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    Startup Icelandic air carrier makes a play in the tough, low-cost transatlantic market

    Startup low-fare carrier Play will connect Baltimore, Boston and New Windsor, New York, with 23 European destinations, including its Reykjavik, Iceland, hub, starting this spring.
    CEO Birgir Jonsson says Play can succeed where predecessors like Wow Air and Norwegian failed thanks to better capitalization and a focus on staying lean and low-cost.
    The airline launched amid the height of Covid last June with Europe flights. Jonsson says the pandemic pause was baked into launch plans and offered Iceland a glimpse at how important tourism is to its economy.

    Passengers board an Airbus passenger jet operated by Icelandic low-fare carrier Play.

    Startup low-fare Icelandic airline Play announced new transatlantic service out of a third U.S. airport, Stewart International in New Windsor, New York, to begin June 9. (Stewart lies about 65 miles north of New York City.)
    Play, which launched last July with nonstops from Reykjavik, Iceland, to London’s Stansted Airport, is the latest low-fare airline to attempt to make heavily discounted service across the Atlantic work.

    Play’s immediate Icelandic forebear, Wow Air, went bankrupt in 2019 after starting long-haul services to the U.S. West Coast and India. Denmark’s Primera Air faced a similar fate in 2018. Low-cost Norway-based competitor Norwegian, meanwhile, abandoned long-haul intercontinental operations in January 2021 in order to focus on European and Middle Eastern routes.
    More from Personal Finance:Here are 22 destinations it will be cheaper to fly to in 2022Where Americans want to travel, and not so muchBus lines look to attract wary passengers with premium services
    Now, Play will debut flights from the U.S. to Reykjavik — and onward from there to 22 other European cities — on April 20 with flights from Baltimore/Washington International Airport, followed by Boston Logan starting May 11 using narrow-body Airbus A320neo and A321neo planes. The carrier is promoting the new connecting services to Europe with fares as low as $109 one-way. CNBC.com associate editor Kenneth Kiesnoski spoke with Play CEO Birgir Jonsson — formerly with Wow Air himself — on what it’s like to start an airline amid a pandemic and how Play plans to succeed where others have failed.
    (Editor’s note: This interview has been condensed and edited for clarity.)
    Kenneth Kiesnoski: Sustaining a low-fare service across the Atlantic has proven tricky, as the failures of airlines like Iceland’s own Wow Air show. How will Play succeed where others have stumbled?

    Birgir Jonsson: Play and Wow are actually closely related, so to speak. Many on our key management team are ex-Wow employees, as are a lot of our flight crew. I myself was a deputy CEO at Wow for a period.
    So we know that story quite well. And, in fact, Wow was a great company and was doing really well operating the business model that we are [now] operating. It was only when Wow started operating wide-bodied jets like Airbus 330s and flying to the [U.S.] West Coast and basically doing the long-haul [and] low-cost thing — which is a hill that many good soldiers have fallen on many times.

    Birgir Jonsson, CEO of Reykjavik, Iceland-based low-fare airline Play.

    KK: Not only Wow but Primera Air and even Norwegian, which has ceased flying long-haul routes.
    BJ: Right. But [Play was] was founded with, or managed to raise, around $90 million and proceeded to execute a business model of creating a hub-and-spoke system connecting the U.S. to Europe with a stop in Iceland [mixed] with point-to-point traffic to and from Iceland. We launched the European side of the network-in June and ran that for six months until we launched commercial sales to the U.S.
    The reason I think Play will work out better than Wow is simply that the company’s better funded, [whereas] Wow was owned by one guy. And, it was way too big, grew too fast and the foundation was just too weak. We are a listed company. All the governance things around that kind of venture are completely different, more disciplined, more focused. Also we now know the pitfalls. We are just going to focus on the proven concept, the market that we know that exists.
    KK: The pandemic hit travel hard, but probably business travel hardest, as work and meetings migrated online. Since you’re low-cost, are you targeting leisure only or will you also court business flyers?
    BJ: In a pure marketing sense, we are targeting the VFR [visiting friends and relatives] and leisure markets. Having said that, I always have a pretty difficult time defining what business travel is because when someone says “business travel,” most people think of someone flying business class, drinking champagne — some premium service.
    But there are a lot of people traveling for reasons other than going on holiday or visiting friends. Going to conferences [or] training, for example — these kinds of things. It’s not only high-powered CEOs going to Davos, you know. We just want to offer a no-frills, very economical product that’s very simple to use. We don’t have a business class; it’s an all-economy product. But for anyone, be it a company or individual, that wants just a simple approach, a good ticket price and safe, timely service, we are the right choice.

    KK: Would you say Play is ultra-low-cost, like Ryanair, Frontier or Spirit? How do you differ from flag carrier Icelandair apart from price?
    BJ: In Ryanair’s case, they fly relatively shorter legs. If I’m going to fly to New York, it takes five hours. You need to be able to recline your seat and to be able to have some leg space and such. So we’re not going hardcore like that. If there’s a distinction between a low-cost and an ultra-low-cost product, I would say that we are some type of low-cost.
    If you compare us to Icelandair, I would say the product is nearly identical. Okay, we don’t have a business class as such. But in terms of the general experience onboard, on both airlines you have to pay for your meals, drinks and luggage and all that stuff. Legacy airlines are transforming themselves into a low-cost products anyway. If I made a list of 10 things that would justify that, the first five on that list are “price.”
    KK: How did Covid affect your launch plans? I know around 10 new carriers debuted last year during the pandemic. Did you slow things down and use the opportunity to fine-tune or something?
    BJ: We started operations with the general view Covid would end in the next 12 to 18 months, and that seems to be happening. In order to start an airline, especially a transatlantic one, you need runway. You need to hire crew, you need to train them. You need to position yourself on the market.
    We would always have needed some kind of a ramp-up period. So we have never been focused on financial performance in the first six to eight— or even 12 — months. The demand was more to build an airline, have everything working and basically be prepared for when the whole business model is realized, which will be in spring when we launch the U.S. [flights].
    Would I have liked Covid to end sooner, or would I have liked more passengers? Of course. But we managed to get a 53% load factor and 100,000 passengers — in a country of 400,000 people, in the middle of Covid. We are extremely happy about that. We would have liked to have 80%, of course, yes. But this was acceptable.

    Icelandic airlines have long offered transatlantic passengers free stopovers at the international hub at Keflavik, Iceland, to promote tourism to places like the Landmannalaugar Valley.
    Anastasiia Shavshyna | E+ | Getty Images

    KK: Low-cost carriers often serve secondary urban airports. But you’re flying into BWI and Boston Logan, so why Stewart for the New York metro market?
    BJ: New York is one of the most competitive markets in the world. Our position is to win passengers with low fares. And you can offer low fares [only] if you have low costs. Stewart offers that, for sure. It’s a lean airport to use. You cannot be low-fare if you have the same cost base as everyone else; then you’re subsidizing tickets. And that’s basically what happened in Wow’s case.
    The other side is that there’s also very little competition out of upstate New York; there are no international flights at the moment. [But] there are a lot of attractions and businesses, and real estate prices have been rocketing. It’s almost a completely different market than New York City. I’m completely in love with Stewart. Baltimore’s a similar story, because in Europe we don’t talk about Baltimore. We’d say, “Washington.” BWI is a fair way out of the city but there’s a customer there in Maryland.
    KK: Like Icelandair, Play offers a free stopover stay in Reykjavik for passengers, which helps local tourism. But pre-Covid, there was pushback in many popular destinations about over-tourism. What’s your take?
    BJ: [The stopover] is a tradition that has been built over decades and we, for sure, offer that. In terms of Icelandic tourism, it’s interesting. It’s becoming one of the biggest industries in Iceland, apart from fisheries. We have so much nature and so much to see. But visitors tend to gather around the same spots, whereas if you drove for 20 minutes you’d see the same thing — but you’re completely alone.
    It’s a discussion that’s going on in all popular destinations. Locals can’t get a table at the restaurants and all that. But the fact is that we couldn’t sustain those high-quality restaurants, clubs and bars and such in Iceland if it weren’t for tourists. In that sense, Covid was a good thing — if you can call a pandemic a good thing. One day, everything just stopped. And you don’t really know what you have until you lose it.

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    EV start-up Polestar takes shots at Tesla CEO Elon Musk and Volkswagen in Super Bowl ad

    EV start-up Polestar used its first-ever Super Bowl ad to indirectly take shots at its competitors, including Tesla and Volkswagen.
    The 30-second spot, called “No Compromises,” is simple and to the point. It features shots of the company’s Polestar 2 electric vehicle with the word “No.”
    Words following “No” during the ad range from general terms to “dieselgate” and “conquering Mars”

    Electric vehicle start-up Polestar, which is expected to go public this year, used its first-ever Super Bowl ad to indirectly take shots at its competitors, including Tesla and Volkswagen.
    The 30-second spot, called “No Compromises,” is simple and to the point. It features shots of the company’s Polestar 2 electric vehicle with the word “No,” followed by words and phrases directed at other traditional Super Bowl commercials and car companies.

    Words following “No” during the ad range from general terms such as “epic voiceovers” and “dirty secrets” to “dieselgate” – referring to a former diesel emissions scandal with Volkswagen – and “conquering Mars” – a critique on Tesla and its CEO Elon Musk, who has plans to land humans on Mars by 2026.
    The commercial ends at “No. 2” and then “Polestar 2,” the company’s all-electric performance car.

    “The Super Bowl is an iconic event and I’m excited to bring Polestar’s message to such a wide audience,” Polestar CEO Thomas Ingenlath said in a statement. “We are a young and ambitious brand. We believe in ‘no compromises’, for our design language, our sustainability efforts, and the performance of our cars, and we wanted to share that philosophy with this ad. This is the perfect place to further raise awareness of our brand in the US, and beyond.”
    Polestar is controlled by Volvo Car AB and its owner Zhejiang Geely Holding Group Co. In September, the company announced a deal to go public during the first half of this year by merging with a U.S.-listed blank-check firm backed by billionaire Alec Gores and investment bank Guggenheim Partners at an enterprise value of $20 billion.
    Here’s the ad:

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    The true cost of empty offices

    CITIES HAVE often bounced back from crises. From pandemics and earthquakes to floods and fires, the world’s urban powerhouses have emerged stronger when faced with adversity. After the Great Fire of London destroyed most of the city in 1666 a raft of fire safety regulations were ushered in. Builders swapped timber for brick or stone. Walls were made thicker. Streets became wider. When cholera tore through America in the 1850s New York and other cities introduced sewage systems and public parks.Today’s urban areas face a challenge of a different sort. With the mass return to office work still uncertain, the pandemic has sharpened debate about what the future holds for their commercial hubs. Key business districts like Manhattan, the City of London, Tokyo’s Marunouchi and La Défense in Paris have borne the brunt of the office exodus. Before lockdowns the 21 largest business districts in the world housed 4.5m workers and around a fifth of the headquarters of Fortune Global 500 companies, according to EY and the Urban Land Institute. When covid-19 emptied offices around the world, most professional work shifted to home offices or kitchen tables. As the pandemic stretches into a third year, the fate of business districts remains unclear. Can they continue to attract investment and talent or will new work patterns jeopardise their commercial dominance?On the face of it, things could have been worse for the owners of gleaming city office towers. Unlike the retail and hospitality sectors, office tenants have mostly continued to pay rent and analysts have retracted many of their worst projections. Leasing activity even picked up in cities like London towards the end of 2021.The reality, however, is far from rosy. Home-working has hit demand for office space, with vacancy rates rising faster in business districts than anywhere else. Globally, unoccupied offices make up 12% of the total, up from 8% before covid. Across London 18% of offices are vacant. In New York the share is nearly 16%. More than one in five offices in San Francisco are empty. In Hong Kong, where downsizing has become common, net effective rent, which is adjusted for abatements or incentives, dropped by more than 7% in 2021 after falling more than 17% in 2020.Rather than lowering rents, landlords are offering more freebies than ever to retain tenants or attract new ones. In Manhattan, cash gifts for tenants—typically used for kitting out new office space—have more than doubled since 2016. Across America, the average number of rent-free months has risen to its highest since 2013. Some property developers remain optimistic, betting that demand for office space will eventually bounce back. But with each new variant of covid-19, plans for a wide-scale return to the office have been delayed, and delayed again. And changing patterns of attendance look set to reduce the overall demand for space.Financial markets reflect the darkening mood. Offices, particularly in business districts, are rapidly losing ground to better-performing areas of property such as warehouses and apartments. Having traditionally formed the core of commercial-property portfolios in America, offices accounted for less than a fifth of transactions in 2021. Globally, investors spent more on apartments for the first time. Foreign investment into offices also fell below the pre-pandemic average in countries such as America, Britain and Australia in 2021. By contrast, foreign investment in warehouses more than doubled in these markets.Valuations mirror the uncertainty, too. Prices of buildings in business districts have taken a hit even as commercial-property prices have boomed in other parts of cities. In San Francisco’s Financial District, for example, property prices have slumped by nearly a fifth since the end of 2019, according to the latest figures. Across the broader metropolitan area, they have increased by more than 5%. In Manhattan they have fallen by around 8% since the start of the pandemic. Asian cities have fared better. Office prices across Seoul, for instance, have risen by more than a third since the end of 2019. Most investors take a long-term view, so capital allocated to offices will be locked in for years. But sentiment is shifting away from cities with a large concentration of offices and towards smaller markets with a broader mix of buildings. A survey of investors with assets under management of more than $50bn by CBRE, a property firm, showed a preference in 2021 for markets like Phoenix and Denver over New York and Chicago. The biggest business hubs will no doubt continue to attract large sums: London’s offices are forecast to attract £60bn ($81bn) of overseas capital over the next few years, according to Knight Frank. But deserted office blocks in dense commercial districts will continue to cast an ominous shadow.Landlords insist concerns are overblown. Despite many buildings remaining stubbornly empty, they maintain that demand for the best space is holding up. True, some prime properties still attract plenty of suitors. Tenants are increasingly swapping ageing office blocks for modern, greener workplaces with better air-filtration systems and higher-quality amenities. But these high-end properties represent 20% or less of buildings in most cities. (They do, however, make up a disproportionate share of investment activity: in New York, just nine out of 69 office transactions accounted for 80% of the total amount invested in 2021.)The gap between the best assets and the rest of the market will widen further. Refurbishments may rejuvenate some tired-looking buildings. For many older assets, however, inflation, labour and materials shortages in the construction industry and the high cost of upgrading buildings to meet tougher environmental standards will make it harder to justify the expense.The consequences for business districts could be far-reaching. The mass departure of bankers, lawyers and other professionals also hurts the cafes, restaurants and other small businesses that serve them. Many were already struggling with supply-chain disruptions, labour shortages and rising costs. Lockdowns cost Sydney’s economy an estimated A$250m ($178m) a week and 40,000 jobs. Across New York City, more than a third of small businesses closed during lockdowns; before the pandemic the sector accounted for over half of private-sector jobs in the city.Civic slideMunicipal finances, too, are exposed. Dormant offices mean shrinking tax revenues for cities which rely on them to fund public services. Empty offices also put pressure on transit systems. Reduced passenger numbers are projected to leave a £1.5bn hole in the finances of London’s transport authority by 2024. Business districts are taking defensive measures. A common approach has been to make them more vibrant, a trend that was already under way before the pandemic. The City of London is proposing more “all-night cultural celebrations”, traffic-free streets on weekends and at least 1,500 new apartments by 2030, while Canary Wharf has added bars, restaurants and boating experiences to draw in younger crowds. Singapore’s Urban Redevelopment Authority concedes it may need to rethink the mix of buildings in downtown district, in addition to planning more cycle paths and pedestrianised streets. In America, skyscrapers are opening their doors to the public, offering new observation decks and Instagrammable art installations. Paris, meanwhile, plans to turn car parks in La Défense into “last-mile” delivery hubs. As the world of work evolves, commercial hubs are changing with it. More

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    Stock futures are slightly higher as Wall Street weighs Russia-Ukraine tensions, potential Fed rate hikes

    Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, January 18, 2022.
    Brendan McDermid | Reuters

    Stock futures were slightly higher Sunday evening as investors continued to monitor the developing tension between Ukraine and Russia and potential Fed rate hikes.
    Futures tied to the Dow Jones Industrial Average climbed 83 points, or 0.2%. S&P 500 futures rose 0.1% and Nasdaq 100 futures added 0.05%.

    The moves follow a rocky week for stocks, which were pressured by a hot inflation report and fears of a Russian attack on Ukraine. The Dow and S&P 500 fell 1% and 1.8%, respectively, for the week. The tech-heavy Nasdaq Composite slid more than 2%.
    On Friday, the Dow tumbled 503.53 points, or 1.43%. The S&P 500 dropped 1.9% and the Nasdaq Composite shed 2.8%. The declines came as the White House warned that a war in Ukraine could begin “any day now” and urged Americans there to leave “immediately.” Oil prices jumped Friday, along with traditional safe havens like Treasurys.
    “The real fear is that China backs Russia and the relationship between China and the U.S. continues to deteriorate,” said Robert Cantwell, chief investment officer at Upholdings. “How it changes the U.S. relationships with the other economic superpowers – that’s what’s really scary and would affect economic outcome.”
    A phone call over the weekend between U.S. President Joe Biden and Russian President Vladimir Putin, in which Biden attempted to dissuade Putin from attacking Ukraine, failed to achieve a breakthrough. 
    Some airlines have also halted or redirected flights to Ukraine amid the brewing crisis, while the Pentagon ordered the departure of U.S. troops in Ukraine.

    Stock picks and investing trends from CNBC Pro:

    Traders are also weighing the potential impact of surging inflation on the U.S. economy, as well as the potential measures the Federal Reserve could take to quell the jump in prices.
    The Labor Department reported last week that inflation in January surged 7.5%, its biggest gain since 1982. Rate-sensitive tech stocks were hit hard by the report, which briefly sent the 10-year Treasury yield above 2% — the first time since 2019 that the 10-year traded above that level.
    After the report’s release, St. Louis Fed President James Bullard said that he was open to a 50-basis point rate hike next month, adding that he wanted to see a full percentage point of hikes by July. To be sure, San Francisco Fed President Mary Daly said Sunday that the central bank should take a “measured” approach when raising rates.
    “This past week, the primary story was all about inflation,” Cantwell said. “Every single time the inflation number comes out, it keeps surpassing expectations and the while the Fed has signaled that it’s going to raise rates, they haven’t actually raised them. The longer they wait, the faster they’re going to have to raise them.”
    Economists at Goldman Sachs also raised their Fed forecast to seven hikes for 2022, and said it sees the 10-year hitting 2.25% this year.
    The firm also lowered its 2022 S&P 500 price target to 4,900 from 5,100. That would represent just a 2.8% return from where the benchmark ended 2021. Goldman said that higher rates will crimp valuations.
    Earnings are expected to ramp up again this week, with Nvidia, Walmart, Shopify, AMC and more scheduled to report.

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    Labour v capital in the post-lockdown economy

    “A GOOD COMPROMISE”, the saying goes, “is when both parties are dissatisfied.” Dissatisfaction rages in the post-lockdown economy. Households say that price-gouging companies are jacking up prices, contributing to an inflation rate across the rich world of 6.6% year on year. Companies bat such accusations aside, believing that they are the truly wronged party. They complain that staff have become workshy ingrates who demand ever-higher wages. Earlier this month Andrew Bailey, the governor of the Bank of England, courted controversy by suggesting that workers should moderate their wage demands—even as he failed to tell companies not to raise their prices.A “battle of the markups”, between higher wages and higher shop prices, is under way. And there can only be one winner, all else equal. Broadly speaking, economic output must flow either to owners of capital, in the form of profits, dividends and rents, or to labour, as wages, salaries and perks. Economists refer to this as the “capital” or “labour” share of GDP. Who has the upper hand in the post-lockdown economy?The Economist has compiled a range of indicators to answer this question. First we calculate a high-frequency measure of the capital-labour share across 30 mostly rich countries. In 2020 the aggregate labour share across this group soared (see chart 1). This was largely because firms continued to pay people’s wages—helped, in large part, by government-stimulus programmes—even as GDP collapsed. Advantage, labour.More recently, however, the battle seems to have shifted in favour of capital. Since its peak in 2020 the rich-world labour share has fallen by 2.3 percentage points. Frustratingly, the data end in September 2021—and most economists anyway argue that labour’s share is not a perfect gauge of economic fairness, since it is so hard to measure. The evidence since then suggests that countries fall into one of three buckets, depending on how the battle of the markups is playing out.In the first camp is Britain. There, underlying wage growth is in the region of 5% a year, unusually fast by rich-world standards. But corporations seem not to have much pricing power, meaning that they are struggling to fully offset higher costs in the form of higher prices. Digging into Britain’s national accounts, we estimate that the nominal profit in pounds per unit of goods and services sold is only as high as it was in early 2019, even as unit labour costs are rising by about 3% per year. Labour seems to be winning out at the expense of capital. Perhaps Mr Bailey has a point.The second group consists of most other rich countries outside America. There, neither labour nor capital seems able to triumph. After correcting for pandemic-related distortions Japan’s pay growth appears to be slowing to below 1% a year, suggest data from Goldman Sachs, a bank. Pay settlements in Italy and Spain are treading water, while wage growth in Australia, France and Germany remains well below where it was before the pandemic. Workers in these places are not really joining in with the inflationary party.But businesses are not soaring either. In Europe pre-tax profit margins, as measured in the national accounts, have risen in recent months but remain below where they were just before the pandemic. In Japan the “recurring” profits before tax of large and medium-sized firms recently returned to pre-pandemic levels. The profits of smaller firms remain well below, however.In the third group sits America. Here wage growth is rapid, at about 5% a year. But as shown in their most recent financial results, big listed American firms are doing a better job at protecting margins than analysts had expected. A series of unusually large stimulus payments may mean that households are able to absorb the higher prices that companies impose. In early February Amazon said it would increase the price of its Prime membership package by 17% (even as it chose not to announce price rises in other parts of the world).Some firms are increasing their margins despite soaring costs. Tyson, an American meat producer, reported an 18% jump in the costs of its inputs in the most recent quarter compared with a year earlier, a 19.6% rise increase in its average selling prices, and a 40% rise in its adjusted operating profits. It says that escalating meat prices have not slowed demand.An economy-wide measure of corporate margins is rising fast. Dario Perkins of TS Lombard, a financial-services firm, breaks down America’s rise in unit prices since the start of the pandemic into companies’ labour costs, non-labour costs and profits. Wages are rising, but nonetheless markups are responsible for more than 70% of inflation since late 2019, he finds (see chart 2). In a recent report, analysts at Bank of America argue that greater pricing power helps explain why American equities have a higher price-earnings ratio than European ones.The story is not over yet. Some economists wonder if workers will before long demand even higher wages to compensate for higher shop prices. There is some evidence of this in America and Britain, where wage growth seems to be accelerating. Businesses’ expectations for future wage settlements remain fairly conservative, though that could soon change. If wages do start to grow more quickly, the cycle of price rises and compensating wage demands might start up all over again. Before long the post-lockdown economy could look like the ultimate compromise—where nobody is satisfied.For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

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    The fall of Peloton's John Foley and the stock market's big founder problem

    Peloton founder John Foley stepped down from his CEO role on Feb. 8 following a tumultuous period for the connected fitness company.
    The departure of Foley, who led the company since its iteration in 2012, resurfaces the question of how long a company needs to be “founder-led.”
    A recent study suggests that while founder-CEOs increase the value of a company before and during an IPO, that boost starts to diminish compared to a non-founder CEO.

    John Foley, co-founder and chief executive officer of Peloton Interactive Inc., stands for a photograph during the company’s initial public offering (IPO) in front of the Nasdaq MarketSite in New York, U.S., on Thursday, Sept. 26, 2019.
    Michael Nagle | Bloomberg | Getty Images

    Roughly two months after Peloton’s IPO, founder John Foley appeared on CNBC’s “Closing Bell” where he touted the “predictability of the revenue” of the connected fitness company.
    “We know how to grow and stick the landings on what we tell the Street, what we tell our board and our investors [about] how we’re going to grow,” Foley said in that Nov. 5, 2019 interview.

    That’s a very different tone from what Foley said on the company’s second-quarter fiscal 2022 conference call on Feb. 8, where he acknowledged that the company had “made missteps along the way,” that it was “holding ourselves accountable,” and he was going to “own” that — which included his departure as CEO, several executive and board changes, and a wide range of cost-saving measures, including cutting roughly 20% of its corporate workforce.
    Peloton, a two-time CNBC Disruptor 50 company, had been led by Foley since it was founded in 2012, and his fellow founders Tom Cortese, Yony Feng, and Hisao Kushi have remained as senior executives. The other co-founder, Graham Stanton, left in March 2020 but has stayed on as an advisor, per his LinkedIn.
    Peloton’s bumpy road that has seen its stock price drop more than 73% over the last year has raised the question of how long a founder-CEO like Foley should hang on post-IPO, especially if that journey starts to look more like a HIIT and hills ride than an easy one.
    The track record is very varied. On one side, you have a founder like Jeff Bezos who stayed on as CEO for more than 20 years after Amazon’s IPO with massive growth along the way. Of course, there’s Steve Jobs, who ended up leaving Apple amid board tensions after he hired “professional CEO” John Sculley, only to ultimately return to oversee one of the most remarkable business turnarounds in market history. On the other side, you have Groupon founder Andrew Mason, who was fired as CEO in 2013, roughly 18 months after the company went public, following a series of Wall Street misses, a declining stock price and very-public mishaps.
    Jeffrey Sonnenfeld, senior associate dean for leadership studies at Yale School of Management, said that 20 to 30 years ago, the trend from many venture capitalists would be to push out founding management at a critical change in the life stage of a company, “then the quote-unquote ‘professional management’ came in,” he said.

    That’s happening less now, and Sonnenfeld said that some of that is for good reasons, like having a more experienced leadership group in place that has experience leading companies through various lifecycles. Foley did, with Barnes & Noble and other start-ups. But there are bad reasons, such as “founder shares that secure your leader-for-life status in the empire,” he said. In the case of Peloton, where Foley will remain chairman, he and other company insiders still control about 60% of the company’s voting stock.
    Peloton did respond to a request for comment by press time.

    When is it time for a founder to step aside?

    More founders, especially in tech, are replacing themselves. Manish Sood, who founded cloud data management company Reltio, wrote in a 2020 CNBC op-ed that the reason he replaced himself as CEO after nearly a decade in charge is that he “recognized that to sustain predictable hyper-growth requires a special set of skills, and Reltio would require a CEO with experience leading public companies.”
    “Preparing for growth takes courage at all phases,” Sood wrote. “In the beginning, entrepreneurs often risk everything to start companies because they believe in a new or different vision. They often face seemingly insurmountable obstacles. It takes a great deal of insight to recognize when an emerging growth company needs to pivot or change direction as it grows.”
    Jack Dorsey shared a similar sentiment when he suddenly stepped down as Twitter CEO in November.
    “There’s a lot of talk about the importance of a company being ‘founder-led.’ Ultimately I believe that’s severely limiting and a single point of failure…I believe it’s critical a company can stand on its own, free of its founder’s influence or direction,” Dorsey wrote in a memo to Twitter employees.
    There have been some efforts to try to figure out exactly what that founder-CEO shelf life is. A recent Harvard Business Review study of the financial performance of more than 2,000 publicly traded companies found that on average, founder-led companies outperform those with non-founder CEOs.
    However, that difference essentially drops to zero three years after the company’s IPO, and at that point, the founder-CEOs “actually start detracting from firm value.”
    “Our data shows that the presence of a founder-CEO increases firm value before and during IPO, suggesting that a founder-friendly approach actually makes a lot of sense for VCs, who typically invest while companies are still in their earlier stages and cash out shortly after they IPO,” the authors wrote. “However, given our finding that on average, post-IPO performance is lower for firms with founder-CEOs, investors looking to get in after a company has already gone public would be wise to take a less founder-friendly approach — and investors, board members, and executive teams alike will benefit from proactively encouraging founder-CEOs to move on before they reach their expiration dates.”
    It’s unclear what the future holds for Peloton and if it can regain the momentum that saw it disrupt the fitness industry.
    The company’s new CEO, Barry McCarthy, cited his experience working with two “visionary founders” in Reed Hastings and Daniel Ek at Netflix and Spotify, respectively, in his first email to Peloton staff, which was obtained by CNBC, saying that he is “now partnering with John [Foley] to create the same kind of magic.”
    “Finding product/market fit is incredibly hard to do. It’s extremely rare. And I believe we have it,” McCarthy wrote. “The challenge for us now is to figure out the rest of the business model so that we can win in the marketplace and on Wall Street.”
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    FDA plan to fast-track Pfizer vaccine for kids under 5 fails to deliver, leaving parents waiting until April

    The FDA and Pfizer dashed parents’ hopes this week when they delayed the authorization of the Covid vaccine for children under 5 years old.
    The FDA and Pfizer said they are waiting on data about the effectiveness and safety of a third dose, which won’t come until April.
    Dr. Paul Offit said the fast-track plan was based on the assumption that the third dose would prove safe and effective, but there’s no guarantee that will be the case.
    “I’m glad that we’re going to wait until we have all of the data to make that decision,” Offit said.

    A vaccinator draws a Pfizer-BioNTech coronavirus disease (COVID-19) pediatric vaccine in Lansdale, Pennsylvania, U.S., December 5, 2021.
    Hannah Beier | Reuters

    Parents of children under 5 will have to wait until at least April to get their kids vaccinated against Covid-19, after the Food and Drug Administration and Pfizer this week abruptly delayed plans to get the shots authorized on a fast-track basis.
    The FDA had originally planned to authorize the first two doses of what will ultimately be a three-dose vaccine as soon as this month. However, Dr. Peter Marks, head of the FDA’s vaccine division, said updated data submitted by Pfizer and BioNTech did not support the plan to get the first two doses out early. Marks acknowledged that the decision was abrupt, but said the FDA was following the science.

    “The data that we saw made us realize that we needed to see data from a third dose in the ongoing trial in order to make a determination that we could proceed with doing an authorization,” Marks told reporters during a call Friday, without providing specifics on the data. 
    Acting FDA Commissioner Janet Woodcock said the drug regulator had sought to act swiftly  to protect children against omicron as Covid hospitalizations among the youngest rose to record levels in recent weeks. However, the FDA’s safety and efficacy standards required the agency to wait for more information on the third dose, Woodcock said. 
    “The goal was to understand if two doses would provide sufficient protection to move forward with authorizing the use of the vaccine in this age group,” Woodcock said in a statement. “Our approach has always been to conduct a regulatory review that’s responsive to the urgent public health needs created by the pandemic, while adhering to our rigorous standards for safety and effectiveness,” she said.
    “Being able to begin evaluating initial data has been useful in our review of these vaccines, but at this time, we believe additional information regarding the ongoing evaluation of a third dose should be considered,” Woodcock said.
    Dr. Paul Offit, a member of the FDA’s vaccine advisory committee, said the fast-track plan was based on the assumption that the third dose was safe and effective, but there’s no guarantee that will be the case once the final data is submitted.

    “Imagine us approving it after two doses and then finding out later that the third dose was unsafe and then having to pull back,” said Offit, a pediatrician and director of the Vaccine Education Center at Children’s Hospital of Philadelphia. “I’m glad that we’re going to wait until we have all of the data to make that decision.”
    The FDA had come under pressure in recent weeks from some parents and physicians to quickly expand eligibility to protect toddlers through 4-year-olds as the omicron variant swept the country. Children under 5-years-old are the only age group left in the U.S. that is not eligible for vaccination. 
    Nearly 5,200 children were hospitalized with Covid on Jan. 18, according to a seven-day average of data from the Department of Health and Human Services, twice as many as the prior peak during the fall of 2021. That figure has since fallen to about 3,000 as of Friday, HHS data shows. 
    The American Academy of Pediatrics, in a statement Friday, said although the news was frustrating to many parents, it’s important to have a rigorous review process to ensure a safe and effective vaccine.
    “A careful, robust and transparent process to evaluate the evidence for the vaccine in this age group is essential in order for parents to have confidence in offering the vaccine to their children,” the AAP said.
    The problem is that two doses of Pfizer and BioNTech’s vaccine did not produce an adequate immune response in children aged 2 through 4 during clinical trials. The companies are evaluating a lower, 3-microgram dose level in kids under 5, compared to older children and adults who get 30-microgram shots.
    Pfizer and BioNTech amended their clinical trial in December to study a third dose to determine whether that would produce the immune response needed to protect against Covid. The companies had said all along that data would not be ready until April.
    However, the rapid rise of omicron over the holidays and through January created what Pfizer called an “urgent public health need” to get kids in this age group vaccinated. Marks said the FDA’s sudden decision to delay authorization should not impact parents’ confidence in the vaccine. He said the shift shows that the FDA takes its responsibility seriously and makes decisions based on the data as it emerges.
    “I hope this reassures people that the process has a standard, that the process is one that we follow,” Marks said. “And we follow the science in making sure that anything that we authorize has the safety and efficacy that people have come to expect from our regulatory review of medical products.”
    Wayne Koff, CEO of the Human Vaccines Project and a professor of epidemiology at Harvard, said there’s good reason to expect the third dose will improve the effectiveness of the vaccine in children under 5-years-old. Booster doses have proven effective at preventing severe illness in other age groups, Koff said, and the vaccine should really be considered a three-dose regimen in general across age groups at this point.
    Offit said the Covid shot will likely become a routine childhood vaccine in the future, like immunization against polio. The U.S. eliminated polio in the 1970s, but it still vaccinates kids because the virus continues to circulate in some corners of the world. Public health experts largely agree that the eradication of Covid is unlikely at this point.
    “The fact remains, we’re going to need to have a highly protected population for years and decades. I suspect this will become a routine childhood vaccination,” Offit said.
    Though some parents may feel that it has taken too long to expand access to the vaccine, Koff said the FDA has accelerated the process as much as possible by progressively lowering the eligibility age while adhering to safety and efficacy standards.
    “In the beginning you have to show the vaccine is safe and effective in the adult population,” Koff said. “Once you have shown that, then you’re able to go down in terms of the age of the adolescents and then eventually the younger kids and then eventually the infants.”
    Offit said children under the age of 18 get infected less frequently and less severely, which is why vaccination has focused on the older populations first. As parents wait for the vaccine, they should build a “moat” around their kids who aren’t eligible by making sure everyone who is in contact with them has gotten their shots, he said. 
    While about 75% of U.S. adults are fully vaccinated with two doses of the Pfizer or Moderna shots or one dose of the Johnson & Johnson vaccine as of Thursday, that figure is lower for kids. Roughly 57% of those aged 12 to 17 are fully vaccinated, according to the CDC, and 24% of those 5 to 11.
    — CNBC’s Nate Rattner contributed to this report.

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    ‘You have to take a chance on yourself’: founders of a hiring app share their best career advice

    Deborah Gladney, 34, and Angela Muhwezi-Hall, 32, are part of a small but growing club of million-dollar Black female founders.
    The sisters are the creators behind QuickHire, a hiring platform that connects workers to service and skilled-trade jobs. In November, QuickHire raised $1.41 million in an oversubscribed round of funding, making Gladney and Muhwezi-Hall the first Black women in Kansas to raise over $1 million for a startup, according to AfroTech.

    It’s a feat for any entrepreneur, but especially when you consider that Black female startup founders received just 0.34% of the total $147 billion in venture capital invested in U.S. startups through the first half of 2021, according to Crunchbase.
    When the sisters started their venture in March 2020, Gladney was pregnant with her third child, and Muhwezi-Hall ended up in the hospital after contracting Covid-19. They weathered uncertainties of the pandemic, saw racial unrest during the George Floyd protests, penny-pinched to invest $50,000 of their own savings, and experienced microaggressions while fundraising. A beta version of QuickHire launched in the fall of 2020, and they released a finished product to the public in April 2021.
    Today, QuickHire matches more than 11,000 job seekers with jobs at 60 mid- to large-size service industry companies in the Wichita, Kansas, and Kansas City metro areas. During the Great Resignation, QuickHire data is also proving how businesses must provide better jobs to the working class — jobs with good pay, stable hours, health insurance and future careers — if they ever hope to fill openings.
    CNBC Make It spoke with the two sisters for their best career advice, and how it helped them launch their very first $1 million business.

    ‘Don’t ever let anybody see you sweat’

    The biggest piece of career advice Gladney takes to heart comes from a former boss: “Don’t ever let anybody see you sweat.”

    “There’s just so much power in not giving other people the power in knowing that they won any situation over you,” Gladney says.
    Gladney says the experience of pitching QuickHire and raising money hasn’t been without experiencing bias and microaggressions — situations “where people have said or done something where, if we’d shown them they got to us, I think they would have succeeded in stopping us.”
    Gladney remembers pitching to investors and feeling like they had “every card stacked against us.” They applied to but got turned away from accelerator programs, “and it left a bad taste in our mouths. The reasons for why we were turned down just weren’t very clear. And it made us wonder, is it because we’re Black women doing this?”
    It’s an all-too-common scenario for women and founders of color in the VC world, where the majority of investors are white men. “We felt like we had to come to the table with more revenue or more validation than our counterparts, because we knew that we weren’t going to be able to raise if we didn’t make it even more comfortable for [investors] to take a chance on us,” Gladney says.
    Gladney and Muhwezi-Hall nearly gave up on trying to get into an accelerator program until they had one motivating meeting with a managing director with the accelerator TechStars Iowa. They got into the accelerator, and their growth took off.
    Gladney says she relies on a few core people, including her sister, her husband and her father, to manage the frustrations that come with being a Black female founder in the tech space.
    “They get it all from me,” she says, “but it helps me go out there and fight the world.”

    ‘You’ve got to go to grow’

    Muhwezi-Hall says the best advice she’s ever gotten was that you have to “go to grow.”
    “Sometimes in life, and especially in careers, for you to find those opportunities of advancement and to widen your horizon, you have to get out of your comfort zone,” she says. “You have to take a chance on yourself.”
    For Muhwezi-Hall’s part, the seeds for QuickHire were actually planted back in 2017, when she was a college and career counselor at a Los Angeles high school. She had plenty of resources to offer to those bound for college, but few for students headed to service or skilled trade jobs. Roughly 108 million people, or 71% of the labor force, work in the service sector — why weren’t there better ways to connect them with stable careers other than filling out paper job applications?
    “This was an idea that we sat on for so many years,” Muhwezi-Hall says, adding that Gladney often encouraged her to bring it to life. The urgency of the pandemic, when she saw tens of millions of service workers losing their jobs, caused her to reprioritize her idea.
    Muhwezi-Hall and Gladney got to work on building QuickHire in March 2020. By August, Muhwezi-Hall moved with her husband from L.A. into Gladney’s basement in Wichita, Kansas, for seven months to continue building. Muhwezi-Hall and her husband have since relocated to Chicago, and the sisters work together remotely and during in-person visits.
    “At some point, you have to move,” she says. “And if you are afraid to move, you’ll never grow. So that’s something that I apply to everything: You’ve got to go to grow.”
    Check out:
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    This 29-year-old launched a business to support Black NFT artists—and it made $140,000 in 10 months
    Co-founder of $1.6 billion brand Skims: ‘I have a rule — you have to do things that scare you’
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