Bloomberg Your need-to-know = guide to trends, Businessweek themes, and people one __ SPECIAL ISSUE, = 4 ieuent E. ONSH BP oc ! ] SOCOmPAN! t flying taxis oS TO WAZCHHow can | prosper in changing markets? Should | adjust my portfolio? How do | come out ahead? For some of life’s questions, you're not alone. Together we can find an answer. © UBS 2022. All rights reserved.in l= Na GAN lV 2 mw COVER TRAIL| ‘etsmade “sothisweekisthe Yer Ahead ss” Yes! Anannual readin, Whar ontlook for 202 Well weve got some ecions, were ‘ecovering roma new ‘Covid vara theres infaion: “baa ver "You know what they say history repeats isl “Hin, whatifcoers repeated hers val BACK THROUGH THE LOOKING GLASS 2 | watacraen o Sheen ECONOMICS] FLYING TAXIS ‘fentarihadie ANDPOLITICS Thatsright, fying taxis! 36'| “inctontthehanwe Macronsace in the hole _HowJoby Aviation got early altitude 28 screatal ‘How Democrats can winthemidierms i~-‘Regulation for the Jetsons era 38 | tomakethe magazine peace in the Middle East 71 Startup stockshave trouble taking off 38 | Grtheyes wemde Getreadyfor theendofstimulus ______12_Seveninthe forefront zy | Posen ims China sees diminishing returns from Covidzero _14_Introducing the “vertiport” 40 | shatwasatinte se ‘Nuclear power makes a comeback 15 FINTECH qopmmaine Investors stay on the sidelines in India 16 Whoneedsa bank, anyway? BR panies Hot Seat: South Africa's Cyril Ramaphosa 17 Buynow, pay lateris credit, Kids a ese Alleyeson Georgia in November 18 Thebigboys are fighting back Z| derine aeten CONSUMER Gary Gensler the robo ae | erento The EV truckraceison 30 _Riseofthe super apps az Pass the popcorn—in a theater, please 21 Realestate keepsiit, well, real 48 ‘Akinder, gentlerfur 23 HotSeat. Crypto exchanges 49 Hot Seat: Biogen’s Alzheimer's drug 23 GREEN ‘ir travelis down, but Wizx Airis...expanding? 25 Taking carbon capture seriously 30 ‘The stakes get higher for Macau's casinos 26 Tesla’s power play 52 That time we allreally needed a drink 27 ‘Americans want EVsjust make them big 53 TECHNOLOGY LUXURY Abbrand-new web, or more of the same? 28 Overlanding: The posh way to rough it 56 ‘The Facebook election season isback. Gulp 30 Brooklyn's alt-dairy kingdom 58 Hot Seat: Instacart’s Fidji Simo_ 31 Who's bidding at Sotheby's and Christie's 58 ‘Sorry, Inte, you get to playfrombehindnow 32 There's more to Hawaii than uausandleis 60 ‘Tuck in for some lab-grown grilled chicken 32 HotSeat: Aston Martin's Lawrence Stroll 6 Infrastructure week, meetinfrastructure yeat 33 irllbe amixed vintage for the wine world 62 Golf's Asian Tour gets out of the rough I Jane Bond? Legal shrooms? What are the odds? 65 50 COMPANIES TO WATCH 66 BACK PAGE Jour 2021 scorecard 80 Soe rad 8 VaHY UVaA FHL ‘yoonssoupna SiequootaPane eae ae a ~ | | OT SIs re Pm. PRpTen fi erred) Cie Can central banks chart a course that safely takes us out ofthis bizarro world?a ae u News flash: The coronavirus isn’t going to be public enemy No. 1 for the global economy in 2022. The biggest dangers this year will stem from inflation and the risk that policymakers will call the post-Covid recovery wrong. This is the year we'll find out whether the global economy is robust enough to get by with less help from governments and central banks. And whether inflation is a tempo: rary byproduct of Covid or a more persistent problem. When confronted with a wide range of possibilities, forecasters usu: ally settle somewhere in the middle. ‘Among those Bloomberg surveyed, the consensus is that the world economy will expand 4.4% in 2022, after the 5.8% bounceback of 2021. From 2023 onward, most agree, growth will return to its longterm norm of around 3.5%, as if Covid never happened. ‘There’s just one problem. From ground level, nothing about this econ: omy looks normal; it’s completely out of whack. If that’s still true in 12 months, policymakers will almost certainly have messed up. ‘Take the labor market. There were at least 10 million job vacancies across the U.S. at the end of 2021, which every restaurant manager, plant foreman, and chief executive wil tell you they're struggling to fill. The labor shortage shows up everywhere—except in the sta tistics. Dig into the numbers, and you'll find at least 5 million adult Americans not working today who were gainfully employed at the start of 2020. ‘The US. isn’t the only country with workers missing in action. The U.K. had more than a million unfilled jobs in November but at least 600,000 more people sitting on the sidelines of the job market than at the start of 2020. They are declining to take up work even as wages pick up. Whether it’s waiters or truck driv- rs, microchips or cream cheese, the mismatch between demand and sup: ply has become the leitmotif of the Covid recovery-the legacy of a crazy 18-month period that saw the world’s biggest economy shrink by almost 20% in six months then gain it all back by the middle of 2021. ‘The big winners from that historic bounce were U.S. households, whose wealth soared thanks to booming real estate and stock markers (that is, those that had wealth to begin with). Collectively, Americans had an esti- mated $2.6 trillion in extra savings sitting in their bank accounts as of mi year, a stash that equals 12% of gross domestic product. For much of 2021, policymakers at the Federal Reserve and many other central banks felt confident dismissing the labor shortages and supply-chain bottlenecks as short-term conse- quences of the pandemic. Lingering fear of Covid and those extra federal dollars in bank accounts were discour- aging many of the unemployed from returning to work. Give it time, and these issues will get sorted out, the central banks reasoned. ‘That a good portion of the 2021 infla tion “surprise” was due to rising energy prices appeared to strengthen the case for central bank inaction, because higher fuel costs, on balance, tend to slow growth. But by Thanksgiving, US. consumer price inflation was run. ning at 6.8% a year, the highest since Ronald Reagan was president and about three times the Fed’s forecast at the start of 2021. So in December the narrative finally shifted from “It’s transitory” to “It’s taking so long to move on, it ‘may need a kick,” and markets are now betting the Fed will hike interest rates at least three times in 2022. The Bank of England, expecting inflation to go above 6% in the coming months, got a head start at its last policy meeting of 2021, raising interest rates by 25 basis points. Investors have penciled in another four increases in 2022. The European Central Bank hasn’t raised its policy rate in more than a decade, and its pre dent, Christine Lagarde, has said an increase isn’t in the cards this year either. The 19-country euro zone is less inflation-prone than the U.K. and the U.S, to start with, plus its eco nomic recovery has been less robust. Nonetheless, with the latest data release showing that consumer prices increased ata record pace of 5% in the year through December, the ECB could also come under pressure to hike. So we know that the world’s most important central bank will be withdrawing support from the economy, and others may not be far behind. The course of 2022 will be shaped by whether that’s too much for the recovery to take or whether it’s too litle, too late. It used to be that central banks caused most recessions. To be on the “too much” side of the argument and worry about the Fed causing the next one, it helps to be pessimistic about the economic fallout from the omicron variant and also to fear the economic side effects of federal stimulus dollars drying up at the same time interest rates are rising. Bloomberg Economics expects that omicron will have a visible but short lived effect on growth. Each successive Index of personal expenditure ‘on goods 242019 =100 7S. / Canada 7 UK. / Euro sr08 20 110 i peak in infections has tended to have diminishing economic costs, in part because everyone has gotten better at handling the economic fallout. Omicron appears to be more contagious but less deadly than earlier variants. Spikes in infections could sill weigh on economic activity in the short term by push- ing absenteeism sharply higher-as is already happening in the U.S. and UK. Yet in the longer term, omicron’s arrival could speed the transition from pan- demic to endemic, reducing the need for economically disruptive lockdowns. ‘The hit from governments ending support spending is harder to play down, because it’s simple arithme: tic. The U.S. economy had two years and a trillion dollars in federal stim- ulus, much of it in the form of cash handouts. Removing all of that inevi- tably punches a hole in total demand worth at least 3% of GDP, according > or2017 zz02 1s Arnuee VaHY UVaA FHL yoonssousna Sequ001aJanuary 17,2022 ‘THE YEAR AHEAD ‘Bloomberg Businessweek GDP growth forecast, year-over-year change ©2021 ©2022 0 4 inca Phiopines Spain Indonesia aly Saud Arabia Malaysia China Euro ares Singapore Pakistan” rence: Germany us. uK Pers canada Thailand South Korea Japan New Zeslond Colombia Argentina Nigeria Australia cite Mexico Turkey Russia Homa Kong, soutnatica] e Braai | © e ‘to Goldman Sachs Group Inc. chief political economist Alec Phillips. And that forecast assumes that the Biden administration manages to pass its $1.75 trillion Build Back Better plan, which is spread over to years and might add 0.5 percentage point to growth in 2022. All or most of that extra spend- ing could evaporate if the White House cannot cut a deal with West Virginia's Democratic Senator Joe Manchin, who's aholdout. Will this about-face for both fiscal and monetary policy kill the global recovery? Financial markets don’t seem tothinkso. Global equity markets were worth about $150 trillion at the end of 2021, having doubled in value since March 2020. The broad S&P 500 index of US. stocks even managed to go up on the day the Fed announced it would be tapering off its bond purchases faster to clear the runway for rate liftoff. Bloomberg Economics expects the US. economy to grow at a 4.4% pace through the first half of 2022, despite the hit to spending and investment from ‘omicron and the withdrawal of federal stimulus, slowing to a still respectable 2.7%6in the second half. One big reason: ‘The majority of American consumers still have money to spend-that extra $2.6 trillion sitting in bank accounts. ‘And, for once, that money isn’t concen: trated among the richest households, probably because an estimated two- thirds came from government handouts. ‘Anna Wong, chief U.S. economist at Bloomberg Economics, reckons that a family with income in the $24,000 to $75,000 range now has enough of a cushion to maintain pre-pandemic spending for at least another two ‘months without cutting into regular sav- ings. This group would typically have lit: tle or no financial wiggle room at all. Assume the U.S. economy can with- stand monetary tightening, What about the rest of the world? Shifts in the Fed's stance may spur a flight of money to the U.S. and away from riskier markets. Many emerging: market economies will face a difficult choice between raising rates themselves to stem outflows or keeping them low to sustain the domes- tic recovery. Ziad Daoud of Bloomberg Economics has identified five that are especially vulnerable to rising US. rates: Brazil, Egypt, Argentina, South Africa, and Turkey, or the Beasts. (Although President Recep Tayyip Erdogan’s unconventional approach to taming inflation, by cutting rates, arguably puts Turkey in a class of ts own.) Overall, emerging-market policy rates will probably go up, but Bloomberg Economics anticipates that these econo- mies, excluding China, will row 4.8% in 2022, That's almost 2 percentage points lower than in 2021, though it’s well above pre-Covid levels. ‘The biggest reason the world might be able to shrug off the impact of Fed tightening is that the ECB and the Bank of Japan are committed to keeping rates at rock bottom for the time being. So there’s still a lot of cheap money floating around the world in search of a home. This partly explains why long: term interest rates~as reflected in the yield on 10-year U.S. Treasury bonds— haven't reacted very dramatically to the Fed’s plans to raise short-term rates. ‘Another is that the People’s Bank of China, for the first time in living memory, is going to be moving in exactly the opposite direction from the Fed. This is a big deal, the mone- tary analogue to China's top diplomat, Yang Jiechi, telling U.S. Secretary of State Antony Blinken where he could put his lectures about human rights at their fractious first meeting in Alaska in March. By loosening policy to sup- port an economy struggling with the effects of a property market crack- down at the same time the Fed is tight- ening, the PBOC will be making its >Introducing ATEM Mini Pro The compact television studio that lets you create presentation videos and live streams! 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Italian Prime Minister Mario Draghi has argued that govern: ments need to take action to protect consumers, but governments already carrying alot of extra debt won't relish having to help out again. In France the energy crisis and a potential sixth wave of Covid will pro- vide the backdrop for a presidential election that, barring a last-minute upset, will likely see Emmanuel Macron hold on to power (page 8). Italy's future looks less certain follow- ing the surprise news in December that Draghi may seek the presidency, leaving the more hands-on job of prime minis ter to someone else. Voting begins on Jan. 24. Italy is still deemed the country ‘most likely to cause the next European financial crisis, and none of Draghi’s likely successors have the stature of the former ECB president nor the con fidence of other European leaders and international investors. In the U.K, after a string of pol cal scandals, many now expect Prime Minister Boris Johnson to be ousted in a party coup sometime in the first half of 2022. Mujtaba Rahman, manag- ing director for Europe at the Eurasia Group Ltd., a political-risk consulting company, puts a 40% probability on Johnson losing power by the end of the year. But with no parliamentary elec- tion on the horizon, a change of ieader- ship will possibly not have a big impact on the handling of the economy. Let's shift our attention back to 3 , feet isate HL A 1[pllgeve't a the U.S., which for better or worse dominates any discussion about the tra- jectory of the global recovery, because itgenerates approximately one-quarter of world output. Investors are pricingin only three U.S. rate increases in 2022. Bloomberg Economics sees the Fed’s latest forecasts for the unemployment rate and core inflation as consistent with six hikes. But even that would barely take the main US. policy rate above 1% by yearend, well below inflation and below the pre-Covid level. With or without President Joe Biden’s Build Back Better spend- ing, it would be surpris- ing if those hikes were enough to stall an econ- ‘omy that entered the year with significant momen- m& ‘um. The bigger question, then, isn’t whether Fed Chair Jerome Powell and company will have done too much by the end of the year but rather will they have done enough? “My fear is that we are already reaching a point ao where it wll be challeng- ing to reduce inflation without giving rise to recession,” said former US. Treasury Secretary Larry Summers in an interview in December. The economist and Bloomberg contributor a worried early and often in 2021 that President Biden’s $19 trillion Covid. relief package would stoke inflation without fh 50% <0 trey ee iseria Mexico € south Atrca <—e cre 0 catomiia eoux. ‘€e Pratpines — evs, doing much to increase underlying growth. His argument, that a third round of short-term stimulus wasn’t really needed, looks stronger now that wwe have household data suggesting U.S. families had collectively already made up all of the pandemic shortfall in wage income by the time the package was passed in the spring. Plenty of others have joined ‘Summers in the peanut gallery taking shots.at the Fed, among them economist and Bloomberg columnist Mohamed ELErian, who rates the Fed's “transi- tory” line on inflation “probably the ‘worst inflation callin the history of the Federal Reserve.” ‘To believe it’s going to take more than a few interest-rate increases to kill inflation, it helps to have the view that supply side problems are only partly to blame for higher prices. Also, that workers in this out-of kilter Covid economy suddenly have leverage to extract increasingly hefty wage rises from employers. U.S. hourly wages rose 5.8% in October from the previous year, the third-highest year-over-year ‘wage growth since the early 1980s. A broader measure of wages and bene- fits also logged its biggest one-quarter increase this century. It’s been more than four decades since the U.S. saw a wage-price spi- ral. For America’s hourly workers, pay has barely kept up with inflation since the 1980s, let alone helped fuel it, a trend underpinned by globalization, falling union membership, and rising automation. Even so, the sheer level of demand in the second half of 2021 should give pause to anyone who thinks US. inflation will go away overnight. ‘The consensus among the econo- mists Bloomberg regularly surveys is that the pandemic may have changed the way we work and shop in an endur- {ng way, but that the basic dynamics of demand and supply will revert to the norm fairly quickly once we neutralize the threat from the virus. Then infla- tion will start gravitating back toward the Fed's longterm goal of 2%. I'they’re right, policymakers will have managed tosteer the U.S, economy toa soft land- ing and avoid a recession. If they're wrong, 2023 will be the year we all pay the price. —Stephanie Flanders“Banking with First Republic saves me a great deal of time. Wherever I am in the world, they take care of what I need.” 1D HO, M.D. if Medical Center Core ORCS ce ad Pewter etn TeesJanuary 17,2022 ECONOMICS& POL THE YEAR AHEAD Bloomberg Businessweek ICS Armidterm surpi il Mideast realignments il Budget cut blues 2 Covid zero costs China Warming to nuclear India needs investment samaphosa Georgia on everyone's mind 18 Edited by Gristina Lindblad and Amanda Kolson Hurley It’s the Economy, Stupide ‘France's president has an ace up his sleeve as he seeks a second term For five years, Emmanuel Macron has been fending off challenges from the fringes of French politics. It began in the 2017 election runoff against far- right nationalist Marine Le Pen, continued through a showdown with the yellow vests protest move- ment, and is culminating in a culture-war clash with ultra-right-wing polemicist Eric Zemmour, who entered the race for the presidency in November. But as he seeks reelection in April, the president who was nurtured in the top echelons of the French technocracy has a potential knockout punch: the robust economy. With polls showing that the French are veering right, Macron regularly gives nods to that part of the electorate. He has praised former President Nicolas Sarkozy for inciting a debate on “national identity,” hired a hard-line interior minister, and gave an inter- view to a far-right publication in which he spoke about immigration and Islam. In turn, his star has faded among left-wing voters. But rather than becoming ensnared in confron- tations about identity and immigration, Macron’s most senior supporters are urging him to lean on his economic record. >Photograph by Joanna McClure SOLLITOd ® SOINONODA — zz02'1Asenver (VaHV NVA TEL oussousne Biequ001aJanuary 17,2022 ECONOMICS & POLITICS ‘THE YEAR AHEAD ‘Bloomberg Businessweek After a precipitous crash early in the Covid-t9 pandemic, France has enjoyed a standout rebound, with out: put reaching pre-crisis levels in the fall-ahead of peers and sooner than even Macron’s team expected. Vast spending to support households and businesses during the lockdowns preserved the country's economic foun dations, and Macron has built on them with the high-speed deployment of a £€100 billion ($113 billion) recovery plan. “at a time when crowing about France’s decline seems to be in fash: jon, we have among the best economic ‘growth figures in the euro zone, and we got back to pre-crisis levels of activity three months sooner than expected,” Finance Minister Bruno Le Maire told Parliament atthe start of December. Trends in the job market and corporate investment suggest that Macron’s contested labor and tax reforms from early in his tenure are finally delivering results. Despite media portrayals of a nation of dis- contents, one long-running survey indicates the French consider their living standards higher with Macron in the Elysée Palace than under either of his two most recent predecessors. After taking office in 2017, Macron pushed changes through Parliament to make labor laws more flexible and used his first budget to pick apart France's hheavy taxes on wealth and capital Such changes take time to bear fruit, and the record is up for debate. A recent report by the institut des Politiques Publiques found that while Macron’s po cies as president, including during Covid, have boosted 0 disposable’ incomes overall-particularly for 6 7. working people-they . didn't help the poorest segment of the population. Another report, from the government think tank Conseil d’Analyse Economique, found no lnk between the changes in taxation and improvements in wages and invest ment, And some of Macron’s planned overhauls remain on the to-do list, including the pension reform he paused dling the pandemic. Even fits tricky to establish cause and effect, many indicators have improved in the last five years, giving Macron’s favorability “a ‘apo + 17% S 9/2014 a 37%| 11/2020) Macron plenty of numbers to bolster his creabilty. His pro-business tilt has helped return company profit margins tolevels not seen since before the global financial crisis, Thats no vote-winner in country where corporate profits are at best viewed with suspicion, but he ean point to a corresponding increase in investment rates, which have reached their highest level since the 1970s. The pandemic did litle to disrupt the trend of companies putting more money back into the economy~in fact, invest ment levels in France are higher now than before the crisis, while Europe as whole still hasnt recovered. Entrepreneurial spirits are running high, with the monthly count of new companies continuing on a sharp up- ward curve that began in 2017 and was only briefly interrupted by Covid. Foreign investors are piling in, help. ing the country surpass the U.K. and Germany in consulting firm EY's rank ing for attracting projects that create omens HOW facilities and jobs. : The labor market is stronger despite the 59 upheaval of lockdowns, O cnemployment has dropped to levels seen just before the first wave of Covid, and the employment rate hit 67.5%, its high est level since record-keeping began nearly a half-century ago. The French Teader can also boast some success in raising the ratio of new hires on cov ted open-ended contracts~a ticket in France to access housing and loans. Come April’s election, the eco: nomic stars may align for the incumbent president, with activ ity stil rebounding, billions of extra euros in consumers’ pockets, and “Macronomics” intact. That timing could be crucial, because the recent surge of the omicron variant has driven Covid cases to record numbers, put pressure on hospitals, and em- broiled Macron in a controversy over his use of vulgar slang directed at the unvaccinated. He'll also be counting on the longer-term economic argu- ment to offset more recent concerns about surging inflation, as well as pe- rennial doubts as to whether he came anywhere near achieving his aim to unite a country polarized by right-left divisions on issues ranging from reli- gion to security. IfMacron prevails, he'll be the first incumbent to win reelection in France since Jacques Chirac 20 years ago. With Olaf Scholz now chancellor in Germany and Mario Draghi leading Italy, that raises the prospect of Europe's three largest economies being run by closely aligned champions of closer El gration who are eager to project the bloc’s economic heft. Should he be defeated by Le Pen, the political landscape in Europe will look significantly different. While she has dropped her opposition to the euro, her National Rally party remains staunchly opposed to any federal shift in the EU and wants to put the brakes on free circulation and trade within the bloc. Valérie Pécresse, a center-right candidate who's risen in the polls in recent weeks, would provide more continuity, promising pro-business pol icies similar to Macron's. ‘Whatever the result of the coming election, the winner will potentially benefit from an economic base some have compared to that left to Angela Merkel by reformist German Chancellor Gerhard Schréider. Holger Schmieding, the chief economist of Berenberg, in 2017 posited a “golden decade” ahead for France. He says his thesis still holds. “The rebound of France is one of the most interesting longer-term stories, and it is a key factor in stabi lizing the core of Europe for good,” he says. “The return to a balance between Germany and France has huge politi: cal ramifications beyond the numbers.” —William Horobin, Ania Nussbaum, ‘and Caroline Alexander .How the Could Keep The House ‘The party is widely expected to lose seats, but Republican self-sabotage could give itan assist ‘The most common prediction among political pundits for 2022 is that Democrats will lose control of the House of Representatives in November. ‘The reasons are almost too numerous to list: Inflation is up; voters’ perception of the economy is down; Covid-tg lin: gers; President Joe Biden is unpopular; and by a 2-to-t margin, Americans say the country is on the wrong track. In addition, the president's party almost always loses seats in midterm elections. ‘These powerful headwinds have both parties believing that House Democrats are most likely doomed. But conventional wisdom sometimes turns out to be wrong. What woul take for Democrats to defy expecta tions in the fall? Although no one is predicting such an outcome, political handicappers and strategists in both parties can envision plenty of scenarios for how Democrats might pull a rabbit out of their hat. Any upset would be predicated on one thing: a return to normalcy. Insiders agree that inflation would have to fall and Covid subside to the point where schools stay open and masks are an afterthought. “It needs to feel like 2019, not 2021,” says Liam Donovan, a Republican strategist. Since midterm performance is closely tied to the president's approval rating, Biden would also have to lift himself out of his slump in the low 40s-particularly with independent voters. Gallup polls show his approval dropped. sharply among independents from February to September, then ticked up slightly to 40% in December. Independents, unlike hardened parti sans, are apt to change their minds response to changing conditions. Indeed, even as polls show broad Aissatisfaction, there are hints that bet- ter days may lie ahead. A November YouGov poll found that 74% of ‘Americans said their lives had returned to “normal” almost two years into the Covid pandemic. Ifomicron and future variants don't plunge the U.S. back to the dark days of 2020, Democrats think more people will come to share that feeling and vote accordingly. Biden’s revival is a precondition for any Democratic recovery. But it prob- ably isn’t sufficient for the party to hold the House. Democrats will also have to turn out in historic numbers, something they rarely do in midterm elections. The good news, says AFL: ClO strategist Mike Podhorzer, is that the surge in Democratic votes during the Trump era was so large that the party doesn’t have to rely on persuad- ing Republicans to defect. “The Democrats’ way out ofthis isto get people who didn't show up to vote for Hillary, but did vote for Biden, to show up in November,” says Podhorzer. “Biden won 81 million votes.” But those Biden voters would first need to be motivated. Polls show they're not. What could change that? One possible answer is the U.S. Supreme Court overturning Roe v. Wade in June. “It could be absolutely game-changing in two ways,” says Democratic pollster Celinda Lake, “By energizing women under 40, who aren't paying a lot of attention to poli tics. And by firing up women over 50, who are the key swing bloc in politics right now. They remember when Roe ‘was new or nonexistent, and some of the older ones had the experience of taking someone to Canada or Mexico for an illegal abortion.” For all the heated debates over messaging, most experts suspect Democrats can’t control their own destiny. “When parties defy the midterm curse, it’s usually because the other party did something to self-sabotage,” says David Wasserman of the non: partisan Cook Political Report. “That's what happened when Republicans impeached Bill Clinton in’98.” ‘When it comes to Republicans inflicting damage on their own party, all eyes turn to one man: former President Donald Trump. His score- settling with members of his own party after his loss to Biden probably cost Republicans control of the Senate. ‘As much as Democrats might loathe the prospect of his return, Trump could plausibly short-circuit historical vot- ing patterns by sowing discord within his party and sabotaging Republican voter enthusiasm. To defy predictions, Democrats probably need him to be a high-profile negative factor in the ‘months leading up to the election. Donovan has a theory about how that might occur. “For the last year, ‘Trump has been in a straitjacket where he can’t harm his own party,” he says. “With Jack Dorsey [the former Twitter Inc. chief executive officer] leaving, maybe he gets back on Twitter.” That would vault Trump back into the public spotlight. And then, who knows? Says Donovan, “There's no big- ger midterm wild card than letting the tiger out of its cage.” —Joshua Green A Big Thaw In the Middle East]? Regional rivalries cool down, giving some states more latitude and leverage Ina part of the world where stability and predictability are elusive, 2021 ended much the way it started: with surprise reconciliations among regional rivals and the prospect of more. In January 2021, Saudi Crown Prince Mohammed bin Salman invited > 8 SOLLITOd ® SOINONODA. VaHY UVaA FHL ‘yoonssoupna SiequootaJanuary 17,2022 ECONOMICS & POLITICS ‘THE YEAR AHEAD ‘Bloomberg Businessweek 4 Sheikh Tamim bin Hamad Al Thani, the Qatari emir, to a Gulf summit, where they signed an agreement end- ing the three-year-plus boycott of Qatar that the kingdom had led ‘Ten months later, United Arab Emirates Foreign Minister Sheikh Abdullah bin Zayed Al Nahyan met in Syria with Syrian President Bashar al-Assad, who was until recently a pariah in most of the Arab world. ay Syria had been suspended from the Arab League in 2011 because of the Assad regime's violent crack- down on a popular uprising, a conflict that later escalated into a civil war. The UAE-Syria meeting in November signaled the possibility of a normaliza- Sat crown Prince ee Vesely ct Ateceraslies ‘Mohammed bin Salman tion of Syria’s regional ties at the upcoming Arab League summit, to take place in Algeria in March. Also in November the UAE's de facto ruler, Sheikh Mohammed bin Zayed Al Nahyan, paid a visit to Turkey, launch ing a $10 billion fund to invest in the country and ending a decade of strained relations. Asimilar thaw between Turkey and Egypt-which had scaled back their ties about nine years ago—could hap: pen in 2022, And there are signs of a rapprochement between Turkey and Saudi Arabia, with Turkish President Recep Tayyip Erdogan set to visit the kingdom in February, although differ: ences remain. Sanctions on tran may lft if nuclear talks progress, though they remain in a constant state of near collapse. Iran has had rounds of talks with Saudi Arabia in Iraq, and Iranian President Ebrahim Raisi has been invited to the UAE, a visit that’s expected to mark a turning point in relations between the countries. Any tightening of links between mostly Shiite Iran and the Sunni-majority Gulf states, including the UAE and Saudi Arabia, could ease regional sectarian conflicts. ‘Two main factors appear to be influencing the change in the landscape. ‘The first is that the US. has been grad ually disengaging from the Middle East ns policy appears to give the Saud) for more thana decade. That's left more room for regional leaders to maneuver and look for other ways to ensure their security. However, with freer rein also comes more risk: “If the Americans withdraw further, then that’s a further vacuum, and those leaders may not be so sure what fills that void,” says H.A. Hellyer, a scholar at the Carnegie >. Endowment for International Peace ED ige University fellow. Another factor is the end of the Arab Spring era, which strained relations as coun- jes took different sides in the conflicts between governments and demonstra- tors. The next stage “will be moving from sof decreasing tensions to building bridges, focused on common inter ests” according to Ayham Kamel, head of the Middle East and North Africa at political risk consultant Eurasia Group. Regional leaders still remain fear ful of another wave of popular unrest, Kamel says, and that has led to ris: ing repression. Egypt is experiencing its worst human-rights crisis in many decades, according to Human Rights Watch, and there are fears that Tunisia, ‘which had managed to establish a func- tioning democracy, is regressing into authoritarianism after the president in July seized additional powers and shut: tered partiament. Karen Young, a senior fellow at the Middle East Institute in Washington, says the winners from the shift are mainly Gulf countries. “There’s more of a potential now for a whole lot of bilateral moves and dealmaking,” she says, “but a lot of the leverage is in the hands of afew.” A look at the map confirms that. ‘There are no signs of an end to the almost eight-year-long war in Yemen. In Syria, fighting has subsided, and Assad has recovered large portions of the country, but the road map to peace remains in question. And Lebanon enters another year on the brink, with no recovery in sight from its economic collapse and the crash of its currency. —Donna Abu-Nasr Ml Washin Where Budget \ Cuts Threaten Growth ‘The pivot away from pandemic stimulus will hurt more in some places ‘The world economy bounced back from the Covid-19 slump faster than most forecasters reckoned was pos- sible a year ago-thanks largely to record injections of government money. Now those aid programs are getting trimmed or wound down. ‘What that means for global growth is one of the key questions for 2022. Financial markets are fixated on how fast central banks will raise interest rates to counter surging inflation. But how governments adjust their bud- gets will likely have a bigger impact on economies than anything monetary authorities do, at least in the devel: oped world. Belt-tightening is under way at various speeds in different parts of the world, and much of itis provisional. The omicron variant could yet upend governments’ plans. In the USS., President Joe Biden’s proposals to ramp up spending on child care and clean energy have hit a wall in Congress, though they're not dead yet. Offsetting that is the prospect of more stimulus in Japan and China~and pethaps in Europe, where Germany's new government is keen to make green investments. Here’s a roundup of where fiscal pol- icy is headed in some of the world’s biggest economies. After the biggest stimulus program in history, budget policy swung from being a support for growth to becom: ing a drag in the second quarter of last year, according to the Brookings Institution’s gauge of fiscal impact. Biden has been pushing a spend- ing bill worth $1.75 trillion over a decade, with the biggest dollop com- ing this year. It includes an extension of the child tax credit and support i éIlustration by Angela Stempel for clean power and electric vehicles. ‘The president has been unable to win backing from West Virginia Democratic Senator Joe Manchin, whose vote is needed to pass the mea sure, so it’s on hold for now. If the so-called Build Back Better legislation collapses, it would likely shave about 0.75 percentage point off 2022 growth, according to Moody's Analytics, which currently forecasts 4% expansion. Passing a Manchin: approved version of the bill could add 0.5% to growth, Moody’s says. Meanwhile, Biden has acted to pro- Jong one kind of stimulus that doesn’t require a Senate vote: extending a freeze on student debt repayments until May. (CHINA Relatively restrained early in 2021, when the economy was rebounding strongly, China changed course when growth started to flag later in the year. Beijing began prodding local govern: ‘ments to borrow and spend faster. It also extended some personal income tax breaks as part of an effort to stimulate consumer spending. Expect ‘more supportive measures in 2022, as officials endeavor to keep growth from sinking below 5%. mo) Negotiations over how to get back to fiscal normality have revived tensions between a “sound finance” camp traditionally led by Germany-and those more concerned with avoiding a repeat of last decade's austerity-driven slump. ‘That clash won't be resolved quickly, because the debt and deficit restrictions lifted during the pandemic will remain suspended throughout 2022, France, which takes over the European Union’s rotating presidency for the first six months of 2022, has ‘made investment and pro-growth pol- icies the top priority. Germany's new finance minister, Christian Lindner, hhas a reputation as a fiscal hawk and hhas repeatedly warned of the need to censure “monetary stability” in the euro area. Yet ona visit to Parisin December, he remarked that Germany and France “don’t always share the same ideas,” but havea knack for consensus in the end. JAPAN Prime Minister Fumio Kishida— who faces national elections in the summer-unveiled a spending package in November that includes cash pay: ‘ments for families with children, wage increases for low-paid caregivers, and a revival of subsidies for domestic travel (currently on hold as the dan- ger of omicron is assessed). With an initial price tag of 56 tril- lion yen ($480 billion), equal to 10% of gross domestic product, the pack- age was much larger in scale than expected, even if some of the mea- sures are effectively re-ups of existing programs. Together, they will limit the drag on growth from the phaseout of other pandemic relief. Chancellor of the Exchequer Rishi Sunak is redefining what it means to be a Conservative in Britain. In 2021, he raised taxes by more than any > zz08 1s Armnuee ld ¥ SOINONODT & E z g oonssousna 51equ0018January 17,2022 ECONOMICS & POLITICS ‘THE YEAR AHEAD ‘Bloomberg Businessweek Diminishing Returns From Covid ‘The economic costs of Ghina’s virus containment policies are mounting In 2021, China managed to stamp out scattered Covid outbreaks while still delivering annual economic growth in the neighborhood of 8%. It helped that, even as the country kept its borders more or less sealed, foreign direct invest- ‘ment and portfolio capital kept rushing in, while exports continued to flow out. Yet as Goldman Sachs noted in a Jan. 5 report, the economic costs of Beljing’s Covid-zero stance “appear to be increasing over time as each new variant is more transmissible than the previous ones.” Omicron is a threat ofa different magnitude, even for a population that’s 87% vaccinated, because the China-made shots appear to provide inadequate protection against it. Expect more citywide lockdowns like the one instituted in Xian, a metropolis | of 13 million residents. These wreak havoc on local businesses and can snarl up supply chains. They also spook con- | sumers. Industrial production and retail sales, which had been flagging toward the tail end of last year, may be further | depressed asa result. Goldman Sachs reckons that in an extreme scenario where a national lockdown is decreed, annual | growth could phinge to 1.5%, the lowest recorded since 1976. —Gristina Lindblad and James Mayger Frzote New confirmed Covid cases, weekly Scheduled seats on international flights, weekly Exports Inbound foreign direct investment Inbound portfolio investment Equities = Bonds Economic activity, a year-over-year change 7 Retail sales ——S=—_—_ east output x \ 158 UX. finance minister in almost three decades, amounting to a £46 billion ($62 billion) charge-about 2% of GDP- on households and companies. This was intended to fund extra spending on health care and austerity-ravaged public services without adding to debt racked up during the pandemic. Sunak, who's said it would be “immoral” to increase borrowing, is on track to get the national debt on a declining path by the middle of the decade. But his boss could throw him off course. With coronavirus raging once again, energy bills soaring, and interest rates set to tise, Prime Minister Boris Johnson is under mounting pres sure to postpone a planned £12 billion payroll tax increase in April. EMERGING MARKETS Brazil, which had the most generous pandemic stimulus among emerging economies, pared back much of it last year. But President Jair Bolsonaro, ‘who is campaigning for reelection this year, is again increasing cash trans fers to the poorest households. Doing so required changes to a government spending cap in place since 2016-and that helped weaken the currency and drive interest rates higher amid con- cerns about increased inflation, which is running above 10%. Mexico kept a tight grip on spending, There were some signs of loosening in September's budget pro posal for 2022, which foresees a deficit of 3.1% of GDP, compared with 2.4% in a preliminary version, Stil, President Andrés Manuel Lopez Obrador says he won't increase the national debt, and his administration recently announced a fresh round of cuts at government agencies, including mothballing the nation’s climate institute, In Asia, Thailand and Malaysia have raised debt ceilings to accommo: date more spending, while Vietnam is considering a new support package worth about 4% of economic output. Indonesia, meanwhile, has pared back its budget and raised taxes as itaims to bring its deficit back under 3% of GDP by 2023. —Ben Holland, Chris Anstey, Andrew Atkinson, William Horobin, James Mayger, Maria Eloisa Capurro, Claire Jiao, and Yuko Takeo . Countries are warming to the idea of building new reactors ‘The green energy transition is hitting some speed bumps, as power short- falls in Asia and Europe boost global demand for fossil fuels. That’s expos- ing the pitfalls of relying too much on fickle wind and solar—and focusing ‘more attention on nuclear energy. Although efforts to battle climate change have been largely dominated by renewables, the International Energy Agency says achieving net-zero greenhouse gas emissions by 2050 will require doubling nuclear power worldwide. Itaccounted for just 4% of primary energy consumption in 2020, according to BP Ple’s Statistical Review of World Energy. “Nuclear needs to be part of the broader conversation,” says Joseph Majkut, director of the energy security and climate change program at the Genter for Strategic & International Studies in Washington, D.. “We'll need to build quite a lot to get there.” ‘The US. is at the forefront of efforts to design smaller nuclear syste ‘These so-called SMRs-small modular reactors~are expected to be faster, eas- ier, and cheaper to build than the mas: sive conventional nuclear plants that are common now. TerraPower LLC, ‘which has secured $80 million in fund- ing from the U.S. Department of Energy to develop its technology, is planning to install a new type of reactor at a ‘Wyoming coal-fired power plant that’s scheduled to close in 2025. ‘The Bill Gates-backed company says the system could be operational as soon as 2028 and has a projected cost of $4 billion, Contrast that with the $29 billion price tag of the two reac- tors being added to the 1980s vintage Vogtle nuclear power plant in Georgia, a project that has been plagued by delays and massive cost overruns. NuScale Power LLC expects to complete an SMR plant in Idaho by 2029. The goal is to fabricate the key components at a factory and ship them to the project site to be assem- bled. The company is also chasing opportunities abroad, including in Romania, where it may be able to build plant even sooner, by 2028. European countries have announced some of the world’s most ambitious climate goals, which is why many are looking to add more emission-free nuclear power. Skyrocketing electricity and concern that the European Union relies too much on Russian nat- ural gas are aiding the case for nuclear. There’s a market realignment under way on the continent, with for: ‘mer Soviet republics looking for alter natives to Russian-made reactors. Poland, the EU’s most coal-dependent nation, is working with NuScale and talking to Electricité de France SA (EDF) about supplying multiple con- ventional nuclear plants. France already gets about 70% of its power from nuclear, more than any other country. The government is fund {ng efforts by EDF to develop SMR tech nologies and also considering building ‘more big facilites, in part because some of its reactors are nearing the end of their life spans. Germany, where aver- sion to nuclear power helped birth a national political party, is bucking the trend: Ie’ set to decommission its three remaining reactors this year and has no plans to build new ones. ‘No country is plowing more money into new nuclear plants than China, whose fleet is on track to surpass that of the US., the world’s largest, by the middle of this decade. The country plans to build at least 150 reactors over the next 15 years at a cost of as much as $440 billion. China is also pus! to export its expertise to developing nations, including Pakistan, > 8 SOLLITOd ® SOINONODA. VaHY UVaA FHL yoonssousna Sequ001aJanuary 17,2022 ECONOMICS & POLITICS > INDI ‘THE YEAR AHEAD ‘Bloomberg Businessweek Other Asian countries are being more cautious. Japan is evaluating SMRs but has been wary of restart- ing any of its reactors since the 2011 Fukushima disaster. Its most recent national energy plan sets a goal of getting 20% to 22% of its power from nuclear by fiscal 2030, up from about 5% in 2020, but doesn’t spell out , whether new plants would get built? Edwin Lyman, director of nuclear 0) power safety for the Union of Marlow Concerned Scientists, says that while the world needs more carbon: free electricity, nuclear reactors need to make economic sense to earn a big: ger share of the global power mix. Hefty government subsidies may not be a sustainable strategy for building and operating power plants. “Nuclear has a huge disadvantage,” Lyman says. ‘t's expensive” —Will Wade, Jonathan Tirone, and Shoko Oda . MIA in —Corporate Investment Companies are standing on the sidelines, which could jeopardize the recovery India has bounced back strongly from the pandemic and stands poised to claim the mantle of fastest-growing economy in 2021 and probably 2022 as well. The government's latest pro- jections are for a 9.2% expansion in the fiscal year that ends in March. Forecasts from the International Monetary Fund have growth dipping to 8.5% the following year, but even at that slower pace, India is expected to outshine all major economies. While the headline numbers are impressive, they conceal a troubling trend: Gross fixed capital formation, a ‘measure that encompasses investment 5 si- shi over wing least lead trol in physical assets from plants and equipment to bridges and roads, amounts to less than one-third of gross domestic product, according to World Bank data, In China, it’s more than 40%. Reserve Bank of India Governor Shaktikanta Das remarked in early December that private investment “is still lagging,” which could jeopardize the improvement in aggregate demand, ‘There's a broad consensus among ‘economists that India needs to boost that number to ensure a sustain: able recovery. The government is winding down its pandemic stimulus, motivated in part by the risk of having India’s sovereign debt rating down- Braded to junk, And while the central bank kept interest rates low ‘even as inflation ticked higher in 2021, economists surveyed by Bloomberg are predicting 60 basis points of hikes in this calendar year. Pent-up demand from house holds that were forced to retrench during two waves of Covid-19 infec jons will help underpin growth, but itwill fade as the year wears on. “The two drivers that were there in the pre-Covid period-private consump- tion and government spending—will not be growing at the same pace,” says Nikhil Gupta, chief economist at Motilal Oswal Financial Services Ltd. “So the only possible driver is private investment, which has yet to show strong pickup.” Investment had been trending down for about a decade going into the pandemic, despite efforts by Prime Minister Narendra Modi’s government to revive it, including Make in India, a program launched in 2014 to encourage IndianPrine companies to set up Miniter amoai factories, Yet for many would-be investors, labor and land rights issues that hamper such projects overwhelmed the incentives. ‘An initiative unveiled in 2019 that earmarked $1.9 billion for infrastructure projects via public private partnerships ‘was also supposed to goose investment. ‘Then the pandemic struck. Undeterred, the government rolled out a new program in 2020 that offers cash payments to companies meeting production targets in industries such as electronics, pharmaceuticals, and auto components. If companies needed any further incentive, India's Reserve Bank cut the benchmark interest rate to a record low of 4% at the start of the pan- demic, where itstill remains. So why are businesses reluctant to invest? Among the possible explanations is that demand remains fragile across many sectors, plus uncertainty about the impact ofa new wave of infections. Yuvika Singhal, an economist with Quantico Research in New Delhi, calls ita chicken-and-egg situation: “From a macroeconomic standpoint, only ‘when the consumption recovery looks durable are we likely to see the invest- ment cycle turn decisively.” she says. There are signs the pandemic may have given rise to a two-speed econ- omy. While formal employment is picking up, rural India’s vast informal economy continues to struggle, with demand still high for government assistance and jobs available through an employment guarantee program. Ifabout two-thirds of the population doesn’t have the means to purchase items such as biscuits, shampoos, and two-wheelers, many companies could remain reluctant to inves “Sustainability will remain the key challenge,” says Kunal Kundu, an economist with Société Générale GSC Pvt. “While the most pro- nounced K-shaped recoveries ever and the concomitant rising inequal: ity helped drive consumption in cer- tain segments, aggregate demand is likely to remain muted-especially in comparison to the level seen two years ago.” —Vrishti Beniwal and Malavika Kaur Makol .= enact the economic reforms he prom- 2 ised. Those include completing the deregulation of the power industry to encourage private investment and to end years of intermittent black- outs as well as auctioning the spec- CYRIL RAMAPHOSA trum telecommunications companies need to expand and modernize. He South Africa’s president can't afford to keep delaying reforms | Must also reorganize the moribund municipal governments that are cost- When South Africa’s Cyril Ramaphosa | ing his party votes, kick-start an infra- ascended to the presidency in| structure drive, and ignite growth—all February 2018, he spoke of a new | in the shadow of a pandemic that’s dawn. The nine-year reign of his pre- | decimated Africa’s most industrialized decessor, Jacob Zuma, had seen tens | economy and driven unemployment of billions of dollars looted from state | to a record 35%. companies. Under the new president | Above all, Ramaphosa must curtail the rand appreciated and business | the corruption that’s made graft syn- confidence surged in a bout of mar- | onymous with the South African state. ket enthusiasm the media dubbed ! He’s got little to show for his efforts so Ramaphoria, which quickly fiz- far. Although he replaced the zled. This year offers leadership of corrupt and Ramaphosa the chance to mismanaged state compa- start living up to the hype. nies, they remain dysfunc- With his main rival tional. And while he installed sidelined by corruption a former legal adviser from charges, Ramaphosa the International Criminal has a firmer hold on Court as head of the National power for the leadership Prosecuting Authority, the of the ruling African country has yet to see a National Congress. That single major conviction of a leaves the former labor union politically connected figure. leader and multimillionaire business- | If the president manages to make man poised to clinch a second and | headway on this long to-do list, final five-year term at December’s | South Africa may see a recurrence of party conference. Ramaphoria. And the ANC, in power Now that the threat of an intraparty | since the end of apartheid, could be = challenge has been largely removed, | saved from the ignominy of seeing its Ramaphosa may finally be able to | share of the vote fall below 50% for the first time, in national elections sched- uled for 2024. —Antony Sguazzin VaHY UVaA FHL ‘yoonssoupna SiequootaJanuary 17,2022 ECONOMICS & POLITICS ‘THE YEAR AHEAD Bloomberg Businessweek Photograph by Joanna McClure Georgia On Our Minds, Again ‘The Southern state will be the stage for ‘more high-stakes political drama ‘The swing state of Georgia became the crux of American politics in the 2020 election cycle. Not only did Georgians choose a Democrat for president for the first time in decades, helping Joe Biden clinch a victory, but they also elected two Democrats to the U.S. Senate in January 2021, giving the party razor-thin control of that chamber. Expect the spotlight to return to the state in 2022. One of its Senate seats is ‘again up for grabs. After becoming the first Black senator in Georgia history— ‘winning only a partial term in office in a special election~Raphael Warnock will vie for a full term in November. His likely challenger is University of Georgia and pro football legend Herschel Walker, who's backed by for mer President Donald Trump. Walker is also Black and, until recently, was a resident of Texas. ‘Then there’s the high-drama gov- ernor’s race. On the ballot: Stacey Abrams, the organizing powerhouse credited with turning Georgia blue in 2020 and a national lightning rod for Republican rage; Brian Kemp, the sit: ting GOP governor who beat her in 2018; and David Perdue, who lost his seat in the Senate to then-33-year-old Jon Ossoff in January 2021 and is now challenging Kemp in the primary. ‘Trump is pushing Perdue’s extraor- dinary move as payback for Kemp declining the defeated president's demands to overturn his electoral loss in Georgia. Perdue has already said he wouldn't have certified Biden’s win as required by law. The former sen- ator, once a Kemp family friend and supporter, even introduced him as Georgia's next governor at the state GOP convention in June. “This is going to be the marquee race in the country about Trump's influence in the Republican Party,” says Jessica Taylor, who follows gov- ernors’ races for the Cook Political Report. “This establishes the litmus test everywhere, which is, ‘Do you think the election was stolen?’” Republican consultant Brian Robinson says Perdue’s pitch is that “a significant minority of Republicans have lost faith in Kemp and will not show up to vote,” which would tip the race to Abrams. Kemp’s counter- argument, in Robinson’s words: “I’m the only person in the race who has ever beat Abrams, and you [Perdue] couldn't even beat Jon Ossoff.” Nor is Kemp the only Georgia Republican suffering the wrath of ‘Trump and his supporters. His back- ers are trying to defeat Secretary of State Brad Raffensperger, the top elec- tions official, who debunked Trump's voter-fraud claims and refused to overturn the 2020 results. Lieutenant Governor Geoff Duncan, who pub- licly denounced the stolen-election narrative, has decided not to seek reelection. Duncan says Perdue’s run is a mistake: “There is no math that makes it easier to beat Stacey Abrams by having David Perdue in the race.” Georgia—once a bastion of racial segregation but now a powerhouse of Black business and politics—will also test whether Democrats can overcome Republican moves to limit voting to tilt elections in their favor. Stung by 2020's losses, exurban and suburban Republicans changed governmental structures, clamped down on mea- sures meant to make voting easier, and drew new congressional boundaries to dilute the growing Democratic major- ity in Atlanta's outskirts. How much these maneuvers will bolster the GOP in the rapidly changing state remains tobeseen. —Margaret NewkirkFind More Investment Opportunities Worldwide with GlobalAnalyst Find new opportunities to diversify your portfolio and discover undervalued companies that may have greater growth potential. GlobalAnalyst lets you compare the relative value of global stocks by region, country, industry or individually. Learn more and try GlobalAnalyst é InteractiveBrokers Membr - NYSE: FINRA, SIPC ~The projection or ces information generated by Interactive Boker! Globalinalys tol regarding the lkenood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and (uarantogs of ftiroresuts Posse not a esate say vary wth oo oho fol ove ine, MPOBTANT. Corporat data & rovidod by third-parties, and Interactive Brokers makes no warranties as fo tye acouracy of that data. You should Go your wn due Bligence prior fo relying on any such data displayed in GlobalAnalyst ierinceeneasJanuary 17,2022 CONSUMER THE YEAR AHEAD Bloomberg Businessweek A spirited pandemic Edited by Fur tries to be animal-friendly James E. Ellis About to Get Nasty ‘The auto giants held off while Tesla took the lead in the plug-in car market. ‘They won't with their most profitable vehicles In the summer of 2019, General Motors Co. President Mark Reuss teased out the idea that the company’s first electric pickup wouldn’t necessarily be designed for the job site but would be something with “more style and capability for off-road.” The implication then was that electric trucks, with their high cost and heavy batteries, weren’t quite ready for work duty. True to Reuss’s word, GM’s first plug-in pickup was the $110,000 Hummer EV, a high-end ride that went into production in November. On Jan. 5, GM Chief Executive Officer Mary Barra told the world a different story. The new Silverado she showed off virtually at the CES 2022 electron- ics show will start selling in the spring of next year, beginning with a $39,000 work truck ver- 2 sion that’s ready for towing and hauling. szasoy's Amore expensive version aimed at week. — end trail riders and suburban cowboys will ~ = hit showrooms in the fall of 2023. Why the turnabout? Batteries have gotten cheaper and better, for one, which means it’s easier to sell plug-in pick- ups such as a Silverado or Ford Motor Co.’and Ford researchers they're ready to plug in. Battery power has cap tured the imagination of retail buy- ers, and commercial customers are increasingly lured by the lower cost of operation and environmental, social, and governance benefits of adding zero-emissions trucks to their fleets, says Steve Majoros, Chevrolet’s mar: keting director Majoros, citing GM's consumer research, says pickup truck buyers show the fastest increase of any seg: ment in considering an electric vehicle for their next purchase. The Silverado announcement generated lots of inter est, and the $105,000 fully loaded version of the Chevy sold out in just 12 minutes, he says. Ford has said that almost 200,000 customers put down $100 to reserve the electric F150 Lightning pickup, set to go on sale this spring. Demand is so strong that the company says it will nearly double planned production, to 150,000 a year. GMis hinting that it may need more production capacity for the electrified Silverado than it has at Factory Zero, its EV plant in Detroit, which also builds the electric Hummer pickup, and will churn out a battery-powered Hummer SUY; the Cadillac Escalade; Chevy and GMC pickups; and the Origin driverless shuttle. “Silverado is a priority of the company, and Silverado EV will be a priority for the company,” Majoros says. “Knowing e kinds of volumes that we, rect and knowing what's ¢ to happen in this market, Factory Zero is the beginning.” ‘GM and Ford, which every year vie full-size pickup sales, expect competition in the form of an for the lea electric Ram from Stellantis NV (for: merly Fiat Chrysler Automobiles) plus a growing convoy of newcom. ers. Tesla Inc. is preparing to build its Cybertruck, and startup Rivian Automotive Inc. began production of its $67,500 RiT pickup in October. Ford started manufacturing the Lightning before the electric Silverado, so it has head start, but the GM truck ‘can go 400 miles on a charge, vs. the Lightning’s 300 miles, an issue for buy- ers with range anxiety. The Cybertruck is promising up to 500 miles, which could give it an edge since trucks lose range when hauling and towing. Still, the huge base of pickup own ers already driving Chevys, Fords, or Rams could help the established truck makers in the battle a other upstarts. Analysts see growth, but less than what the automakers expect. Jeff Schuster, LMC Automotive’s president of Americas operations and global vehicle forecasting, predicts sales of 125,000 electric pickups next year Ford alone cou be building more than that. 2024, with 40% of them being Tesla Cybertrucks. That means Ford, Rivian, and GM-which will be selling the elec- trified Hummer, Silverado, and GMC Sierra by then-would be fighting for the rest. “There’s a lot of production being built up,” says Sam Fiorani, vice pres- ident for global vehicle forecasting at ‘AutoForecasting Solutions. “The prob- lem is we don't know how deep this pool is. When you start building tens of thousands or hundreds of thousands, then you learn how many people are willing to pay” —David Welch Hollywood|is To Theaters ane aT simultaneously online-and Spider- ‘Man’ big box office-are behind the bet | Man bx fear behind he bet Fans of action director Michael Bay's . | movies will be able to get their fix in April, when Universal Pictures releases Ambulance, a bank-heist thriller with plenty of police helicopter chases, ively in theaters~a strategy many studios had eschewed during the pan- Reaena eee Hollywood is tiptoeing back toward normal in 2022. “Theaters have weathered many, .| many storms throughout history,” says Bradley Fischer, one of Ambulance’s producers. The extinction of cine- mas, he adds, “has been predicted and proven false again and again.” Ae Sil sees arc hedging their bets. this year, including Ambulance, will 45 days later. That’s a big change from the good old days of 2019, when it could take three months or After almost two years of shut- downs, capacity restrictions, > 8 waINSNOO VaHY UVaA FHL ‘yoonssoupna Siequootaeruary 1 CONSUMER THE YEAR AHEAD Bloomberg Buslneseweek film postponements, and the simultaneous release of some pictures in cinemas and online, the industry is coalescing around a different strat egy: Films released in theaters will get shorter exclusive runs before moving to subscription services such as Disneys, HBO Max, Paramounts, and Peacock. This year will be a big test for this model, with cinemas learning whether they can generate enough traffic during those initial exclusive periods to have a profitable business and movie studios finding out if they can maximize reve nue from online and theatrical outlets. Hollywood is planning a big come- back in 2022, with a calendar loaded with potential blockbusters—including Avatar 2, the latest jurassic World install ment, and the long-delayed Top Gun sequel featuring megastar Tom Cruise, who's also expected to draw moviegoers with his return in Mission: Impossible 7. ‘There'll be superheroes, too, including former teen vampire Robert Pattinson in his first turn as the Caped Crusader in The Batman, slated for March. But with Americans now conditioned to watching first-run films at home, counting on moviegoers to buy tick- cts is hardly a sure thing. Then again, Sony Group’s Spider-Man: No Way Home has delivered a $1.5 billion-plus, theaters-only bonanza since despite the omicron surge. “Consumer habits have been impacted,” says Jeff Goldstein, head of domestic distribution at AT&T Inc’s Warner Bros. Pictures. “We see from this holiday period that there’s no ques: tion that the avids have returned, but the more casual moviegoers have been much slower to return.” After releasing all ofits films last year on HBO Max on the same day they hit theaters in the U.S., Warner Bros. plans ‘a two-pronged approach in 2022. While most of its biggest titles will get exclu sive cinema runs, including The Batman ‘and anew Aquaman flick scheduled for December, several other pictures will go straight to HBO Max. They pected 202215, and its mid-December opening Canedan box of, neatly ‘double lat enrtake $8b with family appeal, including a new Father of the Bride, and those aimed at adults such as the Steven Soderbergh thriller Kimi. “Most things don’t belong in a movie theater,” says Kevin Goetz, chief exec- utive officer of Los Angeles- based Screen Engine/ASI, which does market research for studios. With the cost of seeing a film in a cinema with a family of four approaching, $90, including concessions, “you better know that movie is going to deliver,” he says. “That's why peo: ple want to see superhero movies. ‘They want to see huge action-adven- ture movies.” Bloomberg Intelligence forecasts about $8 billion in U.S. and Canadian box office receipts this year. That would be short of the $11.4 billion in 2019, but still well above the $2.3 billion in 2020 and $4.5 billion in 2021, according to researcher Comscore Inc. It doesn’t help that the total inventory of 2022 films getting theatrical releases won't Ilustration by Angela Stempelmatch pre-pandemic times, even with the big titles planned. Before the pan- demic, studios released about 140 mov- ies annually, according to Comscore. ‘That fell to 52 in 2020 and 93 last year, with only a slightly higher number expected this year. ‘Theater companies point to the diminished results of many big films released simultaneously online and in cinemas as proof that theaters till mat ter. “Doing a big blockbuster movie at the same time in a theater as on a streaming service was kind of a failed experiment,’ says Richard Gelfond, CEO of Imax Corp. “A lot of it was cannibal ized by piracy over the streaming ser vice. And people just didn’t turn out. An event wasn't created.” For Ambulance producer Fischer, the ticket sales still registering for Spider Man tell him moviegoers are ready “and incredibly willing” to return to the big screen. “To me, that’s wow-the theatrical experience is alive and well,” he says. “It’s an experience you can’t have at home.” —Brian Eckhouse, with Christopher Palmeri . ur Tries to SHE Its Image, Again ‘The industry is betting anew certification program will win back consumers worried over animal welfare Few products have suffered a bigger image implosion than fur. Once a sta tus symbol for the rich, rock stars, and royalty, its increasingly become stig: matized, a fashion fail synonymous with animal suffering and the ostenta tious display of wealth. ‘And yet, through decades of public protests, corporate boycotts, and vegan activism, the industry has lumbered on, thanks to Chinese mink shoppers and the global trend of fur trimmings > BIOGEN’S ADUHELM DRUG ‘The new Alzheimer’s treatment faces questions about its efficacy and cost Aduhelm, the first new Alzheimer’s treatment in almost 20 years, faces a major challenge in April when Medicare, which provides health coverage for 63 mil- lion elderly and disabled Americans, will announce its final decision on whether to cover the drug. It could be a make-or-break moment for Aduhelm, made by Biogen Inc. and Eisai Co., which are also seeking approval in Europe and Japan. The drug has confronted steep hurdles since the U.S. Food and Drug Administration approved it in June. Some doctors on an FDA advisory committee who doubted Aduhelm slowed the progression of Alzheimer’s resigned in protest when the agency overruled them and cleared the drug. Aduhelm went on to record just $2.3 million in sales in the first four months it was available. Biogen later halved the price of the drug, which is administered via monthly intravenous infusions, to $28,200 a year. The drug’s already questionable prospects became even more dismal on Jan. 11, when Medicare proposed restricting its use to patients in clinical trials. Agency officials said they’re skeptical any benefit will out- weigh potential harm, a bad sign for its final decision in April. With almost 6 million Alzheimer’s patients in the U.S. alone, any treatment that gains widespread use could be a blockbuster. But most insurers are refusing to pay for Aduhelm without more evidence of its efficacy. —Angelica Peebles a 2202 1 Avenue waINSNOO VaHY UVaA FHL ‘yoonssoupna SiequootaJanuary 17,2022 CONSUMER ‘THE YEAR AHEAD ‘Bloomberg Businessweek on arctic anorak hoods. Now the $25 billion industry is seeking redemp- tion, arguing that fur has its rightful place in the era of sustainability and careful consumption, ‘The pitch is called Furmark, a certification program that aims to ensure animal welfare and sustainabil ity at every step of the supply chain and to ultimately bring back busi ness. Consumers can trace the farm where a mink, fox, or sable was kept and where the pelt was later dyed and dressed, providing alevel of assurance that animal rearing and environmental standards were maintained in the best possible way. Furmark (not to be confused with the computer graphics card bearing the same name) could turn out to be the last stand for an industry beaten down by trade bans, squeamish fash jon houses, and a public sensitized to animals’ well-being. Apparel maker Canada Goose Holdings Inc. has said it vill stop using fur in all its products by the end of this year. This is also the last year that retailer Saks Fifth Avenue will sell fur products. Opposition to fur has become part of the political mainstream. Israel was the first country to halt fur sales, in 2021, with a few exceptions for reli- gious garments. French lawmakers adopted a bill in November that bans farms from breeding animals exclu- sively for their pelts. Italy, home to fur stalwart Fendi-whose double-F logo stands for “Fun Fur”-announced in December that it’s banning fur farm- ing. The U.K. could be next: The gov- ernment, which already prohibited rearing animals for fur 20 years ago, is mulling a law that would ban all sales and imports of fur products. Furmark was supposed to counter all that, but soon after its launch in September, it ran into troubl conglomerate Kering SA, i porter, announced that al ofits brands, which inchide Gucci and Yves Saint Laurent, will stop using fur entirely. Elle magazine followed, banning dis- play of fur in its 45 global editions. “The battle appears to be lost, at least in the West,” says Frédéric Godart, associate professor of organizational behavior at Insead, the French business Photograph by Joanna McClure school. “The issue around fur is not whether it’s sustainable. The issue is far itself?” ‘The International Fur Federation, a governance body overseeing the trade in more than 50 countries, acknowl ‘edges that it’s late in getting a certifica: tion program off the ground. Furmark is in fact the industry’s second attempt at self policing: Its frst, in 2007, didn’t cover the entire supply chain or set standards that went beyond national welfare rules. ‘One major player remains at least partially absent from the cur- rent program: China, the world’s top fur exporter. The IFF managed to bring Chinese manufacturers, dress- ers, and dyers on board, but not the farms, because China didn't conform with independent inspections of the ‘operations. That’s a major problem for Furmark, because much of the pub lic’s concern revolves around the con ditions of breeding and farming. All Furmark-labeled products are made from wild or farm-raised ani- mals from producers that adhere to closely defined welfare programs. And ressers, which prepare the pelts, and dyers must pass tests on sustainabil ity, emissions, use of chemicals, and safety. Each item receives an alphanu- ‘meric code that traces its journey from cage to coat. Furmakers are trying to use the industry’s sustainability argument as a weapon against a key rival: faux fur, which is usually made of synthetic materials that have been criticized for adding to microplastics piling up in ‘oceans. “I cannot think of a material or a product that is more sustainable than a fur coat” that’s passed on from grand ‘mothers to granddaughters, says Aron Liska, whose family-owned Austrian luxury fur brand Liska & Co., founded in 1947, is part of Furmark. IFF members have little choice but to embrace the new code of conduct:5 § ‘Those who don’t are expelled from the organization. Farmers who refuse to meet Furmark standards are cut off from auction houses that sell skins. Mark Oaten, chief executive officer of the IFF, acknowledges the tough road ahead. Establishing Furmark among trappers, farmers, and retail ersis one thing, but making it a recog: nizable emblem for consumers will be the next challenge, he says. And then there’s the issue of broad resistance to fur because of its association with an idle elite who places personal pres- tige over animal welfare. “It's true that there isa group of consumers who are opposed to fur regardless of how sus tainable itis,” says Oaten. “Some peo: ple are never going to eat meat, and some people are never going to go on an airplane. Everybody has their choices, and I’m in the business of respecting that.” Still, the global fur market has shown that it’s able to cope with adver- sity. The industry has grown by about 40% in the last 15 years despite the sharp drop in Europe. That’s because of China, where the fur market surged ‘more than fivefold since 2006. —frina Anghel and Angelina Rascouet = ABoldB Onan Trave Rebound Eastern Europe's Wizz Air, a major layer close to home, has bigger plans The travel sector is still struggling to survive the ravages of the coronavirus. Each time an outbreak recedes, another variant appears, throwing a nascent recovery off course once more, But from its perch in Eastern Europe, Wizz Air Holdings Plc is charting an aggressive— and potentially risky-expansion. ‘The budget carrier has pledged to lift capacity 50% above pre-pandemic levels this summer, deploying bigger planes and more flight slots to reach the goal. The gambit, punctuated by its November order for 102 Airbus SE planes worth $13 billion at list price, will either vault Wizz into the league of larger low-cost rivals Ryanair Holdings Plc and EasyJet Ple or make it even ‘more vulnerable to Covid9's vagaries. ‘Wizz carried 4o million passengers in 2019, the year before the virus upended the industry, and it remains confident that 2022 will be the year it cements its status as a top European player. Chief Executive Officer Jozsef Varadi, International fg 7 Neth America 7 bia Paco 7 Europe who founded the Budapest based air- line in 2003, can earn a £100 million (6136 million) bonus if he can push Londonisted Wizz’s market value ‘to almost £12 billion over five years, more than double where it stands now. “Our plans are aggressive, but by late spring we expect that omicron will be largely behind us,” says Varadi, pre- viously CEO of Hungarian flag carrier Malev. “We want to be in pole position to goback to the market.” He's pressing ahead with plans to take delivery of Airbus narrowbodies at a rapid rate of 4.5 a month over the next eight years, renewing his entire fleet with the world’s longest-range single aisle jetliner. That could open up far-flung routes to parts of the Middle East and even Asia. By the decade's end, he envisions a 500-aircraftfleet-four times the size of its 2019 complement— that could carry 170 million people a year, a tally exceeded before the virus by only American Airlines Group Inc. and Delta Air Lines Inc. ‘Backed by Bil Franke’ private equity firm Indigo Partners LLC (which also holds stakes in discount- cers Frontier Airlines in the U.S. and Volaris in Mexico), Wizz has hired 1,500 people since August. The airline is also moving more jets to markets in Western Europe and to Abu Dhabi, where it operates a low-cost venture with a local partner. ‘The discount model provides room for expansion in Eastern Europe, where a growing middle class is embracing the idea of impromptu beach trips and city breaks. Wizz has made the Airbus A32ineo jet, 109% °7% the biggest modern narrow- body at 239 seats, its main- stay, Ryanair is modernizing ‘ozoat_ with Boeing Co's 737 Max 8, which has 40 fewer seats, while Easylet predominantly operates the midsize Airbus A320. Filling those extra seats may not be easy as Covid outbreaks ebb and flow, and larger planes may limit Wiz2’s ability to profit ably add daily frequencies on its routes even in more buoyant times. “Filling bigger aircraft may be challeng- ing,” says Andrew Lobbenberg, an ana- lyst at HSBC in London who covers the transportation industry. “Having differ- ent sized aircrafts also helpful because itallows you to play around with them by day of the week or season of the year to optimize capacity.” —_ kh ~ Varadi points to the 96% seat occu- pancy Wizz achieved before the pandemic as an indication that its pi them high, sell them-cheap approach is enough to lure customers. “We're nota business airline,” he says. “We're in the leisure market, and ifleisure passengers can get the right price, they'll ftin with everything else:” — Christopher Jasper, with Siddharth Philip . 8 waINSNOO VaHY UVaA FHL yoonssousna Sequ001aJanuary 17,2022 CONSUMER ‘THE YEAR AHEAD An Handin Macau Expiring casino licenses and Chinars crackdown on high rollers are big risks ‘The clock is ticking for casinos in the world’s largest gaming market. The licenses of Macau's six operators expire in June, two decades after the Chinese city opened its gaming industry to for- ign investment. That’s creating the possibility that new players may enter the market in 2022 and other operators could lose their place at the table. ‘The deadline couldn't come at a worse time for the city’s casino oper: ators, still suffering from a dearth of customers because of China’s border shutdowns aimed at walling out the coronavirus. Macau’s gaming revenue in 2021 was $10.8 billion, down 70% from its pre-pandemic level, as sev- eral Covid-19 outbreaks led the Chinese government to temporarily suspend quarantine-free travel between the city and the mainland from late September to mid-October. Currently, residents in nearby Hong Kong need to quarantine for two weeks upon entering Macau, and the door remains shut for visitors from the rest of the world. ‘Meanwhile, Macau’s casinos are sub- ject to heightened scrutiny as the gov- ernment cracks down on high rollers auls legislation governing the Alvin Chau, chief executive officer of Suncity Group, one of several operators of so-called junkets. Extending credit to high rollers, these have long drawn Beijing's ire for help- {ng clients transfer money out of China. ‘Chau confessed to establishing overseas gambling platforms and carrying out illegal virtual betting activities, police said. Suncity’s publicly traded arm, Suncity Group Holdings Ltd., which doesn’t operate the junket business, has said it could be “adversely affected” ifit loses Chau's financial support. ‘The company runs overseas neem casinos, travel and hotel ser vices, and property develop: ‘ment. Chau, who's resigned as the company’s chairman and shut his privately owned jun: ket operations in Macau, couldn’t be reached for comment. Chau’s arrest sent shock waves throughout the city’s gaming halls, with experts predicting casino oper- ators would need to reduce their r ance on a relatively small number of ‘wealthy customers. Targeting Suncity ‘was “a death blow to the junket indus- try,” Sanford C. Bernstein analysts wrote in a research note. ‘A shakeup of the “VIP” gambling sector—which accounts for about $3 bil lion in annual revenue, one-third of the city’s total gaming return—will bring Macau more in line with President Xi Jinping’s “common prosperity” cam: paign, meant to demonstrate that his government is reducing inequality. Heightened state oversight ‘repandemsic evel 70% ‘marks a shift from decades of tolerating ‘Macau's role in enabling capital fight, says Steve Vickers, CEO of Hong Kong- based risk consultant Steve Vickers & Associates. “Billions of dollars have been funneled out of China in stark noncompliance with capital control regulations, and the big beneficiaries have been the casinos,” he says. It’s unclear whether some or all of the current operators will receive new licenses or how long they will last. ‘Macau officials revising the city’s gam- bling laws are considering pro- posals to mandate increased local ownership of casinos and to empower government representatives to supervise ‘operators and approve divi- dend distributions. Especially vulnerable to policy shifts are MGM China Holdings, Sands China, and Wynn Macau. These affili ates of American companies typically send substantial dividends home, mak: ing Macau the major profit engine for their parents. Both Wynn Resorts Ltd. and Las Vegas Sands Corp. got more than 60% of their revenue from China in 2019. But U.S.-China relations suf- fered in 2021 as Washington responded to news of Chinese persecution of ‘Muslim Uyghurs in the Xinjiang region, President Joe Biden expanded a black- list of Chinese entities in December, preventing them from accessing key US. suppliers and technologies, and banned Americans from investing in more Chinese technology companies. He also launched a diplomatic boycott of Beijing’s Winter Olympics and signed bipartisan legislation banning goods ‘made with forced labor in Xinjiang-a law that China’s Foreign Ministry spokesman called “vile.” For Chinese officials eager to show their displeasure with Biden, casinos with US. parents make easy targets. To continue operating in the city, American: owned casinos may need to dilute their holdings and offer local part: ners stakes of as much as 20%. That would result in them “keeping more of their profits in Macau” rather than sending them back to the U.S., says Bloomberg Intelligence analyst Angela Hanlee. —Shirley Zhao . : ' i iSales of booze, a welcome companion during lockdowns, have rebounded to pre-pandemic levels ‘The combination of travel bans, lockdowns, school closures, and canceled family gatherings brought on by the global pandemic was enough to drive a person to drink. And with bars, restaurants, and sporting venues often closed or restricted, consumers had to find new ways to get one. Off premise sales of alcohol soared after March 2020, and the trend is expected to continue. “It’s more important than ever for food and beverage operators to meet customers wherever they feel the most comfortable-whether that’s curbside, in-store, or via delivery,” says Bryan Solar, head of restaurants at payments processor Square. One surprising area of growth: products with no buzz. At online liquor retailer Drizly, nonalcoholic U.S. alcohol sales Alcohol sales compared to pre-pandemic trends at bars, clubs, and lounges —. —— << Z ——————— ee) Change in off-premise sales ‘Since January 2019 a 7 Spits. 7 Wine 7 Beer Teauia fieore —syz020 aoa o Alcohol sales online i 50. Popular alcohoc beverage types sokt ° byDray ab ashareof total ses 30 Sparking wine . ° Jaza020 oszoal zeoe 1s Annuer waINSNOO VaHY UVaA FHL yooussousna Siequ0taJanuary 17,2022 ‘TECHNOLOGY ON ‘THE YEAR AHEAD Bloomberg Businessweek Another Facebook election 30 HotSe The Intel, idji Simo Time for vat meat Bigiinjrastructure bucks Edited by Joshua Brustein and ‘Max Chafkin The New Web Vs. the Old We ‘Meet Web3, which could replace the Big Tech powers, or be co-opted by them If you’ve spent any time around the tech industry recently, you’ve probably heard the good news about Web3, the presumed next chapter in internet history. The so-called Web 2.0 era, which was dominated by a handful of social media platforms, is over. Web3 boosters say that instead of relying on Facebook— now rebranded Meta Platforms Inc. to avoid any of the bad vibes associated with social media—we’ll soon be communicating using decentralized services that will make the current fears of censorship by tech monopolies passé. Web3 applications are based on cryptocurrencies, or digital tokens that are tracked on blockchains. These tokens are distributed to an app’s early investors and users, and can also be bought and sold on crypto- currency exchanges. In theory at least, they’ll appre- ciate as an app takes off. Venture capitalists invested $30 billion in crypto projects last year, according to research company PitchBook. Much of that went into Web3 startups such as Sky Mavis, developer of Axie Infinity, a blockchain-based video game; BitClout, a decentralized social network whose founder is known by the pseudonym “diamondhands”; and OpenSea, a marketplace for nonfungible tokens, the digital col- lectors’ items known as NFTs.Ilustration by Angela Stempel whose venture capital firm, Andreessen Horowitz, recently raised $2.2 billion for a new crypto fund— Webs offers the chance to participate in a vast utopian project while simul taneously getting in on a financial boom. Bloomberg LP, which owns Bloomberg Businessweek, has invested in Andreessen Horowitz.) Detractors see the movement as a branding exer: cise designed by tech investors to pre serve the mania for cryptocurrency tokens. They point out that many of the big Web3 investors are the same people who backed Web 2.0. “It’s ult mately a centralized entity with a dif ferent label,” tweeted Jack Dorsey, a ‘Twitter Inc. cofounder and utive officer of Block Inc., which, until its recent blockchain-themed rebrand ing, was known as Square. ‘Andreessen responded to Dorsey's critique by blocking him on Twitte When Kelsey Hightower, a princi pal engineer at Google’s cloud com: puting division, tweeted that Web3 ‘was just taking existing products and “rub[bing] some cryptocurrency on it,” an engineer at the crypto trading plat- form Coinbase replied: “Google’s days are numbered. We are coming for you. Ticktock:” Hightower says he was taken aback. “This whole ‘I'm at war with your employer, and you're going to be a casualty of this war’-that’s new, he says. nthe other hand, successful geeks arguing bitterly about web architecture is as much an aspect of Silicon Valley's culture as the hackathon or the fleece vest. “People are very religious about their beliefs” says LiJin, a co-founder of the Webg investment firm Variant. For Jin, a web economy in which art ists and musicians sell NFTs directly to fans would allow them to reclaim power from Facebook, YouTube, and other companies. She believes today’s social media and Web3 will ultimately coexist, but the idea that a fully real ized Webs will simply replace it ratch- ets up emotions on both sides, she says. “We're reaching a boiling point in terms of popular sentiment against technology incumbents and social media platforms.” ‘The irony is that today’s incum- bents mostly got their start trying to do exactly what Webs promises now: to disrupt a previous generation of gatekeepers in tech and media. Last fall the entrepreneur and investor Reid Hoffman described the “wild idealism” of the early Web 2.0 era, during which he started the profes- sional social network Linkedin. “The reigning ethos was to minimize rules, institutional hierarchies and gatekeep- ing of any kind while enabling decen- tralized networks and peer-to-peer interaction,” he wrote in an essay for a Knight Foundation conference on internet history. Web 2.0 did usher in an era of decentralization, creating tools that ‘made it easy for anyone-in theory at least—to reach an enormous audience online. But the companies running the social networks also collected huge > zz08 1s Armnuee ADOIONHOAL VaHY UVaA FHL oonssousna 51equ0018January 17,2022 ‘TECHNOLOGY ‘THE YEAR AHEAD ‘Bloomberg Businessweek stores of personal data, which they milked for massive financial returns. In 2016, Microsoft Corp. bought Linkedin for $26 billion. Meta is worth more than $900 billion. To Hoffman, this was the natural maturation phase that came after the revolution. “You have this pattern, where you get a decentralized plat form and then recentralize key fea tures that work better technologically, ras businesses, or as infrastructure,” he says. While Hoffman says he sup ports Webs, he predicts the same thing will happen. “Everyone says this will be decentralized forever. Well, no.’ In certain key areas, the shift Hofiman predicts is already happen- ing. Opensea, the NFT marketplace, recently stepped in when a New York art gallery owner, Todd Kramer, com: plained that a collection of 16 NFTS, mostly cartoon images of bored pri mates, had been stolen in a hack Opensea froze the NFTS, making them effectively worthless. Although this might seem like a sensible safeguard, some users complained it was a viola tion of the promise of Web, which is that no centralized entity should be able to restrict how individuals use the digital assets they possess. By this logic, OpenSea’s ability to stop some- one from selling a stolen NFT is the same as Facebook getting to decide when something counts as misinforma- tion. Allie Mack, an OpenSea spokes: woman, said that the NFTs remain on the blockchain and that the company was simply enfore: ing the rules of its platform | “to ensure the safety of our customers and the growth of the broader NFT space.” ‘The crypto world’s reputation as a crazy new financial arena where masses of random traders are get- ting rich may also be overstated. A recent study for the National Bureau of Economic Research showed that the top 1,000 Bitcoin holders con trolled about 15% of all the cur. rency in circulation as of the end of 2020. And Chainalysis, a blockchain research firm, recently found that most NFT profits go to the traders who have access to so-called whitelists, which allow them to buy the new tokens before they're offered on the ‘open market. Moreover, it isn’t clear that regular people will be as excited about the dis- uptive power of Web3 as tech inves- tors are. The currency of the social media era was attention, which encouraged everyone, for better or worse, to go about their lives as if they were celebrities. In Web3 every- one isa day trader. Some gamers are already expressing hostility to NFTs video games because they just want to have fun, not manage a portfolio, and companies such as the crowd: funding service Kickstarter PBC have gotten blowback for signaling interest in Webs. Tim O'Reilly, the investor and entrepreneur who coined the term “Web 2.0," wrote an essay in December titled “Why it's too early to get excited about Webs.” So far the predominant ‘way to participate in Webs is to bet on various tokens; the social networks of the future are still mostly hypothetical. ‘The history of technology, according to ‘O'Reilly, isa repeated pattern where people get overly excited about some. thing, creating bubble that eventually pops, sometimes leaving something useful behind, “I love the idealism of the Webs vision,” he wrote, “but we've been there before” —Joshua Brustein, ‘with Mark Bergen . Election Year ‘The political fight online in 2021 may not have seemed calm, but 2022's going tobeworse 2022 had barely dawned when Facebook and Twitter waded into their first big political controversy of the year. On Jan 2., Twitter Inc. perma: nently suspended the personal account of Georgia Representative Marjorie ‘Taylor Greene, citing the Republican's continued use of the account to spread misleading health information about Covid-9 in violation of the platform's rules. The next day, Meta Platforms Inc. followed with a 24-hour suspension of her Facebook account. ‘The move inspired predictable con- demnation from Republican politicians. “Welcome to the Woketopia,” tweeted Florida Representative Matt Gaetz; Ohio Senate candidate J.D. Vance tweeted a screenshot of Greene’s suspended account, along with a message: “These companies need to be crushed.” 2022s likely to be a year full of social ‘media companies making content mod- eration decisions that politicians don’t like, Elections create an incentive for overheated or misleading claims, and all 435 seats in the House are up for grabs, as well as 34 of the 100 Senate seats. “Campaigns are using election disinfor- ‘mation in really novel ways, and we're going to see more of that in 2022,” says Jesse Littlewood, vice president for cam- paigns at the good government group Common Cause. This puts the companies in an awk ward situation. Greene may be violat | ing their policies, but she’s also a sitting public official run’ ning for reelection. At atime when most can- didates rely on social media to communicate with voters, such a ban is effectively a decision to keep someone from being a full participant in electoral politics. Republicans consistently accuse ‘Twitter and Facebook of abusing their power, but Littlewood and other crit- ics say social media companies allow too much content designed to under: mine voters’ faith in the integrity of the electoral system to spread on their platforms. In February 2020, Facebook employ- es outlined the ways its products could be used to discourage voting, accordingE to a document that whistleblower Frances Haugen shared with regulators last year. The report rated the compa- ny’s readiness to detect ads cont obvious forms of voter suppression such as trying to trick people about the logistics of voting-as moderate. But it had a grim assessment of Facebook's ability to address content that took sub tler approaches to voter demotivation, like saying voting wasn't worth the trou ble given the long lines. “we know this will happen, and we have no product protec: tions in place for it,” the employees concluded. Since then, Meta has expanded its voter suppression policy to fight content that questions lawful YY Number of countries, where government and Political party actors Use organized social media manipulation g, campaigns 2017 2018 2019 2020) voting methods or election outcomes. Both Facebook and Twitter sought to remove such messages or label them as misleading during the 2020 election. Neither company has said whether it’s planning to do anything new related to election security for the midterms. Experts predict that, even if the companies set firm guide lines and try to enforce them, the com ing election season is going to be an exhausting game of cat and mouse. “The clearer the rules are, the more that you can expect campaigns to push up right up against the rules,” says Stanford Law School professor Nate Persily. —Naomi Nic . FIDJI SIMO The Instacart CEO steers away from the competition, Fidji Simo took over Instacart Inc. in August, assuming the helm of one of Silicon Valley’s most valuable startups. The job came with some daunt- ing challenges, among them potential competition in the grocery delivery business from Amazon, DoorDash, and Uber and a perpetually restive gig economy workforce. Things look even trickier now after the departure of several high-ranking executives and rising uncertainty around an expected initial public offering. The pandemic transformed grocery delivery from a welcome convenience to an essential service. Simo must now prove Instacart’s business model is ready for public markets, even in a post-pandemic world. Her strategy has been to focus on building technology that grocery stores can use to set up their own e-commerce outfits rather than doubling down on becoming a logis- tics platform competing directly with DoorDash Inc. and Uber Technologies Inc. Doing so, she hopes, will help shore up frayed relationships with grocers who turned to Instacart as a lifeline during the pandemic but are now wary of ceding too much power. Simo has presented her company as an ally in what she’s described as the grocers’ “fight against Amazon.” She also has to keep investors, who’ve already poured almost $3 billion into Instacart, feeling good about the company’s direction. —Jackie Davalos i 8 Z Q VaHY UVaA FHL ‘yoonssoupna SiequootaJanuary 17,2022 We’re Number... = ‘TECHNOLOGY ‘THE YEAR AHEAD Intel and the U.S. are passing the torch con semiconductors, whether they like itor not Intel Corp. is on the brink of losing its status as the world’s largest chipmaker. For the first three quarters of 2021, Samsung Electronics Co. held a narrow lead in sales. The final numbers for the full year will be available in late January, but it seems likely that Intel will drop to second place. Even if the company holds on for another year, this has the appearance of a durable reordering, Investors are already acting as Intel’s heyday has passed. Several other chipmakers have higher stock market values, including Taiwan Semiconductor Manufacturing Co. and Nvidia Corp., whose market valuation ‘No one is predicting Intel's de It still produces the vast maj. ity of the world’s computer proces sors, more complex than the memory’ chips Samsung specializes in, and rakes in an enormous amount of cash with high profit margins. { Still, Samsung surpassing Intel would be a significant shift. Intel, eof the companies that first put the licon in Silicon Valley, has dominated the $400 billion semiconductor indus- try for most of the past 30 years. It’s the foremost USS. chipmaker at a time when the geopolitical implications of the industry loom large. Chief Executive Officer Pat Gelsinger, who rejoined Intel in early 2021, aims to return it to leadership on the crucial area of manufacturing technology while also muscling in on the outsourced man- uufacturing business that TSMC and Samsung now dominate. Investors ini tially applauded Gelsinger’s approach, but they're increasingly focused on its high cost and the time it may take to deliver results. It takes years to design semiconductor, develop the technolo- sles needed to produce it, and build the plants where it’s made. Gelsinger will be spending most if not all of this year doing the best he can with decisions his predecessors put in place. ‘The rise of TSMC and Samsung, the stress the pandemic has placed on the supply chain, and the increased tensions between the U.S. and China have all heightened anxiety that the U.S. could be left vulnerable asa critical industry shifts its center of gravity toward Asia. In 1990, two years before Intel started its runas the biggest chipmaker, the U.S. accounted for about 37% of worldwide production. That’s down to about 1296, according to the Semiconductor Industry Association. Europe’s slice of that market has fallen even further. ‘The Biden administration is consider- ing ways to tighten restrictions on the sale of equipment to Semiconductor Manufacturing International Cor China's biggest chipmaker, and has said it wants to boost domestic manufactur- ing of semiconductors. Gelsinger has been a leading propo- nent ofa proposal in Congress to devote $50 billion to support the building of chip plants in the U.S. But progress has stalled. It would represent an unprec- edented piece of industrial policy. In the best-case scenario, subsidies could persuade Intel, TSMC, and Samsung to build more plants in the US., but not in 2022, given how long it takes to con- struct the mutibillion-dollar facilities. Intel’s leader is trying to get the company to thrive even as its dom- inance wanes. Success in that goal would be relatively unprecedented in the chip industry-a place where his company has done so much to define the yardsticks for success. The brutal pace and expense of innovation means that once you fall behind, the road back to the top is usually too steep to climb. lan King . No Chickens Were Harmed In the Makin ‘This could be the year U.S. regulators allow companies to begin selling ‘meat grown in labs ‘Near the end of last year, Upside Foods Inc. opened a meat pro- cessing plant like no other. I the $50 million facility, just outside Berkeley, Calif., workers cultivate small lumps of animal cells in large vats over two weeks, slowly growing them >In 2022, There’ll Be 52 Weeks ‘Tens of billions of federal dollars will begin flowing into tech projects Money from the enormous U.S. infrastructure spending law passed last year will really begin rolling out in 2022, and will continue coming for years. While a lot of investment is earmarked for maintaining and improving roads and bridges, delivering clean water, and dealing with climate change, one of the biggest chunks is dedicated to improving the country’s broadband networks. Other technology projects-electrifying buses, beefing up cybersecurity software, upgrading uiilities, and developing new clean energy sources—are also in ine to receive billions in funding. —Mark Bergen Federal Communications Broadband ommsionsubids to Rela nin no improving te oy ‘ibe hovechols for Te average cost ot ere service nthe Serie ndvieos i Us tsngh andifsntatbecame the aay 9908 Cybersecurity Spoods nabout 65% of US. counties ae to ao” pat of ransomoae attacks to qualy a5 "roadbona” according tothe National fas shown how timay state ae Iedociation of Coumtes $14.2b oval government oybrsecary 's-the now investment helps them apply what one expert calle "basic ‘ita hygiene {Grant money for states to support deployment Digital ea Grants for state and and adoption Beetnaal tocal governments $28b $250m St Grants torre elctic aac $42.56 Mitel infsstctre Climate ‘timate changes a crucial actor many ofthe ivestmenisin theta but ‘significant amount of money ill go toward technologies that are rectly ‘Simin to woan the economy off carbon. Developing new energy technologies ‘suchas clean hyorogen and ‘Sdvanced nuclear, a8 well a9 edveng indus emiesone through carbon ‘captro and other sratonios, Smart grid vehi charang network “Tho. Deparment ot Enray Teco sTeerbous Woton nga the darcy Pepuatonines ine Sree aesneneey ta - : Besser sage it ‘Slctre vehicle cnaren, Seccenteereel Sccording thea fond tendo gids moro- ene" in ‘Sow Bul Sopa Tesponding bwin demand. BloombergNEF has estimated that ‘every 1000 new electric buses can reduce diese consumption by 600 bares ‘ay. Today, 97% of alle-buses In ‘xistenee ae China zz02 1s Arnuer ADOIONHOAL VaHY UVaA FHL oonssousna Sequ0diaJanuary 17,2022 ‘TECHNOLOGY ‘THE YEAR AHEAD ‘Bloomberg Businessweek Photograph by Joanna McClure é ef &e Fad % é e @ 3 se into chicken breasts and steaks. No animal is slaughtered at any point in the process-the flesh is manufactured. ‘At 53,000 square feet, the factory is the largest ever dedicated to so-called cul tivated meat; the company hopes con- sumers will be able to buy the meat it makes sometime in 2022. Unlike plant-based meat alterna. tives that have been on the market for years, cultivated meat is real meat. ‘The techniques used to grow it are ‘well developed; the problem for start ups such as Upside is producing the meat in large quantities while achiev: ing the smell, texture, and mouthfeel diners expect. After seven years of work, Upside says it's ready to pump out as much as 50,000 pounds of food from the California plant. “We want to be able to ship product from here nation: ally and then internationally,” says Uma Valeti the chief executive officer and co-founder. He says Upside can ‘make just about any meat product, but {twill focus first on things like chicken nuggets and chicken breasts and has already started production at the faci: ity. When I tried an Upside chicken breast last year, it smelled and looked exactly like grilled chicken. It tasted like it, too, though the texture ‘was a bit softer and less juicy, Poundsol ign a waiver. Before the pub- sets the same chance to try it, Upside needs a green light from US. regulators. Both the Food and Drug Administration and the Department of Agriculture have spent three years figuring out how they'll ‘monitor the cultivated meat industry, visiting laboratories and examining ‘every process companies use to make their products. Upto My taste test required me to produce annually 50k Although cultivated meat itself is considered safe, there are plenty of unanswered questions about how often the vats should be cleaned and how the ‘meat should be transported and stored. ‘There’s also the question of what to name it. The agencies issued a pub- lic request for comment in November, asking interested parties to chime in on exactly what meat that’s been raised in vat should be called. Upside and oth- ers have pushed for “cultivated meat” instead of “synthetic meat,” “vat meat,” or other less appetizing alternatives. Such deliberations are an encour- aging sign for those hoping U.S. agen- cies will soon approve the products. Another potentially favorable develop- ‘ment: The USDA recently spent $10 mil- lion to create the National Institute for Cellular Agriculture, which is meant to back research in the field and turn the U.S. into aleader in manufactured meat. “There’s been this haggling over the regulatory framework, but these are signs that the agencies are realy close,” says Chase Purdy, the author of Billion Dollar Burger: Inside Big Tech’s Race for the Future of Food. It’s already possible to purchase some types of man-made meat. In December 2020, Singapore became the first nation to approve the sale of culti- vated meat. Israel’s Aleph Farms says it will be ready with some vat-grown thin-cut steaks by yearend. California companies such as BlueNalu Inc. and Wildtype hope to follow with sea food products, including sushi-grade fish. Meanwhile, San Francisco-based Eat Just Inc. is already selling chicken in Singapore. According to Purdy, there’s been pushback from beef ranchers and their lobbyists about the arrival of cultured meat, though industrial proces- sors have largely welcomed the technology. Given the regulatory activity and the hundreds of millions of dol- lars already invested in American startups, the U.S. has a strong inter- est in becoming an early leader in the industry. “My view is that it might bea perfect storm that makes the U.S. the next country to greenlight cultured meat,” Purdy says. —Ashlee Vance ll lab meatYou don’t need to 7A be a bioengineer to ea loeasteverxenaets shape of humanity. Help power your portfolio with the innovators of the Nasdaq-100. 4; Invesco QQQ NOT FDIC NSURED | MAY LSE VALUE | NO BANK GUARANTEE ‘Ther are isk inoked with investing in ETFs, incating posible los of money. TF ae subject fo sks to thse of stocks. vestments focused ina particular sector, suchas tecnnology, are subject to greater risk and are more greatly impacted by market volt, than mor ceri investment, ‘The Nastag-100 Index comprises the 100 largest non-financial companies traded onthe Nasdag, An investment cannot be made direct ito an index. Before investing, consider the Fund's investment objectives, risks, charges and expenses. Visit invesco.com/fundprospectus for a prospectus containing this information. Read it carefully before investing. Insc rts ne5 z 9 z a 6 2 THE YEAR AHEAD era Bush Bb TAXIS Stocks that didn’t take flight ACE's dream approaches reality _ 38 One big hurdle: regulatory approval 38 Seven leaders approaching takeoff 39 Air taxi ports are coming soon, too 40 Edited by Dimitra Kessenides From Bloomberg Hyperdrive Gimmick Or the Next Big Thing? jillions of dollars have flowed into companies working to build eVTOLs Mlustrations by Pete SharpStartups around the globe are in the final stage of developing and refining the technology behind what the industry calls eVTOLs, or electric vertical takeoff and landing aircraft. These flying taxis are battery-powered and, the companies say, destined to fly without a pilot—once regulations allow. Billions of dollars flowed into the sector in 2021, as well as an impressive number of orders, mostly from commercial airlines. The next 18 months will be pivotal for the fledgling industry, as manufacturers run vital test flights and finalize plans for so-called vertiports and regulators consider how best to guarantee safety. Nowhere has the prospect of the electric air taxi been greeted as eagerly as in airline boardrooms. Even as the travel industry fights to survive the coronavirus crisis, the world’s lead: ing carriers have been embracing the promise of eVTOLs, placing tentative orders for more than 1,500 of the craft in the past two years. Vertical Aerospace Ltd. has deals with American Airlines, Japan Airlines, and Virgin Atlantic to introduce services by 2025. Archer Aviation is sitting on a mammoth order from United Airlines Inc. These and other manufacturers will spend the next year and a half run: ning test flights and seeking regulatory approval so they can turn provisional orders into completed sales. ‘The carriers see the craft as the ideal means of transporting rich trav- elers and corporate passengers to and from the airport, loosening the grip of the car, train, and taxicab on drop-off ‘while improving the customer experi ence, “It’s all about the first and last 100 miles,” says Shai Weiss, chief exec utive officer of Virgin Atlantic Airways Ltd. “You can spend hours on relatively short airport journeys by public trans port or sit in a traffic jam. EVTOLs can do the trip in 30 minutes, and people will pay a premium for that.” Although Virgin has yet to decide ona pricing structure, Weiss says ini- tial research suggests travelers may be willing to spend twice their usual bud- get for airport commutes if they know that the trip will be short and com- fortable and that they're guaranteed to arrive on time. Even at twice the cost of a taxi, eVTOLs would still be cheaper than helicopters-plus much quieter and free of carbon emissions. Virgin Atlantic has options to buy ‘as many as 150 of Vertical Aerospace’s VX4 craft, designed to carry four passengers plus a pilot more than 100 miles at speeds approaching 200 mph. The startup is set to make its first fight this year. ‘Weiss says the concept is especially ‘well-suited to Virgin, which draws most of its passengers from relatively small areas around London and Manchester, ‘within the VX4's range. EVTOL flights would also enhance parent Virgin Group’s upscale, tech-forward image, exemplified by bil lionaire founder Richard Branson’s bid to establish a space-tourism business through his Virgin Galactic venture. ‘The VX4 craft could land in airports, with travel formalities completed ear- lier, further slashing journey times and heightening the premium experience. Other airlines have ordered fly: ing taxis to address specific needs. Brazil's Gol Linhas Aéreas Inteligentes SA agreed in September to buy or rent ‘as many as 250 VX4s from leasing com: pany Avolon Holdings Ltd., which is acting as an intermediary between Vertical and several of its customers. ‘The deal could help transform travel in Sao Paulo, which has become the world’s busiest city for helicopter flights because traffic snarl-ups typi cally block hundreds of miles of road. Japan Airlines Co’s deal for 100 VX4s is linked to plans to serve the 2025 World Expo, the carrier has said. There are also plans to oper- ate flying taxis in Tokyo to exploit the world’s largest concentration of helipads. The landing sites, which were built as part of the city’s earth ‘quake-evacuation preparations, have been underused because of local restrictions on helicopter fights. The fleets of wholly electric, zero-carbon craft will also serve to bur- nish carriers’ green credentials as they struggle to keep pace with emissions reductions in sectors where the laws of physics pose less of a hurdle. “Airlines know that they have to be seen to shift toward net-zero, and electrification of these short hops isa step in that direc- tion,” says Andrew Macmillan, Vertical ‘Aerospace’s infrastructure director. A 160-page study published by the European Union Aviation Safety ‘Agency in May suggested eVTOLs could become a reality as early as 2024. It found that even though people are gen- erally positive about them, they have some concerns mainly around safety but also about noise, the impact on wildlife, and whether the craft could pose a security risk, Even so, flying taxis have become a viable prospect faster than previ ously envisaged even within the eVTOL community, Macmillan says, spurred by advances in battery, electric ‘motor, and composites technology > Airline Orders for eVTOLs ‘sof Jan. 7,ordered trom OVortcal @Embraer/Eve OLium @Archer Country eVTOLs ordered ‘American Airings US. Br VeainAtantis UK. Japan Anes Japan Iberoit Spain Republic Aways US. Skywest us. au Brea United Aitines/Mesa US. 8 VaHY UVaA FHL oonssousng S1equ0dtaJanuary 17,2022 FLYING TAXIS ‘THE YEAR AHEAD ‘Bloomberg Businessweek 4.as well as a surge of funding from whom he calls “serious people with serious money: Investment is up thirtyfold since 2019, with $6.5 billion flowing to eVTOL manufacturers and infrastruc ture planners after a spate of stock market listings and the sale of holdings to financiers and industrial partners (chart below). Vertical, which is based in Bristol, England, and trades in New York, counts American Airlines, Avolon, Honeywell International, Microsoft, and Rolls-Royce Holdings among its backers. “When you've got the technology and money, you're going to get some- where,” Macmillan says, “and I think the airlines have seen that.” Plus, he says, airlines’ experience oper- ating complex aerial networks will help to dispel many of the safety con cerns about flying taxis among the traveling public. Virgin’s Weiss says eVTOLs are a much stronger bet than other fledgling technologies such as hydrogen pro- pulsion. “They may not be exactly on time, and their costs may be higher in the beginning,” he says. “But it’s now more likely than not that they're going to succeed.” —Christopher Jasper JoeBen Bevirt, CEO of Joby Aviation, ‘may have the edge for taking to the skies Although people have been trying to establish a flying car economy since the da Vinci days, JoeBen Bevirt may well be the crazy (and cagey) dreamer ‘who finally gets it done. Bevirt’s Joby Aviation has been developing autonomous technology for almost 13 years. He arrived early at the form and function that might work: eVTOL aircraft. Basically, Joby is making something more like a massive drone than a sedan with wings. “Everything thas converged according to plan,” says Bevirt, who leads engineering on the flying car. “We're really excited about Reducing the Fever Shares in several eVTOL startups that went public via SPAC deals have dropped 25% or more. “It is a speculative market, because there are so many variables, that need to pan out,” says Kristine Liwag, a Morgan Stanley analyst. “But the exciting aspect here is the opportunity for disruption... You may have our aircraft and the choices we made a decade ago.” He says his rig gets greater range than many rival aircraft and claims it’s quieter. Bevirt started dreaming about build- {ng fying cars while growing up in Santa Cruz, Calif. A Stanford-trained engineer, he bootstrapped Joby in part with pro- ceeds from his sale of GorillaPod, which made novel camera tripods. In 2021, Joby joined the public markets via a special purpose acquis or SPAC, backed by Linkedin Corp. co-founder Reid Hoffman. The deal ‘made Bevirt a billionaire. This year, Joby’s manufacturing line will start cranking out five-seat aircraft Gnitially, there will be a pilot) and putting them through the paces for certification from the Federal Aviation Administration. ‘Thanks in part to its purchase of Uber Technologies Inc’s flying car unit, Joby has leases lined up for stra tegic rooftops-soon-to-be sky ports in ‘major cities. Its plan is to quickly shut- tlea person from the airport to, say, an urban transportation hub. Bevirt says he’s building a people's service. He expects a ride on his whirl- igig to cost about as much as a taxi, with costs driven down to 86¢ a mile for available seats when it's up and run- ning in 2026 and charges of about $3 per seat‘mile, Bevirt says Joby will save {billion commuters an hour a day. “Its been dreamt about for so long,” he says. “1 don’t think we fully recognize how much of a watershed moment we're helicopter replacement at first. In the long run, it could be car replacement.” | living through.” —Kyle Stock . ‘The market, she says, could increase to $9 trillion by 2050. —Thomas Black ‘Change in share price since going public Flying Is the tum soby Aviation Archer Altion Easy Part 208 20% Regulatory certification is the hurdle ° 0 weal lormas 0 wal svveel Leyovas \onsras ‘The emerging cast of air taxi companies promising to revolutionize urban trans- portation has raised billions of dollars and enticed investors. Now comes the hard part: winning airworthiness certification from reg- ulators such as the Federal Aviation Administration, And that’s merely the first in a series of exacting technical approvals that air taxi makers must