February 22, 2019

It Started With a Jolt: How New York Became a Tech Town

After the financial crisis, graduates with computing skills shunned Wall Street for Silicon Valley. But that is no longer the case, as the finance industry is attracting young talent and seasoned technologists. Last year, for example, JPMorgan Chase lured Apoorv Saxena, a senior A.I. product manager at Google, to lead the bank’s A.I. product development, and Manuela Veloso from Carnegie Mellon University to head an A.I. research team.

For Ms. Samuel, 25, the job was appealing, but so was the locale. New York is where many of her friends have come to start their careers. And Ms. Samuel, who sang in a choir and an a cappella group in college, describes herself as a “big Broadway geek.”

For most recent graduates, the financial meltdown a decade ago is a distant memory. Today, it is not Wall Street but the big tech companies, like Facebook and Google, that are under fire. Their business models, based on gathering consumer data and targeted ads, have put them at the center of global concerns about privacy and false news.

That is a recruiting opportunity these days for R. Martin Chavez, a senior parter at Goldman Sachs, who is also a computer scientist with a Ph.D. from Stanford. At recruiting events, his pitch is to say Google and Facebook have done “amazing things” and quickly add: “If you want to work on advertising, that’s where you should go. If you want to use math and software to solve hard problems for governments, corporations and other institutions, you should come to Goldman Sachs.”

As the New York tech sector grows, policymakers and executives hope to broaden its reach beyond Manhattan and the affluent portions of Brooklyn. Fred Wilson, an investor and venture capitalist in New York for more than three decades, saw a warning sign in the protests in Long Island City, Queens, over the news that Amazon had planned to move in.

“That’s partly from a sense that it’s not going to help them, and only drive up their costs,” Mr. Wilson said of the community. “To really be a success in New York, the benefits of the tech sector have to extend to every borough and every neighborhood.”

Deborah Estrin was the first non-Cornell computer scientist to join the Cornell Tech faculty in 2012. Ms. Estrin was at the University of California, Los Angeles, and not looking to move. But she read the Cornell Tech proposal, and its emphasis on applied technology resonated.

Article source: https://www.nytimes.com/2019/02/22/technology/nyc-tech-startups.html?partner=rss&emc=rss

Labor’s Hard Choice in Amazon Age: Play Along or Get Tough

In some respects, these arguments go back decades. Thomas Kochan, a management professor at the Massachusetts Institute of Technology, noted that the United Automobile Workers and General Motors negotiated a new arrangement when the company set up its Saturn division in the mid-1980s. In exchange for a role in managerial duties, the union agreed to forgo many of the work rules typical in other plants, such as those governing which worker could do what job. The arrangement stoked tensions within the union and the company for years.

But in recent years the growing reach of tech conglomerates has created urgency within labor to court their workers, Mr. Kochan said.

Despite their minimal presence in these companies, unions have a variety of levers to pull. They can exert influence through politicians when public subsidies are involved, as in the Amazon case. And they can pressure regulators to scrutinize businesses that upend traditional industries, like transportation and hospitality.

Whether to use these levers to force concessions, or to take a less adversarial approach that would give labor a foothold in big tech, has divided the labor movement.

In 2016, Uber reached a five-year agreement with a regional branch of the International Association of Machinists and Aerospace Workers to create a drivers’ guild, which would advocate on behalf of drivers but not challenge their status as independent contractors. The Machinists would also have to refrain from turning the guild into a formal union during that time. In exchange, Uber agreed to provide the organization with funding and a way to communicate directly with drivers. The guild says a majority of its revenue comes from other sources.

A rival group representing professional drivers criticized the Machinists for creating a so-called company union — federal law prohibits unions that companies fund or control, though the law applies only to workers who are employees. Some union officials complained that the guild was anti-democratic, since drivers hadn’t elected Machinists officials to represent them.

But Sharon Block, a senior Labor Department official under President Barack Obama, argued that the deal was defensible. Ms. Block pointed out that the guild had taken something of a hybrid approach between cooperation and antagonism, lobbying for policies such as a minimum earnings standard for drivers and allowing passengers to tip, both of which have been enacted in New York.

Article source: https://www.nytimes.com/2019/02/22/business/economy/labor-unions-amazon.html?partner=rss&emc=rss

U.S. Wrangles China for Firm Commitments as Trade Talks Continue

The administration has been searching for concrete, commercially based criteria for performance outcomes — not just superficial legal changes that leave no impact on the ground. For example, even though China has changed laws to allow foreign companies greater access to its markets, a variety of regulatory barriers and licensing requirements continue to prevent foreign companies from operating freely, said Scott Kennedy, a China scholar at the Center for Strategic and International Studies.

“Even if they could agree to some sort of standards on structural reforms, having them come to agreement on what enforcement would look like, that’s even further of a stretch,” Mr. Kennedy said of the talks.

Both countries have also floated measures that could undermine years of efforts aimed at making China’s economy more market oriented. The offers include large state-directed purchases of technological goods, natural gas and soybeans, as well as closer management of China’s currency. Those measures would violate Chinese promises to the World Trade Organization and the International Monetary Fund.

But that may matter little to Mr. Trump, who has been largely focused on narrowing the trade gap between the two countries by getting China to buy more American products. The United States’ trade deficit with China is likely to increase in 2019, said Derek Scissors, a resident scholar at the American Enterprise Institute, increasing pressure on Mr. Trump to reach a deal that involves more American products flowing East.

“It’s coming from, how do we close the bilateral goods deficit really fast,” Mr. Scissors said. “We need large, quick purchases from the Chinese so the president isn’t ripped to pieces for violating the metric he ran on in 2016.”

China’s recent offers have included buying $200 billion of American semiconductors over the next six years, in addition to purchases of soybeans and natural gas. The eye-popping figure would help to reduce the $382 billion trade deficit in goods that the United States ran up with China last year, a metric that Mr. Trump often sees as evidence of a failed economic relationship.

In return for buying more American products, the Chinese have asked Mr. Trump not to follow through on his threat to increase tariffs to 25 percent from 10 percent — and to hopefully remove the tariffs entirely. They have also pushed the United States to remove restrictions on exports of high-tech products to China as well as constraints on Chinese investments in the United States.

Article source: https://www.nytimes.com/2019/02/21/business/economy/china-us-trade-talks.html?partner=rss&emc=rss

Corner Office: Delta C.E.O. Ed Bastian: ‘Leadership Is Not a Popularity Contest’

It was a business unit called syndication, where they would produce commercials, and in return take airtime as a barter arrangement. I had this sense that they weren’t realizing actual value in return, and it turned out that the revenues they were booking were totally fictitious. It was just kind of a bookkeeping exercise, and it turned out it was a fraud of $50 million.

Soon after that, you wound up managing a team. Was that difficult so early in your career?

When you’re young, you want to be friends with people. But leadership is not a popularity contest. It’s about making some tough decisions, trying to give counsel and trying to make the best decisions for your team.

What were you looking for when you went on to work for Frito-Lay?

As an accountant, you’re not making the decision — you’re not bringing business ideas and being accountable for the results. I wanted to own the result. I worked at Frito-Lay International, which was a conglomeration of all these snack companies around the world. Each had its own snacks, its own flavors and brands, and Frito was on an acquisition binge. We would acquire brands in the U.K. or in the Netherlands or in China or in Russia. We would get on the Frito-Lay plane on a Monday and visit three, four, five countries around the world, get back Friday evening in Dallas for the weekend, and the next Monday we’d hit another set of countries. I was on the road 90 percent of the time.

Did you have a family then?

I did. It was hard. That marriage wound up breaking up shortly after that period. It was difficult. But from a business standpoint, it was incredible.

How did you wind up at Delta?

A friend called me and said Delta had an opening as a corporate controller. I said, “I feel like I live on an airplane, so why not?” Then I got inside, and realized it’s a hell of a lot more complicated than you can appreciate.

And the airline industry had some dramatic highs and lows back then.

Yeah. 9/11 happened and changed all of our worlds. I was in Atlanta and watched the second plane hit on TV. Being in the airline business, your first thought is the safety of your crew and your team. There was immediately a worldwide ground stop on air travel, and we had to put all our planes down immediately.

In Atlanta, it was eerie. Our offices are right across from the airfield, and there was just the sound of silence for several days. It was like a pall that sat over the airport, the office, everything. We saw international business drop to almost nothing overnight. We had to let 15,000 people go in two weeks because we didn’t have any cash coming in. It took us 10 years as a company to recover from that.

Article source: https://www.nytimes.com/2019/02/21/business/dealbook/delta-ceo-ed-bastian-corner-office.html?partner=rss&emc=rss

Fed Explains Pause as Officials Debate Future Rate Increases

The Fed has slowly been winnowing that $4 trillion portfolio by allowing up to $50 billion in bonds to mature each month, but officials appeared to agree in January that the balance sheet runoff should end this year.

Officials agreed that “it would be desirable to announce before too long a plan to stop reducing the Federal Reserve’s asset holdings later this year” and said the announcement “would provide more certainty about the process for completing the normalization of the size of the Federal Reserve’s balance sheet.”

The minutes also highlighted just how hard it is for the Fed, which does not traffic in plain language, to always effectively communicate its plans. At the January meeting, Fed officials noted that investors were perceiving the central bank to be “insufficiently flexible” in both its rate increase campaign and its balance sheet runoff.

Fed officials tried to change those perceptions after both the December and January meetings. The Fed chairman, Jerome H. Powell, said in a news conference on Jan. 30 that officials had concluded that recent economic developments — including slowing global growth, turmoil in financial markets and uncertainty over trade negotiations — had pushed the central bank to “a patient, wait-and-see approach regarding future policy changes.”

“We are now facing a somewhat contradictory picture of generally strong U.S. macroeconomic performance, alongside growing evidence of crosscurrents,” Mr. Powell said. “At such times, common sense risk management suggests patiently awaiting greater clarity.”

Curt Long, the chief economist at the National Association of Federally-Insured Credit Unions, said the minutes revealing the shift to a more “patient” stance were “certainly a nod to jittery markets.”

Greg McBride, the chief financial analyst for Bankrate.com, was more blunt: “It’s evident the Fed was rattled by the markets and caved,” he wrote on Wednesday.

Article source: https://www.nytimes.com/2019/02/20/business/economy/fed-interest-rates-minutes.html?partner=rss&emc=rss

Democrats Want to Tax the Wealthy. Many Voters Agree.

The Times poll found strong support for a wealth tax akin to Ms. Warren’s plan. Sixty-one percent of Americans said they approved of imposing a 2 percent tax on the wealth of households with a net worth of more than $50 million. (Under Ms. Warren’s plan, the rate would rise to 3 percent on wealth over $1 billion, but the Times survey didn’t ask about that provision.) An earlier Morning Consult poll found similar results.

“We pay taxes on our property, why not on your wealth?” said Gary Montoya, a school safety officer in Panama City, Fla.

Mr. Montoya, 39, is a registered Republican and a supporter of Mr. Trump. But he said taxes on the rich must rise to reduce the federal budget deficit, among other priorities.

The idea of a wealth tax, however, is newly prominent in American politics, and it isn’t clear whether support will hold up. Republicans haven’t had time to attack the policy, as they have with the estate tax, and it would face legal challenges if enacted. Moreover, voters used to hearing about income-tax rates might not fully understand the idea of a wealth tax, said Vanessa Williamson, a political scientist at the Brookings Institution who has studied public opinion on taxation.

The wealth tax also raises practical challenges that could turn off some voters. Kris Stallard, a data analyst in Tulsa, Okla., says he wants to raise taxes on the rich, and has no problem with a wealth tax in principle. But he questions how it would work in practice.

“You might own houses, businesses, that sort of thing,” said Mr. Stallard, a Democrat. “Is the government going to take parts of businesses from people?”

Other Democrats are taking a more traditional approach to taxing the rich: raising income taxes on the highest earners. Ms. Ocasio-Cortez has proposed a marginal rate as high as 70 percent on annual income over $10 million. The top rate today is 37 percent, down from 39.6 percent before the Republican tax law that passed in late 2017.

Article source: https://www.nytimes.com/2019/02/19/business/economy/wealth-tax-elizabeth-warren.html?partner=rss&emc=rss

With Interest: The Week in Business: Amazon Breaks Up With New York, and Warren Buffett Takes Stock

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Do you have Presidents’ Day off? I hope so, and that you’re spending it someplace warm and dry, even if that’s just a nest of pillows your living room. The third week of February is the peak of winter drear, in my opinion, and we could all use a break from the gray skies and interminable drama in Washington. Whether you’re heading into a short workweek or not, here’s what to know when it starts, from the latest on President Trump and the wall to the market outlook from the billionaire investor Warren Buffett, and other business and tech news.

FEB. 10-16

So much for negotiating. Congress passed a spending bill to keep the government open before the deadline on Friday, but the legislation only includes $1.375 billion for 55 miles of steel-post fencing along the southern border. That’s a fraction of the $5.7 billion for more than 200 miles of steel or concrete barriers that President Trump has been demanding for months. Mr. Trump responded by declaring a national emergency to tap into billions of dollars originally earmarked for other government projects. Critics view this action as an attempt to save face on his wall promises. But the move also raises questions about his executive powers, and will most likely be challenged in the courts.

Alexa, we hardly knew thee. Amazon abruptly canceled its plan to build a sprawling corporate campus (also known as HQ2) in New York City, citing backlash from government leaders, unions and residents. Although the company promised to bring 25,000 new jobs to the area, that wasn’t enough to drown out critics who opposed the cushy tax breaks and other financial incentives that New York lawmakers used to lure the tech giant to Long Island City, Queens. “A number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward,’’ Amazon said in a statement on Thursday. It still plans to build another campus in Virginia.

Oh look, the dreaded tax forms in your mailbox: It’s that time again. To make this season even more painful, millions of Americans will get smaller tax refunds this year, or find that they owe money despite no changes in their salaries. Yes, the Trump administration’s tax overhaul was supposed to keep more money in your pocket, but the average refund for early filers was down 8.4 percent. What’s going on? For some taxpayers, it’s that certain deductions no longer apply. For others, it’s that less money was withheld from their pay last year. Either way, this isn’t what you want to hear from your accountant, and it could dampen consumer spending in the coming months.

Article source: https://www.nytimes.com/2019/02/16/business/the-week-in-business-amazon-warren-buffett.html?partner=rss&emc=rss

Watch Out. Tax Season Is Even More Stressful Than Usual.

CreditPablo Delcan Company + Saad Moosajee

Only a year after sweeping changes took place, proposals to revamp the tax code — yet again — are rampant. From the Democratic side come calls for a more progressive system, requiring wealthy people to pay more, reversing the rise in income inequality that has been underway. Republicans, on the other hand, want to make the current tax rates — which are set to expire at the end of 2025 — permanent. The division of power in place in Washington means that you shouldn’t count on big changes this year. But the heated debates in Congress and on the 2020 campaign trail will give clues about legislation to come.


CreditPablo Delcan Company + Saad Moosajee

Wealthy people are reaping the richest benefits from the changes in the tax code, and many of them are rejoicing, as you might expect. But an affluent few are raging against a so-called reform that has put more money — a lot more — in their pockets. They were already doing quite well, they say, and don’t need extra help from the tax system: Poorer people need the money more. Some millionaires and billionaires, however, resent this kind of talk. Friends of the wealthy tax critics call them “traitors to their class.”


CreditPablo Delcan Company + Saad Moosajee

The 2017 tax bill provides a 20 percent deduction for “qualified business income,” which is a great boon for those who can get it. But who, exactly, qualifies? The rules are arcane, and I.R.S. guidance has been changing. Health, law, financial services, entertainment and consulting businesses don’t qualify, for example, but architecture and engineering do. In some cases, eligibility hinges on small details. Read on for some pointers.


CreditPablo Delcan Company + Saad Moosajee

By enabling affluent investors to postpone paying the tax man, new opportunity zone funds are starting to attract substantial sums. The funds are a tax break that was included in the 2017 tax law as a way of drawing money into distressed communities.

The idea is that investors get tax breaks, while the neighborhoods get new businesses and upgraded apartment buildings, shops and the like. But the areas that have been designated as distressed are not always really needy. The vibrant Long Island City neighborhood where Amazon proposed placing its campus, a plan it has abandoned, was designated an opportunity zone, for example. And even when neighborhoods are truly distressed, providing tax breaks for the rich may be an awkward way of redeveloping them.


Article source: https://www.nytimes.com/2019/02/16/your-money/watch-out-tax-season-is-even-more-stressful-than-usual.html?partner=rss&emc=rss

Northern Virginia Is Keeping Amazon’s 25,000 Jobs, and Wants You to Know It

“Oh, yes, we are pleased,” she said. “It speaks to certainty that we know what we are doing and put a lot of planning and effort early on into it.”

From the beginning, Virginia officials said, their preparations differed sharply from those of other cities that applied to Amazon. Residents and others were generally welcoming, in contrast to the steady drumbeat of protests in New York.

For years, the region had planned and made improvements to roads, subways, trains and bike lanes to accommodate a major corporation like Amazon, Ms. Backmon said.

A bipartisan state board of legislative leaders that reviews major incentive deals had many hours of discussions on Amazon before an agreement was reached for the new campus, said Stephen Moret, who runs the Virginia Economic Development Partnership.

“The fact that that group exists and was so heavily engaged periodically throughout the 14 months was a major contributor for how well things have rolled out at the state level,” Mr. Moret said in a recent interview. He said Arlington and Alexandria officials had been briefed about Amazon in closed sessions multiple times as well.

Late last month, the Virginia legislature overwhelmingly passed a $750 million incentive package for Amazon, which the governor signed into law. It provides Amazon with $550 million in grants for the first 25,000 jobs it creates, and $200 million more for creating 12,850 additional jobs in subsequent years.

Officials in Nashville, which landed a smaller development project from Amazon, with about 5,000 jobs, also drew distinctions between their approach and New York’s. The city and Tennessee offered a combined $102 million in tax incentives, significantly less per job than New York’s multibillion-dollar promise. And Nashville’s offer didn’t come with some of the attention-grabbing perks that New York’s did.

Article source: https://www.nytimes.com/2019/02/15/technology/amazon-virginia-crystal-city.html?partner=rss&emc=rss

China and U.S. to Continue Trade Talks Next Week

In some cases, the purchase offers are being poorly received in the United States because they could distort existing supply chains. This week, China offered to ramp up purchases of American semiconductors, to the industry’s chagrin.

“The reported offer by China to vastly increase its purchases of U.S. semiconductors may look good at first glance, but it’s a mirage, aimed at shuffling U.S. supply chains and driving them deeper into China,” said John Nueffer, president of the Semiconductor Industry Association. “It would also represent a significant departure from the market-driven economics that have long defined our sector and the U.S. economy.”

He added: “We are confident U.S. government negotiators will see through this distraction.”

The Trump administration and the American business community have mostly been leery about an agreement that centers on purchases of goods but does not address long-term issues involving China’s government-backed drive for high-tech competitiveness. Some market-oriented economists in China have also advocated limits on the government’s industrial policies, because they worry about the ever-rising debt associated with them.

“If we don’t address the deeper issues, neither side will be doing itself any favors,” said Tim Stratford, who is the chairman of the American Chamber of Commerce in China and the managing partner of the Beijing office of the Covington and Burling law firm.

Mr. Trump and Mr. Xi agreed in Buenos Aires on Dec. 1 on a stopgap compromise that does not fully satisfy either side but might prove durable. Mr. Trump agreed not to raise tariffs further then but kept in place the tariffs he had already imposed, while China removed most of the retaliation that it had imposed.

That deal has not satisfied trade hawks in the United States, who want broader changes in the bilateral relationship, or the more nationalistic wing of the Chinese Communist Party, which perceived the deal as representing, to some extent, a Chinese retreat.

Article source: https://www.nytimes.com/2019/02/15/business/trump-china-us-trade.html?partner=rss&emc=rss