Philippa Kaur

PRESIDENT DONALD TRUMP’S demand in August that ByteDance sell TikTok to an American firm set off a race for the Chinese firm’s trophy asset. Jockeying for the popular short-video app’s American business, with 100m users, was fierce. Microsoft seemed ahead, and got a late fillip when Walmart joined its bid. But the software-and-grocery duo was pipped to the post. On September 14th Oracle, a database firm, signalled it had brokered a deal.
Oracle’s clinching argument in its favour seems to have been its rapport with the White House. Larry Ellison, Oracle’s founder and chairman, hosted a fund-raiser for Mr Trump. The firm’s boss, Safra Catz, served on his transition team in 2016. “She lobbied a lot in Washington and she did a great job,” says a ByteDance investor. Oracle also enlisted the firm’s powerful American venture-capital backers, including Sequoia Capital and General Atlantic.

Details of the planned transaction are still being ironed out. But it looks like a U-turn for Mr Trump, who for months seemed hellbent on a full sale of TikTok by ByteDance—which the Oracle deal is not. His stated reasons concerned national security: the risk of TikTok handing Americans’ data over to China’s Communist Party and of running disinformation campaigns on behalf of China. (TikTok insisted it would never hand users’ data to China and that it has no propaganda role.)
The deal leaves both the president’s supporters and critics of his strong-arming of TikTok scratching their heads. Josh Hawley, a Republican senator from Missouri, called the deal “flatly inconsistent” with Mr Trump’s original executive order, which promised to ban the app unless its ownership changed by September 20th.
Perhaps to help make up for the absence of a clean sale, ByteDance is giving Oracle sway over all of TikTok globally rather than just America, Canada, Australia and New Zealand. Microsoft and Oracle were offering around $25bn-30bn to acquire these four markets. The revised plan is for ByteDance to place global TikTok into a separate company with headquarters in America. ByteDance would remain the majority shareholder. Its American VC investors are expected to come in as minority shareholders alongside Oracle—an arrangement that suits them better than TikTok’s sale to Microsoft, which would have deprived them of meaningful influence over the world’s hottest social-media property.
The Committee on Foreign Investment in the United States (CFIUS), a federal oversight body which has been examining TikTok for months, will assess the transaction by September 20th. It then falls to Mr Trump to give it the formal go-ahead. People close to ByteDance worry that China hawks around him could still derail it.

Chinese majority ownership still rankles. Oracle and ByteDance also have no clear answer to worries about disinformation. And though Oracle will host and process all American data in its computing cloud, and possibly that of TikTok users globally, the deal does not sever TikTok’s links with its Chinese parent. ByteDance will keep supplying, running and updating the algorithm that powers TikTok’s “for you” page. Microsoft argues it would have made a better TikTok steward, for example by continually vetting the algorithm. In an acerbic concession note, the software giant said it will monitor TikTok’s future progress in the areas of “security, privacy, online safety and combating disinformation”.
The fudge may suit Mr Trump fine. Risks associated with banning TikTok have risen. On August 28th China’s commerce ministry invoked its own national-security concerns to block the sale of ByteDance’s algorithm to foreigners. It seemed to dare the president to go for a ban, the legal basis for which has always looked shaky. According to an American diplomat, the executive orders on TikTok were drafted by Peter Navarro, the president’s China-bashing economic adviser. They did not go through the usual vetting process by lawyers and bureaucrats and could contain holes; ByteDance has already filed a lawsuit. Mr Trump’s other advisers also cautioned against a ban that could irk millions of TikTokers in battleground states like Texas and Florida.
The most obvious winner from the farrago is China’s government. Its bureaucrats played the political chess game to perfection, notes a ByteDance investor. The Chinese firm gets to keep some of its prize asset rather than sell it on the cheap. Oracle will benefit, especially if it manages to wrest TikTok’s cloud contract from Google—though the internet giant may challenge such a move in court. Microsoft, which also has a big cloud platform, looks the loser. But given the chaos and uncertainty of dealing with Mr Trump, the runner-up might in time come out ahead. ■
This article appeared in the Business section of the print edition under the headline “Trump card” More

CATCHING SNOWFLAKES is fun. It has become lucrative, too. Investors scrambled for shares in Snowflake, a maker of database programs, as it went public on the New York Stock Exchange on September 16th. The eight-year-old firm more than doubled its valuation the first day of trading, from $33bn to over $70bn, making its initial public offering the largest ever for a software firm. Even Warren Buffett, abandoning his customary tech-shyness, got in on the action. The legendary investor’s conglomerate, Berkshire Hathaway, put $735m into the firm, through a separate private placement and by purchasing shares from a former chief executive—a stake that is now worth $1.56bn.
The excitement shines a light on an obscure corner of information technology: software for managing corporate data. This database market already generates $55bn a year in sales (see chart). It is expected to expand rapidly as data become, if not the new oil, then at least an input for most companies. And it is changing in intriguing ways—not all of them good for Snowflake.

A database used to be best understood as a digital steam engine. Before electricity came along, a factory’s machines sat near a single power source. Similarly, corporate applications—programs that keep track of a firm’s finances or its supply chain, say—were built around databases housing all of a firm’s important information. Hard disks were pricey and had limited capacity so the best way to store it was in lean “relational” databases. Max Schireson, who used to run MongoDB, a database-maker, and now works for Battery Ventures, an investment firm, likens these to “a parking garage where, to save space, you put all the seats in one place, the tyres in another and so on”. The industry became dominated by a few firms, with Oracle leading the pack.

As storage got cheaper and data volumes exploded, though, startups erecting new kinds of digital car park proliferated. Many focus not on tracking specific transactions but on analysing all manner of data to glean relevant knowledge about a business, such as where certain products sell best. These more cluttered “data warehouses”, as they are known, were pioneered in the late 1970s by a firm called Teradata. Their latest iterations are “data lakes”, which take in all sorts of unstructured information, including text and pictures.
Snowflake has gone a step further. It was one of the first firms to lift database systems from companies’ in-house data centres and into the computing clouds, the biggest of which are operated by Amazon, Google and Microsoft, a trio of tech giants. Snowflake’s customers can add capacity as needed—and pay depending on their use rather than a fixed price for a software licence, as was typical for relational databases. Better yet, its “multi-cloud” service works across the three big computing clouds, so customers need not get locked into any one of them. Recently Snowflake has also added features that let customers share and sell data, setting itself up as a data exchange of sorts.
This has convinced many that Snowflake could be the next Oracle. The firm is certainly on a roll. Although it has yet to make money, its losses, of $171m in the six months to July, have declined as revenue has more than doubled year on year, to $242m. On current trends sales could reach nearly $1bn in the next 12 months.

Despite these promising numbers, and the market’s blessing, Snowflake has its work cut out. The company’s uniqueness will not last much longer, says Donald Feinberg of Gartner, a research firm. Rival firms, in particular the big cloud providers, have been beefing up competing products and have even dabbled with the multi-cloud. A few startups are already offering cheaper and more flexible “open source” alternatives such as ClickHouse, a particularly zippy data-management system sold by a startup called Altinity.
Other challengers are building more specialised digital repositories. Data generated by websites, for instance, are often stored on “document-oriented” databases that, in the garage analogy, keep cars intact rather than strip them for parts. MongoDB is the market leader in this segment. Confluent, another startup, is big in “streaming” databases that garner information from sources like sensors. These are more akin to a motorway service station: data are quickly checked to see if action is needed.
Much as today’s assembly lines are driven by dispersed electric motors rather than a single steam engine, then, corporate IT systems will increasingly rely on sundry specialised databases, predicts Zane Chrane of Bernstein, a broker. That—and the fact that data will increasingly be analysed in real time, rather than saved in a conventional database—will limit the power and profits of any single supplier. So Snowflake is unlikely ever to become as dominant as Oracle. Snowflakes fly high in a flurry. They also melt.■
This article appeared in the Business section of the print edition under the headline “Steam engine in the cloud” More

IN THE AUTUMN of 2010 le tout Paris of business braced for the sad, if predictable, end of an era. After 173 years and six generations, Hermès, a purveyor of handbags to bankers and neckties to their husbands, was to become part of LVMH. The champagne-to-evening-gowns mastodon, home to Louis Vuitton and Christian Dior, among many others, had disclosed a stake of 17% and rising. Bernard Arnault, LVMH’s boss, with a knack for closing in on companies he admires, had only to pick off a few Hermès heirs ready to cash out. Bankers assumed the “wolf in cashmere” would take mere weeks to gobble up his elegant prey.
Fast forward to autumn 2020, and the various descendants of Thierry Hermès not only still control their family’s firm, they have beaten LVMH at its own game. One of their own, Axel Dumas, has reclaimed the helm from an outside manager. Mr Arnault has all but scarpered off the Hermès shareholder register and moved on to other targets, though not always successfully: on September 9th LVMH said it would not go ahead with a $17bn bid for Tiffany, an illustrious American jeweller. By just about any measure, Hermès has led the luxury pack, nearly trebling revenues between 2010 and 2019, to €6.9bn ($7.7bn). Operating margins last year hit 34%, best in the industry. Even as it has been roiled by covid-19, its market capitalisation has risen this year to €78bn, while big competitors have shrunk.

Plenty of companies, particularly those with family histories, resist the lure of takeovers by bigger rivals. Often the decision is guided by pride rather than financial sense. Hermès provides a road map of how to stay independent—and how it can pay off.
The first step was to keep the wolf at bay. Though listed since 1993, most of Hermès’s shares belonged to 60 or so descendants, split into various branches. Hermès threw up all manner of defences. Mr Arnault was publicly rebuked as a corporate raider (less polite language was used). Lawyers attacked the underhand way in which his stake was built through complex financial products that skirted disclosure rules (LVMH was later fined €8m by the markets regulator). Ultimately, Hermès family members eager to remain in charge created a structure which pooled just over 50% of shares, committing themselves to owning their stakes come what may until 2031. By 2017 Mr Arnault had given up.
The second step is to use independence wisely. That Mr Arnault coveted Hermès is testament to its good management. But the general rule in the past decade has been that multibrand conglomerates like LVMH, Richemont (home of Cartier and Montblanc) or Kering (Gucci and Saint Laurent) hold an edge over single-brand outfits like Burberry, Prada or Hermès. The cost of building new e-commerce capabilities can be spread more widely; size gives a bargaining advantage with landlords. Creators are lured to the biggest names in a virtuous loop of desirability.
Hermès might have struggled to compete head-on. So instead—and this is the wise part—it played to its strengths. While rivals flocked to the fashionable, ostentatious and cutting-edge, it erred on the side of discretion, timelessness and tradition. Its biggest hits today, the Birkin and Kelly handbags that often sell for $10,000 or more, are refreshed versions of what it has sold for decades. It can do whimsy and eye-catching: its website currently features a functioning porcelain skateboard, a snip at €3,350. And whereas a Dior dress will last one season, an Hermès product is for life. As creative directors shuffle from one brand to the next, at Hermès the same designer has overseen menswear since 1988.

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Understatement works as a strategy only because Hermès enjoys an aura of exclusivity. This gives it pricing power to sell knick-knacks for over ten times what they cost to make. Waiting lists for Birkins stretch for years. Because much of what it sells carries through the seasons, Hermès does not need discounts to get it off the shelves. That preserves both margins and the brand, a luxury group’s most valuable asset. The firm claims not to have a marketing department. It is the kind of claim a clever marketing department might dream up, but Hermès does spend only around 5% of revenues on advertising and promotions, half the share of rivals.
The stolid approach has paid off in the pandemic. Sales will probably drop this year because of store and factory closures in the spring. But Hermès looks in better shape than its competitors, says Luca Solca of Bernstein, a broker. It is less reliant than they are on Asian tourists shopping in Paris or New York. It makes most of its wares itself, so does not need to bail out third-party suppliers. Demand wobbles are less of a problem given those long waiting lists. And if well-heeled consumers are to spend in a recession, they favour timeless brands.
For success to endure, Hermès heirs may require one more thing. The company is a digital laggard. A mere 2-3% of its sales last year came from its website, half its rivals’ share. Its Instagram account—a measure of a brand’s buzziness—has just 10m followers, compared with 41m for Chanel or Gucci. It lacks younger consumers who inject brands with vitality; according to Citigroup, a bank, only a quarter of sales are to Gen-Zs or millennials (the oldest of whom are about to turn 40).
Tough as leather
Mr Dumas is alive to this. Hermès has started to branch out into cosmetics, offering aspiring shoppers a cheaper entry point than Birkins (or skateboards). It has invested in a Chinese venture, Shang Xia, that may be useful if consumers in China—big buyers of luxury goods—start coveting local baubles instead of French ones.
Such moves are not so different from Mr Arnault’s. He might have executed the same savvy strategy at Hermès; LVMH executives still speak of the “brand that got away” with reverence. But the Hermès clan can draw satisfaction from the fact that their investment in the family firm has yielded returns of over 400% since 2010—even juicier than if they had traded their stakes for LVMH shares. ■
This article appeared in the Business section of the print edition under the headline “The one that got away” More

THE MEMOIRS of chief executives can be exercises in pompous self-justification or, just as bad, in grandiose philosophising about social and political trends. Occasionally, however, a corporate titan writes a book that is both readable and a practical guide for managers hoping to follow in their footsteps. David Cote, the former CEO of Honeywell, an industrial conglomerate, has produced an excellent effort with “Winning Now, Winning Later”.
It is true that Mr Cote occasionally comes across as a bit of a martinet. When a team failed to come up with suggestions to cut costs, he ordered them to cancel all other meetings and keep talking until they produced the results. And his juniors were clearly kept on their toes; he was also very much a hands-on manager. “The idea that as a leader you can focus on strategy and delegate its implementation to great people is a fallacy,” he writes. But his approach paid off and the book is a detailed guide to the tricky task of managing a big business.

To give one small example, plenty of executives talk about encouraging greater diversity in the workforce, but little gets done. Mr Cote was fed up with junior managers declaring that they could not find suitable candidates in their area. So he had his team break down the population statistics in places where his factories were located to demonstrate that there should be many opportunities to hire workers from different backgrounds. Diversity duly improved.
The author’s broader aim is illustrated by his subtitle: “How Companies Can Win in the Short Term, While Investing for the Long Term”. He thinks the idea that corporate leaders have no choice but to embrace short-termism in the face of pressure from investors is “one of the most pernicious beliefs circulating in business today”.
When Mr Cote took over at Honeywell in February 2002, he says the company was “a train wreck and on the verge of failure”. Remarkably, the board and outgoing boss refused him any access to the company’s financials until July 2002, when he also became chairman. What he eventually found was that the group had pursued short-term profits through aggressive accounting practices. During the previous decade, for every dollar in earnings Honeywell generated only 69 cents in cash.
He changed the accounting approach, put a greater focus on investment and aimed to expand the business while keeping fixed costs constant. Some of the biggest problems he faced were legacies of the previous regime. For example, former managers had sold a company for $60m but agreed to be liable for meeting asbestos claims in perpetuity. By the early 2000s, the asbestos liability was $1bn. He tried to deal with all such legal claims as quickly as possible. “It’s probably going to be cheaper for your organisation to resolve your legacy issues now than it will be a decade from now, when the harm will have mounted even more,” he writes.

When it came to improving the business, Mr Cote spent a lot of time focusing on Honeywell’s processes. Collectively, these changes were known as the Honeywell Operating System and they included such steps as reducing the use of toxic cleaning chemicals, which cut costs, shortened production time and improved worker safety. Reforming a business is a never-ending task. “Over time all organised systems evolve towards chaos,” he writes. “Unless you pursue change relentlessly, your efforts will eventually wither away.”
Over time, all this made a difference. The company increased investment in research and development from 3.3% of sales in 2003 to 5.5% in 2016, and its operating margins rose from 8% in 2003 to about 16% in 2018. Investors were impressed. Honeywell’s market value rose from $20bn when he took over to $120bn when he left in 2018, with returns easily beating the S&P 500 index.
One suspects Mr Cote’s focus on detail was more important for the company’s success than some of the more standard corporate pronouncements he reveals. Honeywell developed five “initiatives” and 12 “behaviours”, which seems way too many for an employee to keep track.
And despite his best efforts, he does not quite solve the dilemma expressed in his subtitle. At one point, he admits that “Pursuing both short- and long-term performance requires a period of upfront investment during which performance might lag for a little while.” In other words, even an able manager like Mr Cote needs a bit of luck, and patience on the part of directors and shareholders, to turn a company around.
This article appeared in the Business section of the print edition under the headline “The delight is in the detail” More

HUAWEI IS ON the ropes. From midnight on September 14th the Chinese technology giant will be cut off from essential supplies of semiconductors. Without chips it cannot make the smartphones or mobile-network gear on which its business depends. America’s latest rules, finalised on August 17th, prohibit companies worldwide from selling chips to Huawei if they have been made with American chipmaking kit. American semiconductor companies, for which Huawei has been a lucrative customer, have implored their government to extend the deadline, as have their industry bodies. A full reprieve looks unlikely.
Huawei now looks likely to follow one of three paths. The first involves Washington granting licences to suppliers so that they can sell chips to the firm in a limited fashion. This would let Huawei stay in business—just about. MediaTek, a Taiwanese chipmaker that is one of its main suppliers, has petitioned America’s Department of Commerce (DoC) for such a permit. To keep Huawei’s edge blunt, suppliers keen to produce chips designed by its in-house semiconductor unit, HiSilicon, are unlikely to be issued such dispensation.

Even a debilitated Huawei may not satisfy America. The DoC’s default setting is to deny permits. That would force the Chinese firm to take more desperate action, such as making its own chips using older technology that could be sourced from supply chains that do not include American firms. Pierre Ferragu of New Street Research, a telecoms-and-technology research firm, expects Huawei to do this within 12 months.
This path has just become rockier. On September 4th Reuters reported that America’s Department of Defence has proposed putting Semiconductor Manufacturing International Corporation (SMIC), China’s leading chipmaker, on the same blacklist as Huawei. The Pentagon alleges that SMIC works with China’s armed forces, and so poses a threat to national security. A blacklisting would destroy SMIC’s business, which relies on American machine tools. Its share price fell by almost a quarter on the news. SMIC denies having military ties and said it is in “complete shock”. The threat of such action may dissuade SMIC from teaming up with HiSilicon, as Huawei might have hoped.
This leaves the third eventuality. Huawei may go bust, or be forced to sell off bits of its business. This would not happen immediately: at the end of 2019 it had cash reserves of 371bn yuan ($53bn), enough to cover operating costs for a year and a half. But if push comes to shove, it may offload HiSilicon. Huawei’s chip-design arm is one of the most advanced such outfits in the world. According to IC Insights, a firm of analysts, HiSilicon broke into the global top-ten design companies by revenue in the first half of 2020, the first Chinese firm to do so. Since it will no longer be able to design chips for its owner after September 14th, HiSilicon could profitably focus on doing so for third parties in China. That would generate a new revenue stream for Huawei. If instead Huawei were forced to shut HiSilicon, its laid-off engineers would be snapped up by chip-design teams at other Chinese technology giants like Alibaba, Tencent and ByteDance. Or they could start new design firms of their own; many are said to be slipping out pre-emptively.
Each scenario worries firms like Qualcomm. The big American chip-designer lists Chinese competition as a risk in its annual filings. Last year Chinese sales made up $11.6bn out of Qualcomm’s $24.3bn in revenue. A HiSilicon liberated from Huawei would threaten those sales.

Huawei is putting on a brave face. It says it will spend over $20bn on research and development this year, $5.8bn more than in 2019 and about as much as Amazon, a firm with double its sales. It hopes to gain new revenue streams less vulnerable to American attacks. These are unlikely to let up even if Joe Biden becomes president next year. But as Uncle Sam tightens the grip, it risks squeezing Chinese technology into a form which it no longer controls. Huawei hopes to hang on until then.■
This article appeared in the Business section of the print edition under the headline “Creative destruction” More

“WE ARE NOT manufacturers of water. We are porters of nature.” So goes a famous quip by Zhong Shanshan, the 66-year-old founder and boss of Nongfu Spring, China’s most popular brand of bottled water. On September 8th the Hangzhou-based bottler listed on Hong Kong’s bourse to spectacular fanfare. Demand for shares from retail investors outstripped supply by 1,148 times (see chart). The share price shot up by 60% over the first three days of trading. Its market capitalisation reached $53bn. Mr Zhong, who still owns 84% of Nongfu Spring, is now China’s third-richest person, narrowly trailing two tech moguls: Jack Ma of Alibaba and (unrelated) Pony Ma of Tencent.
Rising disposable incomes and public anxiety about the safety of tap water, which is unfit to drink in most of China, have fuelled demand among Chinese for the bottled variety. Consumption per person of bottled water rose from 41 litres in 2014 to 59 litres in 2019, according to data from Mintel, a market-research firm. Americans, by comparison, guzzled an average of 141 litres last year. That suggests Chinese bottlers still have plenty of room for growth, not least because tap water in America is (typically) potable.

Nongfu Spring is the runaway industry leader. It accounted for 29% of the volume sold in China in 2019. Foreign brands such as FIJI Water, Evian (owned by Danone) and Aquafina (part of PepsiCo) are easily spotted in many Chinese supermarkets. But none has a market share greater than 6.5%, reckons Mintel.

One reason for Nongfu’s success is its effort to cater to all market segments. Stingy folk can buy a mass-market 380ml-plastic bottle for as little as 1.5 yuan ($0.22). The well-heeled may opt for the glass-bottled version, which comes with “award-winning” designs and retails for 30-45 yuan. In between you can get a lithium-rich liquid which is claimed to benefit the nervous system. Total revenues across Nongfu’s waters increased by 42% between 2017 and 2019, to 14.3bn yuan. Gross margins held steady at an impressive 60%.
Nongfu sceptics point out that the bottled-water industry, in China and elsewhere, has few technical barriers to entry. The main raw material is polyethylene terephthalate (PET), a plastic that is cheap and easy to process. No special knowledge is required. Evergrande, a Chinese property developer, boasts its own line of bottled water called Evergrande Spring. The water itself tends to be an afterthought.
Not in Nongfu’s case. As its aggressive marketers never tire of stressing, it possesses water-extraction permits for ten of China’s most famous unspoilt bodies of water—from Thousand Island Lake in the eastern province of Zhejiang to Mount Tianshan in the remote western region of Xinjiang. The permits, granted by local governments for up to 30 years, are a moat against competitors. Loris Li, an independent analyst of China’s beverage industry, observes that “the quality of the original water source” can be a strong point of brand differentiation.
Nongfu Spring has another edge: it is seen as close to Chinese officialdom. At high-level political summits, rows of Nongfu bottles arranged on tables are a common sight. As sources of advantage go, it doesn’t get better than this in China. ■

This article appeared in the Business section of the print edition under the headline “Bottle shock” More

IN THE 1970S Japan gave the world pocket calculators and the Walkman. A less well-known Japanese invention of the era was canned coffee. Fifty years on, the country remains the biggest consumer of ready-to-drink brews, guzzling 3.1bn litres per year, half the global total and enough to fill Tokyo’s new Olympic Stadium almost to the brim. As domestic sales slow—they fell by 12.5% in the five years to 2019, to $11.5bn—Japanese sellers of the stuff are looking abroad, and especially thirstily across the Pacific.
America consumes only around a fifth as much canned and bottled coffee as Japan does. But Americans are developing a taste for it. The market has expanded by 78% since 2014. Margins are more energising than in Japan. This should be a gift to ready-to-drink coffee’s Japanese pioneers. It hasn’t been.

Suntory, a Japanese beverage giant, which dominates its home market for prepackaged coffee, is notable by its absence in America. Matthew Barry of Euromonitor, a research firm, points to differences in consumer preferences between the two countries as one explanation. In America canned coffee is favoured predominantly by young people, and especially young women. They want a large, cold, café-quality beverage in a resealable bottle. In Japan the typical drinker is a middle-aged blue-collar man who buys cans from a vending machine. Another explanation is America’s concentrated market for quality brews. As well as cornering coffee shops, Starbucks accounts for 63% of canned-coffee sales by volume.
The Seattle-based giant is now covetously eyeing Japan, where tastes and consumer habits are growing more similar to Western ones, with a lot more young female tipplers than before, for instance. Starbucks already has nearly 1,600 cafés in the country. Other foreigners, too, are making their presence felt. Japan’s favourite canned coffee, Georgia, is owned by Coca-Cola, which dreamed up the brand in Japan (and named it after its home state). The drinks giant is now launching packaged products by Costa Coffee, a British coffee-shop chain it owns. And last month Blue Bottle, a posh Californian coffee chain owned by Nestlé, a Swiss group, launched its first canned-coffee vending machine—in Tokyo.
This article appeared in the Business section of the print edition under the headline “Caffeine clash” More

THE WORLD’S 7.5bn people want a vaccine for covid-19 as soon as possible. One person needs it by November 3rd. As President Donald Trump limps towards election day, he wants to report real medical progress against the disease. Earlier this year it seemed possible that one or two pharmaceutical firms might be able to obtain some sort of limited approval by the time Americans cast their ballots. That may still be possible. It is certainly desirable, given the pandemic’s toll on lives and livelihoods. But on September 8th, in an unprecedented move, nine global drugmakers, including AstraZeneca, GSK, Pfizer and Sanofi, announced a pledge to uphold scientific and ethical standards in the search for a coronavirus vaccine.
The message is intended to reassure the public that the companies will not bow to mounting political pressure from the White House to rush through a vaccine without the proper safety and efficacy tests. But it is also a rebuke to the president, who has been politicising the drug-approval process—and eroding public confidence in the Food and Drug Administration (FDA). This could undermine trust in any vaccine that arrives, as sooner or later one almost certainly will.

Mr Trump has already successfully harried the FDA to authorise drugs, such as hydroxychloroquine, with no scientific evidence for their efficacy. He has accused the regulator (unfairly) of being part of a “deep state” effort to try to slow down vaccine development until after the election. It looked like part of a strategy to get the regulator to hurry up.
Big pharma is clearly worried. Drug firms stand to lose a great deal if their products are seen as being waved through prematurely. The industry relies on the FDA to make business possible. In the same way that people fly because they trust the aviation regulator, they take medicines because these are believed to be safe and effective. Take away the trust and the medicines’ makers would suffer.
So would investment in research. Pharmaceutical firms have little incentive to develop better drugs if they can simply claim a new product is superior without having to prove it. When Mr Trump came into office, some in his entourage lobbied him to install as head of the FDA someone with a more relaxed approach to efficacy standards. Doctors and patients immediately raised the alarm. But so did drugmakers, who pushed for a more serious candidate to assume the position.
The industry statement makes it clear that vaccine development will move at the pace of science, not politics. More evidence of this came the same day, when AstraZeneca halted clinical trials around the world after one participant showed an adverse reaction. This may slow down vaccine development. But it is also par for the course. Indeed, AstraZeneca’s decision shows that the system is working. Not so much deep state as deep science.■

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This article appeared in the Business section of the print edition under the headline “Strong medicine” More