Philippa Kaur

A YEAR AGO employers were furloughing staff. Now many of them are desperately looking for more. The rapid bounce-back in some bits of the labour market—notwithstanding the risk of a new pandemic flare-up—has been good news for workers angling for a pay rise. It is also a boon for staffing agencies, which match firms with potential hires. Beyond short-term dislocations to the workforce, the changing way in which people want to work should keep the recruiters busy.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

DEEPGLINT, A CHINESE facial-recognition firm, was one of 14 companies slapped with American sanctions on July 9th for alleged links to human-rights abuses in China’s far-western region of Xinjiang. It is also a globally recognised leader in its field and has raised money from Sequoia Capital and other big American investment firms. DeepGlint’s founders, who graduated from Stanford and Brown universities in America, must now discuss with their foreign backers the prospect of decoupling from the Western commercial sphere. Many Chinese companies have been forced to hold similar talks.China Inc appears to be on the back foot. In America President Joe Biden has picked up where Donald Trump left off, placing restrictions on Chinese companies. Last year Congress passed a bill that may eventually force Chinese firms to delist from American stock exchanges, which would affect nearly $2trn in market value. Huawei, banned from America, has struggled to sell its 5G telecoms kit elsewhere in the West. ByteDance was nearly forced to divest from its prized short-video app, TikTok, over American fears that the Chinese regime could access global users’ personal data. Tencent, another internet giant, is said to be haggling with American regulators worried about its 40% stake in Epic Games, the developer of Fortnite.Around the world Chinese companies are, fairly or not, viewed as instruments of the Communist Party. Britain’s prime minister, Boris Johnson, said on July 7th that the government would probe the Chinese acquisition of Newport Wafer Fab, the country’s largest chipmaker, on national-security grounds. Australia’s defence department could tear up a 99-year lease with a private Chinese company for a big port. Completed outbound acquisitions by Chinese firms shrivelled from some $200bn in 2016 to $36bn in 2020. Cross-border lending, mostly to poor countries, by some of China’s state banks has stopped growing.It is not the first time that a wave of Chinese corporate expansion has met a frosty reception. When commodity giants such as CNOOC, an oil firm, began buying foreign reserves, and rivals, in the 1990s, it stoked fears of resource colonialism. In the 2010s Chinese industrial groups’ aggressive pursuit of Western rivals from chemicals (ChemChina’s takeover of Syngenta) to cars (Geely’s of Volvo) reminded some anxious rich-world governments of Japan’s corporate conquests in the 1980s. At the same time, Chinese acquisitions of trophy assets such as the Waldorf Astoria hotel (by Anbang, a conglomerate) allowed other Westerners to dismiss China Inc as unserious or dodgy (a suspicion confirmed by the subsequent collapse of Anbang and a few similar groups after charges of fraud).Now, just as innovative Chinese tech firms have captivated Wall Street, China’s increasingly authoritarian regime is itself reining in its global champions. President Xi Jinping appears bent on disconnecting them from Western capital markets and controlling their data. Tencent and Alibaba, an e-commerce behemoth, have between them lost $340bn in market value since the crackdown began late last year. Days after its $67bn New York flotation, Didi found its ride-hailing app banned by Chinese data regulators. ByteDance has scotched plans to go public in New York.Speak softly and carry a small chequeAll this looks like a treacherous climate for Chinese companies. Look closer, though, and a new generation of firms is not just adapting to it but thriving. Many have spent years expanding global operations and now make as much money outside China as they do within. Some are pursuing smaller investments under the radar. And, inverting a decades-old trend of copying Western intellectual property (IP), a few have become tech powerhouses in their own right, selling advanced products to the world.The scale of China Inc is formidable. China was the largest investor in the world in 2020. Foreign direct investment (FDI) from Chinese firms hit $133bn, down only slightly from 2019 despite the headwinds (see chart 1). The country has some 3,400 multinationals, almost as many as America and western Europe combined, reckons Bain, a consultancy. Around 360 big listed Chinese groups report foreign revenues. These amounted to around $700bn in 2020, compared with 250 large firms earning a total of $400bn in 2012, according to data from Bloomberg (see chart 2). In 2020 Chinese venture capitalists ploughed an estimated $3.2bn into American startups in 249 deals, the second-biggest year on record by value, calculates Rhodium Group, a research firm. Analysts at CB Insights say that Chinese investors’ participation in American venture deals last quarter was the highest since at least 2016.The Chinese presence is deep as well as broad. Last year more than 100 of the listed firms earned at least 30% of revenues outside China; 27 earned 70% or more. All told, China’s top ten foreign earners booked $350bn or so in overseas sales. This total has grown by 10% a year on average since 2005, Bain says, twice as fast as the equivalent figure in America, Europe or Japan. Tencent’s foreign sales have risen at an annual rate of 40% for nearly a decade, and now make up 7% of its huge top line.The first plank of China Inc’s new global strategy is astute localisation. In the past most Chinese FDI consisted of asset purchases. Last year, by contrast, a lot was reinvested earnings from operations abroad. Hisense, a maker of consumer electronics, wants to treble its overseas sales, from $7.9bn in 2020 to $23.5bn in 2025, half its projected total, says Candy Pang, its head of marketing. That would leave a lot of money to spend on foreign factories, research and development, and marketing (it is sponsoring the 2022 football World Cup in Qatar, among other sports events).Chinese firms have also retained their subsidiaries’ foreign leadership. Despite recently merging with another state-backed giant, ChemChina has allowed its foreign assets to operate as global companies. Pirelli, which it bought in 2015 for €7.1bn ($7.6bn), still makes tyres in Italy. Syngenta, for which it paid $43bn a year later, maintains a Swiss headquarters, a mostly foreign executive team, and a nine-person board with only two Chinese state officials. Similarly, Geely has allowed foreigners to run Volvo, and Haier, an appliance-maker, kept most of GE Appliances’ top brass after acquiring the American firm. “You can belong to China without having a Chinese-dominated board,” says an executive at one Chinese multinational.The second pillar of China Inc’s new globalisation strategy is to shun mega-deals in favour of smaller ones. The speculative wave of outbound investments between 2015 and 2017 swallowed up $425bn in assets and raised plenty of eyebrows among foreign and Chinese regulators alike. By contrast, of the 235 outbound transactions so far this year only three were valued at more than $1bn.The master of mini-dealmaking is Tencent. It has made at least 85 cross-border investments since the start of 2019, according to Refinitiv, a data provider. Many of these are small stakes taken as part of a larger consortium of investors that includes prominent non-Chinese private-equity groups. This year, for example, Tencent bought a 4% stake in Rakuten, a Japanese internet group, for about $600m—small change for a giant worth nearly $700bn. It has also continued to invest in America, with at least 12 deals over the past two-and-a-half years, including the purchase of a $150m stake in Reddit, an American online platform which hosts popular discussion forums.Chinese companies are making their global presence felt in one last way. Rather than swooping into foreign countries to buy up technology, or copying Western IP, they are going out to sell their own, says Bagrin Angelov of CICC, a Beijing-based investment bank. Because Chinese subsidies to makers of electric cars and batteries require them to own some of the core IP, companies such as BYD, CATL, Gangfeng and SVolt raced to develop it. Having done so, they are now targeting export markets. BYD and SVolt are setting up factories in Europe. So is CATL, which in December also announced plans to build a $5bn one in Indonesia.BeiDou, China’s state-owned answer to America’s GPS satellite-navigation system, was used by more than 100 countries in 2020, according to EY, a consultancy. Chinese telecommunications services cover more than 170 countries with a population of 3bn people. Regardless of American sanctions, Huawei remains a popular choice for 5G networks even in parts of Europe. Horizon Robotics, which develops self-driving systems, counts Germany’s Volkswagen and Bosch among its partners.And new Chinese stars are rising all the time. Few fashionistas probably realise than Shein, a fast-fashion darling beloved of the hip TikTok set, is Chinese. The company boasts the top shopping app in 50 countries—including America, where it was downloaded on more iPhones than Amazon in June. OneConnect, a financial-technology platform owned by Ping An, a big insurer, is selling a number of digital-banking products developed for China to banks and other firms across Asia and beyond. It recently designed an artificial-intelligence fraud-prevention system for a Sri Lankan lender.These subtle corporate conquerors could still be stymied—by the heavy hand of China’s Communist rulers or America and its allies, which are bound to keep an ever beadier eye on Chinese commercial incursions. The go-getting Chinese multinationals would then need to adapt once again. They have shown themselves to be more than capable of doing so. ■This article appeared in the Business section of the print edition under the headline “Inconspicuous expansion” More

IN AMERICA, IF you want to dominate an industry, you channel your inner Elon Musk and shout about it. But CATL, the Chinese company that makes batteries for some of Mr Musk’s Tesla electric vehicles (EVs), is different. When your columnist first contacted it in 2017, the brush-off was swift. “We want to concentrate on our products only and do not accept any interviews at present.” These days it is only marginally less blunt. “Unfortunately, we are sorry that it’s hard for us to arrange [interviews] at the moment.” The temptation is to give it a dose of its own medicine and ignore it.And yet in 2017 the firm, founded only six years earlier as Contemporary Amperex Technology Ltd, vaulted from being the world’s third-largest battery-maker to its biggest. It has since reached a market value of 1.3trn yuan ($200bn), more than the second, third and fourth producers—South Korea’s LG Chem, Japan’s Panasonic, and China’s BYD—combined. In recent days its rising share price has made its 53-year-old founder, Zeng Yuqun, richer than Jack Ma, a much-better-known Chinese tech baron. Given Mr Ma’s blackballing by the Chinese government, for Mr Zeng to have kept his head down now looks shrewd.The world will hear a lot more about CATL in the future. That is because one of the justifications for its high valuation is that it is about to move beyond the Chinese mainland, the world’s biggest EV market where it accounts for about half of lithium-ion-battery sales, to Europe, Indonesia and possibly even America. Its profitability far exceeds that of its global peers. Its technology has become at least as good as theirs, giving it the clout to outcompete them and contribute meaningfully to a worldwide clean-energy revolution. And yet it is also what Sam Jaffe of Cairn ERA, a battery consultancy, calls the “dreamchild” of China’s government-industrial complex. That makes it a potential flashpoint in the torrid world of technology geopolitics.CATL’s low profile starts with its provenance. Mr Zeng created it in the backwater of Ningde, a subtropical city better known for tea than tech, in Fujian province where he grew up in a hillside village. But he has long had high ambitions. In 1999 he founded Amperex Technology Ltd (ATL), a maker of lithium-ion batteries for portable devices, which he sold to TDK, a Japanese firm, in 2005. One of his big clients was Apple, maker of the iPhone.Seeing the potential for EV batteries, which China was keen to turn into a strategic industry, Mr Zeng led a spin off from ATL in 2011, severing links with its Japanese parent company—possibly to please the Chinese authorities, says Mark Newman, a battery executive who formerly covered the company as an investment analyst. When it listed in 2018, CATL had a small percentage of direct and indirect state ownership. More important, the government had its back. For years China used subsidies to favour domestically produced batteries for electric cars and buses, kneecapping South Korean competitors such as LG Chem and Samsung SDI. CATL, one of two top-tier Chinese producers, benefited most. The other, BYD, made cars as well as batteries. For that reason, many rival carmakers in China—including foreigners such as Tesla and BMW—gave it a wide berth and turned to Mr Zeng instead.It is unfair, however, to ascribe CATL’s success purely to economic nationalism. According to James Frith of BloombergNEF, a consultancy, when CATL was faced with the winding down of subsidies in 2019, it quickly leapfrogged its South Korean rivals to produce the latest high-nickel batteries, which run for longer than the cheaper lithium-iron-phosphate ones that had been China’s staple. Chinese carmakers are bolder than their Western counterparts (apart from Tesla) in adopting innovative chemistry, he adds, which gives CATL more freedom to experiment. It also gets more for its investment in China than rivals do elsewhere and has a cheaper workforce, which makes its operating margins, just shy of 15%, the best in the business. Strong profits provide more cash to invest in expansion. Neil Beveridge of Bernstein, an investment firm, expects its capacity roughly to quadruple to 500 gigawatt-hours (GWh) of battery cells a year by 2025. That is an amount similar to what is promised from all of the world’s gigafactories today. Only Mr Musk sets more outlandish targets.Zeng and the art of market-share maintenanceMost of CATL’s expansion will come in China, where it has a growing export business. But by the end of this year it is also expected to start production at its first offshore factory, with capacity of 14GWh in Erfurt, Germany, from where it will supply carmakers like BMW, Volkswagen and Daimler. Its move overseas appears to be motivated by a desire to retain its market leadership as EV sales outside China accelerate. Its South Korean and Japanese rivals have a bigger global presence. Simon Moores, a battery consultant, thinks a subsequent step will be into America.Yet energy—even the clean stuff—is dirty business, muddied by geopolitical rivalries and economic jingoism. There are already fears in the West that CATL’s profitability in China will enable it to offer cut-price products abroad, reopening wounds caused when China’s subsidised solar panels swept the world in the 2010s. Moreover, advanced batteries, like semiconductors, are increasingly discussed in terms of an arms race. Europe and America are offering big inducements for locally made batteries and adjacent supply chains in order to catch up with China. They see a strategic vulnerability in being too reliant on a Chinese supplier.As a result, CATL will have to be clever. Already it has more alliances with global carmakers than any other battery firm; jointly building factories close to their operations around the world would buy it political support. It will need to counter geopolitical paranoia by stressing the importance of cheap batteries, both for EVs and clean-electricity grids, in the fight against climate change. More transparency wouldn’t go amiss, either. It is a fine line between being coy and acting as if it has something to hide. ■This article appeared in the Business section of the print edition under the headline “Superpower surge” More

SQUINT DURING the final of the European football championships and it was possible to imagine that two corporate executives were at work on the touchline. One was the sharply dressed Roberto Mancini, manager of Italy, who was often shown angrily gesticulating at his team. His rival Gareth Southgate, the England manager, was also dressed in a suit but had a much calmer demeanour, often pausing to consult his colleagues.The two represent different styles of football management. Mr Mancini has a domineering approach, akin to that of Sir Alex Ferguson, the former manager of Manchester United, who was famous for getting so close to his players that a tirade became known as the “hairdryer treatment”. Gareth Southgate is a more emollient and inclusive character. During the tournament he took the time to praise the efforts of some of the reserve members of the squad who never made it on to the pitch. Like many a modern executive, Mr Southgate was promoted from within, managing the England under-21 squad before becoming coach of the senior team. The result was that he had a strong and lasting connection with many of the players.In corporate terms, one could see Mr Mancini as akin to Jack Welch, the legendarily hard-boiled former head of General Electric, or the hard-charging boss of a private equity group. In contrast, the style of Mr Southgate resembles that of the new, socially conscious breed of corporate manager. He supported his players when they “took the knee” to protest against racism and wrote a letter to England fans, stating that it was the duty of players “to continue to interact with the public on matters such as equality, inclusivity and racial injustice, while using the power of their voices to help put debates on the table, raise awareness and educate”. It is easy to imagine those sentiments coming from the mouth of Paul Polman, who as boss of Unilever championed a sustainable business model for the consumer-goods giant. This does not mean that Mr Southgate lacks a ruthless streak. One of his first acts as manager was to drop Wayne Rooney, England’s ageing talisman, and he has suspended some of his stars for past misbehaviour. Italy’s eventual victory makes it tempting to argue that this proves the greater virtues of a more aggressive style of management pursued by Mr Mancini. After all, the final represented the 34th consecutive game under his leadership in which Italy had avoided defeat. This was a complete turnaround after the squad failed to qualify for the 2018 World Cup under Mr Mancini’s predecessor. Italy started the tournament with a lower world ranking than England, which also enjoyed home advantage for the match. But the final was exceptionally close. The teams were level after normal time and extra time; had one of England’s penalties hit the inside of the post instead of the outside, the outcome might have been different. Mr Southgate also deserves credit for getting England into a big final for the first time in 55 years, having also guided them to a World Cup semi-final in 2018. Under his predecessor, the team was knocked out of the 2016 European championships by Iceland, a footballing minnow. In a time of polarisation, Mr Southgate is widely admired for his politeness and modesty.And Mr Mancini’s aggressiveness has led to problems in the past. A year after guiding Manchester City to an English Premier League title in 2012, he was sacked over concerns about his habit of harshly criticising his players in public and being “aloof and icy” with backroom staff. One player texted a journalist “Can we put the champagne on ice yet?” on rumours of his departure. After leaving City, he had three unsuccessful stints in club management before taking the Italian job in 2018.In the corporate world, the fashion has moved more towards the Southgate style of management. In football as in business, aggressive management can work for a while. But it only succeeds if it is accompanied by other qualities. What unites Messrs Mancini and Southgate is their meticulous attention to detail. And any manager, in football or business, is only as good as the team at their disposal. If either Mr Mancini or Mr Southgate had been in charge of a team from a smaller nation with fewer resources, they would not have made it to the final. As Warren Buffett wisely remarked, “When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.” More

A LAWYER in his early 30s pauses outside an elegant clothing shop in New York’s Tribeca district. It is the first time he has been out in 30 days, he says, turning away from the shuttered establishment. Covid-19 is only part of the reason for his isolation. Unlike many main-street businesses that have not survived the lockdowns, his employer has been swamping him with work of late. And it is not alone. America’s elite law firms are having a banner year. Associates, often toiling from home, have melded with their laptops. Senior partners, holed up in their second homes in the Hamptons, barely have time to enjoy the beach. The pandemic has pushed huge numbers of companies to raise capital, merge, buy rivals or be acquired by them. Nearly 16,000 deals involving at least one American party have been announced in the first six months of this year, roughly half as many again as in the same periods in 2016-20 (see chart). Many involved novel legal structures such as special-purpose acquisition companies (SPACs), which list on a stock exchange in order to reverse-merge with a promising start-up. On top of that, lockdowns have introduced fresh legal wrinkles (does an infectious disease count as force majeure? how to conduct due diligence on a deal by Zoom?). One veteran reports that some law firms are so busy as to decline assignments, in violation of an unwritten rule never to do so that is in the industry as revered as The Constitution. According to the American Lawyer, an industry journal, total revenues at the 100 biggest firms rose by 7% last year, to $111bn. At the same time, expenses such as travel and entertaining clients all but vanished. As a result, average profit margins increased, from 40% to 43%. Profits per equity partner rose by over 13%, to an all-time high of nearly $2.2m. These went up at all but six of the top 100 firms. At the most lucrative ones, such as Davis Polk, Kirkland & Ellis or Sullivan & Cromwell, they surpassed $5m. Each equity partner at Wachtell, Lipton, Rosen & Katz, the richest of the lot, raked in $7.5m, up from $6.3m in 2019 (and, housebound, had to spend less of it to maintain a certain sartorial standard, captured in the term “white shoe” that still refers to New York’s elite firms).The billable-hour bonanza has left firms with more money to lure new recruits. That is just as well. With the supply of legal professionals limited by elite law schools’ refusal to admit many more students, firms are engaged in a fierce battle for talent. Last month Milbank, another big firm, raised its starting salaries for new associates from the industry standard of $190,000 to $200,000. A day later Davis Polk offered freshman lawyers $202,500. Partners at other firms say they matched Davis Polk within 24 hours, lest they be considered second-tier. Most big firms are awarding special spring bonuses to associates who billed enough hours (typically 60 a week or more)—which plenty have done in these febrile times. The money, says the head of one big firm, is a reward for hard work. It is also, he acknowledges, an effort to stop desertions. Poaching is rampant at all levels of these organisations. McDermott Will & Emery, a fast-growing firm from Chicago, hired six new outside partners in May alone. Even firms famous for staff loyalty, such as Cravath, Swaine & Moore or Wachtell, have lost lawyers to rivals. A senior partner at a large firm says he begins his day by opening emails from recruiters inquiring about his availability. He then peruses career announcements in legal periodicals. For the first time in 20 years Major, Lindsey & Africa, a large legal recruitment firm, is looking to Australia and Canada for associates with dealmaking experience to place at New York firms. Not all elite American firms have prospered in the pandemic. The current conditions have favoured partnerships with expertise in complex transactions, such as Wachtell or Davis Polk. Some generalists have done less well. Profits per partner at Baker McKenzie, a Chicago-based giant, declined by nearly 10% in 2020. The dealmaking specialists could suffer if the merger-and-acquisition boom peters out, as is already happening to the SPAC craze, which provided lawyers with oodles of work in late 2020 and early 2021. And as America reopens those covid-crimped expense accounts could begin to swell again, squeezing margins.Managing partners are therefore thinking about what comes next. Mayer Brown is expanding its restructuring and bankruptcy practice, perhaps in anticipation of an end to government stimulus programmes that have kept many businesses afloat. Many others are beefing up their antitrust and regulatory practices as President Joe Biden and his Democratic Party in Congress threaten to regulate big business and go after dominant companies, from Silicon Valley to Wall Street. The white shoes will not suffer a shortage of well-heeled clients soon. More

“IT WILL BE humbling. It will be spiritual.” This is how Virgin Galactic wooed customers with the prospect of a few minutes in space in 2004. Within five years, the space-tourism firm claimed, it would take a total of over 3,000 passengers on life-changing jaunts in its spaceships. On July 11th, after a last 90-minute delay, Virgin Galactic finally began to make good on that promise. Its VSS Unity rocket plane was released from a support aircraft, fired up an engine that accelerated it to three times the speed of sound and soared 85km above Earth’s surface. Thence, for four minutes, its six temporarily weightless passengers, including the firm’s British co-founder, Sir Richard Branson, beheld the planet’s curvature against the blackness of outer space, before returning to a spaceport in New Mexico.It is unknown if Sir Richard, not known for humility, felt any up there. Back on the ground he called the experience “magical”. Even if he did, he probably also gloated a bit, having just pipped Jeff Bezos, a fellow (much wealthier) billionaire to the heavens. On July 20th Amazon’s recently retired boss plans to go slightly higher, for slightly less time, in New Shepard, a vertical-launch vehicle built by his own spacefaring company, Blue Origin.The tycoons are among a growing group of enthusiasts that believe space tourism’s time has finally come. A handful of paying customers have flown in Russian spacecraft built as part of a government space programme. Virgin Galactic and Blue Origin, by contrast, designed and built their own vessels for the purpose of lobbing paying passengers beyond the upper reaches of Earth’s atmosphere. “For the first time, we have large, well-funded firms devoted to developing space tourism at scale,” says Matthew Weinzierl of Harvard Business School.Suborbital tourism is part of a broader space economy that has boomed over the past decade thanks to advances in rocketry and satellite technology. Entrepreneurs and financiers are invading what was once the preserve of governments. In 2020 investors poured $28bn into space businesses, hoping to emulate the success of SpaceX, which has slashed the cost of orbital launches thanks to its ingenious reusable rockets and is valued at $74bn. Bank analysts see vast riches in the stars. Those at Morgan Stanley expect the entire space economy to generate $1trn in revenue by 2040, from $350bn today. Their counterparts at UBS forecast $800bn by the end of this decade.Space tourism, UBS thinks, will make “a big contribution” to that total if it proves a stepping stone to replacing mass long-haul aviation with hypersonic travel. That is highly unlikely. For now Blue Origin and Virgin Galactic will offer brief suborbital flights. Sir Richard floated slightly below the Kármán line, usually defined as 100km (62 miles) above Earth’s surface, where air becomes too thin to sustain unpowered flight. If all goes to plan, Mr Bezos will float a bit above it (a distinction that Blue Origin has, unsportingly, repeatedly highlighted on Twitter).But sub-orbital space tourism is not Blue Origin’s main goal. The company is focussed on developing a large new rocket, the New Glenn, for launching satellites, on selling advanced rocket engines to other companies and on bidding on NASA contracts such as that for a system to land humans on the Moon. In the long run Mr Bezos sees Blue Origin as fostering the development of a large-scale space-based economy rather than offering services to thrill seekers.That is not to say that Blue Origin’s bigger rockets will not, someday, take paying customers who want to go to orbit for fun. SpaceX, though not driven by the tourist market, is beginning to make some money from it as a sideline. It is making seats on the Crew Dragon capsules which it uses to deliver astronauts to the International Space Station (ISS) available to private citizens by way of a company called Axiom Space, which has an agreement with NASA to send its first tourist to the ISS next year. Before that the Inspiration4 mission, paid for by Jared Isaacman, who runs a payments company, will see Mr Isaacman and three companions orbit the Earth in a Crew Dragon without visiting the ISS.Even suborbital jaunts have an appeal, apparently. Nearly 7,600 people bid to accompany Mr Bezos on his flight. The (still-anonymous) winner coughed up $28m. A survey by Cowen, an investment bank, found nearly two in five people with a net worth of over $5m would consider paying $250,000, Virgin Galactic’s current price, for a ticket. Given that Earth is home to around 2m such people, according to Capgemini, a consultancy, that sounds like a decent-sized market.Virgin Galactic says it has a waiting list of several hundred willing travellers (which according to Sir Richard includes Elon Musk, SpaceX’s boss). At current prices the business could be lucrative, once regular flights begin to offset the rockets’ development costs. Chamath Palihapitiya, a venture capitalist and Virgin Galactic’s chairman, has said he expects operating-profit margins in the industry to reach nearly 70% at scale, comparable to that of a software company.Despite its boosters’ claims, however, space tourism is unlikely to be a large part either of the space business or of the tourist industry—at least in the next decade or two. New technologies and frequent trips could help reduce costs but how fast and by how much is uncertain, says Douglas Harned of Bernstein, a broker. Morgan Stanley recently cut Virgin Galactic’s projected annual revenues by 2030 from $1.8bn to $1.3bn, less than half as much as Sir Richard’s Virgin Atlantic airline made before covid-19 grounded most air travel. Without tourist friendly destinations to visit (the capacity of the ISS is strictly limited), orbital tourism, with its far higher ticket prices, is unlikely to be a huger earner.Investors are not falling over themselves to get into the sector. Several space-tourism startups, such as Rocketplane, Armadillo Aerospace and XCOR Aerospace, have thrown in the towel. This year the popular space-themed exchange-traded fund run by ARK Invest, a tech-investment firm, dumped most of its shares in Virgin Galactic, which went public in 2019. Both Sir Richard and Mr Palihapitiya sold much of their stakes in the firm to free up cash in the past few months. Retail traders on the WallStreetBets Reddit forum talk of shorting the stock.Another challenge—and the biggest uncertainty—relates to safety. History has shown that a disaster, particularly in an industry’s early stages, can set progress back by years and cause demand to wilt. NASA suspended its programme to send untrained civilians to orbit in 1986 after a schoolteacher perished along with the rest of the crew in the Challenger disaster. It took 15 years for another civilian to brave the journey (on a Russian craft).The risk is lower for suborbital missions, which place fewer demands on life support systems and increasingly come fitted with emergency abort technology, explains Jonathan McDowell, an astrophysicist at Harvard University. America’s Congress instituted a “learning period” for commercial spaceflight in 2004, leaving medical and safety standards up to the private firms, so long as customers are clearly warned about the risks. But those are not insignificant for passengers barrelling at Mach 3 or more strapped to a pile of high-explosives. As Mr McDowell put it, “being safer than orbital flight doesn’t make it safe.” VSS Unity’s sister craft perished in an accident in 2014.Even without any accidents, problems may arise when the learning period expires in 2023. Strict top down regulation in designing, building and operating commercial human spaceflight could mean that industry “will no longer have the freedom to pursue new approaches to improving safety”, says Karina Drees, president of the Commercial Spaceflight Federation, a trade group. Add more humdrum annoyances such as launch delays, which are common and often longer than an hour-and-a-half, and space tourism may remain a hobby for a few superrich with a daredevillish streak and lots of time to spare. Not exactly a mass market, then, for the time being. ■ More

IT WASN’T a bad start for Andy Jassy, who on July 5th succeeded Jeff Bezos as boss of Amazon. The next day the share price of the digital empire, which Mr Bezos had led since founding it as an online bookshop in 1994, rose by nearly 5%, and its market value jumped above $1.8trn. Mr Jassy’s undoubted managerial virtues probably weren’t the reason. The likelier cause is the Pentagon’s decision to bin a cloud-computing deal with Microsoft. The $10bn contract, which Amazon had challenged, arguing it was unfairly awarded to its rival, is instead to be shared by the two tech giants and possibly others. Still, if the new CEO is to maintain Mr Bezos’s sterling record, a little luck won’t hurt.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

MESSAGING IS AN intimate medium for sharing private views and sentiments. It is a cocktail-party whisper in digital form, as one user of WhatsApp, a service owned by Facebook, put it. Now some of the world’s biggest brands are venturing into this personal realm. Aware of the limitations of conventional communication channels like call centres and email, a few years ago firms started using WhatsApp and its sister app, Facebook Messenger, as well as Apple’s iMessage and independent apps such as Line.The pandemic gave all such apps a fillip. Messaging on Instagram, Facebook’s photo-sharing app, and on Messenger rose by 40%. Four-fifths of mobile-device time is now spent on chat apps. Companies can usually be relied upon to go where customers are, so messaging has become vital for business, not just experimental, says Javier Mata, founder of Yalo, a startup whose technology connects firms to messaging platforms. Firms once used them chiefly for customer service. Now they want to get people to buy stuff via chat, as hundreds of millions of Chinese do on WeChat, owned by Tencent, China’s mightiest tech giant.Because many popular messaging platforms are encrypted, data on transactions are hard to come by. But growth is undoubtedly happening. Over 1bn people now interact with businesses via chat, not counting China. Each day 175m people send a message to WhatsApp business accounts (WhatsApp channels designed for companies). Yalo’s customers include consumer-goods giants such as Coca-Cola, Nestlé, PepsiCo and Unilever, as well as Walmart, the world’s biggest retailer. Apple Business Chat, which started in 2017, is used by Home Depot DIY stores, Hilton hotels and Burberry, a fashion brand. Facebook’s roster includes Sephora, a cosmetics retailer, and IKEA, a furniture giant. LVMH, a French luxury-goods conglomerate, is testing out messaging, according to Jeroen van Glabbeek, chief executive of CM.com, a Dutch conversational-commerce platform.“C-commerce” is already entrenched in Asia and Latin America, where spotty access to broadband and high-quality devices puts e-commerce and company-specific apps out of reach for many. Now Western consumers are beginning to embrace the ease, speed, personalisation and convenience of messaging. For firms, the return on investment seems higher for messaging than for call-centre exchanges or email chains, says Emile Litvak, head of business messaging at Facebook.Boosters of business messaging claim that c-commerce will displace e-commerce within a decade or two. But messaging is best understood as a refinement of e-commerce, and a sibling of “social commerce” (shopping on social media). Most messaging conversations between large firms and consumers start from corporate e-commerce websites equipped with a “click to message” button. Plenty begin on social networks.In some ways c-commerce is a throwback to the past. Apart from mail order and its modern guise, online shopping, trade has relied on conversation for millennia. Yet business messaging does have new elements. It is more personalised than SMS marketing, which has itself had success in recent years in America and Europe. Automatic messaging is moving beyond rudimentary chatbots, which have been around since the mid-2010s. Artificial intelligence (AI) is getting better at unstructured exchanges that shoppers used to have with expert retail assistants.For now, says Marc Lore, who led Walmart’s digital efforts, a lot of business messaging has humans in the loop. In future, he reckons, AI will be able to answer customer requests as fuzzy as “get me a birthday toy for a five-year-old around science education for roughly $40”, suggesting choices and completing the transaction in seconds. And when AI gets better at natural dialogue, as it will after learning from human interactions, consumer-to-business messaging may sound if not exactly like J.A.R.V.I.S, Tony Stark’s digital butler in the Marvel comics, then close enough.Until that time, firms must tread delicately. Full of family and friends, chat apps are emotional spaces, says Robert Bennett, CEO of Rehab, an agency that helps brands reach consumers digitally. Try to sell someone yoga leggings after an exchange with their mother, he says, and your firm might find itself deleted faster than an ex. But get it right—think gentle reminder of evening meditation from a purveyor of herbal teas—and the rewards look tasty. ■This article appeared in the Business section of the print edition under the headline “Chat-up lines” More