The trade fight between the U.S. and China is showing little sign of ending: China’s foreign minister warned Secretary of State Mike Pompeo this morning that the U.S. should “stop such misguided activities.” But with Beijing running out of ways to fight back, it may open a new front that could decimate corporate America’s deal-making.
The Chinese government could hold up or kill takeovers that require its approval, as happened when Qualcomm tried to acquire NXP Semiconductors. But more deals now risk suffering that fate — including Walt Disney’s purchase of 21st Century Fox and United Technologies’ acquisition of Rockwell Collins. (Deal-makers already said they were worried about the trade war.)
The strategy has risks. Alex Stevenson of the NYT notes that if China is seen as increasingly inhospitable to business, its already struggling economy could suffer more. (Beijing announced yesterday that it was injecting $175 billion into the economy to help prop it up.)
As Fred Hu, the chairman of the investment firm Primavera Capital Group, told the NYT, “China is trying to cultivate ties with” American business giants. It may not be able to have it both ways.
More China news:Chinese stocks fell, even after the economic intervention. David Einhorn of Greenlight Capital told investors that he dumped his stake in Apple over trade fears.
Reid Hoffman says big isn’t always bad for social media
As calls to break up social media companies like Facebook grow, the entrepreneur and investor writes (on LinkedIn, the social network he co-founded) that the matter isn’t cut-and-dried:
It’s not Facebook’s size that caused the issues. Size makes a platform attractive to hackers, but it also gives that platform more resources to defend itself. If there were, say, five smaller social networks in place of Facebook, that would probably make the situation far worse, because each would be more vulnerable to attack, and when serious problems arose, it would be harder to track down the bad behavior and figure out how to thwart it.
Instead, he argues that there’s a bigger problem: “We haven’t agreed on a set of goals for how social media should impact civil society.” Before we rush to tear up Facebook, he writes, we should work out if social media can be changed to improve society — as happened to newspapers, radio and TV — by demanding more from the companies.
Mr. Hoffman concedes, though, that his approach would mean “a long and never-ending process.”
It’s all about market failure. Left alone, markets will generate too much pollution (Nordhaus) and too few ideas (Romer).
Things might be quiet. Many American companies will observe (the controversial) Columbus Day. It’s also Canadian Thanksgiving.
To survive global warming, rewire the global economy
Avoiding global warming is expensive. Dealing with the damage that it causes could be financially ruinous.
A new report from the U.N.’s scientific panel on climate change predicts that if greenhouse gas emissions continue at their current rate, the atmosphere would warm by as much as 2.7 degrees Fahrenheit above pre-industrial levels by 2040. That could cause as much as $54 trillion in damage, because of effects like worsening food shortages, wildfires and droughts.
To avoid that fate, the report urges huge transformations of the world economy in the next few years. That means taxing carbon dioxide emissions (perhaps as high as $27,000 per ton by 2100), investments in clean energy (of $2.4 trillion every year through 2035), and a complete end of coal use by 2050.
But such swift and unified change is politically unlikely, especially with President Trump intending to withdraw from the Paris climate agreement.
High finance traditionally donates to Republicans over Democrats, with the G.O.P. having outraised its rival by more than $50 million over each of the last three election cycles. This year is proving to be different, according to the NYT: Wall Street is turning blue.
Traditional Republican donors like Paul Singer are still giving money to the party, but others have broken rank. Seth Klarman, the hedge fund billionaire, plans to give $20 million to Democrats. Other financiers are backing obscure Democratic candidates for Congress.
Some of Wall Street’s Democratic supporters say they’re driven by opposition to President Trump. Others see something else at work: “They just want to follow winners,” the conservative economist Stephen Moore told the NYT.
Take Jack Poulson, a research scientist alarmed by Google’s efforts to build a censored search engine for China. He took his concerns to Jeff Dean, the tech giant’s head of A.I. What happened, according to Kate Conger and Cade Metz of the NYT:
According to Dr. Poulson, Mr. Dean said that Google complied with surveillance requests from the federal government and asked rhetorically if the company should leave the United States market in protest. Mr. Dean also shared a draft of a company email that read, “We won’t and shouldn’t provide 100 percent transparency to every Googler, to respect our commitments to customer confidentiality and giving our product teams the freedom to innovate.”
The next day, Dr. Poulson quit.
It may be hard for these tech giants to find replacements, as well. The NYT added that some students are asking similar questions — before they even join the work force.
Steve Ballmer dishes on his best and worst investments
Mr. Ballmer joined Microsoft early, amassed a huge fortune, then bought the L.A. Clippers for $2 billion. Not bad. In an interview with the WSJ, the former Microsoft C.E.O. recounted his greatest hits and misses.
• His best bet: Quitting Stanford’s business school to join Microsoft, obviously.
• His worst bet: Investing in furniture. He sold tens of millions worth of Microsoft stock to buy two furniture retailers, and both went bankrupt. Had he held onto his shares, his fortune — estimated by Forbes at $43.5 billion — would have been even bigger.
Mr. Ballmer’s bottom line? “Stick with what you know. Or really dedicate yourself to learning something new.”