The U.S. Senate has finally found a cause for bipartisan action: bashing Facebook and Google. The tech giants (plus Twitter) took a thumping yesterday for their slow response to evidence that Russia was using them to try to manipulate the 2016 election.
Here’s Democratic Senator Dianne Feinstein, in whose state all three companies reside:
So much for the home state advantage. And here’s Republican Senator Richard Burr, who chairs the Senate Intelligence Committee:
Three takeaways from the day’s drubbing:
First—The tech companies erred badly by not sending their CEOs to face the music. It’s a sign they aren’t taking the charges seriously enough, and it will only inflame the anger on Capitol Hill.
Second—As CEO Daily has argued before, the line that “we’re not media companies, we are just platforms” needs to be abandoned. To quote Lyndon Johnson, “that dog won’t hunt.”
Third—This problem doesn’t end with the Russian investigation. The Senators believe—as do I—that the tech companies have to accept some responsibility for the quality and veracity of the information they pass on to Americans. That has far-reaching implications…which, of course, is why the companies so desperately, but futilely, cling to the notion that they are mere neutral “platforms.”
More news below.
• Trump Set to Anoint Jerome Powell
President Donald Trump is due to announce Jerome Powell as the next chairman of the Federal Reserve later Thursday. He’ll succeed Janet Yellen when her term ends in three months’ time—the first chair to leave with interest rates higher than where he/she found them since G. William Miller in 1979 (let that one sink in for a second). Wall Street expects Powell broadly to continue Yellen’s cautious tightening of monetary policy through gradual rate rises and the unwinding of the Fed’s quantitative easing program. Elsewhere Thursday, the Bank of England is expected to raise interest rates for the first time in a decade.
• Tesla Misses Big
Shares in Tesla fell more than 5% after the bell after it reported its widest ever loss of $619 million, despite slightly beating revenue expectations at nearly $3 billion. Elon Musk gave some detail on the problems in ramping up production of the Model 3, but declined to say when Tesla will reach the interim target of 10,000 a week. It will take until March—many months behind schedule—to reach 5,000, he said.
• Auto Sales Surprisingly Strong
Auto sales topped expectations for the second month in a row in October, falling by a much-smaller-than-expected 1.3% year-on-year (that’s actually a small increase when adjusted for working days). Post-hurricane replacements, the continued strength of the labor market, and a high level of consumer confidence all helped to stave off an expected decline. Overnight, Honda shares rose 5.2% after it raised its profit forecast for fiscal 2018.
WSJ, subscription required
• Fallon His Sword
The flood of sexual harassment allegations unleashed by the case of Harvey Weinstein swept away its biggest political victim to date: U.K. Defense Secretary Michael Fallon resigned, reportedly in order to pre-empt further revelations about inappropriate behavior towards female journalists. Fallon will stay on as an MP (his behavior was unbecoming only for a minister, not a lawmaker), but the loss of other, more junior MPs to similar allegations could easily lead to Prime Minister Theresa May losing her weakening hold on power completely.
Around the Water Cooler
• Colin Kaepernick and the Case of the Falling Pizza Sales
Roger Goodell is copping it from all sides now. The CEO of Papa John’s, no less, accused the NFL of poor leadership Wednesday. John Schnatter complained that the long-running anthem protests have hit sales. Papa John’s is an NFL sponsor that is entitled to grouse at not getting its money’s worth. However, when the comments go hand-in-hand with a downward revision to the outlook for sales and profits, Schnatter exposes himself to accusations of deflecting blame—quite apart from upsetting people who think the dispute itself is about more important things than the fortunes of a pizza company.
• Boardrooms Slightly Less White and Male
Women and minorities accounted for half of the 397 appointments of independent directors at S&P500 companies so far this year, according to data compiled by recruitment firm Spencer Stuart. The Wall Street Journal cited Spencer Stuart’s Julie Hembrock Daum as saying pressure from institutional shareholders accounted for much of the progress, singling out State Street Global Advisors for being particularly prominent in punishing companies that failed to address diversity issues meaningfully.
WSJ, subscription required
• Fitbit, GoPro Prove Hardware Is Still Hard
Further proof of the saying that “Hardware is hard”: Fitbit reported a net loss of $113 million for the quarter, mostly due to write-downs and other exceptional items. Revenue slumped 22% to $392 million, although that was marginally less dismal than the market had expected. Meanwhile GoPro shares fell 12% after it forecast a weak holiday season, despite a surprisingly healthy underlying profit in the third quarter.
• Astros Clinch the World Series
The Houston Astros won the World Series for the first time, beating the LA Dodgers in Game 7 thanks not least to a two-run homer from George Springer. I’ve got a prior record of mangling baseball stories, so I’ll stop there, adding only that our colleagues at Sports Illustrated reckon they’ll repeat the trick next year.
Summaries by Geoffrey Smith; email@example.com