Welcome to the Weekly Scan. Here’s what we’re following for the week of September 21, 2020.
Make sure to check back as we update these stories.
TikTok, Oracle, and Walmart
Over the weekend, President Trump approved a deal that will allow cloud-computing and software services company Oracle and the retailer Walmart to take a minority stake in the U.S. operations of video-creation app TikTok. The deal will reportedly bring to an end a struggle between Trump and the Chinese-owned company, which the president had threatened to ban this month if it didn’t sell its local operations to a U.S.-based company. TikTok’s parent company, ByteDance, agreed to set up a new company in the U.S. called TikTok Global. Oracle and Walmart will reportedly own a combined 20% stake in the company.
- The takeaway: Trump had originally demanded that ByteDance sell a majority ownership of its U.S. business to a U.S. company, meaning a stake of more than 50%. (U.S. venture investors, including Sequoia Capital and others, own about 40% of ByteDance, which technically means the company would be U.S.-owned.) Under the current deal, Oracle will provide cloud services to TikTok, and Walmart will provide e-commerce services, linking its retail operations to the app’s 100 million primarily younger consumers. The Trump administration had threatened to banTikTok in response to alleged national security concerns related to potential misuse of consumer data gathered by the app. Last week, the president also banned TikTok and WeChat, also owned by a Chinese company, from app stores, although that ban has been delayed.
Supreme Court vacancy
Supreme Court Justice Ruth Bader Ginsburg, the second woman to ever serve on the high court’s bench, died on Friday at age 87 from complications related to pancreatic cancer. A champion of women’s and minority rights, Ginsburg was also one of four liberal votes on the court. Her death is likely to set off a political battle over a replacement, with the election just weeks away. Trump has said that he will put forward a nominee by the end of the week.
- The takeaway: A conservative replacement for Justice Ginsburg would give conservatives a majority as they examine a number of business cases before the end of the year. In November, the Supreme Court will hear a lawsuit to overturn the Affordable Care Act (ACA), the Obama-era legislation that expanded healthcare to 20 million uninsured Americans. The court will also hear a case between cloud-computing company Oracle and Google during this session, over copyright issues related to software interfaces, as the Trump administration prepares an antitrust case against Google.
The power of zero
The Federal Reserve, the nation’s central bank, said that it would keep interest rates between 0% and 0.25% until it sees signs of inflation in the economy. Generally speaking inflation is an increase in prices for a broad basket of goods and services. Additionally, the Fed revised previous economic projections for 2020, saying that the unemployment and a decrease in the Gross Domestic Product (GDP) would be better than expected.
- The takeaway: The Fed slashed interest rates to near zero in March, as the pandemic shut down the economy, to motivate U.S. consumers to continue spending money. Although the U.S. economy still has a ways to go in terms of recovery, the Fed lowered its unemployment projection for 2020 to 7.6% from 9.3%. The Fed has suggested that interest rates could remain near zero through 2023.
More on the Max
The House of Representatives released its final report on Boeing’s 737 Max airplane, following an 18-month investigation of two separate crashes that killed 346 people in 2018 and 2019. The committee found that Boeing minimized issues with the plane’s anti-stall software, called the Maneuvering Characteristics Augmentation System (MCAS), which uncontrollably pushed down the plane nose dozens of times in simulations, and in the doomed flights, as pilots struggled to override the system. The Committee also found that Boeing purposely hid the extent to which the MCAS was a new system from regulators, and didn’t require simulator training for many pilots, which might have prevented the crashes..
- The takeaway: Before the crashes, the 737 Max was the fastest-selling plane in Boeing’s history, and brought in billions of dollars for the company. As a result of the crashes, the plane was grounded indefinitely around the world. In response to the House report, Boeing has said that it is thoroughly testing the new 737 Max design to insure a safe aircraft going forward.
Covid-19 vaccine update
Last week, the Center for Disease Control (CDC) said that although a Covid-19 vaccine is expected by the beginning of 2021, the U.S. probably won’t have enough doses for widespread immunization until the third quarter of 2021. When a vaccine is approved, the first doses will go to specific groups such as healthcare workers. Dozens of biotech and pharmaceutical companies are racing to test and approve a vaccine with at least 50% efficacy.
- The takeaway: An effective Covid-19 vaccine is widely believed to be the best route for the return to normalcy, allowing businesses, schools, and offices to open safely. As part of a program called Operation Warp Speed, the U.S. government has funneled $10 billion into seven companies working on vaccines. Vaccine development usually takes two to three years, but the pandemic has put pressure on companies to accelerate that timeline.