Crackdown
President Trump made clear for months that he would take aim at diversity, equity and inclusion initiatives when he took office. But the ferocity with which he has done so — both within the federal government and, soon, in the corporate sector — has set off alarm bells in boardrooms.
“We have heard from many, many clients,” James A. Paretti Jr., a shareholder at the law firm Littler Mendelson who specializes in workplace issues, told DealBook’s Sarah Kessler about the reaction to the executive order.
The latest in Trump’s attacks on D.E.I.: Federal workers face “adverse consequences” if they don’t report colleagues who defy orders to purge their agencies of such efforts, The Times reports. (One employee said it felt like being recruited to the Gestapo.)
Trump also revoked an executive order that prevented private government contractors from using discriminatory hiring and employment practices, and he instructed the agency overseeing them to stop “allowing or encouraging” efforts “to engage in work force balancing based on race, color, sex, sexual preference, religion or national origin.”
Companies are worried. Trump’s executive order instructs government agencies to look at private-sector D.E.I. efforts and identify “up to nine” potential civil compliance investigations of corporations, nonprofits and more.
Among the most legally vulnerable programs, civil rights lawyers say, are those that give out employment benefits like jobs or promotions to specific groups on the basis of their race.
Some companies are standing firm on D.E.I. anyway. Shareholders in Costco on Thursday will vote on an investor proposal from a conservative think tank that asked management to outline the business risks of diversity programs. The retail giant’s board has written a full-throated defense of D.E.I. (Corporate America is closely watching the vote.)
Others are opposing similar shareholder proposals. When asked by Andrew about a potential challenge to JPMorgan Chase’s D.E.I. initiatives, the bank’s C.E.O., Jamie Dimon, said on Wednesday, “Bring them on.” Dimon added, “We’re very proud of what we’ve done” in reaching out to various communities, though he noted that he would listen to arguments about what JPMorgan might be doing wrong.
Can D.E.I. survive? The conservative activist Robby Starbuck wrote on social media on Wednesday that D.E.I. was “cornered and in a position to die” but was not dead yet.
Paretti told DealBook he did not think that all types of diversity efforts were at risk. But, he added: “Do I think there is going to be change? Do I think the focus may change? Absolutely.”
HERE’S WHAT’S HAPPENING
Tens of thousands evacuate a wildfire north of Los Angeles. The Hughes fire has consumed about 10,000 acres, forcing homeowners to flee and businesses to close, and temporarily shutting down Interstate 5. The good news: There’s a chance of rain in the area on Friday, a welcome reprieve for the fire-decimated region.
Robert F. Kennedy Jr. plans to keep his stakes in legal fights against Merck. Ethics disclosures revealed that Kennedy would continue to collect fees for referring clients to a law firm suing the drug maker over Gardasil, its HPV vaccine. (He has earned more than $2.5 million from that over the past two years.) The arrangement raises concerns that he would face serious conflicts of interest were he to be confirmed as Trump’s health secretary.
Prince Harry gets an apology from Rupert Murdoch’s News Group Newspapers. The Duke of Sussex, who sued Murdoch’s British tabloids over a phone hacking scandal, won an admission of “unlawful conduct” from the media giant, along with a multimillion dollar payout. The settlement is a partial victory for the prince and spares the Murdoch company from facing a public trial.
Trumping Davos
President Trump has had such an effect on this year’s World Economic Forum in Davos, Switzerland, that one attendee asked last night why the event hadn’t been delayed to avoid clashing with the inauguration and the first days of the new U.S. administration.
Trump is expected to dominate the discussions of business and civic leaders here more overtly when he speaks via videoconference later on Thursday. But he has already shifted the focus of the event: One executive described the vibe to DealBook’s Lauren Hirsch as “atavistic” — an “exhilerating return” to the “before times” when C.E.O.s could just focus on business.
Talk about “saving the world” is out; talk about U.S. growth and deals is in. One executive joked that he was here for “D.E.I.” — “deregulation, energy and investment.” Bankers, who often complain that uncertainty is bad for business, are now willing to try all sorts of deals to see what will work.
Some banking leaders are weighing more involvement in crypto as that industry appears to carry Trump’s backing. “If the rules come in and make it a real thing that you can actually do business with, you’ll find that the banking system will come in hard on the transactional side of it,” Brian Moynihan of Bank of America told Andrew on CNBC.
Others are showing acceptance of tariffs, long an object of concern. “If it’s a little inflationary, but it’s good for national security, so be it,” Jamie Dimon of JPMorgan Chase, told Andrew. “I mean, get over it.”
The big question is how long the good times will roll. “I think with this political administration, we’re all going to need to regain our beginner’s mind and see how things are going to play out,” Marc Benioff of Salesforce told Andrew.
There are plenty of obvious worries, including the potential impact of mass deportations, an economic policy ripe with contradictions and, yes, the consequences of tariffs. And, privately, executives have acknowledged other problems:
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Some crypto executives have been unhappy with the memecoins the Trump family unveiled ahead of the inauguration.
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Other leaders wondered whether executives close to Trump would use that access to help build up their industries — or just to pad their own interests. Some with ties to Trump could think systematically about how to create long-term change, one major investor told DealBook. But that’s not necessarily why they’re where they are, the investor added.
Musk stews over Stargate
As one of President Trump’s closest allies, Elon Musk was expected to reap a huge advantage over his rivals. But the tech mogul has already found himself on the outs of the biggest business deal yet of Trump’s nascent term: Stargate, the enormous A.I. infrastructure project that has investors agog and is fast becoming the envy of the tech world.
Musk has taken presidential snubs badly before. But this one — involving Sam Altman of OpenAI, with whom he has been clashing in court — raises questions about how much influence the Tesla leader has with the highly transactional president.
A recap: On Tuesday, Trump announced the venture, which was organized by OpenAI; Oracle; SoftBank; and MGX, an Emirati investor, that would give U.S. tech companies vast new stores of computing firepower for A.I.
Musk immediately cast doubts about the venture, saying the companies did not have the money promised.
“Wrong, as you surely know,” Altman fired back.
Stargate’s founding partners do have lots of financial firepower. In the fall alone, OpenAI raised $6.6 billion at an astounding $157 billion valuation from deep-pocketed backers including Thrive Capital and Microsoft. SoftBank has pledged to pour $100 billion into U.S. tech and A.I. infrastructure.
The Information reports that OpenAI and SoftBank will each invest $19 billion in Stargate, for what was is said by the website to be an 80 percent stake in the venture. About $7 billion is expected to come from Oracle and MGX, the publication adds, with the remainder coming from other investors and debt financing.
Why all this matters: Shares in SoftBank and Oracle rose on Wednesday, as did those in Microsoft and the A.I. chip giant Nvidia, which investors expect to benefit from the venture. Shares in Tesla, however, fell.
Stargate could provide huge amounts of valuable computing power — especially to OpenAI, which Altman told colleagues would have operational control, according to The Information. And it has the imprimatur of Trump.
That’s a huge blow to Musk, whose own companies are also on the hunt for A.I. capacity and appear to have been blindsided by the announcement. Does it mean that there are limits to the benefits of being “first buddy”?
The Trump torrent of activity continues
In his inauguration speech, President Trump vowed to put America first “every single day,” a promise that has already had global repercussions.
On Day 3 of his presidency, Trump took aim at Russia and, closer to home, at cities and states that don’t play ball with his planned immigration crackdown. He also suggested that he would consider funneling federal money away from FEMA to state officials as he blamed the agency for not doing their job in handling national disasters.
Here’s the latest:
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Trump threatened tariffs and sanctions on Russia if President Vladimir Putin didn’t end the war in Ukraine soon.
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The American president also played down TikTok’s risks to national security, a key argument that led to the law requiring its ban (which he is seeking to circumvent). In the first Oval Office interview of his new term, Trump told Fox News’s Sean Hannity, “Is it that important for China to be spying on young people? On young kids watching crazy videos?”
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Trump picked Andrew Puzder, a former fast-food C.E.O. whom he had nominated to labor secretary in his first term, as ambassador to the European Union, and Brent Bozell, a longtime conservative activist, as head of the U.S. Agency for Global Media.
Overseas markets are rallying this morning, while the dollar is down. That’s largely because Trump still hasn’t officially done anything on tariffs. The S&P 500, which is lower in premarket, remains a whisker away from a record. But Jamie Dimon of JPMorgan Chase cast doubt on market valuations: “Asset prices are kind of inflated, by any measure,” he told Andrew.
A major Wall Street banker weighs going to Washington. Michael Grimes, a Morgan Stanley tech rainmaker who advised Elon Musk on his takeover of Twitter, is in discussion to join the administration temporarily, according to The Wall Street Journal. A likely landing place may be at Musk’s government cost-cutting unit.
THE SPEED READ
Deals
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“Why Oracle and Salesforce Should Merge” (The Information)
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Neko Health, a body-scanning start-up co-founded by Daniel Ek of Spotify, has raised $260 million in a round led by Lightspeed Venture Partners and is seeking to enter the U.S. market. (FT)
Politics and policy
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House Republicans are negotiating to raise the cap on state and local tax deductions after receiving President Trump’s blessing. (Bloomberg)
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One of the targets of Elon Musk’s government cost-cutting: the penny. (Business Insider)
Best of the rest
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In job news: Amazon will lay off 1,700 workers in Quebec and close its warehouses there; and CNN is reportedly set to cut hundreds of positions. (NYT, CNBC)
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“Investors lose their appetite for the obesity trade” (FT)
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