ITK Daily | June 7

Always Be Communicating.

Happy Wednesday.

Here’s today’s ITK Daily.

To be ITK, know this:?

Key Ukrainian dam blown up, Kyiv blames Russia: Politico reports those living near the Nova Kakhovka hydroelectric plant — approximately 16,000 people — have been urged to leave their homes.

BBC: Ukraine dam: Thousands flee floods after dam collapse near Nova Kakhovka

Politico: Sunak blasts Russia’s ‘new low’ as MI6 investigates Ukraine dam explosion

NYT: Blinken to talk to Saudis about normalizing ties with Israel

WSJ: As Blinken visits Saudi Arabia, human rights are back in focus

Bloomberg: US Secretary of State Blinken set to travel to Beijing for talks in coming weeks

Macron to visit Germany in July amid ongoing tensions with Scholz: Politico reports the EU’s two leading economies will try to repair relations after clashing over China, nuclear energy and finance.

The Times: Pedro Sánchez ‘eyes top Nato job’ in case he loses Spanish election

UK General Election: The latest polling by Redfield and Wilton Strategies has Labour up 1 percent on 44 percent, a lead of 14 percent over the Tories, who are up 2 percent on 30 percent.

The Starmer project: Labour’s surprisingly bold economic agenda: For all its orthodox rhetoric, the party’s plans for an interventionist industrial policy would represent a striking shift.?FT

+ It was not by chance that Rachel Reeves, who hopes to become Britain’s first female chancellor, chose to launch Labour’s new economic plan last month while she was in Washington DC.

+ The shadow chancellor’s visit to Washington was a signal that a prospective Labour government wants to introduce a significantly more interventionist industrial policy and has a bolder plan for the economy than many had anticipated.

Rishi Sunak wants to lead the world on AI. The world ain’t listening: The British prime minister wants to make AI governance a key focus of his meeting with US President Joe Biden this week.?Politico

Rishi Sunak seeks to burnish UK’s global credentials on Washington trip: UK leader will hope to show Britain remains a key player in global security and forging AI regulatory framework.?FT

Giorgia Meloni seeks to cement power by remaking corporate Italy: The right-wing leader must decide whether to opt out of China deal as she looks to drive change in the economy through state-owned companies.?Bloomberg

+ On her first day in office Italy's Prime Minister Giorgia Meloni renamed the country’s economic development department as the “Industry and Made in Italy Ministry”

+ TMeloni government has already intervened in Italy Inc. The aim: to influence and reshape the country’s long term industrial strategy and institutions.

+ While Meloni is not the first Italian premier to intervene in state-owned companies — the outsider who came to power as leader of a small far-right party — is determined to secure control over strategic infrastructure.

+ Top of her “Italy First” agenda is the creation of national champions in areas from energy to fashion and luxury and the launch of a sovereign wealth fund to finance them.

+ “Meloni is ultimately a national conservative and her politics involve pragmatic responses to external challenges,” said Giovanni Orsina, director of the School of Government at Rome’s Luiss University. “She has a good chance of staying the whole five-year term. And has the luck to be able to place her people in the corporate world. It is only natural that she should take advantage of it.”?

+ The government must decide by the end of the year whether to renew its involvement in the Belt and Road Initiative, China’s investment pact designed to deepen economic ties with allies across the world.?

+ Italy is the only G-7 member country in the program and its 46-year-old leader — described by close supporters as assertive, self-aware and strategic — is under pressure to pick sides in the increasingly fraught rivalry between China and a US suspicious of Beijing’s ambitions.?

+ Chinese investors — ranging from Pirelli to Inter Milan football club — there is a fear of a backlash from Beijing if there is any abrupt move.?

+ “We need to cut the agreement in a silent way, not to blow it in China’s face,” the official added. “It is impossible to think that we can avoid doing business with China.”?

+ The government gambled that membership of the BRI would turn Italy into a gateway for Chinese investment into Europe. Yet, according to data compiled by Rhodium Group, Italy has not enjoyed as great an uptick in investment as it might have expected.

+ Between 2000 and 2022, China invested about €16 billion in Italy, compared to €17 billion in France and €32 billion in Germany. Bank of Italy data show that China's direct investment stock into the country did not change significantly after 2019, hovering just under €5 billion annually until 2022.

+ About 2,000 Italian companies are active in China, according to the Italy-China Foundation, employing about 157,000 people and business worth €17 billion.

+ At Singapore's Raffles Hotel in May several Italian executives met informally to discuss the impact of their government quitting the BRI. All asked to remain anonymous for fear of retaliation from Beijing, but said they are lobbying the Meloni government to delay the decision.?

+ Government advisers in Rome are investigating concessions to Beijing — from an easing of some import and export tariffs to trade deals and investments linked to specific sectors — to reduce the damage of any withdrawal.?

+ “How Meloni will solve her dilemma on Italy’s role in the Belt and Road will be a watershed moment for her government,” said Nathalie Tocci, director of the Istituto Affari Internazionali think-tank, and former board member of Eni SpA. “She used an unwavering support for Ukraine and to the US as a way to gain the trust of international partners.

Reuters: Iran presents its first hypersonic ballistic missile, state media reports

How America is reshaping the global economy: The Biden administration thinks it is winning the argument for a new Washington consensus. Some allies remain wary.?Gideon Rachman

+ An unheralded revolution has taken place in America’s approach to international economics. As the new thinking emerges, it is reshaping the global economy and the western alliance.

+ The approach was set out most clearly in a speech by Jake Sullivan on April 27. The fact that Sullivan is President Joe Biden’s national security adviser is a clue. Strategic rivalry with China is central to the new thinking.

+ Sullivan’s speech ranged well beyond geopolitics. It was a highly ambitious effort to pull together the domestic and international goals of the Biden administration — and turn them into a coherent whole.

+ The US intends to use a new strategic industrial policy to simultaneously revitalise the American middle-class and US democracy, while combating climate change and establishing a lasting technological lead over China.

+ Sullivan is also at pains to emphasise that “de-risking” does not mean cutting China out of global supply chains. Speaking to me last week, he said: “We’re trying to build a world in which there is more than one source for critical products . . . We’re not saying that China should not build iPhones or produce solar panels, but that other countries should too.”

+ Hovering over all these economic discussions is a cloud of geopolitical fear. Russia is waging war on the borders of the EU. The Japanese fear China. All sides look to Uncle Sam for military protection. America’s allies still have their reservations about the Sullivan doctrine. But this is no time to get into an argument with the US.

Chris Christie’s 2024 mission: Is it knocking out Donald Trump? Or does he think he can win??WSJ - Editorial

+ "Most of the GOP’s other 2024 contenders, by contrast, continue to treat Mr. Trump as if they’re handling unexploded ordnance."

+ “I’m not a paid assassin,” he recently insisted. “When you’re waking up for your 45th morning at the Hilton Garden Inn in Manchester, you better think you can win.” But if Mr. Christie isn’t a guided missile aimed at Mr. Trump, is he an unguided one, liable to blow up, say, Florida Gov. Ron DeSantis?

Chris Christie is not in it to win it. His task is more important.?Jennifer Rubin

+ Christie’s highest value to the party — and to the country — not unlike the contribution of former congresswoman Liz Cheney (R-Wyo.), is to mount an effective takedown of Trump in the Republican presidential primary that either brings the GOP to its senses or hobbles him going into the general election.?

Chris Sununu’s bad and good advice for Republicans: The New Hampshire Governor won’t run for the GOP nomination.?WSJ - Editorial

+ "Republican candidates who don’t show momentum by November ought to bow out, so Mr. Trump gets a serious primary challenge."

Fox + Trump: Trump is slated to sit for an extensive interview with Fox News’ Bret Baier later this month.

Companies that embraced social issues have second thoughts: Executives rethink if and when to weigh in on potentially divisive issues, fearing backlash from all sides, and develop crisis plans in case things go wrong.?WSJ

+ “We run a business. We don’t run a political organization. We don’t run a religious organization, and we don’t run a social organization. However, [we] recognize that we operate in a society. We hire employees with opinions and views. We work with customers that have opinions and views. So we have to take all that into account.”?

Quebec the new epicenter of Canada's raging wildfires: AFP reports Canada's Quebec province, not used to the huge number, scale, and strength of wildfires ravaging the rest of the country, has become the latest hotspot with about 160 fires burning on Tuesday, most of those out of control.

Bloomberg: Wildfires force miners to halt operations in Eastern Canada

+ About 150 fires are raging in Quebec; most are out of control.

+ Smoke drifts south and hangs over New York and Canadian cities.

Air-quality levels worsen in US due to Canadian wildfires: WSJ reports millions of Americans in the Midwest and the Northeast are under air-quality alerts as smoke moves south from more than 400 active Canadian wildfires.

The world is finally spending more on solar than oil production: The International Energy Agency just released its annual investment report. Here’s where the money is going.?Casey Crownhart

+ The world saw about $2.8 trillion of investments in energy in 2022, with about $1.7 trillion of that going into clean energy.?

+ In 2022, for every dollar spent on fossil fuels, $1.70 went to clean energy. Just five years ago, it was dead even.

In a geologic triumph, scientists drill a window into Earth’s mantle: The record-breaking achievement offers unprecedented clues to what’s happening deep inside the planet.?WP

+ The record-breaking achievement has electrified geoscientists, who for decades have dreamed of punching through miles of Earth’s crust to sample the mysterious realm that makes up most of the planet. The heat-driven churn of the mantle is what fuels plate tectonics in the crust, giving rise to mountains, volcanoes and earthquakes.

+ The new expedition, by an ocean drilling vessel called the JOIDES Resolution, did not technically drill into the mantle, and the hole isn’t the deepest ever drilled beneath the ocean floor.

+ Instead, researchers cruised to a special “tectonic window” in the North Atlantic where drills don’t have to tunnel as far to strike pay dirt. Here, the rocks of the mantle have been pushed close to the surface as the ocean floor slowly pulls apart at the nearby Mid-Atlantic Ridge.

+ “Think of the crust in the way that you have a beautifully iced cake, but what you want is the cake, not the icing,” said Jessica Warren, a professor of Earth sciences at the University of Delaware who has also been monitoring the project’s progress remotely. “If we want to understand the Earth as a whole, there’s a huge, huge amount of rock below that.”

+ What scientists have long craved was a drilled sample of mantle rock.

Five globally successful Chinese companies you’ve never heard of: TikTok and Shein are household names, but ShareIt and Yalla aren't far behind.?ROW

Sequoia to separate its China business: The venture-capital firm told its investors it would split into three independent partnerships that would be distinct firms with separate brands.?WSJ

+ Sequoia Capital, one of the most powerful names in technology investing, said it would separate its China and US businesses, a move that underscores the growing tussle between Beijing and Washington over who controls the next generation of cutting edge innovations.

+ “It has become increasingly complex to run a decentralized global investment business,” said Sequoia’s investor note, signed by the leaders of its practices in the US, China and India.

+ The note cited several business reasons for the split and didn’t directly address geopolitical concerns. The firm has “seen growing market confusion due to the shared Sequoia brand as well as portfolio conflicts across entities.” The firm has hence decided to embrace what it called a “local-first approach.”

+ While geopolitical issues were a major driver in getting the talks started, by the end, the decision to split was also about business concerns, people familiar with the matter said. As the China and India funds have grown, for example, they have sought to invest in companies in which the US fund is already invested in a major competitor, the people said.

+ The planned moves will see its US and Europe venture-capital business continuing to be known as Sequoia Capital. Sequoia China will change its English name to HongShan, which is what it is currently called in Mandarin. In India and Southeast Asia, the firm will be known as Peak XV Partners.

+ Peak XV is a reference to the original British name for Mount Everest.?

US venture capital giant Sequoia to split off China business: Group plans to break up into three entities following Beijing’s campaign to rein in country’s largest tech companies.?FT

+ The Chinese arm will give up the Sequoia name and instead be called HongShan, a romanization of its Chinese name, which means redwood.

+ The VC group will also separate its Indian and south-east Asian business into a third entity, it said, adding that the changes would take place by March next year.

+ The geopolitical tensions and close association with the US have put Shen in a tough position domestically. In a speech and proposals to China’s top political consultative body last year, Shen said that Beijing had to prioritise developing robotics and green energy, which many interpreted as trying to align Sequoia China with Beijing’s priorities.

Jamie Dimon says US is pursuing the right strategy on China?Bloomberg

+ Jamie Dimon said the Biden administration is pursuing the right strategy on China by focusing on national security and working with allies and the business community.

+?He said Secretary of State Antony Blinken and others are focusing on vital interests such as national security, rare earths and semiconductors while at the same time trying to address unfair trade practices.?

Nikkei: Honda to roll out EV model in India within 3 years

Pilots fear artificial intelligence will replace them on the flight deck: Le Monde reports technologies such as Dragonfly, developed by Airbus, enable aircraft to fly autonomously. According to the manufacturer, it is not intended to replace pilots.

ChatGPT took their jobs. Now they walk dogs and fix air conditioners.?The technology used to automate dirty and repetitive jobs. Now, artificial intelligence chatbots are coming after high-paid ones.?WP

SEC sues Coinbase in latest move against crypto: WSJ reports the regulator said the US’ largest crypto platform violated rules that require it to register as an exchange. Shares fell 12% on the day.

The ultimate start-up office is for sale?Adriane Quinlan

+ Kickstarter’s former headquarters was one of the most enviable, if not the most enviable office in the amenity wars of Obama-era Brooklyn. And now, look how far we’ve come: The building is now on the market. The listing demotes the 29,000-square-foot space from its 2010s status as an example of where office design was heading to its contemporary state as a fossil of how we once worked, an industrial ruin much like the Eberhard Faber Pencil Factory that once occupied it.

+ As Kickstarter employees told The Verge, they were actually annoyed by some of the office innovations, which included “people dressed up as dinosaurs for a week to wander through the office making animal noises.”

The binge purge: TV’s streaming model is broken. It’s also not going away. For Hollywood, figuring that out will be a horror show.?Josef Adalian + Lane Brown

?+ “These companies took what was an extraordinarily successful economic model and they destroyed it in favor of a model that may or may not work — but almost certainly won’t work as well as the old model.”

?+ “Everything became big tech — the Amazon model of ‘We don’t actually have to make money; we just have to show shareholder growth.’ Everyone said, ‘Great. That seems like the thing to do.’ Which essentially was like, ‘Let’s all commit ritual suicide. Let’s take one of the truly successful money-printing inventions in the history of the modern world — which was the carriage system with cable television — and let’s just end it and reinvent ourselves as tech companies, where we pour billions down the drain in pursuit of a return that is completely speculative, still, this many years into it.’”

+ So who is getting rich off hits like The Night Agent? Not streaming services, no matter how many global viewing hours they accumulate. Many streamers have spent themselves into billions of dollars of debt building their content libraries, and subscription fees haven’t grown fast enough to close the gap.

+ "You can have a massive hit on your platform, but it’s not actually doing anything to increase your platform’s revenue. It’s absolutely conceivable that the streaming subscription model is the crypto of the entertainment business.”

+ Wall Street treated Netflix not like the next HBO but more like the next Tesla, ignoring the profit factor to focus on growth.

+ “The unspoken thing was that this will all be accretive to valuation: ‘I may not be running a profitable business, but boy, is it going to add stock value!’”

+?“The entire industry was spending money with no regard to making money”

+ "It’s absolutely conceivable that the streaming subscription model is the crypto of the entertainment business."

+ "...now everybody’s basically playing a baseball game where people can only hit singles. The ball over the fence is still only a single.”

+ “There is not a linear relationship between the amount of art you make in a given year and the amount of great art that will result.” -- Steven Soderbergh

+ It may not have helped that some streaming services thought their recommendation algorithms could replace old-fashioned marketing, which made it easy for even great shows to come and go without causing a ripple.

+ “Premium and streaming have been chasing more of a film attitude than a TV attitude, which is making shows more expensive but oftentimes not as good as they used to be. You’re seeing ideas that should’ve been movies being elongated into eight episodes, and they don’t have the narrative engines to sustain them for that long.”

+ “I mean, I’m sorry, but people seem to really like Two and a Half Men, and none of my writers want to write that. They all want to write Barry. And you know who watches Barry? Nobody.”

Your dog is a secret weapon in the fight against cancer: Every year, thousands of pets develop tumors very similar to those found in people. Find drugs that work for canines, and human treatments should follow.?Wired

+ Canine studies could change all this. Cancers that arise in pet dogs are molecularly and microscopically similar to cancers in people—in the case of osteosarcoma, the similarities are striking.?

Wine-tasting: It's junk science: Experiments have shown that people can't tell plonk from a grand cru. Now one US winemaker claims that even experts can't judge wine accurately. What's the science behind the taste??Guardian

+ For a drink made by fermenting fruit juice, wine is a remarkably sophisticated chemical cocktail.

+ Three of wine's most basic qualities – sweetness, sourness and bitterness – are picked up by the tongue's taste buds. A good wine has the perfect balance of sweet from the sugar in grapes, sourness from the acids, particularly tartaric and malic acid, and bitterness from alcohol and polyphenols, including tannins.

+ "People underestimate how clever the olfactory system is at detecting aromas and our brain is at interpreting them"

How Gabrielle became Coco Chanel: A new exhibition at the Victoria and Albert Museum in London charts the designer’s transformation from an impoverished girl to a woman whose style went on to define not just her own era, but ours too.?The Times

Francoise Gilot, the woman who dumped Picasso, dies aged 101: AFP reports France's Francoise Gilot, who died Tuesday aged 101, survived what she called the "hell" of being Spanish artist Pablo Picasso's mistress and muse to become a renowned artist in her own right.

CNBC: PGA Tour agrees to merge with Saudi-backed rival LIV Golf

+ The PGA Tour agreed to merge with rival LIV Golf, which is backed by the Saudi Arabia Public Investment Fund, an entity controlled by the Saudi crown prince.

+ The proposed merger comes after the PGA Tour and LIV Golf have been embroiled in lawsuits regarding antitrust claims.

+ The deal would end all pending litigation.

Bloomberg: Golf-crazy Saudi wealth manager orchestrated the shock PGA-LIV truce

+ LIV backer Rumayyan pushed for the warring sides to talk.

+ Meetings in London, Venice, and San Francisco helped lead to a deal.

The high-profile advisers behind LIV Golf and the PGA Tour's surprise merger?Bloomberg

+ PCP Capital Partners’ Amanda Staveley worked with PIF.

+ Allen & Co. will help PGA figure out the valuation of assets.

+ The PGA’s board also features dealmakers who were instrumental in brokering an introduction with LIV, the people said. PGA board members Jimmy Dunne, who’s vice chairman of investment bank Piper Sandler, and Edward Herlihy, a senior attorney at powerhouse M&A law firm Wachtell Lipton Rosen & Katz, were involved in helping bring both sides together, according to the people.?

Saudi Arabia to spend billions on shock merger of PGA Tour and LIV Golf: FT reports the deal resolves a bitter dispute between established series and the breakaway league that has divided men’s game.

PGA Tour, Saudi-backed LIV Golf agree to merge: WSJ reports the stunning merger weds the Saudi money and the PGA Tour name and connections after months of bruising litigation and sharply traded accusations.

LIV Golf: PGA Tour agrees to merge with Saudi-backed rebel tour: Breakaway tour LIV Golf merges with PGA Tour in a deal that will end pending litigation and resolve Ryder Cup row.?The Times

+ The Times understands Amanda Staveley, the Newcastle director, played a pivotal role in brokering the deal. Staveley was at the Masters at Augusta in April and is believed to have represented the PIF in negotiations through her company PCP Capital Partners.

The PGA Tour partners with its nemesis LIV. The money wins again.?An allegedly righteous battle for the future of golf ends in a staggering merger.?Jason Gay

+ Money wins. It’s a pithy line from magnate Logan Roy in the media opera “Succession,”

+ Shorter version: After shaming players for taking the money, the PGA Tour is… taking the money.?

+ In the coming days we will learn of more winners, losers and raw feelings. It’s an old lesson that gets repeated again and again in sports and business, but still deserves an occasional reminder. The money has won, because it almost always does.?

In the PGA Tour, LIV Golf battle the money won. Morality was always secondary?Brody Miller

+ “Have you ever had to apologize for being a member of the PGA Tour?”

+ Was it all fake? Or was it evidence that money can dissuade any principle?

+ The Public Investment Fund of Saudi Arabia bought the PGA Tour, pouring billions of dollars into it with the governor of the PIF, Yassir Al-Rumayyan, serving as chairman of the joint venture. Monahan will be CEO.

+ “It’s less about how people respond today,” Monahan said. “And it’s all about how people respond in 10 years. And when they see the impact that we’re having on this game together there’ll be a lot of smiles on people’s faces, and there’ll be a lot more people playing this game all over the world.”

Karim Benzema joins Al-Ittihad, becoming latest Saudi sports prize: NYT reports the acquisition of Benzema is part of a billion-dollar project to lure global stars to Saudi Arabia’s top league and expand the kingdom’s sports profile.

Apple TV+ announces Messi documentary: AFP reports that streaming platform Apple TV+ announced a four-part documentary series on Argentina's World Cup-winning captain Lionel Messi on Tuesday.

Le Monde: Djokovic into French Open semi-finals for 12th time

AFP: Alcaraz sets up Djokovic showdown in French Open semis

Enjoy the ride + plan accordingly.

-Marc?

Marc A. Ross | Chief Communications Strategist @ Caracal

Caracal produces ITK Daily.

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