Back to school

MARKETS

• U.S. markets: The Dow closed above 27,000 for the first time. If it were an NBA player, the Dow would have just passed Hakeem Olajuwon to become the 11th highest scoring player in league history.
• U.S. economy: The budget deficit widened 23% to $747.1 billion in the first nine months of the fiscal year.

WORKFORCE

Amazon Workers Hit the Books

While the robots get ready for fourth grade, Amazon (-0.81%) is sending its human workers to summer school. It announced plans yesterday to spend $700 million retraining about 100,000 employees (roughly one-third of its U.S. workforce) by 2025 to help them better compete in today’s increasingly automated economy.

The first lesson: Two is most certainly a Prime number.

What’s the strategy?

Amazon wants to let robots handle low-skill jobs like sorting packages. It’ll spend about $7,000/worker to transition the humans who currently do that into more highly skilled jobs, like data mapping and logistics coordination.

• For example: On Amazon’s dime, hourly fulfillment center workers could take classes in IT support. Or nontechnical corporate workers could learn software engineering.

The kicker: Amazon’s retraining aims to both improve skills for workers looking to climb the company’s ranks and for those hoping to launch new careers outside Amazon’s ecosystem. Plus, the training is voluntary.

But the retraining program also shows that Bezos is more sensitive about alleged employee (mis)treatment than he is about almost any other matter of public relations.

• 2020 hopeful Sen. Bernie Sanders has made a metric ton of hay over Amazon's treatment of employees in its warehouses.
• Employees at an Amazon facility in Minnesota are striking during next week’s Prime Day sales event to protest working conditions.

Amazon has been on the offense, raising its minimum wage to $15/hour last year. And the retraining push will also see Amazon invest more in its existing employee advancement programs, like college tuition reimbursement.

Big picture: Amazon’s facing 1) the tightest labor market in half a century and 2) the breakneck pace of digital transformation. By reshaping the skill sets of workers it already has on payroll, Amazon is betting it can stay ahead of the heated competition for skilled labor.

HEALTH CARE

Trump Pulls a Double Nix on Drug Prices

Yesterday, the Trump administration nixed its plan to nix rebates from government drug plans.

Zoom out: The White House has been fixated on lowering drug prices for years. As part of that effort, President Trump has trained his sights on pharmacy benefit managers (PBMs), middlemen that negotiate prices between insurers and drug companies—and then take a cut of the negotiated discount.

And...we’re not sure if you’ve heard a podcast advertisement recently, but these days middlemen tend to be an easy target. The administration's plan would have forced PBMs that work with Medicare and Medicaid to charge a flat fee and figure out a different way to generate revenue. Supporters said that would pass savings on to patients.

Pharma companies supported ending the process that makes their drugs cheaper, while insurers opposed ending the process that gives them discounts. No surprise, then, that health insurer stocks jumped in a big way yesterday.

REGULATION

France Brings the Pain Au Chocolat to Big Tech

French lawmakers voted to slap a 3% tax on over two dozen of the world’s biggest tech giants yesterday, including Amazon, Google, and Facebook.

How do the French define a giant? The tax will apply to digital services companies with annual revenue of at least ~$845 million globally and ~$28 million in France.

U.S. leadership was not happy. Trade Representative Robert Lighthizer announced plans to launch a probe into France’s tax under the same trade practice law that’s being used to justify the trade war with China.

• So does that mean tariffs on Camembert? Not anytime soon. The investigation will likely take more than a year, so any potential levies on imports from France are a while off.

Zoom out: European leaders have been trying to impose a multilateral levy on huge tech companies in the past year, arguing the firms dodge taxation through subsidiaries. The countries couldn’t agree on just how it should be done, so France embraced its “vive la révolution” attitude and implemented its own tax.

TECH

Teams Work Makes Microsoft’s Dreams Work

After just over two years on the market, workplace chat app Microsoft Teams says it has surpassed main competitor Slack (-0.54%) in regular usage. Teams has over 13 million daily active users to Slack’s 10 million last reported in January.

And you know Microsoft (+0.40%) CEO Satya Nadella never shows up to a party without a pretty chart to pass around.

It’s not like coordinating a dairy-free Summer Friday happy hour for your company is any easier on one chat app than the other. But Microsoft has an enormous advantage it plays well: about 75% of desktop computers run its Windows operating system.

• Since March 2017, Teams has been included in the corporate Office 365 software bundle for free.

Zoom out: This was the first time Microsoft broke out Teams stats, but it has said before that the software was its fastest growing business app ever.

Zoom out x2: Since Slack went public on June 20, its stock price hasn’t finished higher than its closing price that first trading day.

QUIZ

Quizzing Me Softly

Plans to never retire. One of 108 billion people who’ve ever lived. Always remains calm when ordering a bagel. It’s the Brew’s weekly news quiz.

1. Friends is leaving Netflix and heading to the new streaming service AT&T’s WarnerMedia announced on Tuesday. What is the name of the streaming service?

2. Hedge funds reported their best first half to a year since 2009. Which performed better in the first half of 2019—the S&P 500 or hedge funds?

3. PepsiCo reported standout earnings for last quarter thanks to increased marketing and new investments. Let’s see how well you know PepsiCo. Which of the following products is not a Pepsi product?

1. Lifewtr
2. Aunt Jemima
3. Powerade
4. Bubly

4. This week’s Sun Valley conference (aka “summer camp for billionaires”) is known for spontaneous meetings leading to big deals, or as Warren Buffett calls it, ABWA. What does ABWA stand for?

5. Over the next year, my adjusted operating loss will shrink to zero for the first time. My new-ish CEO is the former boss at Delta. I operate something called the Southwest Chief. What company am I?

6. For extra credit: Why is Scarlet so darn cute?

*Answers: 1) HBO Max 2) the S&P 500 3) Powerade is owned by Coca-Cola 4) “Acquisitions By Walking Around” 5) Amtrak 6) There is no wrong answer*

WHAT ELSE IS BREWING

• The White House hosted a social media summit, though reps from the biggest platforms (Facebook, Google, Twitter) weren’t in attendance.
• Twitter (-0.64%) also didn't show up to the internet yesterday afternoon, when it suffered a global outage.
• Reckitt Benckiser will pay up to $1.4 billion in the largest settlement related to the U.S. opioid epidemic.
• Amazon Music Unlimited has become the fastest growing music streaming service, per the FT’s insiders.
• Google disclosed that it employs people to transcribe recorded audio clips from its smart assistant, and they can sometimes eavesdrop on sensitive info.

BREAKROOM

Friday Puzzle
Here’s a riddle from legendary puzzlemaster Hubert Phillips via Popular Mechanics.

Adam and Eve play rock-paper-scissors 10 times. You know that:

• Adam uses rock three times, scissors six times, and paper once.
• Eve uses rock twice, scissors four times, and paper four times.
• There are no ties in all 10 games.
• The order of games is unknown.

Who wins? By how much?

Breakroom Answers