Diversity, Equity & Inclusion: Enough with Bro Culture

Elon Musk’s all-male clique, the “Paypal Mafia,” epitomize the problem of Bro Culture in Tech. This close-knit circle of PayPal alumni founded or invested big in lucrative companies such as Tesla, Airbnb, Youtube, Uber, Pinterest, and LinkedIn. They invest in each other’s ventures and dictate which start-ups will receive their support and which will not. Basically, they gatekeep. But who do they close the gates to?

Mafia member Max Levchin answered this question in an interview with Fortune in which he attributed PayPal’s success to “self-selecting for people just like you.” In other words, they seek to exclusively hire those who fit into their “clique” – and by virtue of this their image of a ‘bro.’ This image skews straight, cisgender, and male.

Levchin elaborated on his dream employee: “He thinks like me, he’s just as geeky, and he doesn’t get laid very often. Great hire! We’ll get along perfectly.” Levchin admitted that the work culture he promulgates, in which disagreements sometimes lead to wrestling matches, excludes women and other minority groups. But he asserted that hiring employees of similar backgrounds and dispositions increases productivity, which is essential for startups’ success. Therein lies the problematic, bro-culture ethos that defines the PayPal Mafia: not only is diversity not worth pursuing; it is antithetical to success.

For a case in point, in the 646 companies PayPal mafia members invested in from 1995 to 2018, only eighty-nine (48%) had at least one female founder, and only one had a founder who identified as nonbinary. As the de facto golden boys of Silicon Valley, the PayPal Mafia inspires other power players to gatekeep in the same way, e.g., in the first quarter of 2022, women-founded teams received just 2 percent of venture capital funding. 

Because industry paragons like the PayPal Mafia primarily value bros’ perspectives, so do the directors, executives, and managers under them, who often ignore and denigrate employees who do not fit the ‘bro’-mold (“non-bros”). Junior male employees emulate this problematic behavior to advance, resulting in workplaces replete with harassment and discrimination. Riot Games, Activision Blizzard, Alphabet, Pinterest, Rivian, Uber, and SpaceX, among others, have all faced multiple gender discrimination suits alleging a toxic “Bro Culture.” Loretta Lee, who worked at Google from 2008 to 2016, alleged that she faced lewd comments, pranks, and even physical violence from her male colleagues daily. Employees who speak out against their companies’ Bro Culture often face retribution. After she complained, Lee’s male colleagues stopped approving her work, creating the illusion of false performance for which Google eventually terminated her. 

Bro Culture harms businesses by making them more difficult and less attractive places for non-bros to work at. This carries tangible financial consequences, e.g. Alphabet paid $310 million and Riot Games, $100 million, to settle sexual harassment and gender discrimination suits. Despite Max Levchin’s claims to the contrary, Bro Culture hinders productivity. Employees at Blue Origin attributed widespread project delays and budget overruns to a toxic work environment fueled by Bro Culture. Female employees struggled to be productive in the face of constant harassment and discrimination. In the highly collaborative schema of the tech world, hindering the work of some hinders the work of all. In the Google example, Lee’s male colleague’s retaliatory refusal to approve her work on a project delayed the entire project. As the highly skilled workforce that drives Tech grows increasingly diverse, employees will grow less tolerant of Bro Culture, and companies that only value bros will miss out on important pools of talent. 

For the sake of decency and financial sense, the technology industry must seek to eliminate Bro Culture from the top down. Industry leaders must fund more female- and minority-founded companies and support DEI initiatives in the businesses in which they invest, including a guarantee of equal pay regardless of gender. To eliminate harassment and discrimination, tech companies must empower Human Resources. HR should have regular check-ins with employees in which they can speak openly without fearing retaliation. Hiring committees must make a concerted effort to hire more minorities, women, and people who respect them. Onboarding committees must impress upon new hires the importance to the company culture of valuing everyone’s perspective. None of these steps will be easy, but if the technology industry truly strives to build a brighter future full of AI, self-driving cars, and commercial spaceflight, it must abandon the oppressive beliefs of the past. 

Anti-Woke Bank: Corporate Social Responsibility and GloriFi

Corporate social responsibility, or the idea that corporations should consider the needs of the community as much as the needs of their shareholders, is nothing new. In the famous case of Dodge v. Ford Motor Co., Henry Ford declared the purpose of Ford was to benefit others including his community, his customers, and his employees. Any benefit to his shareholders was meant to be incidental. Ford would go on to lose that case, setting the precedent for years to come that shareholders take precedence in the long list of corporate stakeholders.

Many corporations today advance far-reaching and progressive social causes. For instance, some financial firms such as JP Morgan and Bank of America have put their money behind clean, renewable resources in an effort to decrease our reliance on fossil fuels.

Some firms, including a startup known as GloriFi. have decided to take the opposite approach. GloriFi was founded by Toby Neugebauer and Nick Ayers, with funding from Ken Griffin and Peter Thiel. GloriFi is a mission-driven financial technology company which specializes in banking, credit cards, mortgages, and insurance. The founders had one objective in mind: to be a force for American conservatism on Wall Street. GloriFi has financially supported causes including bolstering police forces, capitalism, gun rights, and traditional family values. At the Summer Conservative Political Action Coalition event in 2022, Neugebauer furiously rallied at what he viewed to be Wall Street’s ubiquitous liberalism. Metaphorically shaking his fist, Neugebauer declared that it was time to “deliver better products than the people who hate us.”

Within months, GloriFi was on the verge of bankruptcy, and its investors had nearly lost all their investments. The firm had launched products that became commercial failures, including an inoperable credit card with material incompatible with payment terminals. The firm consistently missed deadlines, laid off several employees, and failed to deliver on its promise to provide quality service emphasizing traditional values.

Before long, Neugebauer was facing demands from investors to resign. Neugebauer responded by blaming vendors, surrounding himself with yes-men and sycophants, and growing increasingly paranoid and distrusting towards his business partners. GloriFi’s failure cannot be explained purely by the firm’s founders’ ideologies, which put them at a deficit in an increasingly progressive Wall Street. GloriFi refused to understand that company profits are more important to shareholders than ideological spending, corporate responsibility, and effective Environmental Social Governance (ESG).

While corporations continue to maintain their own corporate social responsibility goals, this is secondary to the aim of increasing company value. Demonstrated by A.P. Smith Manufacturing, a fire hydrant manufacturing company, who argued before the New Jersey Supreme Court that their company benefitted from investment into their community. By funding universities and higher education, the company ensured its community would continue to produce skilled consumers and workers for the future.

If GloriFi expects to succeed, its management should reevaluate how they plan to increase company value. Management should follow shareholder advice and focus less on paying homage to “conservative values.” Glorfi must consider how their community investments contribute to the value of their company. Social responsibility is more than just personal politics and private vendettas, it means a greater effort to ensure the survival of the company through social investment and understanding.

Fear of Recession at the Plain Sight after Fed Increases Benchmark Rates

Federal benchmark rates continued to rise after the Federal Reserve approved its third-consecutive increase this year by adding 75 basis points while projecting another increase. They expect the rate will increase until reaching 4 to 4.5 percent by the end of this year, a level we have not seen since 2008. This increase comes as expected in the battle against soaring inflation rates, which is at 8.2 percent annually, near its highest rate in 40 years. This increase was followed by negative responses on the stock market. The Dow Jones Industrial Average (DJIA) sunk 19.38 percent while the S&P 500 suffered a 23.64 percent decline on a year-to-date basis, falling to the level that people call a “bearish market.” The future economic forecast is even more gloomy. While the first two quarters of 2022 saw negative growth, experts claim that the third quarter’s Gross Domestic Product (GDP) is also close to zero. Consequently, the rise of interest rates will affect the economic recovery after it was hit by the last recession during the pandemic. Households, particularly low-income families and workers, will be the first to be affected as the hike in interest expenses will increase prices for products and services while they face the danger of unemployment. The United States will, once again, face the threat of recession.

While there is no standard for defining a recession, most experts refer to a recession as a significant decline in GDP for two consecutive quarters. The National Bureau of Economic Research (NBER) offers a broader definition of recession by taking into account several factors, such as the decline in GDP, the decline in real income, the rise of unemployment, the slowed production and sales of the industrial sector, and the lack of consumer spending. Many of these factors affect each other, meaning the decline in GDP will likely constrain consumer spending, which affects the production of products, and in turn, gives rise to the unemployment rate. According to NBER, a recession happens for months, while the average recession lasts for 21.6 months. The most recent recession in the United States is the Covid-19 recession, which lasted around two months.

Rising inflation rates is one of the common causes of a recession. When inflation is high, the price of goods and services increases and hampers people’s ability to purchase. Because the value of money is diminished, people tend to spend more of their money on everyday goods rather than save it. Consequently, people will ask for a wage increase, and in turn, the company will increase the product’s price again to make up for the labor cost. Then the cycle repeats itself. If this pattern continues for a more extended period, low-income families are the ones who suffer the most because they will not be able to afford the price increase, and their savings will not be enough to cover their expenses.

In order to control the inflation rate to a moderate level, the Federal Reserve resorts to its most helpful method: increasing the federal benchmark rates. Higher interest rates will slow down the inflation rate by tightening monetary policy. Simply put, the Federal Reserve increases the short-term interest rate, which makes money harder to borrow. Business owners will reduce the production of goods and services because of the rise of operational and interest expenses. On the other hand, consumers will be forced to tighten their belts and discourage consumption, driving down demand. Moreover, people will be eager to save money because the bank rate is higher. This pattern will continue until the supply and demand reach equilibrium and create price stability.

Increasing the federal benchmark rate is not risk-free, as it will bring other problems to the table. Jerome Powell, Chairman of the Federal Reserve, said, “While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses.” Low-income families are the ones who suffer the most as they will experience lower quality lives. First, as the interest rate rises, the companies will increase the price of goods and services to make up for their higher interest expenses. The Federal Reserve estimates that prices of goods and services will continue to grow at a level of more than three times the two percent target.. As a result, the low-income families probably will not be able to afford the usual standard of living because everything from gas, water & electricity bills, food, and groceries become more expensive. Moreover, while the increased interest rate encourages people to save money in the bank because of higher investment returns, low-income families might be unable to benefit from this as their savings barely cover their expenses.

Furthermore, the rise of interest rates also affects their repayment loans, such as mortgages and automobile leases. Their installments will increase as the interest rate increases, especially on a floating-rate lease. Accordingly, the rental lease will also become more expensive because landlords tend to pass the increased mortgage rent to their lessee. Finally, the increased rate also has a negative impact on the job market. In a worst-case scenario, the Federal Reserve projects an increase in the unemployment rate to 4.4 percent next year. That would mean the loss of 1.2 million jobs. The combination of increased interest rates and lower demand will diminish companies’ revenue and production, and in return, they will restrict their hiring rate. At some point, some companies might not be able to compensate their workers due to a lack of cash flow. Thus, mass layoffs will probably occur as companies attempt to cut labor costs. Consequently, many low-level employees will be on the verge of unemployment because their positions are the first on the list when companies plan to lower production and are easy to replace when the economic situation goes back to normal.


By Ristyo Pradana



Regulating Fast Fashion Industries as the New Norm?

Legislators all around the world are looking at fast fashion industries with greater scrutiny. In March 2022, the European Union published the Ecodesign for Sustainable Products Regulation (ESPR) to improve product circularity and identify substances that may prevent products from being recycled. 

ESPR specifically set single-fiber, or monofiber, clothes as the new standard, which makes clothes easier to recycle. Across the Atlantic in America,  the Fashioning Accountability and Building Real Institutional Change Act—known as the FABRIC Act—is the first federal fashion bill which aims to improve the labor rights of garment workers and encourage reshoring of the American garment manufacturing industry. More regulations on the fast fashion industry are also appearing at the state level. California recently passed a bill that requires hourly wages for garment workers. Under this new bill, workers would no longer be paid per garment, and manufacturers and brands would be penalized for illegal pay practices. 

Growing government regulations may be a response to the inability of fashion industries to self-regulate, despite their stated intentions. While in recent years, many fashion brands began sustainability marketing, much of the efforts remain acts of greenwashing that yield little concrete benefits to the environment or garment workers. The Netherlands’ Authority for Consumer Markets notably investigated H&M and Decathlon for greenwashing and misleading marketing claims. This is just one example, out of many, that led to the introduction of these new fast fashion regulations across America and the Western Europe which have begun to hold fashion brands legally accountable for their production and marketing not only domestically but also abroad in their offshoring factories. This series of new rules shifts the burden away from the so-called responsible and socially aware consumers and has begun to tackle fashion corporations.

In addition to its impact on fast fashion brands, new regulations will also affect the international supply chain of fast fashion. Specifically, as ESPR covers all clothes sold in the bloc which imports nearly three-quarters of its textiles, any fashion multinationals export to the EU would be impacted. We should expect the trickle-down effect of EU and American policies to hit fast fashion suppliers in developing nations. With the new regulations, one may envision a mutually beneficial scenario. Fast fashion brands may reshuffle their supply chains and possibly identify and transform local providers in Southeast Asia to comply with the EU standards. Economically resourceful fashion brands may in turn proactively provide infrastructure, training, and protection for offshore garment workers. 

Nonetheless, this possibly auspicious situation gives rise to many more concerns, among which who would bear the cost of more expensive products. It is predictable that sourcing sustainable and recyclable materials and ensuring workers’ rights would increase the cost of production. This rise in cost is at least a short-term problem before sufficient innovation can ensure cheaper and widely available recycling methods, thus creating a more efficient and closed ecosystem for clothing production. We are indeed hopeful that more and more startups have come up with solutions for effectively recycling clothes. France-based Carbios SA developed technology to recycle the polyester in clothes blended with synthetic and organic materials. It signed an agreement with sportswear brands earlier this year, including Puma SE and Patagonia. 

Holding fast fashion brands legally responsible for their impact on the environment and workers’ rights may also reshape the landscape of the fashion industry and induce interesting consumer behavior. The heightened labor and recycling standard in the new EU regulation would increase the retail prices of fast fashion items, at least in the short term. The single-fiber requirement would also pose challenges to many fast fashion designs, which rely heavily on mixed fiber fabrics. The major appeal of fast fashion—cheap pricing—would be mitigated. Consumers may gradually decide to purchase less or prioritize second-hand clothes shopping. It may also be likely that fast fashioning pricing would begin to approximate that of local and small business. As a result, consumers would place greater emphasis on the design, quality, or convenience of their purchases. Granted, fast fashion brands may have the upper hand in marketing and advertising. However, with lessened price competition, small and local businesses may finally have the ability to compete with fast fashion brands through the creation of a loyal consumer base.  

Masterpiece Misplaced: Uffizi’s lawsuit against Jean Paul Gaultier and the Legal Complexities of Art x Fashion Collaborations

The Uffizi Galleries in Florence, Italy, are suing French fashion label Jean Paul Gaultier for “unauthorized use” of imagery from The Birth of Venus, a 15th-century painting by the famous early renaissance artist Sandro Boticelli. “Le Musée,” the capsule collection at the center of the lawsuit, was intended to be Jean Paul Gaultier’s tribute to the art world. 

Art and fashion have always been intimately intertwined worlds of creative expression, one often borrowing inspiration and ideas from the other. The earliest known “collaboration” was between Spanish surrealist artist Salvador Dali and Italian couturier Elsa Schiaparelli. 

In 1938, Schiaparelli used a print specially designed by her friend Dali to produce the iconic. While the terms of this collaboration were mutually agreed upon, it would have been an unrealistic proposition if one of the parties had died many years before. This was the case for Yves Saint Laurent who, for his autumn-winter collection in 1965, launched the iconic “Mondrian” dress, for which he candidly and publicly drew inspiration from a painting by the then deceased Dutch painter and famous pioneer of modern art, Piet Mondrian. The modernist style of Saint Laurent’s dress revolutionized high fashion, with its short length, minimalistic silhouette, and unique pattern. It is unknown whether the designer asked Mondrian’s estate for permission, but if the dress was available today, authorized use would likely be immediately raised by Saint Laurent’s legal team. 

The lawyers at Jean Paul Gaultier’s atelier failed to consider the “authorized use” question before the very public and costly release of a full collection featuring Botticelli’s masterpiece, not only on items of clothing but also widely circulated publicity materials. The Uffizi claimed that it sent Jean Paul Gaultier a letter of formal notice in April requesting that the brand remove these items of clothing from the market, or respond with plans to make a commercial agreement that would “remedy the abuse committed.” The museum claims that it was forced to take legal action after the letter was ignored. The fashion house could argue that the Boticelli image was painted during the 1480s, which places it in the public domain, making it free from copyright protections. However, the Uffizi’s claim finds support in Italy’s Codice dei beni culturali e del paesaggio, the Italian Code of Cultural Heritage of 2004. The code, which is entirely independent of copyright law, intends to protect “objects with a ‘cultural interest,’” i.e., those with “artistic, historical, archaeological and ethno-anthropological interest.” The code takes precedence over copyright law and remains in force even when a painting with the vintage of Botticelli’s Birth of Venus has fallen into the public domain. 

Damages will be a contentious issue in future stages of this lawsuit. How much will Jean Paul Gaultier have to pay for the alleged unfair use and its lack of response to notice from Uffizi? According to Ella Schmidt, director of the Uffizi Galleries, fees can range anywhere between a few thousand to tens of thousands of euros, depending also on how many garments the image appears on. Gaultier’s use of the image on an entire collection of clothes might set the company back by more than €100,000. 

This lawsuit raises many interesting questions about the cost of “inspiration” in the fashion industry. It also highlights the increasingly strict policies museums and artists’ estates are adopting vis-a-vis licensing, fair use and compensation. A couple of years ago, the Wall Street Journal explored the ethics of fashion’s voracious, somewhat crass, and profit-driven attempts at (over)licensing famous works by deceased artists. This raises a policy question about what limits the law should set to balance the protection of cultural heritage and the rights of individuals and companies to profit from authorized works deriving from creative freedom and inspiration.

Art and fashion collaborations quickly achieve the status of high fashion from the day they drop and continue to enjoy their high worth as rare vintage items on resale websites throughout their lifetime. Takashi Murakami x Louis Vuitton, Coach x Jean-Michel Basquiat and Raf Simons x Robert Mapplethorpe are just some examples of successful ventures. Some fashion “collaborations,” however, have not gone down well in the public eye. Marc Jacobs, for example, was sued by Nirvana in 2019 for using images resembling the grunge band’s classic black-and-yellow iconography in its Redux Grunge collection. Roberto Cavalli faced similar allegations from street artists in San Francisco’s Mission District for using designs of their murals without permission. The latest to join the list of accused infringers is the Chinese clothing company Shein, which already suffers from a murky reputation and allegations of questionable ethical practices. British oil painter Vanessa Bowman accused the multi-billion dollar enterprise of unauthorized use of her images on their product, but thus far hesitates to get involved in time-intensive and expensive litigation. 

Allegations of infringement are not good for any fashion brand and a nuisance for artists. The increasing number of cases in this area indicates a mismatched sense of “fair use” on both sides and the need for frontloading collaborations with more robust transactional terms and safeguards.  Collaborations that achieve the highest levels of commercial success and cultural acceptance seem to be collaborations in the true sense: based on mutually agreed upon terms, clear communication about image use and predetermined models of profit-sharing. If the designer in question is knowingly using imagery from another artist’s work, the best recourse to avoid costly litigation and potential payment of damages would be to communicate with the artist themselves (or their estate, in case of a decedent), acquire relevant permissions and, ideally, draw up an arrangement for mutually benefitting from sales. 

Stakeholder Capitalism: Yvon Chouinard’s Bold Play

Patagonia Inc. founder and avid climber Yvon Chouinard’s autobiography, Let My People Go Surfing, provides important insights into his background and recent decision to sell his company. In 1970, he lamented the damage caused to his beloved Yosemite by fellow climbers hammering pitons into the rock. For Chouinard, this issue was personal because his company was selling the pitons. Unable to stomach the environmental degradation, he transitioned from selling invasive pitons to smaller chocks that did not require hammering. He advertised the use of these chocks as “clean climbing.” They became a smashing success.

By the 1990s, Chouinard was struggling to reconcile being “in business to save the world” with profiting off the resource-intensive clothing industry. A hired consultant challenged Chouinard’s commitment to philanthropy, “I think that’s bullshit…if you’re really serious about giving money away, you’d sell the company.” Chouinard balked at the idea. He worried that new management would do away with his initiatives to use costly organic cotton and donate one percent of yearly revenue to environmental causes. Chouinard continued his activism for decades, all the while worrying that “it wasn’t enough.” 

In 2022, Chouinard found a solution. He transferred Patagonia’s voting shares to the Patagonia Purpose Trust and its non-voting shares to a 501(c)(4) called the Holdfast Collective. The trust, which will hold two percent of Patagonia’s total shares, will have sole authority to appoint members of the board and structure the company charter. This will allow Chouinard to keep control in the hands of family and trusted advisers who will uphold the company’s mission statement: “We’re in business to save our home planet.” The Holdfast Collective will receive the company’s yearly profits as a dividend, all of which will go to environmental causes. Chouinard  structured the Holdfast Collective as a 501(c)(4) so it can make political contributions. Because of this choice, he received no tax benefits for giving away his multi-billion dollar company. More than fifty years after building a company on the ethos of clean climbing, some hope that Chouinard just laid the foundation for an era of clean capitalism. 

Chouinard’s innovation is one of the bolder examples of stakeholder capitalism. This idea that businesses should pursue goals other than profits for shareholders recently gained support from the Business Roundtable, a yearly gathering of prominent CEOs. For decades the meeting promulgated the idea that corporations exist to serve their shareholders. However, in 2019, the CEOs issued a statement that corporations must start placing the interests of the environment, workers, and communities on equal footing with the quarterly earnings report. 

Reasonable minds differ as to the viability of stakeholder capitalism. In 1970, Milton Friedman published an article decrying the intrusion of social responsibility into boardrooms. He believed a corporation’s only responsibility is to “increase its profits so long as it stays within the rules.”  Vivek Ramswany, a healthcare entrepreneur and prominent critic of stakeholder capitalism, echoes Friedman’s concerns. Ramswany further argues that corporations entering the political sphere will give corporate executives the power to decide our social values, eventually causing “rampant and…irresolvable cultural discord.”

For now, Patagonia is popular on both sides of the aisle, despite its long history of political activism. But, some evidence supports Ramswany’s fears. Ron DeSantis, the governor of Florida, has been vocal in his opposition to socially responsible companies. After Disney criticized a controversial Florida education bill, DeSantis pulled their tax exemptions and lambasted them in the press. Conservative state treasurers are also entering the fray. The treasurers of Arkansas and Louisiana pulled over half a billion dollars from BlackRock, an investment manager, due to the firm’s commitment to environmental causes. It remains to be seen if Patagonia’s restructuring will result in a similar backlash.

Friedman saw stakeholder capitalism as an effort by citizens to “obtain through undemocratic procedures what they cannot attain by democratic procedures.” He is right, but this is not the searing indictment he believes it to be. The filibuster effectively makes the United States the only member of the OECD (a club of advanced economies) that requires a supermajority to pass simple legislation. With the public sector perpetually gridlocked, it is unsurprising that citizens look to the private sector to combat the seemingly inexorable march of climate change. Chouinard’s restructuring of Patagonia constitutes a welcome act of unfathomable generosity and a noteworthy innovation in corporate governance. Patagonia’s ability to continue thriving under this new structure will be a bellwether for those who wish to change the nature of corporate boardrooms. Friedman and Ramswany may yet be right that the private sector is fundamentally unsuited to solve our social ills. But, when confronted with warming oceans and a limp legislature, what else was Chouniard to do?


Generation Z’s ‘Big Brother’ – TikTok’s Intrusive Data Collection Practices and Regulations

TikTok, arguably the most popular social media platform among gen-Z, has faced legal scrutiny over the past two years regarding its data policy and ties to China. The debate about cybersecurity is not an unfamiliar one, as it’s commonplace for social-media giants, such as Facebook and Twitter, to invasively collect and use personal information from its users for targeted content and ads. Similar to Facebook and Twitter, TikTok collects users’ data in a variety of ways — compiling information on user contact lists and calendars on their phones, gathering user’s search and view history, content of their messages, and geolocating devices on an hourly basis. What distinguishes TikTok from the other social-media platforms is not only its “more aggressive” and “intrusive” data collection practices, which are granted by the app permissions automatically, but also its close ties to the Chinese authorities.

While TikTok has consistently stated that the data it gathers from U.S. users are stored in the U.S., not China, leaked audio from more than 80 internal TikTok meetings revealed Chinese TikTok employees can access U.S. users’ data. Additionally, the Chinese government could potentially force ByteDance, TikTok’s Beijing-based parent company, to collect and turn over user data to the government. The Chinese government would use this data to build a “vast database of information that could be used for espionage,” by “identifying U.S. government employees who might be susceptible to blackmail.” As data security worries mount, the U.S. government has repeatedly questioned and imposed restrictions on TikTok, including an executive order to ban TikTok issued by Trump in September, 2020, and revoked by Biden in June, 2021.

In September, TikTok reached preliminary agreement with the U.S. government to resolve its national security concerns. TikTok and the Committee on Foreign Investment in the United States (CFIUS) crafted a deal to address national security concerns. They agreed upon three main changes TikTok must implement. First, TikTok will store all data collected in the U.S. solely on servers run by Oracle, a cloud platform headquartered in Texas, instead of on its own servers. Second, Oracle will monitor TikTok’s algorithms of content recommendations, in order to address concerns that the Chinese government could influence American public opinion via TikTok’s personal feed. And lastly, TikTok will set up a board of security experts responsible for reporting to the U.S. government and overseeing TikTok’s U.S. operations. This preliminary draft is being reviewed by U.S. national security officials, and many hurdles still remain. 

For one, big data and data privacy and security has been a focus of government regulation and enforcement for the past few years – many federal agencies, such as the Federal Trade Commission and Cybersecurity and Infrastructure Security Agency, are working on new rules, and “in 2021 alone, 36 states enacted new cybersecurity legislation.” Moreover, the government’s close scrutiny of TikTok’s data privacy policies are intertwined with the whims of the global political spectrum, “as TikTok has become a symbol of the Cold-War-like atmosphere in relations between Beijing and Washington.” In a sense, suspicion toward TikTok reflects a suspicion of China, and criticisms of TikTok are unlikely to cease even if an agreement is reached with the U.S. government. 

Furthermore, the three changes TikTok agreed to implement are unlikely to make any significant progress in clearing the legal cloud surrounding the potential national security threat of its data practices. First, even with data stored on American servers, the concerns about national security remain, because physical storage on U.S. soil does not preclude the Chinese government from  accessing user data. As the leaked recordings show, data freely flows between the U.S. and China through TikTok and ByteDance’s tools for data visualization, content moderation, and monetization, and more. Additionally, data stored on Oracle servers will only include data not publicly available on the app, meaning that public content will still likely be accessible to the Chinese government. TikTok must go further to address the national security concerns raised by the U.S. government, as its ties to China increase TikTok’s threat perception by the U.S. TikTok’s global reach and recognition will be hindered if the platform is banned in America.  


Sentenced to Life (Unemployed): Hiring the Formerly Incarcerated Amid Labor Shortage

An increasing number of businesses are adopting open hiring practices—often referred to as second-chance hiring—by eliminating previous restrictions placed on applicants with criminal records. In doing so, these companies have produced a two-fold economic and societal gain. That is, these amended hiring processes help alleviate the gaps of the current U.S. labor shortage, all while taking steps towards addressing the detrimental impacts of mass incarceration in the U.S. and the social and racial inequities that plague the criminal justice system.

This year, the labor shortage in the U.S. has reached unprecedented levels. The U.S. Bureau of Labor Statistics reported just over 10 million job openings at the end of August 2022. In an effort to fill these spaces in the workforce, employers have pursued multiple avenues of recruitment. For instance, in May 2022, 49% of businesses reported raising compensation for open positions. Others—both small businesses and larger companies—have shifted their hiring focus towards “different groups they hadn’t looked at before,” such as those without degrees, candidates with less relevant experience, and people with criminal records.

Previously incarcerated individuals have historically struggled to reenter the workforce upon release. This is exacerbated by the fact that a large majority of job applications require background checks. For many employers, notice of any sort of criminal record is enough to place an application in a separate pile and often in the trash. The Prison Policy Initiative reported that the unemployment rate for formerly incarcerated individuals in 2018 was over 27%, whereas the overall unemployment rate in the U.S. is only 3.5%. Almost half of formerly incarcerated people are unemployed one year after being released from prison.

Big companies like JP Morgan Chase and CVS Health have led the way in attacking the root of this issue by disposing of traditional hiring restrictions based on criminal history altogether. Jamie Dimon, chairman and chief executive of JP Morgan Chase, describes the unemployment rate amongst formerly incarcerated individuals as a “moral outrage.” His company’s hiring process is dedicated to targeting and overcoming barriers posed by occupational licensing rules and systemic racism in the U.S. criminal justice system. Last year alone, JP Morgan Chase hired 4,300 people with criminal records.

Similarly, CVS Health has made hiring efforts concentrated on mitigating the racial inequities produced by the criminal injustice system. In the U.S., people of color are disproportionately at risk of conviction, and are far more likely to receive longer and more severe sentences than their white counterparts. Amongst previously incarcerated individuals, Black women face the highest rates of unemployment estimated at 43.6%, followed by Black men at 35.2%. By comparison, previously incarcerated white women and men, experience lower unemployment rates of 23.2% and 18.4%, respectively. Women of color are disproportionately placed in part-time jobs as well. By focusing its hiring initiatives on communities of color, CVS has made real steps towards addressing these major gaps of inequality, and smaller businesses across the country have begun to follow suit.

Services like 70 Million Jobs and the Redemption Project help facilitate second-chance hiring on a wide scale. Genevieve Martin, executive director of Dave’s Killer Bread Foundation, advises companies on how to effectively execute this approach. She emphasizes that “Second-chance hiring is less likely to work if an organization is doing it for the wrong reasons… It’s not a program. It’s a business model.” In other words, the intention behind implementing second-chance hiring is vital to the model’s success. Thus, fostering a corporate culture with a commitment to hiring the best candidate requires upholding an emphasis on inclusion.

Several studies have established a high correlation between unemployment rates and recidivism. One study from the Indiana Department of Correction concluded that the recidivism rate among unemployed offenders was 42.4%. For employed offenders, these rates dropped to 26.2%. A representative from Progressive—another company expanding their hiring practices to formerly incarcerated applicants—raises, “If we can’t be part of the solution, providing people with opportunity, how can we be surprised when people repeat the same cycle?” Second-chance hiring is one of many examples of how placing a rehabilitative lens on criminal punishment can lead to tremendous and widespread societal benefits. There is no reason that even short criminal sentences should carry consequences for life.

This growing trend in open hiring initiatives has demonstrated substantial positive effects on both the U.S. economy and labor force. Nonetheless, there is more work to be done. In order to fully address the inequities that pervade the criminal justice system, it must be restructured at its foundation—beginning with extensive policy reform and systemic change. Administering restoration mechanisms, limiting public access to criminal records, implementing fair employment and licensing laws, and providing financial support upon release are just a few of the many proposed solutions at the forefront of this discussion.

The Knives Are Out for Startup Acquisitions: Predictions on the Adobe-Figma Deal

Big Tech has grown in size and scope over the past decade through acquisitions of hundreds of smaller players in the market. Emerging tech startups with innovative products and business models were attractive targets in the eyes of Big Tech and technology investors.

US antitrust regulators have historically paid less attention to these tech deals, but now regret the limited antitrust scrutiny. With Lina Khan’s appointment as chair of the FTC in June 2021, major tech company takeovers of small businesses, otherwise known as “killer acquisitions,”  face heightened antitrust review. This new combative approach was further signaled with the FTC’s unexpected move to block Meta’s purchase of a VR gaming startup; a move generating great concern among Big Tech gatekeepers. Meta’s antitrust challenge serves as a preview of future FTC efforts, and all eyes now turn to Adobe’s acquisition of Figma.

What happened in FTC v. Meta?

Within was founded in 2014 and focuses on fitness-related virtual reality apps. Within’s most renowned product Supernatural, is an app offering various workout choreographies in virtual locations such as the Galapagos Islands, China’s Great Wall and the surface of Mars. Meta designs and sells VR headsets, hardware and software including its famous rhythm game Beat Saber. Meta’s potential acquisition of Within put the company and Mark Zuckerberg on the FTC’s radar. On July 27, 2022, the FTC filed a complaint in California alleging the acquisition of Within would substantially lessen competition and create a monopoly in two different markets.

This deal concerned the FTC, especially to Lina Khan, for several reasons. In the VR fitness app market, the FTC considers Meta as a potential entrant, and claims the deal will prevent entrance to the market because of Within’s status as an established incumbent. According to the FTC, Meta reduces innovation by buying what is already on the market rather than developing its own VR fitness app. Yet, ironically, Meta describes the FTC’s intervention as an “attack on innovation” with no legal grounds but “[ideological] speculations . . . sending a chilling message to anyone who wishes to innovate in V.R.”

The FTC also seeks to preserve the existing competitive dynamics in the VR fitness app market with their acquisition challenge, as Meta’s Beat Saber and Within’s Supernatural are regarded as “close competitors.” A relationship known to increase innovation and customer choice. Coincidentally enough Meta – previously known as Facebook – announced this acquisition just one day after changing its name to Meta, which prompted the FTC to perceive Meta’s rebranding as efforts to become a monopoly in the metaverse.

Should tech startups be concerned?

Today, most startups desire acquisition by a large company, a concept often termed the “exit strategy.” According to a PitchBook report published in April 2022, the total exit values for VC-backed startups in the US were calculated as $265.8 billion in 2019, $324.8 billion in 2020, and $776.4 billion in 2021. This dataset exemplifies the value of mergers and acquisitions and the reasons many startups proceed with an exit strategy in mind.

In the past, the FTC had prevented deals involving acquisitions of dominant competitors in the relevant market, but this is changing. The FTC’s recent efforts to stop startup acquisitions indicate the agency plans to expand the scope of traditional antitrust applications. In other words, the scope of premerger review is expanding to cover startup acquisitions considered to be potential entrants/competitors. Some argue the increased scope of review may lead to a decrease in startup takeovers, as Big Tech may be reluctant to go through the cumbersome and lengthy process of antitrust review. Some critics further argue that the agency’s new approach will hurt future startups by restricting possible acquisitions and may “have the unintended effect of helping Big Tech by disincentivizing entrepreneurs from launching startups.”

Will the FTC kill Adobe’s $20 billion deal?

“Our goal is to be Figma not Adobe” – A tweet created by Figma’s CEO Dylan Field on January 29, 2021. On September 15, 2022, Adobe officially announced in a press release that it will acquire Figma at a massive price of $20 billion. If successful, this will be the biggest acquisition for a VC-backed, privately owned startup in the last 20 years, according to Bloomberg.

Considering Meta’s ongoing antitrust litigation, this deal is large enough to draw the FTC’s attention. In contrast to the Meta case, where Within was not seen as a major competitor to Meta, and yet the FTC still filed a lawsuit, here, the software giant Adobe and the collaborative design platform, Figma, are direct competitors in the design software market; meaning the deal is likely to be seen by the FTC as a “killer acquisition.” Escaping regulatory antitrust attention in the current FTC environment will not be easy for Adobe’s acquisition. If they do, it would likely serve as a shift in FTC’s antitrust enforcement efforts.

Does Russia’s War in Ukraine Mark a Shift in Corporate Policy?

With the recent sanctions imposed by the US and Europe Union, Russia is facing mounting economic pressure to stop its invasion into Ukraine. In order to comply with the sanctions as well as the requests of Ukrainian officials, Western companies ranging from energy to technology sectors have curtailed their operations in Russia.

However, many corporations have gone above and beyond what is needed to align with the sanctions by either withdrawing completely or providing additional support to Ukraine. For example, SpaceX has sent Starlink terminals to provide internet access to Ukraine in response to faltering Ukrainian communication and Airbnb is providing short-term housing for Ukrainian refugees.

It is rare to see a company to do more than the bare minimum in order to affect politics. One could optimistically argue that the companies have suddenly developed a moral compass, but the likely motivation for taking a stance in this geopolitical conflict is the fear of reputational damage to the companies’ brands. This is evident from WeWork, which previously announced that it would not remove business from Russia because its “assets were doing incredibly well” but now has divested its operations after criticism from consumers.

Thus, the Russia-Ukraine war begs the question: have corporations begun to shift their focus from just shareholder concerns to stakeholders more broadly or is this just a one-off?

There is an age-old debate regarding corporate objectives. On the one hand, shareholder primacy requires companies to care solely about shareholder interests – making profits. On the other hand, stakeholder primacy gives corporations the freedom to seriously consider the concerns of other stakeholders, like consumers and employees, which often run counter to shareholder interests. For example, higher wages for employees may decrease the amount of money payable to shareholders, but will benefit employee morale.

In this geopolitical conflict, consumers have demanded that companies with considerable  political power forego potential profits and do more than what is simply required by law. Many of these corporations are financial powerhouses as well as global enterprises. The vast amount of money that these corporations hold allows them to support important causes that need financial stimulation. Furthermore, globalization has led to the inherent involvement of companies in other countries and makes them inescapably influential in foreign politics. For example, although social media platforms like Meta Platforms and YouTube are American corporations, they connect people from all over the world and are therefore used by many consumers outside the US. Since there are many users in Russia, these companies play vital roles in this war by ensuring their platforms are not exploited by the Russian government to promote propaganda and false information.

Because of this potential to shape political landscapes, consumers have been rightly advocating for companies to use this power to take a stance in political conflicts, even to the detriment of shareholder profits. To a hopeful mind, this war could represent a turning point in corporate objectives, allowing for stakeholder voices to be heard in addition to shareholders, and treating corporate social responsibility more seriously in the future.

However, some express concern that the corporate actions in the Russia-Ukraine war might only be an exception to the norm for two reasons. First, while Russia’s actions have received almost unanimous outrage, other conflicts with similar human rights implications have received less international condemnation, whether it is due to racial bias, unequal media coverage, or other reasons that have resulted in less stakeholder pressure. Second, many technology companies do not have large operations in Russia, making the burden of losing profits in that region much less significant in comparison to the wrath of consumers.

08With the growing apprehension of a possible conflict between China and Taiwan, it will be interesting to see if companies will continue to value stakeholder concern and take similar measures in a situation where such actions could significantly impact corporate growth and profits.