than double this decade. Companies includ-
ing Genomic Prediction bet many going into that process have
seen enough loved ones suffer from a polygenic disease to want
risk scoring. “Everyone has someone in their family,” says Chief
Executive Officer Laurent C.A.M. Tellier, whose mother has
faced down multiple cancers. “Everyone.”
Ten years ago, it wasn’t clear this kind of risk analysis would
ever be possible, let alone practical. Over the past decade,
advances in genetic testing have improved the technology’s
efficiency at a pace faster than that of computer chips. Some
lower-level DNA sequencing costs as little as $40 now, and your
whole genome could soon be mapped for $100, a fraction of
today’s cost. Massive global DNA repositories allow researchers
to draw connections between certain genes and all manner of
life outcomes. Some studies correlate genes with height; others,
with how far a person is likely to go in school.
Genomic Prediction doesn’t offer scores on attributes
unrelated to health, nor does rival Orchid, which is backed
by 23andMe Inc. CEO Anne Wojcicki. But there are ways for
Tech Issue May 30, 2022
motivated parents to get those kinds of predictions, and Collins
and her husband did just that. Although choosing your embryo
based on its odds of earning a graduate degree is still a long way
off from eugenics, or even from the gene-editing tool Crispr, it’s
decidedly more fraught than efforts to minimize cancer risks.
There’s some real daylight between the solid science
behind polygenic scoring for disease risks and parental desires
to pick the “perfect kid.” So as the science makes its way into
leading peer-reviewed journals, it’s yielding much more spir-
ited debates than you usually see in publications with names
like Fertility and Sterility. In general, the true believers say
polygenic risk scoring should be available and clearly offered
to everyone. Critics say it’s a slippery slope to designer babies.
Skeptics say both camps are overselling how much we really
know about what the testing can show and stress that genetic
predispositions don’t lead to linear outcomes. Choosing your
healthiest-seeming embryo, after all, can only tell you so much
about even the genetic influences on a child’s life.
This spring, the prestigious journal Nature warned that the
“alarming rise” of polygenic embryo testing has run “well ahead
of a full understanding of the potential benefits—or dangers.”
Last fall, Shai Carmi, a statistical geneticist at the Hebrew
University of Jerusalem, published a study in the biomedical
journal eLife that found that selecting an embryo with the lowest
polygenic score for schizophrenia could reduce a future child’s
risk by almost 50%—with several important caveats. 69
“There is accumulating evidence, based on modeling and
simulation and some real data from families, that there is poten-
tial for risk reduction,” says Carmi. “But there are very serious
limitations and practical problems.” Scores may not be as accu-
rate as believed for all kinds of reasons—complex diseases are
complex—and risk reductions may be lower in practice than
modeling suggests, especially if parents have few embryos to
“Reducing the risk for one thing can
also reduce the risk for good things that
come with it”
choose from. And this finding on disease risks did nothing, he
says, to challenge his research from a 2019 study published
in the journal Cell, where he concluded that polygenic testing
would likely have little effect on height (maybe an inch) or IQ (a
couple of points). Still, he says, the disease-risk correlations are
solid. More conservative critics argue even that data shouldn’t
be attached to any grand promises until more definitive stud-
ies can be conducted over decades.
Genomic Prediction says its testing simply builds on well-
established methods. While it’s tracking patient outcomes for
a formal study, the underlying technology is widely accepted
and the mass genetic data uncontested. “It’s just DNA,” says
Nathan Treff, the company’s chief scientific officer. “We don’t
have to wait for embryos to turn into adults, because
we have the same information on adults that we get
from an embryo.”
 Bloomberg Businessweek
If the scientific community can’t reach a consensus
on this stuff, is it possible for parents-to-be, who just
want the best for their children, to separate the truth
about the limitations of polygenic risk scores from the rosy
promises? Well, let’s hope so, because the most important
thing about the scores, and one that’s inarguable, is that poly-
genic scoring is already here.
The initial process of polygenic embryo testing looks pretty
comparable to the single-gene tests that have been around
much longer. First, cells are drawn from an embryo a few
days old, and the DNA is processed. Then proprietary soft-
ware analyzes the material, using data on hundreds of thou-
sands of people, from DNA projects like the UK Biobank, to
translate genetic variations into odds for diseases. Since its
founding in 2017, Genomic Prediction has used mathemat-
ical methods rooted in physics to draw information from
even tiny quantities of embryo DNA. “These fancy meth-
ods are shown to actually work by looking at tens of thou-
sands of real-world brother or sister pairs,” CEO Tellier says,
“and proving able to accurately predict which one has schizo-
phrenia, or cancer, despite both being in the same family
70
Simone Collins
Malcolm Collins
“We actually did a new round of IVF after
having already done five rounds just to get
these tests. That’s how desperately we
wanted this data”
 When Genomic Prediction wouldn’t analyze their
embryos’ genes for mental health risks, Collins and her
husband took their data someplace that would
May 30, 2022
environment.” So far, one of the company’s more striking
findings is that desirable health-related genes often appear to
cluster in one embryo while risks of illness cluster in another.
“It’s very cruel,” says Tellier, who was previously head of bio-
informatics at BGI, China’s leading genomics company. “Some
people are just born with cards stacked against them in a lot of
ways, and other people are just born with a lot of luck. This is
all we can do—help stack those odds.”
On a recent Monday at its pristine headquarters in North
Brunswick, N.J., lab supervisor Heather Garnsey performs
the final steps in the scientific equivalent of a four-day rec-
ipe to extract usable genetic information from embryo cells.
Her processes amplify the DNA to thousands of times its orig-
inal volume and fragment it into tinier pieces so it can hybrid-
ize (attach) to a glass slide. Ultimately, she says, a laser reader
interprets fluorescing spots on slides into the particular genetic
codes present in the sample in each position.
Genomic Prediction charges $1,000 upfront, plus $400
per embryo analyzed. When parents-to-be get the score
sheet for their embryos, one of the company’s genetic coun-
selors talks them through what it means. The head coun-
selor, Jennifer Eccles, and her team begin by breaking down
what the scores for overall health include. They may also
address specific risks tied to family histories of disease. In
general, though, the early adopters who come their way are
often less concerned about a specific disease and more about
maximum data-gathering, she says. She calls this frame of
mind “genetic forward.”
That certainly describes Collins and her husband. Both are
authors whose education nonprofit, the Collins Institute for
Gifted Youth, promotes individualized teaching programs for
home-school and boarding-school kids. They live outside Valley
Forge, Pa., with their two sons and want a big family. By the
time they heard of polygenic risk scoring, they’d spent $20,000
a pop on five sets of IVF treatments. “We actually did a new
round of IVF after having already done five rounds just to get
these tests,” Collins says. “That’s how desperately we wanted
this data.” They scrimped over months for treatments to gen-
erate many embryos and asked Genomic Prediction to analyze
a dozen of them.
Along with an overall health score, each embryo received a
specific score rating its risk for both types of diabetes, several
types of cancer, four heart-related conditions, and schizophre-
nia. Genomic Prediction told them one of their embryos had a
1.61% chance of schizophrenia, compared with a 1% risk in the
general population, while another embryo had just a 0.29%
risk. Such data is useful not just for selection, Collins says, but
 Bloomberg Businessweek The
for an, um, unusual style of parenting. “When you tell your
kid not to smoke pot, it becomes a lot more meaningful when
you can say, ‘You, personally, are way more at risk of develop-
ing schizophrenia than the general population,’ ” she says. “It’s
about helping kids understand where they need to be careful.”
That wasn’t, however, where Collins and her husband
wanted to stop. “What was most important to us was mental
health and performance,” she says. “We have a lot more confi-
dence in things like early cancer detection and treatment than
in the ability to address things like brain fog and depression.”
Genomic Prediction doesn’t offer scores on cognitive func-
tion or height. It originally considered including findings on
whether an embryo was likely to be intellectually disabled or in
the bottom 1% for height but dropped the idea. So the Collinses
downloaded the raw embryo data from Genomic Prediction and
exported it to the website of SelfDecode, a Florida company that
analyzes adult DNA, which they paid $199 to use for a month.
Running the SelfDecode analysis on each of their embryos gave
them assessments of far less tangible qualities, like supposed
capacity for stress management. They created a spreadsheet
with each embryo’s scores, weighting them according to their
desired mental health traits.
Many differences were minuscule, but there were some out-
liers, according to the SelfDecode analysis. It rated one embryo
with a 91% risk for chronically low mood, compared with a
21% risk for another. All the cross-checking made the decision
much easier, Collins says, because their top pick in terms of
SelfDecode’s mental health assessment was also the embryo
with the best Genomic Prediction scores for general health.
Collins says she and her husband didn’t seek to select against
attention-deficit/hyperactivity disorder or autism because the
conditions can correlate with some advantages, including raw
intelligence. “We’re a very neuro-atypical household,” says
Collins, who’s been diagnosed with autism, as has one of her
sons. “We feel like the world as it exists now is actually in some
cases better adapted for autistic people.”
Genomic Prediction doesn’t encourage parents to seek
outside insights on nonmedical traits, Tellier says, but it’s
each customer’s right to have access to their embryos’ raw
genetic data. He also wouldn’t discount the possible value of
other correlations. “A genome is a genome,” he says. “Almost
any analysis is possible.” That includes analyses that raise
more complex dilemmas. Studies suggest, for example,
PHOTOGRAPH BY BRAYLEN DION FOR BLOOMBERG BUSINESSWEEK
that higher odds of creativity correlate with higher odds
for bipolar disorder. “Reducing the risk for one thing can
also reduce the risk for good things that come with it,” says
Eccles, the head counselor. “There’s a whole Pandora’s box
we have yet to touch.”
Polygenic risk scoring is unlikely to face serious legal
blowback in the US, where it would be generous to call the
regulation of fertility treatments laissez-faire. That leaves
parents-to-be vulnerable to companies that overprom-
ise, says Michelle Meyer, a legal scholar and bioethicist at
Geisinger Health System in Pennsylvania. “At a minimum,
Tech Issue May 30, 2022
you want people to know what they’re getting into,” she says.
Critics of polygenic embryo testing argue that it could add
unnecessary stress and confusion to the already difficult IVF
process, leading parents to discard embryos unnecessarily.
The nonprofit European Society for Human Genetics called
polygenic risk scoring “premature at best” this spring, noting
that environment can dramatically affect genetic expression.
It said more research is needed to understand how polygenic
risk scores might be useful in medical treatment, including
for adults. “It will be vital that a societal debate takes place
before any potential application of the technique,” the group
wrote, “and this should be focused on what would be consid-
ered acceptable with regard to the selection of individual traits,
in particular.” In other words, the writers weren’t sure about
the accuracy of the results but were nonetheless worried about
eugenics-style selection—a concern the New England Journal of
Medicine also flagged in a call for “an urgent society-wide con-
versation” on the subject last summer.
Treff, Genomic Prediction’s chief scientific officer, says he’s
game for broader debate. “It does require these big conversa-
tions,” he says. “There’s a lot of work there.” In the latest issue
of the journal Fertility and Sterility, from May, he and Oxford
ethicist Julian Savulescu argue that the real crime would be
not offering their scores to everyone, because a lower chance
of disease means a better life for a future child. “The lesson of
the Nazi eugenics program is that couples, not the State, should 71
make their decisions about reproduction,” they wrote.
In December, Genomic Prediction doubled its venture fund-
ing to about $25 million and says it will use the cash to expand
and add to its testing panel. Boston IVF, one of the biggest fer-
tility networks in the US, recently started offering Genomic
Prediction’s polygenic testing to its patients, says CEO David
Stern. “Like anything else, you have early adopters,” he says.
“We have had patients who worked in the biotech field or the
Harvard milieu who came in and asked for it.” Stern predicts
that, like egg freezing, polygenic embryo testing will grow
slowly at first, but steadily, and eventually demand will reflect
the powerful appeal of lowering a child’s odds for disease.
The technology’s potential to exacerbate inequality isn’t
lost on him. He already sees the gaps between a state like
Massachusetts, where fertility treatments are often covered
by insurance, and California, where they often aren’t. “That’s
not fair,” he says, “and the same applies to this, where you cre-
ate the potential that people who can afford it can now have
children without this disease, but people who can’t afford it,
can’t.” The analysis also might not be as reliable for non-White
people, because genomic data collected to date has tended to
skew heavily toward people with European ancestry.
Believers such as Collins and her husband support govern-
ment subsidies for fertility and parenthood but aren’t inter-
ested in any conversation about slowing down. “This is about
the people who care about giving their children every oppor-
tunity,” she says. “I do not believe that law or social
norms are going to stop parents from giving their
kids advantages.”
 Faux Meat
Bloomberg Businessweek
od Ne ed s
Our Fo
t
More S un li gh
Tech companies continue refining their latest
veggie fast foods, but it’d be more disruptive
to better police the meat supply
By Elizabeth G. Dunn
Investors have poured an estimated
$8 billion into meat and dairy
alternatives in the past two years,
yet Americans are slaughtering,
consuming, and exporting more
meat than ever. While “bleeding”
pea burgers and chicken-flavored
mushroom nuggets can be great,
the meat industry’s treatment of
its animals and employees and its
impact on global health and climate
72 change face too little oversight from
overstretched or underempowered
government agencies. With Russia’s
invasion of Ukraine further stressing
pandemic-addled supply chains
globally, the most disruptive new
food technology just might be bolder
regulation. Here’s a starter to-do list
for the US, a blueprint that could be
worth adapting elsewhere, too.
① Wean animals off antibiotics
About two-thirds of the
medically important drugs sold in the
US go to animals, typically to keep
livestock healthy in the brutal factory
farms known as concentrated animal
feeding operations, or CAFOs. The
overuse of these drugs contributes
to the deadly threat of antibiotic-
resistant bacteria,
and the Food and
Drug Administration
should take
steps to end it.
The FDA could
outlaw routine use of antibiotics for
livestock. To enforce this, regular
testing for antibiotic residue would
have to be conducted at farms and
× vs. Big Ag
Illustrations by Patrik Mollwing
meat processing plants. (A study
published in Science in April showed
that beef labeled “free of antibiotics”
often wasn’t.)
② Ensure “organic” means humane
The US Department of
Agriculture’s standards for organic
labeling include a loophole that’s led
to some producers raising hogs and
chickens in factory-
farm conditions.
The USDA could
remedy this with the
stroke of a pen, by
reinstating an Obama-era rule that
set tougher standards for animal care
and housing.
③ Walk the line
The USDA can improve safety
and health conditions for America’s
500,000 meatpacking workers by
lowering the maximum speeds on
meat processing lines and raising the
minimum staffing
requirements.
Enforcing
these rules will
likely require
dramatically more funding for the
Occupational Safety and Health
Administration, which has faced
widespread criticism for its lax
oversight of Covid-19 protocols, and
more training for its inspectors.
④ Hold polluters to account
Industrial meat processors’
expenses do not, at present, own
up to the greenhouse gases emitted
in the raising and slaughtering of
animals. The Securities and Exchange
Commission is debating instituting
×
Email: contactus@bloombergsupport.com. QST#1008327064. Registered for GST as Bloomberg L.P. GST #12829 9898 RT0001. Copyright 2022 Bloomberg L.P. All rights reserved. Title registered in the U.S. Patent Office.
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O c t o b e r a n d N o v e m b e r 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 :
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rules that would
require companies
to account for this
pollution, adding
investor pressure
on them to reduce
it. When it comes
to CAFOs, the
Environmental Protection Agency
already has the authority to regulate
emissions under the Clean Air Act and
should start doing so.
⑤ Stop subsidizing cruelty
Taxpayers finance CAFOs
at their peril. Factory farms often
rely on low-interest USDA loans to
fund their construction and Farm
Bill conservation grants to offset the
cost of storing industrial quantities of
animal waste. (Besides emitting high
levels of planet-warming pollutants,
manure can
contaminate local
groundwater and
crops; particles
drifting through
air and water from nearby mega-
feedlots onto fields of leafy greens
likely causes E. coli outbreaks.) The
USDA and Congress can eliminate
this funding. Under the Clean Water
Act, the EPA can lean on states to
write stricter CAFO permits and
crack down on violations.
⑥ Break ’em up
The top four companies
processing US poultry, hogs, and
cattle control an estimated 54%, 66%,
and 82% of their respective markets,
squeezing farmer profits and leaving
the supply chain extremely fragile,
as the pandemic demonstrated.
A pair of bills from Democrats in
Congress, including one sponsored
by Senator Elizabeth Warren, would
either halt agribusiness mergers or
prohibit market
concentration
above 33% across
all US industries. A
third bill, sponsored
by Democratic Senator Cory Booker,
would ban construction of
large CAFOs and phase out
existing ones by 2040.
Meet the ↷
New Creators
The visionaries creatively applying
technology in business to drive change.

From left to right →

Jay Jordan, Co-Founder & COO, Strella Biotechnology
Katherine Sizov, Co-Founder & CEO, Strella Biotechnology
George Boateng, Co-Founder, SuaCode.ai
Aparna Sharma, Cloud Transformation Leader, IBM Consulting
Dr. Rania Khalaf, CIO & CDO, Inari
Stephanie “Snow” Carruthers, Chief People Hacker for X-Force, IBM
Bryan Young, Co-Founder & CEO, Home Lending Pal

ibm.com/new-creators
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