"A moment of moral and political nihilism": Theologian Adam Kotsko on our current crisis

Leftist theologian Adam Kotsko on the Trump coup, the collapse of neoliberalism and the apocalypse overdose

By PAUL ROSENBERG FEBRUARY 6, 2021 

POSTMODERN MANACHISM 

Joe Biden and Donald Trump (Photo illustration by Salon/Getty Images)

In the wake of Donald Trump's failed insurrection, the most reflective observation I have encountered is theologian Adam Kotsko's article "An Apocalypse About Nothing," in a new left-wing Christian publication called The Bias. (That confusing name apparently has a heritage in the 1960s British Catholic left.) While the 24/7 cable news narrative has been all about how dramatically different the Trump and Biden presidencies are, Kotsko stressed the opposite: Trump's child separation policy was virtually the only thing to set him apart from previous Republican presidents, while "Joe Biden is the most conservative Democratic nominee of the postwar era."

While many people might argue with those assessments, it's more difficult to dispute Kotsko's deeper point about the broader historical pattern: "Over and [over] again, and to an increasing degree, the alternation of power between two broadly similar political parties is treated as an apocalyptic emergency." When every election is the most catastrophically important in history — when nothing is ever gained, beyond a temporary reprieve — something is surely missing at the core.

Kotsko also noted that "the word 'apocalypse' refers etymologically to a revelation, or more literally an uncovering," adding: "Apocalyptic literature always finds its society and historical moment to be corrupt and decadent." So rather than rail against the overheated apocalyptic rhetoric of others, Kotsko undertook his own cool-eyed, analytical version, saying, "I will follow my prophetic and apostolic forebears in diagnosing the root cause of that corruption and decadence as a failure to recognize the truth, which has resulted in a thoroughgoing moral and political nihilism."

That truth is not simply the failure of the neoliberal order — ushered in by Ronald Reagan and Margaret Thatcher, but embraced by Bill Clinton, Tony Blair and Barack Obama as well — but a good deal more as well: the lies about human nature, freedom and the market which lie at the core of the neoliberal faith, as Kotsko unfolded in his 2018 book, "Neoliberalism's Demons: On the Political Theology of Late Capital." So I reached out to ask him to discuss what he had uncovered at the core of our historical moment's "corruption and decadence." This interview has been edited, as usual, for clarity and length.

Shortly after Trump's failed coup attempt, you wrote "An Apocalypse About Nothing." You called the attempt "a potentially apocalyptic moment, one in which all our certainties about constitutional government and electoral politics dissolved and all bets were off," and yet in terms of normal politics, you argue, it was hard to see why. Above the blow-by-blow melodrama, from a larger perspective many people would agree that the Democrats lack the confidence and vision to stand up to Republicans, and I think your work can help us better understand why. But I want to begin with your deeper argument. You write that in your book you argue that neoliberalism "has always been an apocalyptic discourse." 

First of all, how do you define neoliberalism?
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Neoliberalism is the political and economic project which has been a shared ambition by most major parties in most Western countries for the last generation. It is a project of trying to reimagine and re-create as many parts of society as possible on the model of a competitive market.

What do you mean by describing it as an "apocalyptic discourse"?

It started off as an oppositional movement. Especially after the First World War and the Great Depression, the free market ideal was under threat. It had been discredited and different alternatives were being tried, including more radical alternatives like the Soviet Union. So the people who were theorizing this before it became public policy were constantly like, "You need to adopt our free-market ideals or else you're going to be Communists." So it was like a voice calling in the wilderness: "Get back to the gospel of the free-market or else you're going to lose your freedom forever!"

When Reagan came in, and Thatcher as well, they adopted a similar kind of apocalyptic tone, except that they were kind of like the messiah implementing this plan. It was defeating all these enemies. Reagan is often credited — probably falsely — with delivering the crushing blow against the Soviet Union that made its dissolution inevitable and breaking the welfare state, all these powers that were literally demonized in a lot of neoliberal discourse The perception was that he was the one vanquishing them.

Then when the Democrats adopted the discourse themselves, how was it apocalyptic for them?

I think for them it turned around the idea that once the neoliberal order was established, it was no longer a matter of defeating these alternatives, because they had been all defeated. You know, the claim that there was no alternative to neoliberalism seemed true at that moment. The only threats were just these nihilistic threats of disaster — natural disasters, chaos, failed states, terrorism — these purely negative threats that were constantly menacing the world scene. The Democrats, and basically the left wing of neoliberalism in general, positioned themselves as trying to stabilize and rationalize the neoliberal system so that these nihilistic threats would not fester and lash out.

In your book, "Neoliberalism's Demons," you write that "neoliberalism makes demons of us all." Can you explain what's entailed in this demonization? It's a bit different from what folks might think.

I think the common use of the word "demonization" — aside from literally making an analogy between somebody and a demon — suggests saying something like really, really negative about them. Like, Republicans hate Hillary Clinton, so they demonized her. But I think there's a little bit more nuance to that, if you look at the theological tradition and what Christian thinkers were saying about how demons came about.



According to this mythology, God created them initially as angels, but then gave them this kind of impossible test, from the very first moment that they were created. Some of them were deemed to have failed for choosing not to submit to God quickly enough, or something like that. I took that to be emblematic of something that happens constantly in neoliberalism, which is that we're given a kind of false or meaningless choice that just sets us up to fail. That just puts us in a position where we are supposedly responsible for the bad outcome but doesn't give us enough power to actually change the situation, or change the terms of the choice we're given.

Your book talks about student debt in relationship to that. Could you say something more about that, to help flesh it out?

I think especially with talk of student loan forgiveness coming up, this is an especially relevant example. When people are arguing against student debt forgiveness, they say it's unfair to those who were responsible, and either didn't take on debt or worked their way through college or they paid them off, and that you're going to create incentives for people to take on all these irresponsible debts that they can't pay for. In general, student debt us a great example of this entrapment, because on the one hand, it's a contract that's freely entered into, but on the other hand, students are constantly told from a very young age that the only way they're going to have a livable life is if they go to college.

So they feel trapped. They have to take on student loans, because the alternative of not going to college just doesn't seem viable to them. And then they're on the hook for this very unusual form of debt that you can't get out of through bankruptcy, that you have to pay for even if you didn't finish your degree. It's a situation that's basically set up so that they can only fail, that they can only hurt themselves. But on a formal level, they are still responsible because they freely chose to do it.

You go on to talk about the benefits that flow to the purveyors of neoliberalism, both Republicans and Democrats, from leaning into this apocalyptic tone. Say a bit more about that.

If you look at what neoliberalism is promising, it's kind of boring. There's not a lot of dynamism or meaning to it. It's just like, if we set up economic incentives in the right way, then the right people will be rewarded and the lazy people will be punished, or something like that. I think Thomas Frank once wrote an article where he called neoliberalism "The God That Sucked." [Note: Frank was referring to the market with that term, but by extension the ideology of neoliberalism was clearly implicated.]

I think this apocalyptic rhetoric really gives us a sense of meaning and moral heft that it doesn't objectively have. It's the paradox of somebody claiming, "I'm on this great moral crusade and opposing these powerful forces," when really they're saying we should let the rich get even richer. The apocalyptic stance helps to resolve some of this cognitive dissonance, and give people an emotional attachment to it that wouldn't otherwise exist.


There's also an awful lot of scolding that goes along with neoliberalism.

It is very moralistic, very intent on blaming people. I think that neoliberalism presents itself as being about individual freedom and that it's trying to set up society so that whatever happens is a reflection of all of us collectively — or at least that it aggregates all our decisions onto the outcome that we all want. Since individual choice is the only kind of choice it recognizes, politicians wind up kind of pulling that string a lot to offload responsibility on individuals rather than themselves.

I think we've seen this a lot with COVID, the pandemic. It's intrinsically a shared, collective thing that requires a large-scale response, and yet we're constantly asked to be angry at individuals who choose not to wear masks, when there isn't a law making them wear masks. Individuals are supposed to discern what the true guidance should be on safety and respond appropriately, even though the political authorities haven't actually given that to them. It's really been reduced to a pretty absurd point in the pandemic, but it shows a dynamic that's always been going on.

You write that "Over and [over] again, and to an increasing degree, the alternation of power between two broadly similar political parties is treated as an apocalyptic emergency." But then came what you call "the genuine neoliberal apocalypse," meaning the great financial crisis of 2008. Why was that an apocalypse specifically for the neoliberal worldview?

Because it objectively discredited all their claims about how society works and how the market works. For them, the market is supposed to take individual choices and produce the appropriate rewards or punishments. But given that the crisis was so widespread and universal, it's not as though everybody just stopped and decided to make the wrong choices. And especially the fact that the choice that was being punished was buying a house, which is normally seen as the mark of responsibility. That added a kind of absurdity, like adding insult to injury. It also exposed the fallacy that the market is supposed to be much wiser and more far-seeing than any human being could be, when in fact the market was so completely wrong about these subprime mortgages and had built so much on them. That seemed to discredit the ideas that the market can handle things. So I think, objectively speaking, this should have forced a reckoning: Man, maybe we've been wrong this whole time. And it did not.

That's just what I wanted to ask about next: Why didn't we get any kind of significant or meaningful change?

I think that, first of all, we shouldn't have expected any change from the Republicans. They just kind of doubled down on their scapegoating, and they fantasized that the crisis was due to individual bad actors, which just so happened to be minorities. For instance, with the fantasies that mortgage subsidies somehow caused it, or something like that. So they're just stuck in a complete fantasyland of trying to make the math work out.

I think that for Democrats, it was both fortunate and also very unfortunate that Obama arose at the moment that he did. Because it seems like he was kind of a unique political talent, and the only one who could sell this agenda. He was very dedicated to doing neoliberal best practices, and bringing everybody in who supposedly knew what they were doing. They applied those practices and the economy did start to get better, based on the metrics, even if people were suffering, and even though the unemployment rate was misleading because so many people had supposedly given up. It still seemed to be getting better. And he then won re-election too, which seemed to endorse the fact that the best practices had worked.

I think that on the one hand, the Republicans became completely detached from reality, and on the other hand, the Democrats became complacent, because they were treating very meager successes as, like, a vindication of their entire strategy. The real problem is that, given the neoliberal hold over both parties for so long, there's just been basically brain drain. There's nobody other than old-timers like Bernie Sanders who has any kind of different outlook. Anybody who's come up since the neoliberal turn has to be within that mindset, or else they can't get anywhere in the party. So when the time came, there was nobody to ask questions or to look at the situation differently.

You also identify the coronavirus crisis as the second time in this young century when "the neoliberal paradigm has faced an apocalyptic challenge." There's a greater divergence between Trump and Biden's responses than there was between Bush and Obama's, but you write that "the goal was still to ensure that the market continued to function 'normally,'" and you make the related observation that both parties "cannot afford to tell the truth ... that the neoliberal consensus has failed and will continue to fail."

This ties into the beginning of your piece, where you argue that Trump is not all that different from other Republicans, while Biden was the Democrats' most conservative postwar nominee. I see Biden as a weathervane candidate, who responded to a younger, more diverse electorate to get elected and has some desire to try new things, although perhaps there's a lack of sustaining ideas.

I've been pleasantly surprised by the directions Biden has taken, although my expectations were basically at rock-bottom. I think that what's lacking — the ideas are not lacking. I mean, if we're talking about basically reforming every aspect of society, plans exist, activist groups exist, academic studies of their plausibility exist. In terms of knowing what to do, we've got it. But all those solutions seem to be impossible. I think it's good that Biden is pushing for more relief, but that's still basically cutting checks to people. That's not restructuring the economy to make it more robust against the next inevitable pandemic. We know they're going to become more frequent. We know this is going to happen again, and simply giving people aid now does not restructure the economy so that it's more robust against something like that.

Most absurd of all, I think, is the rejection of Medicare for All. if there's ever been an event that shows that health is an intrinsically public good that he should be handled by society as a whole, not on a for-profit basis, surely it's this pandemic, yet that's still off the table. Biden has ruled all along that option is off the table, and has even said he would veto it. So I don't think it's a lack of ideas. I think it's just that so much is dismissed as impossible from the get-go, or as unrealistic, that it doesn't even get discussed. There is a difference, obviously an important difference, between the two parties. But on the grand scale of things, it's minuscule compared to what could be done and needs to be done.

What I meant by "ideas" was overarching, organizing ideas that can make sense of specific proposals and provide a shared framework on the scale of neoliberalism, ideas that are sweeping enough to provide a common orientation and set of shared assumptions people can draw on in a political discussion. That seems to be what we're lacking.

Yeah, that makes more sense. I think there is a kind of grab-bag quality to a lot of progressive proposals. That was something that the Green New Deal was castigated for, kind of wanting to do everything at once, but without a shared, easy core idea that's animates all of it and tells us why it's all connected. Have you seen this book by Mike Konczal, "Freedom From the Market"? It seems like that could be a promising step in the right direction. Trying to reclaim the term "freedom," instead of the market and freedom being identified. Making clear that we realize that the market is constraining in a lot of ways, and that it doesn't do certain things well, doesn't always have the right answers.

I think it helps to see the market as a human creation. Wheels are good things, but we get flat tires all the time. The maintenance of wheels and the maintenance of bridges are part of the package that comes with them. The same applies to markets: They're useful creations, but you don't worship them. You fix them to work properly.

I'm sure you're right there are good uses for markets, but it's the idolatry of markets that's the problem, the idea that everything has to be in that mold. Even right now, we're only talking about them negatively. We don't have a positive alternative. I think you're right, that's what's lacking. It's probably unrealistic to expect a man in his late 70s to suddenly have a come-to-Jesus moment and develop a whole new politics. [Laughter.]

We could perhaps stimulate those around him, and those coming up, to seek an alternative! Another thing I'm struck by is that idolatry of the market leads to a contraction of moral considerations: Rather than facing a multitude of moral goods that need to be considered distinctly, in different situations, everything is given a market price. It flattens out all moral reasoning. I think we need to push back against that, to revitalize our sense of diverse, pluralistic moral goods, as well as moral agency.

Yeah, I think you're right. Whenever we do that, we're always in this defensive crouch. There's always a temptation to turn the corner and say, "Actually, if we were more humane to each other, that would help the economy!" It tends to be this black hole that sucks everything out. In my own experience — I'm an academic in the humanities, and we always have to prove our worth somehow. Why can't we say, "Hey, business leaders, why don't we prove the worth of what you're doing? Why should you dominate our lives? Why should you control everything? The one chance we get for education in our lives — why should it be for you? Why can't it also be for us? Why can't it be for our own minds and our own interests?"

But it seems like everybody's more stuck on, like, "We provide critical thinking skills that will make you better at doing business!" That may be true or not true, but it's still within that framework. I think you're right that we lack that alternative. Even in my book, I wind up saying, "We need to abolish the market," but I don't say, "And here's what it will look like when we do it. Here's the positive alternative that will replace it." So I'm just as guilty as anybody.

I like to end my interviews by asking, "What's the most important question I didn't ask? And what's the answer?"

Where you can buy my book. [Laughter.]


PAUL ROSENBERG is a California-based writer/activist, senior editor for Random Lengths News, and a columnist for Al Jazeera English. Follow him on Twitter at @PaulHRosenberg.

'We are crying out for help': Surge of attacks against Asian Americans due to COVID-19 conspiracies

Photos: Screen captures

Speaking to MSNBC on Sunday, a panel of actors and activists explained that the attacks on Asian Americans are growing as hostility over COVID-19 grows.
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Over the course of the last year, President Donald Trump and the far-right have spread conspiracy theories that China is responsible for the coronavirus. Presumably, many racists can't tell the difference between Chinese, Japanese and Vietnamese Americans, so they've attacked anyone even resembling an Asian American or Pacific Islanders.

In San Francisco, a 19-year-old is facing murder charges after he pushed an elderly Thai man so hard that he fell on the ground, hit his head on the pavement and died.

Just this weekend, a Yale graduate student was gunned down in the streets of New Haven, Connecticut. His name was Kevin Jiang and he was only 26-years-old with a birthday next week. While the police haven't found the murderer, they noted that this is another in a strange increase in gun violence the city is experiencing.

Last month, President Joe Biden issued a memorandum on the racist attacks against Asians and Pacific Islanders. But it was a recent attack in Oakland targeting a 91-year-old man, that motivated actors Daniel Wu and Daniel Dae Kim to offer a reward for anyone with information that could lead to an arrest of the man's killer.

Kim noted that the elderly community has already dealt with a lot over the past year with the pandemic, and now they're being attacked if they do leave their homes.

Civil Rights Activist Amanda Nguyen said that the country is reaching a "reckoning" and begged Americans to "wake up and choose love. And look, I know that sounds really corny, but the opposite of love isn't hate, it's apathy. Silence erases our humanity, yet it roars through the head of every Asian American as they step out the door."

https://www.msnbc.com/msnbc/embedded-video/mmvo100668997897

OPEN SCHOOLS NOT CAPITALI$M

Why Opening restaurants is exactly what the coronavirus wants us to do

Pro Publica
February 06, 2021

PRE COVID 19

Waiter pouring wine for customer

On Jan. 29, New York Gov. Andrew Cuomo was promoting “marital bliss" at a coronavirus news conference.
Announcing that indoor dining would reopen at 25% capacity in New York City on Valentine's Day, and wedding receptions could also resume with up to 150 people a month after, Cuomo suggested: “You propose on Valentine's Day and then you can have the wedding ceremony March 15, up to 150 people. People will actually come to your wedding because you can tell them, with the testing, it will be safe. … No pressure, but it's just an idea."

Cuomo isn't alone in taking measures to loosen pandemic-related restrictions. Michigan Gov. Gretchen Whitmer allowed indoor dining to resume at 25% capacity starting Feb. 1. Idaho Gov. Brad Little increased limits on indoor gatherings from 10 to 50 people. Massachusetts Gov. Charlie Baker is raising business capacity from 25% to 40%, including at restaurants and gyms. California Gov. Gavin Newsom lifted stay-at-home orders on Jan. 25.

To justify their reopening decisions, governors point to falling case counts. “We make decisions based on facts," Cuomo said. “New York City numbers are down."

But epidemiologists and public health experts say a crucial factor is missing from these calculations: the threat of new viral variants. One coronavirus variant, which originated in the United Kingdom and is now spreading in the U.S., is believed to be 50% more transmissible. The more cases there are, the faster new variants can spread. Because the baseline of case counts in the U.S. is already so high — we're still averaging about 130,000 new cases a day — and because the spread of the virus grows exponentially, cases could easily climb past the 300,000-per-day peak we reached in early January if we underestimate the variants, experts said.

Furthermore, study after study has identified indoor spaces — particularly restaurants, where consistent masking is not possible — as some of the highest-risk locations for transmission to occur. Even with distanced tables, case studies have shown that droplets can travel long distances within dining establishments, sometimes helped along by air conditioning.

We're just in the opening stage of the new variants' arrival in the United States. Experts say we could speed viruses' spread by providing them with superspreading playgrounds or slow them down by starving them of opportunities to replicate.

“We're standing at an inflection point," said Sam Scarpino, assistant professor at Northeastern University and director of the school's

Emergent Epidemics Lab. Thanks to the arrival of vaccines, he said, “we finally have the chance right now to bring this back under control, but if we ease up now, we may end up wasting all the effort we put in."

Dr. Luciana Borio, an infectious disease physician who was a member of the Biden-Harris transition team's COVID-19 advisory board, put it more bluntly at a congressional hearing on Feb. 3. “Our worst days could be ahead of us," she said.

I interviewed 10 scientists for this story and was surprised by the vehemence of some of their language. “Are you sure it could be that bad?" I asked, over and over.

They unanimously said they expected B.1.1.7, the variant first discovered in the U.K., to eventually become the dominant version of coronavirus in the U.S. The Centers for Disease Control and Prevention has estimated that B.1.1.7 will become dominant in March, using a model that presumes it's 50% more transmissible than the original “wildtype" coronavirus. The model's transmission rate was based on experience in the U.K., which first detected B.1.1.7 in September and saw an increase in cases that became apparent in December, straining hospitals despite stringent closures and stay-at-home orders. So while our country appears relatively B.1.1.7-free right now, the situation could look drastically different in a matter of months.

Experts are particularly concerned because we don't have a handle on exactly how far B.1.1.7 has spread. Our current surveillance system sequences less than 1% of cases to see whether they are a variant.

Throwing an even more troubling wrench into the mix is that B.1.1.7 is continuing to morph. Just this week, scientists discovered that some B.1.1.7 coronaviruses in Britain had picked up a key change, known as the E484K mutation. That mutation had previously been found in the B.1.351 variant, which was first discovered in South Africa. Scientists have hypothesized that it's the E484K mutation that has reduced the efficacy of some vaccines in South African trials, so this is incredibly worrying news.

“It's really hard to thread this needle without sounding like a prophet of doom," said Angela Rasmussen, a virologist at Georgetown University's Center for Global Health Science and Security. While vaccines bring hope, she said, governors who are moving to expand indoor dining are “completely reckless"; if they don't course correct, “I don't think it's hyperbolic to say the worst could be yet to come."

The choices that our federal and state leaders make right at this moment will determine if we can bend the curve once and for all and start ending the pandemic, or if we ride the rollercoaster into yet another surge, this one fueled by a viral enemy harder to fight than ever before.

All of us have agency in deciding this narrative, Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, stressed. “Certainly you need to be prepared for the possibility that things might get worse in the light of the variants, but that is not inevitable because there are things that we can do to mitigate against it," he said in an interview. “We're not helpless observers of our own fate."

Fauci urged states to “double down on your public health measures … to have virtually everybody wear masks, to have everyone maintain social distance, to have everybody avoid congregate settings, and to have everybody wash their hands very frequently."

And don't wait until it's too late, warned Michael Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota.

“We are so good at pumping the brakes after we've wrapped the car around the tree," he said. The new variants aren't being complacent. “There's still a lot of human wood out there for this coronavirus to burn."

To understand the epidemiologists' warnings, it helps to understand what variants are, how they have been behaving and our limitations in knowing exactly how far they have spread.

People have a bad habit of anthropomorphizing the coronavirus: ascribing human-like intentions to it, as if a microbe can discern that we finally have a vaccine and try to evade it. But viruses don't really have any schemes; they just reproduce. “Coronaviruses are a single strand of RNA in a sac of fat," epidemiologist Larry Brilliant reminded me. “They're preprogrammed to replicate and continue replicating. That's their job."

Once in a while, when a virus replicates, a mistake occurs, and a letter in the strand of RNA is copied inaccurately. That's called a mutation. Many times, those mutations are neutral. Sometimes they are detrimental to the virus, and that lineage will quickly die off. Other times, they're beneficial to the virus in some way, such as by making it more transmissible. When a version of the virus becomes functionally different, that's when scientists consider it a variant.

As of Feb. 4, according to the CDC, the U.S. has found 611 cases of B.1.1.7, the variant first discovered in the United Kingdom, five cases of B.1.351, first identified in South Africa, and two cases of P.1., first identified in Brazil. But that's almost certainly an undercount.

Part of the reason why epidemiologists are advocating for us to stay hunkered down is because the U.S. doesn't know exactly where all the variant cases are.

The term that public health uses is “surveillance." I like to think of it as having eyes on the virus. In order to have good eyes on where coronavirus infections are in general, all you need is the regular swab tests that we're all familiar with. But in order to tell whether a positive case is the wildtype coronavirus or one of the more nasty variants, an additional step is needed: genomic sequencing. For that, the sample needs to be sent on to a lab that has specialized machinery capable of conducting sequencing.

Until recently, sequencing in the U.S. was a patchwork effort, conducted by a mix of academic and public health agency labs keen to track the evolution of the coronavirus. Though the CDC hosted a weekly call where those scientists already conducting sequencing could compare notes, there was no dedicated federal funding or coordination to ensure that samples were routinely gathered from across the country.

Today, the U.S. sequences less than 1% of its total cases. This is a pittance compared to the U.K., which sequences around 8-10% of its positive test results. But volume alone isn't the only thing that matters. Representation, meaning where the samples come from, is another crucial factor. Since most of the sequencing so far has come from voluntary efforts, the U.S. has suffered from uneven visibility, with a whole bunch of eyeballs in parts of the country that are biotechnology and academic hubs, like Boston, San Francisco and San Diego, and less in “surveillance deserts" like North and South Dakota. There, barely any samples have been sequenced at all, even when those states had explosions of COVID-19 cases.

Dr. Phil Febbo is chief medical officer at Illumina, one of the world's biggest sequencing technology companies. Like so many parts of the coronavirus response, keeping a lookout for variants has suffered from a lack of federal leadership, Febbo said. As early as March of last year, Illumina representatives began meeting with federal agencies, advocating for a national genomic surveillance system.

“We talked to any three-lettered agency we could," Febbo said. “Those conversations were cordial: They said they heard what we were saying, but then they'd say, 'But we need more tests, but can you do it in five minutes, can it be point-of-care?'" It wasn't until Dec. 18, when B.1.1.7 was taking off in the United Kingdom, that Illumina finally got a call from the CDC offering to sign a contract with the company. (Since December, CDC has engaged Illumina to do surveillance work by signing twocontracts potentially worth up to $4.6 million.)

Today, Illumina sequences positive samples that are passed on from a diagnostic testing company, Helix. Each RNA strand of the SARS-CoV-2 virus has about 30,000 nucleotides, each represented by one of four letters. Illumina's sequencers read through each sample's code and compare each letter to a reference sequence, looking for significant changes. The data gets passed back to the CDC, which uses location data stripped of personal identifiers to map the spread of any variants that Illumina has picked up.

The CDC said it has contracted with several large commercial companies with the goal of sequencing up to 6,000 samples a week by mid-February. Through another program, called the National SARS-CoV-2 Strain Surveillance System, state public health labs are supposed to send a total of 1,500 samples to the agency every other week. This program went into effect on Jan. 25 and is still ramping up, according to a CDC spokesperson.

Febbo says more can be done to increase surveillance. He notes that the Biden administration, while clearly more invested in variant surveillance than the Trump administration, hasn't set a public target in the same way it has for vaccinations with its “100 million shots" campaign. Illumina estimates that sequencing 5% of all samples would allow us to be confident that we are catching all variants of concern, and he would like the Biden administration to make that a public goal. It can be done, Febbo says: “It hasn't been the lack of capacity, it's been the lack of will."

Having clearer information about where variants are would give governors and local officials actual information with which to make decisions. Then they could say with confidence, “We can open indoor dining because we know that the variants aren't circulating in our community." Absent that information, the only thing we can do is act like the variants are here.

The good news is that so far, the vaccines that have been made available to the public appear to be reasonably effective against the coronavirus variants. They may be slightly less effective against B.1.351, the variant discovered in South Africa, but none of the variants are total “escapes," so a vaccine should offer you at least partial protection against any form of the coronavirus you encounter.

All of the available shots give your immune system some familiarity with the virus, allowing it to be more prepared to meet the bug in the wild, whether it's the original strain or a variant. Having a savvier immune system, in turn, means that even if you do get infected, you're less likely to need to be hospitalized, and less likely to die.

“Regardless of what's happening with this variant, we're much better with people seeingSARS-CoV-2 after seeing the vaccine than not," said Derek Cummings, a biology professor at the University of Florida's Emerging Pathogens Institute.

However, we're not very far along with vaccinations yet. As of F eb. 4, only 2.1% of the U.S. population had been reported to have received both doses of the vaccine; 8.5% had received one dose. That means we're in a precarious moment right now where the vast majority of the U.S. hasn't had a chance to get protected, and the variants have a window to multiply. (Of course, those who have already gotten sick with COVID-19 have natural immunity, but some scientists are concerned that those who develop only mild symptoms may not gain as much innate immunity as those who receive a vaccine.)

Of the scientists I talked to, Caitlin Rivers, a computational epidemiologist at Johns Hopkins Center for Health Security, was the most optimistic about a potential variant-fueled surge. “I do think that B.1.1.7 has the possibility to precipitate a wave, but it probably won't be as bad as the last wave, because we have a lot of preexisting immunity and we are rolling out the vaccines," she said. Thanks to the vaccines, the U.S. will have more population immunity by March, when the CDC predicts B.1.1.7 will become dominant, than the U.K. did when the variant hit there late last year. “It's a low likelihood that we will have a gigantic fourth wave, but not impossible," she said.

Still, Rivers said, “now is not the time to relax." She, too, was critical of state policies to loosen restrictions. “When you create the same conditions that allowed the last surge, you should expect the same results," she said. “Our main move should be to reduce transmission as much as possible while we vaccinate as much as possible."

Time is not on our side, as the morphing B.1.1.7 variant showed us when it picked up the E484K mutation. While we are lucky that our vaccines still work against the current variants, we have to keep in mind that in this race between vaccines and variants, the variants aren't staying static.

The big fear is that eventually, a variant will come along that provides the virus with a complete immune escape, preventing our vaccines from working against it. Even though we can update our vaccines, that would take time. The only way to guarantee that the virus won't mutate into a variant that our current vaccines don't cover is to lower transmission significantly, said genomic epidemiologist Alli Black: “The virus will continue to mutate as it continues to spread. We're not going to stop that biological fact unless transmission stops." And vaccinating everyone quickly is one key way to make it harder for the coronavirus to get from person to person in the first place.

“We need to start responding like the variants are going to take over and they are one of the biggest threats," said Cummings, “or we won't have vaccinated enough people when this rolls through."

Throughout this pandemic, the U.S. has often been in the fortunate position of not being first when it comes to novel viral encounters. We weren't the country where SARS-CoV-2 originated. We weren't the place where B.1.1.7 was spawned. We've had the opportunity to look to other countries and learn from them, if only we'd choose to.

Epidemiologist after epidemiologist pointed out that the U.K., Denmark and Portugal required drastic measures— the dreaded L word, “lockdown" — to get B.1.1.7 under control. “We've seen that multiple different countries in Europe have had to close schools after making it a policy that schools would be the last to close," Rivers, from Johns Hopkins, noted.

If we don't want the same fate to befall the U.S., now is the time to act, the scientists urged.

Improving surveillance can help. Utah Public Health Laboratory has a robust state sequencing program, analyzing a random sample of cases sent by the state's two largest hospital groups. Kelly Oakeson, its chief scientist for next generation sequencing and bioinformatics, has set a goal of sequencing 10% of all cases in the state; his lab is currently doing about 3%. They could do more, he said. The only problem is that they don't have enough pipette tips due to a national shortage. Oakeson said he's hoping that the Biden administration will leverage the Defense Production Act to produce more pipette tips so he can increase his state's surveillance capabilities.

“We can't get transmission down through vaccination alone," said Rasmussen, the Georgetown virologist. “We need to be encouraging leadership, both at the state and federal levels, to protect people, to have paid sick leave for people if they become symptomatic."

A restaurant server in New York City, who was laid off early in the pandemic from a high-end steakhouse, told me he understood what the epidemiologists were saying from a scientific point of view. But, he asked, “if you want to shut everything down, who's going to pay the bills?"

He continued, “In order to do what the epidemiologists want to get done, you can only do that with policies to support the people and make it worth their while to do it." He's job hunting, and he said that if he was offered a position that put him indoors on Valentine's Day, “I would have to take it." He'd put on a double mask and go to work.

Whenever we have options, though, individual decisions can make a difference. Black, the genomic epidemiologist, encouraged everyone to limit travel as much as possible: “It just really facilitates introductions of these circulating variants."

Hang in there, urged Scarpino, the Northeastern professor, painting a hopeful picture: “Cases are coming down, vaccines are going up. Let's pretend that politicians wake up and don't reopen restaurants and we avoid a big wave in March. Then we're running downhill on the vaccines because the pipeline gets better and better. Then we can get our lives back."

That sounded so tantalizing. Dream-worthy. Just a matter of good science-based public policy and collective compliance driving down the case counts until those little mindless RNA-filled fat sacs have nowhere to go, no one to infect, no way to replicate, no chances to mutate. I imagine them bumping around, lost without crowded indoor spaces to breed in, thwarted by vaccine-boosted immune cells, unable to find a host, dwindling, going, gone.

Some scientists believe life may have started on Mars -- here's why
Nicole Karlis, Salon
February 07, 2021

The presence of methane has long been a point of contention among Mars experts

 EUROPEAN SPACE AGENCY/AFP/File / HO

On February 18, NASA's Perseverance rover will parachute through thin Martian air, marking a new era in red planet exploration. Landing on the Jezero Crater, which is located north of the Martian equator, will be no easy feat. Only about 40 percent of the missions ever sent to Mars succeed, according to NASA. If it does, Perseverance could drastically change the way we think about extraterrestrial life. That's because scientists believe Jezero, a 28 mile-wide impact crater that used to be a lake, is an ideal place to look for evidence of ancient microbial life on Mars.

Once it lands, Perseverance will collect and store Martian rock and soil samples, which will eventually be returned to Earth. This is known as a "sample-return mission," an extremely rare type of space exploration mission due to its expense. (Indeed, there has never been a sample return mission from another planet.) And once Martian soil is returned to Earth in a decade, scientists will set about studying the material to figure out if there was ever ancient life on Mars.

Yet some scientists believe that these samples could answer an even bigger question: Did life on Earth originate on Mars?

Though the idea that life started on Mars before migrating on Earth sounds like some far-fetched sci-fi premise, many renowned scientists take the theory seriously. The general idea of life starting elsewhere in space before migrating here has a name, too: Panspermia. It's the hypothesis that life exists elsewhere in the universe, and is distributed by asteroids and other space debris.

To be clear, the notion of life on Earth originating on Mars isn't a dominant theory in the scientific community, but it does appear to be catching on. And scientists like Gary Ruvkun, a professor of genetics at Harvard Medical School, say that it does sound "obvious, in a way."

The evidence starts with how space debris moved around in the young solar system. Indeed, we have evidence of an exchange of rocks from Mars to Earth. Martian meteorites have been found in Antarctica and across the world — an estimated 159, according to the International Meteorite Collectors Association.

"You can assign them to Mars based on the gaseous inclusions that they have, that are sort of the equivalent of the gases that were shown by the Viking spacecraft" to exist in Mars' atmosphere, Ruvkun said. In other words, small bubbles of air in these rocks reveal that they were forged in the Martian air. "So, there is exchange between Mars and Earth — probably more often going from Mars to Earth because it goes 'downhill,' going to Mars is 'uphill,' gravitationally-speaking."

But for Ruvkun, whose area of expertise is genomics, it's the timing of cellular life that he believes makes a strong case that life on Earth came from somewhere else — perhaps Mars, or perhaps Mars vis-a-vis another planet.

Ruvkun noted that our genomes reveal the history of life, and provide clues about the ancestors that preceded us by millions or even billions of years. "In our genomes, you can kind of see the history, right?" he said. "There's the RNA world that predated the DNA world and it's very well supported by all kinds of current biology; so, we know the steps that evolution took in order to get to where we are now."

Thanks to the advancement of genomics, the understanding of LUCA (the Last Universal Common Ancestor) — meaning the organism from which all life on Earth evolved from — has greatly advanced. By studying the genetics of all organisms on Earth, scientists have a very good sense of what the single-celled ancestor of every living thing (on Earth) looked like. They also know the timeline: all modern life forms descend from a single-celled organism that lived about 3.9 billion years ago, only 200 million years after the first appearance of liquid water. In the grand scheme of the universe, that's not that long.

And the last universal common ancestor was fairly complicated as far as organisms go. That leaves two possibilities, Ruvkun says. "Either evolution to full-on modern genomes is really easy, or the reason you see it so fast was that we just 'caught' life, it didn't actually start here." He adds, "I like the idea that we just caught it and that's why it's so fast, but I'm an outlier."

If that's the case, then Erik Asphaug, is a professor of planetary science at the University of Arizona, is also an outlier. Asphaug said that what we know about the oldest rocks on Earth — which have chemical evidence of carbon isotopes, tracing back to nearly 4 billion years ago — tell us that life started "started forming on Earth almost as soon as it was possible for it to happen."

If that's the case, it makes for an interesting precedent. "Let's say you expect life to be flourishing whenever a planet cools down to the point where it can start to have liquid water," Asphaug said. "But just looking at our own solar system, what planet was likely to be habitable first? Almost certainly Mars."

This is because, Asphaug said, Mars formed before Earth did. Early in Martian history when Mars was cooling down, Mars would have had a "hospitable" environment before Earth.

"If life was going to start anywhere it might start first on Mars," Asphaug said. "We don't know what the requirement is — you know, if it required something super special like the existence of a moon or some factors that are unique to the Earth — but just in terms of what place had liquid water first, that would have been Mars."

An intriguing and convincing piece of evidence relates to how material moved between the two neighboring planets. Indeed, the further you go back in time, the bigger the collisions of rocks between Mars and Earth, Asphaug said. These impact events could have been huge "mountain-sized blocks of Mars" that were launched into space. Such massive asteroids could serve as a home for a hardy microorganism.

"When you collide back into a planet, some fraction of that mountain-sized mass is going to survive as debris on the surface," he said. "It's taken a while for modeling to show that you can have a relatively intact survival of what we call 'ballistic panspermia' — firing a bullet into one planet, knocking bits off, and having it end up on another planet. But it's feasible, we think it happens, and the trajectory would tend to go from Mars to the Earth, much more likely than from Earth to Mars."

Asphaug added that surviving the trip, given the mass of the vehicle for the microorganisms, wouldn't be a problem — and neither would surviving on a new, hospitable planet.

"Any early life form would be resistant to what's going on at the tail end of planet formation," he said. "Any organism that's going to be existing has to be used to the horrific bombardment of impacts, even apart from this, swapping from planet to planet."

In other words, early microbial life would have been fine with harsh environments and long periods of dormancy.

Harvard professor Avi Loeb told Salon via email that one of the Martian rocks found on Earth, ALH 84001, "was not heated along its journey to more than 40 degrees Celsius and could have carried life."

All three scientists believe that Perseverance might be able to add credibility to the theory of panspermia.

"If you were to go and find remnants of life on Mars, which we hope to do with Perseverance rover and these other Martian adventures, I would be personally surprised if they were not connected at the hip to terrestrial life," Asphaug said.

Ruvkun said he hopes to be one of the scientists to look for DNA when the sample from Mars hopefully, eventually, returns.

"Launching something from Mars is a seriously difficult thing," he said.

But what would this mean for human beings, and our existential understanding of who we are and where we came from?

"In that case, we might all be Martians," Loeb said. He joked that the self-help book "Men are from Mars, Women are from Venus" may have been more right than we know.

Or perhaps, as Ruvkun believes, we're from a different solar system, and life is just scattering across the universe.

"To me the idea that it all started on Earth, and every single solar system has their own little evolution of life happening, and they're all independent — it just seems kind of dumb," Ruvkun said. "It's so much more explanatory to say 'no, it's spreading, it's spreading all across the universe, and we caught it too, it didn't start here," he added. "And in this moment during the pandemic — what a great moment to pitch the idea. Maybe people will finally believe it."

LA REVUE GAUCHE - Left Comment: Search results for PANSPERMIA (plawiuk.blogspot.com)

Feds give update on probe in deadly Georgia poultry plant incident

2021/2/7 ©TheAtlantaJournalConstitution

Tanks of liquid nitrogen are seen at the Prime Pak Foods poultry processing plant after a liquid nitrogen leak on Jan. 28, 2021, resulted in six deaths and multiple hospitalizations in Gainesville, Ga.. - ELIJAH NOUVELAGE/AFP/AFP/TNS

ATLANTA — The federal investigative board looking into last month’s incident at a poultry processing plant in Gainesville has found that issues on a conveyor appear linked to the deadly chemical leak.

Six workers were killed at the Foundation Food Group on Jan. 28. The plant uses liquid nitrogen to flash-freeze chicken, and an “inadvertent release” happened on one of the plant’s five production lines. About a dozen people were injured and taken to a hospital, and 130 people were evacuated.

The U.S. Chemical Safety and Hazard Investigation Board released the following new details Sunday about the incident:

—The plant had been experiencing unresolved operational issues on the chicken conveyor that appear to have resulted in the accidental release of liquid nitrogen in the flash-freezing bath.

—The Chemical Safety Board has information that Line No. 4 was shut down the morning of the incident. The shutdown was due to operational issues on the conveyor line.

—Foundation Food Group maintenance personnel reported the computerized measuring system indicated a low liquid level in the immersion bath used to flash-freeze the chicken products.

—The liquid nitrogen units were manufactured and installed by Messer and are leased to the Foundation Food Group.

—The Foundation Food Group performs routine maintenance on the Messer-owned equipment.

Nitrogen, often used to flash-freeze food, is odorless, colorless and can reduce the oxygen in the air, cause asphyxiation or burns from the cold.

Killed in the gas leak were Jose DeJesus Elias-Cabrera, 45, of Gainesville; Corey Alan Murphy, 35, of Clermont; Nelly Perez-Rafael, 28, of Gainesville; Saulo Suarez-Bernal, 41, of Dawsonville; Victor Vellez, 38, of Gainesville; and Edgar Vera-Garcia, 28, of Gainesville.

WTF

The Chemical Safety Board’s work is ongoing, and the board’s chairman and CEO, Katherine Lemos, said at a Jan. 30 news conference in Gainesville that a full report could take several years. The board makes safety recommendations but does not issue citations or fines.

The plant is owned by Gainesville-based Foundation Food Group, which formed Jan. 1 after Prime-Pak Foods and Victory Processing merged, according to state records.

Mohamed El-Erian on the GameStop short squeeze: 

'We came very, very close to a market accident'

On the January jobs report:

'It's a disappointing report in many respects'

And he's also the Chief
Economic Advisor at Allianz.




Julie Hyman
·Anchor
Sat, February 6, 2021, 6:45 AM·3 min read

The latest move in the GameStop (GME) roller coaster was a 19% jump in the shares in Friday’s session that wasn’t enough to prevent an 80% slide on the week. While the short squeeze in GameStop and other heavily-shorted names may be abating for now, the factors underlying the action aren’t going away anytime soon. That means regulators’ job is just beginning.

“They have to play massive catch-up,” Mohamed El-Erian, president of Queens’ College at Cambridge University and chief economic advisor at Allianz, told Yahoo Finance Live. “We have done well in reducing systemic risk in the banking system, but what regulators haven’t done well is recognizing risk doesn’t disappear. It morphs and migrates, and it migrated to the non-banks.”

Those non-banks include platforms like Robinhood and other commission-free trading apps, which retail investors used to stage bull raids on GameStop and others. When the platforms were then forced to enact rolling trading restrictions by the trade clearing authority, there was a ripple effect throughout the broader equity market, ending in the worst week for stocks since October. (Stocks since rebounded, with the major averages posting their best weekly performance since November).

El-Erian said while the outburst may have been brief, it sent a signal.

“The biggest signal for someone who’s investing in the market as a whole is that there is a lot of risk-taking, and a lot of leverage. And rightly so, because liquidity is abundant, and the cost of borrowing is so low. But a lot of leverage tends to create excessive risk-taking,” he said. “And therefore, the risk of a market accident goes up. Last week we came very, very close to a market accident — very close. It was avoided through various things, but we came very close.”

The “underlying forces that propelled the uprising” persist, El-Erian wrote in an op-ed in the Financial Times — and could cause more disruptions.


Regulators appear to be in information-gathering mode for now. Treasury Secretary Janet Yellen on Thursday convened a meeting of the heads of the U.S. Securities and Exchange Commission, Commodities Futures Trading Commission, Federal Reserve Board and Federal Reserve Bank of New York. As Yellen said in an interview with ABC, “we need to understand deeply what happened before we go to action.”

That understanding will take time, in part because there are competing constituents, as El-Erian points out.

“You have four competing claims on the regulatory process. One is the protection of the small investors. Two, you have a question of, is Reddit some sort of collusion, some sort of market manipulation? Three, we have questions about the intermediary and hedge funds. Was there collusion there? And four, you have a question of investment suitability.”

Because of the thorny process of teasing all of that out, “I doubt that you’re going to see deterministic action any time soon,” he said.

Julie Hyman is the co-anchor of Yahoo Finance Live, weekdays 9am-11am ET.

Read the latest financial and business news from Yahoo Finance

Robinhood’s Collateral-Crunch Explanation Puzzles Wall Street

Annie Massa, Yalman Onaran and Matthew Leising
Sat, February 6, 2021, 6:00 AM·7 min read

(Bloomberg) -- A week after Robinhood Markets tried to clear the air by explaining why it slapped controversial limits on trading hot stocks, Wall Street’s risk professionals are still perplexed: How was the firm so ill-prepared for an obvious surge in collateral calls?

To the financial industry, anticipating collateral demands from hubs such as the Depository Trust & Clearing Corp. is Brokerage 101. Major firms assign teams to study the DTCC’s methodology, estimate its requests and make sure ample cash is available. Everyone grumbles, sure, but they also know what happens when firms fall short: They scramble for a lifeline or shut down. Robinhood gathered billions from backers to keep it going.

“They obviously fell very, very short,” said David Weisberger, a market-structure consultant who built trading systems at Salomon Brothers and Morgan Stanley. He said he’s been puzzling over Robinhood, given what he called the “well known” requirements of clearinghouses. “This was a franchise-threatening event.”


The Silicon Valley startup left users fuming by temporarily restricting certain purchases at the height of January’s mania over GameStop Corp. and other “meme stocks” that were in the midst of skyrocketing. By the end of this week, as millions of customers were downloading its app to trade the fallen darlings and new ones, risk managers were still stuck on how Robinhood ended up in the predicament.

Reached for comment, a company spokesperson referred to a Thursday blog post by the president and chief operating officer of Robinhood Securities, Jim Swartwout.

“We have grown rapidly. And we have, at times, encountered challenges as we’ve scaled to meet this moment,” Swartwout wrote, describing how the firm’s growth and a surge in trading volume fueled collateral demands. “To say the overnight increases in volume Robinhood experienced last week were extraordinarily high would be a vast understatement. The surge was magnitudes higher than the norm.”

Chief Executive Officer Vlad Tenev has linked the trading restrictions to a roughly $3 billion collateral call that arrived early Jan. 28 from part of the DTCC, which Robinhood has said contributed to a 10-fold jump in weekly clearinghouse deposit requirements for equities. While Tenev has credited the DTCC for being reasonable and ultimately accepting $700 million, he has at times portrayed its formulas as opaque, noting they include a “discretionary” component.

“We don’t have the full details” of how the DTCC arrived at its initial demand, Tenev told Elon Musk last weekend in an interview broadcast on the social-conversation app Clubhouse. “It would obviously be ideal if there was a little bit more transparency so we could plan better around that.”

The rejoinder from industry executives: It’s pretty much just math.

‘Shame on Them’

In interviews, more than a half-dozen senior risk executives -- some from Wall Street’s largest firms -- reacted with bemusement to any assertions that the magnitude of the DTCC’s demands can’t be anticipated. They spoke on the condition they not be identified, in some cases because they interact with Robinhood.

They acknowledged there’s always complaining about the difficulty of pinpointing what clearinghouses will seek, and that things can go wrong. Some executives even recounted times when they got pressed for millions of additional cash on short notice. But overall, the group said that large, well-run firms don’t get surprised by requests that threaten to empty their pockets.

One brokerage executive said Robinhood should have ensured it had enough capital or stopped processing trades of volatile stocks. Charles Schwab Corp.’s TD Ameritrade, for example, began limiting bets on certain meme stocks the day before Robinhood did. Robinhood’s later restrictions were more severe, tapering off into the week that followed.

“Once every decade or so there are improbabilities that occur,” said Weisberger, who now runs cryptocurrency venture CoinRoutes. Self-clearing firms such as Robinhood need to know what potential demands they could face. “If they studied it and came up with an answer and it was wrong, well shame on the people who studied it,” he said. “If they didn’t study it, well then shame on them.”

Avoiding Surprises

The DTCC bases much of its deposit demands on elements including a clearing member’s concentration in volatile stocks, the volume of trades occurring, imbalances in buying and selling, and the firm’s financial condition. The more a brokerage is exposed to erratic shares, the more collateral it has to post. The less capital a brokerage has on hand, the more severe its surcharge may be.

The goal is to protect the broader financial system from trading defaults. To make collateral calls predictable, the DTCC says it provides “reporting and other tools to our clearing members to help them anticipate their margin requirements for a particular portfolio.”

The nightmare that clearinghouses are designed to avoid is that a brokerage loses so much money before a trade is completed that the firm can’t hold up its end of the transaction. Without a clearinghouse, one firm’s failure could cascade through the financial system. Unwinding just one trade means undoing all of the subsequent transactions if that share already was resold.

A broker-dealer’s collateral burden rises if it lends money to customers, and especially if they bet heavily on, say, stocks that have recently multiplied in value, as GameStop and others did last month. If prices suddenly crash -- which also happened -- it raises the risk that clients may not be able to repay their margin loans, leaving the brokerage to eat their losses. Some of the recent stock declines may be attributable to Robinhood liquidating clients’ positions to head off defaults on loans, according to Wall Street risk managers.

“Someone’s got to pay,” said Eric Budish, a professor of economics at the University of Chicago’s Booth School of Business. If you’re a brokerage, “you have capital to deal with that existential risk. I was surprised Robinhood didn’t have more capital for that scenario.”

Margin lending constituted about 20% of Robinhood’s $6.7 billion balance sheet in mid-2020. Robinhood tapped credit lines and raised about $3.4 billion from investors at the end of January.

Robinhood, founded in 2013, has been hiring Wall Streeters to help integrate the startup into the more traditional financial system. The firm appointed former Securities and Exchange Commission member Dan Gallagher, Fidelity Investments’ Norm Ashkenas and Wells Fargo & Co.’s Kelly Zigaitis to senior legal and compliance roles.

Robinhood’s Prescription

This week, Robinhood offered its own prescription to avoid future problems: The U.S. stock market should abandon its two-day settlement system and switch to a real-time process.

Moving the U.S. equity market to instantaneous settlement is a huge undertaking that would require years of work. Two components of trading would probably need to be digitized: The securities and the cash to pay for them. Digitally representing a security like a stock or bond isn’t difficult and a small-scale effort by Paxos Trust Co. to use blockchain to settle stock trades in near real-time received a green light from the SEC in 2019.

Digitizing U.S. dollars to pay for stocks is years off, if it ever happens. Another hurdle is all of the banks, brokerages, hedge funds and trading firms that buy and sell shares would need to update their systems to make the change. The transition would no-doubt be expensive.

Australia embarked on a plan to do just that in 2016 when Digital Asset Holdings announced a deal with ASX Inc. to remake the Australian Stock Exchange so settlement times could be cut from days to minutes. The project has been extended repeatedly and is currently two years behind schedule.

Meanwhile, Robinhood is fortunate to have access to venture capital to weather a rough patch, said Joanna Fields, founding principal at market structure consultancy Aplomb Strategies.

“There are firms that have controls, governance frameworks and processes, and that do not have the capability of getting that kind of capital infusion,” she said.

©2021 Bloomberg L.P.

Toshiba CEO Kurumatani Shouldn’t Put Politics and Personal Agenda Before Shareholders




Toshiba Corporation’s 1 Trillion Yen ($9.5 Billion) Investment Plan Blindsided Shareholders


Toshiba Sets Operating Income as Growth Target at Potential Expense of Shareholder Value


Toshiba CEO Kurumatani Resists Modern Corporate Governance Standards


Other Japanese Companies Have Taken Far Bigger Strides to Improve Governance


Farallon, Effissimo Request More Transparency, Seek EGMs


Toshiba Trades at Steep Discount to Peers, Likely Reflecting Governance Concerns

By Jarrett Banks and John Jannarone

Toshiba Corporation was once the face of corporate Japan’s global rise. As a 50 percent partner in Time Warner’s film and television business in the early 1990s, it passed on the movie adaptation Michael Crichton’s Rising Sun, in what was seen as a power move.

Although times have changed and the company is no longer involved in the film industry, Toshiba President and CEO Nobuaki Kurumatani seems stuck in the past when it comes to value creation and corporate governance.

Founded in 1875 just a few years after the Meiji Restoration that ended rule under the shogunate, Toshiba is much older than other Japanese electronics majors like Hitachi, Panasonic and Sony. But the usual way of thinking at Japanese conglomerates toward foreign shareholders—we’ve been running the show for centuries and don’t care about your opinions—isn’t going to cut it anymore.

Overseas investors bailed out Toshiba in 2017 by participating in a $5.4 billion share offering after accounting scandals and concerns about its nuclear power business threatened the Japanese company’s survival. But now, Mr. Kurumatani doesn’t want to listen to those investors or others seeking reform.

Toshiba’s pursuit of growth in operating income rather than prudent value creation has been painful for shareholders, with the company making serial acquisitions that rarely worked out. There is a risk that Mr. Kurumatani hasn’t learned from the past. So far, he appears concerned about making the company bigger rather than return on investment, which requires serious capital discipline.

Toshiba doesn’t have a good track record of successfully integrating acquisitions, and investors are right to ask why this time could be any different. Major acquisitions and investments have led to write-downs, indicating Toshiba may have wandered into businesses where it didn’t belong.

That has translated to an abysmal stock performance. The shares have fallen 47% in the last decade while the benchmark Nikkei 225 has nearly tripled.

The massive conglomerate, which employs 130,000 people, narrowly avoided a delisting from the Tokyo Stock Exchange three years ago after multibillion-dollar losses at its Westinghouse nuclear unit pushed liabilities beyond its level of assets. It was forced to sell its prized semiconductor business and take an infusion of cash from a large contingent of activist shareholders. The writedowns and accounting scandals triggered a management shakeup and the appointment of Mr. Kurumatani, the first outsider named CEO in over half a century.

Although Japan has made a concerted effort in recent years to bring corporate governance up to a higher standard, Mr. Kurumatani has been shifting strategy with the wind. In December, activist fund Farallon Capital, which owns a 5.37% stake, asked the conglomerate to convene an extraordinary general meeting of shareholders to seek approval before the company can make significant changes to the Toshiba Next Plan. Farallon said it was deeply concerned that Toshiba suddenly announced a growth strategy that was materially different from the plan already in place.

Amazingly, shareholders explicitly requested the ability to have a say on capital allocation policy at the 2020 annual meeting. That provision exists at many other Japanese companies but had been absent at Toshiba until last year. But just a few months later, Mr. Kurumatani essentially went rogue by announcing his big M&A plans.

Such a flagrant disregard for shareholders could cause trust in Mr. Kurumatani to erode. Any nods to the will of shareholders appear to be transactional moves designed to temporarily mollify them rather than earnest corporate policy changes.

But shareholders are unlikely to give up. Last year, Singapore-based activist fund Effissimo Capital Management, Toshiba’s largest shareholder with a 10% stake, narrowly failed to install three directors on the Japanese company’s board. This year, things could easily swing the other direction.

Then there are Mr. Kurumatani’s political connections – which he has possibly used to interfere with shareholder votes. The Financial Times reported that, ahead of Toshiba’s July 2020 AGM, the former head of Japan’s Government Pension Investment Fund held private discussions with Harvard Management Co., which subsequently abstained from voting.

Equally alarming are signs of potential meddling in vote counts themselves. Another large Toshiba shareholder, 3D, discovered that the votes on about 5 million of its shares hadn’t been counted by Sumitomo Mitsui Trust, the shareholder services firm that administered the voting for Toshiba. At the same time, Toshiba engaged Goldman Sachs to defend it against activists – a likely costly engagement that will burn precious resources.

Neither Toshiba nor Farallon responded to emailed requests for comment from CorpGov while Effissimo didn’t answer multiple phone calls to its Singapore office.

Shareholder Return Since Mr. Kurumatani Become CEO in April 2018 – Bloomberg

Mr. Kurumatani struggles with a dicey 58% approval rate among shareholders. That’s partly due to questionable actions in 2020 such as Toshiba’s buyout of chip-equipment maker NuFlare Technology along with accounting irregularities at its Toshiba IT-Service unit.

Toshiba returned to the top section of the Tokyo Stock Exchange on Jan. 29, after more than three years in its second tier. The inclusion will require passive funds to buy an estimated 58 million shares, or 13% of outstanding stock. This could have been a moment to rejoice for activist shareholders. But instead, Mr. Kurumatani has many shareholders worried about big M&A.

Toshiba should focus on growing organically, shedding money-losing assets and finding a sturdier financial footing. That would be of more value to shareholders in the long term.

Toshiba’s share price indicates investors have little faith in current management’s ability to do the right thing. Toshiba trades at a multiple of 13.6 times forward earnings, according to Sentieo, an AI-enabled research platform. That’s among the lowest valuations in the company’s peer group, with Nidec Corp trading at 54 times, Tokyo Electron LTD at 24 times, and Sony at 23 times.

But even a P/E multiple is an overly flattering way to benchmark Toshiba. The company is sitting on net operating losses worth at least a couple billion dollars. That suggests the market values the core business considerably less than its $16 billion market capitalization.

Mr. Kurumatani’s tenure as CEO was supposed to restore confidence after years of mismanagement and scandals. Instead, he has generated little value for shareholders, with the stock going sideways until a very recent pop – likely due to the company restoring its status on the Tokyo Stock Exchange’s first section rather than any prudent decisions by Mr. Kurumatani.

As an outsider, Mr. Kurumatani has a genuine opportunity to effect positive change at Toshiba – perhaps even to guide the company back to its former glory. But if he cannot find a way to get along with shareholders, there may be some painful days ahead.

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