SCOTUS and the Duopoly’s Deadlock — CEO Daily, Monday, 2nd October

Good morning.

The Supreme Court this week will have an opportunity to address a festering problem that it played no small part in creating: partisan gerrymandering. The Court’s insistence that the constitutional standard for judging redistricting plans is limited to “one-person, one-vote” (every district in a state must have the same number of people) and protection of civil rights (plans cannot disenfranchise minorities) has, in combination with high-powered computing and copious data, given free rein over the last four decades to creating ever wilder political maps. That’s led to partisan ghettoes and helped breed an entire generation of politicians who have never learned the art of appealing, or even talking, to voters from the other party.

Why should this matter to readers of CEO Daily? Because, as Harvard’s Michael Porter has argued, political dysfunction is the biggest economic problem facing the U.S.. The nation’s complete inability to address the most obvious economic problems – health care, education, infrastructure, the corporate tax system, budget, etc. – offer plenty of evidence. In March of this year, Porter and his colleague Katherine Gehl published an analysis of the U.S. political system in Fortune using Porter’s famous tools of competitive analysis, and concluded it is a classic “duopoly” – which works well for the duopolists, but not for the customers (American citizens). Gehl and Porter recently elaborated on that analysis in a piece published by Harvard Business School, which you can read here.

Creating a less partisan methodology for drawing congressional districts is not a silver bullet solution to the nation’s political problems – indeed, many political scientists argue it’s not a solution at all. But anyone who has closely watched, or participated in, the national political discourse over the last four decades can’t help but conclude gerrymandering has played a role in its demise. And the court could begin to fix its error with this case. Emily Barone of TIME has done a smart look at the upcoming case, here. Or you can take a deeper dive with this analysis on Scotusblog.

More news below.

Alan Murray

Top News

Las Vegas Shooter Leaves at Least 50 Dead, over 100 Injured

At least 50 people were killed and 200 injured by a gunman at a country music festival in Las Vegas, in what appears to be the worst mass shooting in U.S. history. The incident happened near the Mandalay Bay Resort and casino. Las Vegas police shot and killed the gunman, and are seeking a suspected “companion.” There is no word yet on the gunman's motives. Fortune

Cohn Puts Offshore Tax Rate at Around 10%

Gary Cohn, President Trump’s top economic adviser, told Fox News that administration intends to impose a tax “in the 10 percent range” on offshore corporate profits, filling in one of the key blanks in the plan outlined last week. That would apply to anything up to $3 trillion of profits currently parked offshore, he said. Cohn said there would be bifurcated rates for cash and non-cash holdings, with liabilities on illiquid assets being lower and payable over a longer time-frame. Fox News

After the Storm, the Tweetstorm

President Trump’s Twitter feed again raised eyebrows, not to mention hackles, with a public dressing down of Secretary of State Rex Tillerson for the quaint notion that the job of the country’s top diplomat is to practise diplomacy. He also rounded on Carmen Yulin Cruz, the mayor of San Juan, Puerto Rico, and other Puerto Rican leaders, calling them ”politically motivated ingrates” who “want everything to be done for them.” Cruz had said the slow federal response to damage from Hurrican Maria was “killing us.” The island is still largely without power, while supplies of food, fresh water and fuel are also scarce. According to FEMA, over 10,000 federal staff are currently in Puerto Rico and the U.S. Virgin Islands. Fortune

Burn (Coal), Baby, Burn

Rick Perry took U.S. energy policy back to the heyday of disco with proposals that would skew the electric power market heavily back in favor of coal and nuclear generation. The proposals offer generous mandatory payments for plants that have 90 days of fuel supply on site, which effectively shuts out gas-fired plants that are cheaper to build and operate, involve far smaller contingent liabilities and have a much smaller adverse impact on human health. The proposals also go against an industry-wide trend to more decentralized power distribution enabled by advances in grid management technology, to say nothing of the trend toward rising consumer demand for greener electricity. They will face stiff pushback both from cleaner generators and consumers. FT, metered access

Around the Water Cooler

Catalonia in Crisis

Catalonian Premier Carles Puigdemont said a unilateral declaration of independence was “imminent” after a chaotic Sunday in which Spanish police clashed violently with those who took part in the region’s disputed referendum. Analysts still doubt independence is the endgame, given that the turnout was low enough to cast doubt on the vote’s authority. Around 800 people were injured in the clashes. The euro hit a two-month low against the dollar and Spanish bond yields a two-month high in early trading in Europe.   Fortune

Facebook to Hand Over Russian Ads

Facebook said it will turn over to Congress copies of some 3,000 ads that the social network says were probably bought on its social network by people in Russia in the months before and after the 2016 election. In a post marking observance of Yom Kippur, the Jewish Day of Atonement, Zuckerberg asked forgiveness “for the way my work was used to divide people rather than bring us together.”  Fortune

A Travesty of Governance

Hopes that Dara Khosrowshahi would quickly impose order at Uber took a beating over the weekend, as co-founder and ex-CEO Travis Kalanick used his residual powers to appoint two new board members: Ursula Burns, the former CEO of Xerox, and John Thain, who was CEO of Merrill Lynch in the run up to the 2008 crisis. Khosrowshahi said the move came as a “complete surprise”, according to Recode. Fortune

Google Throws Publishers a Bone 

Google will end its “first click free” policy this week, a move that may placate some of its most vocal critics in the publishing industry. News outlets had complained that the policy allowed Google to give away their news for free. Whether this tweak will make a material difference to readers’ willingness to pay for subscriptions is far from clear. Fortune

Summaries by Geoffrey Smith;


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