Data Sheet—The Merits of Blocking Broadcom’s Acquisition of Qualcomm

You’re forgiven if up until this week you’d never heard of CFIUS, the Committee on Foreign Investment in the United States. It’s the murky interagency group that suggested that the President reject Broadcom’s acquisition of Qualcomm, a proposed deal not yet considered by its shareholders.

Now we all know about CFIUS, murky though it remains, because its job is to scrutinize deals that could hurt the national security of the U.S. It was born during the Ford Administration to keep sensitive military technology out of Russian hands. Now it is being used as an industrial-policy tool, and its target is overwhelmingly China.

First a word on this murkiness. CFIUS doesn’t so much act as it intimates. Its body language or silence suggests to companies their deal won’t win approval. And so they bow out. This is what happened when Alibaba affiliate Ant Financial tried to buy remittance heavyweight Moneygram and when Alibaba competitor Tencent tried to invest in Here Technologies, a digital mapmaker. This lack of transparency is relevant because CFIUS’s actions are an important part of the global M&A process, where clear signals are preferred to smoke and mirrors.

CFIUS’s industrial-policy posture isn’t new. It began during the Obama years, and it is aimed not so much at protectionism in the trade-policy sense as protecting national “champions” in the face of a state-coordinated onslaught from China. Unappealing though it may be, using CFIUS to keep China from hollowing out a key U.S. industry has its merits.

It is a screwy state of affairs when the world’s two largest economies block each other’s moves in an effort at preserving their own industries and those of allies. After Qualcomm, the biggest beneficiaries of stopping Huawei—the true target of CFIUS’s wrath in the Broadcom affair—are Samsung and Ericsson, the pride of South Korea and Sweden, respectively.

The opponents of globalization probably didn’t envision a new, non-military superpower battle over commerce. But that’s what they’re getting. The formerly anonymous CFIUS is at the center of the U.S. arsenal.

NEWSWORTHY

History is a nightmare from which I am trying to awake. In a stunning rebuke of a one-time Silicon Valley media darling, the Securities and Exchange Commission announced on Wednesday that it was charging Theranos CEO Elizabeth Holmes with having raised $700 million "through an elaborate, years-long fraud." Holmes agreed to pay a penalty of $500,000 and forfeit both her CEO position and some 19 million shares she owned in the company. Holmes garnered effusive press coverage (including from Fortune) by spreading lies about the capabilities of Theranos blood testing technology, the SEC said. (And Fortune has published its own mea culpa).

Mistakes are the portals of discovery. Elsewhere on the crime blotter, prosecutors charged Jun Ying, former chief information officer of a unit of Equifax, with insider trading for exercising stock options and selling $1 million worth of shares ahead of the public disclosure of the massive hack attack that penetrated the credit bureau's files.

We were always loyal to lost causes. Google's YouTube plans to use Wikipedia entries to help shoot down conspiracy videos posted to its site, but the company didn't tell the nonprofit Wikimedia Foundation that runs the giant online encyclopedia ahead of time. “We were not given advance notice of this announcement,” the group said on Wednesday. Plus, some experts don't see the addition of Wikipedia entries as much of a help. "Having to supplement conspiracy-theory videos with third-party fact-checking is kind of embarrassing for Google," New York magazine's Brian Feldman writes. "Having to rely on a volunteer-driven nonprofit is even more embarrassing."

Longest way round is the shortest way home. Ride hailing service Lyft said on Wednesday it was partnering with auto manufacturer Magna International to develop self-driving cars. Magna will also invest $200 million in the startup at a valuation of almost $12 billion.

I had never spoken to her, except for a few casual words. The Siri project at Apple has been beset by missteps and poor management, according to a blockbuster report in the subscription newsletter The Information. Mashable has a free summary of some of the reporting.

Better pass boldly into that other world.Amazon credited its original show The Man in the High Castle with attracting 1.2 million new customers to its $99-per-year Prime program, and 1.5 million from its auto show stolen from the BBC, The Grand Tour, through early 2017, according to documents seen by Reuters.

Real adventures do not happen to people who remain at home. Billionaire philanthropist (and Microsoft co-founder) Bill Gates is getting some face time with President Trump on Thursday afternoon at the White House. The conversation will be closed to the press, but Gates may spill the beans afterwards, as he's dished on his December 2016 meeting with the prez.

(Can you name that author in the headline quotations? Answer in tomorrow's newsletter.)

FOOD FOR THOUGHT

Just four years ago, the stock market had soured on Amazon and analysts couldn't see how the e-commerce giant would ever make a profit. Since then, opinions have reversed, especially due to optimism about the company's cloud services business, and Amazon's stock has rocketed ahead. It's now the third most valuable company on the market, trailing only Apple and Google. Shira Ovide at Bloomberg chronicles the changing views in an informative piece (with great charts) for Bloomberg. There's now almost no market Amazon won't attack, she notes:

Its dominance can’t be contained to a few areas such as books, electronics, or even computer networks. Remember my colleague Brad Stone’s book The Everything Store? That title may have undersold Bezos’ ambitions. He seems to want to establish his place in every industry. Parcel delivery, supermarkets and packaged foods, apparel, trucking, auto parts, pharmaceuticals, real estate brokerages, makeup, concert ticketing, swimming pool supplies, and banking are just a sampling of the fields battered at various points in the past year because of Amazon’s encroachment or even rumors of its interest in entering them. Amazon declined to comment for this story.

The company has grown so large and difficult to comprehend that it’s worth taking stock of why and how it’s left corporate America so thoroughly freaked out. Executives at the biggest U.S. companies mentioned Amazon thousands of times during investor calls last year, according to transcripts—more than President Trump and almost as often as taxes. Other companies become verbs because of their products: to Google or to Xerox. Amazon became a verb because of the damage it can inflict on other companies. To be Amazoned means to have your business crushed because the company got into your industry. And fear of being Amazoned has become such a defining feature of commerce, it’s easy to forget the phenomenon has arisen mostly in about three years.

IN CASE YOU MISSED IT

Nectome Wants to Preserve Your Brain for Decades, But the Process Will Kill YouBy Grace Donnelly

IBM and Cloudflare Join Forces to Take on AmazonBy Robert Hackett

This Is What's Next For Broadcom and Qualcomm After Trump Blocked Huge MergerBy Aaron Pressman

Amazon Alexa Can Now Get You Breakfast at Midnight With Denny's On-DemandBy Don Reisinger

YouTube Is Limiting How Much Time Its Moderators Spend Watching Disturbing VideosBy Tom Huddleston Jr.

Here's Why Elon Musk Is Poaching 'The Onion' StaffersBy Don Reisinger

BEFORE YOU GO

Duke University assistant professor of philosophy Felipe De Brigard has a big grant from the Navy to study causation in the mind–why and how do we attribute blame for events? Sometimes, it's just made up, he says. "We specifically are working on how people imagine, and how memory both constrains and guides our imagination."