Economy

Elon Musk Takes on a Goliath

App Store under fire.Credit…Samuel Corum/Agence France-Presse — Getty Images

Elon Musk wages war on Apple

Elon Musk has been unafraid of picking fights, whether with prominent politicians, political whistle-blowers or his own employees. But in taking on Apple on Monday, the Twitter owner was trying to start a brawl that could have ramifications stretching from Silicon Valley to Washington.

Mr. Musk complained that Apple had paused most of its advertising on Twitter, continuing his berating of companies that have done so. But it’s his allegation that Apple “threatened to withhold Twitter from its App Store but won’t tell us why” that could prove more important.

Apple is a major source of ad dollars for Twitter. It was the biggest advertiser on the platform in the year’s first quarter, spending $48 million, according to The Washington Post.

Mr. Musk’s App Store allegation resurrects a potent charge against Apple: that it has used access to millions of iPhone and iPad devices as a cudgel to extract more money from app makers. A key part of Mr. Musk’s plans for Twitter is collecting more revenue from subscriptions — but under Apple’s policies, up to 30 percent of those sales from iPhone users would go to Apple itself. (“Did you know Apple puts a secret 30% tax on everything you buy through their App Store?” Mr. Musk tweeted.)

But Mr. Musk has also pitched his complaint in bombastically broader terms, calling it “a battle for the future of civilization.” (Twitter’s former head of public safety, Yoel Roth, wrote in a recent Times guest essay that Apple’s and Google’s app stores do prohibit certain kinds of content, and that failure to adhere to those rules — including by allowing certain kinds of material on the Twitter app — “would be catastrophic” to Twitter’s business.)

So far, Apple hasn’t commented on Musk’s allegations.

Apple is already being investigated for its App Store policies, including by the Justice Department. Meanwhile, Spotify sued Apple for rejecting its audiobooks app three times, accusing it of anticompetitive behavior. And Epic Games is still locked in a legal fight with Apple over forced use of the company’s in-app payment system. (Epic’s C.E.O., Tim Sweeney, backed Musk’s fight on Tuesday, tweeting, “Apple is a menace to freedom worldwide.”)

Republicans — including Representative Ken Buck of Colorado and Senator Mike Lee of Utah, the ranking members of the House and Senate antitrust subcommittees — also seized upon Musk’s comments as proof that Apple and Google should open up their app stores.

HERE’S WHAT’S HAPPENING

Congress plans to intervene in the rail labor dispute. House Speaker Nancy Pelosi said lawmakers would vote on a bill to impose a White House-brokered compromise that could avert a crippling transport strike ahead of the holidays. It’s not clear that legislation could pass the evenly divided Senate, and many unionized workers are unhappy with the deal.

Leon Black is accused of raping a woman at Jeffrey Epstein’s home in 2002. Cheri Pierson sued Black, the former Apollo Global Management C.E.O., becoming the second woman to publicly accuse him of sexual assault. A lawyer for Mr. Black denied Pierson’s claims and called them an extortion attempt.

Bob Iger commits to reining in expenses at Disney. At his first companywide meeting on Monday, the recently rehired Disney C.E.O. said that he would keep a hiring freeze in place and that Disney+ would focus on turning a profit over adding subscribers. Mr. Iger also said Disney was committed to inclusive storytelling, seemingly defying conservative critics.

Major banks are working on a Zelle fraud compensation plan. The seven owners of the Zelle quick-payment service, including Bank of America and JPMorgan Chase, are discussing a policy that would reimburse customers for some kinds of scams, The Times reports. Lawmakers and regulators have pressed the banks to do more to help victims of Zelle-based fraud.

Inside the last days of FTX

The fallout from FTX’s collapse is still being felt. On Monday, BlockFi, a crypto lender that targeted individual investors, offering them loans and high-interest savings accounts backed by Bitcoin and other cryptocurrencies, filed for bankruptcy. In June, FTX extended a $400 million lifeline to BlockFi, which had been struggling for months. At the time, BlockFi had other bidders offering to help. But in the wake of FTX’s demise, few are willing or able to offer a rescue to failing crypto firms.

FTX’s founder, Sam Bankman-Fried, appears to have thought that a savior, or solution, would emerge as his own firm flailed. That was the case even in the exchange’s final hours. The result was a chaotic last few days for FTX, which pitted S.B.F., as he’s known, against his former top aides for control of the firm, according to new documents detailed in a report this morning by The Times’s David Yaffe-Bellany. Documents, internal texts and emails sent in the days before FTX’s Nov. 11 bankruptcy filing show S.B.F. as increasingly deluded and desperate; top lawyers and staffs at the firm struggled to convince S.B.F. that bankruptcy was the only option.

  • In a Nov. 10 email to staff, S.B.F. said he was close to securing new financing from the crypto entrepreneur Justin Sun. It never materialized.

  • Senior FTX employees reached out to S.B.F.’s father, the Stanford Law School professor Joe Bankman, in an effort to get his son to give up control of the company.

  • S.B.F. delayed the hiring of John Jay Ray III, the restructuring expert who has since taken over the company, thinking he still had time to raise new funds.

  • Early on Nov. 11, S.B.F. refused to sign off on FTX’s bankruptcy filing.

“The founding team is not in a cooperative posture,” Ryne Miller, a top FTX lawyer based in the U.S., wrote in an email to S.B.F. and other staffers. “Please can you sign the document,” Miller wrote S.B.F. at 2:29 a.m. on Nov. 11.

More on Elon Musk’s Twitter Takeover

  • An Established Pattern: Firing people. Talking of bankruptcy. Telling workers to be “hard core.” Twitter isn’t the first company that witnessed Elon Musk use those tactics.
  • Targeting Critics: After laying off nearly half the company, Mr. Musk has continued cutting Twitter’s work force by firing employees who had criticized him.
  • On the Edge: Mr. Musk gave the employees still with the company a deadline to decide whether to stay or leave. Hundreds resigned, leading users to question whether the site would survive.
  • Unpaid Bills: Mr. Musk and his advisers have scrutinized all types of costs at Twitter, instructing staff to review, renegotiate and in some cases not pay outside vendors at all.

S.B.F. continues to believe he could have saved the firm. Even after FTX filed for bankruptcy, and having resigned as C.E.O., he continued contacting potential investors about providing new funding. In a brief interview this weekend, S.B.F. told The Times that he had lined up “numerous parties” willing to invest in FTX, even after its collapse, though he declined to name them.

Here’s what else is happening in crypto this morning.

  • Digital asset prices are bouncing back, with Bitcoin up 1.7 percent to trade near $16,500.

  • A venture firm tied to Peter Thiel, the tech billionaire and a major Bitcoin booster, held a 19 percent stake in the now-bankrupt BlockFi.

  • BlockFi is suing S.B.F.’s investment vehicle to seize the shares it owns in Robinhood, the trading app operator. According to BlockFi, the FTX founder had pledged the stock as collateral, but never paid up.

  • The crypto exchange Kraken agreed to pay $360,000 to settle a dispute with the Treasury Department over whether it violated sanctions policy by allowing users in Iran to trade crypto.


“​​The classic school of thinking that businesses should only make money is very much alive. But many of my classmates look at the world we have today and say, ‘Yeah, there’s clearly some things about this system we need to fix.’”

Chinedum Egbosimba, a 27-year-old Harvard Business School student, on how a new generation of students is increasingly challenging traditional ideas about business and capitalism.


Why China’s zero-Covid policy matters to the world

China is once again moving global markets on Tuesday — this time, higher.

Investors appear to be betting Beijing will ease its zero-Covid policy, even as authorities reasserted their commitment to the approach.Rare public protests against President Xi Jinping’s highly restrictive policy have been largely quashed, but the damage to the economy is putting pressure on the government to reopen parts of the country that are under full or partial lockdown.

The evidence of any easing is thin. China announced it would renew its vaccination push for older people, but otherwise has only slightly tweaked its anti-Covid policy. In Shanghai, the country’s financial center, authorities closed some businesses and reintroduced quarantine for close contacts. Nevertheless, stocks in Hong Kong and Shanghai rebounded sharply on Tuesday, and that risk-friendly mood has swept into Europe and U.S. stock futures. Here’s how China’s approach to the virus almost three years after the start of the pandemic is still preoccupying global investors:

  • China’s growth is slowing. Nomura last week cut its China G.D.P. forecast for this year (+2.8 percent) and next (+4 percent), predicting a rocky road ahead. “Markets might be tumultuous this week. Reopening will be slow, painful and bumpy,” Ting Lu, the bank’s chief China economist, warned investors on Monday. If that slowdown further hits China’s massive manufacturing sector, there would be consequences for the global supply chain — Apple already expects a production shortfall of 6 million iPhones because of disruptions at a Zhengzhou factory — and stocks. Apple fell 2.6 percent on Monday, underperforming the S&P 500.

  • Commodity prices are highly dependent on China. The country “consumes 40 to 70 percent of global commodity supply,” Tom Price, head of commodities strategy at Liberum, an investment bank, told DealBook. Uncertainty over whether Chinese factories and industrial plants would be shut because of infection has added volatility to the pricing of everything from crude oil to iron and gold in recent weeks, Price noted.

  • A possible silver lining: the impact on emissions. China is the world’s biggest greenhouse-gas emitter. One effect of zero-Covid crackdowns in cities across the country: the Chinese have been driving less frequently. According to Rystad Energy, “Chinese road traffic remains well below comparable 2020 and 2021 levels as persistent lockdowns and China’s growth slowdown weigh on road traffic.” If that were to persist, it could limit oil prices in the short term — something to watch as OPEC+ nations meet next week to determine production policy.

THE SPEED READ

Deals

  • Microsoft reportedly plans to offer concessions to E.U. regulators to win approval of its $69 billion takeover of Activision Blizzard, including a licensing deal with Sony. (Reuters)

  • The data-crunching firm Palantir apparently missed the warning signs of investing in start-ups after they went public by SPAC. (Bloomberg Opinion)

  • The London Metal Exchange defended canceling billions of dollars worth of nickel trades in March, saying a wave of margin calls would have led to widespread chaos. (FT)

Policy

  • Irish regulators fined Meta $275 million for a data leak, bringing E.U. fines against Facebook’s parent company to over $900 million. (NYT)

  • The C.E.O.s of the supermarket chains Kroger and Albertsons will testify in the Senate over Kroger’s plan to buy its smaller rival for $24.6 billion. (Reuters)

  • Live Nation and Ticketmaster are unlikely to be broken up, despite calls to do so after Ticketmaster’s problem-ridden effort to sell tickets to Taylor Swift’s upcoming tour. (Seeking Alpha)

Best of the rest

  • Barclays’ C.E.O., C.S. Venkatakrishnan, disclosed that he had been diagnosed with non-Hodgkin lymphoma and will undergo treatment over the next few months. (FT)

  • Tech companies are rushing to hire Twitter’s recently laid-off misinformation experts. (NYT)

  • Elon Musk’s Boring Company repeatedly promised cities its tunnels would transform their traffic problems — then failed to follow through. (WSJ)

  • These Gen Z workers are romanticizing their return to office life, one viral TikTok video at a time. (NYT)

  • “Where Does All the Cardboard Come From? I Had to Know.” (NYT Magazine)

Thanks for reading! We’ll see you tomorrow.

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