Archive for category: Diversified Industries

Here’s What You Need To Know

In the nation’s capital this morning, members of the public lined up early to get a prime seat, not at the theater but at the federal courthouse, for one of the most anticipated dramas of the year: the antitrust trial over AT&T’s $85.4 billion bid to acquire Time Warner. The outcome of the trial will have large implications beyond the Beltway, with media companies and other prominent industries watching closely the arguments on both sides, and hints to its possible conclusion, in order to stay ahead of the curve in today’s regulatory environment. Here’s what you need to know about the case:

1. Why The Merger Came About: Ironically, AT&T’s efforts to compete against what it sees as an advertising duopoly has gotten it labeled a potential monopoly itself. With data now widely considered the world’s most valuable resource, AT&T’s move to acquire Time Warner is an effort to capture the data of millions of viewers who watch Time Warner’s content on channels like HBO, TBS, CNN, and TNT, as well as its blockbuster movie franchises like DC Comics and Harry Potter. This move could allow the conglomerate to “reinvent itself as one giant advertising network” that could rival tech giants Facebook and Google, who currently dominate the online ad industry and have been attracting dollars from television. The merger was not expected to be controversial because regulators have approved similar vertical mergers in the past.
2. How The Merger Ended Up In Court: AT&T CEO Randall Stephenson initially went on a “charm offensive” to not only ease apprehensive executives within the Time Warner empire, but also to lobby the President and help influence easy approval of the merger. But it has not worked out that way. AT&T declined the Department of Justice (DOJ) condition that it sell Time Warner’s Turner unit, and the DOJ filed suit to stop the merger. While there has been speculation that Trump’s disdain of Time Warner’s CNN is responsible for the government’s stance against the merger, the DOJ argues that it would mean less competition for consumers, despite not being head-to-head competitors, and result in potential raised costs of $436 million for consumers.
3. What Other Media Companies Are Watching: Earlier this month, the chief executive of the world’s largest advertising agency, WPP’s Martin Sorrell, told CNBC that consolidation is the future of the media industry – largely due to “certain pressures, technological changes in the long-term, and shorter-term pressure” from tech companies disrupting traditional media and consumers shifting to cross- and multi-platform content consumption. To compete with tech companies like Netflix, Amazon, and others, media companies are watching to see whether ambitious vertical integration will gain regulatory approval in this case. If so, Disney’s acquisition of 21st Century Fox and Sinclair Broadcasting’s purchase of Tribune Media will likely face less scrutiny on this front, and even encourage other deals – like a possible recombination of CBS and Viacom – to move forward.
4. How The Outcome May Reverberate In Other Regulated Industries: Beyond media, this trial is viewed as a bellwether because mergers are on the rise. For example, one major pending deal before the DOJ includes CVS Health’s $69 billion merger with Aetna. Furthermore, a decision in favor of the DOJ will allow tech to continue to have an upper hand on traditional media, and will also help the tech industry determine regulators’ appetites at a time when policymakers are calling for increased regulation of their activities and business practices.
5. How Companies Can Anticipate And Mitigate Similar Challenges: Precedent seemed to suggest that AT&T’s merger with Time Warner would be easily approved, but instead the merger is highlighting the fact that an easy process of regulatory approval cannot be assumed. Engaging an extensive network of lobbyists and unveiling a public relations “charm offensive” are no longer enough for companies thinking about mergers and acquisitions in today’s fluid and uncertain regulatory environment. Instead, companies need to operate from a place of knowing what they don’t know, ensuring that they fully understand the regulatory landscape – key personnel and stakeholders, any opposition, the network of influence whose interest align for and against it – and use that information to build their case and make well-informed business decisions.

A ruling on the AT&T-Time Warner antitrust case is expected sometime before the June 22 merger deadline. Until then, companies can only wait, watch closely, and begin anticipating and preparing for whatever comes next.

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FRIENDS IN LOW PLACES

In the throes of the 2016 presidential campaign, then-First Lady Michelle Obama delivered an impassioned speech at the Democratic Convention in Philadelphia that was widely seen as a “backhanded slap” at then-candidate Trump’s campaign, pronouncing that “when they go low, we go high.” How things have changed since then. Philippe Reines, a former aide to Hillary Clinton, shared his advice for Democratic presidential candidates in 2020 to beat Trump, which includes going “high when you can,” but largely using tactics that are for those “living in the real world,” imitate Trump’s penchant for boasting, gloating, and never apologizing, and shun hiring staff “who [say] they’d rather lose than stoop to [Trump’s] level.”

While some candidates in this cycle may be adapting to this cruder version of politics that is not big on social graces, and which failed to work for Reines’ candidate in 2016, an oasis made up of serious candidates in both parties – who campaign hard on policies and facts – may make for a more palatable and effective campaign in 2020. But if Democrats follow Reines’ advice to hurl more insults at Trump and his voters, the results in 2020 are unlikely to be much different than they were in 2016.

MILLENNIALS #ADULTING ON SCAMS 

While older people are often warned to be vigilant of cons and scams, the Federal Trade Commission (FTC) released a report showing that younger Americans in their 20s and 30s are actually more vulnerable to falling for them. In fact, twice as many millennials lost money in reported fraud during 2017 as did people over the age of 60, although the latter often lost more money.

One prominent explanation for this surprising fact is that millennials are more comfortable sharing their personal information online, where scammers can then target online accounts and take stolen data and sell it on the dark web. So, while there may be an inclination to chalk up the FTC’s findings to the added wisdom of age or confirmation-bias against millennials, it may be correlated instead to the technologies in which younger generations are well-versed. 

FACTS OUT OF THE BAG

Measures that enact plastic bag bans have become common in localities across the country as a way to become more green and minimize the environmental impact of single-use plastic bags used in retail stores and supermarkets. But what if policies that discourage plastic bag use are actually bad for the environment?

That appears to be the conclusion of a government study in the United Kingdom that was meant to inform policymakers on this issue before enacting plastic bag policies, which shows that alternatives to plastic – like paper, cotton, and low-density polyethylene – have a worse environmental impact than single-use plastic bags. Though these results did not stop UK policymakers from proposing to extend policies to tackle today’s “throwaway culture,” they suggest that ideology and intentions may be behind plastic bag policies that are ineffective and have the opposite impact desired.

REPEAL IN A ROUNDABOUT WAY

Republicans’ failure to repeal and replace Obamacare with unified control of the federal government was a cause for anger and embarrassment, although Reason managing editor Peter Suderman argues in The New York Times that Republicans may “have succeeded anyway – just not in the manner they expected.” Suderman points to concrete steps such as Congress’s repeal of the individual mandate and the Medicare cost-control board as part of last year’s tax reform law, and the executive branch’s support of association health plans and limited-duration insurance. Yet, he notes that people who support market-driven health care, as opposed to those who want to amend health policy at the federal level by reforming Obamacare in their own image, are caught in a dynamic that cedes the “real debate about how health care should be financed, regulated and provisioned.”

The most plausible way to restore the debate to its crux may be through the courts. Several states are pursuing a lawsuit challenging Obamacare’s constitutionality after the individual mandate, which the Supreme Court ruled as constitutional only because the Court deemed it to be a tax rather than a questionable regulation of commerce, was repealed as part of tax reform. As such, this lawsuit may represent perhaps the final chance for actual full repeal of the 2010 law. Even if it fails, though, the foundational pieces of the law are crumbling, and the reforms underway may provide a path to a better, post-Obamacare future of care – that is, unless Republicans in Congress work to shore up the status quo.

FOCUSED RECRUITING OR DISCRIMINATION?

Is a company’s decision to focus on college campus recruiting discriminatory? Middle-aged accountants who applied to PricewaterhouseCoopers and were rejected believe so, suing the firm and alleging that its focus on college recruiting discriminates against older applicants. This case and others are endemic of a new legal battleground focused on age discrimination over hiring, rather than firing. The Communications Workers of America recently filed a class-action lawsuit against T-Mobile U.S., Amazon.com, and Cox Communications alleging that by using Facebook recruitment ads targeted by age, the firms were in violation of “the federal Age Discrimination Employment Act (ADEA), which protects individuals who are 40 years of age or older from employment discrimination based on age.”

Case precedent requires that plaintiffs prove that age was the decisive factor in their complaints, highlighting that companies will not only have to adapt to the new legal threat from increasingly common age discrimination litigation, but also the new political and reputational challenges that may result from the fallout from such allegations. As the judge in the PwC case asked, “How can I tell who is [recruiting on campus] for invidious reasons and who isn’t?” Firms will have to tread carefully, lest the court of public opinion decide for them.

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This week, China’s parliament, the National People’s Congress (NPC), amended the Chinese constitution to remove term limits for President Xi Jinping – a moment that Xi has been building up to for a long time. Whether you agree with President Trump’s policies toward China or not, which most recently include starting a trade war by imposing controversial tariffs on steel and aluminum, his rhetoric has awakened mainstream attention to the trend of a persistent and assertive China that has previously been discussed  within foreign policy circles. Here are three main levers Xi has been using to bring about his “Chinese Dream” of national rejuvenation while the American public’s attention has largely been focused elsewhere:

• Bolstering Security At Home And Abroad: Under Xi’s leadership, China has been rapidly pursuing military modernization and announced this week an 8.1 percent increase to its military spending. At the same time, China’s state surveillance, which initially was built out to suppress unrest in its western provinces, is rolling out across the country and even being exported to other authoritarian states around the world. The continued militarization of the South China Sea and other assertive actions abroad was highlighted in the U.S. Department of Defense’s 2018 National Defense Strategy, which names China as a “strategic competitor.” However, some have argued that Xi’s consolidation of power is indicative of insecurity rather than confidence and strength.
• Investing Heavily In Public Diplomacy: The Belt and Road Initiative (BRI), a multi-national zone of economic and political influence with Beijing at its core, is Xi’s flagship project that has led to Chinese investment across Asia, Africa, and Europe. Although some countries have been apprehensive about the geostrategic character of the initiative, they have taken the significant Chinese investment despite its tendency to encourage dependency and undermine the existing institutions in those countries. China has also been investing a significant amount in Latin America, to the detriment of the Monroe Doctrine, begging the question as to what the U.S. will do to buttress this historical cornerstone of America foreign policy going forward. On both, Secretary of State Rex Tillerson has recently sounded the alarm, but with President Trump’s withdrawal from the Trans-Pacific Partnership, the U.S. has diminished leverage.
• A Robust Campaign Of Foreign Influence: China has traditionally taken a long view of its robust foreign influence activities, whether using Chinese-sponsored cultural institutes on American college campuses, or spreading propaganda on Facebook and state-run English news outlets. China has also stepped up its human intelligence to gather defense and economic secrets, making FBI Director Christopher Wray’s testimony on Chinese influence timely – although it has been mocked as “Cold War era” thinking by a top Chinese government spokesman.

Despite the criticism of this Administration’s policies, the conventional approach taken by those in power has failed to address Xi’s rising China up to this point. This failure may be due to some faulty assumptions that should be discarded in favor of a policy of strategic counter pressure. While Trump’s current policy of direct confrontation has increased public awareness of Chinese adventurism, it would benefit from broader statecraft. Trump’s tendency to undermine admirable intentions of his policy with bad implementation, like his recently announced “unproductive” tariffs, means he may not get the results he seeks.

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TWO OPPO EXTREMES

When it comes to opposition research, seemingly small details can make a big impact. For example, candidates running for office this year in crowded Democratic primaries are discovering that past residency in Washington, D.C. can be a campaign liability with voters when property records are obtained and leveraged by rival campaigns to paint an opponent as a “carpetbagger.” But what happens when people don’t remember why they should care about the details of a candidate’s past?

That oppo conundrum may be the case “across the pond,” as voters seem to be letting Labour Party leader Jeremy Corbyn off the hook for his alleged interactions with Czech Intelligence during the Cold War more than three decades ago. This example demonstrates how time can dull voters’ perceptions, lending further credence to the importance of taking opposition research seriously, and defining one’s opponent early and often – before time runs out.

CROSSED SOUNDWAVES IN CUBA?

Theories of what caused Americans to suffer injuries due to a “sonic attack” of an unknown nature in Havana have led to a number of nefarious explanations, but computer scientists at the University of Michigan stumbled across a possible (and comparably) benign and simple one: that a pair of Cuban eavesdropping devices were placed too close together, “tripping the ultrasound that ironically was supposed to make their presence quiet,” resulting in a disturbing, harmful sound.

Associate professor Kevin Fu and his team’s interest was piqued when ultrasound was theorized as a possible explanation for the attacks, but as Fu said, “it didn’t make sense. Ultrasound is inaudible [to humans], and you wouldn’t hear it.” The technical report released by Fu and his team provides a plausible hypothesis of what happened in Cuba, although they admit that “additional evidence” is needed to determine whether correlation is causation. Should this hypothesis stand up to more scrutiny, it remains to be seen what – if anything – the Trump Administration would do to reverse actions taken to punish the island’s regime for failing to provide safety for American diplomatic personnel.

IS DATA ENOUGH?

In a surprising turn of events, 72 percent of C-suite executives across a variety of sectors believe that if their industry is to be disrupted, it will be from legacy companies rather than new startups or “digital giants” like Google, Facebook, and LinkedIn. The reason behind this thinking is that Big Tech – contrary to the prevailing wisdom – only controls around 20 percent of the world’s commercializable data, whereas “far older incumbents like Unilever, Procter & Gamble, Bank of America” and Santander own approximately 80 percent.

With no single company monopolizing it, Artificial Intelligence (AI) can be used by large companies to customize and monetize their own proprietary data. Yet, in today’s fast-moving policy landscape where continued scrutiny is focused on how companies use data, the regulatory environment may provide the ultimate verdict on what industries are ripe for disruption.

KNOWN CLIMATE UNKNOWNS

A recent study by climate scientists in a French journal received little attention in the U.S. media, and the reason why may be because it did not fit the narrative of much of the environmental journalism in the American media. The study narrows “the range of expected warming to be between 2.2 and 3.4 degrees Celsius,” ruling out the possibility of warming greater than 4 degrees, which has been predicted by the U.N.’s Intergovernmental Panel on Climate Change for the last 25 years.

This study is “the latest crystallization of a trend” that concludes less warming than previously predicted, and more “uncertainty” on the part of the scientists as to how much warming to expect and what its outcome will be for humanity. Climate science reporting that relies on a narrative that leaves out uncertainty is distorting the public policy debate, suggesting that a recognition of the known climate unknowns would make for a more nuanced evaluation of the cause and effect of environmental policies.

SLICING AND DICING FOOD SCIENCE FACTS

Is shoddy data at the heart of viral studies on healthy eating featured in prominent outlets like the Today show and The New York Times? According to a Buzzfeed investigation into the work of the head of Cornell’s prestigious Food and Brand Lab, it appears so. The investigation cites instances where Professor Brian Wansink “discussed and even joked about exhaustively mining datasets for impressive-looking results,” publishing subpar studies with statistically insignificant results in academic journals with “low standards,” and framing findings to stir up media coverage to “go virally big time.”

With internal and external pressures on university professors to publish studies and gain prestige, the scientific process can suffer, instead leading to scientists slicing and dicing facts to draw “exciting, sexy” conclusions from ambiguous data. However, rest assured that the research bullpen at Delve knows that nothing is more exciting or sexier than providing our clients scrupulously-sourced facts that can be independently verified by a third party.

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While you were watching the Olympics or glued to the latest 24-hour news cycle, Toyota Motor Corporation announced that it is preparing to rollout an electric engine that includes as much as 50 percent less rare earth minerals due to its concern about a future shortage of supply. This seemingly innocuous announcement, however, is a rather public display highlighting the emerging fight over strategic minerals that will have major innovation, industrial, national security, and policy implications in the future. Here is our analysis to help you navigate this issue as it gains prominence:

1. What Are Strategic Minerals? Strategic minerals is a broad term to group various rare earth elements and metals together like platinum, uranium, phosphorus, and others.  These minerals are critical for nearly every aspect of modern life including electronics, smartphones, electric vehicles, agricultural products, defense technology, and more.
2. Why Are Strategic Minerals In High Demand? The consumption of these minerals outpaces the amount of supply, which is why Toyota’s announcement was important. Control of mineral deposits is heavily concentrated in a limited number of countries and companies, making unpredictable price and availability fluctuations common. For example, Chinese companies control 90 to 95 percent of the rare earths market, 64 percent of the world’s coltan supply is located in the chaos-filled Democratic Republic of the Congo, and South Africa and Russia control nearly all of the world’s platinum reserves – meaning that economic and political tensions caused by the inequality of these resources will escalate as the supplies become more scarce.
3. Strategic Minerals And U.S. National Security: Given their prominence in military technology and the manufacturing economy, access to strategic minerals is a national security consideration. Semiconductors, microchips, and programs like the F-35 Joint Strike Fighter and B-21 deep strike bomber depend on these minerals, and attention is being paid to the need to implement a policy to lessen the stranglehold of a country like China, which has leveraged its advantage in rare earths and used it to exert political pressure on other countries in the past.
4. The Looming Mineral Shortage: Technologies like electric vehicles and smartphones require the extraction of strategic minerals to produce, but as more ambitious production goals are set, as a recent analysis by Recurrent Investment Advisors found, it is increasingly unlikely that the supply can meet the demand, particularly in countries where supply chains are underdeveloped or nonexistent. Further, the existing production levels must increase by an exorbitant amount, and this inability to extract the minerals will lead to exponentially higher prices due to scarcity.
5. The Challenges To U.S. Domestic Mineral Development: The development of strategic mineral deposits, of which there are thought to be large repositories in the Western U.S., is viewed as “destructive” by elements of the environmentalist movement because of the pollution that may result from mining operations. In addition, the environmentalist movement opposes the Administration’s decision to open federal lands in the Western U.S. to mining, preferring to “protect” the lands rather than “open them up to mineral development.”
6. What Does The Policy Environment Look Like Going Forward? With an executive order issued in December on a “Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals” that explores increased domestic exploration and streamlined permitting for mining, and investment in efforts to extract rare earths from coal mining waste, the policy environment is ripe for harnessing America’s domestic strategic minerals – in a similar way domestic energy has been before it.

The never-ending quest for innovation is incumbent on the ability to develop new technologies, which in turn, are absolutely dependent on strategic minerals. Bringing new technologies to market means bringing down the costs of acquiring them to make them accessible to more people. Yet more of these technologies are demanding more of these minerals, leading towards higher costs and dwindling supplies. Everything from cars to wind turbines depend on them, suggesting that the key to more efficient and effective technologies is inextricably linked with getting strategic minerals out of the ground unless and until someone can discover an alternative to them.

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ALL THE WRITERS FIT TO VET

If you blinked, you may have missed The New York Times newest tech opinion writer. Quinn Norton, the former head of opinion writing on technology for Wired magazine, was hired and fired by the Times within seven short hours. After the hire was announced, a “newly curious” public unearthed a collection of old tweets from her Twitter account that used slurs and “revealed a friendship with [an] infamous neo-Nazi.”

Criticism mounted on Twitter, and the political and reputational damage resulting from the hire led to the editorial page editor releasing a statement calling the disparaging tweets “new information to [the Times]. Based on it, we’ve decided to go our separate ways,” which goes to show that whether in politics or business or media, vetting matters.

ENDING “STOLEN CAR” MAJORITIES

Veteran Capitol Hill advisor Michael Boland has a solution to fix what he deems a “broken process” in government where the political party in power “drives its majority like a stolen car,” misusing it “to dictate a policy outcome.” Rather than bring one policy prescription to the floor of the House or Senate for a vote, Boland instead suggests returning to a time when multiple alternative prescriptions were brought to the floor to be debated and voted on, with the proposal garnering the most votes prevailing.

In addition to living up to the Constitution’s division of power to insulate government “from the passions of the moment,” Boland believes that such a fix will lead to better policy results and make people less angry about today’s two-party system. While this step may help restore integrity to the internal process by which government works, it may also help strengthen the republic in another significant way: by making the public less susceptible to being influenced by social media bots that feed off public anger.

23 & ME & YOU? 

With the personal genetics business booming, can genetics-based science be applied to dating to find your soulmate? With services in existence that collect DNA to match users with “genetically compatible mates” for only $15.99, it would appear the answer is yes. But a Smithsonian magazine article shows that the science behind this is not yet proven.

Personalized-genetics dating services operate on the assumption that certain genes create pheromones, or chemical signals, that make people more or less attractive to a potential mate. However, scientists who have studied pheromones have defined them differently or concluded that they have yet to be found at all, meaning that DNA dating may not get one closer to love than algorithms in Tinder or Bumble, which in turn may prompt more attention from regulators towards the burgeoning genetic testing industry.

IRS #RESISTANCE TO TAX REFORM

Due to a little-known memorandum signed by the Treasury Department in 1983, the Internal Revenue Service (IRS) is largely exempt from submitting its rules to The White House’s Office of Information and Regulatory Affairs for oversight like every other executive agency, an issue that has gained new urgency now that the IRS is in charge of implementing the tax reform law. Without oversight, IRS bureaucrats can impose their own policy judgments and cause impediments to executing the law, which the IRS has already done in declaring that most taxpayers were not able to deduct prepaid 2018 property taxes on their 2017 returns before the new law took effect.

In an ironic twist, the President’s own Treasury Department is stonewalling the implementation of a law he championed – over the guidance of an executive order he signed at the beginning of his term to reduce tax regulatory burdens – suggesting that the easy part may have been getting tax reform passed through Congress in the first place, rather than its implementation by the bureaucracy.

STOP, DON’T RUN, FROM PRESIDENTIAL POLITICS

With little-known candidates like Maryland Congressman John Delany and New York businessman Andrew Yang already running for the Democratic Party’s nomination for president in 2020, columnist Jonathan Bernstein asks why obscure candidates and those with low practical chances to win the nomination instead run for more realistic offices they could actually win and make a policy impact.

Despite the aberration of first-time candidate Donald Trump winning the presidency, Bernstein considers running for the highest office in the land to be “significant wastes of talent” for politicians who have not previously held statewide elected office, faulting both a “political culture and a political media which sees far too many things through presidential election politics.” Such advice could lead to Democrats fielding strong candidates who compete in winnable races down-ballot, an approach that could reverse losses at the state level and make the party more competitive nationally – if only they would heed it.

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Last week, the Department of Defense (DoD) released the Nuclear Posture Review (NPR) to ensure a “safe, secure and effective nuclear deterrent.” In the days following its release, the NPR has been described both in the U.S. and abroad as everything from “flawed overkill” to “bringing humankind closer to annihilation.”

Beyond the hyperbole, an evaluation of the facts pertaining to the NPR demonstrate a different view of the document and what it means for the U.S., our allies, and our adversaries. These are the key points you need to know about the NPR:

• What Is An NPR? The NPR is a major look at the policy and capability of America’s nuclear arsenal. On January 27, 2017, President Trump issued an executive order to undertake this review, which was last conducted by the Obama Administration in 2010, and prior to that in 1994 and 2001. The NPR released last week reflects changes in the geopolitical landscape during that time, including a resurgent Russia, an emboldened China, a North Korea on the verge of perfecting nuclear-armed missiles capable of reaching the U.S. mainland, and an Iranian regime that has continued to develop weapons programs despite the Joint Comprehensive Plan of Action.
• What This NPR Does: Among the key conclusions reached in the NPR are the need to modernize both the nuclear triad – the U.S. military’s ability to launch nuclear attacks from land, sea, or air – and the command-and-control system to better confront and defend against the challenges posed by adversaries with advanced cyber weapon capabilities. Some of the specific modernization programs included in the NPR were initiated during the Obama Administration, like the Columbia-class nuclear missile submarine and the B-21 long-range strike bomber. Criticism of the NPR, therefore, may be more a reflection of who the President is rather than the underlying policy.
• Armageddon Or Asymmetric Response? One proposed change in policy is the focus of some critics who worry it could increase the likelihood for the use of nuclear weapons. The change would allow the Pentagon to consider responding with small nuclear weapons to a non-nuclear attack launched by an adversary against U.S. nuclear “command and control, or warning and attack assessment capabilities.” Particularly given the proliferation of asymmetric warfare, American officials believe that this change is a “strategic imperative” because these low-yield nuclear weapons, when introduced into the U.S. arsenal, can deter Russia’s perceived belief that it could use its own low-yield weapons in a limited conflict without triggering wider U.S. nuclear retaliation.
• What This NPR Does Not Do: While proposing the development of low-yield nuclear weapons among other updates, the NPR does not mandate new American nuclear weapons. These reforms would utilize existing nuclear warheads and update components as proposed in the prior Administration, without resulting in the U.S. reneging on its approach of sustaining its current nuclear levels.
• Is The NPR Unnecessarily Destabilizing To The Current Order? Although critics may view a low-yield nuclear weapon as destabilizing, American nuclear weapons have continued to deter a large-scale attack on the U.S. and its allies since the end of World War Two and lived up to treaty obligations. On the contrary, Russia has been accused by members of both parties of violating the spirit and intent of existing nuclear arms treaties, and Russian President Putin’s remarks in 2014 about the preemptive use of tactical nuclear weapons suggest that America’s nuclear posture should be updated to account for this threat.

The review released last week does not change the known unknowns of nuclear deterrence, nor the underlying risks associated with it. Rather, this review – conducted by the Department of Defense as it has been in previous administrations – provides an account of the status of America’s nuclear deterrent, and how it can continue to keep Americans safe well into the future.

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STARTUPS STAY PRIVATE

The decline in the number of companies choosing to go public has led some to proclaim the death of the American initial public offering (IPO), while others proclaim this negative view is flawed. However, the impact of this downward trend should concern people who want to grow the economy and allow more Americans to share in its prosperity.

Since 1997, the number of public U.S. companies each year has halved to around 3,600 in 2016, meaning that the opportunity for everyday Americans to invest in new, fast-growing companies (either directly or through mutual funds, pensions, and other similar vehicles) – and to reap the rewards of doing so – are narrowing. While startups, whose intangible investments are increasingly more important than capital investments, would benefit from alternative venues to list in favor of a full IPO, the question of how to keep investment opportunities open for working Americans remains unclear.

(ALREADY) PAID FAMILY LEAVE?

Can paid family leave be already paid for, without creating a whole new entitlement program? That is the view of a recent study from the Independent Women’s Forum, which was adapted into an editorial for The Wall Street Journal. In the piece, the authors suggest allowing new parents the ability to collect early Social Security benefits for a period of time after the birth of a child if they agree to delay the collection of their retirement benefits in the future for a comparable amount of time.

This policy would be in stark contrast to an entirely new, unfunded federal leave program, as well as the current patchwork of mandated leave policies at the state and local levels, and despite criticism, the support from Capitol Hill and others may mean that should paid family leave become a reality, it may do so without placing an additional mandate or tax burden on employers.

COMMENCING CRYPTO-EVASIVE MANEUVERS

Several weeks ago, we speculated in TL;DR about the coming worldwide crypto crackdown, especially given the concern that countries could use cryptocurrencies to evade international sanctions. Well, it seems we’ve arrived. This week, Axios discussed the challenge for regulators in combatting such evasion tactics, both in keeping up with the different currencies, of which there are more than 1,400, and in regulating without hampering legitimate innovation in this emerging space.

A senior U.S. Treasury official recently called for greater regulation “all over the world” to prevent the use of cryptocurrencies for illegal purposes, and indeed, sanctions packages will need to be designed going forward to account for this evasion. But, as one skeptic noted, the countries trying to evade sanctions may not ultimately “have the capacity to pull this off” as regulators adapt.

A YUGE SHIFT IN THE “ROLE OF GOVERNMENT”

In his Roll Call column, Stuart Rothenberg argues that the profound shift in the public’s attitude towards the “role of government” will have a far greater significance on the midterm elections than the more frequently considered presidential approval rating or generic Congressional ballot test.

When an NBC News/Wall Street Journal survey asked respondents about their view on the “role of government” last month, 58% of adults said government should do more “to solve problems and help meet the needs of the people,” while 38% said it was doing too much. This 20-point difference is a huge gap historically, and although this number can fluctuate greatly in reaction to each president’s agenda, the current receptivity to a larger role for government may be a warning to Republicans as they attempt to keep their majorities in Congress in this year’s midterm elections.

STAFF MATTERS 

A recent study in the Journal of Politics by Jacob Montgomery and Brendan Nyhan is one of the first studies to empirically quantify the impact congressional staffers have on legislative behavior. The study examined senior staffers in Congress and mapped out the different lawmakers they worked for over their careers.

What they found is that staff matters, and in particular, that the “linkages” created between legislative offices is a good indicator of lawmaker effectiveness and ideological alignment. At a time when diminished resources for Congress can make it difficult enough to retain and attract experienced staffers, this study may further buttress the case that good staff is worth it: for the lawmaker and their constituents.

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Last week, Amazon announced 20 finalists from 238 cities that submitted bids for its “HQ2,” leaving cities left off the list to do some serious soul-searching in the wake of its decision. The public competition, which has been ripe for parody, has mostly been noted for civic leaders scrambling to make their cities sufficiently attractive, often by attempting to outbid each other on tax incentives, to lure the e-commerce giant, and the 50,000 high-paying jobs and five billion dollars’ worth of investment, that it brings.

But is a big tax incentive package really all it takes to get HQ2, or to attract other innovative companies for that matter? Amazon’s original request for proposal (RFP)highlights the main factors driving its process, and although tax incentives are one part of this, other factors point to broader public policies that make for a better economic environment for all businesses, not to mention help cities improve the quality of life for all of their citizens. As cities consider what makes them attractive investment targets in the 21st century, here’s a sampling of those policies:

• A Stable And Business-Friendly Tax Structure: While the bidding war to provide greater tax and other incentives to Amazon has been the focus of scrutiny and criticized across the ideological spectrum, recent actions suggest that the desire for a stable, business-friendly environment and tax structure is shared by many businesses. After tax reform was signed into law, Apple announced an investment of $350 billion in the U.S. economy over the next five years, creating more than 20,000 jobs, and paid $38 billion in taxes on money it was previously holding overseas. Additionally, a business-friendly tax structure benefits employees, with over 125 U.S. employers announcing cash bonuses and pay increases after the corporate tax rate went to 21% from 35%. Rather than punish business, like the lawmakers in the California State Assembly who have already introduced a bill to force large companies to give half of their expected savings due to the tax law over to the state, facts suggest that a stable and business-friendly tax structure can enable economic growth, jobs, and wealth – without wasting money, time, and effort on incentives.
• Affordable Housing: The price of housing, and the cost-of-living more broadly, impacts a company’s ability to recruit talent and the salary it pays them. HQ2 is predicted to drive up rents in whatever city is ultimately chosen, so major metro areas with large housing markets may be impacted less than smaller ones. Housing policy is also intertwined with congestion and gentrification, which resulted from Amazon’s growth in Seattle and helped contribute to its decision to find another location for further expansion. Therefore, cities looking to create or maintain more affordable housing may look to Houston for some inspiration, whose relaxed zoning policy has helped it remain an affordable place to live in spite of its growth.
• A Culture Of Entrepreneurship: In a recent Forbes article, the Mercatus Center’s Adam Millsap examined Dayton, Ohio’s past as an innovative and successful city during the first half of the 20th century. To help spur that vibrancy in this century, Millsap proposes implementing policies that enable local entrepreneurs to “plant a thousand seeds,” rather than have the city hinge “its economic hopes on large, footloose companies.” One way to do this is to remove regulation and red tape – in the form of local ordinances that make it difficult for small businesses to open or expand – as a means of generating employment growth.
• “Permissionless Innovation”: Mercatus’ Millsap also proposes an attitude change on the part of the city’s leadership towards a policy of “permissionless innovation.” Instead of a regulatory environment that operates on a “precautionary principle,” which insists that new innovations fit within the existing regulatory framework, “permissionless innovation” would allow for experimentation that could lead to new technologies and business models by default due to this light-touch approach.

Only one city will be the home of HQ2, but that does not mean others need to miss out on jobs, improved quality of life, and vibrant economic growth. With the right policy approach, a city can not only attract the next Amazon, but more importantly, enable its creation.

News You Can Use

ALASKA ROLLS DEEP

While some may think of big, blue states with high populations like California or New York as having the most state legislative staff per capita, the state with the most is actually Alaska – and it’s not even close. Alaska has almost seven staffers for every 10,000 residents, and Hawaii, the number two state, has only four staffers for every 10,000 residents.

Put in another context, Alaska has roughly the same amount of state legislative staffers as Ohio does, but the latter has more than 12 times the population of the former. Fiscal constraints may require Alaskan lawmakers to revisit the staffing levels, but historical data from the National Conference of State Legislatures makes one thing abundantly clear: Alaska rolls deep.

PEOPLE OVER(EXAGGERATE) PROFITS

Public scrutiny of companies is high, and business leaders are seeking to respond to this scrutiny by not only delivering financial performance, but a positive contribution to society. However, this public scrutiny may be based on a faulty assumption.

The general public thinks that the average company makes a 36% profit margin, which is actually five times higher than the median industry profit margin of six percent. This common misconception is used by politicians on the left as justification for promoting policies to force companies to pay more taxes, raise wages, and increase benefits, but if the public had a better understanding of the facts, they may be less inclined to support politicians whose policies treat job-creators like limitless ATMs.

37 FLAVORS OF REGULATORY RELIEF

The Trump Administration’s first year is viewed in some quarters as having had limited success, or having been an outright “failure.” Missing from these evaluations is the significant work the Administration has done to roll back the regulatory burden of the administrative state.

The Wall Street Journal compiled 37 major changes already made, proposed, or underway that will impact the way the federal bureaucracy regulates American businesses for years into the future. These policies may not garner much attention, but should the Administration continue to build off of this list into 2018 and beyond, the resulting economy, viewed favorably by Americans, could make Republicans more formidable in upcoming elections than currently perceived.

INSIGHTS TAKE EFFORT

After starting on the education beat for the Arizona Daily Star, reporter Hank Stephenson heard almost immediately about the longtime rumor of a blacklist used to retaliate against employees of the Tucson Unified School District. At first, he thought the list couldn’t exist, as another reporter would have “flushed it out long ago,” but an innocuous-looking agenda item at the end of a long and tedious school board agenda drove him to attend the meeting.

Three hours into the meeting, after other journalists left, he came across a clue that ultimately led to his making a public records request that showed more than 1,400 names of employees blacklisted over two decades, and resulted in his writing a featured article. Although he attributes getting his piece due to his “ability to sit through tiresome public meetings,” it demonstrates some of the values the team at Delve takes seriously: dig deeper, because details matter.