President Trump follows through on his threat to challenge the legal protections enjoyed by social media and internet companies, Magic Leap’s CEO is stepping down and China sees its biggest autonomous driving round yet.
Here’s your Daily Crunch for May 29, 2020.
Yesterday, President Donald Trump signed an executive order targeting the legal shield that internet companies rely on to protect them from liability for user-created content. Next, we’ll almost certainly see a court battle over whether the order is legal and enforceable.
While Trump and Attorney General William Barr have expressed interest in undermining Section 230 of the Communications Decency Act before, this week’s action was prompted by Twitter’s decision to add a fact-checking link to the president’s tweet about voting by mail. That conflict isn’t going away either, with Twitter adding a “public interest notice” to another of Trump’s tweets for glorifying violence.
Magic Leap founder and CEO Rony Abovitz announced that the company has secured a new bout of funding — but that Magic will be attempting a major turnaround without him at the helm.
As China’s largest ride-hailing provider with mountains of traffic data, Didi clearly has an upper hand in developing robotaxis, which could help address driver shortages in the long term. But it was relatively late to the field.
Cisco’s Todd Nightingale, writing in a blog post announcing the deal, said that the kind of data that ThousandEyes provides around internet user experience is more important than ever as internet connections have come under tremendous pressure.
Promoteo co-founder Ximena Aleman looks at what impact regulation has had so far in Latin America, and what needs to happen to strike a balance between sector growth and public trust. (Extra Crunch membership required.)
The ride-hailing giant rolled out a similar feature in the U.S. back in April, offering drivers the ability to respond to job postings from around a dozen other companies, as well as the ability to receive orders through other Uber units: Eats, Freight and Works.
We’re working with the COVID-19 Technology Task Force, as well as Harvard’s Berkman Klein Center, NYU’s Alliance for Public Interest Technology, Betaworks Studios and Hangar. We’ll be playing host to their live-streamed discussion around contact-tracing and exposure-notification applications, including demonstrations of some of the cutting-edge products that will be available in the U.S. to tackle these challenging, but crucial, tasks.
The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 9am Pacific, you can subscribe here.
The lawsuit, brought by the Knight First Amendment Institute at Columbia University, the Brennan Center for Justice and law firm Simpson Thacher & Bartlett, seeks to undo both the State Department’s requirement that visa applicants must disclose their social media handles prior to obtaining a U.S. visa, as well as related rules over the retention and dissemination of those records.
Last year, the State Department began asking visa applicants for their current and former social media usernames, a move that affects millions of non-citizens applying to travel to the United States each year. The rule change was part of the Trump administration’s effort to expand its “enhanced” screening protocols. At the time, it was reported that the information would be used if the State Department determines that “such information is required to confirm identity or conduct more rigorous national security vetting.”
In a filing supporting the lawsuit, both Twitter and Reddit said the social media policies “unquestionably chill a vast quantity of speech” and that the rules violate the First Amendment rights “to speak anonymously and associate privately.”
Twitter and Reddit, which collectively have more than 560 million users, said their users — many of which don’t use their real names on their platforms — are forced to “surrender their anonymity in order to travel to the United States,” which “violates the First Amendment rights to speak anonymously and associate privately.”
“Twitter and Reddit vigorously guard the right to speak anonymously for people on their platforms, and anonymous individuals correspondingly communicate on these platforms with the expectation that their identities will not be revealed without a specific showing of compelling need,” the brief said.
“That expectation allows the free exchange of ideas to flourish on these platforms.”
Jessica Herrera-Flanigan, Twitter’s policy chief for the Americas, said the social media rule “infringes both of those rights and we are proud to lend our support on these critical legal issues.” Reddit’s general counsel Ben Lee called the rule an “intrusive overreach” by the government.
It’s not known how many, if any, visa applicants have been denied a visa because of their social media content. But since the social media rule went into effect, cases emerged of approved visa holders denied entry to the U.S. for other people’s social media postings. Ismail Ajjawi, a then 17-year-old freshman at Harvard University, was turned away at Boston Logan International Airport after U.S. border officials searched his phone after taking issue with social media postings of Ajjawi’s friends — and not his own.
Abed Ayoub, legal and policy director at the American-Arab Anti-Discrimination Committee, told TechCrunch at the time that Ajjawi’s case was not isolated. A week later, TechCrunch learned of another man who was denied entry to the U.S. because of a WhatsApp message sent by a distant acquaintance.
A spokesperson for the State Department did not immediately comment on news of the amicus brief.
After applying a fact-checking label Tuesday to a misleading vote-by-mail tweet made by US president Donald Trump, Twitter is on a roll and has labeled another of the president’s tweets — this time screening his words from casual view with what it calls a “public interest notice” that states the tweet violated its rules about glorifying violence.
Here’s how the tweet appears without further interaction:
The public interest notice replaces the substance of what Trump wrote, meaning a user has to actively click through to view the offending tweet.
Engagement options are also limited as a result by this label, meaning users can only retweet the offending tweet with a comment; they cannot like it, reply to it or vanilla retweet it.
Twitter’s notice goes on to explain why it has not removed the offending tweet entirely — and this is where the public interest element of the policy kicks in — with the company writing: “Twitter has determined that it may be in the public’s interest for the Tweet to remain accessible.”
Twitter appears to be shrugging off the president’s decision yesterday to sign an executive order targeting the legal shield which internet companies rely on to protect them from liability for user-created content — doubling down on displeasing Trump who has accused social media platforms generally of deliberately suppressing conservative views, despite plenty of evidence that ad-targeting platform algorithms actually boost outrage-fuelled content and views — which tends, conversely, to amplify conservative viewpoints.
In the latest clash, Trump had tweeted in reference to violent demonstrations taking place in Minneapolis sparked by the killing of a black man, George Floyd, by a white police officer — with the president claiming that “THUGS are dishonoring the memory of George Floyd” before threatening to send in the “Military”.
“Any difficulty and we will assume control but, when the looting starts, the shooting starts. Thank you!” Trump added — making a bald threat to use military force against civilians.
Twitter has wrestled with the issue of how to handle world leaders who break its content rules for years. Most often as a result of Trump who routinely uses its platform to bully all manner of targets — from rival politicians to hated journalists, disobedient business leaders, and even actors who displease him — as well as to dispense direct and sometimes violent threats.
Since being elected, Trump has also used Twitter’s global platform as a foreign policy weapon, firing military threats at the likes of North Korea and Iran in tweet form.
Back in 2018, for example, he teased North Korean leader Kim Jong-Un with button-pushing nuclear destruction (see below tweet) — before going on to “fall in love” with the dictator when he met him in person.
North Korean Leader Kim Jong Un just stated that the “Nuclear Button is on his desk at all times.” Will someone from his depleted and food starved regime please inform him that I too have a Nuclear Button, but it is a much bigger & more powerful one than his, and my Button works!
— Donald J. Trump (@realDonaldTrump) January 3, 2018
Twitter’s go-to defence for not taking offending Trump tweets down in the past has been that, as US president, the substance of what the man tweets — however mad, bad and dangerous — is inherently newsworthy.
However, more recently, the company has created a policy tool that allows it to intervene — defining terms last summer around “public interest” content on Twitter.
It warned then (almost a full year ago, in June 2019) that it might place a public interest notice on tweets that would otherwise violate its rules (and therefore merit a takedown) — in order to “to provide additional context and clarity”, rather than removing the offensive tweet.
Fast forward a year and the tech giant has started applying labels to Trump’s tweets — beginning with a fact-check label earlier this week, related to the forthcoming US election, and following up now with a public interest notice related to Trump glorifying violence.
So, finally, the tech giant seems to be inching towards drawing a limit-line around Trump in near real-time.
Explaining its decision to badge the US president’s threat to order the military to shoot looters in Minneapolis, the company writes: “This Tweet violates our policies regarding the glorification of violence based on the historical context of the last line, its connection to violence, and the risk it could inspire similar actions today.”
— Twitter Comms (@TwitterComms) May 29, 2020
“We’ve taken action in the interest of preventing others from being inspired to commit violent acts, but have kept the Tweet on Twitter because it is important that the public still be able to see the Tweet given its relevance to ongoing matters of public importance,” Twitter goes on.
It also links to its policy against tweets that glorify violence — which states unequivocally [in bold]: “You may not threaten violence against an individual or a group of people.”
Back in June, when Twitter announced the ‘abusive behavior’ label, it also warned that tweets which get screened with a public interest notice will not benefit from any algorithmic acceleration, writing: “We’ll also take steps to make sure the Tweet is not algorithmically elevated on our service, to strike the right balance between enabling free expression, fostering accountability, and reducing the potential harm caused by these Tweets.”
However the newsworthiness of Twitter’s decision to finally apply its own rules vis-a-vis Trump will ensure there’s plenty of non-algorithmic amplification.
We reached out to the company with questions about its decision to apply a public interest screen on Trump’s latest tweet but at the time of writing it had not responded.
On Wednesday night, Twitter CEO and co-founder, Jack Dorsey, put out a series of tweets defending its decision to apply a fact-check label to Trump’s earlier misleading tweets about vote-by-mail.
“This does not make us an “arbiter of truth”,” wrote Dorsey. “Our intention is to connect the dots of conflicting statements and show the information in dispute so people can judge for themselves. More transparency from us is critical so folks can clearly see the why behind our actions.”
Fact check: there is someone ultimately accountable for our actions as a company, and that’s me. Please leave our employees out of this. We’ll continue to point out incorrect or disputed information about elections globally. And we will admit to and own any mistakes we make.
— jack (@jack) May 28, 2020
Dorsey’s remarks followed pointed comments made by Facebook CEO Mark Zuckerberg to Fox News, seeking to contrast Facebook’s claimed ‘neutrality’ when policing its platform with Twitter’s policy of taking a stance on issues such as political advertising (which Twitter does not allow).
“I just believe strongly that Facebook shouldn’t be the arbiter of truth of everything that people say online,” Zuckerberg told the conservative news station. “Private companies… especially these platform companies, shouldn’t be in the position of doing that.”
It’s notable that Dorsey used Zuckerberg’s exact turn of phrase — “arbiter of truth” — to reject Facebook’s attack on Twitter’s policy as a straw man argument.
After the White House told reporters that the president would soon announce an executive order “pertaining to social media,” the draft of that order is out in circulation. We’ve reviewed the draft, and while its contents are somewhat shocking by the standards of a normal administration, this isn’t the first time we’ve seen the Trump administration lash out at social media companies over accusations of political bias. In fact, we may be seeing the same executive order now that circulated in draft form last year.
A draft of an executive order is just that: a draft. Until the administration actually introduces or signs an order, its wishes — and threats — should be taken with a grain of salt. But we can get an idea of what this White House has in mind for punishing social media companies for ongoing unfounded claims of anti-conservative censorship.
The president’s draft order tries to exert control over social media companies in a few ways. The most ominous of those is by attacking a law known as Section 230 of the Communications Decency Act. That law, often regarded as the legal infrastructure for the social internet, shields online platforms from legal liability for the content their users create. Without the law, Twitter or Facebook or YouTube (or Yelp or Reddit or any website with a comments section, including this one) could be sued for the stuff their users post.
Whether you think they should be held more accountable for their content or not, in a world without Section 230, social media companies would never have been able to scale into the services we use today.
The draft order attacks this legal provision by claiming that that part of the law means that “an online platform that engaged in any editing or restriction of content posted by others thereby became itself a ‘publisher,'” implying that a company would then be legally liable for things its users say. This is a misleading interpretation at best and one that seems specifically intended to let the White House intimidate companies like Twitter into moderating platforms even less.
This interpretation is a willful inversion of what the law really intends. Sen. Ron Wyden (D-OR), who co-authored Section 230, often says that the law provides companies with both a sword and a shield. The “shield” protects companies from legal liability and the “sword” allows them to make moderation decisions without facing liability for that either.
While Trump is trying to intimidate social media companies into doing even less moderation — such as Twitter labeling the falsehood he tweeted — the consensus beyond this politically expedient viewpoint is that social media should actually be removing and contextualizing more of the potentially harmful content on their platforms.
“Members across the spectrum, including far-right House and Senate leaders, are agitating for government regulation of internet platforms,” Wyden wrote in a prescient TechCrunch op-ed two years ago calling for tech companies to step up or face an existential threat.
“Even if the government doesn’t take the dangerous step of regulating speech, just eliminating the [Section] 230 protections is enough to have a dramatic, chilling effect on expression across the internet.”
Beyond attacking Twitter’s moderation decisions through Section 230, the draft executive order says the White House will reestablish a “tech bias” reporting tool, presumably so it can unsystematically collect anecdotal evidence that he and his supporters are being unfairly targeted on social platforms. According to the order, the White House would then submit those reports to the Justice Department and the Federal Trade Commission (FTC). The order would further rope in the FTC to make a public report of complaints and “consider taking action” against social media companies that “restrict speech.”
It’s not clear what kind of action, if any, the FTC would have legal ground to take.
The order also asks the Commerce Secretary to file a petition that would require the Federal Communications Commission to “clarify” parts of Section 230 — a role the commission isn’t likely eager to embrace.
“Social media can be frustrating. But an executive order that would turn the FCC into the president’s speech police is not the answer,” Democratic FCC commissioner Jessica Rosenworcel tweeted on Thursday morning.
The order also calls for the U.S. Attorney General William Barr to form a working group of state attorneys general “regarding the enforcement of state statutes” to collect information about social media practices, another presumably legally unsound exercise in partisanship. Barr, a close Trump ally, has expressed his own appetite for dismantling tech’s legal protections in recent months.
While Trump’s executive order may prove toothless, there is some appetite for dismantling Section 230 among tech’s critics in Congress — a branch of the government with much more power to hold companies accountable.
The most prominent of those threats is currently the EARN-IT Act, a Senate bill introduced in March that would amend Section 230 “to allow companies to “‘earn’ their liability protection” under the guise of pressuring them to crack down on enforcement against child sexual exploitation. The executive order doesn’t directly connect to that proposal, but sounding the war drums against the tech industry’s key legal provision will likely signal Trump’s Republican allies to double down on those efforts.
In response to the circulating draft executive order, Twitter declined to comment when reached by TechCrunch, and Facebook and Google did not respond to our emails. The Internet Association, the lobbying group that represents the interests of internet companies, was out with a statement opposing the president’s efforts on Thursday morning:
“Section 230, by design and reinforced by several decades of case law, empowers platforms and services to remove harmful, dangerous, and illegal content based on their terms of service, regardless of who posted the content or their motivations for doing so.
“Based on media reports, this proposed executive order seems designed to punish a handful of companies for perceived slights and is inconsistent with the purpose and text of Section 230. It stands to undermine a variety of government efforts to protect public safety and spread critical information online through social media and threatens the vibrancy of a core segment of our economy.”
The group also pointed to the fact that political figures rely on social media to successfully broadcast their thoughts to millions of followers every day—80 million, in Trumps’ case.
The ACLU also weighed in on the executive order Thursday morning. “Much as he might wish otherwise, Donald Trump is not the president of Twitter,” said ACLU Senior Legislative Counsel Kate Ruane. “This order, if issued, would be a blatant and unconstitutional threat to punish social media companies that displease the president.”
“Ironically, Donald Trump is a big beneficiary of Section 230. If platforms were not immune under the law, then they would not risk the legal liability that could come with hosting Donald Trump’s lies, defamation, and threats.”
Tensions escalate between President Trump and his favorite social media platform, Google and Microsoft considering investing in the Indian telecom market and the Raspberry Pi foundation announces a new Raspberry Pi.
Here’s your Daily Crunch for May 28, 2020.
After Twitter flagged a pair of President Trump’s tweets with a fact-checking label on Tuesday, White House officials denounced a specific Twitter employee and said that the president will soon sign an executive order “pertaining to social media.”
Meanwhile, in a series of tweets, Twitter CEO Jack Dorsey resisted the idea that the platform is becoming an “arbiter of truth” and instead said, “Our intention is to connect the dots of conflicting statements and show the information in dispute so people can judge for themselves.” He also said, “There is someone ultimately accountable for our actions as a company, and that’s me. Please leave our employees out of this.”
Weeks after Facebook acquired a 9.9% stake in India’s Reliance Jio Platforms, two more American firms are reportedly interested in the Indian telecom market. Google is considering buying a stake of about 5% in Vodafone Idea, the second largest telecom operator in India, according to Financial Times. Separately, Microsoft is in talks to invest up to $2 billion in Reliance Jio Platforms, Indian newspaper Mint reported Friday.
As always, you get a single-board computer that is the size of a deck of cards. It has an ARM-based CPU, many ports, Wi-Fi, Bluetooth and a big community of computer enthusiasts. The 8GB model costs $75, which makes it the most expensive Raspberry Pi out there.
This could have been Marqeta’s year to list as a public company on a major American stock exchange. Instead, in the wake of an American economy pushed over the edge by a global pandemic, the company has turned to an undisclosed financial services firm for another $150 million in equity funding.
Hans Vestberg, CEO of TechCrunch’s parent company Verizon, joined us for an episode of Extra Crunch Live. In our discussion, he spoke about how he’s managing the organization during this global crisis, his thoughts on work-from-home, acquisition strategy and the ways in which 5G will change the way we work and live. (Extra Crunch membership required.)
SpaceX and NASA made the call to scrub the launch since there were a couple of weather issues that prevented the attempt from taking place. The next window for the launch is Saturday, May 30 at 3:22 PM EDT.
Don’t waste any time arguing! These recommendations are 100% objectively correct.
The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 9am Pacific, you can subscribe here.
President Trump is again testing Twitter’s stomach for misinformation flowing from its most prominent users.
In a flurry of recent tweets, Trump floated conspiracy theories about the death of Lori Klausutis, an intern for former congressman Joe Scarborough who was found dead in his Florida office in 2001—a freak accident a medical examiner reported resulted from a fall stemming from an undiagnosed heart condition. Scarborough, a political commentator and host of MSNBC’s Morning Joe, is a prominent Trump critic and a frequent target for the president’s political ire.
The medical evaluation and lack of any evidence suggesting something nefarious in the former intern’s death has not been enough to discourage Trump from revisiting the topic frequently in recent days.
“When will they open a Cold Case on the Psycho Joe Scarborough matter in Florida. Did he get away with murder?” Trump tweeted in mid-May. A week later, Trump encouraged his followers to “Keep digging, use forensic geniuses!” on the long-closed case.
A blow to her head? Body found under his desk? Left Congress suddenly? Big topic of discussion in Florida…and, he’s a Nut Job (with bad ratings). Keep digging, use forensic geniuses! https://t.co/UxbS5gZecd
In a statement provided to TechCrunch, Twitter expressed that the company is “deeply sorry about the pain these statements, and the attention they are drawing, are causing the family.”
“We’ve been working to expand existing product features and policies so we can more effectively address things like this going forward, and we hope to have those changes in place shortly,” a Twitter spokesperson said.
When asked for clarity about what product and policy changes the company was referring to, Twitter pointed us to its blog post on the labels the company introduced to flag “synthetic and manipulated media” and more recently COVID-19 misinformation. The company indicated that it plans to expand the use of misinformation labels outside of those existing categories.
Twitter will not apply a label or warning to Trump’s recent wave of Scarborough conspiracy tweets, but the suggestion here is that future labels could be used to mitigate harm in situations like this one. Whether that means labeling unfounded accusations of criminality or labeling that kind of claim when made by the president of the United States remains to be seen.
In March, Twitter gave a video shared by White House social media director Dan Scavino and retweeted by Trump its “manipulated content” label — a rare action against the president’s account. The misleadingly edited video showed presumptive Democratic nominee Joe Biden calling to re-elect Trump.
According to the blog post Twitter pointed us to, the company previously said it will add new labels to “provide context around different types of unverified claims and rumors as needed.”
Even within existing categories — COVID-19 misinformation and manipulated media — Twitter has so far been reluctant to apply labels to high profiles accounts like that of the president, a frequent purveyor of online misinformation.
Twitter also recently introduced a system of warnings that hide a tweet, requiring the user to click through to view it. The tweets that are hidden behind warnings “[depend] on the propensity for harm and type of misleading information” they contain.
Trump’s renewed interest in promoting the baseless conspiracy theory prompted the young woman’s widower T.J. Klausutis to write a letter to Twitter CEO Jack Dorsey requesting that the president’s tweets be removed.
In the letter, Klausutis told Dorsey he views protecting his late wife’s memory as part of his marital obligation, even in her death. “My request is simple: Please delete these tweets,” Klausutis wrote.
“An ordinary user like me would be banished from the platform for such a tweet but I am only asking that these tweets be removed.”
Here’s another edition of “Dear Sophie,” the advice column that answers immigration-related questions about working at technology companies.
“Your questions are vital to the spread of knowledge that allows people all over the world to rise above borders and pursue their dreams,” says Sophie Alcorn, a Silicon Valley immigration attorney. “Whether you’re in people ops, a founder or seeking a job in Silicon Valley, I would love to answer your questions in my next column.”
“Dear Sophie” columns are accessible for Extra Crunch subscribers; use promo code ALCORN to purchase a one- or two-year subscription for 50% off.
My spouse’s startup is transferring her to the U.S. to help set up an office there. Will I be able to go with her and work in the U.S.? How long will it take for me to get a work permit? How long will we be able to stay?
— Hopeful in Hyderabad
Congratulations on starting an exciting new adventure with your family. U.S. immigration law allows visa holders to bring their spouse and dependent children with them to the U.S. and you can check out this podcast on the topic. Dependent children are defined as children who are under the age of 21 and unmarried. Whether or not the spouse can get a work permit, which is called an Employment Authorization Document (EAD), depends on which dependent visa the spouse receives.
It would be one of the greatest startup investments of all time. Masayoshi Son, riding high in the klieg lights of the 1990s dot-com bubble, invested $20 million dollars into a fledgling Hong Kong-based startup called Alibaba. That $20 million investment into the Chinese e-commerce business would go on to be worth about $120 billion for SoftBank, which still retains more than a quarter ownership stake today.
That early check and the rise, fall, and rise of Son and Alibaba’s Jack Ma helped to cement an intricately connected partnership that has endured decades of ferocious change in the tech industry. Ma joined SoftBank’s board in 2007, and the two have been tech titans together ever since.
So it is notable and worth a minute of reflection that SoftBank announced overnight that Jack Ma would be leaving SoftBank’s board after almost 14 years.
Yet, one can’t help connect the various dots of news that hovers between the two companies and not realize that the partnership that has endured so much is now increasingly fraying, and due to forces far beyond the ken of the two dynamos.
On one hand, there is a pecuniary point: SoftBank has been rapidly selling Alibaba shares the past few years after decades of going long as it attempts to shore up its balance sheet amidst intense financial challenges. According to Bloomberg in March, SoftBank intended to sell $14 billion of its Alibaba shares, and that was after $11 billion in realized returns on Alibaba stock in 2019 from a deal consummated in 2016. It’s just a bit awkward for Ma to be sitting on a board that is actively selling his own legacy.
Yet, there is more here. Jack Ma has become a figure in the fight against COVID-19, and has burnished China’s image (and his own) of responding globally to the crisis. In the process, though, there has been blowback, as concerns about the quality of face masks and other goods have been raised by health authorities.
And of course, there is the deepening trade war, not just between the United States and China, but also between Japan and China. Japan’s government is increasingly looking for a way to find a “China exit” and become more self-sufficient in its own supply chains and less financially dependent on Chinese capitalism.
Meanwhile, the Trump administration has been seeking out avenues of decoupling the U.S. from China. Overnight, the largest chip fab in the world, TSMC, announced that it would no longer accept orders from China’s Huawei following new export controls put in place by the U.S. last week and its announcement of a new, $12 billion chip fab plant in Arizona.
SoftBank itself has gotten caught up in these challenges. As an international conglomerate, and with the Vision Fund itself officially incorporated in Jersey, it has confronted the tightening screws of U.S. regulation of foreign ownership of critical technology companies through mechanisms like CFIUS. Its acquisition of ARM Holdings a few years ago may not have been completed if it had tried today, given the environment in the United Kingdom or the U.S.
So it’s not just about an investor and his entrepreneur breaking some ties after two decades in business together. It’s about the fraying of the very globalization that powered the first wave of tech companies — that a Japanese conglomerate with major interests in the U.S. and Europe could invest in a Hong Kong / China startup and reap huge rewards. That tech world and the divide of the internet and the world’s markets continues unabated.
There has been a steady drumbeat of news on the U.S.-China trade front since the start of the Trump administration. President Trump has made decoupling from China’s economy on on-again, off-again proposition. There was the trade conflict with weekly changes in American tariff policy, the threats against ZTE and Huawei, the responses from China against Qualcomm and NXP and the launch of new restrictions on China investment in U.S. startups and telecom infrastructure.
With COVID-19 and the ensuing global economic collapse, much of that conflict was put on the back burner. A tentative agreement between the U.S. and China — agreed to before the worst of the pandemic — seemed to get even broader support as the economic indicators from the globe’s two superpowers started to trickle out.
Then this week happened, and in almost no time at all, the U.S.-China trade detente has been torn apart.
Overnight, there were three critical stories that are going to reshape U.S.-China trade for the foreseeable future, with plenty more stories lurking beneath the surface.
First, you have the announcement this morning from the Department of Commerce that the Trump administration is going to ban Huawei from using U.S. software and hardware in certain strategic semiconductor processes, a move designed to limit the leading Chinese chip manufacturer from growing its market power and technological capabilities. Earlier yesterday, the administration also announced an extension to the government’s export ban on Huawei and ZTE.
The Trump administration has threatened moves like this since almost the president’s first day in office, and Commerce even couched the language, saying that it is “narrowly and strategically” targeting the Chinese company. Nonetheless, Huawei’s importance as one of China’s leading technology companies can’t be overstated, and the two moves combined is already being perceived as a direct assault on China’s recovering economy.
Second, you have a major announcement overnight from TSMC — the world’s largest chip foundry and one of the only foundries that can handle the manufacturing of the most advanced chips — that the Taiwanese company will invest and launch a major, $12 billion factory in Arizona. The release says that the factory will be capable of producing the world’s most advanced 5-nanometer chips when it launches in a couple of years. The announcement came after weeks of debate in Washington aimed at cutting off TSMC’s ability to build chips for mainland Chinese companies like Huawei — a move that TSMC argued would dramatically hurt its profitability and ability to invest in further R&D.
Third, you had the announcement this morning that Foxconn’s profits dived 90% due to COVID-19 and declining smartphone shipments. Foxconn, a Taiwanese hardware assembly company (among many other things), has been caught in the smoldering U.S.-China trade conflict, and even attempted at one point to build its own $10 billion manufacturing facility in Wisconsin with Trump’s felicity only to scuttle that plan entirely in an embarrassing setback.
Meanwhile, the trade deal that had calmed tensions between DC and Beijing appears increasingly in doubt.
And that’s just what happened overnight.
There are so many individual data points on U.S.-China trade that it can be hard to see the patterns. Policies have hardened, policies have softened, but at its core the U.S. and China have attempted to keep the trade flowing, if only to maintain growth in their economies. That’s what coupling has been all about: while there can be massive disagreements between the two sides, each has something the other wants. China wants to build and grow, while America wants to design and buy.
The past few months of COVID-19 have changed that calculus, as has an election year in the United States, where wariness of China has hit record, bipartisan highs, according to polls. The intense conflagration of the American economy, with tens of millions jobless and growth stalled for the time being, means that even more intense scrutiny is being placed on anything that might be harming the country’s financial math. We are now seeing the fruits of that new normal.
There will be more decoupling maneuvers in the coming weeks. There will also almost certainly be a renegotiation of the U.S.-China trade deal, despite comments that neither side is interested in reopening those discussions.
Yet, the real interesting dynamic to watch is going to be Taiwan, which is home to strategically critical sectors of the chip industry. TSMC’s announcement accepts the reality of decoupling, but attempts to work around it by recoupling the United States to the safety of Taiwan. Taiwanese companies and the island’s politicians have avoided ceding its technology to other countries, creating a dependence that they have hoped would protect the island in the event of a mainland Chinese invasion. After all, if the Pentagon can’t get its chips, it’s going to have to intervene, or so the thinking holds.
In this new world though, TSMC building an American factory doesn’t undermine that narrative, it actually strengthens the bonds between the U.S. and Taiwan. More jobs, more trade, more travel and, ultimately, a deeper appreciation of the importance of each other. The question is how far the Trump administration is willing to go here. Taiwan is bidding to rejoin the World Health Organization, where it was an observer up to 2016. How deep are those ties? Will the U.S. go beyond its own diplomatic framework to intensely push for Taiwan’s reentry in spite of Chinese opposition?
That’s what is next, but what is clear today is that the world of semiconductors, of internet infrastructure, of the tech ties that have bound the U.S. and China together for decades — they are frayed and are almost gone. It’s a new era in supply chains and trade, and an open world for new approaches to these huge existing industries.
The U.S. Food and Drug Administration (FDA) has issued a new warning about the known side effects of hydroxychrloroquine and chloroquine, two antimalarial drugs (also used in the treatment of chronic rheumatoid arthritis and lupus), on the same day that a group of researchers published a paper in the Journal of the American Medical Association about their termination of a study investigating the potential of chloroquine as a potential COVID-19 treatment.
The drugs can have dangerous side-effects, and the study written about in the AMA journal was ended early because the “primary outcome” was the death of study participants, with 22 deaths resulting. Before it was abruptly ended, the researchers found a lethality rate of 39 percent in the group of its subjects who took high dosages, and 15 percent in the low dosage group, with an overall lethality rate of 27 percent.
“Our study raises enough red flags to stop the use of a high-dosage regimen, because the risks of toxic effects overcame the benefits,” the researchers said in their findings.
The FDA’s alert on April 24 does’ make specific mention of this study, but the 81-person phase II clinical trial represents one of the largest to date. The FDA notice does advise that reports they have received of deaths in COVID-19 patients receiving hydroxychloroquine, either alone or in tandem with other drugs including an antibiotic known as azithromycin (which all patients in the investigation published in the AMA journal were taking) can result in “abnormal heart rhythms such as QT interval prolongation, dangerously rapid heart rate called ventricular tachycardia and ventricular fibrillation, and in some cases, death.”
Hydroxychloroquine and chloroquine gained widespread attention because Donald Trump advocated them as likely effective treatments for COVID-19, despite a lack of significant scientific evidence or any clinical suites done about their safety, likely due to early, small-scale investigations that showed they might have some potential. He repeatedly touted the drugs as proven safe, since they have been cleared for use previously in treating other medical conditions, but didn’t appear to grasp that this does not mean they aren’t dangerous or perhaps deadly when taken in the context of other conditions, or for individuals with other risk characteristics.
AT&T is getting a new boss, the first piece of Apple and Google’s COVID-19 contact tracing program should be available soon and Snap is looking to raise more debt.
Here’s your Daily Crunch for April 24, 2020.
A big changing of the guard is underway at one of the world’s biggest names in telecoms and media. The change is effective on June 1, and while Stephenson is retiring, he will stay on as executive chairman of AT&T until January 2021.
Stankey has held other roles at AT&T, including CEO of WarnerMedia and CEO of the AT&T Entertainment Group. His promotion suggests a continuing emphasis on the media side of the business.
The first version of Apple and Google’s jointly developed, cross-platform contact tracing API should be available to developers as of next week, according to a conversation between Apple CEO Tim Cook and European Commissioner for internal market Thierry Breton.
Snap’s Q1 earnings impressed investors but the company is still losing plenty of cash and it’s clear that the full impact of the digital ad market’s downturn won’t be seen until the company’s Q2 earnings. The company is now looking to raise looking to raise $750 million.
Leaked images obtained by TechCrunch reveal that Google considered and designed a feature that would let people donate money to websites to help support news publishers, bloggers and musicians. But the company ultimately scrapped the idea.
Although it looks like the COVID-19 pandemic has clipped the tails of many unicorns, this era won’t last forever. Investors expect the domestic and global economy to recover, perhaps as soon as late 2020 or early 2021. (Extra Crunch membership required.)
The interim legislation will allocate $310 billion to replenish the SBA’s Paycheck Protection Program (PPP), $75 billion for hospitals and $25 billion for COVID-19 testing. President Trump previously expressed his approval of the bill, as well as his intention to sign it and make the funds available as quickly as possible.
Nintendo confirmed earlier reports of account breaches dating back over the past few weeks. The gaming giant issued an update (via Nintendo Japan) noting that around 160,000 Nintendo Accounts were impacted, with accounts being used to purchase digital items without the owner’s consent.
The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 9am Pacific, you can subscribe here.
Could the coronavirus crisis — and the way different countries have responded — make Silicon Valley VCs more bullish on European startups? That’s the thesis put forward by Salman Ullah, co-founder and managing director of Merus Capital.
As COVID-19 spreads globally, he argues that countries with national healthcare — along with fiscal and monetary policies that balance the interests of citizens versus those of corporations — are better positioned to navigate the pandemic.
More broadly, investors prefer to invest in stable and resilient economies, and resilience depends on the ability of governments to respond to a crisis, let alone one on such an unprecedented scale. For investors, the strength of national infrastructure and political institutions in many European countries is a net positive — and a stark contrast to Trump’s U.S.
Germany, where Merus has already made several investments, is cited as an example of a European country that has become more attractive to Silicon Valley investors in recent years. Not only is the cost of starting up in Germany lower, but Ullah argues there’s been a “cultural shift” amongst young people who now view startups as a viable career path, while the coronavirus crisis — and the German government’s response — is making ecosystems such as Berlin and Munich even more attractive.
“Your dollar goes much further in Europe, rents are lower, everyone gets free healthcare, essentially,” says Ullah during a call. “And the level of education and expertise in computer science in particular is no better or worse than in the U.S. And I think the pandemic has just kind of reinforced that.”
In a time of such uncertainly and the economic shock that comes with that, Ullah notes that in European countries like Germany, citizens aren’t worried about the personal cost of healthcare. He also points to the way German finance minister Olaf Scholz has pledged unlimited credit for businesses affected by the pandemic alongside an expansion of its short-time work scheme, which gives support for companies that are forced to reduce working hours of their employees.
Ventilators assembled by GM and Ventec Life Systems were delivered to hospitals Thursday night with more making their way to facilities today and through the weekend, the first in a 30,000-unit order with the U.S. government.
The deliveries, which went to hospitals in Chicago and Olympia Fields, Ill., are a milestone for the two companies that launched an effort less than a month ago to make thousands of ventilators for hospitals during the COVID-19 pandemic.
GM and Ventec announced a partnership March 20 to help increase production of respiratory care products such as ventilators. The companies had initially focused on making Ventec’s critical care ventilators called VOCSN, a higher end multi-function device that includes a ventilator, oxygen concentrator, cough assist, suction and nebulizer. The device, which has more than 700 components, was cleared in 2017 by the FDA.
GM investigated the feasibility of sourcing the materials needed as well as what it would take to build a new clean room and production line within its Kokomo, Ind. factory. GM estimated it would cost about $750 million, a price that included retrofitting a portion of the engine plant, purchasing materials to make the ventilators and paying the 1,000 workers needed to scale up production, the source said. The remaining $250,000 of estimated costs came from Ventec.
The Trump Administration balked at the price tag, putting a contract with the U.S. government in limbo. GM and Ventec planned to push ahead anyway, even as President Trump used Twitter to criticize the automaker and its CEO Mary Barra . Trump then signed a presidential directive ordering GM to produce ventilators and to prioritize federal contracts, just hours after the automaker announced plans to manufacture the devices.
In spite of the scuffle, GM did reach a $490 million contract with the federal government to produce 30,000 ventilators by the end of August. Under the contract, GM is producing a different critical care ventilator from Ventec called the VOCSN V+Pro, a simpler device that has 400 parts. The other more expensive and complex machine had a multi-function capability.
To speed its ability to build ventilators, the government contract calls for the VOCSN unit with ventilator capability only, according to GM.
Production began this week with one shift of workers and is ramping up. Eventually, GM has plans to add a second and then a third shift in the coming weeks, according to a company spokesperson. More than 1,000 workers will be needed over the three shifts.
To date, 10 ventilators have been delivered to Franciscan Health in Olympia Fields. Another 10 were expected to be delivered Friday afternoon to Weiss Memorial Hospital in Chicago. A third shipment of 34 ventilators will be delivered Saturday to the Federal Emergency Management Agency at the Gary/Chicago International Airport for distribution to other locations where the need is the greatest, according to GM.
The need for ventilators is urgent as cases of COVID-19 pop up with increasing frequency as widespread testing begins. While some people with COVID-19 reported more mild symptoms, others have experienced severe respiratory problems and need to be hospitalized. The shortage has prompted automakers including Ford and Volkswagen to investigate ways of ramping up ventilator production. Ford and GE Healthcare have licensed a ventilator design from Airon Corp and plan to produce as many as 50,000 of them at a Michigan factory by July.
Automakers are also making face masks, face shields and Powered Air-Purifying Respirators (PAPRs) for healthcare workers.
A new flurry of tweets from President Trump is pushing the limits of social platform policies designed explicitly to keep users safe from the spread of the novel coronavirus, both online and off.
In a series of rapid-fire messages on Friday morning, Trump issued a call to “LIBERATE” Virginia, Minnesota, and Michigan, all states led by Democratic governors. Trump’s tweets promoted protests in those states against ongoing public safety measures, many designed by his own administration, meant to keep residents safe from the virus. Trump also shared the messages on his Facebook page.
In the case of Minnesota, the tweet was not a generic message to his supporters in the state—it referenced a Friday protest event by its name, “Liberate Minnesota.”
— Donald J. Trump (@realDonaldTrump) April 17, 2020
LIBERATE VIRGINIA, and save your great 2nd Amendment. It is under siege!
— Donald J. Trump (@realDonaldTrump) April 17, 2020
In Minnesota, the in-person protest event gathered a group of Trump supporters outside the St. Paul home of Minnesota Governor Tim Walz to protest the state’s ongoing lockdown. According to a reporter on the scene Friday, the protest had attracted attendees in the “low hundreds” so far and few were practicing social distancing or wearing masks. The event was organized on Facebook.
Scheduled start time was noon and the crowd looks to be in the low hundreds. This is *only* an eyeball estimate. There’s also a fair number of drivebys – vehicles with flags or writing on the sides driving down Summit, honking, waving to protesters.
— Patrick Condon (@patricktcondon) April 17, 2020
“President Trump has been very clear that we must get America back to work very quickly or the “cure” to this terrible disease may be the worse option!” the event’s Facebook description states. In a later disclaimer, event organizers encourage attendees to exercise “personal responsibility” at the protest, stating that they “are not responsible for your current health situation or future health.”
Over the last month, Facebook and Twitter both rolled out relatively aggressive new policies designed to protect users from content contradicting the guidance of health experts, particularly anything that could result in real-world harm.
The president’s tweets contradict his administration’s own guidance, detailed yesterday in coordination with health experts, on reopening state economies. Earlier this week, Trump claimed that a president has “total authority” to reopen the national economy, a sentiment that his tweets Friday appeared to undermine.
Trump’s calls to action in support of state-based protests would also appear to contradict both Twitter and Facebook’s new rules specific to the pandemic, which in both cases explicitly forbid any COVID-19 content that could result in the real-world spread of the virus.
In late March, Twitter updated its safety policy to prohibit any tweets that “could place people at a higher risk of transmitting COVID-19.” The stance banned tweets claiming social distancing doesn’t work as well as anything with a “call to action” that could promote risky behaviors, like encouraging people to go out to a local bar.
On April 1, Twitter again broadened its definition for the kind of harmful COVID-19 content it forbids, stating that it would “continue to prioritize removing content when it has a clear call to action that could directly pose a risk to people’s health or well-being.”
Facebook similarly expanded its platform rules to match the existential health threat posed by the coronavirus. In guidance on its policies for the pandemic, Facebook says that it “remove[s] COVID-19 related misinformation that could contribute to imminent physical harm.” As an example, the company noted that it in March it began removing “claims that physical distancing doesn’t help prevent the spread of the coronavirus.”
Social media companies signaled early in the U.S. spread of the coronavirus that they would take health misinformation—and the safety of their users—more seriously than ever. In some instances, this tough talks appears to have manifested in improvements: Facebook, which has generally been more proactive about health misinformation compared to other topics, moved to promote health expertise and limit the spread of misleading coronavirus content on the platform, even announcing that it would notify anyone who had interacted with COVID-19 misinformation with a special message in their newsfeed.
When asked about the protest events and the president’s tweets, Twitter pointed TechCrunch to its existing COVID-19 policy page. Facebook did not provide answers to questions about the protests organized on its platform by the time of publication.
Many have been understandably concerned that, amid corporate bailouts, a $1,200 check won’t be enough to survive several more weeks of lockdown. But the stimulus check is, at very least, better than nothing, particularly for the more than 22 million Americans have filed jobless claims in the last month alone.
But actually getting the check is easier said than done. There have been a number of roadblocks for many Americans. Many students are ineligible. Same goes for many elderly and disabled people. Immigrants without a social security number, too. There have been a variety of delays, as well, including the President’s unprecedented mandate that his signature appear on paper check.
For millions of Americans, a “glitch” will further delay matters. The deposit, planned for yesterday, was delayed for “several million” people who used popular services like H&R Block, Jackson Hewitt and TurboTax to file their taxes last year, according to The Washington Post. The issue? The IRS didn’t have their direct deposit information on file.
Those checking their stimulus status via the IRS’s “Get My Payment” tool this week were greeted with a perplexing “Payment Status Not Available” message. No additional information was provided.
The IRS says it’s currently working to resolve the issues that have led to the delay.
There will be plenty of jokes. “Why is tonight different from all other nights,” the first of The Four Questions, will almost certainly serve as a laugh line in all but the most serious Seders this year. As for the plague — haven’t we had enough plague talk already?
For Jews across the world, Passover will serve as another attempted return to normalcy. There are few things in the calendar as reliably consistent as Passover, with its customs, prayers and extremely set menu.
Here in the States, Passover is the most commonly celebrated holiday among Jews. According to Pew, roughly 23% of the Jewish American population attend services monthly, while 70% say they attended a Seder a year prior. That the figure includes 42% of non-religious Jews is a testament to how transcendent the consistency and practice can be.
This year, however, things will be different. Because everything is different. It has been clear for some time now that this year’s holiday would be profoundly transformed by COVID-19, first through bans on social gatherings that made religious services an impossibility and ultimately due to international stay at home orders that are keeping many family members apart.
For Passover 2020 (or, 5780, depending on where you start counting), teleconferencing services — Zoom in particular — will have to do in a pinch.
“Judaism does not have a central governing body that can tell individuals or congregations how to respond in this crisis, and in Judaism’s very long relationship with technological development rabbis have almost always been playing catch-up to norms established by the Jewish public; even after the Industrial Revolution, rabbis were rarely the first to respond,” David Zvi Kalman, Fellow in Residence at Shalom Hartman Institute of North America told TechCrunch. “That being said, the religious questions that this pandemic raises are often about how a Jewish community is supposed to function, and so rabbis have an unusually large role to play in shaping the communal response.”
Late last month, a group of 14 orthodox rabbis signed a ruling declaring that families would be allowed to use teleconferencing technology to conduct Seders.
The document cited similar exceptions as those invoked during Shabbat, which otherwise has a blanket ban against the use of technology. “Just as it is permissible for a non-critical patient to receive treatment on Shabbat in order to cure him of illness, such is the case here,” the rabbis explained.
“We have made the decision, in these emergency situations, to knowingly put aside some of the restrictions regarding the use of electronics on Shabbat in order to stay spiritually connected even though we are physically separated,” New York-based Rabbi Rachel Ain told TechCrunch.
She has been among those leading congregations in services for much of the city’s stay at home order. “We have made the decision, in these emergency situations, to knowingly put aside some of the restrictions regarding the use of electronics on Shabbat in order to stay spiritually connected even though we are physically separated,” she add, explaining that the synagogue has explored a wide variety of different avenues.
When Passover begins tonight at sundown, Jews all over the world will be engaged in TeleSeders — most for the first time, including all of the trials, tribulations and novelty that brings. For many Christians, the event will also, perhaps, set an interesting precedent for the upcoming Easter holiday, as Trump’s earlier promises to end the shutdown ahead of then have become increasingly unrealistic.
Like so many aspects of our life, there’s a pervasive question of whether this will ultimately serve as a kind of new normal, going forward. The phrase “Next year in Jerusalem,” sung by many at the Seder’s end, will take on a special sort of diasporic resonance, as many are forced to remain at distance from friends and family.
“While I suspect that virtualized learning will be taken much more seriously after this crisis is over, I think a vast majority of Jews would prefer to attend prayer services in person (at least among those Jews who attend services at all),” Kalman tells TechCrunch. “A lot of rabbis are definitely worried about setting precedents for virtual community that will end up diminishing in-person gatherings. At the same time, this crisis is causing a lot of rabbis to take social isolation — which isn’t a problem specific to this pandemic — a lot more seriously.”
On Friday, the Kenyan augmented reality game developer Internet of Elephants launched its latest game in partnership with the conservation science experts from the Borneo Nature Foundation, Goualougo Triangle Ape Foundation, Zoo Atlanta and Chester Zoo.
The new game, called “Wildeverse”, uses AR to create a virtual forest that players can explore to find certain animals — or clues to an animal’s whereabouts.
Though the game was intended to be played outdoors, the COVID-19 crisis forced the team to pivot, creating an option that lets people move about virtually using in-game controls, or walk around in more confined spaces.
The game starts with a chat-based segment introducing players to the gameplay and setting up some context around the virtual environment players will be exploring. Its graphics aren’t focused on recreating a completely immersive jungle environment, but create an abstracted forest and canopy of trees which players explore. A timer keeps track of how long a player takes to complete a mission, which involve identifying certain animals or looking for traces of their presence in the AR-created forest.
Once a mission is complete, the player runs through a scripted interaction with an actual conservationist who helped the Internet of Elephants game developers come up with the concept for the game and provided research assistance and support for the actual animals represented in the gameplay.
Image courtesy of Internet of Elephants
The game can be played on any iOS or Android device that support ARKit or ARCore.
Challenges range from searching for the animals themselves or their footprints, food leftovers or poop to looking for illegal human activity and threats to the habitat of four real orangutans, chimpanzees, gorillas and gibbons.
To make the game, Internet of Elephants developers led by company founder Gautam Shah, actually went to the jungles of Borneo and Congo to speak with conservationists about their work and scout for wildlife to use in te game, the company said in a statement. The game developers tracked several families of monkeys
“Ape populations are being decimated across the world. Wildlife protection will only become a global priority if enough people take an interest. Conservationists on the ground are fighting an uphill battle with the support of only a handful of people,” said Shah in a statement. “We are on a mission to turn the 2 billion people playing games today, into wildlife lovers and supporters of conservation efforts.”
For Shah, the newest launch for Internet of Elephants continues the company’s mission, which began in 2015 when the American-born Shah forsook a career in consulting to launch his AR-based gaming company. Other members of the Internet of Elephants team have equally interesting stories, including product lead, Jake Manion, who had spent six years as the creative director for Aardman Animations, the Academy-award winning studio behind Wallace & Gromit and Shaun the Sheep.
Shah sees three primary conservation elements to the Wildeverse game. First, he says, it creates a link between players and the conservation societies that the company works with, giving people a better sense of what conservation organizations actually do. The game also forces players to confront issues like forest fires, illegal logging, poaching, and the challenges surrounding conservation work that are exacerbated by development and human consumption changing the composition of the jungles these animals call home. Finally there’s an educational element to the game.
“You really really do learn a lot of juicy stuff and we don’t shy away from getting technical,” says Shah. “All that collectively is about creating a connection between you sitting in St. Louis and someone in Borneo trying to study orangutans,”
Originally, the game was meant to be played outdoors, with a thirty-meter radius of space to get the full sense of the gameplay, but it can work in a small studio apartment in Los Angeles equally well, given the modifications the team made before the game’s launch.
The text component of the game is informative and gives players a chance to learn about the foods orangutans eat, their habitat and their lives in the jungle. The script is slightly clunky, but not tiresome, and is based on conversations with the actual conservationists working in these different forests.
Ultimately Shah hopes to expand the number of habitats and the breadth of the game so players can explore different geographies and learn about endangered species on every continent.
There’s no monetization in the game yet and it will remain free-to-play, but Shah hopes to add some revenue-generating elements as development continues along with multi-player features, he said.
Ultimately, the game is about connecting and educating a new generation to the wonders of nature conservancy through the newest tech tools and gameplay.
“We want to make wildlife a positive, exciting topic of daily conversation for millions of people currently unconnected to conservation. We want to make Fio, Buka, Chilli and Aida celebrities, just like Kim Kardashian, Messi, and Donald Trump,” says Shah. “People’s attention matters so much more than they think.”
Under new guidance issued by the Small Business Administration it seems non-profits and faith-based groups can apply for the Paycheck Protection Program loans designed to keep small business afloat during the COVID-19 epidemic, but most venture-backed companies are still not covered.
Late Friday night, the Treasury Department updated its rules regarding the “affiliation” of private entities to include religious organizations but keep in place the same rules that would deny most startups from receiving loans.
(b) If you are a faith-based organization, *no affiliation rules apply to you,* because the SBA just said so. Out of nowhere. At like 10pm on a Friday night.
— Doug Rand (@doug_rand) April 4, 2020
The NVCA and other organizations had pushed Treasury Secretary Steve Mnuchin to clarify the rules regarding startups and their potential eligibility for loans last week. And House Republican leader Kevin McCarthy even told Axios that startups would be covered under the revised regulations.
2/ There are rumors that the PPP Loan program may still fix the Affiliate Rule next week. Until fixed, it's nearly impossible for most VC-backed startups to apply because it would require huge legal lift to amend all of the charters of these companies to change control provisions
— Mark Suster (@msuster) April 4, 2020
At its essence, the issue for startups seems to be centered on the board rights that venture investors have when they take an equity stake in a company. For startups with investors on the board of directors, the decision-making powers that those investors hold means the startup is affiliated with other companies that the partner’s venture firm has invested in — which could mean that they’re considered an entity with more than 500 employees.
“[If] there’s a startup that’s going gangbusters right now, they shouldn’t apply for a PPP loan,” wrote Doug Rand, the co-founder of Seattle-based startup Boundless Immigration, and a former Assistant Director for Entrepreneurship in the Office of Science and Technology Policy during the Obama administration, in a direct message. “But most startups are getting killed because, you know, the economy is mostly dead.”
The $2 trillion CARES Act passed by Congress and signed by President Trump was designed to help companies that are adversely affected by the economic fallout resulting from the COVID-19 outbreak in the US and their employees — whether those businesses are directly affected because their employees can’t leave home to do their jobs or indirectly, because demand for goods and services has flatlined.
While some tech startups have seen demand for their products actually rise during these quarantined days, many companies have watched as their businesses have gone from one to zero.
The sense frustration among investors across the country is palpable. As the Birmingham-based investor, Matt Hottle, wrote, “After 4 days of trying to help 7 small businesses navigate the SBA PPP program, the program went to shit on launch. I’m contemplating how many small businesses, counting on this money, are probably locked out. I feel like I/ we failed them.”
After 4 days of trying to help 7 small businesses navigate the @SBAgov PPP program, the program went to shit on launch. I’m contemplating how many small businesses, counting on this money, are probably locked out. I feel like I/ we failed them.
— Matt Hottle (@MattRedhawk) April 4, 2020
And although the rules around whether or not many startups are eligible remain unclear, it’s probably wise for companies to file an application, because, as the program is currently structured, the $349 billion in loans are going to be issued on a first-come, first-served basis, as Suster flagged in his tweets on the subject.
General Catalyst is advising its companies that are also backed by SBIC investors to apply for the loans, because that trumps any other rules regarding affiliation, according to an interview with Holly Maloney Burbeck, a managing director at the firm.
And there’s already concerns that the money could run out. In a tweet, the President announced that he would request more money from Congress “if the allocated money runs out.”
I will immediately ask Congress for more money to support small businesses under the #PPPloan if the allocated money runs out. So far, way ahead of schedule. @BankofAmerica & community banks are rocking! @SBAgov @USTreasury
— Donald J. Trump (@realDonaldTrump) April 4, 2020
“Congress saw fit to allow Darden to get a forgivable small business loan—actually a taxpayer-funded grant—for like every Olive Garden in America. But Congress somehow neglected to provide comparable rescue measures for actual small businesses that have committed the sin of convincing investors that they have the potential to employ a huge number of people if they can only survive,” Rand wrote in a direct message. “The Trump administration has full authority to ride to the rescue, and they did… but only for large religious organizations.”
With national the stockpile’s inventory of life-saving healthcare equipment getting dangerously close to zero, President Trump on Thursday signaled that he will leverage a key national security provision to order additional companies to produce ventilators.
Trump’s reluctance to employ the law known as the Defense Production Act (DPA) has puzzled many as the administration attempts to right the myriad early wrongs that allowed the novel coronavirus to spread within the nation’s borders—an unprecedented modern public health crisis expected to claim as many as 200,000 lives in the U.S.
“Today, I have issued an order under the Defense Production Act to more fully ensure that domestic manufacturers can produce ventilators needed to save American lives,” Trump said in a statement. “My order to the Secretary of Health and Human Services and the Secretary of Homeland Security will help domestic manufacturers like General Electric, Hill-Rom, Medtronic, ResMed, Royal Philips, and Vyaire Medical secure the supplies they need to build ventilators needed to defeat the virus.”
The order will enable Health and Human Services Secretary Alex Azar to use “any and all authority available” to steer production efforts.
After much early confusion around the president’s willingness to invoke the DPA without actually putting it to use, Trump appeared to change course and on Friday wielded the law against General Motors which had already announced its intention to start manufacturing ventilators in spite of a lack of federal guidance. That heel-turn came two days after the Trump was poised to announce a deal with GM and ventilator maker Ventec Life Systems to produce up to 80,000 devices. The announcement was reportedly scuttled when the White House and FEMA balked at the effort’s $1 billion price tag.
Trump has repeatedly called the crisis-level demand for ventilators, masks and other medical supplies into question. “I have a feeling that a lot of the numbers that are being said in some areas are just bigger than they’re going to be,” Trump told Fox News host Sean Hannity last week. “I don’t believe you need 40,000 or 30,000 ventilators.” The president has also repeatedly questioned the nationwide shortage of N95 masks and other basic health protective gear, suggesting that in New York health facilities are somehow losing the masks or allowing them to be stolen, a false claim for which there is no evidence.
As states still compete for vital life-saving resources, federal orders through the DPA would force any private companies on the receiving end of an order to prioritize federal contracts. The law also allows the federal government to use its muscle to ensure that supply chains are able to produce and provide materials every step of the way. While much has been made of the law’s potency to mobilize supplies in the midst of a national crisis, the Trump administration will likely need to actively manage and coordinate with these newly-tapped manufacturers to see such orders through.
In dragging its feet to issue orders through the DPA, Trump appeared to put full faith in the private sector to step up on their own without a directive from the White House. While some companies indeed did just that, those nascent production efforts are nowhere near meeting demand and distribution issues are not resolved. With the outbreak threatening regions around the nation, many states forge ahead without vital life-saving supplies as the acute health crisis unfolding in New York offers a glimpse of a potentially disastrous near-future.
Despite false assertions by the president to the contrary, any potential treatments to counter or prevent COVID-19 are still only at the stage of early investigations, which include one-off treatment with special individual case authorizations, and small-scale clinical examinations. Nothing so far has approached the level of scrutiny needed to actually say anything definitively about their actual ability to treat COVID-19 or the SARS-CoV-2 virus that causes it, but the first large-scale U.S. clinical study for one treatment candidate is seeking volunteers and looking to get underway.
The study will be conducted by the Henry Ford Health System, which is seeking 3,000 volunteers from healthcare and first responder working environments. Depending on response, the researchers behind the study are looking to begin as early as next week. Study lead researcher Dr. William W. O’Neil said in a press release announcing the study that the goal is to seek a more definitive scientific answer to the question of whether or not hydroxychloroquine might work as a preventative medicine to help protect medical front-line workers with greater risk exposure from contracting the coronavirus.
Hydroxychloroquine (as well as chloroquine) has been in the spotlight as a potential COVID-19 treatment due mostly to repeated name-check that President Trump has given the drug during his daily White House coronavirus task force press briefings. Trump has gone too far in suggesting that the drug, which is commonly used both as an anti-malarial and in the treatment of rheumatoid arthritis and lupus, could be an effective treatment and should be thrust into use. At one point, he claimed that he FDA had granted an emergency approval for its use as a COVID-19 treatment, but Dr. Anthony Fauci clarified that it was not approved for that use, and that clinical studies still need to be performed to evaluate how it works in addressing COVID-19.
Studies thus far around hydroxychloroquine have been small-scale, as mentioned. One, conducted by researchers in France, produced results that indicated the drug was effective in treating those already infected, particularly when paired with a specific antibiotic. Another, more recent study from China, showed that there was no difference in terms of viral duration or symptoms when comparing treatment with hydroxychloroquine with treatment using standard anti-viral drugs, already a common practice in addressing cases of the disease.
This Henry Ford study looks like it could provide better answers to some of these questions around the drug, though the specific approach of seeking to validate prophylactic (preventative) use will mean treatment-oriented applications will still have to be studied separately. The design of the study will be a true blind study, with participants split into three groups that receive “unidentified, specific pills” (possibly anti-virals or some equivalent); hydroxychloroquine; or placebo pills, respectively. They won’t know which they’ve received, and they’ll be contacted weekly by researchers running the study, then in-person both at week four and week eight to determine if they have any symptoms of COVID-19, or any side effects from the medication. They’ll get regular blood draws, and the results will be compared to see if there’s any difference between each cohort in terms of how many contracted COVID-19.
These are front-line healthcare workers, so in theory they should unfortunately be at high risk of contracting the disease. That, plus the large sample size, should provide results that provide much clearer answers about hydroxychloroquine’s potential preventative effects. Even after the study is complete, other competing large-scale trials would ideally be run to prove out or cast doubt on these results, but we’ll be in a better position than we are now to say anything scientifically valid about the drug and its use.