Philippa Kaur

STANTON, TENNESSEE, looks like a place from a bygone age. The town hall quaintly resembles a 1960s grocery store. Next door is a cannery, where townsfolk use communal stoves to make soups and peach preserve for winter. For much of its history, Stanton’s main source of income has been cotton farming, which was so depressed, many smallholders upped sticks and left.Yet amid the cotton fields something remarkable is taking shape. Ford, one of America’s three big carmakers, is setting up the biggest industrial complex in its history, including an electric-vehicle (EV) plant, a battery factory and a base for its suppliers, with an investment of $5.6bn. A year after it broke ground thousands of acres have been covered with concrete and steel. Construction workers in high-vis jackets stomp into Suga’s Diner, the only food joint in the 400-person town, for lunches of fried chicken and catfish. When Ford announced the project in 2021, the diner had a sign lamenting a shortage of chicken. Now a help-wanted sign points to a shortage of staff. “We are rushed off our feet,” says Lesa “Suga” Tard, the owner.It is a similar story in De Soto, Kansas. Its industrial activity was abruptly cut short decades ago when an army munitions factory was mothballed. In April construction began on a $4bn Panasonic battery factory, the largest investment in the state’s history. Driving to the 9,000-acre site in his pickup truck, Rick Walker, the mayor, points out diggers turning a country road into a four-lane highway, counts the cranes—nine of them—helping erect the factory’s second storey, and talks optimistically about a giant solar farm due to be built nearby.image: The EconomistA drive over several days down parts of America’s “auto alley”, which stretches from the Great Lakes to the Gulf of Mexico, provides a glimpse of industrial history in the making. The country is in the grip of an investment boom in everything from semiconductor “fabs” to solar farms (see map). By late 2022, firms had announced a cumulative $210bn of investments in EV and battery factories in America, up from $51bn at the end of 2020, according to Atlas Public Policy, a data gatherer. Such investments have already contributed to a boom in American construction spending, which has doubled since the end of 2021, according to government statistics.Several factors explain what some are calling America’s manufacturing renaissance. President Joe Biden claims much of the investment is the result of financial incentives resulting from the Chips and Science Act and the Inflation Reduction Act (IRA), two of his signature policies. But state and local giveaways also help. So does the desire to outcompete China, as well as reshoring after supply-chain chaos during the pandemic. In the case of carmakers like Ford, which decided to build at Stanton before the IRA was passed, the fear is that unless they seize the initiative on electrification, they will lose their dominance of America’s car industry to Tesla, the EV front-runner.Given how attached Americans outside a few coastal cities remain to their gas guzzlers, the surge in EV and battery factories may seem like white elephants in the making. Yet the companies behind them clearly see a commercial logic. And the factories are already playing a role in national debates. The EV and battery plants are important points of contention in a strike against Detroit’s big three carmakers, Chrysler (part of Stellantis, whose biggest shareholder part-owns The Economist’s parent company), Ford and General Motors (GM). Both Mr Biden and Donald Trump are due to visit Michigan in coming days, to support the strikes. The United Auto Workers (UAW) is worried that the new factories will be hard to unionise. But the cost of labour is likely to be pivotal in determining whether America’s manufacturers can regain their mojo or not.There is little evidence of a full-blown migration of the car industry from the unionised north to the less union-friendly south. James Rubenstein of Miami University, in Oxford, Ohio, who specialises in the geography of the car industry, notes that non-American carmakers have been building factories in the south for decades. And as much new activity is happening in the old carmaking states as in the new ones. GM’s first contiguous EV and battery plant is in Detroit, close to the dilapidated and graffitied factories left over from the city’s heyday. Two hours’ drive away, Ford plans to build a battery plant in Marshall, Michigan, using technology from a Chinese company, CATL. “Everyone’s getting a pretty fair share of the largesse, both north of the Ohio River and south,” says Mr Rubenstein.image: APThe megaprojects may not, then, be reconfiguring America’s large-scale industrial geography. But at the local level, their impact is extraordinary. They are sprouting up in left-behind places that for years waited in frustration for a manufacturing revival to arrive. These places have several things in common.First, they long ago earmarked huge spaces of unproductive land for industrial development. Allan Sterbinsky, mayor of Stanton, says the town set aside 4,000 acres for industrial development decades ago; the state government even set up an office in Japan to promote it. Toyota, a Japanese car giant, made a few exploratory approaches. But it took Ford to ensure that the town’s ambitions could be realised, he says. In Kansas, De Soto started drawing up plans to rezone 9,000 acres for development a decade ago.The second common feature is the availability of labour. Though many of the new factories are in rural backwaters, they have access to big pools of workers within commuting distance. Once up and running, Ford’s operations are expected to employ 6,000 workers, about 15 times more than Stanton’s meagre population. A technical college on site will in time train future workers. For now, it will be fairly easy to find them in Memphis, which is about a 40-minute drive away, and which the car industry has hitherto overlooked. De Soto has 1.5m potential workers within a 30-minute radius, including Kansas City, so Panasonic should have no problem hiring 4,000 people, says Mr Walker.The new factories will nevertheless contribute to further clustering in the American car industry—a third shared trait. This is helpful in order to minimise the cost of transporting heavy batteries. Ford will have SK On, its South Korean battery partner, on site in Stanton. It will also have car-parts suppliers, such as Magna, directly on its doorstep. Unlike the gigafactory in Nevada, where Panasonic has teamed up with Tesla, the Japanese firm’s De Soto plant will supply more than one customer, and make different types of lithium-ion batteries.The projects’ reliance on copious sources of clean energy, meanwhile, makes them symbiotic with the proliferation of wind and solar developments nearby. The skyline along the Kansas prairies is thick with wind turbines, which generate almost half of the state’s electricity. The Tennessee Valley Authority, a multi-state utility, is investing heavily in new solar and other forms of generation capacity to meet sharply rising electricity demand in the south because of projects like Ford’s.Still, there are a few big bones of contention. One is the cost and efficacy of government incentives to promote the investment boom. Ford and SK, which are also building two battery factories in Kentucky, have conditionally been granted a $9.2bn loan from the Department of Energy. They also hope to qualify for a battery-production tax credit under the IRA. Panasonic will reportedly receive $830m in state-funded tax credits, as well as potential IRA support.A new report by Ahmed Medhi and Tom Moerenhout, of the Centre on Global Energy Policy at Columbia University, calculates that the IRA tax credits provide savings of more than 30% for battery manufacturers, helping bridge the gap between the cost of producing batteries in America and China. However, their success in stimulating investments may make their fiscal costs higher than projected. They are also triggering “subsidy wars” with the European Union. Although they might boost factory towns, that comes at a cost to the taxpayer, and perhaps in the long term, blunts the industry’s incentives to innovate. De Soto had to offer tax breaks and the like to lure Panasonic, which for many months kept its identity secret even from town officials so as not to tip off competitors.Another concern is the environmental and social impact of investments. Companies want to develop greenfield sites in places where demand for labour is not too fierce. But that can stir hostility from locals who resist turning fields into factories and worry about pollution and overuse of local resources, even in the service of a “green revolution”. Some also fear that industrial development will destroy the traditional character of their towns, or increase living costs. At a café in De Soto, Kira Horn, a waitress, describes how at night the lights on the cranes, which work around the clock, make the site look “like a city”. Although people like her boss, who is also an estate agent, are already relishing the business and property boom, some of her young friends worry that it will price them out of buying homes.Then there is the union challenge. Neither Kansas nor Tennessee are union-friendly states. In contrast to GM, which has a unionised factory near Nashville, Tennessee, Ford’s workers at Stanton will not automatically be required to join the UAW. This has caused friction. In June the UAW’s president, Shawn Fain, blasted the Biden administration for lending money to the Stanton project without agreeing wage requirements up front.Ford caught a breather on September 22nd when the UAW decided to expand its strike only at factories run by GM and Stellantis, saying it had made progress in negotiations with Ford. But the carmaker will be loth to give much ground on Stanton. Erik Gordon of the University of Michigan’s Ross School of Business says that the revitalisation of American manufacturing will hinge on automation and labour. The Detroit carmakers’ EVs will be uncompetitive if labour costs are too high, he says.If America’s entrepreneurial muscle is to be rebuilt and left-behind places revived, as the champions of local projects hope, these hurdles will need to be overcome. And Mr Biden’s turn towards subsidies could still bring with it economic costs for the country at large. But, although it is early days, the prospects for Stanton look encouraging. The presence of Ford’s supply chain so close to the factory floor is likely to attract more small businesses. The mayor’s projections show that, as a result of Ford’s investment, the town’s population is likely to grow about 20-fold in just over a decade. Mr Sterbinsky is already securing investments in water, sewage and other infrastructure to support that growth. He has toured southern states to learn how to turn sleepy places into creative hotspots that attract enterprising types. Stanton’s genuine southern treasures, such as the cannery and Suga’s Diner, are a good start. ■ More

STANTON, TENNESSEE, looks like a place from a bygone age. The town hall quaintly resembles a 1960s grocery store. Next door is a cannery, where townsfolk use communal stoves to make soups and peach preserve for winter. For much of its history, Stanton’s main source of income has been cotton farming, which was so depressed, many smallholders upped sticks and left.Yet amid the cotton fields something remarkable is taking shape. Ford, one of America’s three big carmakers, is setting up the biggest industrial complex in its history, including an electric-vehicle (EV) plant, a battery factory and a base for its suppliers, with an investment of $5.6bn. A year after it broke ground thousands of acres have been covered with concrete and steel. Construction workers in high-vis jackets stomp into Suga’s Diner, the only food joint in the 400-person town, for lunches of fried chicken and catfish. When Ford announced the project in 2021, the diner had a sign lamenting a shortage of chicken. Now a help-wanted sign points to a shortage of staff. “We are rushed off our feet,” says Lesa “Suga” Tard, the owner.It is a similar story in De Soto, Kansas. Its industrial activity was abruptly cut short decades ago when an army munitions factory was mothballed. In April construction began on a $4bn Panasonic battery factory, the largest investment in the state’s history. Driving to the 9,000-acre site in his pickup truck, Rick Walker, the mayor, points out diggers turning a country road into a four-lane highway, counts the cranes—nine of them—helping erect the factory’s second storey, and talks optimistically about a giant solar farm due to be built nearby.image: The EconomistA drive over several days down parts of America’s “auto alley”, which stretches from the Great Lakes to the Gulf of Mexico, provides a glimpse of industrial history in the making. The country is in the grip of an investment boom in everything from semiconductor “fabs” to solar farms (see map). By late 2022, firms had announced a cumulative $210bn of investments in EV and battery factories in America, up from $51bn at the end of 2020, according to Atlas Public Policy, a data gatherer. Such investments have already contributed to a boom in American construction spending, which has doubled since the end of 2021, according to government statistics.Several factors explain what some are calling America’s manufacturing renaissance. President Joe Biden claims much of the investment is the result of financial incentives resulting from the Chips and Science Act and the Inflation Reduction Act (IRA), two of his signature policies. But state and local giveaways also help. So does the desire to outcompete China, as well as reshoring after supply-chain chaos during the pandemic. In the case of carmakers like Ford, which decided to build at Stanton before the IRA was passed, the fear is that unless they seize the initiative on electrification, they will lose their dominance of America’s car industry to Tesla, the EV front-runner.Given how attached Americans outside a few coastal cities remain to their gas guzzlers, the surge in EV and battery factories may seem like white elephants in the making. Yet the companies behind them clearly see a commercial logic. And the factories are already playing a role in national debates. The EV and battery plants are important points of contention in a strike against Detroit’s big three carmakers, Chrysler (part of Stellantis, whose biggest shareholder part-owns The Economist’s parent company), Ford and General Motors (GM). Both Mr Biden and Donald Trump are due to visit Michigan in coming days, to support the strikes. The United Auto Workers (UAW) is worried that the new factories will be hard to unionise. But the cost of labour is likely to be pivotal in determining whether America’s manufacturers can regain their mojo or not.There is little evidence of a full-blown migration of the car industry from the unionised north to the less union-friendly south. James Rubenstein of Miami University, in Oxford, Ohio, who specialises in the geography of the car industry, notes that non-American carmakers have been building factories in the south for decades. And as much new activity is happening in the old carmaking states as in the new ones. GM’s first contiguous EV and battery plant is in Detroit, close to the dilapidated and graffitied factories left over from the city’s heyday. Two hours’ drive away, Ford plans to build a battery plant in Marshall, Michigan, using technology from a Chinese company, CATL. “Everyone’s getting a pretty fair share of the largesse, both north of the Ohio River and south,” says Mr Rubenstein.image: APThe megaprojects may not, then, be reconfiguring America’s large-scale industrial geography. But at the local level, their impact is extraordinary. They are sprouting up in left-behind places that for years waited in frustration for a manufacturing revival to arrive. These places have several things in common.First, they long ago earmarked huge spaces of unproductive land for industrial development. Allan Sterbinsky, mayor of Stanton, says the town set aside 4,000 acres for industrial development decades ago; the state government even set up an office in Japan to promote it. Toyota, a Japanese car giant, made a few exploratory approaches. But it took Ford to ensure that the town’s ambitions could be realised, he says. In Kansas, De Soto started drawing up plans to rezone 9,000 acres for development a decade ago.The second common feature is the availability of labour. Though many of the new factories are in rural backwaters, they have access to big pools of workers within commuting distance. Once up and running, Ford’s operations are expected to employ 6,000 workers, about 15 times more than Stanton’s meagre population. A technical college on site will in time train future workers. For now, it will be fairly easy to find them in Memphis, which is about a 40-minute drive away, and which the car industry has hitherto overlooked. De Soto has 1.5m potential workers within a 30-minute radius, including Kansas City, so Panasonic should have no problem hiring 4,000 people, says Mr Walker.The new factories will nevertheless contribute to further clustering in the American car industry—a third shared trait. This is helpful in order to minimise the cost of transporting heavy batteries. Ford will have SK On, its South Korean battery partner, on site in Stanton. It will also have car-parts suppliers, such as Magna, directly on its doorstep. Unlike the gigafactory in Nevada, where Panasonic has teamed up with Tesla, the Japanese firm’s De Soto plant will supply more than one customer, and make different types of lithium-ion batteries.The projects’ reliance on copious sources of clean energy, meanwhile, makes them symbiotic with the proliferation of wind and solar developments nearby. The skyline along the Kansas prairies is thick with wind turbines, which generate almost half of the state’s electricity. The Tennessee Valley Authority, a multi-state utility, is investing heavily in new solar and other forms of generation capacity to meet sharply rising electricity demand in the south because of projects like Ford’s.Still, there are a few big bones of contention. One is the cost and efficacy of government incentives to promote the investment boom. Ford and SK, which are also building two battery factories in Kentucky, have conditionally been granted a $9.2bn loan from the Department of Energy. They also hope to qualify for a battery-production tax credit under the IRA. Panasonic will reportedly receive $830m in state-funded tax credits, as well as potential IRA support.A new report by Ahmed Medhi and Tom Moerenhout, of the Centre on Global Energy Policy at Columbia University, calculates that the IRA tax credits provide savings of more than 30% for battery manufacturers, helping bridge the gap between the cost of producing batteries in America and China. However, their success in stimulating investments may make their fiscal costs higher than projected. They are also triggering “subsidy wars” with the European Union. Although they might boost factory towns, that comes at a cost to the taxpayer, and perhaps in the long term, blunts the industry’s incentives to innovate. De Soto had to offer tax breaks and the like to lure Panasonic, which for many months kept its identity secret even from town officials so as not to tip off competitors.Another concern is the environmental and social impact of investments. Companies want to develop greenfield sites in places where demand for labour is not too fierce. But that can stir hostility from locals who resist turning fields into factories and worry about pollution and overuse of local resources, even in the service of a “green revolution”. Some also fear that industrial development will destroy the traditional character of their towns, or increase living costs. At a café in De Soto, Kira Horn, a waitress, describes how at night the lights on the cranes, which work around the clock, make the site look “like a city”. Although people like her boss, who is also an estate agent, are already relishing the business and property boom, some of her young friends worry that it will price them out of buying homes.Then there is the union challenge. Neither Kansas nor Tennessee are union-friendly states. In contrast to GM, which has a unionised factory near Nashville, Tennessee, Ford’s workers at Stanton will not automatically be required to join the UAW. This has caused friction. In June the UAW’s president, Shawn Fain, blasted the Biden administration for lending money to the Stanton project without agreeing wage requirements up front.Ford caught a breather on September 22nd when the UAW decided to expand its strike only at factories run by GM and Stellantis, saying it had made progress in negotiations with Ford. But the carmaker will be loth to give much ground on Stanton. Erik Gordon of the University of Michigan’s Ross School of Business says that the revitalisation of American manufacturing will hinge on automation and labour. The Detroit carmakers’ EVs will be uncompetitive if labour costs are too high, he says.If America’s entrepreneurial muscle is to be rebuilt and left-behind places revived, as the champions of local projects hope, these hurdles will need to be overcome. And Mr Biden’s turn towards subsidies could still bring with it economic costs for the country at large. But, although it is early days, the prospects for Stanton look encouraging. The presence of Ford’s supply chain so close to the factory floor is likely to attract more small businesses. The mayor’s projections show that, as a result of Ford’s investment, the town’s population is likely to grow about 20-fold in just over a decade. Mr Sterbinsky is already securing investments in water, sewage and other infrastructure to support that growth. He has toured southern states to learn how to turn sleepy places into creative hotspots that attract enterprising types. Stanton’s genuine southern treasures, such as the cannery and Suga’s Diner, are a good start. ■ More

“TO WALK AWAY and retire, it’s a pretty dismal prospect,” Rupert Murdoch told an interviewer in 1998, when he was already well into pensionable age. If he ever did stop working, he added, he would “die pretty quickly”.So the announcement on September 21st that the 92-year-old is stepping down as chairman of Fox Corporation and News Corp, the television and newspaper empires he has built up over more than 70 years, should be treated with some scepticism. Mr Murdoch will stay on as “chairman emeritus” and says he will remain “involved every day in the contest of ideas”. This week he advised staff: “When I visit your countries and companies, you can expect to see me in the office late on a Friday.” It was both a promise and a warning.
The handover of Mr Murdoch’s empire has been a gradual process. He has shied away from earnings calls since the sale of 21st Century Fox, the bulk of his film and TV assets, to Disney in 2019. The question of succession was in effect settled the following year, when James Murdoch, the younger son and sometime heir apparent, left the News Corp board, citing “disagreements over certain editorial content published by the company’s news outlets and certain other strategic decisions”. This left the path clear for Mr Murdoch’s elder son, Lachlan, who will take over from his father at the two family firms.image: The EconomistWhy the change in titles now? Mr Murdoch said in his letter to staff this week that he was in robust health. But investors have recently begun to question those assurances. Vanity Fair reported in April that he had quietly suffered a series of health problems including a broken back, seizures and two bouts of pneumonia. His testimony in a recent legal case against Fox brought by Dominion Voting Systems, which accused the company of damaging its reputation, seemed to lack some of the mogul’s old sharpness.These concerns have coincided with a series of missteps. Fox pursued a calamitous legal strategy in the Dominion case, eventually paying up nearly $800m to settle it. (A related case brought by another voting-technology company, Smartmatic, is expected to go to trial in 2025; Smartmatic is seeking $2.7bn.) It has suffered public spats with some of its anchors, including Tucker Carlson, who was jettisoned in April and has since set himself up on the social network formerly known as Twitter. And an attempt by Mr Murdoch to unify his two companies earlier this year was shot down by shareholders.Those investors may be reassured by Mr Murdoch’s more modest new title. In recent years analysts have come to speak of a “Murdoch discount” applied to Fox and News Corp. Mr Murdoch’s new title means that “his interface with the public markets is over,” says Claire Enders, a media analyst. “But it is obvious that he is the ultimate decision-maker as long as he is alive.”That is reflected nowhere so clearly as his choice of successor. Mr Murdoch set up a decades-long audition between three of his children: Elisabeth, Lachlan and James (his eldest child, Prudence, has mostly stayed away from the company; his two youngest children by another marriage, Grace and Chloe, are still in their early 20s). Though it was James who set up the auction of 21st Century Fox, selling to Disney at the top of the market for $71bn, the job has gone to Lachlan, the child who gets on best with his father. Whereas James and Elisabeth have both criticised the political positions of their father’s companies, Lachlan appears to share the elder Murdoch’s politics. Any changes are likely to be minor: perhaps a little more focus on streaming (Tubi, Fox’s advertising-supported streamer, is performing well) and less on British news media (TalkTV, a recent venture there, has not been a big hit so far).When Murdoch père eventually dies, things may change more. Control of the family trust, which ultimately holds sway over both companies, will pass to the four eldest siblings. The newspaper and television industries are both going through a bumpy digital transition, opening up new possibilities. Assets such as Fox News could be changed, or sold off, when the next generation takes control. But it may be a while before that happens. Mr Murdoch’s mother lived to be 103. One person close to the family, asked what will happen when Mr Murdoch passes, reports simply: “He insists he won’t.” ■ More

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OVER RECENT decades the oil-rich economies of the Gulf have shown a taste for flashy government projects with dubious payoffs. In the early 2000s Dubai spent an estimated $12bn building an artificial archipelago shaped like a palm. Last year Qatar splurged around $220bn hosting the football World Cup. Saudi Arabia, the region’s gorilla, is building a pair of 120km-long skyscrapers in the desert—for roughly $1trn.Amid the vanity projects, some serious efforts at economic diversification are also being pursued. One such endeavour is under way in Abu Dhabi, where earlier this month a government research institute released Falcon 180B, its latest massive artificial-intelligence (AI) model, which is impressing technologists around the world with its performance.Abu Dhabi has even bigger AI ambitions. “We are entering the game to disrupt the core players,” says Faisal al-Bannai, secretary-general of the Advanced Technology Research Council (ATRC), the government agency which houses the institute that created Falcon. He says that later this year the ATRC will announce the launch of a state-backed AI company to go head to head with the field’s leading lights, such as OpenAI, creator of ChatGPT. Though it will face an uphill battle, the Emirati outfit could yet emerge as a credible competitor. Its success will be closely watched both by rivals and by other governments seeking to carve out a role in an AI economy currently dominated by America and China.The Technology Innovation Institute (TII), the applied-research arm of the ATRC, employs around 800 staff of 74 nationalities, working on subjects from biotechnology and robotics to quantum computing. Launched in 2020, it has been experimenting with ChatGPT-like “generative” AI for some time. It released Noor, an Arabic-based AI model, in April last year, and then Falcon 40B, the first iteration of its flagship open-source model, in May this year.Falcon 180B, as its name hints, is a beefed-up version of its predecessor. Comparing the performance of AI models is notoriously tricky, but going by a selection of commonly used benchmarks compiled by Hugging Face, a library of models, TII’s latest release bests the previous open-source champion, Meta’s LLaMA 2. A blog post by Hugging Face staff suggests the model is “on par” with Google’s PaLM 2.Why make such a powerful model freely available? Mr Bannai talks of “democratising” access to a transformational new technology, and warns against power falling into the hands of a small clique of companies, as has happened in the internet economy. But opening up access to Falcon 180B also allows software engineers to play around with a model that is not quite at the technological frontier, and suggest improvements. According to tii, some 12m developers experimented with the first generation of Falcon.Giving away the model also opens up other opportunities for monetisation. Consider Stability AI, a startup whose open-source Stable Diffusion model was behind 13bn of the 15bn images generated by AI in the year to August, according to Everypixel, a software firm. Emad Mostaque, Stability AI’s founder, says that its open-source strategy makes “commercial sense” for the firm “because the models are adopted far more quickly and widely than proprietary models”. Although the company generates revenue directly through its DreamStudio text-to-image generator, that tool accounts for a small fraction of the pictures produced using Stable Diffusion. It also makes money from developers opting to build applications based around the model (or others created by the company) on top of its computing platform, and by building tailored solutions for customers.Mr Bannai has a similar vision. He pictures an “end-to-end platform for AI developers”, pointing to Shopify, an e-commerce platform used by merchants to build online shops, as his inspiration. He says the company will also build new proprietary models and applications tailored for specific fields, such as medicine and law, while keeping access to its core model open. It will experiment, too, with “multimodal” AI systems that incorporate many types of data (from text and images to audio) and “edge” models that can run on smaller devices such as phones.Abu Dhabi may not seem like an obvious hub for AI talent, but big (and tax-free) salaries have already started luring tech whizzes from abroad. The emirate has also been training local brainboxes, including at the Mohamed bin Zayed University of Artificial Intelligence, founded in 2019. And although it will be a late entrant to an already crowded race, the Emirati firm will have some advantages, too.One is a tight-knit business milieu. Many bosses are still grappling with how best to harness generative AI. By teaming up with local businesses and using them as test cases, Mr Bannai reckons his agency’s AI company will quickly be able to learn what works and what doesn’t.Another advantage is the emirate’s deep pockets. Abu Dhabi’s various sovereign-wealth funds hold around $1.5trn in assets, which makes even OpenAI’s $40bn valuation look like chump change. With frontier AI models becoming more computationally intensive and data-guzzling, access to cash could become decisive, especially in a world of higher interest rates.If the endeavour succeeds, it will be a favourable omen for the long-term prospects of the Gulf as the demand for oil declines. Countries that harbour similar hopes of becoming an AI superpower, including Britain, will be watching along with interest—and, perhaps, envy. ■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More

Climate Week NYC got off to an early start in California. In the days running up to the launch of the annual jamboree in New York City, America’s most populous and economically powerful state seized the initiative by hurling two thunderbolts at carbon-intensive businesses.The most eye-catching was a lawsuit filed on September 15th by the Democrat-led state government accusing five big oil companies—BP, Chevron, ConocoPhillips, ExxonMobil and Shell—of lying about the dangers of climate change. Two bills passed days earlier by the state legislature may have a bigger impact. They could, for the first time in America, force big business to make climate-related disclosures. Governor Gavin Newsom vowed to sign both, after a few tweaks.The two approaches—legal and legislative—were hailed by climate campaigners as tipping points in American law. The lawsuit against “big oil” aims to make the defendants pay for the alleged environmental damage suffered in California as a result of the use of their products. The firms reasserted their commitment to decarbonisation and said that the courts were not the right place to tackle such a momentous problem. It is the latest and most significant of dozens of court cases filed by states and cities against fossil-fuel producers in recent years. Those lawsuits proceed slowly and, as yet, no firm has lost. But in April the Supreme Court dealt a blow to oil producers by rejecting their efforts to move such cases from state to federal courts.The two laws are likely to have bigger, and more immediate, consequences. They require large firms that do business in California to disclose their greenhouse-gas emissions and climate-related vulnerabilities. They are the first of a kind in America—and will, like the state’s vehicle-emissions standards, probably have implications far beyond California’s borders.One applies to more than 5,000 companies with global annual revenues of over $1bn, and obliges them to disclose direct and indirect emissions, known as scope 1 and scope 2, beginning in 2026. A year later, they must also reveal their scope 3 emissions, which include those generated by their suppliers and end users. For example, carmakers will have to account for the emissions of those who provide them with parts and those who drive their cars. Scope 3 emissions are hard to calculate and can be many times the direct emissions, making some firms loth to calculate them. The second measure applies to 10,000 or so companies with revenues above $500m. Starting in 2026 they must file reports every other year on the financial impact of climate change on their business. Some companies, such as Microsoft, a tech giant, and Patagonia, a clothing brand, threw their support behind the measures. The California Chamber of Commerce, a lobby group, opposed them, arguing that they would push up compliance costs for firms without curbing emissions. Even so, companies will find it hard to resist the lure of California’s giant market. The climate-disclosure requirements come shortly before America’s Securities and Exchange Commission (SEC), a regulator, is expected to launch something similar at a federal level. Michael Gerrard of the Sabin Centre for Climate Change Law at Columbia University points out that the SEC’s rule is narrower in scope than California’s, only affects publicly traded companies above a certain size, and may be more legally vulnerable.Internationally, California is not alone. Many American multinationals will soon have to comply with even further-reaching climate-disclosure requirements by the European Union. America’s Republican states may growl about extraterritoriality. But when it comes to standard-setting, businesses know they must take California and the EU seriously. ■ More

AROUND THE world, dealmaking is in a rut. A combination of higher interest rates, geopolitical tensions and economic uncertainty has put a hold on joint ventures, mergers and acquisitions. One exception is targets with AI in their name. Another, less obvious one, involves a less catchy initialism: ADCs.Makers of these antibody-drug conjugates, to give them their full name, are all the rage among the world’s biggest drugmakers. Pfizer is paying $43bn for Seagen, which in turn has just teamed up with Nurix Therapeutics, a smaller biotechnology firm, to work on this class of drugs. Amgen, AstraZeneca and Merck have also placed billion-dollar bets on ADCs. In the past five years licensing deals worth $60bn have been signed for such therapies. The number of such deals tripled in that period, to 26. So far this year 18 have been signed, outpacing similar deals involving other emerging cancer drugs.ADCs aren’t new. The first was approved in 2000 for types of leukaemia. They act like guided biological missiles: a payload of toxic chemotherapy is carried by antibodies able to seek out cancer cells directly. Because they bypass normal tissue and go straight for their targets, they let patients receive higher doses that would otherwise cause too much collateral damage.Two developments explain the frenzied stockpiling of these anti-cancer weapons of late. One is increased clinical confidence. Enhertu, an ADC developed by AstraZeneca and Daiichi Sankyo, a Japanese biotechnology company, was first approved in America in 2019. But after another set of trials in 2022 showed that it allowed breast-cancer patients to live almost twice as long without relapse as those treated with standard chemotherapy, its approval was extended to different types of breast and lung cancer. Regulators have cleared a dozen other ADCs, which are now routinely used to treat some of the deadliest cancers, including leukaemia, lymphoma and breast cancer.image: The EconomistMore than 140 new ADCs are currently in clinical trials. Bristol Myers Squibb and Sanofi all have therapies in late-stage tests. AstraZeneca and Merck have each formed a joint-venture with biotech firms in China, to take advantage of Chinese regulators’ more relaxed rules for early-stage trials, which helps accelerate the drugs’ development. Susan Galbraith, who oversees oncology research and development at AstraZeneca, says that the timeline for drug testing in China has been significantly reduced in the past decade.Clinical success has, in turn, boosted commercial confidence. Sales of Enhertu exceeded $1.2bn in 2022. Revenue from Trodelvy, a similar drug approved for advanced breast cancer and sold by Gilead Sciences, rose by 79% last year, to $680m. Kadcyla brought in $1.1bn for its Swiss developer, Roche, in the first half of this year. Evaluate, a provider of health-care data, forecasts that ADC sales could reach nearly $30bn by 2028, up from around $7.5bn last year (see chart). Some of these wagers could misfire. It is unclear just how well the drugs will work in combination with others, such as immunotherapies. They are also complex to make. Any deals involving Chinese partners could unravel if Sino-Western tensions increase. For now, though, ADCs are a global arms race worth cheering. ■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More

Scholars of happiness have found that close relationships are one of the critical ingredients of a contented life. What is true in general is also true of the workplace, according to research by Gallup. The pollster finds that having a “best friend at work” is closely associated with all manner of good things, from greater employee engagement to higher retention and better safety records.At some level, that is unremarkable. Spending time with people you like makes most things more appealing, including work. If a job is sufficiently humdrum, camaraderie among colleagues can be the main draw. The support of friends can also encourage people to try new things. A study from 2015 by Erica Field of Duke University, and her co-authors, looked at the impact of business training given to Indian women. Women who attended the course with a friend were more likely to end up taking out loans than those who came alone.The reverse also applies. Antagonistic relationships with co-workers are always likely to make working life miserable. A study conducted by Valerie Good of Grand Valley State University found that loneliness has an adverse effect on the performance of salespeople. Among other things, they start spending more on wining and dining their customers. The only thing worse than a salesperson who sees you as a way to make money is one who wants your company.So friends matter. The problems come when managers see the words “higher employee engagement” and leap to the conclusion that they should try to engineer work friendships. In a report published last year Gallup gave the example of an unnamed organisation which has a weekly companywide meeting that spotlights one employee’s best friend at work. It’s not known if, in the Q&A, others pop up to sob: “But I thought we were best friends at work.”Startups also offer services to encourage work friendships. One monitors the depth of connections between people in different teams. It identifies shared interests (gluten-free baking, say, or workplace surveillance) between employees who don’t know each other and arranges meetings between them. You thought life was bad? At least you are not making crumpets with a stranger in finance.It is a mistake for managers to wade into the business of friend-making, and not just because it royally misses the point. The defining characteristic of friendship is that it is voluntary. Employees are adults; they don’t need their managers to arrange play-dates. And the workplace throws people together, often under testing conditions: friendships will naturally follow.The bigger problem is that workplace friendships are more double-edged than their advocates allow. They can quickly become messy when power dynamics change. The transition from friend to boss, or from friend to underling, is an inherently awkward one (“This is your final warning. Fancy a pint?”).And friendships have the potential to look a lot like cronyism. A clever study by Zoe Cullen of Harvard Business School and Ricardo Perez-Truglia of University of California, Berkeley, found that employees’ social interactions with their managers could give their career prospects a boost relative to others.The researchers looked at promotions of smokers and non-smokers who worked for a large bank in South-East Asia, hypothesising that sharing smoking breaks with managers who also indulged might give workers a leg up. And so it did. Smokers who moved from a non-smoking boss to a puffer were promoted more quickly than those who moved to another non-smoker. The authors found that social interactions did not just help smokers; socialising between male managers and male employees played a large role in perpetuating gender pay gaps. If firms are going to make friendship their business, they should worry about its downsides, too.Companies should facilitate interactions between employees, particularly in a world of hybrid and remote working. Social gatherings and buddy systems are reasonable ways to encourage colleagues to meet each other and to foster a culture. But a high-quality work relationship does not require friendship. It requires respect for each other’s competence, a level of trust and a desire to reach the same goal; it doesn’t need birthday cards and a shared interest in quiltmaking. Firms should do what they can to encourage these kinds of relationships. If individuals want to take it further, it’s entirely up to them. ■Read more from Bartleby, our columnist on management and work:Who is the most important person in your company? (Sep 14th)Networking for introverts: a how-to guide (Sep 7th)The best bosses know how to subtract work (Aug 31st)Also: How the Bartleby column got its name More