Page 70 – Kanebridge News

May 25, 2021May 28, 2021

Apple and the End of the Car

Now that the car is evolving into essentially a smartphone on wheels, it’s no wonder Apple is kicking the tyres.

First, there is the transition from internal combustion engines to electric motors, which have far fewer mechanical parts. Now, enabled by that change, a second shift is under way—one that’s a prerequisite for a self-driving future.

For a century, the automobile was a system of interoperating mechanics: engine, transmission, drive shaft, brakes, etc. As those mechanics evolved, electronic sensors and processors were brought in to assist them, but the concepts changed little. The result was cars with dozens or hundreds of specialized microchips that didn’t talk to each other. Now that auto makers are moving to electric motors, elaborate entertainment systems and adaptive cruise control, cars need central computers to control all these things—why not use them to control everything?

At the hardware level, this might just mean fewer chips handling more of a car’s functions. Yet it has profound implications for what future cars will be capable of, how car makers will make money, and who will survive—and thrive—in what could soon be a global automotive industry made unrecognizable to us today.

No one inside Apple is saying exactly what its plans are, but the company has been contemplating a role in autos for years, spending huge sums on hiring hundreds, then eliminating their roles when its priorities change, and almost as quickly hiring other engineers with similar skill sets, then firing yet more engineers, all to realize a still-mysterious ultimate vision.

The company also recently approached auto makers including Hyundai about a potential manufacturing partnership, then saw talks fizzle. It’s just as likely Apple is, as usual, experimenting until or unless it hits on something it thinks it can do better than anyone else.

“We have seen enough echoes in the supply chain that we know Apple is really looking into every detail of car engineering and car manufacturing,” says Peter Fintl, director of technology and innovation for Capgemini Engineering Germany, part of a multinational that works with dozens of auto makers and parts manufacturers. “But nobody knows if what Apple creates will be a car or a tech platform or a mobility service,” he adds.

Many other tech companies, including Intel, Nvidia, Huawei, Baidu, Amazon and Google parent Alphabet, are pushing into the usually staid, conservative and relatively low-margin world of automobiles and their parts. Meanwhile, traditional auto makers like Ford, General Motors, Toyota, Daimler and Volkswagen, plus longtime automotive suppliers such as Bosch, ZF and Magna, are trying to behave more like those tech companies.

Basically, everyone is shifting their emphasis to software—and hiring like crazy to do it. In the past year, almost every major automotive company has advertised that it would like to hire many more software developers. Volkswagen, for example, announced in March 2019 that it would add 2,000 to its technical development team; the company already employs thousands of software engineers.

“Software is eating the world, and cars are next on the menu,” says Jim Adler, managing director of Toyota AI Ventures, a venture-capital fund owned by the car maker.

From hardware to software

Today’s most complicated automobiles have up to 200 computers in them, just smart enough to do their jobs controlling everything from the engine and automatic braking system to the air conditioner and in-dash entertainment, says Johannes Deichmann, a partner at McKinsey whose expertise is software and electronics in automobiles. These computers, made by an assortment of suppliers, tend to run proprietary software, making them largely inaccessible even to the auto maker.

Such modularity is fine up to a point—when building a Chevy Malibu, does GM really need to know how the windshield-wiper computer works? Yet the proliferation of these narrow-minded processors has led to unsustainable complexity, says Mr. Deichmann.

Tesla, as you might imagine, has been instrumental in pushing the auto industry in a new direction. Since the first Model S, Tesla pioneered replacing hundreds of small computers with a handful of bigger, more powerful ones, says Jan Becker, chief executive of Apex.ai, a Palo Alto-based automotive-software startup. Systems that used to require dedicated microchips now run in separate software modules instead.

This is why Tesla can add new capabilities to its vehicles through over-the-air updates, he adds. Want better acceleration, longer range, an enhanced self-driving system, or your in-dash entertainment system to play fart noises every time you flip your turn signal? Tesla has shown they’re just a software upgrade away. It’s very much like the model of continual updates to the software in our mobile devices we’ve come to expect.

Following suit, auto makers are scrambling to build or commission their own whole-car operating systems. The field is still wide open, says Mr. Fintl. Nvidia offers its Drive OS, VW and Daimler have announced they are, like Tesla, working on their own, and Google is insinuating itself ever deeper into vehicles through its Android Auto OS. To date, it’s still focused on in-dash entertainment and navigation, but Ford recently announced that as of 2023, it will use Android in the displays of all models sold outside of China—including the just-revealed Ford F-150 Lightning—and will also use Google to help manage the data streams collected from its vehicles. GM is also using Android in its all-electric Hummer.

This is where Apple might face a tough decision: While it has the chance to flex its enormous software and chip-making expertise to create a next-generation platform for the highest bidder, the company tends to create products for its own brand, not components for others. Besides, the strategy of being just another supplier to auto makers is already being pursued by Intel (via Mobileye), Alphabet (via Waymo and Android Auto), Nvidia and others.

The enormous complexity and expense of making and delivering vehicles by the thousands, much less millions—and making them safe—are why so many tech companies are joining forces with automobile companies, rather than trying to build their own vehicles, says Ryan Robinson, automotive research leader at Deloitte.

While analysts for years predicted that big auto makers would make short work of Tesla, it turns out electric vehicles are more about software than hardware. And auto makers aren’t yet good at the kind of software today’s cars and drivers demand. Volkswagen decided last June that, despite years of development, it had to delay the debut of a flagship electric vehicle because its software wasn’t ready.

Enter Apple

“This is the big industry mystery, if a famous fruit company is entering the game,” says Mr. Deichmann.

Apple already has its CarPlay in-dash interface for iPhones. But it’s limited to functions such as entertainment and navigation, and has nothing to do with the deeper integration and capabilities required of a true vehicle operating system. Apple has also demonstrated tremendous capabilities in designing the kinds of microchips and sensors that a smart automobile would require, though for now they’re mainly found in iPhones, iPads and Macs.

Apple didn’t respond to requests for comment.

Apple could build an operating system for a whole vehicle, and run it on its own silicon. But the company seeks to vertically integrate whenever possible, to control every aspect of the user experience. So the question is: Would a car maker let Apple treat it as the company once treated AT&T, when it first rolled out its iPhone? Or the music labels, when it launched iTunes? At a stroke, it turned the tables and took control of massive markets and significant portions of our lives.

This February, Apple’s partnership talks with Hyundai broke down, possibly over Hyundai’s concerns about being absorbed into the Apple Borg. Immediately after, Nissan signalled it might be willing to work with Apple.

If there is any tech company on earth with the resources to go it alone, building a new automaker from the ground up, it’s Apple. But there is no indication this is the company’s aim. If Tesla is the model here, it’s unclear why Apple’s executives would want to endure the tortuous process of building the manufacturing, testing and service capacities this path would require.

If providing the brains for other auto makers’ vehicles is unlikely, and competing directly with Tesla and every other electric vehicle startup unsavoury, that still leaves another option for Apple. As the automotive industry inches toward self-driving taxi services, Apple’s persistence in both acquiring and developing software and hardware for electric, autonomous vehicles could signal its long-term ambitions. Could an Apple mobility company, instead of an Apple car, make the most sense?

GM’s Cruise, Amazon’s Zoox and many others are already moving down this path. But since no such robot-taxi service yet exists, save for some limited experiments by Waymo in Arizona, there is potential for Apple to create something it controls completely, while also providing significant additional revenue to a struggling automaker such as Nissan.

Apple and others could design and commission vehicles that bear their branding, and operate as part of a service they provide, with no trace of the actual manufacturer on them, says Mr. Deichmann.

Apple, after all, isn’t an electronics manufacturer. In fact, it outsources all of its manufacturing, much of it to Foxconn—which as it happens is building up its own auto-making capabilities. Rather, Apple is first and foremost a customer-focused company that uses technical know-how to develop products physically made by contractors like Foxconn. It just happens that deep technical expertise is how it realizes its leaders’ visions. And because fully autonomous driving is turning out to be much harder than anyone predicted, Apple could have the time it would need to develop its own service.

It’s quite possible that Apple will end up spending billions on attempts to develop an electric car without ever releasing a product. Or maybe it offers a product or service that fizzles. It’s possible that transportation is so different in scope and complexity from personal and mobile computing that the only way to succeed is through the kind of grand-scale collaboration Apple isn’t known for.

Toyota chief Akio Toyoda said in March that Apple should prepare itself for a 40-year commitment if it offers cars to consumers. This makes sense, especially if the goal turns out to be not merely to create a car, but to replace a significant portion of the world’s 1.4 billion cars with a completely autonomous, emissions-free, radically transformed transportation system. In other words, a trillion-dollar revolution—and Apple’s already pulled off one of those.

May 25, 2021May 28, 2021

Dasha Zhukova’s New Real Estate Venture

The future of museum-going and cultural forays could be down in your own lobby, according to Dasha Zhukova, the arts patron and philanthropist who is launching a new residential real estate development firm in New York.

Ray, the name of Zhukova’s new brand, sets out to remedy a blind spot she sees in the residential world: the lack of arts and culture experiences in urban developments. Where other buildings and “co-living” spaces offer perks like golf simulators and dog grooming services, Ray’s buildings will offer cultural programming like master classes, events and workshops drawn from local institutions and artists to encourage creative synergy, says Zhukova, 39, with rents pegged at or below market rate.

One of the venture’s projects is reimagining Harlem’s three-story National Black Theatre, founded in 1968 by the late Barbara Ann Teer on the corner of 125th Street and Fifth Avenue, and is set to break ground by the end of May. A 21-storey building will take its place, with the new theatre space, retail and an event space spread across the first four floors, which Ray is developing with L+M Development Partners. The final structure will include 222 apartments, as well as artist studios, co-working spaces, communal kitchens, a library and a wellness space, and is slated to be completed in 2024.

Teer’s daughter, Sade Lythcott, now leads the theatre. “This project and partnership has felt [like] kismet from the time Dasha and I first met in 2019, not around aesthetics or Ray’s business model, but around our mothers. What it has meant to be women, raised by fearless matriarchs,” Lythcott wrote by email. “There is an incredible amount of equity created when you first start from a place that recognizes our shared humanity, honours what came before, in service of creating the built spaces of the future.”

Zhukova was inspired to launch Ray after seeing how visitors were drawn to the Garage Museum of Contemporary Art, the Moscow museum she co-founded in 2008. Its current home was designed by acclaimed architect Rem Koolhaas. “Even if [visitors] had seen all the shows that we had on, they would just stay and hang out in our lobby,” she says. “They would hang out in our cafe for hours on end—just come back day after day because they wanted to be in that environment.”

While hotels such as New York’s Gramercy Park Hotel have showcased art collections including names like Andy Warhol, Damien Hirst and Jean-Michel Basquiat, and developers have often staged high-end homes with trendy art to help sweeten the blue-chip price tags, one of Ray’s rental buildings will boast a permanent installation by Rashid Johnson, whose work just fetched a record US$1.95 million at Christie’s on May 11. Johnson will be creating a plant-filled installation for the lobby of a 110-unit building in Philadelphia’s rising Fishtown neighbourhood, which also will have six street-level artist studios, as well as maker spaces, and will be completed in 2022.

“Access to art shouldn’t be for a privileged few,” Johnson wrote by email. “These art and living spaces are aiming to bridge some of this gap, for me that’s exciting.”

The first two Ray ventures in Philadelphia and Harlem are largely financed by Zhukova. Ray recently inked a third deal, in Miami, where the site will expand beyond the 250-plus unit rental building that will anchor it, says Zhukova, with future plans for retail, offices, landscaped walkways and single- and multi-family homes.) With each project, Ray will emphasize new buildings rather than retrofitting existing space: “To truly rethink the space and how we occupy it…you really need to rebuild,” says Zhukova, who is looking to make inventive use of materials and space in part to make up for areas where Ray is spending more freely. “The focus [is] on how our habits have changed, the technological innovation and the cultural change.”

Her team at Ray currently eschews traditional titles—Zhukova calls her colleagues “thought partners”—and includes Will Kluczkowski, a real estate veteran from DDG; Becca Goldstein, a Stanford MBA whose CV includes a stint at a Brooklyn-based whisky distillery; and the design gallerist Suzanne Demisch.

“We are looking for creative solutions,” says Demisch, who says she enjoys the challenge posed by a limited budget. “We are asking why. There’s not a package for all the touchpoints of the experience—it’s about the aesthetic and the culture of each location.” Months were spent developing and perfecting the hand-split bricks for the facade of the Philadelphia project with manufacturers Glen-Gery and architecture firm Leong Leong—and finding the perfect Pantone swatch for the pinkish hue of the Harlem building facade, which is a nod to the historic Nigerian site the Osun-Osogbo Sacred Grove.

Such historic references were a priority of the architect of Ray’s Harlem project, Frida Escobedo, who is based in Mexico City. Art panels, inscriptions and a geometric, rhythmic facade that echo the motifs of the original National Black Theatre all refer to its previous incarnation, but “we’re also putting a great deal of focus on communal spaces, such as the artist studio and constellation of gathering areas,” says Escobedo, who is collaborating on the interiors with designer Little Wing Lee of Studio & Projects.

Zhukova, meanwhile, is partnering with Artspace, the Minneapolis-based nonprofit developer of art spaces, which will receive funding from the Ford Foundation in order to provide housing and studios at the Harlem building. She hopes to do the same in all Ray buildings. Her goal is to create accessible rents that will allow artists to remain in their home neighbourhoods rather than fleeing cities for more affordable live/work options. Zhukova next has her eye on rising cities including Austin, Nashville, Denver and Portland, Oregon, where she says they will focus on neighbourhoods that are a cultural fit for the brand.

“My personal dream is to build in Arizona,” says Zhukova. “I think in that climate and given the less restrictive building codes, you could build something absolutely incredible.”

May 24, 2021

Auction Markets Running Out Of Steam

Home auction markets reported mixed results over the weekend, May 22, as more record-level offerings tested buyer depth.

National listing numbers were again lower on Saturday but stayed within touching distance of the <ay record of 2563 reported two-weeks ago with 2333 auctions this past weekend.

The national average clearance rate increased to 82%, higher than the previous weekend’s 80.8% and the first rise in six weekends. However, despite the lift, it is smaller markets like Adelaide (90.1%) and Canberra (91.2%) carrying the results.

The larger auction capitals of Sydney and Melbourne are showing signs of fatigue and are expected to drift downwards over the next coming weekends.

Sydney reported a clearance rate of 81.5%, again lower than the 82.9% recorded the previous weekend. Saturday’s results were the fifth consecutive weekend of lower rates.

A total of 949 auctions were reported in the Harbour City, again just below the previous weekend’s 990.

Sydney has now recorded an unprecedented four consecutive weekends with more than 900 auctions, with this weekend’s median price of houses sold at auction sitting at $1,620,000, lower than the previous Saturday’s $1,641,000.

Melbourne reported a clearance rate of 76.9% which was again below the 78.6% of the previous weekend and just ahead of the 74,0% recorded over the same weekend last year.

Saturday, May 22 was the lowest clearance rate of the year so far.

A total of 117 homes were auctioned in Melbourne, close to the previous weekend’s 1159 listings.

Melbourne recorded a median price of $995,500 for houses sold at auction on the weekend which was 9.8% lower than the $1,093,000 recorded over the previous weekend, but 9.9% higher than the 906,000 recorded over the same weekend last year.

Data powered by Dr. Andrew Wilson of My Housing Market.

May 21, 2021May 21, 2021

Prestige Property: Quamby Estate, Hagley, TAS

Quamby Estate has adopted diverse and distinguished roles in the rural, cultural and political life of Tasmania.

The historic manse – which dates back to 1828 – remains as one of Australia’s most desirable family homes.

The 10-bedroom, 10-bathroom, 5-car parking pile is surrounded by some 64-hectares of prime farming land, ideal for those who prize privacy, and are searching for a comprehensive escape from city life.

The picturesque homestead – built in an Anglo-colonial style – is a heady mix of art and architectural wonder with an elegant flagstone paved verandah wrapping around the residence to the north and east – bringing beautiful light to the home.

With a distant view of Ben Lomond plateau the house enjoys double-hipped roods and attics and is structured around a transverse hall. Aside from the ballroom, which was added later, the principal rooms open directly onto the verandah through eight-pane French doors in pairs with transom lights.

Upon entry one is led into the hall which sees two evocative reception rooms – each embodying the home’s classic character with French doors and fireplaces and a library wedged between.

Elsewhere, the dining room’s soaring ceiling, floorboards and generous proportions are ideal for entertaining with an adjoining bar and fireplace adding a layer of intimacy to the residence.

The kitchen – which is built to a commercial quality – ensures Quamby has indeed, moved with the times.

The expansive residence is privy to 10 bedrooms, each accompanied by a sophisticated ensuite.

However, the estate is not limited to the historic homestead, with Quamby including its own manicured nine-hole golf course (yes it has its own golf course), complete with its own clubhouse delivered in a converted stables building.

Further Quamby’s light-filled function room, Georgian era coach house and extensive farm outbuildings play to the estate’s adaptability, with many hosting weddings on the grounds.

Built for Sir Richard Dry, who became the first Australian born state premier, the home sits just 10 minutes from the township of Hagley, and only 30 minutes from Launceston.

The listing is with Knight Frank Tasmania’s Sam Woolcock (+61 400 813 033). Price guide, $8-$10 million; knighfranktasmania.com.au

May 21, 2021May 25, 2021

15 CEOs Reflect On Their Pandemic Year

Hilton Worldwide Holdings Inc. Chief Executive Chris Nassetta worked from home in Arlington, Va., with his wife, six daughters and two dogs for two weeks before returning to the hotel chain’s nearly empty headquarters for the rest of the past year. Sharmistha Dubey has been leading Match Group Inc. from her dining room table near Dallas. Herman Miller’s Andi Owen has her dog Finn to keep her company while working from her home office in Grand Rapids, Mich. Moderna Inc. MRNA 5.05% CEO Stéphane Bancel relishes twice-daily 30-minute walks between his home in Boston and the vaccine maker’s Cambridge offices, where he resumed working in August, so he can crystallize his priorities and reflect on the day. The Wall Street Journal photographed them and 11 other business leaders in their pandemic office spaces as they discussed the past year and what’s to come.

More than a year after the coronavirus upended the way we work, the business leaders said they have found that more communication, flexibility and transparency have been crucial in staying connected to their employees.

Heads of companies across sectors including finance, hospitality and technology spoke from their current workspaces about what they’ve learned from the largely remote year, what challenges they faced and what changes they plan to leave in place during the next phase of work.

Brad Karp, chairman of the law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP, predicted his schedule will remain less hectic after the pandemic is over: “Personally, I can’t see myself reflexively flying cross-country for an hour-long presentation or meeting.”

Nandita Bakhshi

Bank of the West. Working from her home office in New Jersey.

PHOTO: HANNAH YOON FOR THE WALL STREET JOURNAL

“[To handle overwhelming Paycheck Protection Program loan demand], we got 600 volunteers signed up overnight that left their day job, learned how to do a PPP loan, and started to work day and night on that. If we were in the physical world, that collaboration would take lots of meetings to set up. But that happened within hours.”

— Nandita Bakhshi

Adena Friedman

Exchange operator Nasdaq Inc. Working from Nasdaq’s New York office.

PHOTO: GABRIELA BHASKAR FOR THE WALL STREET JOURNAL

“I don’t want to make permanent decisions in a temporary situation…. We want to be able to plan for the future, our employees want us to be able to plan for the future, and yet we’re in a temporary situation so we try very hard to avoid making decisions that we’ll later realize were not the right ones for the organization.”

— Adena Friedman

Juan Andrade

Insurer Everest Re Group Ltd. Working from Everest Re’s New Jersey office.

PHOTOS: GABRIELA BHASKAR FOR THE WALL STREET JOURNAL

“We’re built for responding to a typhoon or to an earthquake or to a hurricane or winter event or whatever it is. And so, yes, you look inward and then you apply a lot of those lessons to how you run the company.”

— Juan Andrade

Chris Hyams

Job-search site Indeed. Working from his home office in Texas.

PHOTO: MARY KANG FOR THE WALL STREET JOURNAL

“I used to spend a lot of time on aeroplanes, travelling as a means of trying to stay connected to people. I was flying 200,000 miles a year for the last six or seven years. And sitting in this one room and just being on Zoom, I am more connected with everyone in the business than I’ve ever been––because everyone is in the same place. We’re all just squares on a screen.”

— Chris Hyams

Stéphane Bancel

Vaccine maker Moderna Inc. Working from Moderna’s Massachusetts office.

PHOTO: MICHAEL BUCHER/THE WALL STREET JOURNAL

“Because of the intensity required to save every hour, every day we could, we were literally working seven days a week non stop. And I realized that I have to be very disciplined … And so I had to actually make sure I was doing sport in order to stay healthy and to stay mentally sane.”

— Stéphane Bancel

Sharmistha Dubey

Online-dating giant Match Group Inc. Working from her dining room in Texas.

PHOTO: ZERB MELLISH FOR THE WALL STREET JOURNAL

“In the Zoom world, you can get a lot of things done, but you have to ask for it. There are very few serendipitous moments. It’s almost as if there is a scripted narrative that we’re using in every conversation we have; it’s very transactional.”

— Sharmistha Dubey

David McCormick

Hedge fund Bridgewater Associates LP. Working from his kitchen in Colorado.

“We took a lot of steps to try to make sure we reaffirm the culture remotely, but there’s nothing like being together. So I think we’re all going to go back to work, hopefully this fall [autumn], with a sense that work is a real privilege. It’s a real privilege to be able to go to the office and be with your colleagues.”

— David McCormick

Michel A. Khalaf

Life-insurance company Metlife Inc. Working from his converted-closet office in New York.

“We like to think that there will be a better normal, hopefully, coming out of this. We’ve seen incredible levels of collaboration of people working in agile ways of innovation and experimentation during the pandemic. In a way, we had to move much faster than we normally work because that was the only way for us to deliver for our customers during the pandemic.”

— Michel A. Khalaf

Andi Owen

Furniture company Herman Miller Inc. Working from her home office in Michigan.

PHOTOS: SYLVIA JARRUS FOR THE WALL STREET JOURNAL

“If we think about how we’re going to take what we’ve learned from this [year of remote work] and move it into the future, we’ve got to take a hybrid approach that’s good for the employer and for the employee … I think productivity in the future is going to be much more a measure of results, rather than activities.”

— Andi Owen

Julia Hartz

Event-ticketing company Eventbrite Inc. Working from her home office in California.

PHOTO: MARISSA LESHNOV FOR THE WALL STREET JOURNAL

“The real shadow side to working remotely is that this [work-from-home] shift … has also revealed and greatly exacerbated inequality. We’re starting to talk more about that, in terms of how access to technology or balancing your home and work lives in this reality has been very challenging.”

— Julia Hartz

Chris Nassetta

Hotel chain Hilton Worldwide Holdings Inc. Working from Hilton’s Virginia office.

PHOTO: GABRIELLA DEMCZUK FOR THE WALL STREET JOURNAL

“The realisation for me was that I wasn’t really built for this. I’ve dealt with it like everybody else. I really like being with our people and it gives me a huge amount of energy. And I hope that when I’m with them—I can’t be with them all the time, obviously given the scale, breadth and depth of this organization—that I give them some energy…. But when I’m sitting here doing Zoom calls all day, it’s hard to really tap into that.”

— Chris Nassetta

Jean Hynes

Investment firm Wellington Management Co. Working from her home office in Massachusetts.

“Going through the pandemic is such a stressful situation, and what we’ve heard back from our employees is that in increasing transparency we took away a lot of the stress. That was a big lesson learned for me as a leader, that we needed to be stress absorbers for the organization.”

— Jean Hynes

Brad Karp

Law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP. Working from his home office in New York.

“Remote work, while initially liberating, can be exhausting. Waking up every morning and going to sleep every night in your office quickly becomes old. So does the lack of boundaries in a world without diversions. The workweek has taken on a 24/7 vibe, and, as a leader of my law firm, creating reasonable boundaries and worrying constantly about my colleagues’ mental health and stress have become critical priorities.”

— Brad Karp

Lynn Good

Electricity and gas company Duke Energy Corp. Working from her home office in North Carolina.

PHOTO: TRAVIS DOVE FOR THE WALL STREET JOURNAL

“We have remarked over and over about what an extraordinary time it has been. But it truly has. I mean, it has threatened health; it has created loss; people have had issues with how to manage their work, their families, their schooling—just everything. And at the same time social unrest [and a] tough political season all coming together.”

— Lynn Good

Brian Niccol

Restaurant chain Chipotle Mexican Grill Inc. Working from Chipotle’s California office.

PHOTO: ROZETTE RAGO FOR THE WALL STREET JOURNAL

“There’s just value in every four or five weeks getting everybody on the phone together, do a live Q&A. It’s really important for our kitchen manager all the way up to our executive team, directors, folks that are doing payroll to have the ability to hear first hand what’s going on and then also provide questions on what they’re feeling and how they’re being impacted right now.”

— Brian Niccol

Produced by Meghan Petersen. Designed by Andrew Levinson. Additional reporting by Chip Cutter and Kathryn Dill.

Working from home or from deserted headquarters, bosses of companies from Moderna to Chipotle talk about their challenges and share lessons for the times ahead

May 20, 2021May 20, 2021

A Record Year Of House Building

According to economists at the Housing Institute of Australia (HIA), a record number of detached housing starts will occur in the 12 months to September 2021.

“More than 146,000 detached houses commencing construction. This is more than 20 per cent higher than the peak of the previous boom in 2018,” stated HIA Economist, Angela Lillicrap.

This forecast is contained in HIA’s economic and industry Outlook Report. The State and National Outlook Reports include updated forecasts for new home building and renovations activity for Australia and each of the eight states and territories.

“This large volume of work will ensure that the industry remains very active through until at least the second half of 2022,” added Ms Lillicrap.

Ms Lillicrap cites a number of factors driving the level of activity, namely, the HomeBuilder scheme and low-interest rates, as well as consumer preferences shifting away from high-density areas.

“The extension of HomeBuilder’s commencement deadline will help limit the impact of constraints imposed by land, labour and materials and ensure the elevated volume of detached homes will be sustained for longer.”

However, the increase in building is not something that is shared between the detached and multi-unit sector, the latter expecting a decline in 2020/21.

“The timing and speed of a recovery in overseas migration will have a significant impact on these forecasts.

The return to stable and certain population growth is central to stable economic growth,” concluded Ms Lillicrap.

May 20, 2021

Bitcoin’s Plunge Sparks Wider Selloff

Bitcoin plunged to its lowest level since February on Wednesday, hitting a low of $30,200, down by more than half from an all-time high of $64,829 it reached just last month.

Ether, the second most valuable cryptocurrency, was down 21% as well on Wednesday.

The fallout was hitting stocks that have ridden the crypto boom. Square (ticker: SQ) dropped 4% and PayPal Holdings (PYPL) was off 1.5%. Companies with even more of their business models tied to the price of cryptocurrencies dropped even more precipitously, with crypto exchange Coinbase Global (COIN) falling 8% and business software firm MicroStrategy (MSTR), which has bought billions worth of Bitcoin, down 11%.

MicroStrategy’s CEO MIchael Saylor, among the most important evangelists for crypto had a short message on Twitter: “I’m not selling.”

Some crypto users couldn’t sell even if they wanted to. Coinbase users complained about trouble accessing the app. The company said “some features may not be functioning completely normal” and it is investigating.

Bitcoin had recovered to about $36,000 by 10:45 a.m. Eastern time, still down 19% in the past 24 hours. But even getting a definitive price was tricky. CoinDesk, among the most popular sites for crypto information, was down for part of the morning, and was showing different prices than coinmarketcap.com, another hub for data, and Coinbase. At about the same time, Coinbase was showing $36,998, while coinmarketcap showed $36,429—the kind of spread that used to happen in crypto but that had diminished in the past couple of years as the market became more liquid.

All of the gains Bitcoin accrued since Tesla (TSLA) got involved with the cryptocurrency have now been erased. And as with many things in crypto, it’s difficult to pinpoint the catalyst for the selloff.

Matt Hougan, chief investment officer of crypto fund provider Bitwise Asset Management, told Barron’s that the drop was caused by “short-term forced and panicked selling by retail investors who entered the market in the past year, spooked by a mix of bad news and misinformation, and turbocharged by the procyclical leverage that’s an inherent feature of the crypto market.”

Looking at patterns on the Bitcoin blockchain itself, he said he sees funds moving from overseas retail investors to institutions in the United States, “which is a good thing for the long-term. But in the short-term, volatility is a part of the market.”

The market has been dropping since Elon Musk began questioning Bitcoin’s negative environmental impacts about a week ago. One more recent catalyst may have been China’s decision to reiterate its ban on financial institutions facilitating crypto transactions.

In the crypto market, momentum can turn quickly and selloffs can accelerate as people try to lock in gains made in the latest bull market. Anyone who bought cryptocurrencies in 2020 is still showing a large paper profit, but maybe getting anxious that those gains won’t hold for long.

This “no doubt this will scare investors just as all pullbacks in all markets scare investors” Jim Paulsen, chief investment strategist at The Leuthold Group, wrote in an email to Barron’s. Paulsen is a more traditional investor who has warmed to Bitcoin in the past year. The selloff isn’t shaking his interest in crypto — he still thinks it’s worth allocating 1% or 2% of a portfolio into it. And he likes that the volatility makes it possible to rebalance frequently when prices go up and down.

One thing Paulsen is watching for is whether the selloff bleeds into the larger market. The S&P 500 was down 1.3% on Wednesday morning. “Note that the other 3 times crypto did this, the stock market suffered a correction or a bear market,” he wrote. “So part of the crypto story may depend on what the stock market does from here? Does it recover soon or is this a full-blown, longer-lasting correction for stocks?”

Saylor and other Bitcoin bulls have said that Bitcoin is an effective hedge against inflation, because the number of Bitcoins is capped at 21 million, theoretically making it impervious to the “money-printing” common with fiat currencies. Prominent hedge-fund managers like Stanley Druckenmiller have bought Bitcoin under that premise, and some analysts have found that Bitcoin has been stealing gold’s thunder.

But as inflation fears grow in the United States, there is evidence that institutional investors are returning to their familiar inflation hedge.

Investors have been pulling money out of Bitcoin futures and funds and putting more of it into gold, according to a new analysis by J.P. Morgan strategist Nikolaos Panigirtzoglou. That’s a shift from the prior two quarters, he wrote. On Wednesday, the spot price of gold was up 0.8% to $1,883.20 per ounce.

May 20, 2021April 20, 2022

Warren Buffett to Offer a New Spin on Modular Construction

A startup owned by Warren Buffett’s Berkshire Hathaway Inc. aims to shake up the construction industry by making it more like car manufacturing.

MiTek Inc., a Missouri-based construction-technology company, is launching a new modular building venture with New York City-based architect Danny Forster & Architecture. The company plans to build entire rooms for hotels and apartment buildings in factories, and then send them to a construction site to be stacked on top of each other.

MiTek has more than 6,000 employees and sells building components, construction software and services like engineering. The company said it is investing tens of millions of dollars in the modular venture, and plans to start working on its first projects early next year.

Modular construction isn’t new, but companies have struggled to be profitable. Transporting entire rooms to construction sites can be expensive, and some finished buildings have suffered from leaky facades.

Other efforts to streamline the construction process have also had issues. Katerra Inc., a Silicon Valley-based startup, has been looking to move a bigger part of construction work to factories and become a one-stop shop that cuts out middlemen like plumbers and architects. But it has struggled under this model, and its main backer, SoftBank Group Corp., had to bail it out.

MiTek looks to modernize modular construction by requiring assembly by general contractors. Instead of building entire rooms in a factory and driving them to a construction site on a flatbed truck, MiTek wants to ship kits of manufactured building parts along with instructions.

General contractors would then construct rooms from these parts, which would include a steel cage forming the structural support for the room, in a warehouse or other type of industrial building near the construction site.

Shipping the parts, rather than entire rooms, keeps transportation costs low and allows MiTek to supply the country from its factory in Lebanon, Pa., said Todd Ullom, the company’s vice president of modular building solutions.

That companies continue to invest in modular construction despite the challenges speaks to the business model’s promise, proponents say. Construction is a massive industry, plagued by rising costs and inefficiencies. Anyone who manages to automate it the way Henry Ford once changed car manufacturing stands to make a fortune, some industry observers say.

“How come an entire industry is operating on mid-to-late-20th-century mode when we’re a quarter of the way, almost, into the 21st century?” said Barry LePatner, a New York-based construction attorney. “It drives me crazy.”

MiTek’s approach brings its own challenges. Relying on customers to assemble rooms based on written instructions can be tricky. Many general contractors are resistant to change, which could lead to friction and mistakes.

Mr. Ullom, who worked as a general contractor for more than 30 years, said relying on a single supplier instead of numerous subcontractors reduces risk, and the instructions are simple to follow. He said MiTek would offer on-site training.

MiTek also plans to automate much of its 225,000-square-foot factory, for example by using robotic welders, not unlike how auto makers assemble cars. Architect Danny Forster’s firm has designed what could become the world’s tallest modular hotel, a planned 26-story building for Manhattan. He said other modular-construction companies moved work from building sites into factories but failed to make it faster or more efficient.

“A lot of times it has been bringing the chaos of the construction site and just putting a roof over it,” he said.

May 19, 2021

Property Of The Week: 99 Fernberg Road, Paddington, QLD

Located in the desirable suburb of Paddington comes this modern family home combining traditional cottage features with contemporary, free-flowing design.

The two-storey 4-bedroom, 2-bathroom, 1-car parking home sees an open plan living design on the first level. It’s here that the living, dining and kitchen area opens out – through bi-fold doors – to a large deck that is ideal for entertaining.

The opening of the bi-fold doors allows for streams of light, giving the home an airy presentation. Once outside, one finds the pool and beautifully landscaped gardens.

Timber, in the form of panelled walls and warm-toned flooring, dominates the aesthetic of the home, and helps keep some of its cottage charm. The use of timber is showcased heavily throughout the major living zones.

Other traditional features, such as the French doors and Venetian shutters all help the home retain some of its period look.

Upstairs sees a large master suite with lush outlook, views over Paddington and a large en-suite. An additional bedroom on the upper level is perfect for a nursery or study.

A further two bedrooms are found on the lower-level.

Paddington is a highly desirable Brisbane locale, with the home nearby to Rosalie Village, Paddington Woolworth’s, University of Queensland, Suncorp Stadium and the CBD via public transport.

The listing is headed to auction on June 5 and is managed by Glynis Austin (+61 403 333 013) of Glynis Austin Properties. Glynisaustin.com

May 19, 2021

China’s Economic Recovery Slowed In April

BEIJING—China’s economic activity grew at a slower pace in April as retail sales missed expectations, complicating the picture of a steady and balanced recovery in the world’s second-largest economy.

Official data released Monday showed industrial output and fixed-asset investment beating market expectations and continuing to lead the recovery, but domestic consumer spending, which has lagged behind for months, remaining soft.

China’s industrial production in April was up 9.8% from a year earlier, slower than March’s 14.1% pace, the National Bureau of Statistics said Monday. Fixed-asset investment decelerated as well, to 19.9% in the January-April period from 25.6% in the first quarter.

Retail sales, a key gauge of China’s domestic consumption, underwhelmed: April’s figure was up 17.7% from the pandemic-hit level a year earlier, well short of March’s 34.2% pace.

Economists had largely expected the double-digit year-over-year percentage growth that major indicators delivered, given the low-base of comparison from a year earlier, when China’s economy had just begun to bounce back from the coronavirus shock. In the coming months, however, that “low-base effect” will fade, given the economy’s recovery during the spring and summer last year.

Monday’s figures on industrial output and fixed-asset investment actually exceeded the forecasts of economists polled by The Wall Street Journal, who had pegged 9.1% and 19.2%, respectively. Retail sales, however, missed their predicted 24.9%.

To strip out last year’s pandemic distortions, government statisticians and economists have benchmarked this year’s numbers against 2019’s. By that measure, official data showed industrial production up 14.1% in April, largely in line with March’s growth rate, while the pace of retail-sales slowed to 8.8% from March’s 12.9%.

The retail-sales miss was a particular disappointment for economists and policy makers, who have been watching for several months for signs of a tilt toward consumption-driven growth in the Chinese economy, after more than a year of expansion led by manufacturing and exports.

For the Chinese economy as a whole, says Ding Shuang, an economist at Standard Chartered, “The problem is not the growth rate, but its unbalanced recovery. Some sectors, such as industrial activity, appeared to be too hot, while others, like service and consumption, haven’t yet recovered to pre-virus levels.”

China’s strong rebound from the Covid-19 pandemic last year was largely driven by its swift factory resumption and government-led investment, while household spending has repeatedly fallen short of expectations.

Pointing to the softness in domestic spending, the Chinese Communist Party’s Politburo—its top decision-making body—said last month that the economic recovery remains uneven and its foundation less than solid.

China’s gross domestic product reported a record year-over-year gain of 18.3% in the first quarter. That makes meeting Beijing’s official target of “above 6%” growth for 2021 a relatively light lift.

Economists argue that the modest growth target leaves Beijing’s policy makers with more wiggle room to address longer-term structural problems in the economy—such as high leverage, potential asset-price bubbles and, in particular, the weakness of domestic consumption.

Chinese policy makers face a dilemma, Louis Kuijs, an economist with Oxford Economics, told clients in a note Monday: While Beijing wants to dial down leverage generally, the persistently weak consumption numbers may increase “pressure to pursue a more pro-growth macro policy that could increase financial risks and leverage.”

April’s lacklustre consumption data came even as China’s labour market showed signs of improvement. The urban surveyed unemployment rate, China’s headline jobless figure, dropped to 5.1% in April, the lowest level in more than a year.

In a briefing Monday, Fu Linghui, a spokesman for China’s statistics bureau, acknowledged the imbalance in the economic recovery, but said the improving labour market and increasing household income would lift consumption.

Iris Pang, an economist with ING Group, said April’s consumption weakness might prove short-lived, with figures for the five-day Labor Day holiday at the start of May indicating robust spending.

Over the holiday, Chinese people made a total of 230 million trips, marking the first time that traveller numbers topped pre-virus levels. The nation’s box office also broke records for revenue and number of moviegoers.

Meanwhile, though fewer cities in China reported rising home prices in April, average new home prices nationwide in April were up 4.45% from a year earlier, official statisticians said Monday, following a 4.36% year-over-year rise in March—underscoring the challenge that policy makers face in reining in home prices.