Recent years have witnessed several attacks on governments and businesses by Ransomware, a malicious software that can encrypt and control computer systems. Although authorities have not released broad statistics regarding trends, the FBI stated that these attacks are becoming “more targeted, sophisticated, and costly.”

Interestingly, before 2019, these attacks were known to target only businesses and individuals. Of late, Ransomware attacks on public-facing institutions is a growing concern. There is a significant threat to public safety, essential utilities, and the backbone of the economy of the city. According to a report by Emsisoft, a security firm, in 2019 Ransomware interrupted 911 services, delayed surgical procedures, and made it tough for emergency response officials to access medical files, scan employee badges, and view outstanding warrants. The report also suggests that in that year, 205,280 organizations submitted files that had been hacked in a Ransomware attack — a forty-one percent increase from the year before.

Slower than average adoption of new technology and a stagnant culture of trivializing cybersecurity are some reasons for the increasing vulnerability of public institutions. The abundance of personally identifiable information (PII) also make city services and hospitals big targets for such criminal activities. This was seen in the recent attack on New Orleans, which led the city to declare a state of emergency. What is worse is that even mitigation strategies such as buying cyber insurance can misfire and have a negative impact. Cyber insurance signifies larger anticipated ransoms. For example, last year, the Florida cities of Lake City and Riviera Beach paid ransoms of about $500,000 and $600,000, respectively. This has led many to emphasize the need to avoid paying ransoms to criminals in the event of an attack. According to data from Coveware, the average payment to release files spiked to $84,116 in the last quarter of 2019, more than double what it was the previous quarter. More so, in December 2019, this figure jumped to $190,946.

Along with entire city governments, several small businesses have suffered tremendous losses from recent Ransomware attacks. Concerns that many small towns in swing states will see more attacks by state-led actors in the wake of the Presidential election in November remain at large. Such attacks on smaller cities are a way to test systems, and motivations for these attacks are wider than mere extortion. However, it can only be hoped that attacks in the past serve as a reminder to enforce greater cybersecurity across public and private facing institutions in the United States.

Ransomware Attacks Grow, Crippling Cities and Businesses

The Wallstreet Journal ranked Austin, Texas as the top city for job market growth along with Nashville, Tennessee coming in at second place. Rankings were based on “the unemployment rate, labor-force participation rate, job growth, and labor-force growth and wage growth.” Apple and Amazon have made recent moves to the southern states, creating a growing number of technology jobs. Austin and Nashville are well known for their vibrant nightlife and great food, but now these two cities are luring young professionals away to begin their careers in places other than larger coastal markets.

In 2019, Apple began construction on a $1 billion corporate campus in Austin, Texas, demonstrating its commitment to expanding in the Lone Star State. In an article written by CNN, the campus “is expected to open in 2022, will initially house 5,000 employees, with the capacity to grow to 15,000. It will run on 100% renewable energy, including from solar power generated on-site, according to the company.” Amazon is also building a new campus which will spark more growth in Nashville due to the company’s goal of hiring 5,000 new employees.

According to the job market rankings, the Bay Area still sits among the top ten, but places like Austin and Nashville can be more attractive in some cases. One of the main differences between California and Texas, for example, is the cost of living. As of 2017 in Austin, “the median house price is $289,000 with a 3-year appreciation rate of 25.2%.” When young college graduates are making decisions on where to work, housing costs can play a major role in the decision-making process. In an article written by MarketWatch, other features luring people to the south are noted, such as “well-known universities…and an intangible cool factor.” Nashville has Vanderbilt University in the heart of the city and Austin is the home of the well-known University of Texas.

A lot of companies are moving to the south for many reasons. The San Francisco Business Times wrote an article stating, “the corporate exodus out of California is bad. It could get worse. There’s no plan to stop it – and the Lone Star State hopes there never will be.” Making the move to the country’s large cities like Austin and Nashville can have many more benefits than just escaping high taxes.

Austin, Nashville Rank at Top of Hottest U.S. Job Markets

President Trump signed the Tax Cuts and Jobs Act (TCJA) into law on December 22, 2017. The law brought about drastic changes to federal tax laws—so much so that the Act is recognized as the largest tax code overhaul in thirty years. American companies constantly pursue methods that allow them to pay taxes lower than 35%, such as using techniques like ‘Double Irish with a Dutch Sandwich.’ In order to tackle this, the law slashed taxes for big companies, aiming to induce them to invest more in the US rather than piling their profits in various tax havens. But no good deed goes unpunished. The budget deficit subsequently increased by more than 50%.

TCJA created a single corporate tax of 21%–as compared to the previous 35%–and  abolished the alternative minimum tax. Unlike tax breaks for individuals, these provisions do not expire.

Rather than paying their fair share of taxes, huge US companies move their profits to countries where tax rates are considerably lower, such as Luxembourg, Bermuda, and Ireland. Lawmakers came up with two tools to tackle this problem and to deter companies from moving capital offshore: the Base Erosion and Anti-Abuse Tax (BEAT) and the Global Intangible Low-Taxed Income (GILTI). BEAT aimed to impose an additional 10% tax on payments that companies send to their foreign affiliates. GILTI would apply a  10.5% tax on offshore earnings. But lobbyists got the best of lawmakers and shut down these proposals before they were ever enacted.

The first victory came for international bankers, who were trapped from all sides. American regulators require international banks to keep their American divisions sufficiently capitalized to sustain huge losses in the event of a crisis. To comply with these regulations, foreign branches of banks provide loans to American divisions, which incur interest. BEAT aimed to tax interest payments from American bank divisions to foreign branches. But Treasury Secretary Steven Mnuchin was successfully convinced by lobbyists to call off these tax impositions, and other major exemptions which were also granted to international banks.

Lobbying against GILTI proved to be equally fruitful. GILTI predominantly targeted tech and pharmaceutical companies, who rely on profits borne from patents. These companies sell their rights in patents to subsidiaries in low taxing countries. The subsidiaries then charge heavy licensing fees to American divisions, causing US profits to fall while tax haven profits rise. GILTI targeted companies that were using this tax loophole. Naturally, the companies responded. United Technologies, Anheuser-Busch, Comcast, and other giants dispatched lobbyists and demanded a “High-tax exception.” After only a few months of lobbying, the Treasury Department made an announcement in June 2019 that it would create the company-requested exception.

Now, two years after this intensive overhaul of federal tax law, the consequences are becoming vivid. While companies are still moving their profits to lucrative tax havens and enjoying profit hikes as a result of various tax cuts and exceptions, the government is collecting billions fewer from corporations. Indeed, the Organization of Economic Cooperation and Development observed that the United States experienced largest drop in tax revenues in 2018.

How Big Companies Won New Tax Breaks from the Trump Administration

The Washington Post in a recent article reported that Michael Bloomberg, a Democratic presidential candidate in the 2020 U.S. presidential primaries, recently announced a financial reform policy that subjects Wall Street to regulatory scrutiny. This policy, however, contradicts many of Bloomberg’s earlier statements in defense of Wall Street while he was mayor of New York.

On Tuesday February 18,  Bloomberg released a proposal that, if adopted, would reverse Trump’s policy to decrease equity levels in banks, toughen up stress tests, and reinstate financial institution’s annual living wills. Most notably, the proposal seeks to strengthen the Volcker Rule and introduce a financial transactions tax (“FTT”) to U.S. markets.

The Volcker Rule was established under §619 of the Dodd-Frank Wall Street Reform Act of 2010. The rule prohibits large commercial banks from using customer deposits to fund investments in hedge funds, private equity funds, and other trading operations. Moreover, the Volcker Rule requires that CEOs personally attest to their banks’ compliance. However, notwithstanding Bloomberg’s recent attempts to strengthen the Volcker Rule, Bloomberg publicly called the Dodd-Frank regulations “stupid laws” back in 2014. Clearly, the long-time New Yorker has undergone a change of heart.

As for the proposed FTT, according to Bloomberg’s proposal, the introduction of an FTT in the U.S. would “defray the costs of overseeing markets” and “address other social needs,” as seen in other global financial centers such as the United Kingdom and Hong Kong. In addition, Bloomberg’s proposal cites a 2015 paper issued by the Urban-Brookings Tax Policy Center that found that the tax burden from an FTT would fall on high income households. As for implementation, the FTT would be set at 0.1% for every stock or bond traded and phased in gradually, starting at 0.02% to minimize unintended consequences. According to Stu Loeser, a senior adviser for the Bloomberg campaign, Bloomberg initially objected to an FTT because he worried that if the U.S. was the only country adopting an FTT, the financial industry would migrate outside of U.S. borders. However, since then, the U.K. and Hong Kong have implemented an FTT. This, according to Bloomberg, has assuaged his prior concerns.

Nevertheless, the proposed introduction of an FTT is not without criticism. For example, the U.S. Chamber of Commerce in September 2019 released a report arguing that the FTT would be paid by ordinary retail investors attempting to save for their retirements and FTTs in other countries raised less revenue than expected. Nevertheless, the suggested strengthening of the Volcker Rule and introduction of an FTT signals a change of heart in the former New York republican mayor.

Bloomberg’s Plan to Crack Down on Wall Street Indicates a Change of Heart

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