A recent survey shows that Americans think this is the best economy since the 1990s. Fifty-nine percent of Americans state that they are financially better off today compared to where they were a year ago. Nearly three-quarters of people predict that their financial situations will become even better one year from now. This survey is not an isolated case. Many other polls and surveys show that Americans have been more optimistic about their personal financial situation and the economy as a whole since the last presidential election. This overall optimism is important for the U.S. economy because it motivates consumer spending and business expansion.

Despite the optimism, the United States has a smaller share of adults who participate in the workforce compared to other developed countries. Statistics show that only eighty-three percent of American adults in their prime worker years (age 25 to 54) are participating in the workforce, which means they are currently working or actively looking for a job. The percentage has gone up since the past few years, but it is still below the levels of the late 1990s. It is also well below the percentages in other developed countries like Germany, Japan, France, Canada and the United Kingdom. Economists said that this held the nation back because the economy and wages could have grown faster if more people were working.

In the last few weeks, Federal Reserve Chair Jerome H. Powell responded to inquiries regarding this problem. When Sen. John Neely Kennedy, a Republican from Louisiana, asked whether “the richness of our social programs” makes people less willing to enter the workforce, Powell dismissed that idea. Powell stated that the amount of benefits people can get in real terms, adjusted for inflation, has actually declined during the period of declining labor force participation. “It isn’t better or more comfortable to be poor and on public benefits now, it’s actually worse than it was,” Powell said.

The vast majority of economists across the political spectrum agree with Powell. Since the major effort to revamp welfare in 1996, it has been harder for people who do not participate in the workforce to receive benefits from the government. Instead, the government has been focusing on subsidizing people who go to work or at least actively look for a job since the 1990s. For example, the government expanded tax credits for people who at least have some income by working. The Earned Income Tax Credit (EITC) is mostly available after people start to have taxable employee compensation or earnings from self-employment. Passive income such as interest and dividends or benefits such as social security do not count.

Powell’s statement is also supported by a 2018 analysis conducted by economists Hilary Hoyne (University of California at Berkeley) and Diane Whitmore Schanzenbach (Northwestern University). The analysis showed that spending on social safety net for children is no longer going to families at the very bottom. Almost all gains in spending has gone to families with earnings or with income above the poverty line.

Another research conducted by the Center on Budget and Policy Priorities indicated that labor force participation rate has increased in many European nations that have more generous safety nets during the same period. Therefore, being more generous to people does not necessarily lead to less willingness to participate in the workforce.

So what is actually preventing American adults from entering into the workforce? Powell said it could be a combination of many factors including the decreasing education attainment rate among the lower- and middle- income population and opioid crisis. More research and surveys should be done in order to look deeper into this problem.

Is Social Welfare Stopping American Adults from Entering the Workforce?

Executive Vice President at the European Commission for “a Europe fit for the digital age,” Margrethe Vestager, announced the European Union’s “digital strategy” in late February, prompting executives at U.S. tech giants, like Facebook and Google, to express both support and concern over the potential effects of the plan. The unveiling of the plan comes as the U.S. and China lead the pack in investing in innovative technologies like artificial intelligence and signals a desire for Europe to carve out a space in the data-driven technology race.

Broadly speaking, the digital strategy aims to provide the European business world with the room to build innovative companies alongside and in fair competition with existing giants, as well as to allow technological innovation to drive public policy making.

“Currently, a small number of Big Tech firms hold a large part of the world’s data,” the paper reads, which “could reduce the incentives for data-driven businesses to emerge, grow and innovate in the EU today, but numerous opportunities lie ahead.”

The plan aims to both promote local innovation across sectors, as well as to regulate data-supported technologies like artificial intelligence, which may pose potential risks to privacy.

The European commission is taking a markedly different approach to digital innovation than the United States, where private, deep-pocketed Big Tech has driven development, and China, where the government has heavily subsidized investment in artificial intelligence. Notably, concerns over individual rights to privacy in the wake of this technological development have emerged in the U.S., where individuals grow wary of unregulated companies like facial recognition startup, Clearview.ai.

The European Commission plans to implement a protective stance ahead of the technological tide. This sentiment echoes that of the conversation surrounding the Commission’s General Data Protection Regulation (GDPR), implemented in 2018, which affected U.S. tech companies’ compliance teams across the board. Given the effect of that bill, it’s not surprising that tech giants are concerned about the potential ramifications of a plan that hopes to de-monopolize data access.

Europe’s Push For Democratized Innovation Rattles Big Tech

On February 18th, employees at the crowdfunding platform Kickstarter narrowly voted to unionize and marked the first step toward organized labor representation in tech. While it is uncertain whether unions comprised of software engineers will take off, Kickstarter United represents a new vision of unions as vehicles to hold employers accountable for ethical decisions.

Labor organizing had been a source of tension at Kickstarter for months. The unionization push began in 2019 after the company became embroiled in an internal debate over whether to allow a fundraising campaign on its site for a comic book that included images of people punching Nazis. Employees eventually convinced Kickstarter to keep the project alive. In the process, they discovered the importance of formalizing their voices to have a say in ethical issues. After months of organizing efforts, Kickstarter management drew high-profile criticism after it fired two organizers. A software engineer who voted to form Kickstarter United last week hailed the decision as “a first step to the sustainable future in tech.”

The success of the Kickstarter union could be a catalyst for organizing efforts at other tech companies, such as Google and Amazon, fraught with employee activism over issues such as climate change and sexual harassment. However, Kickstarter has long positioned itself as a more progressive and mission-driven company than these tech behemoths. For example, Kickstarter is a public benefit corporation, meaning that its corporate decision-making can be based on maximizing public good rather than shareholder profits alone. Furthermore, many of the artists and creatives essential to Kickstarter’s customer base threatened to boycott the platform if it quashed the unionization effort. While it may have made business sense for Kickstarter to allow a union vote, other tech firms have taken a harder stance against unions.

Regardless of whether Kickstarter United will lead to a Google United, it is undeniable that the union vote represents the latest manifestation of tech activism: unionizing around ethical ideals. For example, Kickstarter United plans to include terms for equitable pay, diversity in hiring, transparency, accountability, and inclusion in its union contract. While most unionization drives center around improving pay, hours, and benefits, Kickstarter demonstrates that unions can also be formed with the goal of aligning management ethics with employee voices.

The Kickstart of a New Wave of Tech Activism

SpaceX – the privately held space exploration company led by charismatic founder, Elon Musk – is reportedly raising a new round of fundraising. Reports indicate that the company is looking to raise approximately $250 million dollars at a price per share of $220. This would value SpaceX at about $36 billion – a $3.3 billion dollar increase over its most recent valuation in May 2019. Following WeWork’s financial meltdown last year, this new financing would put SpaceX at the top of America’s list of most valuable tech unicorns.

This new funding would follow $1.33 billion of outside investment last year, totaling to $3.6 billion raised since SpaceX’s inception. The rapid expansion of SpaceX’s Crew Dragon, Starlink, and Starship programs are capital-intensive projects that require significant cash for their continued development. The Crew Dragon project aims to fly astronauts and private citizens into space and includes a large contract with NASA to fly astronauts to the International Space Station. The company expects to launch Demo-2, Crew Dragon’s inaugural mission with live astronauts onboard, later this year. The Starlink project’s mission is to deliver high-speed internet anywhere in the world via a global network of satellites. SpaceX currently sends about 60 satellites into space every few weeks and has launched about 300 Starlink satellites to date. With that said, Musk recently expressed that he hopes SpaceX will one day launch anywhere from 12,000 to 42,000 satellites in total. Finally, Starship, the SpaceX mission involving its largest rocket, strives to be completely reusable and capable of carrying up to 100 people and cargo to “Earth’s orbit, the Moon, Mars, and beyond.”

SpaceX has upended the traditional rocket industry by moving quickly, adapting to failures, and iterating as it goes. Additional funding will help SpaceX compete with rival companies, such as Jeff Bezos’ Blue Origin and Richard Branson’s Virgin Galactic, in a burgeoning private sector space race. Virgin Galactic focuses on commercial spaceflights for space tourism and made its public debut on the New York Stock Exchange last October. Blue Origin, whose mission includes space tourism and lunar landers, continues to expand its employee headcount and just opened a new rocket plant in Alabama earlier this month.

Thus far, private investors have lined up to help these companies compete for government contracts and the public’s attention in what is certainly an unprecedented period of private space innovation and investment. Yet, as the media and public focus their attention on the 21^st century space race, these companies are staring up – in search of new frontiers.

Sky Is Not the Limit- SpaceX Raising a Big New Round of Fundraising

Elliott Management, the $38 billion US activist hedge fund, has reportedly built up a $2.5 billion stake in SoftBank—urging improvements in governance and a share buyback from the troubled Japanese conglomerate. In a country that is only recently seeing the emergence of shareholder activism, this move represents the latest in a series of high-profile and controversial investments by Elliot in Japan. But after a disastrous 2019, the prospect of change may be welcomed by SoftBank shareholders and corporate Japan.

According to Japanese tradition, certain years in a person’s life are predestined to be so-called yakudoshi (“calamitous years”). For SoftBank Chairman Masayoshi Son, 2019 may very well have been one, with the WeWork debacle at the forefront. A key investment of SoftBank’s $100 billion Vision Fund, WeWork’s IPO had to be scuttled after a disappointingly cold reception by Wall Street. This shattered the hopes of a $47 billion evaluation and resulted in a $4.6 billion loss for SoftBank’s Fund. The Fund’s other investments have not fared much better: Uber—perennially unprofitable and unable to raise its stock price above IPO levels—is facing an increasingly harsh regulatory environment. Other unfortunate investments include Wag, the dog-walking startup, Oyo, an Indian hotel startup, and Zume, a pizza robot startup. The upshot is that SoftBank recorded a 99% loss in operating profit in the last quarter of 2019 versus the previous year, and the proposed new Vision Fund will likely fall far short of the $100 billion-plus goal—with most of the capital coming from SoftBank itself.

Enter Elliot Management Corp. Attracted by SoftBank’s comparatively low stock price, which is discounted to the value of its holdings, the hedge fund clandestinely built its stake since the WeWork disaster and is now pressing for a $20 billion share buyback and improvements in SoftBank’s corporate governance. A “vulture fund” to some, Elliott’s reputation in Japan is nothing short of notorious, especially since the bidding war surrounding Unizo. In an open letter in October 2019, Elliott pressured the Tokyo real-estate company to take a tender offer from Blackstone, with possible plans to remove the company’s top executives by calling an extraordinary shareholder meeting.

Until recently, such tactics were unheard of in Japan. But now, the country is an appealing market for foreign activists—perhaps even the most attractive outside the U.S. Many companies listed in the TOPIX trade well below their book values, with many of them having passive management and large stockpiles of cash. The S&P 500 has an average price-to-book ratio of about 3.74, whereas the TOPIX 500 manages a measly 1.21. SoftBank currently trades at a price-to-book ratio of 0.94. The activists are betting that improvements in corporate governance and share buybacks will finally realize the intrinsic value of these Japanese stocks. That dream is shared by the Abe government, which, hoping to finally revitalize the ailing Japanese economy, has been pushing reforms to improve corporate governance.

The verdict is still out on whether these bets will pay off, but activist investors are sure to remain in the Japanese spotlight for the years to come. And while controversial, they might bring about the creative destruction that Japan, Inc. desperately needs.

SoftBank Chairman Masayoshi Son to Face Notorious Activist Fund Elliot Management

The convenience and utility of technological innovation has led to the discovery of awe-inspiring and chilling inventions. One of the most recent innovations in robotics technology has made its way to the Massachusetts State Police (“MSP”), sparking controversy from technology policy experts and civil rights activists alike. The 70-pound, four-legged robot “dog,” created by Boston Dynamics, was leased to the MSP for three months to assist with the agency’s bomb squad. The robot is named “Spot” and signifies a new age for robotics and technology.

The news of the lease inspired Kate Crockford, director of the ACLU of Massachusetts’ Technology for Liberty, to issue a statement calling for public transparency and increased regulation. The Technology for Liberty Project strives to “ensure that new technology strengthens rather than compromises the right to free expression, association, and privacy.” The police’s continued use of more advanced technologies without more transparent public disclosure is exactly what Crockford fears will jeopardize those same liberties. In addition, she expressed concern about the potential impact of allowing access to new and uncharted innovations without clear state or federal authority for protecting civil rights within this context.

Policy experts have likewise called for increased regulation of robotics technology as the creation of newer and better formulations of robots has outpaced regulatory and law-making mechanisms within the government. Ryan Calo, for example, likens the current difficulties in regulating robotics to those experienced when the railroad was first invented. As the debate continues in the U.S. between pushing for closer governmental regulations and trusting large corporations to regulate themselves, Boston Dynamics seems to be doing a better job at limiting the power of the police department than local authorities.

Marc Raibert, Boston Dynamics founder, said that it specifically structured the transaction as a lease so it could regulate the use of the robotics technology and remove the devices from customers that misuse it. While it is heartening that the company is taking steps to think about these issues, it is significant that the power is in Boston Dynamic’s hands to regulate the use of its own products. On the other hand, the question becomes whether the government is equipped to regulate the police, as America has struggled to maintain a policing system absent deep-rooted racial biases that ultimately harm disenfranchised communities. Thus, the invention and use of new technologies in policing is only going to make this debate more dire to resolve.

Robotic “Dog” Leased to Massachusetts Police Department Sparks Controversy

Since the dot-com bubble, a period in which companies made their growth out of the surplus of venture capital funding supporting their internet-based businesses, and the stock market crash that followed it, the start-up industry has faced many highs and lows. The New York Times recently compiled events suggesting that the current year is likely to be a tough one.

Back in 2008, the renowned venture capital firm Sequoia Capital gathered its start-ups to prepare them for a downturn in the industry. The slideshow presented by the firm, then titled “R.I.P. Good Times,” set the self-explained takeaway for entrepreneurs to incorporate into their businesses’ models: costs moderation.

Despite the hype caused by the formation of the largest venture capital fund in history (when the Japanese Conglomerate SoftBank raised a $100 billion Vision Fund), and by the biggest amount of venture capital investment made in the US history ($130.9 Billion raised in 2018 according to Pitchbook and National Venture Capital Association (NVCA)), recent events suggest that pursuing growth at the cost of profitability might not be a valid business plan anymore.

On January 9, 2020, Lime announced that after reaching more than 120 cities, the company is closing operations in twelve markets across the globe. The reason for this being the company’s new primary focus: profitability. Likewise, some trending “unicorns” have been underperforming: Uber and Lyft went through discouraging IPOs and are having yearly losses of billions of dollars. Uber made history by having the worst first-day dollar loss in the US IPO records. Not only did its stocks close down 6.7% on its opening day and amount to an aggregated loss of $655 million for the first public buyers, but its market capitalization of $69.7 billion was also almost half of the valuation predicted by bankers in 2018.

Another Softbank backed company, WeWork, withdrew its IPO, resigned its chief executive and suffered a valuation loss from $47 billion to $8 billion. This move was a consequence of investors’ cautiousness about young companies that have yet to prove their profitability in the following years.

Layoffs contribute to what might be the payback for the abundant decade lived by start-ups so far. Zume and Getaround – the robot pizza and the car-sharing start-ups – cut 500 jobs, among other businesses, such as 23andMe, Flexport, Firefox, Quora. Workers are thus prone to be skeptical about finding employment with start-ups.

The “venture” element inherent to investments raised for start-ups is the keystone to transforming ideas into lifechanging products and services. While businesses deepen their roots to compete in the open market, it is seen that their growth cannot impair the focus on its profitability, as the high availability of investment funds is not translated into guaranteed success as some optimistic players in the industry may believe.

The Start-Up Industry Is Challenged by the Market`s Need for Profits

Prior to the end of January, the Chinese government confirmed the human-to-human transmission of coronavirus and alerted worldwide spreading with a rising death toll, following an extension of the Chinese New Year’s holiday to curb high prevalence rate of the epidemic. In the recent post by New York Times, it was reported that millions of employees have been confined to their homes, severely hindering the world’s shipping lines, causing drastic decline in almost every sector. Tedros Adhanom Ghebreyesus, the director of the World Health Organization (WHO), expressed his concerns on Twitter, “2019nCov spread outside China appears to be slow now, but could accelerate . . . in short, we may only be seeing the tip of the iceberg.”

Similar to what the Chinese experienced with the SARS outbreak seventeen years ago, fast-consumption and entertainment sectors will bear the brunt of the effect of coronavirus. The tourism industry will also be curtailed to an extremely low level due to travel restrictions and fight cancellations in the first quarter of the year. After many business hub closures in China, the fast-spreading virus has disrupted supply chains, pushing its counterpart, such as the US, to seek alternatives and bring back jobs to its home country. Secretary of Commerce Wilbur Ross said in a Fox Business Network interview: “it does give businesses another thing to consider when they go through their review of their supply chain.” This is not a positive sign for China’s economy.

The global economy’s reliance on the Chinese economy is being tested, considering it has become a bigger economic entity in terms of consumption, goods export and manufacturing. However, the China Economic Update issued by the World Bank last December indicated that Chinese consumption growth declined to 6.8% in the first three quarters of 2019 due, in part, to the household debt servicing burden and moderate wage growth. The World Bank revised the global growth forecast, which is expected to decelerate for at least the first part of 2020 due to coronavirus and its disruption of supply chains.

Meanwhile, Chinese government and financial agencies have taken an array of actions to defend their economy and rebuild market confidence after being struck by coronavirus. On February 2, the People’s Bank of China (PBOC) announced a 1.2 trillion yuan ($173 billion)  reverse repurchase plan to increase liquidity and maintain a stable currency market, more than 900 billion yuan ($129 billion) in the same period last year. Twenty-eight financing projects have been registered with the Insurance Asset Management Association of China (IAMAC), with 50.8 billion yuan ($7.25 billion) invested into infrastructure last month, more than 79.8% in the same period last year. Projects were more carefully scrutinized with more stringent and onerous restrictions. On the other hand, loose monetary policy is leading to a rising fear of higher inflation rate among its populace, which has climbed up to a record high: 5.4% last month due to the soaring pork price.

Despite the precarious timing, the market is always ready for opportunity chasers. The US and China signed an “phase one” trade agreement, allowing China to open up its financial market, especially in distress debt sector. Oaktree Capital Management was granted license in Beijing on February 18 to invest in the distress debt market, becoming the first distress debt manager in China. Having gained prior experience in lucrative deals Goldman Sachs and BlackRock are also now attempting to seek opportunities.

Businesses started to resume partially this week in major business hubs like Shanghai, Beijing, Shenzhen and Guangdong. Nevertheless, employees are under meticulous scrutiny, including body temperature tests, fourteen day voluntary quarantine, and registration if they go to public places for tracking purposes, as the government encourages working from home and off-peak commutes to control virus spreading.

The Global Economy Is Focusing on China After Coronavirus Outbreak

Earlier this month, the Department of Justice charged four Chinese hackers in the 2017 Equifax data breach. A federal grand jury charged the four named defendants with conspiracy to commit computer fraud, wire fraud, and economic espionage. The indictment also charged them with stealing Equifax’s trade secret information containing its compilations and database designs.

The Equifax breach affected nearly 150 million Americans and is one of the largest in history. According to a DOJ announcement, the four hackers exploited a vulnerability in the Apache Struts Web Framework software and obtained names, birthdates, and social security numbers of nearly half the country. Although in late 2017, Equifax announced that nearly 143 million customers were affected, by 2018 the company identified the toll to be closer to 150 million victims. According to Equifax, it has identified that as many as 209,000 customers’ credit card numbers were exposed and the personal information of 182,000 American consumers was compromised. Further, a staggering 10.9 million lost their drivers’ license data. Shockingly, the effects of the breach were not limited to U.S. consumers; British and Canadian consumers were also targeted.

The response to this monumental breach shows the U.S. government’s growing attention towards treating personal data with the utmost importance. The data is seen to have consumer and national security value and is classified as “proprietary business information.” The ongoing investigation into Chinese TikTok owner, ByteDance, also emphasizes the importance accorded to the national security value of personal data in the U.S.

The breach and the DOJ’s subsequent indictment of Chinese military officers may also have a strong impact on US-China relations. In a 2015 meeting with Presidents Xi Jinping and Barack Obama, it was agreed that China would not “conduct or knowingly support cyber-enabled theft of intellectual property, including trade secrets or other confidential business information, with the intent of providing competitive advantages to companies or commercial sectors.” This commitment was a consequence of the very first U.S. indictment of Chinese hackers in 2014. However, continued attempts at theft of commercial secrets with little censure has proven that the 2015 agreement is ineffective. This has also called for a growing need to meet these ex-post actions with a framework of mandatory cybersecurity policies for corporate entities.

The Equifax data breach resulted in tumultuous implications, including multiple congressional hearings and the dramatic exit of its then CEO, Richard Smith. Although the company has agreed to settle with regulators for $700 million, those truly affected by the breach have yet to be compensated. Of the 150 million affected, only 10% have filed for compensation. More egregious is the fact that the company has only set aside $31 million for the settlement option of up to $125 per consumer. This amounts to less than $7 a person. It is only fair to wonder whether data breaches like this are really being looked at with pressing importance by these huge corporate entities with nearly unlimited access to sensitive consumer data.

U.S. Charges Four Members of Chinese Military in Connection with 2017 Equifax Hack

On February 11, 2020, U.S. District Court Judge, Victor Marrero, ruled that the $26.5 billion merger between Sprint and T-Mobile would not cause anticompetitive behavior or violate antitrust law.

Tensions escalated when attorneys general from thirteen states brought a lawsuit to block the deal arguing that the deal would limit competition and result in higher prices for consumers. The Judge rejected the states’ argument stating that they failed to convince the court that the merged party would pursue anticompetitive behavior that would yield higher prices or lower the quality of wireless services. Further, Judge Marrero noted that Sprint would not be able to continue surviving as an effective competitor in the mobile services industry without the merger.

The deal had already received approval from the Department of Justice (DOJ) and Federal Communications Commission (FCC) last year. T-Mobile and Sprint agreed to relinquish several components of their merged business to comply with antitrust law. Sprint agreed to sell Virgin Mobile, Boost Mobile, and other prepaid phone businesses, as well as some of its wireless spectrum to Dish for $5 billion. The merged companies also promised that they would deploy a 5G network covering 70% of the U.S. population by 2023.

After the District Court Judge’s ruling, the only hurdle remaining is the California Public Utilities Commission approving the transaction. T-Mobile and Sprint had spent years and made multiple attempts to join forces but had abandoned their shared vision fearing regulatory scrutiny. This ruling was a substantial win for the mobile network providers. In a recent statement T-Mobile CEO John Legere said, ″[N]ow we are finally able to focus on the last steps to get this merger done!”

T-Mobile and Sprint are aiming to close the deal as early as April 1, 2020. The merged entity will retain the name, T-Mobile. Sprint customers will transfer to T-Mobile plans, but T-Mobile plans will stay in place. The merging parties have both noted that they are not planning to raise prices, keeping them “the same or better [] for three years.”

Potential upsides of the merger are better services, a wider network, and rolling out a 5G network which is capable of letting users download massive files in seconds. The companies claim that their full 5G network would reach speeds up to five times faster than their current network in a few years, and 15 times faster by 2024. Additionally, they claimed that they are aiming to deliver their network to 99% of the U.S. within six years. T-Mobile’s website also promises that the merger will create 3,500 additional full-time jobs in the first year and 11,000 by 2024.

The Sprint and T-Mobile merger’s narrative brings the anticompetitive marketplace discussion to the forefront. Narrowing the market to AT&T, Verizon, and now the new T-Mobile, could have ramifications like price fixing. As the attorneys general argued, this could lead to a financial harm borne by U.S. consumers. Alternatively, preventing the mobile providers from combining could mean slowing the roll-out of a nationwide 5G network, rural areas continuing to have blotchy mobile services, and less American jobs. Perhaps allowing beneficial mergers to go through, while surveilling the merged parties to ensure ethical business practices, is the optimal way for the government to manage major private sector mergers.

Sprint and T-Mobile Merge- How Will The $26.5 Billion Transaction Impact You?