The chocolate factory

Quote of the Day

You people in tech are crazy. I pay my employees handsomely in cash and I keep all of the equity for myself.”

Market Snapshot

• Europe’s central banks are swapping out dollar reserves with the yuan.
• The U.S. oil industry is on pace to break an output record of 10 million barrels per day.
• Bitcoin plunged below $10,500.
• The Dow briefly topped 26,000 before falling thanks to a dip in energy stocks.

BlackRock CEO Asks Companies to Do Good—And Make Money

Trending in 2018: greed is (not entirely) out and goodwill is (kinda) in. At least according to a letter from BlackRock CEO Larry Fink addressed to companies in the U.S. and Europe.

Head of arguably the most influential investment firm in the world—BlackRock manages $6.3 trillion in assets—Fink issued a directive to firms: contribute to society and deliver financial performance. The “or else”? Risk losing his financial support.

The times, they are a changin’—again

It’s a brave new world in corporate America. And the asset management firm is ostensibly riding the evolving tide of increasing transparency and accountability. In the statement, Fink urged companies to “understand the societal impact of [their] business as well as the ways that broad, structural trends—from slow wage growth to rising automation to climate change—affect [their] potential for growth.”

BlackRock has the heft to make this kind of ask. It already controls one of every three investment dollars in America, via 401(k) plans, ETFs, and mutual funds—and can influence board votes.

Now Fink is putting his money where your mission statement is

A move that actively puts him on the other side of the table from some companies that he’s passively invested in. While social consciousness has, traditionally, been the buzzwork of a company’s marketing department with an eye on profits or pleasing regulators, Fink means to take that one step further.

And he’s not alone.

Last year saw many CEOs taking positions on issues they would’ve previously never spoken up about: immigration policy, race relations, and gay rights. Gone may be the halcyon days of the governing—and Milton Friedman-approved—economic principle of generating profits. Period.

It begs the question: in this new age of corporate personhood where businesses have rights, shouldn’t they also have responsibilities?

Maybe you can’t have your cake, and eat everyone else’s cake, too. You have to share… or something.

GE Is Still Looking for a Silver Lining After More Bad News

It’s one step backward, two steps even further backward for GE (-2.93%). After slashing its dividend in November, the conglomerate reported a charge of $6.2 billion in Q4.

CEO John Flannery called the setback “deeply disappointing,” as he tries to remake the iconic company. But it’s become increasingly clear there’s one particular piece of baggage weighing GE down.

GE’s insurance unit. Even though GE hasn’t sold any new policies itself since 2006, it’s still on the hook as a reinsurer for billions of dollars worth of long-term care policies (e.g. paying for nursing homes), which were popular in the '90s.

This turned out to be a horrible miscalculation, and with the unit running up a deficit, Flannery will need to put aside an additional $15 billion over the next seven years to plug the leak.

It all might amount to a bloated GE splitting up its major divisions.

With a Sale, Nestle Prepares for Life Without Chocolate

Nestle (-0.34%) sold its U.S. candy unit to Italian chocolatier Ferrero Intl. for $2.9 billion, turning down competing offers from Hershey’s, private equity firms, and The Oompa Loompa Holding Company.

It comes as no surprise: the Swiss food group was actively shopping around the business (known for Butterfinger and Baby Ruth), which brought in over $900 million in 2016, or 3% of its U.S. sales.

But it lost its sweet tooth. At a time when American consumers are opting for healthier food, Nestle’s candy has the unfortunate distinction of being very bad for you. It’s the same trend that drove Mars (of M&M’s fame) to strengthen its presence in other industries, like petcare, and Hershey’s to buy Skinny Pop’s parent, Amplify Snack Brands.

As for Ferrero, the purchase is the next step in an all-out assault on the U.S. candy market. After two (now three) recent acquisitions, the maker of Nutella will become the third-largest chocolate company in the U.S.

Google’s New Fiber-Optic Cables: From Sea to Shining Sea

Google is diving headfirst into its cloud business, building out three new subsea fiber-optic cable lines spanning the Pacific Ocean to the North Sea. Of course, this won’t be its first underwater rodeo—the company already has eight cable lines in place.

Most large corporations negotiate a pretty consensual cable-with-benefits program, where companies, like Facebook, assist Google in constructing lines to access high-speed data networks around the world.

And while two of Google’s new lines will be used by other tech giants, one will remain private. The cable, named Curie after Nobel Prize-winning scientist Marie Curie, will stretch 6,200 miles to connect LA and Chile.

For Google, this means it would own the first new line to Chile in 20 years and could mean widespread access to customers in Latin America. But what the Curie really offers is a chance to gain ground on Microsoft and Amazon in the global cloud-computing race.

Amazon controls 34% of the market, Microsoft holds 11%, and Google sits at 5%.

As companies decide which enterprising cloud-provider they’ll use, a few extra transatlantic cables could give Google a leg up.

Stay tuned for pics of Larry Page in a wetsuit.

What Else Is Happening…

• Walmart (-0.19%) plans to cut more than 1,000 jobs, mostly at its headquarters in Bentonville, Arkansas.
• The U.S. government is stumbling toward a shutdown.
• Energizer (+14.51%) is buying Spectrum's battery and portable lighting business for $2 billion. That’s a lot of AAs.
• Congress urged AT&T (-0.51%) to cut ties with Chinese phone maker Huawei amid national security concerns.

Economic Calendar

• Monday     Earnings: No Events (Markets Closed)

                    Economic Events: No Events (Markets Closed)

• Tuesday    Earnings: Citigroup (+), CSX (-), UnitedHealth (+)

                  Economic Events: Empire State Mfg Survey (-)

• Wednesday    Earnings: Alcoa, Bank of America, Goldman Sachs

                        Economic Events: Industrial Production, Housing Market Index

• Thursday   Earnings: American Express, Morgan Stanley

                   Economic Events: Jobless Claims, Philadelphia Fed Business Outlook

• Friday       Earnings: SunTrust

                 Economic Events: Consumer Sentiment

From the Crew

Status update: Facebook will now reduce your exposure to posts by news outlets and brands. Instead, it will emphasize your friends’ posts in the hope that you’ll engage in more meaningful conversation.

In practice, you’ll probably see fewer spaghetti grilled cheese videos and more of your co-worker posting pictures of her life-changing trip to Tanzania.

One question the Brew’s been debating: “How will this move affect Facebook in the long-run?”

On one hand, less news and brand content could give users less reason to remain on the platform and could drive less revenue—investors already sent the stock down 5% following the announcement.

On the other hand, this could recreate a more organic social media experience and reestablish users’ brand loyalty.

We’d love to get your thoughts—join the conversation here!

The Breakroom

Question of the Day

Using the grid below, how many words can you find? Each word must contain the central V and no letter can be used twice, however, the letters do not have to be connected. Proper nouns are not allowed, however, plurals are. There is at least one nine letter word.

O E R
D V B
R A O

Genius: 28 words. Excellent: 20 words. Good: 16 words. Average: 12 words.

(Answer located at the bottom of newsletter)

Business Trivia

What was the only product ever promoted by Elvis Presley in a television commercial?

1. Guitars
2. Suits
3. Radios
4. Donuts

(Answer located at the bottom of newsletter)

Stat of the Day

2020—The year by which renewables will be cheaper than fossil fuels.

Breakroom Answers

Question of the Day: above, adverb, ave, aver, brave, braved, braver, bravo, bravoed, deva, dove, drove, drover, ova, over, OVERBOARD, OVERBROAD, overdo, rave, raved, raver, rev, rove, roved, rover, var, verb, voe. (Explannation)

Business Trivia: Donuts