Philippa Kaur

HOW MUCH have you spent on the cloud today? It takes Robert Hodges only a few clicks to find out. He pulls up a dashboard on a computer in his home office in Berkeley, California, which shows cloud spending at his database firm, Altinity, in real time. The cloud represents half of Altinity’s total costs.Mr Hodges’s widget is a window onto the future. As bills soar, every firm of any size will need to understand not just the benefits of the cloud, but also its costs. Gartner, a consultancy, reckons that spending on public-cloud services will reach nearly 10% of all corporate spending on information technology (IT) in 2021, up from around 4% in 2017. Plenty of technophile startups spend 80% of their revenues on cloud services, estimate Sarah Wang and Martin Casado of Andreessen Horowitz, a venture-capital firm. The situation is analogous to a century ago, when electricity became an essential input (and prompted some firms to hire another kind of CEO: the chief electricity officer).For cloud companies this has been a bonanza. Giants of the industry, such as Amazon Web Services (AWS), Microsoft Azure, Google Cloud Platform (GCP) and, in China, Alibaba and Tencent, have been adding business briskly. Gartner expects global sales of cloud services to rise by 26% in 2021, to more than $400bn. But competition is stirring. On December 9th Oracle, a big software-maker, reported higher revenue than expected, mainly thanks to the rapid growth of its cloud unit. Its market value shot up by nearly 15%, or over $40bn. And a vast welkin of companies is emerging to help businesses manage their computing loads. One such firm, Snowflake, is worth $108bn. Another, HashiCorp, went public in New York on December 8th and now boasts a stockmarket value of $15bn, three times its last private valuation in 2020.The latest cloud formation and the winds shaping it were on full display this month at Re:Invent, the world’s largest cloud-computing conference, held every year in Las Vegas by AWS. Panels about “cost optimisation” and “AWS billing” were among the most popular. The accompanying expo featured booths where startups with names as CloudFix, Cloudwiry and Zesty were offering to help customers manage their cloud use.Businesses’ main motive for moving to the cloud was never about cost but “scalability”: having access to additional computing resources with a few clicks. But cloud bills have grown more complex as well as higher, sometimes rivalling those from America’s notoriously opaque health-care providers. The AWS bill of even a small customer like the Duckbill Group, another cost-consulting firm, can run to more than 30 pages, listing in detail the cost of every single service it has used, from bandwidth in India ($0.01 per request to its website) to a virtual server in Oregon ($83.59 for “Amazon Elastic Compute Cloud” running open-source software).That is only natural, says Corey Quinn, co-founder of the Duckbill Group. Big cloud providers such as AWS, Azure and GCP are amalgamations of dozens of services. AWS sells more than 200, ranging from simple storage and number-crunching to all sorts of specialised databases and artificial-intelligence offerings. Each is billed according to multiple dimensions, including the number of servers, time used or bytes transferred. Then come the discounts and special offers.Ms Wang and Mr Casado have suggested that firms should think about building their own private clouds to keep costs down. So far few firms have opted for such “repatriation”, which is both costly and makes it harder for businesses to enjoy the benefits of essentially unlimited computing resources in the public cloud. Rather, cloud customers are trying to professionalise their “cloud financial operations” (or FinOps in the compulsory tech shorthand), for example making executives responsible for cloud usage feel the financial impact. For the time being, gauging this impact is an arduous manual process. As cloud use grows, it will need to be automated, says Lydia Leong of Gartner. Some will probably be outsourced to upstarts of the sort thronging the Las Vegas shindig. A number sell a mix of consulting and software tools to assess cloud use and offer advice on how to lower costs. CloudFix, which unveiled its service at Re:Invent, charges a subscription to run a customer’s configuration through software that optimises the client’s cloud performance. The big cloud companies have taken note, both of the upstarts and of the growing customer grumbles. Just before the Las Vegas event AWS announced that it would start charging less for data transfers to the internet, lowering the bills of millions of customers. It also helps them identify savings, for instance by offering a “Simple Monthly Calculator” (though it looks rather complex and sports a late-1990s-type web interface). At Microsoft, cloud costs are often rolled into the “enterprise agreements”, all-encompassing subscriptions of sorts, which big companies typically sign up to. GCP, being the smallest of the top three, “strongly believes” in the “multi-cloud”, says Amit Zavery, a senior executive. In other words, it aims to enable customers to choose the best and cheapest cloud services from different providers (thus making it easier for them to pick Google).Costly, with a chance of discountsYet the big providers are not making life easier for customers everywhere. Having customers pay only for the IT they use, while combining different services as needed, is the whole point of cloud computing. At AWS the complexity is seen as a competitive advantage. Its assortment of services is mostly created by independent teams that can innovate faster (including in what and how they charge). “We decided to let our developers build what they build—and unleash their creativity,” says Matt Garman, who heads sales and marketing at AWS.The three big providers also have a habit of making it cheap and easy to transfer data onto their clouds but expensive to move them out again. Critics accuse AWS, and to a lesser extent Azure and GCP, of being digital versions of the “Hotel California”, where you can check out any time you like, but you can never leave. Locking customers in this way may push them to use other services. Mr Garman counters that the higher price of moving data off a cloud (“egress” in the jargon) reflects the higher costs of that exercise. Almost by definition, customers leave with more data than they entered with.Whatever the truth, cloud providers’ fat gross-profit margins—more than 60% in AWS’s case, according to Bernstein, a broker—are attracting competition. In September Cloudflare, which helps customers serve up online content and deflect digital attacks, launched a new data-storage service which does not charge for digital outflows. Matthew Prince, Cloudflare’s boss, says this should “unlock the true potential of the cloud”. That will allow firms to mix and match services from different providers. “Each cloud provider has different strengths and weaknesses,” says Mr Prince. Investors still see Cloudflare’s strengths: despite a recent slide amid a cooling on upstart tech stocks, the firm’s market value of $45bn is nearly eight times what it was after its initial public offering in September 2019.If bets like Mr Prince’s pay off, the industry will become more competitive. As for Altinity, its dashboard is an outgrowth of its product—a cloud-based database that lets users sift through information, including bills, in real time. It is now considering releasing the dashboard’s code for anyone to use and adapt. Fair weather to it.For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

EARLY ON IN “The Inventor”, a documentary about Elizabeth Holmes, the founder of Theranos, she talks about her childhood-reading habits and her interest in what makes a great leader. “So much changes in our society technologically but as humans we don’t change a lot,” she says in that slow, deep voice.Whatever the verdict in Ms Holmes’s ongoing trial, on charges of defrauding investors and patients by making false claims about the startup’s blood-testing technology, she is right about that. The story of Theranos is not simply about how its leaders behaved, and whether they deliberately misled others. (Ms Holmes denies the charges.) It is also about how people take decisions. The trial has shown how cognitive shortcuts helped propel the firm to a valuation of more than $9bn, before reporting by the Wall Street Journal, revealing that its proprietary technology did not work, sent it spiralling towards oblivion.One shortcut concerned Ms Holmes herself. On the face of it, Theranos’s product was a blood-testing device. In fact, the firm’s real product was its founder, a fundraising machine in a turtleneck. Her charisma intoxicated investors, lured employees and charmed the elder statesmen who crammed the startup’s board. Her story—a female entrepreneur who had dropped out of Stanford to disrupt the world of health care—was catnip to journalists.Charisma is a reasonable trait for investors to like in a startup founder. But people too easily equate confidence with competence. In a study from 2012, researchers from the University of Lausanne taught a bunch of mid-level managers a set of “charismatic leadership tactics”—from three-point lists and moral conviction to hand gestures. Observers’ assessment of the managers’ competence leapt as a result.Some of Ms Holmes’s charisma may likewise have been learned. Her defence team has entered two handwritten documents into the court records. One is a note in which she lays out a list of instructions to herself for the day ahead. The other is a set of business rules penned for her by Sunny Balwani, Theranos’s one-time chief operating officer and Ms Holmes’s former lover, whose own trial begins next year. (Ms Holmes’s defence rests in part on her allegations that she was abused, moulded and controlled by Mr Balwani, which he denies.)The documents themselves look risible. “All the laws of nature, all secrets, are imprinted on every cell of our body,” writes Mr Balwani, a somewhat concerning statement from the leader of a medical startup. Ms Holmes’s note includes lines such as “I know the outcome of every encounter”, “I constantly make decisions and change them as needed” and “My hands are always in my pockets or gesturing”. But the formula, if that is what it was, seems to have worked. Seasoned executives at large companies lauded Ms Holmes for “owning the room”, but ignored warning signs that the firm’s product did not work.That may have been because of a second decision-making shortcut: many investors and executives relied heavily on the judgments of others rather than their own eyes. Large chunks of the trial have focused on the addition of the logos of drugmakers like Pfizer and Schering-Plough, without their knowledge, to reports that seemed to validate Theranos’s technology. A former chief financial officer of Walgreens, a pharmacy chain that teamed up with the startup, testified that he thought the reports were written by the pharmaceutical firms, when in fact they had found the technology wanting. Ms Holmes has said that she added the logos herself, claiming to have done so in good faith.It is simply not practical to fact-check everything, or to run a business on the assumption that all information has been doctored. There was no reasonable way to infer from the documents that Pfizer and Schering-Plough were unimpressed by Theranos’s devices. But at some point due diligence has to extend to seeing a technology in action.The story of Theranos is not just about Ms Holmes’s guilt or innocence. It raises questions about Silicon Valley’s “fake-it-till-you-make it” culture, investors’ fear of missing out on the next big thing and the scrutiny that private firms receive compared with listed peers. It is also about the thought patterns that helped Ms Holmes soar. When you review a job candidate’s credentials or take comfort from logos on a website, when you are blown away by someone’s charisma, ask yourself what you really know.For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Business section of the print edition under the headline “The shortcuts to Theranos” More

ASKED WHAT labour wanted, Samuel Gompers, founding president of the American Federation of Labour in the late 1800s, is often quoted as responding: “more”. His actual answer was surprisingly lyrical. “More schoolhouses and less jails…more learning and less vice…more leisure and less greed…more of the opportunities to cultivate our better natures.” His ability to tie loftiness to pragmatic demands for better wages and working conditions helped make the labour movement a powerful and popular force.After years in decline, big labour is regaining both power and popularity. Joe Biden, whose political career began in the union-friendly 1960s, has vowed to be the most pro-union president in history. Feeling newly empowered, workers have staged 241 big strikes this year, 58 of them in November alone. Unions are popping up in surprising places. Last month curators at Boston’s Museum of Fine Arts, who set one up last year, downed catalogues for a day. On December 3rd Liz Shuler, new head of the AFL-CIO, the successor umbrella group to Gompers’s organisation, said big tech is the next frontier to be organised. Workers at Alphabet and Kickstarter have already set up unions. Amazon is in the midst of a protracted conflict at a warehouse in Alabama. All this is going down well with Americans. Public support for unions has reached 68%, according to polling by Gallup, a level not seen in half a century.That presents a pickle for businesses. On the one hand, they are already dealing with a tight labour market. On the other, taking on unions risks angering consumers and potential hires, as well as the president. To balance these competing objectives companies must tread carefully.These days the first-order answer to the Gompers question given by both the Biden administration and big labour is “more trade unions”—or, as the labour movement and its supporters put it, an increase in the “density” of union representation. Only then, the reasoning goes, will better pay, benefits and working conditions follow. The primary objective has been pursued vigorously. Minutes after his oath of office in January Mr Biden dismissed the general counsel of the National Labour Relations Board (NLRB), who acts as the de facto government prosecutor in labour-management disputes. The general counsel’s office has since reversed procedures adopted under Mr Biden’s more pro-business Republican predecessor, Donald Trump, and pushed to undo older rules, some dating back to the days of Harry Truman. In late November the NLRB voided the result of the unionisation vote at Amazon’s Alabama warehouse, which the e-commerce giant carried by more than two to one, and on December 7th it allowed vote-tallying at three Starbucks cafés to go ahead.More densification efforts are afoot. Two bills to expand labour power directly are unlikely to go anywhere, given the Democrats’ slim majorities in both houses of Congress. But worker-friendly provisions have been sewn into other legislation. The new bipartisan infrastructure law directs spending to projects with union labour. Mr Biden’s $2trn social- and climate-spending bill, which has passed the House, includes the tax deductibility of dues and tax credits for electric cars made by unionised workers (as well as heavy fines for labour-law violations). A report of a “whole-of-government” task-force set up by the White House to come up with pro-labour policies that could be advanced without new laws is due out any day. It has received more than 400 suggestions.This revival of organised labour could yet turn out to be a blip. Previous ones petered out; a series of strikes in 1945-46, accompanied by rising inflation, soured the public mood and led to the passage of the more restrictive legislation that remains in force to this day. Unionisation rates have been declining for decades across the West, not just in America. Still, companies are not taking any chances. They are pursuing two main strategies.The first one is to keep quiet. Rather than inveigh against new labour rules, companies are keeping a low profile. They are operating through big business groups such as the National Association of Manufacturers and the US Chamber of Commerce. Both have been lobbying furiously against pro-labour provisions under consideration in Congress, with some success.If firms have no choice but to respond directly, as when facing a unionisation drive, they also proceed discreetly. Most CEOs avoid public statements on such matters. Their comments, says a longtime labour lawyer, can be used as evidence of unfair labour practices or provoke a customer backlash. When they do speak up, it is in anodyne terms such as praising the “direct relationship” between employer and employees, as Starbucks’s boss, Kevin Johnson, did this week. Businesses also rely on third-party consultancies and specialised law firms to conduct surveys to gauge worker dissatisfaction (which may lead to disputes and, eventually, union drives), and organise message bursts and workshops to help convince workers (unthreateningly, since anything else would be illegal) that union dues is not money well spent.Fruits to their labourThe second strategy involves being very loud indeed. Companies are publicising higher wages and benefits. In October Starbucks announced its third rise in just over a year. It will pay baristas at least $15 an hour by 2023, more than twice the federal minimum wage. Amazon has set a floor at $18 for new employees, plus signing bonuses and other perks. Other firms have no choice but to follow suit. According to the Bureau of Labour Statistics, compensation for non-union private-sector employees rose by 1.4% in the third quarter, compared with the second, the biggest jump in a decade. The Conference Board, a business-research outfit, finds that companies expect to raise pay by 3.9% in 2022 on average, the most since 2008. A lot of this is the result of a worker shortage. That it helps pre-empt union demands is a welcome side-effect. One thing is clear. Organised or not, it is labour’s moment. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Business section of the print edition under the headline “Big labour v big business” More

WHEN CAROLINA ESCUDERO was severely depressed, going to a therapist’s office became hard to face. So she joined BetterHelp, a popular therapy app. She paid $65 each week but spent most of her time waiting for her assigned counsellor to respond. She got two responses in a month. “It was like texting an acquaintance who has no idea how to deal with mental illness,” she says. BetterHelp says its service does not claim to operate around the clock, all its therapists have advanced degrees and “thousands of hours of hands-on clinical work”, and users are able easily to switch them if scheduling is hard.Helping people to deal with mental problems has rarely been more urgent. The incidence of depression and anxiety has soared in the pandemic—by more than 25% globally in 2020, according to the Lancet, a medical journal. That, combined with more people using online services, has led to a boom in mental-health apps. The American Psychological Association reckons 10,000-20,000 are available for download. But evidence is mounting that privacy risks to users are being ignored. No one is checking if the apps work, either.Mental-health-tech firms raised nearly $2bn in equity funding in 2020, according to CB Insights, a data firm. Their products tackle problems from general stress to serious bipolar disorder. Telehealth apps like BetterHelp or Talkspace connect users to licensed therapists. Also common are subscription-based meditation apps like Headspace. In October Headspace bought Ginger, a therapy app, for $3bn. Now that big companies are prioritising employees’ mental health, some apps are working with them to help entire workforces. One such app, Lyra, supports 2.2m employee users globally and is valued at $4.6bn.Underneath, though, a trauma lurks in some corners of the industry. In October 2020 hackers who had breached Vastaamo, a popular Finnish startup, began blackmailing some of its users. Vastaamo required therapists to back up patient notes online but reportedly did not anonymise or encrypt them. Threatening to share details of extramarital affairs and, in some cases, thoughts about paedophilia, on the dark web, the hackers reportedly demanded bitcoin ransoms from some 30,000 patients. Vastaamo has filed for bankruptcy but left many Finns wary of telling doctors personal details, says Joni Siikavirta, a lawyer representing the company’s patients.Other cases may arise. No universal standards for storing “emotional data” exist. John Torous of Harvard Medical School, who has reviewed 650 mental-health apps, describes their privacy policies as abysmal. Some share information with advertisers. “When I first joined BetterHelp, I started to see targeted ads with words that I had used on the app to describe my personal experiences,” reports one user. BetterHelp says it shares with marketing partners only device identifiers associated with “generic event names”, only for measurement and optimisation, and only if users agree. No private information, such as dialogue with therapists, is shared, it says.As for effectiveness, the apps’ methods are notoriously difficult to evaluate. Woebot, for instance, is a chatbot which uses artificial intelligence to reproduce the experience of cognitive behavioural therapy. The product is marketed as clinically validated based in part on a scientific study which concluded that humans can form meaningful bonds with bots. But the study was written by people with financial links to Woebot. Of its ten peer-reviewed reports to date, says Woebot, eight feature partnerships with a main investigator with no financial ties to it. Any co-authors with financial ties are disclosed, it says.Mental-health apps were designed to be used in addition to clinical care, not in lieu of them. With that in mind, the European Commission is reviewing the field. It is getting ready to promote a new standard that will apply to all health apps. A letter-based scale will rank safety, user friendliness and data security. Liz Ashall-Payne, founder of ORCHA, a British startup that has reviewed thousands of apps, including for the National Health Service, says that 68% did not meet the firm’s quality criteria. Time to head back to the couch? ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Business section of the print edition under the headline “Psyber boom” More

INVESTORS ARE still speculating about exactly what Didi Global, a ride-hailing giant, did to draw the ire of Chinese regulators. Some say it foolishly pushed forward with its $4.4bn initial public offering (IPO) in New York despite being told by officials to delay the listing. Others suggest it stole the thunder from leaders in Beijing by kicking off trading on June 30th, the eve of the 100th anniversary of China’s Communist Party.Whatever its sin, Didi now says it plans to delist from New York and relist in Hong Kong. It has not specified its reasoning or responded to queries on the move. It is possible that the company has been forced to leave America by Chinese internet regulators. This is a fiasco for the firm and its shareholders, such as SoftBank, a Japanese investment group (whose share price has sunk by 8% since the delisting announcement). It also portends two big changes in how foreign investors will access Chinese shares in the future.The first is the end of Chinese IPOs in America. Not long ago American exchanges were the leading destination for ambitious Chinese firms. Alibaba, an e-commerce behemoth which went public in New York in 2014, remains the largest American IPO in history. Didi was part of a recent groundswell of Chinese darlings keen to tap America’s deep capital markets. Some 248 Chinese groups with a combined market capitalisation of $2.1trn were trading in New York in early October.Those listings have already been threatened by American rules that require all listed firms to provide access to internal auditing documents or be booted off exchanges. Chinese companies cannot readily comply because officials in their home country consider such materials to be “state secrets”. The dilemma goes back a decade but a law put into practice by the Securities and Exchange Commission on December 2nd will purge all non-compliant companies from American bourses by 2024. That could have potentially painful consequences for some investors.Many have held out hope of an eventual agreement between American and Chinese regulators that would revive a once-booming cross-border listing business. However, the suggestion that Chinese regulators are behind Didi’s delisting—an unprecedented intervention by a foreign government in the American market—makes a deal much more difficult to strike, says Jesse Fried of Harvard Law School.A second shift is the redirection of capital flows towards Chinese markets. Didi has been one of many Chinese tech groups in recent months to be hit with harsh regulations. The campaign, which has been aimed almost exclusively at companies with overseas listings, has erased some $1.5trn in shareholder value since February. Yet at the same time Chinese securities markets have experienced a windfall. In particular, foreign holdings of Chinese stocks and bonds on the mainland have nearly doubled between the start of 2019 and September of this year, to about $1.1trn (see chart).The reallocation is mainly the result of two forces. One is the inclusion of Chinese stocks and bonds in global indices, which has meant that index funds need to hold them. Another is the fact that mainland exchanges host few of the pummelled online groups, which mostly have American or Hong Kong listings. As a result, stocks listed in Shanghai and Shenzhen are less exposed to regulatory ire and more diversified, notes Alicia Garcia Herrero of Natixis, a bank. That makes them particularly attractive this year. As more Chinese companies follow Didi from America to Hong Kong, or move to the mainland, even more capital could flow into China.Many foreign investors expect Chinese-listed firms to be more attuned to its rapidly changing regulatory environment, says Louis Luo of ABRDN, an asset manager. And despite their willingness to crush foreign-listed tech groups, the authorities are much more sensitive to domestic market turmoil given the high level of retail investment from ordinary households. It is hard to imagine regulators causing a locally listed group’s share price to collapse as Didi’s has. Rather, companies with regulatory challenges will henceforth need to sort them out before listing in China. Chinese authorities have long hoped that their corporate darlings would list closer to home. They are getting their wish. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Business section of the print edition under the headline “The great reallocation” More

DELIVERY HERO has had a good run in the past couple of years. In August 2020 it ascended to the DAX, the stockmarket index of Germany’s most valuable listed firms. It is present in 50 countries on four continents. Revenue for the third quarter was €1.8bn ($2bn), a jump of 89% compared with the same period in 2020. “We grew 100% before Corona, 100% during Corona and we will grow 100% after Corona,” says Niklas Ostberg, the Berlin-based firm’s Swedish chief executive.By number of orders Delivery Hero is more than twice as big as DoorDash, its large American rival. Even so, DoorDash’s market capitalisation is $58bn, more than that of Delivery Hero ($31bn) and Just Eat Takeaway.com ($13bn), the two big European food-delivery firms, combined. European shares tend in general to underperform American ones. But another reason for investors’ caution is more specific to food delivery. Strict labour laws, a tradition of union organising, pricey unskilled workers and stingy customers, who buy little and tip rarely, make Europe the toughest of all continents for the business.Mr Ostberg says that high labour costs have become less of a problem in Europe, because the efficiency of delivery has improved substantially in recent years. European consumers have also grown less parsimonious amid the pandemic boom in online shopping of all kinds. As a consequence, Delivery Hero has reversed its decision to leave the German market altogether, by offloading its domestic businesses, Foodora, Lieferheld and Pizza.de, to Takeaway.com (a Dutch firm that subsequently merged with Just Eat) in order to focus on fast-growing Asia. In the summer it launched a new app, Foodpanda, in Berlin, Frankfurt, Hamburg and Munich.When it comes to other labour matters, however, things may be about to get tougher still. If a draft proposal in the works in the European Union (EU) becomes law, as many as 4m gig workers delivering meals or ferrying ride-hailers could be reclassified as employees. This would entitle them to a minimum wage, sick leave and paid leave, unemployment benefits, health- and long-term-care coverage, and pension-insurance contributions.The EU estimates that the reclassification could cost gig-economy firms around €4.5bn a year. Like his counterparts in the business, Mr Ostberg insists that many of his riders choose to be freelancers because that lets them work as much as they want, whenever they want. “More or less anyone can work for us at any time of the day,” he says. But such arguments are increasingly cutting less mustard. In February Britain’s highest court ordered Uber (which runs both food-delivery and ride-hailing apps) to reclassify its drivers in London as employees. Delivery Hero’s share price fell by nearly 3% on December 3rd following reports of the draft EU proposal.Such developments help explain why couriers are getting more assertive. The riders of Gorillas, a German online grocer with operations across Europe, have clashed with management for months over working conditions and pay. In October the firm sacked hundreds of riders who had participated in strikes, which further fuelled tensions. In late November a labour court in Germany rejected the management’s attempt to stop Gorillas riders from electing an in-house works council, which they duly did. The firm’s executives grudgingly had no choice but to say they will work with workers’ representatives.All this is happening as competition in Germany intensifies. Delivery Hero will have to invest some €120m in German sales and marketing in 2022, reckons Jürgen Kolb of Kepler Cheuvreux, a financial-services firm. It is now competing with Lieferando, which dominates the German market (and is owned by Just Eat Takeaway.com), Uber Eats, which launched in April, and Wolt, a Finnish firm recently acquired by DoorDash for €7bn. Last month DoorDash launched under its own brand in Stuttgart. The next few years look poised to be dog-eat-dog in German food delivery. Consumers can count on full bellies, courtesy of the gig firms. Their shareholders may go hungry. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Business section of the print edition under the headline “How can we be heroes?” More

CAR-BUYERS are getting behind the wheel of an electric vehicle (EV) in ever greater numbers. No wonder, for they are exciting and easy to drive, compared with internal combustion engine (ICE) equivalents. As battery costs tumble, prices are falling. But the shift to EVs means much more than driving pleasure. Transport is responsible for around a quarter of the world’s carbon emissions and road vehicles account for around three-quarters of that share. If there is to be any chance of reaching net-zero by 2050, EVs will need to take over, and soon.The 6m pioneers who opt for EVs this year will still represent only 8% of all car purchasers. That figure will need to increase to around two-thirds by 2030 and to 100% by 2050 in order to meet net-zero goals. Many an investor is operating on the assumption that this will all happen as smoothly as a Tesla shifts gears. The huge market values of Elon Musk’s company, and of other newcomers such as Rivian with its electric pickup trucks, as well as pricey Chinese EV firms, attest to sky-high confidence. Electric battery-makers, too, are booming and their shares are soaring.Yet look beyond the glamorous, shiny vehicles stuffed with the latest technology that are the obvious embodiment of the EV revolution, and you can see a merciless bottleneck ready to foul things up. Not even those eyeing an EV purchase are sufficiently aware of it. Governments are only waking up to the problem around now. Put simply: how will all these EVs get charged?The current number of public chargers—1.3m—cannot begin to satisfy the demands of the world’s rapidly expanding electric fleet. According to an estimate by the International Energy Agency (IEA), a global forecaster, by the end of this decade 40m charging points will be needed, requiring an annual investment of $90bn a year as 2030 approaches. If net-zero goals are to be met, by 2050 the world will need no fewer than 200m public charging points.It is certainly true that current pledges by governments on the phasing-out of ICE cars and the transition to EVs mean that sales consistent with net-zero look unlikely. Even so, should roads turn electric less speedily, the sums the world needs to spend on charging infrastructure are still stupendous. In a slower scenario envisaged by BloombergNEF (BNEF), a research firm, under which EV penetration continues to rise as battery prices fall, but sales only reach just under a third of all vehicle sales by 2030, roughly $600bn of investment would still be needed by 2040. That would pay for fewer chargers than the IEA foresees—24m public points by 2040, and 309m in total. If net-zero is to be achieved by 2050, BloombergNEF calculates that the cumulative investment required would be a whopping $1.6trn.To the problem of woefully few public chargers, add the poor operational record of the charging industry thus far. On paper, the number currently exceeds what some authorities reckon is needed. The European Commission, for example, thinks every ten electric vehicles require one public charger. According to the Boston Consulting Group (BCG), a consultancy, there are now five EVs per charging point in the European Union and China and nine in America.The reality is starkly different. According to a survey of chargers in China by Volkswagen (VW), inoperable or “ICEd” chargers (those blocked either inadvertently or deliberately by fossil-fuel cars) mean that only 30-40% of Chinese public points—there are now 1m—are available at any time. It is safe to assume some inoperability in the EU and America.Even important drivers deride the experience. Herbert Diess, VW’s chief executive, posted on LinkedIn, a social network, this summer to complain that his holiday had gone less than smoothly because Ionity, a European charging network, provided too few points on the Brenner Pass between Austria and Italy. The firm’s charging facilities in Trento in northern Italy left plenty to be desired. “Anything but a premium charging experience,” he wrote. That vw is a part-owner of Ionity made the criticism sting more.Drivers can smell trouble ahead. Range anxiety and the availability of public charging is a huge issue (see chart 1). In a recent survey by AlixPartners, a consultancy, in the seven countries that make up 85% of global EV sales, the cars’ high prices came third on the list of main reasons not to switch to battery power; the four others were all anxieties related to charging.To assess the scale of the challenge, and how it will be met, start with the basics. One big advantage of EVs is that the cars can be charged at home—or at workplaces, if employers install chargers as a perk. In America, 70% of homes have off-street parking where a charger might be installed (the equivalent figure is lower in Europe and China). BCG estimates that the energy demand for home and workplace charging in 2020 accounted for nearly three-quarters of the total in America, around seven-tenths in Europe and three-fifths in China.Current models of electric cars typically have batteries with ranges of around 250 miles (400km). Some go over 400 miles. The average American drives 30 miles a day, according to Bank of America. Europeans and Chinese drive less than that. That means two types of charger are good enough to top up vehicles, or to give them a bigger boost overnight at home or during the working day. The slowest, delivering up to five miles of range an hour, can do it. So do “level 2” chargers that deliver around 10-20 miles. These chargers are easy on the wallet, too. Using dedicated sockets that cost just a few hundred dollars (they are often subsidised by governments) entitles drivers to the very cheapest electricity tariffs.Nonetheless, home and workplace charging only gets drivers so far. As EV ownership spreads from wealthier households to people living in flats or dwellings without the ability to plug in at home, a public network becomes more and more vital. In America, Europe and China, demand for public charging as opposed to private is expected to increase (see chart 2). Public chargers come in three varieties. A common kind is kerbside charging, which can be via converted lampposts or other dedicated charging points, where cars might park overnight. Then there is “destination” charging, of the sort that is becoming more widely available in car parks at shopping centres, restaurants, cinemas and other public attractions. For both kinds, which count as level-2 charging, the installation cost is usually between $2,000 and $10,000 per point.Fast charging, which can typically deliver 60-80 miles of range every 20 minutes, is vital on main roads for drivers making long inter-city trips beyond the range of their vehicles, and in cities for a quick emergency jolt. Commercial vehicles, such as taxis, driving longer distances need fast charging too. But since charging companies are seeking to recoup hefty costs of $100,000 or more per charger, the price is high. To make life easier for its customers, Tesla’s mapping software directs its cars on long journeys and works out the best route weaving through its dedicated, rapid “Supercharger” network. Other new EV models come with similar features for planning long journeys around fast chargers.In the charging industry’s defence, many in it point out that both EV ownership and charging are in their infancy. Pessimism is unwarranted, they argue, based on just a few years of experience. Only one car in a hundred now on the world’s roads is an EV, after all. And as Pat Romano of ChargePoint, an American firm that is one of the world’s biggest charging companies, notes, this is the start of “a 20 year arc”. But though the charging industry has time to mature, what sounds clear on paper is daunting in reality. The nature of demand for charging at scale is impossible to know as yet, meaning much unpredictability.Expansion is coming fast, say some. Along with all the momentum from EV-phile governments, the opportunity to make money charging the world’s expanding fleet means that “hyperbolic growth” is on the way, insists James West of Evercore ISI, a bank. But exactly how many public chargers are needed for each EV on the road is “an open question” notes Bank of America. Scott Bishop of Yunex Traffic, a division of Siemens, a German firm that makes charging hardware, notes that there are many different answers to the question of what proportion of slow versus fast chargers will be needed.Another problem is that the charging industry is made up of many complex layers. Aakash Arora of BCG’s automotive practice calls this the “gnarliest problem of all”. The need to co-ordinate with and get permission from many different parties helps explain the slow roll-out of charging infrastructure. First, there are firms that make the chargers themselves. Then there are the operators. These might own the points, earning money directly from charging. Or they might lease or sell points to site-owners but make money maintaining the chargers and update software when needed. Site-owners, usually businesses, other private landlords or local authorities, provide the locations for chargers and typically charge rent to operators. Service providers allow the charging to happen, with apps or cards that give access to charge points and provide payment mechanisms.Three kinds of company are coming to rule the EV-charging roost. One is the vertically integrated car giant. Tesla has not revealed what it has spent on its “Supercharger” network, which now numbers 30,000 points worldwide, but it is likely to have been several billion dollars. Other car firms are following, up to a point. BMW, Ford, Hyundai and Mercedes-Benz are partners with VW in Ionity. Its fast-charging network hopes to expand from 1,500 points to 7,000 by 2025. Electrify America, set up by VW as part of its settlement with American regulators over its dieselgate emissions-cheating scandal starting in 2015, now has 2,200 fast chargers in the United States. General Motors says it will spend $750m on charging. Its first move will be to install 40,000 points at dealerships.Specialist charging firms are also expanding quickly. Several have come to public markets during the past year. None of them are profitable, and their revenues are tiny for now, but their market capitalisations are increasing. The most highly valued (at around $7bn) is ChargePoint, which is based in America with 44% of the public-charging market there; it is also expanding in Europe. EVBox, a Dutch firm, has 300,000 points worldwide including a quarter of Europe’s public level-2 chargers and third of fast-charging points. EVgo has half the fast-changing market in America (excluding Tesla). But as Ryan Fisher of BNEF notes, over the next decade, if governments start to cut subsidies, charging companies will have to find business models that reliably produce profits.A third category is oil companies. Fearful of losing business at petrol stations, they are developing ambitious schemes. After buying ubitricity, a leading European on-street charging firm, in February, Shell, an Anglo-Dutch oil major, said in August that it planned to roll out 500,000 charging points around the world by 2025, both kerbside and fast charging. BP and Total have also been busy buying charging firms. Utilities are making a push, too. Wallbox, part-owned by Spain’s Iberdrola, sells chargers for homes and workplaces. The Electric Highway Coalition, made up of 17 American power companies including Dominion Energy and Duke Energy, plans to install fast charging along intercity routes.But grave doubts about the speed of the ramp-up persist nonetheless. Instead of the 40m public chargers the IEA reckons the world will need by 2030 to put the industry on course for net-zero by 2050, BCG forecasts that in America, Europe and China, the world’s main EV markets, there will be only 6.5m. The number of cars per charger will thus rise steeply, it reckons.Governments will certainly act. America’s infrastructure bill will set aside $7.5bn to enable the installation of 500,000 public points by 2030. Mandates such as that recently announced in Britain requiring new homes, workplaces and retail sites to have charging points, adding 145,000 every year, are likely to become more common.But the numbers are still small relative to the vast scale of charging networks that the world needs. More money will be needed to update electricity grids to distribute power to the new source of demand. A reason for optimism is that improvements in batteries should continue to offer longer ranges, meaning less need for frequent charging. Newer batteries will be capable of being charged much more quickly and chargers will deliver current more swiftly in future. Drivers must cross their fingers and hope that technology delivers, again. More

FEW BLOCKBUSTER public share sales have been as tortured as Didi Global’s. Within four days of raising $4.4bn in New York in June the Chinese ride-hailing group was hit with an investigation by the authorities in its home market and its mobile application was dropped from app stores in China, preventing new customers from using it. The firm’s share price remained above its initial public offering (IPO) price for just three trading days and has since fallen by more than 40%. Now the company, which was once valued at $70bn and backed by Japanese investment firm SoftBank, says it will delist from American exchanges altogether and relist in Hong Kong.Investors should consider Didi’s exit a death knell for Chinese IPOs in America. Some $1.5trn of Chinese company shares trade in New York. Those listings have already been threatened by American regulations that require all listed companies to provide access to internal auditing documents or face eventual delisting. Chinese officials have refused to allow access, often deeming this material “state secrets”. The dilemma goes back a decade but recent American legislation, which was adopted by the Securities and Exchange Commission on December 2nd, will purge all non-compliant companies from exchanges within two to three years, with potentially devastating consequences for some investors.Many have held out hope for an eventual agreement between American and Chinese regulators that would revive a once-booming cross-border listing business. Not long ago American exchanges were the leading destination for the IPOs of Chinese tech groups such as e-commerce giant Alibaba and online services group NetEase. Didi has not commented on why it plans to leave the New York Stock Exchange for Hong Kong but the group has been under intense regulatory pressure from the Chinese government since its IPO, ostensibly over data-security concerns. Several news agencies have reported that the Cyberspace Administration of China (CAC), an increasingly powerful regulatory body, has pushed the company to delist.Such action—an unprecedented intervention by a foreign government in the American market—would make an agreement between America and China far more difficult to strike, says Jesse Fried of Harvard Law School. “Didi’s exit will thus be a preview of what is to come,” he says. China’s growing regulatory reach should also raise alarms for global investors. Until now no Chinese enforcement body has sought to control Chinese listings in foreign markets. But new rules give the CAC authority to vet most overseas Chinese tech IPOs. These rules may also apply to share sales in Hong Kong. On December 1st the China Securities Regulatory Commission (CSRC) denied reports that it plans to ban the use of variable interest entities (VIEs), an offshore holding-company structure that has allowed Chinese companies to skirt local regulations barring foreign investments in some types of businesses. Yet Chinese media have reported that regulators are planning to revamp rules on VIEs, indicating tighter control over foreign listings.China’s leadership wants more control over who can invest in the country’s tech groups, and who gets access to the data collected by those companies. Didi’s case shows they have few qualms about severing long-standing connections between those companies and Wall Street.■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More