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    Meet NextEra, America’s most valuable energy firm

    TO MANY INVESTORS, backing an American oil company looks only slightly shrewder than stuffing cash in a blender. Facing covid-19 and old concerns over low returns, the industry is scrambling to boost efficiency. On October 19th ConocoPhillips said it would pay $9.7bn for Concho Resources, a Texan fracking firm. The next day two other frackers, Pioneer Natural Resources and Parsley Energy, announced a $4.5bn tie-up. Across the sector, oilmen are vowing to put profits before growth. How about a firm that offers both?
    As America’s oil industry flails, its most valuable utility, NextEra, has soared. It is already the world’s top generator of wind and solar electricity. When NextEra presented its latest quarterly results on October 21st, it said it now has about 15 gigawatts of renewable projects in its pipeline, larger than its entire existing renewables portfolio. Net profit jumped to $1.3bn, up by 13% year on year.

    Oil bosses have long dismissed utilities as solid but staid, less energy goliath than grandpa. “We have much higher expectations for the returns on the capital we invest,” Darren Woods, boss of ExxonMobil, proclaimed in 2018. Since then his oil major’s market capitalisation has sunk, by 60%. NextEra’s has soared past it to $147bn. It is now America’s most valuable energy company. And it is not slowing down.
    NextEra does not have the global reach of European utilities, with foreign outposts from the Amazon to South Africa. But under the leadership of Jim Robo, it has become a titan. It has two main businesses. Florida Power & Light, a utility that earns a regulated rate of return, serves more than 5m customers in the sunshine state. NextEra Energy Resources builds and operates energy projects—mostly wind farms, but also solar and nuclear, as well as gas pipelines and transmission lines. In 2020 neither business seems revolutionary. But NextEra set winning strategies early and pursued them well, argues Michael Weinstein of Credit Suisse, a bank.
    Florida Power & Light, for instance, was among the first to replace coal-fired power plants with gas, benefiting from cheap supply from America’s fracking boom. The company improved reliability by being an early adopter of machine learning, notes Vivek Wadhwa, who has advised the company and features NextEra in a new book on innovation. The utility is growing healthily—earnings jumped by 11% in the third quarter—and customers’ bills have remained relatively low.
    But it is large-scale renewables that are NextEra’s forte. It was quick to take advantage of generous tax credits to build wind farms across the Midwest. When Mr Robo became its president in 2006, it was already America’s top producer of wind power. And it bet that renewables would grow as costs fell while those of coal-fired power stayed flat. The unsubsidised cost of wind and solar farms (spread over their lifetime) has fallen by about 70% and 90%, respectively, since 2009. Green-minded voters have pushed things along. More than half of American states now mandate that a share of their electricity comes from renewables. The logic for replacing old coal plants with renewables that run on costless inputs—wind and sun—looks obvious.

    Investors agree. NextEra has outperformed not just other utilities and oil firms but the stockmarket as a whole. Total shareholder returns over the past three years have declined by 47% for an index of American energy companies, and 52% for ExxonMobil. NextEra’s have jumped by 112%, more than the broad S&P 500 index (see chart). Credit-rating agencies like the stability provided by Florida Power & Light. NextEra Energy Resources has used its expertise to make competitive bids for contracts, and its scale to lower costs, explains Stephen Byrd of Morgan Stanley, a bank. Sometimes NextEra sells assets to a company in which it has a stake and which uses power projects’ cashflows to pay reliable dividends.
    Other utilities have cottoned on. Mr Byrd points out that Xcel Energy, a midwestern utility that is one of NextEra’s biggest customers, is now building its own wind farms. But NextEra’s size and know-how give it an edge.
    It may grow further through acquisition. In 2019 it completed the purchase of Gulf Power, another Floridian utility. It is rumoured to be eyeing Duke, a regulated utility in North Carolina. “There is not a utility in the country that we couldn’t run more efficiently and better for customers,” Mr Robo declared in July.
    NextEra will also keep investing in generation and grids—this month it raised planned capital spending to $60bn between 2019 and 2022. In the second quarter capital expenditure exceeded that of all but nine American firms. In the energy industry only ExxonMobil spent more. Projects include big solar farms and underground power lines in Florida to make the grid more resilient to storms.

    NextEra has already bought or leased many of America’s most attractive remaining sites for wind and solar energy, says Mr Weinstein. As the grid becomes more reliant on intermittent renewables, demand will rise for batteries. With trademark foresight, NextEra is investing in those, too. ■
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    This article appeared in the Business section of the print edition under the headline “What next” More

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    Italy SpA offers an object lesson in corporate decline

    FEW WORKS of literature capture the challenges of managing decay better than “The Leopard”, Giuseppe Tomasi di Lampedusa’s masterpiece about Sicilian blue bloods struggling to adapt to the changes ushered in by Italian unification in the 1860s. Replace the “shabby minor gentry” with Silicon Valley parvenus and recently impoverished but now monied masses with emerging China, and the novel also serves as an apt metaphor for the decline of once-princely corporate Italy.
    “We had the richest and most perfect region of the world but we are old aristocrats who are losing our momentum,” sighs Marco Tronchetti Provera, boss of Pirelli, a 148-year-old tyremaker based in Milan. Many of his fellow chief executives echo di Lampedusa’s Don Fabrizio, who pined for the days when “We were the leopards, the lions.” Like the fictional patriarch, they see the world in upheaval but find themselves unable to do much about it.

    Ironically, when di Lampedusa’s novel was published in 1958 Italy was the opposite of decaying. Its GDP doubled between 1951 and 1963, and by 1973 added another two-thirds. Gianni Agnelli, Fiat’s dashing owner, hobnobbed with the Kennedys. The Red Brigades’ campaign of terror launched in 1970 shook business for over a decade but did not cripple it. Olivetti became the world’s second-biggest computer-maker, behind IBM. Montedison was its seventh-largest chemicals firm. Mediobanca rivalled Lehman Brothers and Lazard in merchant-banking prowess. Benetton brought colourful sweaters to the masses; Giorgio Armani, Gianni Versace and Dolce & Gabbana shoulder-padded Wall Street and Beverly Hills.

    These days Italy SpA is out of style. The country’s doldrums aren’t news; The Economist called it “the real sick man of Europe” 15 years ago. “It escapes no one, and certainly not business,” says Carlo Bonomi, head of Confindustria, Italy’s main business lobby. Even before covid-19, its economy was smaller than it had been before the financial crisis of 2007-09. Its stockmarket is worth under €500bn ($590bn). It accounts for 3.7% of the MSCI index of European stocks, down from 6.2% in 2000, according to Morgan Stanley, a bank (see chart). Only seven Italian firms feature among the world’s 1,000 biggest listed ones. The €77bn market capitalisation of the most valuable, Enel, an electric utility, is a rounding error relative to that of America’s trillion-dollar tech titans.
    Rather than confront these challenges, plenty of Italian tycoons have been flogging the family silver. Treasured Italian brands that have gone into foreign hands in the past decade include Bulgari, a jeweller (sold to LVMH, a French luxury group); Luxottica, which makes Ray-Ban shades (and merged with Essilor, a French spectacles firm) and Versace (bought by Michael Kors, an American fashion house). Since 2015 Pirelli’s biggest shareholder has been ChemChina, a state-owned giant. In 2018 Federico Marchetti sold Yoox Net-a-Porter, his online luxury startup and Italy’s rare tech success, to Richemont, a Swiss group.
    Others have been departing il bel paese. After merging with Chrysler in 2014 Fiat moved its headquarters to London and legal seat to the Netherlands; it is now combining with PSA Group, a French carmaker. (Exor, the Agnelli family’s Dutch-domiciled investment vehicle which owns 28.9% of Fiat-Chrysler’s shares, is also a shareholder in The Economist’s parent company.) Ferrero, the maker of Nutella, has decamped to Luxembourg. This year Campari, producer of the bitter apéritif owned by the Garavoglia clan, picked the Netherlands. It may be joined by Mediaset, Italy’s biggest private broadcaster controlled by Silvio Berlusconi, a scandal-prone former prime minister, which is seeking to move the headquarters of its holding company there. “I keep less than 5% of my total wealth in Italy. I am very careful with this country,” confessed Francesco Trapani, scion of the Bulgari dynasty, in 2018.
    Many other firms are shadows of their former selves. In 20 years the market value of Generali, an insurer, has more than halved, to €19bn. Telecom Italia’s has shrivelled by nearly 90%, to €7bn. Intesa Sanpaolo and UniCredit, two big banks, tried their hand at consolidation with ambitious deals in Europe, only to retrench.

    Three main reasons explain corporate Italy’s slide into irrelevance. They have to do with a self-reinforcing lack of financial, social and human capital.
    According to the OECD, a club of industrialised countries, 40% of Italian corporate assets are financed by short-term debt, more than among big European peers. Credit is granted on a basis of history, so new firms find it hard to raise money. Political risk—embodied by the rise to power in 2018 of the antibusiness Five Star Movement (M5S)—plays on the nerves. Reliance on banks means that when they get into trouble—as in the financial crisis and the ensuing euro crisis—all their corporate clients suffer, not just the delinquent ones.

    All this constrains investment and makes Italian companies more vulnerable to macroeconomic shocks—of which the covid-19 pandemic is the latest. Cerved, a ratings agency, reckons that even in the best case perhaps 7% of non-financial firms are at risk of default this year. In the worst case that could rise above 10%.
    Italy’s capital markets are shallow compared with the rest of Europe, let alone America. It has no venture-capital industry to speak of. Business elites grumble about Italians’ aversion to investing in their own stockmarket, despite being among the world’s most prodigious savers. Domenico Siniscalco, a former finance minister, likens it to “an oil producing country without an oil industry”. Investors are wary of putting money into listed firms controlled by founding families or the state, which dominate Italy’s shareholder registers—and which prevent their companies from raising new shares, fearing dilution.
    Confidence in big business is further eroded by a constant gusher of scandals. Every few months a business bigwig gets into hot water. In July prosecutors requested an eight-year prison sentence for the boss of Eni, an oil major, for allegedly bribing Nigerian officials to secure an oil block. He and the company deny wrongdoing.
    Roman tragedy
    Disenchantment with corporate Italy sows more mistrust, depleting its already thin social capital. A recent report found that nine in ten Italians want caps on executive pay, the highest share among seven Western countries. That would add to already baroque red tape that is a barrier for upstart firms. Italy ranks 58th out of 190 countries in the World Bank’s “Doing Business” survey. It comes a dismal 97th on securing building permits, 98th for starting new businesses, 122nd at enforcing contracts and 128th on tax rules.

    Rather than improving the physical and legal infrastructure that would help all firms, government money goes to bailing out perennial failures. This year the state once again rescued Alitalia, the endlessly loss-making flag-carrier. Italy has no equivalent of the Fraunhofer institutes that help Germany’s medium-sized firms stay at the cutting edge of their fields, observes Fabrizio Barca, an economist and former development minister. “If we had the infrastructure of the Germans we would be six or seven times more competitive,” says Marco Giovannini, boss of Guala Closures, a global leader in the niche market for bottle tops. “We have to compete against inefficiency.” In 2017 he opened Guala’s main research centre not in its Piedmont home but in Luxembourg.
    Di Lampedusa’s characters might recognise the third shortage—of human capital—as the flipside of pride. In the post-war era, when it fuelled founders’ devotion to their creations, this was a virtue (as to some extent it is today in Silicon Valley). Now it looks like obstinacy. Bankers talk of multiple failed attempts to persuade Mr Armani to build a bigger group in the mould of LVMH. During Italy’s lockdown a photo of him dressing the windows of his Milan store added to the myth of Italian creative genius. LVMH’s billionaire owner, Bernard Arnault, gets others to do that menial task, so he can focus on business.
    In 2017 Guido Corbetta of Bocconi University estimated that half of first-generation Italian firms have an owner-boss who is over 60, and a quarter have one who is at least 70. Italian boardrooms’ denizens seem almost as ancient as the Renaissance art adorning their walls. Italy’s most prominent businessmen—they are almost exclusively male—are octogenarians: Mr Berlusconi (84), Leonardo Del Vecchio of Luxottica (85), Luciano Benetton, the clothing clan’s patriarch (85), Mr Armani (86).
    No wonder Italians feel the system is rigged in favour of a few ageing billionaires and plump for populists like the M5S. Talented youngsters shy away from a career in the unloved business world. “There is now little opportunity anywhere in Italy, even for the wealthy and well-connected,” says Andrea Alemanno of Ipsos, a research firm.

    Despite this self-perpetuating cycle, examples of Italy’s post-war industrial vigour persist. Enel is a world leader in clean energy. In certain areas “pocket multinationals”, as Vittorio Merloni, an entrepreneur, dubbed them in the 1990s, churn out wares admired the world over: Lavazza and Illy (coffee), Moncler and Ermenegildo Zegna (fashion), IMA and Marchesini (packaging), or Technogym (fitness kit)
    And Italy remains a country of enterprise. The OECD reckons nearly a quarter of Italian firms are high-growth, more than in most big European countries. Johann Rupert, the South African financier behind Richemont, has mused that Italy’s craftsmen might benefit from a failure to adapt to globalisation as the world comes to prize their old-fashioned skills. Pirelli’s Mr Tronchetti Provera praises the deal with ChemChina, which let the tyremaker’s headquarters and technology stay in Milan, as “an opportunity to further strengthen our position in China without giving up Italian roots”. Some see Italy’s less hard-edged capitalists as an antidote to Wall Street; last year Jeff Bezos made a pilgrimage to Brunello Cucinelli, founder of a posh-sweater company who advocates a humanistic capitalism.
    In 2011, shortly before he became governor of the European Central Bank, Mario Draghi warned fellow Italians that Venice in the 17th century and Amsterdam in the 18th century planted the seeds of their collapse by putting elite privilege ahead of innovation. Corporate Italy can hang on to what is left of its sheen. But, as Don Fabrizio’s thrusting nephew, Tancredi, told his uncle, “If we want things to stay as they are, things will have to change.”■
    This article appeared in the Business section of the print edition under the headline “How the leopard lost its spots” More

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    Who owns the web’s data?

    SIR TIM BERNERS-LEE had a Romantic vision when he created the World Wide Web in 1989. In his words, he helped “weave” it together as a way of connecting anything to anything—as if he were sitting at a loom, not at CERN, a particle-physics laboratory in Geneva. But those were halcyon days. Now the web risks falling into what he has called a dystopia of prejudice, hate and disinformation. People around him talk of “digital feudalism” to describe the control big technology platforms have over data. As a result, Sir Tim has co-founded a startup, Inrupt, that aims to shift the balance of power. It is one of many incipient efforts aimed at putting data back into the hands of the people.
    It sounds quixotic. The use of data, after all, is now the world’s biggest business. Some $1.4trn of the combined $1.9trn market value of Alphabet (the owner of Google) and Facebook, comes from users’ data and the firms’ mining of it, after stripping out the value of their cash, physical and intangible assets, and accumulated research and development. They are not sated yet. Around the world, sensors on everything from cars to kitchens are expected to churn out exponentially more personal information as the “Internet of Things” expands. The tech giants have their beady eyes on it.

    Their relentless appetite for data is a mounting concern for policymakers in two ways. The first is political. The platforms’ business models depend on network effects and scale to keep users engaged and to sell more advertising. The result is a culture of virality that, while entertaining, poisons public discourse and disquiets governments. The second is economic. The bigger the tech firms are, the harder it is for potential rivals to overcome their data advantage, which suppresses innovation. Viktor Mayer-Schönberger of Oxford University notes that access to capital is no longer the biggest problem for startups. It is access to data.
    So trustbusters are on the warpath. The Department of Justice lawsuit in America against Google, filed on October 20th, accuses the company of using contracts with device-makers, such as Apple, to block other search engines. Google denies this, saying people use its services because they choose to, not because they have to. Whatever the merits of the case, for some the only remedy is to break up the tech giants. That is simplistic. The problems will not be solved just by cutting big tech down to size. Any solution must make data more evenly accessible so that potential rivals can grow.
    This can be done in several ways. One is to empower individuals. Another is to consider collective action. A third is to rely on governments. All three will need to reinforce each other to have a chance of success.
    Start with the individual. It is seductive to argue that each person should have ownership rights over their data. Yet unless laws change radically, in practice it is hard to wrest control back from the tech platforms, because an individual’s bargaining power is woefully weak. Fortunately, other options are surfacing.

    One is a subscription model, along the lines of Netflix or Spotify. MeWe, an “anti-Facebook” social network (with Sir Tim on its board), spares its users bombardments of advertisements and targeted news, and charges fees instead. Another option is to start gathering data on behalf of the individual from all sorts of sources. Inrupt, for instance, is working with the government of Flanders, a region of Belgium, to give every citizen a “pod” to store personal data. It hopes private firms will build user-friendly apps around the data, with people’s consent, says John Bruce, its co-founder. The better the apps, the more eager people will be to furnish it with their data. In India something similar is happening in financial services. Individuals’ and firms’ financial data can be transferred to financial-services firms via “account aggregators” that obtain the owners’ consent. This can help speed up credit-scoring and loan underwriting. It could also be an alternative to huge data guzzlers such as Ant Financial, a Chinese fintech firm.
    A second way to strengthen the power of those who provide data is by collective action—particularly important when so much value on the web comes not from individuals’ data but from their interactions with others. Glen Weyl, an economist at Microsoft, a software colossus, proposes “unions” that bargain on behalf of groups of people for a share of the income generated from the use of their data. The aim, says Mr Weyl, is not to destroy the platforms, just as labour unions do not want to shut down factories. Andrew Yang, a former American presidential hopeful, has proposed a “digital dividend” to individuals via collective bargaining.
    These efforts, however valiant, are in their infancy. They may not amount to anything unless governments, too, weigh in—as they have done with the European Union’s General Data Protection Regulation, and the California Consumer Privacy Act. Though the chief aim of both is privacy, they have dramatically bolstered individuals’ rights over their own data. The European Commission, the EU’s executive arm, long more interventionist than America on tech regulation, plans to go a step further, proposing a Data Act in 2021 that will seek to wrench open the bloc’s public and private data vaults. As with the American government, the EU continues to threaten the cudgel of antitrust law against the tech giants.
    Silicon Valley says it has got the message. This year Facebook offered to pay users for recordings of their own voice, to improve speech recognition. The tech firms are making it easier for users to shift photo files to other platforms. But they are token moves. Switching platforms remains fiendishly hard. Scale and virality are so vital to their business models that they lobby fiercely against regulation. They reassure themselves that most consumers continue to support the exchange of data for free stuff. Yet they must be aware that access to data is becoming one of the philosophical issues of the age. Feudalism eventually gave way to greater property rights. One day data serfdom will go the same way, too.■
    This article appeared in the Business section of the print edition under the headline “Free the data serfs!” More

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    American trustbusters take on Google

    IT WAS A long time coming. On October 20th the Department of Justice (DoJ) at last launched a federal antitrust lawsuit against Google. It is the first time American trustbusters have gone after big tech since their protracted battle against Microsoft 20 years ago. Eleven states signed on to the suit, in which the DoJ accuses the technology giant of abusing its online-search monopoly. Others are likely to bring their own cases against the firm. William Barr, the attorney-general, called it “monumental”. He is both right and wrong.
    Google and its parent company, Alphabet, are not the only ones to come under pressure. Amazon, Facebook and Apple (though not Microsoft, which has trodden carefully since its antitrust run-in) have been variously lambasted for enabling election manipulation, violating privacy and abusing their digital monopolies.

    In that grand scheme of things, the Google case can seem piffling. It carves out only some alleged misdeeds in one part of the business of a single firm. Specifically, the DoJ’s lawyers accuse Google of an illegal monopoly in “general search services, search advertising, and general search text advertising”. They say that to retard rivals like Microsoft’s Bing search engine, Google uses a web of “exclusionary” contracts with smartphone-makers which, they claim, cover 80% of American search queries on mobile devices. They say Google pays Apple over $8bn a year in advertising revenue to ensure its search engine is the default on Apple devices, and has similar deals with manufacturers using its Android operating system. Google denies wrongdoing.
    [embedded content]
    The sums involved are large but the charges are narrow, argues Mark Shmulik of Bernstein, a research firm. They cover only text search, not images or video. Fiona Scott Morton of Yale University, an antitrust expert critical of Google (and an adviser to Apple), notes that the suit does not tackle allegations that Google abuses its market power in digital advertising or the claims that it handicaps potential rivals in specialised searches such as travel.
    The DoJ’s narrow focus may be shrewd. It is harder to prove Google has cornered digital advertising more broadly: it has less than a third of that market, and Facebook on its heels with a quarter. In product-specific search Google has been eclipsed by Amazon. An antitrust expert who supports Google acknowledges that the complaint is “well-crafted” and “is going to have legs”.

    If so, it has a lot of walking to do—and could end in an unremarkable settlement, with Google making token changes to its behaviour and paying a fine that looks hefty until you consider its annual net profit of $34bn. By then, technology may have evolved to make the suit appear less relevant, as happened with Microsoft.
    Nonetheless, the DoJ’s move does carry a whiff of grandness. It could rejuvenate America’s antitrust apparatus, decrepit after two decades of relaxed enforcement that has let many industries grow concentrated. It may prompt monopolists to curb bad behaviour, unleashing long-suppressed creative destruction. As Mr Barr put it, “If we let Google continue its anticompetitive ways…Americans may never get to benefit from the ‘next Google’.”■
    This article appeared in the Business section of the print edition under the headline “Search query” More

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    Should big tech save newspapers?

    IN THE EARLY 17th century the best place to gather news in London was the old cathedral of St Paul’s, a place that buzzed with gossip on politics and was described—unusually for a house of worship—as “the ear’s brothel”. Some of the informants were entrepreneurs; they had recently started writing “letters of news” which they sold to subscribers at a hefty price. Some 400 years later, the original newspaper business model is finally making a comeback.
    The reason it has taken so long to resurface is that, for almost two centuries, newspapers have been on a journey into the mass market which gave them scale, prestige and profit but which has now reached its end. They mostly abandoned dependence on subscriptions and instead sold below what they cost to produce as a way to attract legions of readers to sell to advertisers. The aphorism today applied to users of technology platforms—“If you are not paying, you are the product”—rang almost as true of newspaper readers in the heyday of print advertising.

    No longer. Since the internet took off, the print media’s advertising-supported business model has floundered. In the past 20 years newspapers’ ad revenues in America have fallen by about 80% (to Depression-era levels), while circulation has roughly fallen by half. Though online traffic has surged, revenue from digital advertising has failed to offset the profit draining out of print. Platforms such as Google and Facebook have become the new moguls of the media landscape. In Britain, for instance, Google accounts for more than 90% of search-advertising revenues and Facebook for half the value of all display ads, says the Competition and Markets Authority (CMA), a regulator. In the past two years they have between them disgorged 40% of online traffic going to national papers. The CMA warned in July that ad-fuelled online platforms could hasten the decline of reliable news media.
    This power shift has led newspapers in many countries to plead with politicians that they need help in the face of big tech. Partly because they have, by their very nature, a loud voice, they have generated sympathy. How much they deserve it is another matter.
    The world is strewn with businesses, from books and music to travel and taxis, that have been torn apart by the digital revolution without anyone rushing to the rescue. Why are newspapers different? One argument is that a thriving press supports grass-roots journalism which, though often loss-making, supports democracy. That is reasonable. Yet it is muddled up with other motivations, such as the desire to throttle the tech giants. The result is an array of government interventions in recent months aimed at putting the squeeze on Google and Facebook. In Australia and France trustbusters are striving to force the duo to pay for news they link to on their platforms. In America a congressional subcommittee this month recommended a “safe harbour” for newspapers to negotiate collectively with online platforms.
    Mindful of the hue and cry, Google is offering a handout. This month it pledged $1bn over three years to newspapers to curate news content for its site. Some publishers saw it as a precedent—and a tacit admission that Google should pay for news. Even News Corp, a media behemoth controlled by Rupert Murdoch, which has led the crusade against the tech giants, welcomed the move. Last year Facebook agreed to pay News Corp a licensing fee for displaying some articles in its news tab.

    If anything, the gratitude for big tech’s largesse shows how desperate newspapers are for payment of any kind. Yet set against revenues of $162bn last year at Google’s parent, Alphabet, $1bn is a pittance. More to the point, it will not change the underlying economics of the global newspaper industry, which had about $140bn of revenues last year. That is because the ad-funded business model was living on fumes even before the internet ate the world this century. Data from Benedict Evans, who writes a technology newsletter, show that newspapers in America have been losing share of ad dollars to TV since the 1950s—long before the web. Circulation has also fallen relative to population, suggesting that profits were bolstered by economic and demographic growth, not because the industry was producing a more popular product.
    Claims that the tech giants are plundering newspapers for profit sound far-fetched, too. The real failure is that papers have lost control of distribution to Google and Facebook, making it harder to monetise the traffic. This is a mistake some content industries, such as video-streaming and music, have avoided. Moreover, some of the advertising dollars made by big tech came from bringing new firms, particularly microbusinesses, into the market, rather than poaching online advertisers from newspapers.
    The (slightly) better news
    So ignore the moaning of old-media moguls in distress and look instead at how some newspapers have already adapted to the digital onslaught. Revenues at the New York Times, for instance, are still far short of their ad-funded halcyon days. Yet the number of subscriptions exceeded 6.5m this year, a number that should give the paper enough clout to bypass the tech giants. Tabloids find it harder to turn readers into subscribers, especially with so much clickbait around. But some digital publications with a newsworthy focus such as Axios, which produces sponsored newsletters, are thriving. Axios even plans to enter local markets, where newspapers are in particular trouble.
    The question of who pays for public-interest journalism remains unanswered. But few think it ought to be Google and Facebook. That would “undermine the principles of an independent press”, says Alice Pickthall of Enders Analysis, a research company. Curbing the power of big tech is a matter for the world’s trustbusters, which must not be conflated with bailing out press barons. The survival of newspapers should depend on business, not regulation. Like the gossip merchants of St Paul’s, they need to produce a product that readers are happy to pay a fair price for. ■
    This article appeared in the Business section of the print edition under the headline “Bad news” More

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    Why Chinese firms still flock to American stock exchanges

    CHINESE FIRMS get a frosty reception in America these days. President Donald Trump is a relentless China-basher. His administration has tried to crush Huawei, a telecoms giant, ban TikTok and WeChat, two popular Chinese-owned apps, and expel Chinese companies listed on American stock exchanges. No wonder that some have steered clear of late. Ant Group, a fintech star that may once have followed Alibaba, the tech titan with which it is affiliated, onto the New York Stock Exchange (NYSE), is about to float in Hong Kong and Shanghai instead. Last month Sina, the Nasdaq-listed owner of Weibo, China’s answer to Twitter, said it would go private in a $2.6bn deal. A day later Tencent, another Chinese online colossus, said it would buy out Sogou, a NYSE-traded search company, for $3.5bn.
    Many Chinese firms that might once have flocked to New York are eyeing their home stockmarkets. According to consultants at Deloitte, from January to September new listings in Hong Kong raised some $28bn, two-thirds more than in the same period last year. The money raised by newcomers to the biggest mainland exchanges, in Shanghai and Shenzhen, has reached 355bn yuan ($53bn), 2.5 times the comparable figure in 2019.

    Look closer, though, and plenty of Chinese startups continue to covet American listings. In August KE Holdings, an online property firm backed by Japan’s SoftBank Group, raised $2.1bn; XPeng, an electric-car maker, picked up $1.5bn. Lufax, a fintech firm which this month filed to go public on the NYSE, may raise $3bn. All told, Chinese firms have raised nearly $9bn in American initial public offerings (IPOs) since January, and another $8bn in secondary share sales. Goldman Sachs, an investment bank, reckons that the money raised from Chinese IPOs on the NYSE and Nasdaq has held up during Mr Trump’s presidency (see chart). The market value of Chinese listings in America now exceeds $1.6trn, of which American investors hold nearly a third. Goldman Sachs forecasts a record number of Chinese listings in New York this year.

    Why would Chinese companies flock to America given the apparently toxic environment? For one thing, as Adam Lysenko of Rhodium Group, a research firm, points out, it is often easier to list on American exchanges than in China, with its more restrictive regulatory regime. Ant’s blockbuster stockmarket debut hit a last-minute snag this week when China’s top securities regulator unexpectedly delayed approval for the Hong Kong leg of its dual listing.
    An overseas listing also allows mainland companies to get round China’s strict currency controls. Gary Rieschel of Qiming Ventures, a venture-capital firm, says that going public in New York, the world’s pre-eminent financial centre, makes sense for Chinese firms like Lufax keen on global expansion. For rising technology startups in particular Wall Street also represents an imprimatur from the world’s most sophisticated investors, and access to its deepest and most liquid capital markets.
    Shareholders, for their part, get a slice of its perkiest stocks. Total returns for an index of Chinese firms listed in America tracked by BNY Mellon, a bank, have risen by nearly half in the past 12 months, twice the rate for the S&P 500 index of big American firms. Mr Lysenko calculates that from 2017 to 2019 Chinese firms listed on American exchanges traded at higher valuations relative to earnings than companies in the S&P 500, on the Nasdaq, or indeed those whose shares changed hands on the Shenzhen and Hong Kong stockmarkets. These “red” stocks are simply too tasty for American investors, red as they already are in tooth and claw, to forgo. ■

    This article appeared in the Business section of the print edition under the headline “Red capitalism” More

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    Convenience stores may benefit from covid-19—if they adapt

    CORNER SHOPS are within walking distance of many homes, open long hours and small enough not to require customers to linger too long inside. They no longer sell just basic necessities, such as milk, beer and sweets. And they offer other services, from charging e-bikes in South Korea to paying for online shopping in Mexico. On paper, this makes them perfectly suited to the pandemic. And in practice?
    Going into covid-19, convenience stores were a mixed bag. Some benefited as busier lifestyles, smaller households and ageing populations led more people to shop little, often and locally. They were the only brick-and-mortar shops in South Korea whose sales grew in 2019. OXXO, a Mexican chain with some 20,000 outlets across Latin America, reported sales of $8.7bn in 2019, up by 10% on the year before. Minimarts, which mostly operate as franchises, have been opening in China, India and Thailand.

    Elsewhere they have struggled. In Japan, home to the world’s three biggest chains, they have been in outright decline. The share price of Seven & i Holdings, the giant which owns 7-Eleven and accounts for a third of the industry’s $360bn in global revenues, has dropped by around 30% over the past two years, as investors cooled on its saturated domestic market. Its two Japanese rivals, FamilyMart and Lawson, have been laggards, too (see chart). In many countries supermarkets have been muscling in on their traditional high-street turf. In September Asda, a British supermarket, launched Asda on the Move, joining Tesco Express and Sainsbury’s Local.

    Despite the potential pandemic boost, performance this year has been similarly patchy. The average value per convenience-store transaction in China increased by 120% at the height of the pandemic, and stayed high. In Britain the Co-operative Group declared that sales rose by 8% in the first half, year on year, to £5.8bn ($7.6bn), thanks to its Co-op and Nisa minimarts. At the same time Seven & i reported a 12% drop in operating profits in the three months to August. FamilyMart lost money in the third quarter. OXXO’s parent company, FEMSA, is also in the red this year.
    Although some pandemic shopping habits favour convenience stores, others do not. Rivals are offering the same goods for less and brought to your doorstep, often in an hour or two. Deliveroo, a British food-delivery app (part-owned by Amazon), ferries booze from supermarkets. In August DoorDash, an American one that teamed up with 7-Eleven in the pandemic’s early days, launched its own virtual DashMart.
    To fend off rivals, stores must evolve with shoppers’ changing ideas of convenience, says Amanda Bourlier of Euromonitor International, a research firm. One American chain, Wawa, has opened drive-through stores. Another, Casey’s, has reported a surge in digital sales. Stores in South Korea and Japan, which face labour shortages, are toying with automated payments. In America 7-Eleven now delivers online orders to homes, as well as public places like parks. But its parent has also bought Speedway, a chain of American petrol stations, for $21bn. That adds 3,900 outlets to the 9,000-odd 7-Elevens in America (and 70,000 or so globally). It is a big bet that petrol cars aren’t soon disappearing—and nor are convenience stores.■
    Editor’s note: Some of our covid-19 coverage is free for readers of The Economist Today, our daily newsletter. For more stories and our pandemic tracker, see our hub

    This article appeared in the Business section of the print edition under the headline “Turning a corner” More

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    Countering the tyranny of the clock

    TWO HUNDRED years ago, a device began to dominate the world of work. No, not the steam engine—the gadget was the clock. With the arrival of the factory, people were paid on the basis of how many hours they worked, rather than their material output.
    In the “putting out” system that prevailed before the factory era, merchants would deliver cloth to be woven, spun, stitched or cut to a worker’s home. Each worker would then be paid for the items they produced. That gave the weavers and spinners freedom to work when it was convenient. At the factory, in contrast, workers were required by the owner to turn up for a set shift.

    The tyranny of time was marked by a number of innovations. As few workers owned watches or clocks in the 19th century, people known as “knocker-uppers” would roam the streets rapping on doors and windows to wake workers at the right time. Later, factories would use hooters and whistles to signal the start and end of shifts, and employees would punch in and out using a time clock. Eventually, as workers moved farther away from their place of employment, the power of the clock led to daily rush hours, as millions headed to and from work. Often they paid a penalty in terms of time wasted in traffic jams or awaiting delayed trains.
    The clock’s authoritarian rule may at last be weakening. Flexible working existed well before the pandemic. But it only offered employees the ability to choose when in the day they worked their allotted hours. Remote working has brought a greater degree of freedom. A survey of 4,700 home-workers across six countries commissioned by Slack, a corporate-messaging firm, found that flexible working was viewed very positively, improving both people’s work-life balance and productivity. Flexible workers even scored more highly on a sense of “belonging” to their organisation than those on a nine-to-five schedule.
    It is hardly surprising that workers prefer flexibility. Working a rigid eight-hour schedule is incredibly restricting. Those are also the hours when most shops are open, when doctors and dentists will take appointments, and when repairmen are willing to visit. Parents on a conventional routine may be able to take their children to school in the morning but are unlikely to be able to pick them up in the afternoon. Many families find themselves constantly juggling schedules and giving up precious holiday time to deal with domestic emergencies.
    On reflection, it is also not too shocking that home-workers feel they are more productive. After all, few people have the ability to concentrate solidly for eight hours at a stretch. There are points in the day where people are tempted to stare out of the window or go for a walk; these may be moments when they find inspiration or recharge themselves for the next task. When they do this in an office, they risk the boss’s disapproval; at home, they can work when they are most motivated.

    Remote working is not possible for everyone, of course. There is a long list of industries, from emergency services to hospitality and retail, where people need to turn up to their place of work. But for many office workers, remote working is perfectly sensible. They may maintain some fixed points in the week (staff meetings, for example) but perform many of their tasks at any time of the day—or night. Office workers can now be paid for the tasks they complete rather than the time they spend (which firms would have to monitor by spying on people at home).
    What is striking about Slack’s study is the widespread nature of support for home-working. Overall, just 12% of the workers surveyed wanted to return to a normal office schedule. In America black, Asian and Hispanic employees were even more enthusiastic than their white colleagues. Women with children were generally keen, reporting an improvement in their work-life balance—though a gap exists between discontented American women and those in other countries, who are much happier (the availability of state-subsidised child care helps explain the difference).
    Of course, the new schedule carries dangers: people may lose all separation between work and home life, and succumb to stress. To inject some human contact, companies may embrace a hybrid model in which workers go into the office for part of the week. But overall office-workers’ freedom from time’s yoke is to be welcomed. The clock was a cruel master and many people will be happy to escape its dominion.
    This article appeared in the Business section of the print edition under the headline “Stop all the clocks” More