Archive for category: Diversified Industries

Here’s What You Need To Know

In an end-of-summer edition of TL;DR last year, we wrote that the tech industry was “increasingly vulnerable to activist pressure and government intervention on a range of issues,” listing some of the developing challenges that Big Tech would need to prepare for in the consequential year ahead. With Silicon Valley executives back in Washington, D.C. this week to again testify before Congress, we are revisiting some of our analysis and taking stock of what the policy and regulatory landscape looks like for America’s most-innovative business sector going forward:

• Antitrust Questions Continue To Grow: A growing chorus of investors, experts, and activists have been calling for government antitrust action against Big Tech, which is evidenced by both specific proposals suggesting ways to “break up” particular companies, as well as counter-arguments as to the shortcomings of such proposals. Policymakers on both sides of the aisle appear open to antitrust actions, and the President has used his unmatched bully pulpit to say that Google, Amazon, and Facebook may be in “a very antitrust situation,” while stopping short of calling for antitrust action. Nonetheless, these developments raise the specter that greater regulation of the tech sector may be imminent, whether that is addressed through antitrust legislation or otherwise, which may help explain the industry’s efforts to engage with policymakers on shaping major regulations impacting it, such as those to secure a federal privacy law similar to the European Union’s GDPR.
• Diversity And Economic Disruption Are Still A Challenge: Gender and racial bias challenges persist, as well as a dearth of viewpoint diversity. A focus on diversity and inclusion policies at Silicon Valley firms has yet to meaningfully help recruit and retain talent, and there were threats of regulation earlier this year from the Congressional Black Caucus if the industry did not improve diversity, but it remains to be seen what, if any, steps policymakers may propose to address this issue at this time. Additionally, the consequences of disruption remain, despite positive developments such as traditional retailers adapting to offer consumers experiences and innovations, and e-commerce jobs replacing those in communities where manufacturing has gone away.
• New Pressures From The Political Left: As Amazon’s market cap hit $1 trillion this week, making it the second publicly-traded U.S. company to reach the milestone after Apple, Sen. Bernie Sanders (I-VT) seized the opportunity to introduce the “Stop BEZOS Act” in the Senate, which would require large tech companies that employ low-wage workers to cover the cost of the federal assistance their workers receive – a direct, if highly misleading, attack on their business practices. Further, progressive pressure campaigns to force tech to become arbiters of allowable speech present new risks the industry must navigate. As more tech companies move from disruption to dominance in a growing range of industries (and continue to attract attention on their possible expansion plans), Democratic politicians may feel added pressure to not only create new regulatory frameworks, but to use tech as a punching bag to promote redistributionist policies popular with their far Left base.
• New Suspicions, And Threats, From The Political Right: Although accused of helping Trump get elected by the Left, the Right has become increasingly suspicious that Big Tech is censoring and conspiring against conservatives. In his prepared testimony, Twitter CEO Jack Dorsey – whose platform has been accused of de-emphasizing accounts in search results – said Twitter “does not use political ideology to make any decisions,” and Google and Facebook have faced criticism from President Trump on potential bias as well. The concerns on the Right have culminated in the Sessions’ Justice Department announcing that it will meet this month to determine if social media giants are “intentionally stifling” free speech. However, some experts believe that the President’s allegations of tech bias may actually “inoculate [Big Tech] from regulation,” suggesting that the events over the next several months will be critical to determining the eventual outcomes impacting the industry.

These developments have reinforced our speculation that we have approached an inflection point that will “fundamentally change the relationship between the tech industry, the government, and the public.” Going forward, Silicon Valley will have to continue to adjust to this new landscape – as it has over the past year – in order to strengthen its position with both policymakers and the public as further debates on regulation develop.

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THE COMING BALLOON BUBBLE

Balloons are the latest environmental concern to blow up. Continuing the war on plastic targeting straws and bags, balloons are seen as the next “unnecessary” item environmentalists have in their sights. However, as with straws and plastic bag bans, these policies miss the mark and may ultimately have the opposite effect as intended.

According to a report cited by the balloon industry, balloons made up 1.04% of the total debris collected during a cleanup of U.S. coastline at the beginning of the decade, a percentage that has decreased since. Despite this, the balloon ban is quickly taking flight, serving as a reminder that any industry can find itself under attack and be put on the defensive in this age of heightened activism, regardless of the facts. 

“HALF-BAKED” POLICY

The trajectory of marijuana banking has been a not-so-excellent adventure, largely due to the regulatory no man’s land in which federally-regulated financial services institutions and state-legal marijuana businesses find themselves. In its recent decision to close the bank account of Florida agriculture commissioner candidate Nikki Fried because her campaign received donations from “lobbyists from the medical marijuana industry,” Wells Fargo may inadvertently contribute to hastening a policy solution to clarify this ambiguous position.

While banks have closed accounts related to marijuana advocacy groups in the past, Wells Fargo’s action marked the first time a candidate for public office has had an account closed for donations from the cannabis industry, which could affect policymakers who take donations from the industry and raise broader questions about free speech, thereby exacerbating the need for a federal policy solution to clarify today’s half-baked regulatory framework.

GOFUNDYOURSELF

The story of a good deed gone bad recently reminded people of the uncertainties surrounding popular crowdfunding websites. Fast Company reported that Johnny Bobbitt, a homeless man from Philadelphia, was cheated out of $400,000 raised for him on the crowdfunding website GoFundMe. Kate McClure started the campaign after Bobbitt gave her $20 when she ran out of gas, but McClure and her boyfriend used the money raised through the campaign for trips, a new car, and gambling for themselves. After questions surrounding what extent GoFundMe, which collected around $30,000 in fees from the campaign, could legally intervene to honor the intentions of the campaign, a New Jersey judge ruled that all remaining funds must be deposited into a trust for Bobbitt immediately.

Crowdfunding technology can be a force for good, but this example highlights that this technology is still in its early stages and donors need to beware. This episode may draw renewed calls for regulating crowdfunding sites, though in the meantime, it is best to do your due diligence before contributing to make sure the campaign goes toward what it says it does.

CRISES AND POLITICS

When it comes to the media coverage of public health crises related to lead poisoning, it appears that politics may explain the difference in coverage between two instances. In Flint, Michigan, lead in the water attracted national attention and Republican Governor Rick Snyder continues to be flogged in the public arena for something that was the result of lapses at all levels of government, sullying an otherwise productive tenure as the state’s chief executive.

Contrast that with the New York City Housing Authority’s (NYCHA) coverup of broken elevators, rat infestations, and lead poisoning from paint. This summer, Mayor Bill de Blasio quietly revealed there were 820 positive lead tests in children since 2008, a number that has since changed to 1,160. The media’s watchdog role is crucial in bringing public health crises to light and demanding accountability from politicians who have public health crises occur on their watch, yet the bias in coverage proves an instructive lesson in the power of narrative in the public arena, as well as the need to engage early and often with the facts before a crisis hits.

Here’s What You Need To Know

With his landslide victory in Mexico’s presidential election on July 1st, Andres Manuel Lopez Obrador (known as AMLO) earned the broadest mandate in the country’s recent history. His election is either a good or a bad thing, depending on how you interpret the words and actions of the populist, unconventional leader who upended the political establishment.

In the time before AMLO takes office on December 1st, governments and companies with interests in Mexico are trying to determine what happens next on key issues such as the NAFTA negotiations and Mexico’s in-process reforms of its state-run energy industry. Here’s what we know thus far:

• Who Is AMLO? The 64-year-old left-wing leader is painted by detractors as a “Hugo Chavez-style authoritarian” who will ruin the Mexican economy, and by supporters as a moderate and a pragmatist who represents a new alternative to failed establishment politicians. AMLO first became politically active when protesting the oil industry’s practices against indigenous communities in his home state of Tabasco during the 1970s, and earned a grassroots following that ultimately carried him to the Mexico City mayor’s office in 2000, where his popular administration “subsidized subway fares, provided stipends for senior citizens and single mothers and built elevated expressways.” He ran for president unsuccessfully in both 2006 and 2012, launching street protests in 2006 that were expected to end his political career after he blamed his narrow defeat on fraud.
• What Issues Contributed To AMLO’s Election? The driving issues in Mexico’s presidential campaign were the hot-button issues of crime, corruption, and the status quo. AMLO pledged to be the only candidate who could end the “mafia of power” and corruption that plague Mexico’s current government, as well as try new (albeit vaguely defined) approaches to bring an end to high levels of violence in the country perpetrated by drug cartels that have claimed more than 230,000 lives since 2007. Coupled with an “anemic” Mexican economy that has grown at 2 percent per year for the past quarter century and a backlash towards the dominant establishment parties that have failed to deliver on these issues, AMLO was able to present himself – and the Morena party that he founded in 2014 – as the only option for solving Mexico’s challenges, despite the party being engulfed in a growing scandal over whether it used a charitable fund for earthquake victims to buy votes.
• What Does AMLO Mean For NAFTA Negotiations? Since AMLO’s election, Mexican consumer confidence has surged to its highest level in a decade and billionaire tycoon Carlos Slim has said he sees “no risks” to his business empire in the country, however the private sector as a whole is more reticent as it waits to see how the incoming administration will handle outstanding issues, including NAFTA negotiations and energy. On the former, AMLO has suggested his preference for NAFTA to remain in-force with some modifications possibly, although a top advisor has said AMLO would prefer no NAFTA to a bad agreement, perhaps setting the table for heavier subsidies for Mexican agriculture and an “aggressive state-centered industrial policy.”
• What Does AMLO Mean For Energy? On energy, AMLO has used an “investor-friendly tone,” causing business to hope that he will tweak, rather than reverse, the country’s reform plan launched in 2013 that began to end state energy giant Pemex’s 75-year monopoly over Mexico’s resource-rich energy sector. While the Mexican government has held 14 auctions and signed 100 contracts since then, AMLO supports the halting of further auctions for his government to review these contracts for evidence of corruption, and review privatization more broadly. With these actions amidst U.S.-based and other foreign energy companies eyeing opportunities in Mexico, speculation on what AMLO’s appointed energy advisors mean for policy is rife, proving the standard D.C.-maxim that “people are policy.”

The uncertainty facing American and other foreign companies with interests in Mexico will only be removed by the concrete actions of his administration when it takes office this December. To be prepared for whatever outcomes AMLO’s tenure leads to, companies need to take steps now to minimize the impact these political risks may have on their interests.

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FACIAL LIMITATIONS

Whether unlocking an iPhone or securing the 2020 Tokyo Olympics, facial recognition technology is drastically improving and becoming a more common part of everyday life, bringing with it new challenges for policymakers. A recent example of these challenges for policymakers – literally so, for some – was when one popular facial recognition tool falsely matched 28 members of Congress with mugshots from people who have been arrested for crimes. Other technology used by the Federal Bureau of Investigation was found to misidentify people 14 percent of the time.

While that may be a promisingly small error rate for new technology, it will not suffice when people’s lives and freedom are at stake based on the results. Few laws currently govern facial recognition technology and, with concerns due to mass surveillance and a lack of scrutiny, even prominent tech industry executives are calling for a regulatory and ethical framework. If technology leaders do not provide one soon, policymakers are likely to address the limitations on their own terms, regardless of the implications for innovation in the space.

BUYER AND BUSINESS BEWARE

While it used to be impolite to talk about politics at the dinner table, today fewer people are leaving politics at the door, with political dialogue at times lacking both civility and decency. Enter companies, who are caught between some consumers who expect them to take a stance on political issues, and data that shows other consumers who do not like when companies take stands on “issues pegged to Trump.”

It remains to be seen if proposals such as Sen. Orrin Hatch’s Geneva Convention-like “rhetorical disarmament” in the culture war or AEI President Arthur Brooks’ full “political cleanse” can help maintain friendships and foster more conciliatory discussions among the general public, but one thing is certain: companies need to think twice before mixing business with politics, and proactively prepare for when today’s fast-moving environment fraught with new risks targets them and leads to public affairs challenges.

PHONY PACS FOR PHONY PROSPERITY

With the midterms rapidly approaching, political action committees (PACs) are in full swing to support their favored candidates. On the Left, most of these groups happen to be funded by “one obscure nonprofit” in D.C. called the Sixteen Thirty Fund, “which has funneled millions of dollars to progressive causes in recent years” and has set up a number of local groups across the countries with names such as “Floridians for a Fair Shake, Michigan Families for Economic Prosperity and North Carolinians for a Fair Economy.”

This naming practice is a classic ploy to make the groups appear to be like something they are not, demonstrating the need to always dig deeper and expose the truth when it comes to what opposing interests really stand for and who is behind them.

BEYOND THE BELTWAY SPYGAMES

Spies have become a staple in today’s headlines, with Washington-intrigue and Vladimir Putin’s Russia taking the lion’s share of the attention. Yet, a recent Politico investigation into the foreign espionage operations targeting Silicon Valley and California “community leaders and local politicians who may later become mayors, governors or congressmen” raises two important points lost in today’s headlines.

First, that foreign espionage is targeting corporate interests in cities outside of Washington (and outside of Silicon Valley as the tech industry diffuses to midsize cities such as Austin, Chapel Hill, North Carolina, and Boulder, Colorado); secondly, that other foreign governments, notably the Chinese, are becoming “increasingly sophisticated” in their tactics in doing so. While policymakers undoubtedly will need to devise a broad strategy to confront these challenges, companies in the interim may well want to practice good operational security and wholly understand the landscape in which they operate as a first step to mitigating any potential risks they face.

Here’s What You Need To Know

First with bags and now straws, a full war on plastic is sweeping the nation and the globe. The current media storm is warning people to “stop sucking,” and cities and companies are listening and making plans to, or have already banned, plastic straws. Even celebrities like Calvin Harris and Tom Brady have inserted themselves in the debate, making this movement not only mainstream, but trendy. With plastic under threat, do the facts match the rhetoric? Before resigning yourself to that paper straw, here is what you need to know:

• How Did We Get Here? Viral social media memes about “trash islands” in the Pacific Ocean being tied to plastic use, upsetting video of a plastic straw harming wildlife, and last year’s #StopSucking campaign were all notable components of bringing this issue to prominence. Further, Starbucks’ recent announcement that it will eliminate all plastic straws in its stores worldwide by 2020 is only the latest factor fueling this narrative targeting plastic straws. In fact, Starbucks’ decision came right after Seattle banned plastic straws and other single-use plastics citywide, a trend that has garnered support across the U.S. and the world.
• What Do The Facts Say? As we wrote in a previous edition of TL;DR, outlets such as The New York Times, National Geographic, and The Wall Street Journal cite the statistic that Americans use 500 million straws a day to substantiate anti-plastic policies, yet the source of this statistic was a nine-year-old elementary school student’s unconfirmed phone study. In that edition, we wrote that “a more credible estimate … of the amount of straws Americans throw away is 172 million each day.” When considering that plastic straws make up only 4% of plastic trash by piece, and only “2,000 tons of the nearly 9 million tons of plastic waste that yearly hits the waters,” the focus on straws appears misplaced. Additionally, despite the urgency paid to banning plastic straws in the U.S., a more effective place to begin to reduce plastic pollution may be overseas, as five Asian countries dump more plastic into the ocean than all other nations combined.
• Are There Unintended Consequences From These Bans? Fast-moving policy debates driven by a viral narrative tend to ignore not only the facts, but the unintended consequences of hastily-implemented policies. Regarding single-use plastic straws, bans are drawing fire from advocates for Americans with disabilities, who depend on plastic straws to be able to eat and drink safely, without compromising privacy and dignity. Also, in the case of Starbucks’ ban of plastic straws, the lids the company plans to replace them with would actually increase the amount of plastic used. The company has responded by pointing out that the new lids are recyclable unlike the straws, yet this is cold comfort because most recycled refuse still ends up in a landfill. Lastly, with proposed alternatives like paper straws costing “maybe 10 times” more than plastic straws and proving ineffective, higher costs will likely be passed on to customers.
• How Could Plastic Pollution Actually Be Addressed? A good first step would be to stop with the hysteria, and instead focus on the concrete policy steps that can actually address the end goal: less plastic pollution. With coastal countries in southeast Asia the origin of the vast majority of plastic pollution because of a combination of a growing consumer class and poor waste management systems, helping those countries create effective garbage collection and disposal systems could go a long way toward this goal. Other tactics to reduce plastic pollution include efforts in Asia to increase the usage of water-filtration units to cut down on bottled water consumption, or simply limit providing plastic straws to customers if they ask. Ultimately, the most immediate and effective way to positively impact the amount of plastic pollution may be simple: don’t be a litterbug.

Activists have called straws a “gateway plastic,” and indeed, are setting their sights on companies and governments to continue to push their agenda – facts be damned. In the words of one straw ban supporter, who does not “want the corporations to feel like they’re getting off easily just by eliminating plastic straws,” this is only the beginning. To stay ahead of the curve, those under fire in the public arena will need to leverage the facts of this issue to overcome their public affairs challenges.

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CORPORATIONS VS. THE DEEPFAKE

With impressive advancements in artificial intelligence (AI) continuing at a rapid pace, politicians and political campaigns are not the only ones who need to be wary of the threats from fake videos and recordings; the corporate world should take note, too. In a viral video where he imitated former President Barack Obama, comedian Jordan Peele demonstrated how AI can create fake videos that make the subjects in those videos appear to say or do something they have not.

These so-called “deepfakes” are a threat to politicians and campaigns, as opponents could weaponize fake videos to obfuscate the truth and undermine their target. However, the private sector should proactively prepare for the political and reputational risks stemming from this AI threat as well, since nefarious actors could utilize deepfakes to oust an executive, devalue a stock’s price, or damage a company’s reputation in the public arena.

MORE ELECTRICITY, PLEASE

Largely due to the expected adoption of electric vehicles over the next three decades, a new study by the Department of Energy’s National Renewable Energy Laboratory (NREL) finds that electricity demand could increase by as much as 38% by 2050. Considering that the United States already had the world’s largest decline in carbon emissions in 2017, such a development points toward an encouraging trend that can be lauded by both free-market enthusiasts and conservationists alike, particularly as America’s natural gas boom continues to decrease coal usage to meet this demand.

As the policy discussion turns to improving existing utility infrastructure, environmentalist opposition to fossil fuels – the largest sources of energy for generating electricity in the U.S. – could potentially lead to disruptions and delays that ironically hinder the future for which they advocate.

ALL FOR KAVA-NAUGHT?

Well, this is awkward. Twenty-one newspapers across the country were “duped,” publishing identical letters signed by different individuals bashing Supreme Court nominee Judge Brett Kavanaugh and asking the American people “to take the for-sale sign off our democracy.” Interest groups opposing Kavanaugh’s nomination have denied responsibility, which is understandable given that admitting to being the mastermind of this spectacular AstroTurf campaign fail would be embarrassing.

For the rest of us, we received a near-flawless case study in how not to achieve your public affairs objectives. In the event your opposition is a worthier adversary, you can call Delve to help expose the strategies and tactics of any influence campaign arrayed against your interests.

ADVENTURES IN VENTURE CAPITAL 

Finally, some light will be shed on a discrete industry largely unknown to the public. We are not talking about competitive intelligence for public affairs however, but venture capital (VC). Stanford University’s Venture Capital Initiative has been “steadily amassing a deep and unprecedented database to figure out how VC really works,” which will not only provide insights as to how these firms make decisions, but also some of the best practices they have used to successfully fund and grow startups – notable given the record $23 billion invested by VCs in the second quarter of 2018.

Stanford’s data set includes tens of thousands of contracts between VC firms and the companies they invest in, with less than 1,000 of those having actually been analyzed for insights because they have “to build a whole infrastructure with lawyers, data scientists, and dozens of research assistants who help … read them.” This suggests that more insights are forthcoming as these documents are evaluated, and also demonstrates something the analysts in the Delve research bullpen know well: collection is easy; analysis is hard.

Here’s What You Need To Know

This week, thousands of energy professionals from around the world are descending upon Washington, DC for the World Gas Conference. Held every three years, this is the first time the conference will be held “in a country that is both the world’s largest gas consumer and gas producer,” suggesting the United States has a bright energy future ahead if it can continue to safely extract resources and bring them to market.

However, in a new Morning Consult piece coinciding with the conference, Delve CEO Jeff Berkowitz writes that the continuing politicization of pipelines, regardless of what kind of fossil fuel they are transporting, poses challenges to harnessing this energy future. Especially in light of activism in British Columbia that led to Canada’s proposed $4.5 billion takeover of the Trans Mountain pipeline expansion, the energy industry needs to adapt to the reality that pipelines have gotten political.

• How Did We Get Here? Pipeline projects used to be non-controversial, with much of the opposition against them due to localized NIMBY-ism. All that has changed in today’s New Age of Activism though, where opposition has become increasingly professionalized, digitized, and globalized in an effort to delay and disrupt pipeline projects by politicizing staid bureaucratic processes and taking their case to the courts of both law and public opinion. As protests targeting the Trans Mountain pipeline expansion intensified to the point where it has some wondering if it is the “next Standing Rock,” Canadian Prime Minister Justin Trudeau blamed the uncertainty caused by activists for making the project “too risky for a commercial interest” to build. Trudeau’s ironic about-face highlights that pipelines are not just “too risky,” but have become too political – even for the famously adaptive politician.
• This Did Not Begin With Trans Mountain: Since the Keystone XL pipeline inspired a chain of activists around The White House in 2011, energy activism has grown increasingly prevalent in the political landscape, even becoming a political litmus test for Democratic candidates up and down the ticket. It then continued with the massive protests against the Dakota Access pipeline that began in the Fall of 2016, and since then has metastasized to other projects around the continent. Trans Mountain is simply the latest casualty of activist efforts.
• Welcome To The New Normal: Keystone XL, Dakota Access, and now Trans Mountain are not aberrations, and activist pressure on banks and financial institutions to divest from fossil fuel companies demonstrates the savvy tactics posing risk to the industry going forward. This is the new normal. With the trends pointing toward increased tension, confrontation, and uncertainty, the energy industry must manage and mitigate the political and reputational risk of energy activism, or else risk financial consequences that can hurt the economy and national security of the countries in which it operates.
• How Can Companies Adapt To This New Operating Environment? Existing initiatives focused on community engagement and being-a-good-neighbor policies will always have a role to play in getting pipelines built. Yet, what today’s operating environment also requires is a vigilant and proactive strategy to anticipate and mitigate the public affairs challenges of energy activism. This strategy must include understanding the networks of activism arrayed against infrastructure projects and taking steps to address them, before activists show up at construction sites and regulatory meetings, delay and disrupt pipelines, and negatively impact not only a company’s bottom-line – but also a country’s economic and national security.

Activist pressure has only continued to increase in the wake of the Canadian government’s decision to purchase the Trans Mountain expansion, reminding us that companies are not the only ones facing increased political and reputational risks, and that there is little to suggest that activism will stop until fossil fuel usage is entirely (and impractically) stopped. Read the entire op-ed in Morning Consult here.

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DEATH, TAXES, AND OPPOSITIONAL FORCES

They say nothing is certain but death and taxes, although might we suggest another: oppositional forces. Ironically, both death and oppositional forces are key to an ongoing policy debate. Aquamation, also known as water cremation, is a method of body disposal that is legal in 15 states. While supporters consider it to be “kinder” than embalming or cremation, as well as the “most environmentally friendly method of death care,” opponents – ranging from casket-makers to the Catholic Church – have mobilized against efforts enabling its spread.

After supporters spent $40,000 lobbying one state legislature to legalize aquamation, they were dismayed when a lawmaker who was also a casket-maker derailed the initiative with a viral floor speech comparing the process to “flushing” a loved one. The takeaway? That in today’s policy environment, shoe-leather lobbying in and of itself is not enough, particularly when you can count on death, taxes, and oppositional forces. 

NOT WAYFAIR WINDS AND FOLLOWING SEAS

The President may see it as “a big, big victory”, but the Supreme Court’s Wayfair decision giving state and local governments the ability to start collecting sales taxes from online retailers seems like a big, big headache for pretty much everyone else. As foreshadowed in a previous TL;DR, the ruling may lead to an open season for politicians to implement new revenue schemes and push the limits of their taxing authority.

Not only will companies and consumers have to adapt to a patchwork of state-specific laws in the absence of congressional action, small online businesses may even find themselves in local courthouses far from their location fighting the expansive new tax laws. Consumers may also begin seeing new numbers popping up in their online shopping carts and possibly even with their streaming services. Sometimes, the Court’s ruling enables clarity at the federal level on a public policy question. In this case, Wayfair instead may make that even more unlikely as state and local governments get used to the idea of a new source of revenue.

TOO BIG TO PUNISH?

In an investigative piece, CQ Magazine’s Mike Magner argues Wall Street regulators have been taking it to small firms, and in comparison, letting the big banks off the hook. Magner and Georgetown Law Professor Urska Velikonja dug into Security and Exchange Commission (SEC) enforcement data of the 1,620 cases the regulatory agency has settled since 2008, determining that 762 of those cases would have “triggered automatic” penalties under the Dodd-Frank law regulating financial institutions. However, the SEC passed on enforcing these automatic penalties in 26 percent of these cases, most of which involved most major banks and financial institutions rather than smaller firms.

The reasons cited for the disparate treatment included the reluctance to punish a large firm for the bad actions of a few individuals, the generally “more robust compliance systems” that large institutions can afford to have in place, and the negative impact such penalties could have on the financial system as a whole. Regulations such as Dodd-Frank were put in place to hold major banks and financial institutions more accountable and ensure no future financial crisis is caused by their irresponsibility, but this data shows the law aimed at addressing their past missteps may have instead hurt small banks on which many Americans depend.

PEOPLE ARE POLICY

While hundreds of key positions in the Administration remain unfilled after more than 500 days in office, the gears of government are grinding – and the people in place are the ones who are determining the direction of policy. For one example, look no further than The New York Times’ feature on the Heritage Foundation, a think-tank that has provided a list of conservatives “to serve in a post-Obama government,” and that has accomplished an impressive 64% of its policy agenda in the first year of the Administration.

The impact of people on policies and organizations is something we here at Delve are very familiar with, which is why we created our special report on understanding the Administration staffers in place last year.  Because then and now, when navigating complex policy issues in a challenging environment, insights into key stakeholders are key to achieving one’s public policy objectives.

Here’s What You Need To Know

Trade was front and center as the world’s seven major industrialized economies gathered in Canada for last week’s G7 summit. As Canada and the European Union (EU) have their plans in place to retaliate beginning next month against U.S. steel and aluminum tariffs, tensions boiled over into “chaos” as President Trump trolled allies, called Canadian Prime Minister Justin Trudeau “meek and mild” on Twitter, and refused to endorse the negotiated statement on shared priorities coming out of the summit. These events were only further obfuscated by the internet musings over whether Trudeau’s eyebrows are real.

If you are left wondering what is going on, you are not alone. When it comes to trade, many are taking sides based on their feelings toward the President rather than the facts of the issue at hand. We are only in the opening salvos of the trade debate, and so cutting through the noise and rhetoric (admittedly, no easy feat) with meaningful facts is imperative to preparing for what’s to come:

• How Did We Get Here? The U.S. recently imposed tariffs of 25% on imported steel and 10% on imported aluminum, impacting the EU and Canada, among other nations. In retaliation, the EU and Canada – as well as other countries – have prepared measures against U.S. exports that take effect in July. Although the EU, Canada, and U.S. have all had among the lowest overall tariff rates in the world according to the World Bank, certain products in specific countries have barriers to protect domestic industries.
• What Trade Disparities Actually Exist? For example, Canada imposes a 270% tariff on imports of U.S. dairy products. Yet, dairy exports are only a small portion of U.S. trade with Canada, and American producers have used technological advances that resulted in a large trade surplus with Canada in dairy products despite the tariff. Additionally, vehicles shipped from Europe to the U.S. face a 2.5% tariff, whereas cars built in the U.S. and exported to the EU face a 10% tariff. While having relatively low tariff rates broadly-speaking, the U.S. places some of its highest tariffs on apparel and clothing accessories and footwear imports at an average of 18.7% and 11.9%, respectively.
• Does The U.S. Have A Trade Deficit With Canada? Canada is the biggest export market for U.S. goods and services. Despite Trump’s claim that Canada makes “almost $100 Billion Dollars in Trade with U.S. [sic],” a 2018 report by his Council of Economic Advisers said that in 2016 “the United States ran a trade surplus of $2.6 billion with Canada on a balance-of-payments basis.” Meanwhile, the U.S. Trade Representative says the trade surplus with Canada was $8.4 billion in 2017, and the Commerce Department’s number is at $2.7 billion that year. The difference between these numbers and the deficit cited by Trump is that the latter’s only included merchandise goods and not trade in services such as accounting, legal services, telecommunications, and the like – which accounts for a large part of U.S. trade.

So, what does this debate mean for businesses and the economy? The noise out of the G7 is only the beginning of what is shaping up to be a major policy flashpoint in the coming years. The system that has served the U.S. well for so long is going to need to be brought up to date for the next 70 years. Trump’s objections are as much about what a services-focused economy means for lower-skilled workers than the nature of our trade relations. Being informed on the reality of the debate will be key to defending the aspects of trade policy that still work and addressing those that do not, as well as help you determine how your firm can adapt to this evolving environment.

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VERMONT’S OFFER YOU *CAN* REFUSE

The State of Vermont has an offer that, at least in the cutting words of The Wall Street Journal Editorial Board, you “will probably refuse.” In an attempt to capitalize on the growing remote work movement as a way to bring more people to the state and into its workforce, Governor Phil Scott (R) approved legislation that will pay 100 people who work remotely full-time up to $10,000 each to relocate to Vermont.

Despite perks like world-class skiing, verdant beauty, and a low crime rate, critics point out that workers who relocate (at least initially) will divert funds from policies that could directly contribute to the existing local workforce. In addition, the Journal views the offer as “effectively a loan – with a punishing interest rate,” because workers who relocate will then be saddled with Vermont’s “high-tax misery.” As we have seen with other high-tax states, such gimmickry may not be enough to stop the flight of businesses and people to states with more friendly policy environments.

NO ANIMUS, JUST CANNABIS

With 30 states and D.C. having laws legalizing marijuana in some form, regulatory tensions between the federal government and local jurisdictions show no sign of easing – meaning that policymakers at both levels will continue to propose ideas that shape the debate. However, one area of the marijuana economy in particular appears to have all policymakers seeing green: banking.

California state lawmakers are moving a bipartisan bill that would create state-backed banks in the world’s largest legal marijuana economy to “provide limited banking services to pot-related businesses,” which would not only guarantee banking services to the industry, but help alleviate public safety concerns of the cash economy and make accounting, audits, and oversight more practical. At the federal level, the President said last week he backs a bill cosponsored by unlikely duo Sens. Elizabeth Warren (D–MA) and Cory Gardner (R–CO) that enables banks and credit unions to do business with cannabis-related companies in states where the drug is legal. It remains to be seen what laws are implemented and how soon, but these parallel activities suggest that it may soon be “high” time for a policy solution that gives clarity to both the marijuana economy and the financial sector that serves it.

CARBON CAPTURE RAPTURE 

Here is some good news for the environment: technology that removes carbon dioxide from the atmosphere is cheaper than scientists previously thought. A 2011 economic analysis by the American Physical Society estimated that it would cost $600 to pull a ton of carbon dioxide from the atmosphere, yet scientists this month outlined the design of an industrial plant that could capture carbon at a cost of between $94 and $232 per ton.

Klaus Lackner, who leads Arizona State University’s Center for Negative Emissions, claims this new data suggests these developments “are coming within striking distance of making [carbon capture] interesting economically,” which could encourage market forces to further refine this technology to create greater energy efficiency, benefit the atmosphere, and even lead to the development of carbon-neutral liquid fuel. While energy forecasting remains notoriously difficult, human ingenuity and market forces – both of which were brought to bear in advancing carbon capture technology thus far – demonstrate an alternative approach to potentially revolutionary breakthroughs, rather than stifling regulation and environmentalist obstruction. 

ACTIVIST INVESTING DOESN’T PAY

The proliferation of activist investing continues, foisting political agendas onto the governance of corporate entities despite such agendas being outside of a firm’s core business. Now, a new study from the National Association of Manufacturers goes further by providing evidence that resolutions driven by activist investors do not increase shareholder value, and in fact can have a negative impact given the “high cost in time and resource involved for companies.”

Further, when the politicization of the shareholder process reduces the value of public companies, everyday Americans who invest in the stock market or have pension funds face tangible consequences, highlighting the need to push back against the prevailing narrative that activist investing is a credible way to enhance investment performance.